Media Center

July 23, 2015

KKR & Co. L.P. Announces Second Quarter 2015 Results

Strong Investment Performance Drives Record Economic Net Income

GAAP net income (loss) attributable to KKR & Co. L.P. was $376.3 million and $646.8 million for the quarter and six months ended June 30, 2015, respectively, up from $178.2 million and $388.3 million in the comparable periods of 2014.

Total distributable earnings was $491.4 million and $1,007.9 million for the quarter and six months ended June 30, 2015, respectively, down from $701.0 million and $1,147.8 million in the comparable periods of 2014.

Distribution per common unit was $0.42 and $0.88 for the quarter and six months ended June 30, 2015, respectively, down from $0.67 and $1.10 in the comparable periods of 2014.

Economic net income ("ENI") was $839.9 million and $1,439.4 million for the quarter and six months ended June 30, 2015, respectively, up from $501.6 million and $1,131.8 million in the comparable periods of 2014.

ENI after taxes per adjusted unit was $0.88 and $1.50 for the quarter and six months ended June 30, 2015, respectively, up from $0.57 and $1.32 in the comparable periods of 2014.

Fee and yield earnings were $180.9 million and $348.9 million for the quarter and six months ended June 30, 2015, respectively, up from $154.2 million and $317.0 million in the comparable periods of 2014.

Book value was $10.9 billion on a total reportable segment basis as of June 30, 2015 or $12.77 per adjusted unit.

Return on equity and cash return on equity were 16.6% and 17.1%, respectively.

Assets under management ("AUM") and fee paying assets under management ("FPAUM") totaled $101.6 billion and $83.7 billion, respectively, as of June 30, 2015.

NEW YORK--(BUSINESS WIRE)--

KKR & Co. L.P. (NYSE: KKR) today reported its second quarter 2015 results.

In April 2015, KKR held its final close for Lending Partners II, the successor fund to the predecessor Lending Partners fund. KKR closed this successor fund with over $1.3 billion of capital commitments, which surpassed the predecessor fund that had $460 million in total capital commitments.

In July 2015, KKR held its final close for Global Infrastructure Investors II, the successor fund to the predecessor Global Infrastructure Investors fund. KKR closed this successor fund with over $3.0 billion of capital commitments, which surpassed the predecessor fund that had $1.0 billion in total capital commitments.

"Our strong investment performance resulted in $840 million of Economic Net Income, a record quarterly figure for KKR," said Henry R. Kravis and George R. Roberts, Co-Chairmen and Co-Chief Executive Officers of KKR. "Additionally, we continued to scale several growth areas including our infrastructure and alternative credit businesses."

Note: Certain financial measures, including total distributable earnings, FRE, ENI, ENI after taxes, fee and yield earnings, book value, cash and short-term investments and adjusted units, are not presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"). See Exhibits B and C for a reconciliation of such measures to financial results prepared in accordance with GAAP.

GAAP RESULTS

GAAP net income (loss) for the quarter and six months ended June 30, 2015, included net income (loss) attributable to KKR & Co. L.P. of $376.3 million and $646.8 million, respectively, and net income (loss) attributable to KKR & Co. L.P. per common unit of $0.78 and $1.35, respectively, on a diluted basis. For the quarter and six months ended June 30, 2014, net income (loss) attributable to KKR & Co. L.P. was $178.2 million and $388.3 million, respectively, and net income (loss) attributable to KKR & Co. L.P. per common unit was $0.43 and $1.06, respectively, on a diluted basis. The increase in both comparable periods was primarily due to (i) an increase in investment income and (ii) an increase in KKR & Co. L.P.'s ownership percentage in the KKR business.

 

SEGMENT RESULTS

 
KEY METRICS (UNAUDITED)
(Amounts in millions, except per adjusted unit amounts)
       
   
Quarter Ended Six Months Ended
June 30, 2015   June 30, 2014   % Change June 30, 2015   June 30, 2014   % Change

Total Distributable Earnings

 
Fees $ 272 $ 254 $ 572 $ 582
Realized Cash Carry 252 555 555 749
Net Realized Investment Income 251   282   483   475  
Total Cash Revenues $ 775 $ 1,091 (29 )% $ 1,610 $ 1,806 (11 )%
Total Cash Expenses and Other 284   391   601   658  
Total Distributable Earnings $ 491 $ 700 (30 )% $ 1,009 $ 1,148 (12 )%
Less: Estimated Current Corporate Income Taxes (26 ) (19 ) (55 ) (52 )
Distributable Earnings, net of taxes $ 465 $ 681 (32 )% $ 954 $ 1,096 (13 )%
 
Distributable Earnings, net of taxes per KKR & Co. L.P. common unit $ 0.57 $ 0.85 (33 )% $ 1.17 $ 1.44 (19 )%
Distribution per KKR & Co. L.P. common unit $ 0.42 $ 0.67 (37 )% $ 0.88 $ 1.10 (20 )%
 
Payout ratio 75 % 78 % 76 % 76 %
 
 

Economic Net Income

 
Management, Monitoring and Transaction Fees, Net $ 266 $ 243 $ 560 $ 553
Performance Income 598 429 1,046 785
Investment Income 384   162   604   441  
Total Segment Revenues $ 1,248 $ 834 50 % $ 2,210 $ 1,779 24 %
Total Segment Expenses and Other 501   380   937   770  
Economic Net Income, After-Taxes $ 747 $ 454 65 % $ 1,273 $ 1,009 26 %
 
Economic Net Income, After-Taxes per Adjusted Unit $ 0.88 $ 0.57 54 % $ 1.50 $ 1.32 14 %
 
Fee and Yield Earnings $ 181 $ 154 18 % $ 349 $ 317 10 %
 
 

Other

 
Book Value per Adjusted Unit $ 12.77 $ 12.52 2 %
 
 
 
Last Twelve Months Ended
June 30, 2015 June 30, 2014
Return on Equity 16.6% 28.7%
Cash Return on Equity 17.1% 22.2%
 

Private Markets

AUM was $63.1 billion as of June 30, 2015, an increase of $1.0 billion, compared to AUM of $62.1 billion as of March 31, 2015. The increase was primarily attributable to the appreciation in the fair value of our private equity portfolio and to a lesser extent new capital raised in European Fund IV and Global Infrastructure Investors II. These increases were offset by distributions to limited partners of our private equity funds arising from realizations.

FPAUM was $46.8 billion as of June 30, 2015, a decrease of $0.4 billion, compared to FPAUM of $47.2 billion as of March 31, 2015. The decrease was primarily attributable to distributions to limited partners of our private equity funds arising from realizations which were partially offset by new capital raised in European Fund IV and Global Infrastructure Investors II.

Total segment revenues were $1,004.9 million for the quarter ended June 30, 2015, an increase of $362.0 million, compared to total segment revenues of $642.9 million for the quarter ended June 30, 2014. Total segment revenues were $1,872.9 million for the six months ended June 30, 2015, an increase of $499.3 million, compared to total segment revenues of $1,373.6 million for the six months ended June 30, 2014. The increase in both comparable periods was principally attributable to (i) a higher level of investment income reflecting a higher level of appreciation in our private equity portfolio and (ii) an increase in performance income due to higher net carried interest resulting from more private equity funds earning carried interest and higher net overall appreciation in our private equity portfolio. For the three and six months ended June 30, 2015, the fair value of our private equity portfolio appreciated 7.4% and 11.8%, respectively.

ENI was $666.2 million for the quarter ended June 30, 2015, an increase of $290.0 million, compared to ENI of $376.2 million for the quarter ended June 30, 2014. The increase was primarily attributable to higher total segment revenues as described above, partially offset by higher allocations to the carry pool resulting from the higher levels of net carried interest.

Public Markets

AUM was $38.4 billion as of June 30, 2015, an increase of $1.4 billion, compared to AUM of $37.0 billion as of March 31, 2015. FPAUM was $37.0 billion as of June 30, 2015, an increase of $1.3 billion, compared to FPAUM of $35.7 billion as of March 31, 2015. For both AUM and FPAUM, the increases were primarily attributable to new capital raised, primarily in our CLOs, offset by distributions and redemptions across multiple strategies.

Total segment revenues were $188.2 million for the quarter ended June 30, 2015, an increase of $31.0 million, compared to total segment revenues of $157.2 million for the quarter ended June 30, 2014. The increase in revenues was primarily attributable to an increase in investment income across multiple strategies and the impact of yielding assets of KKR Financial Holdings LLC ("KFN"), which was acquired on April 30, 2014 but was not contributing to our investment income for one month of the second quarter of 2014.

Total segment revenues were $238.2 million for the six months ended June 30, 2015, a decrease of $64.6 million, compared to total segment revenues of $302.8 million for the six months ended June 30, 2014. The decrease was principally attributable to (i) a decrease in investment income due primarily to net unrealized losses in our CLOs and certain other Public Markets related investments and (ii) lower performance income for the period. These decreases were partially offset by an increase in net interest and dividends relating primarily to the yielding assets of KFN, which was acquired on April 30, 2014 but was not contributing to our investment income for the first four months of 2014.

ENI was $136.6 million for the quarter ended June 30, 2015, an increase of $31.0 million, compared to ENI of $105.6 million for the quarter ended June 30, 2014. The increase was principally attributable to the increase in total segment revenues as described above.

ENI was $139.4 million for the six months ended June 30, 2015, a decrease of $64.0 million, compared to ENI of $203.4 million for the six months ended June 30, 2014. The decrease was principally attributable to the decrease in total segment revenues as described above.

Capital Markets

Total segment revenues were $54.7 million for the quarter ended June 30, 2015, an increase of $20.7 million, compared to total segment revenues of $34.0 million for the quarter ended June 30, 2014. The increase in revenues primarily reflect a higher level of overall capital markets transaction activity for the quarter ended June 30, 2015.

Total segment revenues were $99.1 million for the six months ended June 30, 2015, an decrease of $4.1 million, compared to total segment revenues of $103.2 million for the six months ended June 30, 2014. The decrease in revenues primarily reflects a lower level of overall capital markets transaction activity for the six months ended June 30, 2015.

ENI was $37.2 million for the quarter ended June 30, 2015, an increase of $17.4 million, compared to ENI of $19.8 million for the quarter ended June 30, 2014. The increase primarily reflects the increase in total segment revenues as described above.

ENI was $65.3 million for the six months ended June 30, 2015, a decrease of $1.6 million, compared to ENI of $66.9 million for the six months ended June 30, 2014. The decrease primarily reflects the decrease in total segment revenues as described above, largely offset by lower compensation expense.

CAPITAL AND LIQUIDITY

As of June 30, 2015, KKR had $2.0 billion of cash and short-term investments and $3.0 billion of outstanding debt and preferred share obligations on a total reportable segment basis. This includes KFN's debt obligations of $657.3 million and KFN's 7.375% Series A LLC preferred shares of $373.8 million, which are non-recourse to KKR beyond the assets of KFN. As of June 30, 2015, 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 June 30, 2015.

As of June 30, 2015, KKR's portion of total uncalled commitments to its investment funds was $1.3 billion. See Exhibit A for details.

DISTRIBUTION

A distribution of $0.42 per common unit has been declared, comprised of (i) $0.07 per common unit from after-tax FRE, (ii) $0.18 per common unit from realized cash carry, (iii) $0.10 per common unit from KKR's net realized investment income and (iv) $0.07 per common unit from KFN's net realized investment income. The distribution will be paid on August 18, 2015 to unitholders of record as of the close of business on August 3, 2015.

SUPPLEMENTAL INFORMATION

A slide presentation containing supplemental commentary about the Company's financial results for the fiscal quarter ended June 30, 2015 may be accessed through the KKR Investor Relations section 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, July 23, 2015 at 10:00 a.m. EDT. 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 80669130, 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.

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.

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 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, FRE, total distributable earnings, ENI, ENI after taxes, fee and yield earnings, fee and yield EBITDA, equity invested and syndicated capital, uncalled commitments, core interest expense, cash and short-term investments, net realized investment income 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 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. 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, 2014, filed with the SEC on February 27, 2015, quarterly reports on Form 10-Q for subsequent quarters and other filings with the SEC, which are available at www.sec.gov.

 
KKR
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (GAAP BASIS - UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
       
 
   
Quarter Ended Six Months Ended
June 30, 2015   June 30, 2014 June 30, 2015   June 30, 2014
Revenues
Fees and Other $ 255,874   $ 249,370   $ 547,219   $ 552,296  
Expenses
Compensation and Benefits 411,691 358,730 776,690 689,768
Occupancy and Related Charges 16,172 16,059 31,904 31,467
General, Administrative and Other 126,314   210,536   260,616   337,261  
Total Expenses 554,177   585,325   1,069,210   1,058,496  
Investment Income (Loss)
Net Gains (Losses) from Investment Activities 3,110,604 1,971,850 5,030,429 3,944,030
Dividend Income 360,556 272,902 439,371 369,606
Interest Income 302,985 215,872 599,143 377,832
Interest Expense (139,427 ) (65,997 ) (251,390 ) (100,728 )
Total Investment Income (Loss) 3,634,718   2,394,627   5,817,553   4,590,740  
 
Income (Loss) Before Taxes 3,336,415 2,058,672 5,295,562 4,084,540
 
Income Taxes 30,547   6,176   46,685   27,878  
 
Net Income (Loss) 3,305,868 2,052,496 5,248,877 4,056,662
 
Net Income (Loss) Attributable to
Redeemable Noncontrolling Interests (891 ) (6,809 ) 1,042 3,828
Net Income (Loss) Attributable to
Noncontrolling Interests and Appropriated Capital 2,930,453 1,881,090 4,601,022 3,664,578
       
Net Income (Loss) Attributable to KKR & Co. L.P. $ 376,306   $ 178,215   $ 646,813   $ 388,256  
 
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit
Basic $ 0.84 $ 0.47 $ 1.47 $ 1.16
Diluted (a) $ 0.78 $ 0.43 $ 1.35 $ 1.06
Weighted Average Common Units Outstanding
Basic 446,794,950 377,542,161 440,867,813 335,748,498
Diluted (a) 482,651,491 410,179,838 477,467,220 367,877,049
 
(a)   KKR Holdings L.P. units have been excluded from the calculation of diluted earnings per common unit since the exchange of these units would not dilute KKR's respective ownership interests in the KKR Group Partnerships.
 

 
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
       
Quarter Ended Six Months Ended
June 30, 2015   March 31, 2015   June 30, 2014 June 30, 2015   June 30, 2014
Segment Revenues
Management, Monitoring and Transaction Fees, Net
Management Fees $ 181,401 $ 173,780 $ 178,674 $ 355,181 $ 374,067
Monitoring Fees 47,713 97,838 29,610 145,551 65,973
Transaction Fees 92,951 103,286 84,305 196,237 247,821
Fee Credits (56,458 ) (80,494 ) (49,830 ) (136,952 ) (134,498 )
Total Management, Monitoring and Transaction Fees, Net 265,607   294,410   242,759   560,017   553,363  
Performance Income
Realized Carried Interest 252,227 302,425 555,488 554,652 749,038
Incentive Fees 5,893 5,665 11,478 11,558 28,497
Unrealized Carried Interest 340,366   139,284   (137,826 ) 479,650   7,821  
Total Performance Income 598,486   447,374   429,140   1,045,860   785,356  
Investment Income (Loss)
Net Realized Gains (Losses) 176,260 180,667 221,661 356,927 403,389
Net Unrealized Gains (Losses) 131,984   (10,721 ) (119,935 ) 121,263   (34,176 )
Total Realized and Unrealized 308,244 169,946 101,726 478,190 369,213
Net Interest and Dividends 75,406   50,675   60,432   126,081   71,596  
Total Investment Income (Loss) 383,650   220,621   162,158   604,271   440,809  
Total Segment Revenues 1,247,743   962,405   834,057   2,210,148   1,779,528  
Segment Expenses
Compensation and Benefits
Cash Compensation and Benefits 98,871 107,027 91,444 205,898 200,359
Realized Allocation to Carry Pool 100,891 120,970 222,195 221,861 299,615
Unrealized Allocation to Carry Pool 136,566   55,631   (53,435 ) 192,197   5,255  
Total Compensation and Benefits 336,328 283,628 260,204 619,956 505,229
Occupancy and Related Charges 15,475 14,796 14,757 30,271 28,946
Other Operating Expenses 51,613   60,946   54,311   112,559   107,112  
Total Segment Expenses 403,416   359,370   329,272   762,786   641,287  
Income (Loss) attributable to noncontrolling interests 4,383   3,622   3,206   8,005   6,408  
Economic Net Income (Loss) (a) $ 839,944 $ 599,413 $ 501,579 $ 1,439,357 $ 1,131,833
Provision for Income Taxes 44,836 21,235 6,330 66,071 42,911
Equity-based Charges 48,453   52,265   40,877   100,718   80,230  
Economic Net Income (Loss), After Taxes (b) $ 746,655   $ 525,913   $ 454,372   $ 1,272,568   $ 1,008,692  
 
Economic Net Income (Loss), After Taxes Per Adjusted Unit $ 0.88 $ 0.62 $ 0.57 $ 1.50 $ 1.32
Weighted Average Adjusted Units (Fully Diluted Basis) (a) 852,128,762 848,061,661 800,747,528 850,106,448 762,873,784
                         
Assets Under Management $ 101,569,600 $ 99,128,000 $ 97,957,900 $ 101,569,600 $ 97,957,900
Fee Paying Assets Under Management $ 83,732,800 $ 82,884,500 $ 79,656,300 $ 83,732,800 $ 79,656,300
Equity Invested and Syndicated Capital $ 2,011,100 $ 2,945,400 $ 2,345,500 $ 4,956,500 $ 5,722,800
Uncalled Commitments       $ 25,906,300     $ 21,555,600     $ 19,784,200     $ 25,906,300     $ 19,784,200  
                         

Other Information

Fee Related Earnings $ 105,541 $ 117,306 $ 93,725 $ 222,847 $ 245,443
Plus: Net Interest and Dividends 75,406   50,675   60,432   126,081   71,596  
Fee and Yield Earnings (a) $ 180,947 $ 167,981 $ 154,157 $ 348,928 $ 317,039
Plus: Depreciation and Amortization 3,918 3,881 4,140 7,799 8,175
Plus: Core Interest Expense 30,750   25,332   19,205   56,082   37,605  
Fee and Yield EBITDA (a) $ 215,615   $ 197,194   $ 177,502   $ 412,809   $ 362,819  
 
Total Distributable Earnings (a) $ 491,407 $ 516,531 $ 700,973 $ 1,007,938 $ 1,147,781
GAAP interest expense $ 139,427 $ 111,963 $ 65,997 $ 251,390 $ 100,728
Less: interest expense related to debt obligations
from investment financing arrangements and KFN 108,677   86,631   46,792   195,308   63,123  
Core Interest Expense (a)       $ 30,750     $ 25,332     $ 19,205     $ 56,082     $ 37,605  
 
(a)   See definitions for economic net income (loss), adjusted units, fee and yield earnings, fee and yield EBITDA, total distributable earnings and core interest expense under "Notes to Reportable Segments."
(b) Represents economic net income (loss) after reductions for income taxes and equity-based charges.
 

 
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PRIVATE MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
       
Quarter Ended Six Months Ended
June 30, 2015   March 31, 2015   June 30, 2014 June 30, 2015   June 30, 2014
Segment Revenues
Management, Monitoring and Transaction Fees, Net
Management Fees $ 115,346 $ 109,276 $ 111,542 $ 224,622 $ 234,581
Monitoring Fees 47,713 97,838 29,610 145,551 65,973
Transaction Fees 40,321 46,599 45,340 86,920 138,360
Fee Credits (53,286 ) (69,906 ) (43,478 ) (123,192 ) (123,816 )
Total Management, Monitoring and Transaction Fees, Net 150,094   183,807   143,014   333,901   315,098  
 
Performance Income
Realized Carried Interest 243,274 302,425 555,488 545,699 724,288
Incentive Fees
Unrealized Carried Interest 312,379   126,937   (163,564 ) 439,316   (17,788 )
Total Performance Income 555,653   429,362   391,924   985,015   706,500  
 
Investment Income (Loss)
Net Realized Gains (Losses) 145,817 183,264 207,892 329,081 384,090
Net Unrealized Gains (Losses) 145,094   79,363   (122,729 ) 224,457   (52,056 )
Total Realized and Unrealized 290,911 262,627 85,163 553,538 332,034
Net Interest and Dividends 8,234   (7,831 ) 22,760   403   19,952  
Total Investment Income (Loss) 299,145   254,796   107,923   553,941   351,986  
Total Segment Revenues 1,004,892   867,965   642,861   1,872,857   1,373,584  
 
Segment Expenses
Compensation and Benefits
Cash Compensation and Benefits 65,939 73,967 56,522 139,906 123,420
Realized Allocation to Carry Pool 97,310 120,970 222,195 218,280 289,715
Unrealized Allocation to Carry Pool 125,371   50,693   (63,730 ) 176,064   (4,987 )
Total Compensation and Benefits 288,620 245,630 214,987 534,250 408,148
Occupancy and Related Charges 11,832 11,016 11,764 22,848 23,324
Other Operating Expenses 38,125   42,116   39,589   80,241   79,648  
Total Segment Expenses 338,577   298,762   266,340   637,339   511,120  
 
Income (Loss) attributable to noncontrolling interests 143   719   335   862   850  
 
Economic Net Income (Loss) $ 666,172   $ 568,484   $ 376,186   $ 1,234,656   $ 861,614  
                         
Assets Under Management $ 63,129,200 $ 62,139,400 $ 59,417,000 $ 63,129,200 $ 59,417,000
Fee Paying Assets Under Management $ 46,758,800 $ 47,161,900 $ 46,167,300 $ 46,758,800 $ 46,167,300
Equity Invested $ 1,258,200 $ 2,047,400 $ 1,454,400 $ 3,305,600 $ 4,006,200
Uncalled Commitments       $ 21,078,400     $ 18,690,000     $ 17,109,800     $ 21,078,400     $ 17,109,800  
 

 
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PUBLIC MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
       
Quarter Ended Six Months Ended
June 30, 2015   March 31, 2015   June 30, 2014 June 30, 2015   June 30, 2014
Segment Revenues
Management, Monitoring and Transaction Fees, Net
Management Fees $ 66,055 $ 64,504 $ 67,132 $ 130,559 $ 139,486
Monitoring Fees
Transaction Fees 3,873 13,430 7,350 17,303 13,372
Fee Credits (3,172 ) (10,588 ) (6,352 ) (13,760 ) (10,682 )
Total Management, Monitoring and Transaction Fees, Net 66,756   67,346   68,130   134,102   142,176  
 
Performance Income
Realized Carried Interest 8,953 8,953 24,750
Incentive Fees 5,893 5,665 11,478 11,558 28,497
Unrealized Carried Interest 27,987   12,347   25,738   40,334   25,609  
Total Performance Income 42,833   18,012   37,216   60,845   78,856  
 
Investment Income (Loss)
Net Realized Gains (Losses) 31,192 684 14,284 31,876 19,763
Net Unrealized Gains (Losses) (11,988 ) (87,877 ) 3,751   (99,865 ) 18,565  
Total Realized and Unrealized 19,204 (87,193 ) 18,035 (67,989 ) 38,328
Net Interest and Dividends 59,390   51,872   33,822   111,262   43,399  
Total Investment Income (Loss) 78,594   (35,321 ) 51,857   43,273   81,727  
Total Segment Revenues 188,183   50,037   157,203   238,220   302,759  
 
Segment Expenses
Compensation and Benefits
Cash Compensation and Benefits 22,785 24,005 26,904 46,790 53,649
Realized Allocation to Carry Pool 3,581 3,581 9,900
Unrealized Allocation to Carry Pool 11,195   4,938   10,295   16,133   10,242  
Total Compensation and Benefits 37,561 28,943 37,199 66,504 73,791
Occupancy and Related Charges 2,977 3,122 2,544 6,099 4,716
Other Operating Expenses 10,617   14,954   11,474   25,571   19,981  
Total Segment Expenses 51,155   47,019   51,217   98,174   98,488  
 
Income (Loss) attributable to noncontrolling interests 478   175   385   653   907  
 
Economic Net Income (Loss) $ 136,550   $ 2,843   $ 105,601   $ 139,393   $ 203,364  
                         
Assets Under Management $ 38,440,400 $ 36,988,600 $ 38,540,900 $ 38,440,400 $ 38,540,900
Fee Paying Assets Under Management $ 36,974,000 $ 35,722,600 $ 33,489,000 $ 36,974,000 $ 33,489,000
Equity Invested $ 320,800 $ 649,300 $ 724,400 $ 970,100 $ 1,458,500
Uncalled Commitments $ 4,827,900 $ 2,865,600 $ 2,674,400 $ 4,827,900 $ 2,674,400
Gross Dollars Invested       $ 1,110,100     $ 1,210,800     $ 768,200     $ 2,320,900     $ 1,757,900  
 

 
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
CAPITAL MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
         
Quarter Ended Six Months Ended
June 30, 2015   March 31, 2015   June 30, 2014 June 30, 2015 June 30, 2014
Segment Revenues
Management, Monitoring and Transaction Fees, Net
Management Fees $ $ $ $ $
Monitoring Fees
Transaction Fees 48,757 43,257 31,615 92,014 96,089
Fee Credits          
Total Management, Monitoring and Transaction Fees, Net 48,757   43,257   31,615   92,014   96,089  
 
Performance Income
Realized Carried Interest
Incentive Fees
Unrealized Carried Interest          
Total Performance Income          
 
Investment Income (Loss)
Net Realized Gains (Losses) (749 ) (3,281 ) (515 ) (4,030 ) (464 )
Net Unrealized Gains (Losses) (1,122 ) (2,207 ) (957 ) (3,329 ) (685 )
Total Realized and Unrealized (1,871 ) (5,488 ) (1,472 ) (7,359 ) (1,149 )
Net Interest and Dividends 7,782   6,634   3,850   14,416   8,245  
Total Investment Income (Loss) 5,911   1,146   2,378   7,057   7,096  
Total Segment Revenues 54,668   44,403   33,993   99,071   103,185  
 
Segment Expenses
Compensation and Benefits
Cash Compensation and Benefits 10,147 9,055 8,018 19,202 23,290
Realized Allocation to Carry Pool
Unrealized Allocation to Carry Pool          
Total Compensation and Benefits 10,147 9,055 8,018 19,202 23,290
Occupancy and Related Charges 666 658 449 1,324 906
Other Operating Expenses 2,871   3,876   3,248   6,747   7,483  
Total Segment Expenses 13,684   13,589   11,715   27,273   31,679  
         
Income (Loss) attributable to noncontrolling interests 3,762   2,728   2,486   6,490   4,651  
 
Economic Net Income (Loss) $ 37,222   $ 28,086   $ 19,792   $ 65,308   $ 66,855  
                         
Syndicated Capital       $ 432,100     $ 248,700     $ 166,700     $ 680,800     $ 258,100  
 

 
KKR
BALANCE SHEET
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except per unit amounts)
           
 
As of As of
June 30, 2015 December 31, 2014
Cash and short-term investments $ 2,025,779 $ 1,121,385
Investments 9,743,800 (a) 9,807,606
Unrealized carry (b) 1,579,405 (b) 1,283,022 (b)
Other assets 1,025,889   999,654  
Total assets $ 14,374,873   $ 13,211,667  
 
Debt obligations - KKR (ex-KFN) $ 2,000,000 $ 1,527,000
Debt obligations - KFN 657,310 657,310
Preferred shares - KFN 373,750 373,750
Other liabilities 334,426   413,808  
Total liabilities 3,365,486   2,971,868  
Noncontrolling interests 126,140   121,574  
Book value $ 10,883,247   $ 10,118,225  
 
Book value per adjusted unit $ 12.77 $ 12.07
 
                     
 
(a) See schedule of investments that follows on the next page.
 
As of As of

(b) Unrealized Carry

June 30, 2015 December 31, 2014
Private Markets $ 1,468,815 $ 1,196,633
Public Markets 110,590   86,389  
Total $ 1,579,405   $ 1,283,022  
 

 
KKR
SCHEDULE OF INVESTMENTS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except percentage amounts)
     
As of June 30, 2015
   
Investments Cost Fair

Value

Fair Value as a

Percentage of

Total Investments

 
Private Equity Co-Investments $ 2,285,974 $ 2,909,238 29.9 %
Private Equity Funds 822,314   1,103,850   11.3 %
Private Equity Total 3,108,288   4,013,088   41.2 %
Energy 969,845 721,413 7.4 %
Real Estate 729,454 775,054 8.0 %
Infrastructure 172,138   180,351   1.9 %
Real Assets Total 1,871,437   1,676,818   17.3 %
 
Private Markets Total 4,979,725   5,689,906   58.5 %
 
Special Situations 769,487 832,958 8.5 %
Direct Lending 126,019 124,702 1.3 %
Mezzanine 89,287   96,125   0.9 %
Alternative Credit 984,793 1,053,785 10.7 %
CLOs 1,493,080 1,309,936 13.4 %
Liquid Credit 177,781   181,120   1.9 %
Credit Total 2,655,654   2,544,841   26.0 %
 
Specialty Finance 282,648 250,893 2.6 %
 
Public Markets Total 2,938,302   2,795,734   28.6 %
 
Other 1,251,224 1,258,160 12.9 %
 
Total Investments $ 9,169,251   $ 9,743,800   100.0 %
 
                 
 
Significant Aggregate Portfolio Company Investments: (a)
First Data Corporation $ 1,061,332 $ 1,309,329 13.4 %
Walgreens Boots Alliance 165,776 615,574 6.3 %
HCA Inc. 29,455 226,780 2.3 %
Zimmer Biomet Holdings Inc. 68,572 100,485 1.0 %
U.S. Foodservice, Inc. 80,000   96,000   1.0 %
1,405,135   2,348,168   24.0 %
Other Investments 7,764,116   7,395,632   76.0 %
Total Investments $ 9,169,251   $ 9,743,800   100.0 %
 
(a)   The significant aggregate portfolio company investments include the top five private equity investments in portfolio companies (other than investments expected to be syndicated or transferred in connection with new fundraising) based on their fair market value as of June 30, 2015. The fair value figures include the co-investment and the limited partner and/or general partner interests held by KKR in the underlying portfolio company.
 

 
KKR
ASSETS UNDER MANAGEMENT* (UNAUDITED)
(Amounts in thousands)
       
Private

Markets

Segment

Public

Markets

Segment

Total

Reportable

Segments

Quarter Ended June 30, 2015

March 31, 2015 $ 62,139,400 $ 36,988,600 $ 99,128,000
New Capital Raised 1,142,700 2,201,700 3,344,400
Distributions (3,447,000 ) (1,385,300 ) (b) (4,832,300 )
Change in Value 3,294,100   635,400   3,929,500  
June 30, 2015 $ 63,129,200   $ 38,440,400   $ 101,569,600  
 

Six Months Ended June 30, 2015

December 31, 2014 $ 61,505,800 $ 37,106,700 $ 98,612,500
New Capital Raised 2,733,800 4,449,600 7,183,400
Distributions (6,414,000 ) (3,233,900 ) (c) (9,647,900 )
Net Changes in Fee Base of Certain Funds (a) (238,600 ) (238,600 )
Change in Value 5,303,600   356,600   5,660,200  
June 30, 2015 $ 63,129,200   $ 38,440,400   $ 101,569,600  
 

Trailing Twelve Months Ended June 30, 2015

June 30, 2014 $ 59,417,000 $ 38,540,900 $ 97,957,900
New Capital Raised 7,086,700 8,635,800 15,722,500
Distributions (10,504,000 ) (8,117,500 ) (d) (18,621,500 )
Net Changes in Fee Base of Certain Funds (a) (238,600 ) (238,600 )
Change in Value 7,129,500   (380,200 ) 6,749,300  
June 30, 2015 $ 63,129,200   $ 38,440,400   $ 101,569,600  
 
*  

Excludes those assets managed by entities where KKR does not hold more than a 50% ownership interest.

(a) Represents the impact of certain funds entering the post-investment period.
(b) Includes $463.7 million of redemptions by fund investors.
(c) Includes $1,116.9 million of redemptions by fund investors.
(d) Includes $3,132.4 million of redemptions by fund investors.
 

 
KKR
FEE PAYING ASSETS UNDER MANAGEMENT* (UNAUDITED)
(Amounts in thousands)
       
Private

Markets

Segment

Public

Markets

Segment

Total

Reportable

Segments

Quarter Ended June 30, 2015

March 31, 2015 $ 47,161,900 $ 35,722,600 $ 82,884,500
New Capital Raised 1,123,600 2,023,200 3,146,800
Distributions (1,723,600 ) (1,193,800 ) (b) (2,917,400 )
Change in Value 196,900   422,000   618,900  
June 30, 2015 $ 46,758,800   $ 36,974,000   $ 83,732,800  
 

Six Months Ended June 30, 2015

December 31, 2014 $ 47,262,500 $ 35,783,900 $ 83,046,400
New Capital Raised 2,444,100 4,217,000 6,661,100
Distributions (2,684,700 ) (2,780,200 ) (c) (5,464,900 )
Net Changes in Fee Base of Certain Funds (a) (325,200 ) (325,200 )
Change in Value (263,100 ) 78,500   (184,600 )
June 30, 2015 $ 46,758,800   $ 36,974,000   $ 83,732,800  
 

Trailing Twelve Months Ended June 30, 2015

June 30, 2014 $ 46,167,300 $ 33,489,000 $ 79,656,300
New Capital Raised 6,385,600 10,371,500 16,757,100
Distributions (5,151,600 ) (5,683,500 ) (d) (10,835,100 )
Net Changes in Fee Base of Certain Funds (a) (325,200 ) (325,200 )
Change in Value (642,500 ) (877,800 ) (1,520,300 )
June 30, 2015 $ 46,758,800   $ 36,974,000   $ 83,732,800  
 
*   Excludes those assets managed by entities where KKR does not hold more than a 50% ownership interest.
(a) Represents the impact of certain funds entering the post-investment period.
(b) Includes $463.7 million of redemptions by fund investors.
(c) Includes $1,116.9 million of redemptions by fund investors.
(d) Includes $3,132.4 million of redemptions by fund investors.
 

 
KKR
INVESTMENT VEHICLE SUMMARY (a) (UNAUDITED)
As of June 30, 2015
(Amounts in millions, except percentages)
     
Investment Period Amount
Commencement

Date

  End Date Commitment   Uncalled

Commitments

  Percentage

Committed

by General

Partner

  Invested   Realized   Remaining

Cost

  Remaining Fair

Value

Private Markets

             
 
Private Equity Funds
European Fund IV 12/2014 12/2020 $ 2,670.1 $ 2,509.1 7.4% $ 161.0 $ $ 161.0 $ 206.6
Asian Fund II (b) 4/2013 4/2019 5,825.0 4,045.0 1.3% 2,052.0 272.0 1,779.9 3,032.7
North America Fund XI (b) 9/2012 9/2018 8,718.4 4,512.6 2.9% 5,024.4 1,024.2 4,205.7 6,331.8
China Growth Fund 11/2010 11/2016 1,010.0 448.1 1.0% 561.9 61.1 544.5 782.5
E2 Investors (Annex Fund) 8/2009 11/2013 195.8 4.9% 195.8 195.7 18.1 77.2
European Fund III 3/2008 3/2014 6,141.0 789.1 4.6% 5,351.9 4,269.1 3,338.3 4,520.4
Asian Fund 7/2007 4/2013 3,983.3 147.5 2.5% 3,835.8 5,343.1 1,954.9 2,699.1
2006 Fund 9/2006 9/2012 17,642.2 525.6 2.1% 17,116.6 16,154.9 8,760.3 14,972.7
European Fund II 11/2005 10/2008 5,750.8 2.1% 5,750.8 6,574.3 841.1 1,722.1
Millennium Fund 12/2002 12/2008 6,000.0 2.5% 6,000.0 11,699.6 1,219.7 2,232.2
European Fund 12/1999 12/2005 3,085.4       3.2% 3,085.4     8,736.6         44.5
Total Private Equity Funds 61,022.0 12,977.0 49,135.6 54,330.6 22,823.5 36,621.8
 
Co-Investment Vehicles (b) Various Various 5,506.1 2,531.1 Various 3,072.4 1,710.8 2,243.2 3,265.0
                   
Total Private Equity 66,528.1     15,508.1   52,208.0     56,041.4     25,066.7     39,886.8
 
Real Assets
Energy Income and Growth Fund 9/2013 9/2018 1,974.2 1,217.7 12.8% 756.5 109.9 691.0 582.6
Natural Resources Fund Various Various 887.4 2.9 Various 884.5 96.6 809.9 340.1
Global Energy Opportunities (b) Various Various 1,026.4 809.6 Various 250.2 53.6 218.4 146.0
Global Infrastructure Investors (b) 9/2011 10/2014 1,040.1 132.8 4.8% 935.2 123.8 907.2 975.3
Global Infrastructure Investors II 10/2014 10/2020 2,838.7 2,788.4 4.4% 50.3 50.3 53.7
Infrastructure Co-Investments Various Various 1,125.0 Various 1,125.0 338.3 1,125.0 1,560.2
Real Estate Partners Americas (b) 5/2013 12/2016 1,229.1   618.9   16.3% 718.3   257.3   609.8   688.1
Real Assets 10,120.9     5,570.3   4,720.0     979.5     4,411.6     4,346.0
 
Private Markets Total 76,649.0     21,078.4   56,928.0     57,020.9     29,478.3     44,232.8
 

Public Markets

Special Situations Fund 12/2012 12/2015 2,144.0 168.4 11.6% 1,975.6 144.0 1,975.6 2,348.4
Special Situations Fund II 12/2014 (c) 1,694.5 1,609.4 8.9% 85.1 85.0 97.6
Mezzanine Fund 3/2010 3/2015 1,022.8 165.5 4.4% 857.3 354.1 708.6 789.1
Lending Partners 12/2011 12/2014 460.2 81.9 15.2% 378.3 140.3 349.5 347.4
Lending Partners II 06/2014 06/2017 1,335.9 902.6 3.7% 433.3 433.3 469.1
Lending Partners Europe 03/2015 03/2018 556.6 525.2 7.3% 31.4 31.4 36.7
Other Alternative Credit Vehicles Various Various 3,650.3 1,374.9 Various 2,275.4 1,242.8 1,537.6 1,814.9
                   
Public Markets Total 10,864.3     4,827.9   6,036.4     1,881.2     5,121.0     5,903.2
 
Grand Total $ 87,513.3     $ 25,906.3   $ 62,964.4     $ 58,902.1     $ 34,599.3     $ 50,136.0
 
(a)   Reflects investment vehicles for which KKR has the ability to earn carried interest.
(b) The "Invested" and "Realized" columns include the amounts of any realized investments that restored the unused capital commitments of the fund investors.
(c) Three years from final close.
 

 
KKR
DISTRIBUTION CALCULATION (UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
       
 
Quarter Ended Six Months Ended
June 30, 2015   March 31, 2015   June 30, 2014 June 30, 2015   June 30, 2014
Cash Revenues
Fees $ 271,500 $ 300,075 $ 254,237 $ 571,575 $ 581,860
Realized cash carry 252,227 302,425 555,488 554,652 749,038
Net realized investment income - KKR (ex-KFN) 195,408 191,477 245,711 386,885 438,603
Net realized investment income - KFN 56,258   39,865   36,382   96,123   36,382  
Total Cash Revenues 775,393   833,842   1,091,818   1,609,235   1,805,883  
 
Cash Expenses
Cash compensation and benefits 98,871 107,027 91,444 205,898 200,359
Realized cash carry allocated to carry pool 100,891 120,970 222,195 221,861 299,615
Occupancy and related charges 15,475 14,796 14,757 30,271 28,946
Other operating expenses 51,613   60,946   54,311   112,559   107,112  
Total Cash Expenses 266,850   303,739   382,707   570,589   636,032  
 
Cash income (loss) before noncontrolling interests and local taxes 508,543 530,103 709,111 1,038,646 1,169,851
 
Less: local income taxes (12,753 ) (9,950 ) (4,932 ) (22,703 ) (15,662 )
Less: noncontrolling interests (4,383 ) (3,622 ) (3,206 ) (8,005 ) (6,408 )
Total Distributable Earnings 491,407 516,531 700,973 1,007,938 1,147,781
Less: estimated current corporate income taxes (26,155 ) (28,855 ) (19,025 ) (55,010 ) (52,470 )
Distributable Earnings, net of taxes 465,252 487,676 681,948 952,928 1,095,311
Less: Undistributed net realized investment income - KKR (ex-KFN) (117,245 ) (114,886 ) (147,427 ) (232,131 ) (263,162 )
Distributed Earnings $ 348,007   $ 372,790   $ 534,521   $ 720,797   $ 832,149  
 
Distributable Earnings, net of taxes per KKR & Co. L.P. common unit $ 0.57 $ 0.60 $ 0.85 $ 1.17 $ 1.44
 
Distribution per KKR & Co. L.P. common unit $ 0.42 $ 0.46 $ 0.67 $ 0.88 $ 1.10
                         

Components of Distribution per KKR & Co. L.P. Common Unit

 
After-tax FRE $ 0.07 $ 0.10 $ 0.09 $ 0.17 $ 0.24
Realized Cash Carry $ 0.18 $ 0.22 $ 0.41 $ 0.40 $ 0.58
Distributed Net Realized Investment Income - KKR (ex-KFN) $ 0.10 $ 0.09 $ 0.12 $ 0.19 $ 0.23
Distributed Net Realized Investment Income - KFN       $ 0.07     $ 0.05     $ 0.05     $ 0.12     $ 0.05  
                         
Fee and yield earnings distribution per KKR & Co. L.P. common unit       $ 0.15     $ 0.15     $ 0.15     $ 0.30     $ 0.31  
 
Adjusted Units Eligible For Distribution 820,963,434 813,796,584 803,719,050
 
Payout Ratio 74.8 % 76.4 % 78.4 % 75.6 % 76.0 %
 

KKR

Notes to Reportable Segments (Unaudited)

The segment key performance measures that follow are used by management in making operating and resource deployment decisions as well as assessing the overall performance of each of KKR's reportable business segments. The reportable segments for KKR's business are presented prior to giving effect to the allocation of income (loss) between KKR & Co. L.P. and KKR Holdings L.P. and as such represent the business in total. In addition, KKR's reportable segments are presented without giving effect to the consolidation of the funds that KKR manages.

KKR discloses the following financial measures in this earnings release that are calculated and presented using methodologies other than in accordance with GAAP. We believe that providing these performance measures on a supplemental basis to our GAAP results is helpful to unitholders in assessing the overall performance of KKR's businesses. These financial measures should not be considered as a substitute for similar financial measures calculated in accordance with GAAP. We caution readers that these non-GAAP financial measures may differ from the calculations of other investment managers, and as a result, may not be comparable to similar measures presented by other investment managers. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are included elsewhere within this earnings release.

Fee related earnings ("FRE") is comprised of (i) total management, monitoring and transaction fees, net, plus incentive fees, less (ii) cash compensation and benefits, occupancy and related charges and other operating expenses. It is a measure of the operating earnings of KKR and its business segments before carried interest and related carry pool allocations and investment income and comprises a portion of KKR's quarterly distribution. We believe this measure is useful to unitholders as it provides additional insight into the operating profitability of our fee generating management companies and capital markets businesses. The components of FRE on a segment basis differ from the equivalent GAAP amounts on a consolidated basis as a result of: (i) the inclusion of management fees earned from consolidated funds that were eliminated in consolidation; (ii) the exclusion of fees and expenses of certain consolidated entities; (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-based charges and other non-cash compensation charges borne by KKR Holdings or incurred under the KKR & Co. L.P. 2010 Equity Incentive Plan ("Equity Incentive Plan"); (vi) the exclusion of certain reimbursable expenses; and (vii) the exclusion of certain non-recurring items. After tax FRE represents FRE after deductions for current corporate and local income taxes and noncontrolling interests.

Economic net income (loss) ("ENI") is a measure of profitability for KKR's reportable segments and is used by management as an alternative measurement of the operating and investment earnings of KKR and its business segments. We believe this measure is useful to unitholders as it provides additional insight into the overall profitability of KKR's businesses inclusive of carried interest and related carry pool allocations and investment income. ENI is comprised of total segment revenues less total segment expenses and certain economic interests in KKR's segments held by third parties. ENI differs from net income (loss) on a GAAP basis as a result of: (i) the inclusion of management fees earned from consolidated funds that were eliminated in consolidation; (ii) the exclusion of fees and expenses of certain consolidated entities; (iii) the exclusion of charges relating to the amortization of intangible assets; (iv) the exclusion of non-cash equity-based charges and other non-cash compensation charges borne by KKR Holdings or incurred under the Equity Incentive Plan and other securities that are exchangeable for common units of KKR & Co. L.P.; (v) the exclusion of certain non-recurring items; (vi) the exclusion of investment income (loss) relating to noncontrolling interests; and (vii) the exclusion of income taxes.

Fee and Yield Earnings is comprised of FRE and net interest and dividends from KKR's business segments. This measure is used by management as a measure of the cash earnings of KKR and its business segments' investment income. We believe this measure is useful to unitholders as it provides insight into the amount of KKR's cash earnings, significant portions of which tend to be more recurring than realized carried interest and net realized gains from quarter to quarter.

Fee and Yield EBITDA is comprised of Fee and Yield Earnings before the impact of depreciation of fixed assets and core interest expense. This is used by management as another measure of the cash earnings of KKR and its business segments investment income. We believe this measure is also useful to unitholders as it provides insight into the amount of KKR's cash earnings before the impact of interest expense, significant portions of which tend to be more recurring than realized carried interest and realized investment income from quarter to quarter.

Net realized investment income - KKR (ex-KFN) refers to net cash income from (i) realized investment gains and losses excluding certain realized investment losses to the extent unrealized losses on these investments were recognized prior to the combination with KPE on October 1, 2009, (ii) dividend income, and (iii) interest income net of interest expense in each case generated by KKR (excluding KFN). This term describes a portion of KKR's quarterly distribution and excludes net realized investment income of KFN.

Net realized investment income - KFN refers to net cash income from (i) realized investment gains and losses, (ii) dividend income and (iii) interest income net of interest expense less certain general and administrative expenses incurred in the generation of net realized investment income in each case generated by KFN. This term describes a portion of KKR's quarterly distribution.

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

Total distributable earnings is the sum of (i) FRE, (ii) carry distributions received from KKR's investment funds which have not been allocated as part of its carry pool, (iii) net realized investment income — KKR (ex-KFN) and (iv) net realized investment income — KFN; less (i) applicable local income taxes, if any, and (ii) noncontrolling interests. We believe this measure is useful to unitholders as it provides a supplemental measure to assess performance, excluding the impact of mark-to-market gains (losses), and amounts available for distribution to KKR unitholders. However, total distributable earnings is not a measure that calculates actual distributions under KKR's current distribution policy.

Assets under management ("AUM") represent the assets from which KKR is entitled to receive fees or a carried interest and general partner capital. We believe this measure is useful to unitholders as it provides additional insight into KKR's capital raising activities and the overall activity in its investment funds. 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; (iv) the value of outstanding CLOs (excluding CLOs wholly-owned by KKR); and (v) the fair value of other assets managed by KKR. AUM excludes those assets managed by entities where KKR does not hold more than a 50% ownership interest. KKR's definition of AUM is not based on any definition of AUM that may be set forth in the agreements governing the investment funds, vehicles or accounts that it manages or calculated pursuant to any regulatory definitions.

Fee paying AUM ("FPAUM") represents only those assets under management from which KKR receives management fees. We believe this measure is useful to unitholders as it provides additional insight into the capital base upon which KKR earns management fees. This relates to KKR's capital raising activities and the overall activity in its investment funds or CLOs, for only those funds or CLOs where KKR receives fees (i.e., excluding vehicles that receive only carried interest or general partner capital). 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.

Equity invested is the aggregate amount of equity capital that has been invested by KKR's investment funds and carry-yielding co-investment vehicles and is used as a measure of investment activity for KKR and its business segments during a given period. We believe this measure is useful to unitholders as it provides additional insight into KKR's investments among its investment funds and carry-yielding co-investment vehicles and replaces committed dollars invested. 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's investment funds, including investments made using investment financing arrangements.

Gross dollars invested is the aggregate amount of capital that has been invested by all of KKR's Public Markets investment vehicles in our private credit non-liquid strategies and is used as a measure of investment activity for a portion of KKR's Public Markets segment in a given period. We believe this measure is useful to unitholders as it provides additional insight into KKR's investment of capital across private credit non-liquid strategies for all the investment vehicles in the Public Markets segment. Such amounts include capital invested by fund investors and co-investors with respect to which KKR's Public Markets business is entitled to a fee or carried interest.

Syndicated capital is generally the aggregate amount of capital in transactions originated by KKR and its investment funds and carry-yielding co-investment vehicles, which has been distributed to third parties in exchange for a fee. It does not include (i) capital invested in such transactions by KKR investment funds and carry-yielding co-investment vehicles, which is instead reported in equity invested and (ii) debt capital that is arranged as part of the acquisition financing of transactions originated by KKR investment funds. Syndicated capital is used as a measure of investment activity for KKR and its business segments during a given period, and we believe that this measure is useful to unitholders as it provides additional insight into levels of syndication activity in KKR's Capital Markets segment and across its investment platform.

Uncalled commitments are used as a measure of 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. We believe this measure is useful to unitholders as it provides additional insight into the amount of capital that is available to KKR's investment funds to make future investments. Uncalled commitments are not reduced for investments completed using fund-level investment financing arrangements.

Adjusted units are used as a measure of the total equity ownership of KKR that is held by KKR & Co. L.P. (including equity awards issued under the Equity Incentive Plan), KKR Holdings and other holders of securities exchangeable into common units of KKR & Co. L.P. and represent the fully diluted unit count using the if-converted method. We believe this measure is useful to unitholders as it provides an indication of the total equity ownership of KKR as if all outstanding KKR Holdings units, equity awards issued under the Equity Incentive Plan and other exchangeable securities had been exchanged for common units of KKR & Co. L.P.

Core interest expense is used by management as an alternative measurement of interest expense incurred by KKR on a segment basis and excludes interest expense related to debt obligations from investment financing arrangements related to certain of KKR's investment funds, investment vehicles and principal investments and also excludes interest expense incurred by KFN. The financing arrangements excluded from core interest expense are not direct obligations of the general partners of KKR's private equity funds or its management companies, and in the case of debt obligations of KFN are non-recourse to KKR beyond the assets of KFN. On a segment basis, interest expense is included in net interest and dividends within total investment income. We believe this measure is useful to unitholders as it provides an indication of the amount of interest expense borne by KKR excluding interest expense that is allocated to KKR's investment funds, other noncontrolling interest holders and KFN. Additionally, we believe this measure is useful for analyzing KKR's ability to service its debt obligations other than the debt obligations of KFN.

Book value is a measure of the net assets of KKR's reportable segments and is used by management primarily in assessing the unrealized value of KKR's investment portfolio, including carried interest, as well as KKR's overall liquidity position. We believe this measure is useful to unitholders as it provides additional insight into the assets and liabilities of KKR excluding the assets and liabilities that are allocated to noncontrolling interest holders. Book value differs from KKR & Co. L.P. partners' capital on a GAAP basis primarily as a result of the exclusion of ownership interests attributable to KKR Holdings.

Cash and short-term investments represent cash and liquid short-term investments in high-grade, short-duration cash management strategies used by KKR to generate additional yield on our excess liquidity and is used by management in evaluating KKR's liquidity position. We believe this measure is useful to unitholders as it provides additional insight into KKR's available liquidity. Cash and short-term investments differ from cash and cash equivalents on a GAAP basis as a result of the inclusion of liquid short-term investments in cash and short-term investments.

Return on equity measures the amount of net income generated as a percentage of capital invested in KKR's business. Return on equity is calculated by dividing Economic Net Income (Loss), After Taxes on a trailing twelve-month basis by the average book value during the period.

Cash return on equity measures the amount of cash income generated as a percentage of capital invested in KKR's business. Cash return on equity is calculated by dividing Distributable Earnings, net of taxes on a trailing twelve-month basis by the average book value during the period.

 
KKR

EXHIBIT A

KKR'S PORTION OF TOTAL UNCALLED COMMITMENTS TO ITS INVESTMENT FUNDS
(Amounts in thousands)
     
 
Uncalled

Commitments

Private Markets

European Fund IV $ 184,700
North America Fund XI 166,900
Energy Income and Growth Fund 157,200
Global Infrastructure Investors II 121,600
Real Estate Partners Americas 100,700
European Fund III 63,500
Asian Fund II 51,800
2006 Fund 22,700
Co-Investment Vehicles 69,700
Other Private Markets Funds 13,500
Total Private Markets Commitments 952,300
 

Public Markets

Special Situations Fund 19,600
Special Situations Fund II 142,900
Mezzanine Fund 7,000
Lending Partners 12,500
Lending Partners II 33,800
Lending Partners Europe 33,800
Other Alternative Credit Vehicles 65,600
Total Public Markets Commitments 315,200
 
Total Uncalled Commitments $ 1,267,500
 

 
KKR

EXHIBIT B

RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. PER COMMON UNIT - BASIC (GAAP BASIS)
TO ENI AFTER TAXES PER ADJUSTED UNIT (UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
     
Quarter Ended
June 30, 2015   March 31, 2015   June 30, 2014
 
Net income (loss) attributable to KKR & Co. L.P. per common unit - Basic $ 0.84   $ 0.62   $ 0.47
Weighted Average Common Units Outstanding - Basic 446,794,950 434,874,820 377,542,161
Net income (loss) attributable to KKR & Co. L.P. 376,306 270,507 178,215
Plus: Net income (loss) attributable to noncontrolling

interests held by KKR Holdings L.P.

325,703 239,008 186,776
Plus: Non-cash equity-based charges 69,478 76,550 92,957
Plus: Amortization of intangibles and other, net 37,910 (2,790 ) 37,455
Plus: Income taxes 30,547   16,138   6,176
Economic net income (loss) 839,944 599,413 501,579
Less: Provision for income taxes 44,836 21,235 6,330
Less: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 48,453   52,265   40,877
Economic net income (loss) after taxes 746,655 525,913 454,372
Weighted Average Adjusted Units 852,128,762   848,061,661   800,747,528
Economic net income (loss) after taxes per adjusted unit $ 0.88   $ 0.62   $ 0.57
 
 
Six Months Ended
June 30, 2015 June 30, 2014
 
Net income (loss) attributable to KKR & Co. L.P. per common unit - Basic $ 1.47   $ 1.16  
Weighted Average Common Units Outstanding - Basic 440,867,813 335,748,498
Net income (loss) attributable to KKR & Co. L.P. 646,813 388,256
Plus: Net income (loss) attributable to noncontrolling

interests held by KKR Holdings L.P.

564,711 487,590
Plus: Non-cash equity-based charges 146,028 170,485
Plus: Amortization of intangibles and other, net 35,120 57,624
Plus: Income taxes 46,685   27,878  
Economic net income (loss) 1,439,357 1,131,833
Less: Provision for income taxes 66,071 42,911
Less: Equity-based charges associated with the KKR & Co. L.P. 2010 equity incentive plan 100,718   80,230  
Economic net income (loss) after taxes 1,272,568 1,008,692
Weighted Average Adjusted Units 850,106,448   762,873,784  
Economic net income (loss) after taxes per adjusted unit $ 1.50   $ 1.32  
 

 
KKR

EXHIBIT B (CONTINUED)

RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. (GAAP BASIS)
TO ECONOMIC NET INCOME (LOSS), FEE RELATED EARNINGS, FEE AND YIELD EARNINGS, FEE AND YIELD EBITDA, TOTAL DISTRIBUTABLE EARNINGS, AND TOTAL EBITDA (UNAUDITED)
(Amounts in thousands)
   
Quarter Ended
June 30, 2015   March 31, 2015   June 30, 2014
 
Net income (loss) attributable to KKR & Co. L.P. $ 376,306 $ 270,507 $ 178,215
Plus: Net income (loss) attributable to noncontrolling

interests held by KKR Holdings L.P.

325,703 239,008 186,776
Plus: Non-cash equity-based charges 69,478 76,550 92,957
Plus: Amortization of intangibles and other, net 37,910 (2,790 ) 37,455
Plus: Income taxes 30,547   16,138   6,176
Economic net income (loss) 839,944 599,413 501,579
Plus: Income attributable to segment noncontrolling interests 4,383 3,622 3,206
Less: Total investment income (loss) 383,650 220,621 162,158
Less: Net carried interest 355,136   265,108   248,902
Fee related earnings 105,541 117,306 93,725
Plus: Net interest and dividends 75,406   50,675   60,432
Fee and yield earnings 180,947 167,981 154,157
Plus: Depreciation and amortization 3,918 3,881 4,140
Plus: Core interest expense 30,750   25,332   19,205
Fee and yield EBITDA 215,615 197,194 177,502
Less: Depreciation and amortization 3,918 3,881 4,140
Less: Core interest expense 30,750 25,332 19,205
Less: Net interest and dividends 75,406 50,675 60,432
Plus: Realized cash carry, net of realized cash carry allocated to carry pool 151,336 181,455 333,293
Plus: Net realized investment income - KKR (ex-KFN) 195,408 191,477 245,711
Plus: Net realized investment income - KFN 56,258 39,865 36,382
Less: Local income taxes and noncontrolling interests 17,136   13,572   8,138
Total distributable earnings 491,407   516,531   700,973
Plus: Depreciation and amortization 3,918 3,881 4,140
Plus: Core interest expense 30,750 25,332 19,205
Plus: Local income taxes and noncontrolling interests 17,136   13,572   8,138
Total EBITDA $ 543,211   $ 559,316   $ 732,456
 
 
Six Months Ended
June 30, 2015 June 30, 2014
 
Net income (loss) attributable to KKR & Co. L.P. $ 646,813 $ 388,256
Plus: Net income (loss) attributable to noncontrolling

interests held by KKR Holdings L.P.

564,711 487,590
Plus: Non-cash equity-based charges 146,028 170,485
Plus: Amortization of intangibles and other, net 35,120 57,624
Plus: Income taxes 46,685   27,878  
Economic net income (loss) 1,439,357 1,131,833
Plus: Income attributable to segment noncontrolling interests 8,005 6,408
Less: Total investment income (loss) 604,271 440,809
Less: Net carried interest 620,244   451,989  
Fee related earnings 222,847 245,443
Plus: Net interest and dividends 126,081   71,596  
Fee and yield earnings 348,928 317,039
Plus: Depreciation and amortization 7,799 8,175
Plus: Core interest expense 56,082   37,605  
Fee and yield EBITDA 412,809 362,819
Less: Depreciation and amortization 7,799 8,175
Less: Core interest expense 56,082 37,605
Less: Net interest and dividends 126,081 71,596
Plus: Realized cash carry, net of realized cash carry allocated to carry pool 332,791 449,423
Plus: Net realized investment income - KKR (ex-KFN) 386,885 438,603
Plus: Net realized investment income - KFN 96,123 36,382
Less: Local income taxes and noncontrolling interests 30,708   22,070  
Total distributable earnings 1,007,938   1,147,781  
Plus: Depreciation and amortization 7,799 8,175
Plus: Core interest expense 56,082 37,605
Plus: Local income taxes and noncontrolling interests 30,708   22,070  
Total EBITDA $ 1,102,527   $ 1,215,631  
 

 
KKR

EXHIBIT B (CONTINUED)

RECONCILIATION OF KKR & CO. L.P. PARTNERS' CAPITAL (GAAP BASIS)
TO BOOK VALUE AND BOOK VALUE PER ADJUSTED UNIT (UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
       
As of As of
June 30, 2015 December 31, 2014
 
KKR & Co. L.P. partners' capital $ 5,947,415 $ 5,382,691
Noncontrolling interests held by KKR Holdings L.P. 4,827,384 4,661,679
Equity impact of KKR Management Holdings Corp. and other 108,448   73,855
 
Book value 10,883,247 10,118,225
Adjusted units 852,145,905   838,020,974
Book value per adjusted unit $ 12.77   $ 12.07
 
             
 
 
RECONCILIATION OF CASH AND CASH EQUIVALENTS (GAAP BASIS)
TO CASH AND SHORT-TERM INVESTMENTS (UNAUDITED)
(Amounts in thousands)
As of As of
June 30, 2015 December 31, 2014
 
Cash and cash equivalents $ 1,824,686 $ 918,080
Liquid short-term investments 201,093   203,305
Cash and short-term investments $ 2,025,779   $ 1,121,385
 

 
KKR

EXHIBIT C

RECONCILIATION OF WEIGHTED AVERAGE GAAP COMMON UNITS OUTSTANDING - BASIC TO WEIGHTED AVERAGE ADJUSTED UNITS (UNAUDITED)
 
The following table provides a reconciliation of KKR's Weighted Average GAAP Common Units Outstanding to Weighted Average Adjusted Units.
 
Quarter Ended
June 30, 2015   March 31, 2015   June 30, 2014
Weighted Average GAAP Common Units Outstanding - Basic 446,794,950 434,874,820 377,542,161
Adjustments:
Weighted Average Unvested Common Units and Other Securities (a) 35,856,541   37,350,524   32,637,677
Weighted Average GAAP Common Units Outstanding - Diluted 482,651,491 472,225,344 410,179,838
Adjustments:
Weighted Average KKR Holdings Units (b) 369,477,271   375,836,317   390,567,690
Weighted Average Adjusted Units 852,128,762   848,061,661   800,747,528
             
 
Six Months Ended
June 30, 2015 June 30, 2014
Weighted Average GAAP Common Units Outstanding - Basic 440,867,813 335,748,498
Adjustments:
Weighted Average Unvested Common Units and Other Securities (a) 36,599,407   32,128,551  
Weighted Average GAAP Common Units Outstanding - Diluted 477,467,220 367,877,049
Adjustments:
Weighted Average KKR Holdings Units (b) 372,639,228   394,996,735  
Weighted Average Adjusted Units 850,106,448   762,873,784  
 
             
 
RECONCILIATION OF GAAP COMMON UNITS OUTSTANDING - BASIC TO ADJUSTED UNITS AND ADJUSTED UNITS ELIGIBLE FOR DISTRIBUTION (UNAUDITED)
 
The following table provides a reconciliation of KKR's GAAP Common Units Outstanding to Adjusted Units and Adjusted Units Eligible for Distribution.
 
As of As of
June 30, 2015 December 31, 2014
GAAP Common Units Outstanding - Basic 450,396,361 433,330,540
Unvested Common Units and Other Securities (a) 34,262,715   27,493,685  
GAAP Common Units Outstanding - Diluted 484,659,076 460,824,225
Adjustments:
KKR Holdings Units (b) 367,486,829   377,196,749  
Adjusted Units 852,145,905   838,020,974  
Adjustments:
Unvested Common Units and Unvested Other Securities (a) (31,182,471 ) (24,373,441 )
Adjusted Units Eligible For Distribution 820,963,434   813,647,533  
 
(a)   Represents equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan and other securities that are exchangeable into KKR & Co. L.P common units. The issuance of common units of KKR & Co. L.P. pursuant to such equity awards or other securities dilutes KKR common unitholders and KKR Holdings pro rata in accordance with their respective percentage interests in the KKR business.
(b) Common units that may be issued by KKR & Co. L.P. upon exchange of units in KKR Holdings L.P. for KKR common units.

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

Source: Kohlberg Kravis Roberts & Co. L.P.

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