Assets under management (“AUM”) totaled $61.0 billion as of March 31, 2011, up from $54.7 billion as of March 31, 2010.

Fee related earnings (“FRE”) were $126.2 million for the quarter ended March 31, 2011, up from $90.4 million for the quarter ended March 31, 2010.

Gross distributable earnings¹ were $192.9 million for the quarter ended March 31, 2011, up from $84.8 million for the quarter ended March 31, 2010.

Economic net income (“ENI”) was $742.5 million for the quarter ended March 31, 2011, up from $674.8 million for the quarter ended March 31, 2010.

After-tax ENI was $0.96 per adjusted unit for the quarter ended March 31, 2011, up from $0.93 per adjusted unit for the quarter ended March 31, 2010.

GAAP net income attributable to KKR & Co. L.P. was $159.6 million for the quarter ended March 31, 2011, up from $113.8 million for the quarter ended March 31, 2010.

Book value was $6.2 billion on a segment basis as of March 31, 2011, representing $9.08 per adjusted unit.

KKR & Co. L.P. declares a first quarter distribution of $0.21 per common unit.

 

NEW YORK–(BUSINESS WIRE)– KKR & Co. L.P. (NYSE: KKR) today reported its first quarter results for 2011. ENI was $742.5 million for the quarter ended March 31, 2011, an increase of $67.7 million or 10.0%, as compared to ENI of $674.8 million for the quarter ended March 31, 2010. The 6.5% appreciation of KKR’s private equity investments along with increased fees in our private markets segment were the key contributors to the positive results.

AUM was $61.0 billion as of March 31, 2011, up 11.6% from March 31, 2010. The increase resulted from continued investment appreciation as well as new capital raised, partially offset by distributions to the limited partners of our funds. Fee paying assets under management (“FPAUM”) were $45.7 billion as of March 31, 2011, up 7.5% from March 31, 2010, driven primarily by new capital raised.

“The first quarter represented a good start to 2011 for each of our businesses. In particular, this quarter’s strong financial results benefited from a growing number of monetization and exit events across our private equity portfolio, which generated the most distributable cash carry we have had in a quarter since going public. We also achieved meaningful outperformance in our credit strategies, all of which continue to outperform benchmark indices. Finally, our capital markets business has continued to scale, demonstrating well rounded transaction activity across geographies and products,” said Henry R. Kravis and George R. Roberts, Co-Founders, Co-Chairmen and Co-Chief Executive Officers of KKR.

^{_______________________________________________________________________________________________________________________________}

Note: Certain financial measures, including FRE, ENI, after-tax ENI and adjusted units, are not presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). See Exhibits A and B for a reconciliation of such measures to financial results prepared in accordance with GAAP.

¹ See Distribution Calculation on page 18 for the calculation of gross distributable earnings.

GAAP RESULTS

Net income attributable to KKR & Co. L.P. for the quarter ended March 31, 2011 was $159.6 million or $0.75 per common unit, an increase of $45.8 million or $0.19 per common unit, as compared to net income attributable to KKR & Co. L.P. of $113.8 million or $0.56 per common unit for the quarter ended March 31, 2010. The growth was primarily driven by an increase in fees earned and a decrease in equity-based payments recognized.

SEGMENT RESULTS

Private Markets

AUM in the private markets segment was $46.2 billion as of March 31, 2011, unchanged from December 31, 2010, as appreciation in KKR’s private equity portfolio was offset by distributions to limited partners arising from realizations.

FPAUM in the private markets segment was $37.9 billion as of March 31, 2011, a decrease of $0.3 billion or 0.8%, as compared to FPAUM of $38.2 billion as of December 31, 2010. The decrease was primarily due to realization activity in KKR’s private equity portfolio, partially offset by favorable changes in foreign exchange related to Euro denominated commitments and invested capital as well as new capital raised.

FRE in the private markets segment was $90.6 million for the quarter ended March 31, 2011, an increase of $34.4 million or 61.2%, as compared to FRE of $56.2 million for the quarter ended March 31, 2010. The increase was primarily due to (i) higher monitoring fees as a result of $68.8 million of termination payments on monitoring agreements with two portfolio companies during the first quarter of 2011, which impacted FRE by $37.8 million net of associated fee credits and (ii) higher transaction fees as a result of an increase in transaction fee-generating investment activity. These increases were partially offset by higher compensation and other operating expenses.

ENI in the private markets segment was $276.7 million for the quarter ended March 31, 2011, an increase of $83.0 million or 42.8%, as compared to ENI of $193.7 million for the quarter ended March 31, 2010. The increase was primarily due to higher net carried interest resulting from a lower level of management fee refunds and the increase in FRE discussed above.

Public Markets

AUM and FPAUM in the public markets segment as of March 31, 2011 were $14.8 billion and $7.8 billion, respectively, both unchanged from December 31, 2010. Appreciation in the net asset value of certain investment vehicles and new capital raised were largely offset by redemptions.

FRE in the public markets segment was $14.5 million for the quarter ended March 31, 2011, a decrease of $1.2 million or 7.6%, as compared to FRE of $15.7 million for the quarter ended March 31, 2010. The decrease was primarily due to higher compensation and other operating expenses in connection with the development of the equity strategies platform, partially offset by an increase in management fees related to new capital raised.

ENI in the public markets segment was $15.9 million for the quarter ended March 31, 2011, a decrease of $0.4 million or 2.5%, as compared to ENI of $16.3 million for the quarter ended March 31, 2010. The decrease was primarily due to the decline in FRE discussed above, partially offset by higher net carried interest resulting from an increase in the amount of carry-generating invested capital as compared to the prior period.

Capital Markets and Principal Activities

FRE in the capital markets and principal activities segment was $21.1 million for the quarter ended March 31, 2011, an increase of $2.6 million or 14.1%, as compared to FRE of $18.5 million for the quarter ended March 31, 2010. The increase was primarily due to a higher level of overall capital markets transaction activity resulting from an improved environment and the continued growth of this business.

ENI in the capital markets and principal activities segment was $449.9 million for the quarter ended March 31, 2011, a decrease of $14.9 million or 3.2%, as compared to ENI of $464.8 million for the quarter ended March 31, 2010. The decrease was primarily due to a lower level of investment income. While the fair value of KKR’s principal investments increased during the first quarter of 2011, the level of appreciation was slightly lower than in the first quarter of 2010.

CAPITAL AND LIQUIDITY

As of March 31, 2011, KKR had an available cash balance of $1.1 billion and $500.0 million of outstanding debt obligations under its senior notes. 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 March 31, 2011).

As of March 31, 2011, KKR’s portion of total uncalled commitments to its investment funds was $864.8 million, consisting of the following (amounts in thousands):

		Commitments
Private Markets
2006 Fund		$	313,327
European Fund III			297,452
Asian Fund			115,476
Infrastructure Fund			50,000
E2 Investors (Annex Fund)			30,833
China Growth Fund			8,506
Natural Resources I			5,936
Other Private Markets Commitments			1,126
Total Private Markets Commitments			822,656
Public Markets
Mezzanine Fund			30,300
Special Situations Vehicles			11,800
Total Public Markets Commitments			42,100
Total Uncalled Commitments		$	864,756

DISTRIBUTION

A distribution of $0.21 per common unit will be paid on May 27, 2011 to unitholders of record as of the close of business on May 16, 2011.

CONFERENCE CALL

A conference call to discuss KKR’s financial results will be held on Wednesday, May 4, 2011 at 10:00 a.m. EDT. The conference call may be accessed by dialing (888) 211-7360 (U.S. callers) or +1 (913) 312-1390 (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 6213651, 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 Relations section of KKR’s website at www.kkr.com. In addition, you may automatically receive email alerts and other information about KKR by enrolling your email within the “Email Alerts” area of the Investor Relations section of the website.

ABOUT KKR

Founded in 1976 and led by Henry Kravis and George Roberts, KKR is a leading global investment firm with $61.0 billion in assets under management as of March 31, 2011. With 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 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 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 general volatility of the capital markets; failure to realize the benefits of or changes in KKR’s business strategies; 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, 2010, filed with the SEC on March 7, 2011 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
				March 31, 2011				March 31, 2010
Revenues
	Fees			$	231,843			$	106,031
Expenses
	Compensation and Benefits				356,554				365,531
	Occupancy and Related Charges				12,554				9,685
	General, Administrative and Other				45,121				77,724
	Fund Expenses				9,523				10,368
		Total Expenses			423,752				463,308
Investment Income (Loss)
	Net Gains (Losses) from Investment Activities				2,487,209				2,286,553
	Dividend Income				4,808				442,907
	Interest Income				65,368				48,303
	Interest Expense				(17,252	)			(13,827	)
		Total Investment Income (Loss)			2,540,133				2,763,936
Income (Loss) Before Taxes					2,348,224				2,406,659
Income Taxes					30,783				13,452
Net Income (Loss)					2,317,441				2,393,207
Less: Net Income (Loss) Attributable to
	Noncontrolling Interests in Consolidated Entities				1,748,972				1,987,130
Less: Net Income (Loss) Attributable to
	Noncontrolling Interests Held by KKR Holdings L.P.				408,904				292,241
		Net Income (Loss) Attributable to KKR & Co. L.P.		$	159,565			$	113,836
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit
	Basic			$	0.75			$	0.56
	Diluted (a)			$	0.75			$	0.56
Weighted Average Common Units Oustanding
	Basic				213,479,630				204,902,226
	Diluted (a)				213,509,630				204,902,226

______________________________________________________________________________________________________________

(a) KKR Holdings L.P. 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
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
							Quarter Ended
							March 31, 2011				December 31, 2010				March 31, 2010
Fees
	Management and incentive fees:
		Management fees					$	127,550			$	119,043			$	111,029
		Incentive fees						12,013				8,427				12,500
			Management and incentive fees					139,563				127,470				123,529
	Monitoring and transaction fees:
		Monitoring fees						90,427				22,108				22,532
		Transaction fees						87,276				86,774				55,534
		Fee credits						(72,992	)			(21,671	)			(14,267	)
			Net monitoring and transaction fees					104,711				87,211				63,799
	Total fees							244,274				214,681				187,328
Expenses
	Compensation and benefits							63,140				55,594				52,253
	Occupancy and related charges							11,859				10,124				9,685
	Other operating expenses							43,072				53,872				35,001
	Total expenses							118,071				119,590				96,939
Fee Related Earnings								126,203				95,091				90,389
Investment income (loss)
	Gross carried interest							332,121				416,442				323,211
	Less: allocation to KKR carry pool							(139,515	)			(169,305	)			(99,382	)
	Less: management fee refunds (a)							(4,804	)			(24,412	)			(83,740	)
		Net carried interest						187,802				222,725				140,089
	Other investment income (loss)							430,175				398,389				444,702
		Total investment income (loss)						617,977				621,114				584,791
Income (Loss) before noncontrolling interests
	in Income of consolidated entities							744,180				716,205				675,180
Income (Loss) attributable to
	noncontrolling interests							1,660				1,592				376
Economic Net Income (Loss)							$	742,520			$	714,613			$	674,804
Provision for Income Taxes								88,739				17,400				40,078
Economic Net Income, After Taxes (b)							$	653,781			$	697,213			$	634,726
Economic Net Income, After Taxes per Adjusted Unit (c)							$	0.96			$	1.02			$	0.93
Assets Under Management							$	61,043,200			$	60,997,500			$	54,708,700
Fee Paying Assets Under Management							$	45,716,600			$	46,011,100			$	42,528,900
Committed Dollars Invested							$	1,127,100			$	2,691,000			$	1,142,700
Uncalled Commitments							$	13,303,600			$	14,074,700			$	14,234,800
Other Information
Fee Related Earnings							$	126,203			$	95,091			$	90,389
Plus: Depreciation and Amortization								2,641				2,790				2,438
	Fee Related EBITDA						$	128,844			$	97,881			$	92,827
Gross Distributable Earnings							$	192,938			$	157,346			$	84,813
GAAP interest expense							$	17,252			$	18,706			$	13,827
Less: interest expense related to debt obligations
	from investment financing arrangements							6,557				7,535				7,628
		Core Interest Expense (d)					$	10,695			$	11,171			$	6,199

______________________________________________________________________________________________________________

(a) As of March 31, 2011, $62.4 million of carried interest is subject to management fee refunds, which may reduce carried interest in future periods.

(b) ENI, After Taxes is calculated by deducting from ENI the implied income tax provision that has been calculated assuming that all income is allocated to KKR & Co. L.P., which would occur following an exchange of all KKR Holdings units for common units of KKR & Co. L.P. The assumptions and methodology used to calculate the implied income tax provision are consistent with those used in calculating the tax provision for KKR & Co. L.P. under GAAP. The implied income tax provision does not give effect to any tax savings or deductions that may result from the exchange of KKR Holdings units.

(c) Adjusted units represent the weighted-average fully diluted unit count for Economic Net Income purposes using the if-converted method. See Exhibit B for a reconciliation of this item to the comparable GAAP measure.

(d) Core interest expense excludes interest expense related to debt obligations from investment financing arrangements related to certain of KKR’s private equity funds and principal investments. These financing arrangements are not direct obligations of the general partners of KKR’s private equity funds or its management companies. On a segment basis, interest expense is included in other investment income.

KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PRIVATE MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
						Quarter Ended
						March 31, 2011				December 31, 2010				March 31, 2010
Fees
	Management and incentive fees:
		Management fees				$	110,257			$	102,684			$	98,160
		Incentive fees					–				–				–
			Management and incentive fees				110,257				102,684				98,160
	Monitoring and transaction fees:
		Monitoring fees					90,427				22,108				22,532
		Transaction fees					53,178				30,942				25,114
		Fee credits					(70,787	)			(15,673	)			(10,077	)
			Net monitoring and transaction fees				72,818				37,377				37,569
	Total fees						183,075				140,061				135,729
Expenses
	Compensation and benefits						45,975				42,396				40,841
	Occupancy and Related Charges						10,575				9,206				8,925
	Other operating expenses						35,884				47,392				29,746
	Total expenses						92,434				98,994				79,512
Fee Related Earnings							90,641				41,067				56,217
Investment income (loss)
	Gross carried interest						329,047				414,025				322,840
	Less: allocation to KKR carry pool						(138,285	)			(168,338	)			(99,233	)
	Less: management fee refunds						(4,804	)			(24,412	)			(83,740	)
		Net carried interest					185,958				221,275				139,867
	Other investment income (loss)						1,067				(111	)			(2,594	)
		Total investment income (loss)					187,025				221,164				137,273
Income (Loss) before noncontrolling interests
	in Income of consolidated entities						277,666				262,231				193,490
Income (Loss) attributable to
	noncontrolling interests						927				259				(250	)
Economic Net Income (Loss)						$	276,739			$	261,972			$	193,740
Assets Under Management						$	46,239,100			$	46,223,900			$	40,943,100
Fee Paying Assets Under Management						$	37,883,600			$	38,186,700			$	35,901,900
Committed Dollars Invested						$	809,700			$	2,371,500			$	995,500
Uncalled Commitments						$	12,071,700			$	12,625,900			$	12,844,300

KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PUBLIC MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
						Quarter Ended
						March 31, 2011				December 31, 2010				March 31, 2010
Fees
	Management and incentive fees:
		Management fees				$	17,293			$	16,359			$	12,869
		Incentive fees					12,013				8,427				12,500
			Management and incentive fees				29,306				24,786				25,369
	Monitoring and transaction fees:
		Monitoring fees					–				–				–
		Transaction fees					3,729				9,292				5,823
		Fee credits					(2,205	)			(5,998	)			(4,190	)
			Net monitoring and transaction fees				1,524				3,294				1,633
	Total fees						30,830				28,080				27,002
Expenses
	Compensation and benefits						11,159				7,586				7,142
	Occupancy and related charges						955				612				568
	Other operating expenses						4,208				3,580				3,597
	Total expenses						16,322				11,778				11,307
Fee Related Earnings							14,508				16,302				15,695
Investment income (loss)
	Gross carried interest						3,074				2,417				371
	Less: allocation to KKR carry pool						(1,230	)			(967	)			(149	)
	Less: management fee refunds						–				–				–
		Net carried interest					1,844				1,450				222
	Other investment income (loss)						(351	)			188				508
		Total investment income (loss)					1,493				1,638				730
Income (Loss) before noncontrolling interests
	in Income of consolidated entities						16,001				17,940				16,425
Income (Loss) attributable to
	noncontrolling interests						138				157				145
Economic Net Income (Loss)						$	15,863			$	17,783			$	16,280
Assets Under Management						$	14,804,100			$	14,773,600			$	13,765,600
Fee Paying Assets Under Management						$	7,833,000			$	7,824,400			$	6,627,000
Committed Dollars Invested						$	317,400			$	319,500			$	147,200
Uncalled Commitments						$	1,231,900			$	1,448,800			$	1,390,500

KKR
STATEMENTS OF OPERATIONS
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT (UNAUDITED)
(Amounts in thousands)
						Quarter Ended
						March 31, 2011			December 31, 2010			March 31, 2010
Fees
	Management and incentive fees:
		Management fees				$	–		$	–		$	–
		Incentive fees					–			–			–
			Management and incentive fees				–			–			–
	Monitoring and transaction fees:
		Monitoring fees					–			–			–
		Transaction fees					30,369			46,540			24,597
		Fee credits					–			–			–
			Net monitoring and transaction fees				30,369			46,540			24,597
	Total fees						30,369			46,540			24,597
Expenses
	Compensation and benefits						6,006			5,612			4,270
	Occupancy and related charges						329			306			192
	Other operating expenses						2,980			2,900			1,658
	Total expenses						9,315			8,818			6,120
Fee Related Earnings							21,054			37,722			18,477
Investment income (loss)
	Gross carried interest						–			–			–
	Less: allocation to KKR carry pool						–			–			–
	Less: management fee refunds						–			–			–
		Net carried interest					–			–			–
	Other investment income (loss)						429,459			398,312			446,788
		Total investment income (loss)					429,459			398,312			446,788
Income (Loss) before noncontrolling interests
	in Income of consolidated entities						450,513			436,034			465,265
Income (Loss) attributable to
	noncontrolling interests						595			1,176			481
Economic Net Income (Loss)						$	449,918		$	434,858		$	464,784

KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Quarter Ended March 31, 2011
(Amounts in thousands)
															Capital Markets			Total
							Private Markets				Public Markets				and Principal			Reportable
							Segment				Segment				Activities Segment			Segments
Fees
	Management and incentive fees:
		Management fees					$	110,257			$	17,293			$	–		$	127,550
		Incentive fees						–				12,013				–			12,013
			Management and incentive fees					110,257				29,306				–			139,563
	Monitoring and transaction fees:
		Monitoring fees						90,427				–				–			90,427
		Transaction fees						53,178				3,729				30,369			87,276
		Fee credits						(70,787	)			(2,205	)			–			(72,992	)
			Net monitoring and transaction fees					72,818				1,524				30,369			104,711
	Total fees							183,075				30,830				30,369			244,274
Expenses
	Compensation and benefits							45,975				11,159				6,006			63,140
	Occupancy and related charges							10,575				955				329			11,859
	Other operating expenses							35,884				4,208				2,980			43,072
	Total expenses							92,434				16,322				9,315			118,071
Fee Related Earnings								90,641				14,508				21,054			126,203
Investment income (loss)
	Gross carried interest							329,047				3,074				–			332,121
	Less: allocation to KKR carry pool							(138,285	)			(1,230	)			–			(139,515	)
	Less: management fee refunds							(4,804	)			–				–			(4,804	)
		Net carried interest						185,958				1,844				–			187,802
	Other investment income (loss)							1,067				(351	)			429,459			430,175
		Total investment income (loss)						187,025				1,493				429,459			617,977
Income (Loss) before noncontrolling interests
	in Income of consolidated entities							277,666				16,001				450,513			744,180
Income (Loss) attributable to
	noncontrolling interests							927				138				595			1,660
Economic Net Income (Loss)							$	276,739			$	15,863			$	449,918		$	742,520

KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Quarter Ended December 31, 2010
(Amounts in thousands)
															Capital Markets			Total
							Private Markets				Public Markets				and Principal			Reportable
							Segment				Segment				Activities Segment			Segments
Fees
	Management and incentive fees:
		Management fees					$	102,684			$	16,359			$	–		$	119,043
		Incentive fees						–				8,427				–			8,427
			Management and incentive fees					102,684				24,786				–			127,470
	Monitoring and transaction fees:
		Monitoring fees						22,108				–				–			22,108
		Transaction fees						30,942				9,292				46,540			86,774
		Fee credits						(15,673	)			(5,998	)			–			(21,671	)
			Net monitoring and transaction fees					37,377				3,294				46,540			87,211
	Total fees							140,061				28,080				46,540			214,681
Expenses
	Compensation and benefits							42,396				7,586				5,612			55,594
	Occupancy and related charges							9,206				612				306			10,124
	Other operating expenses							47,392				3,580				2,900			53,872
	Total expenses							98,994				11,778				8,818			119,590
Fee Related Earnings								41,067				16,302				37,722			95,091
Investment income (loss)
	Gross carried interest							414,025				2,417				–			416,442
	Less: allocation to KKR carry pool							(168,338	)			(967	)			–			(169,305	)
	Less: management fee refunds							(24,412	)			–				–			(24,412	)
		Net carried interest						221,275				1,450				–			222,725
	Other investment income (loss)							(111	)			188				398,312			398,389
		Total investment income (loss)						221,164				1,638				398,312			621,114
Income (Loss) before noncontrolling interests
	in Income of consolidated entities							262,231				17,940				436,034			716,205
Income (Loss) attributable to
	noncontrolling interests							259				157				1,176			1,592
Economic Net Income (Loss)							$	261,972			$	17,783			$	434,858		$	714,613

KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Quarter Ended March 31, 2010
(Amounts in thousands)
															Capital Markets			Total
							Private Markets				Public Markets				and Principal			Reportable
							Segment				Segment				Activities Segment			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
	Compensation and benefits							40,841				7,142				4,270			52,253
	Occupancy and related charges							8,925				568				192			9,685
	Other operating expenses							29,746				3,597				1,658			35,001
	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

KKR
BALANCE SHEETS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except per unit amounts)
As of March 31, 2011
		Private Markets Segment				Public Markets Segment			Capital Markets and Principal Activities Segment				Total Reportable Segments
Cash and cash equivalents		$	400,668			$	6,324		$	659,052			$	1,066,044
Investments			–				–			5,045,625	(a)			5,045,625
Unrealized carry			615,573				4,845			–				620,418
Other assets			120,316				54,608			77,452				252,376
Total assets		$	1,136,557			$	65,777		$	5,782,129			$	6,984,463
Debt obligations		$	–			$	–		$	500,000			$	500,000
Other liabilities			218,536				10,987			36,941				266,464
Total liabilities		$	218,536			$	10,987		$	536,941			$	766,464
Noncontrolling interests			(1,082	)			747			16,773				16,438
Partners’ capital		$	919,103			$	54,043		$	5,228,415			$	6,201,561
Book value per adjusted unit (b)		$	1.35			$	0.08		$	7.65			$	9.08
As of December 31, 2010
		Private Markets Segment				Public Markets Segment			Capital Markets and Principal Activities Segment				Total Reportable Segments
Cash and cash equivalents		$	229,729			$	10,007		$	516,544			$	756,280
Investments			–				–			4,831,798				4,831,798
Unrealized carry			523,002				3,001			–				526,003
Other assets			194,424				53,222			39,730				287,376
Total assets		$	947,155			$	66,230		$	5,388,072			$	6,401,457
Debt obligations		$	–			$	–		$	500,000			$	500,000
Other liabilities			104,248				10,193			45,837				160,278
Total liabilities			104,248				10,193			545,837				660,278
Noncontrolling interests			(1,750	)			766			16,537				15,553
Partners’ capital		$	844,657			$	55,271		$	4,825,698			$	5,725,626
Book value per adjusted unit (b)		$	1.24			$	0.08		$	7.06			$	8.38

_______________________________________________________________________________

(a) See capital markets and principal activities segment schedule of investments that follows in this press release.

(b) Adjusted units represent the fully diluted unit count using the if-converted method. See Exhibit B for a reconciliation of this item to the comparable GAAP measure.

KKR
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT
SCHEDULE OF INVESTMENTS
(Amounts in thousands, except percentage amounts)
		As of March 31, 2011
								Fair Value as
								a Percentage
Investment		Cost			Fair Value			of Total Investments
Private Equity Investments:
Co-investments in portfolio companies of
private equity funds:
Dollar General Corporation		$	164,291		$	588,630		11.7	%
HCA Inc.			171,228			512,286		10.2
Alliance Boots GmbH.			301,352			312,870		6.2
The Nielsen Company B.V.			156,839			284,732		5.6
NXP B.V.			250,000			282,357		5.6
Biomet, Inc.			151,443			151,443		3.0
U.S. Foodservice, Inc.			100,000			120,000		2.4
ProSiebenSat.1 Media AG			226,913			113,149		2.2
First Data Corporation			135,258			81,155		1.6
KION Group GmbH.			128,058			59,988		1.2
Energy Future Holdings Corp.			200,000			40,000		0.8
PagesJaunes Groupe S.A.			235,201			–		–
Capmark Financial Group Inc.			137,321			–		–
			2,357,904			2,546,610		50.5	%
Private equity funds:
KKR 2006 Fund L.P.			1,098,580			1,157,132		23.0	%
KKR Asian Fund L.P.			174,703			248,019		4.9
KKR European Fund III, Limited Partnership			168,243			184,689		3.7
KKR Millennium Fund L.P.			186,024			182,581		3.6
KKR European Fund, Limited Partnership			106,256			123,217		2.4
KKR European Fund II, Limited Partnership			92,939			81,210		1.6
KKR E2 Investors, L.P.			9,432			14,000		0.3
KKR China Growth Fund			1,479			1,775		–
			1,837,656			1,992,623		39.5	%
Other Investments			493,386			506,392		10.0	%
Total Investments		$	4,688,946		$	5,045,625		100.0	%

KKR
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT
SCHEDULE OF INVESTMENTS, CONTINUED
(Amounts in thousands, except percentage amounts)
	As of March 31, 2011
								Fair Value as a Percentage of Total Investments
Investment		Cost			Fair Value
Significant Aggregate Investments: (a)
Dollar General Corporation		$	227,972		$	783,895		15.5	%
HCA Inc.			217,011			631,025		12.5
Alliance Boots GmbH			426,523			448,791		9.0
NXP B.V			279,089			314,472		6.2
The Nielsen Company B.V.			172,841			311,336		6.2
			1,323,436			2,489,519		49.4
Other portfolio companies (b)			2,872,124			2,049,714		40.6
Other investments			493,386			506,392		10.0
		$	4,688,946		$	5,045,625		100.0	%
Investments by Geography:
North America		$	2,745,450		$	3,376,265		66.9	%
Europe			1,682,065			1,287,156		25.5
Asia Pacific			261,431			382,204		7.6
		$	4,688,946		$	5,045,625		100.0	%
Investments by Industry:
Healthcare		$	976,295		$	1,414,821		28.0	%
Retail			559,998			1,115,324		22.1
Media/Telecom			822,569			625,403		12.4
Financial Services			870,567			615,171		12.2
Technology			513,963			597,648		11.8
Industrial			301,587			272,526		5.4
Consumer Products			150,853			174,671		3.5
Energy			472,467			189,754		3.8
Other			20,647			40,307		0.8
		$	4,688,946		$	5,045,625		100.0	%

_______________________________________________________________________________

(a) The significant aggregate investments include investments in portfolio companies with individual fair values of 5% or more of the capital markets and principal activities segment investments balance as of March 31, 2011. The fair value figures include the co-investment and the limited partner and/or general partner interests in the underlying portfolio company.

(b) Other portfolio companies includes investments in private equity portfolio companies with individual fair values less than 5% of the capital markets and principal activities segment investments balance as of March 31, 2011.

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
	December 31, 2010						$	46,223,900			$	14,773,600			$	60,997,500
		New Capital Raised						66,200				227,800				294,000
		Distributions						(2,472,900	)			(488,600	)			(2,961,500	)
		Foreign Exchange						146,000				–				146,000
		Change in Value						2,275,900				291,300				2,567,200
	March 31, 2011						$	46,239,100			$	14,804,100			$	61,043,200
Fee Paying Assets Under Management
							Private Markets Segment				Public Markets Segment				Total Reportable Segments
	December 31, 2010						$	38,186,700			$	7,824,400			$	46,011,100
		New Capital Raised						66,200				227,500				293,700
		Distributions						(775,500	)			(474,700	)			(1,250,200	)
		Foreign Exchange						392,100				–				392,100
		Change in Value						14,100				255,800				269,900
	March 31, 2011						$	37,883,600			$	7,833,000			$	45,716,600

KKR
INVESTMENT VEHICLE SUMMARY (UNAUDITED)
As of March 31, 2011
(Amounts in millions, except percentages)
		Investment Period
Private Markets		Commencement Date		End Date		Commitment			Uncalled Commitments			Percentage Committed by General Partner			Invested			Realized			Remaining Cost				Fair Value
Private Equity Funds
China Growth Fund		11/2010		11/2016		$	1,010.0		$	903.7		1.0	%		$	106.3		$	–		$	106.3			$	127.6
E2 Investors (Annex Fund)		8/2009		11/2011			550.3			435.5		4.1	%			114.8			–			114.8				171.7
European Fund III		3/2008		3/2014			6,091.2			3,795.4		4.4	%			2,295.8			–			2,295.8				2,497.4
Asian Fund		7/2007		7/2013			3,983.2			1,542.1		2.5	%			2,441.1			119.1			2,378.7				3,648.2
2006 Fund		9/2006		9/2012			17,642.2			4,082.3		2.1	%			13,559.9			2,589.6			12,298.7				14,580.6
European Fund II		11/2005		10/2008			5,750.8			–		2.1	%			5,750.8			1,084.2			5,076.1				4,502.2
Millennium Fund		12/2002		12/2008			6,000.0			–		2.5	%			6,000.0			6,591.8			3,641.8				5,878.8
European Fund		12/1999		12/2005			3,085.4			–		3.2	%			3,085.4			7,363.9			281.8				1,508.7
Total Private Equity Funds							44,113.1			10,759.0						33,354.1			17,748.6			26,194.0				32,915.2
Co-Investment Vehicles		Various		Various			3,194.4			599.9		Various				2,594.5			351.2			2,499.1				3,243.9
Natural Resources I		3/2010		10/2013			257.5			197.8		2.9	%			59.7			–			59.7				64.2
Infrastructure Fund		9/2010		9/2016			515.0			515.0		9.7	%			–			–			–				–
Private Markets Total							48,080.0			12,071.7						36,008.3			18,099.8			28,752.8				36,223.3
Public Markets
Special Situations Vehicles		Various		Various			1,857.5			858.9		Various				998.6			–			998.6				1,071.7
Mezzanine Fund		3/2010		3/2015			558.6			373.0		8.1	%			185.6			–			185.6				192.2
Public Markets Total							2,416.1			1,231.9						1,184.2			–			1,184.2				1,263.9
Total						$	50,496.1		$	13,303.6					$	37,192.5		$	18,099.8		$	29,937.0			$	37,487.2

KKR
DISTRIBUTION CALCULATION
(Amounts in thousands, except unit and per unit amounts)
							Quarter Ended
							March 31, 2011
FRE							$	126,203
Realized cash carry								73,227
Less: local income taxes								(4,832	)
Less: noncontrolling interests								(1,660	)
Gross distributable earnings								192,938
Distributable earnings to KKR & Co. L.P. (31.67%)								61,103
Less: estimated current corporate income taxes								14,597
Total distribution							$	46,506
Distribution per KKR & Co. L.P. common unit							$	0.21
Outstanding KKR & Co. L.P. common units								216,317,787

___________________________________________________________________________________________________________________________________

DISTRIBUTION POLICY

KKR intends to make quarterly cash distributions in amounts that in the aggregate are expected to constitute substantially all of the cash earnings of its investment management business each year in excess of amounts determined by KKR to be necessary or appropriate to provide for the conduct of its business, to make appropriate investments in its business and its investment funds and to comply with applicable law and any of its debt instruments or other agreements. KKR does not intend to distribute gains on principal investments, other than certain additional distributions that KKR may determine to make. These additional distributions, if any, are intended to cover certain tax liabilities, as calculated by KKR. When KKR & Co. L.P. receives distributions from the KKR Group Partnerships (the holding companies of the KKR business), KKR Holdings receives its pro rata share of such distributions from the KKR Group Partnerships. For the purposes of KKR’s distribution policy, its distributions are expected to consist of an amount 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) any additional distributions for certain taxes as described above. 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.

KKR

Notes to Reportable Segments (Unaudited)

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.

Definitions

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 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 charges and other non-cash compensation charges borne by KKR Holdings; (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 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.

After-tax ENI is calculated by deducting from ENI the implied income tax provision that has been calculated assuming that all income is allocated to KKR & Co. L.P., which would occur following an exchange of all KKR Holdings units for common units of KKR & Co. L.P. The assumptions and methodology used to calculate the implied income tax provision are consistent with those used in calculating the tax provision for KKR & Co. L.P. under GAAP. The implied income tax provision does not give effect to any tax savings or deductions that may result from the exchange of KKR Holdings units.

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. 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 or calculated pursuant to any regulatory requirements.

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.

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 cash management fees earned or a portion thereof, carried interest is reduced, not to exceed 20% of cash 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 KKR’s capital markets business.

You should note that KKR’s calculation of FRE, ENI, after-tax ENI, AUM and FPAUM may differ from the calculation of other investment managers and, as a result, its measurements of FRE, ENI, after-tax ENI, AUM and FPAUM may not be comparable to similar measures presented by other investment managers.

KKR
EXHIBIT A
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				Quarter Ended				Quarter Ended
					March 31, 2011				December 31, 2010				March 31, 2010
Total reportable segments fee related earnings					$	126,203			$	95,091			$	90,389
Investment income						617,977				621,114				584,791
Less: Income attributable to noncontrolling interests						(1,660	)			(1,592	)			(376	)
Economic net income (loss)						742,520				714,613				674,804
Income taxes						(30,783	)			(14,362	)			(13,452	)
Amortization of intangibles and other, net						(1,286	)			(1,219	)			(2,516	)
Non-cash equity based charges						(141,982	)			(107,040	)			(252,759	)
Allocation to noncontrolling
	interests held by KKR Holdings L.P.					(408,904	)			(411,413	)			(292,241	)
Net (income) loss attributable to KKR & Co. L.P.					$	159,565			$	180,579			$	113,836

___________________________________________________________________________________________________________________

RECONCILIATION OF TOTAL REPORTABLE SEGMENTS PARTNERS’ CAPITAL TO KKR & CO. L.P. PARTNERS’ CAPITAL (GAAP BASIS UNAUDITED) (Amounts in thousands)
			As of March 31, 2011				As of December 31, 2010
Total Reportable Segments Partners’ Capital			$	6,201,561			$	5,725,626
Plus: Equity impact of KKR Management Holdings Corp. and other				(52,949	)			(52,745	)
Less: Noncontrolling Interests held by KKR Holdings L.P.				4,687,568				4,346,388
Total KKR & Co. L.P. Partners’ Capital			$	1,461,044			$	1,326,493

KKR
EXHIBIT B
RECONCILIATION OF WEIGHTED AVERAGE GAAP COMMON UNITS OUTSTANDING TO WEIGHTED AVERAGE ADJUSTED UNITS
The following table provides a reconciliation of KKR’s Weighted Average GAAP Common Units Outstanding to Weighted Average Adjusted Units.
								Quarter Ended
								March 31, 2011		December 31, 2010		March 31, 2010
Weighted Average GAAP Common Units Outstanding – Basic								213,479,630		209,383,219		204,902,226
Weighted Average Unvested Common Units(a)								30,000		30,000		–
Weighted Average GAAP Common Units Outstanding – Diluted								213,509,630		209,413,219		204,902,226
Adjustments:
Weighted Average KKR Holdings Units (b)								469,527,790		473,624,201		478,105,194
Weighted Average Adjusted Units								683,037,420		683,037,420		683,007,420
RECONCILIATION OF GAAP COMMON UNITS OUTSTANDING TO ADJUSTED UNITS
The following table provides a reconciliation of KKR’s GAAP Common Units Outstanding to Adjusted Units.
								As of		As of
								March 31, 2011		December 31, 2010
GAAP Common Units Outstanding – Basic								216,317,787		212,770,091
Unvested Common Units(a)								30,000		30,000
GAAP Common Units Outstanding – Diluted								216,347,787		212,800,091
Adjustments:
KKR Holdings Units (b)								466,689,633		470,237,329
Adjusted Units								683,037,420		683,037,420

____________________________________________________________________________________________________

(a) Represents equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan. The issuance of common units of KKR & Co. L.P. pursuant to awards under its equity incentive plan 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.

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

 

Source: KKR & Co. L.P.

 

 

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