KKR & Co. L.P. Announces Fourth Quarter and Full Year 2012 Results

Significant realization activity drives record total distributable earnings

GAAP net income (loss) attributable to KKR & Co. L.P. was $96.7 million and $560.8 million for the quarter and year ended December 31, 2012, respectively, up from $46.1 million and $1.9 million in the comparable periods of 2011.

Assets under management (“AUM”) totaled $75.5 billion as of December 31, 2012, up from $66.3 billion as of September 30, 2012.

Fee related earnings (“FRE”) were $86.0 million and $319.8 million for the quarter and year ended December 31, 2012, respectively, down from $116.6 million and $417.2 million in the comparable periods of 2011.

Total distributable earnings were $546.3 million and $1,449.4 million for the quarter and year ended December 31, 2012, respectively, up from $146.5 million and $782.6 million in the comparable periods of 2011.

Economic net income (loss) (“ENI”) was $347.7 million and $2,130.9 million for the quarter and year ended December 31, 2012, respectively, up from $285.5 million and $750.9 million in the comparable periods of 2011.

After-tax ENI was $0.48 and $2.90 per adjusted unit for the quarter and year ended December 31, 2012, respectively, up from $0.33 and $0.73 per adjusted unit in the comparable periods of 2011.

Book value was $7.0 billion on a segment basis as of December 31, 2012, representing $9.87 per adjusted unit.

KKR & Co. L.P. declares a fourth quarter distribution of $0.70 per common unit, bringing year-to-date distributions for 2012 to $1.22 per common unit, up from $0.74 per common unit for 2011.

NEW YORK--(BUSINESS WIRE)-- KKR & Co. L.P. (NYSE: KKR) today reported its fourth quarter and full year 2012 results.

For the fourth quarter and full year 2012, the carrying value of KKR’s private equity investment portfolio appreciated 4.0% and 23.8%, respectively, driving meaningful ENI.

ENI was $347.7 million for the quarter ended December 31, 2012, an increase of $62.2 million compared to the quarter ended December 31, 2011. The increase was primarily attributable to higher net carried interest earned from our investment funds. ENI was $2,130.9 million for the year ended December 31, 2012, an increase of $1,380.0 million compared to the year ended December 31, 2011. The increase was primarily due to a higher level of appreciation in the carrying value of our principal investments and greater net carried interest earned from our investment funds.

Total distributable earnings was $546.3 million and $1,449.4 million for the quarter and year ended December 31, 2012, respectively, an increase of $399.8 million and $666.8 million from the comparable periods in 2011. The increase in both comparative periods is due to a higher level of realization activity in our private equity investment portfolio.

On October 1, 2012, we closed our acquisition of Prisma Capital Partners LP and its affiliates (“Prisma”), a leading provider of customized hedge fund solutions. Prisma’s results have been reported as part of our Public Markets segment in the fourth quarter of 2012. As of December 31, 2012, Prisma had $8.5 billion of assets under management.

AUM was $75.5 billion as of December 31, 2012, an increase of $9.2 billion, or 13.9%, compared to AUM of $66.3 billion as of September 30, 2012. Fee paying assets under management (“FPAUM”) was $60.8 billion as of December 31, 2012, an increase of $10.5 billion, or 20.9%, compared to FPAUM of $50.3 billion as of September 30, 2012. The increases in both AUM and FPAUM were primarily attributable to new capital from the acquisition of Prisma and to a lesser extent new capital raised and appreciation in the fair value of our investment vehicles. The increases were partially offset by distributions to limited partners of our investment funds. Neither AUM nor FPAUM include $4.0 biillion (includes general partner commitment) of capital raised for our second Asian private equity fund.

On January 23, 2013, we announced the acquisition of a 24.9% interest in Nephila Capital Ltd. (“Nephila”). Nephila is a leading investment manager that offers a broad range of investment products focusing on reinsurance risk, investing in instruments such as insurance-linked securities, catastrophe bonds, and weather derivatives. Nephila has assets under management of approximately $8 billion as of January 1, 2013 and has been managing institutional assets in this space since it was founded in 1998. This strategic partnership increases our breadth of liquid product offerings through a strategy which is uncorrelated to the global financial markets relative to other asset classes. Nephila’s assets under management are not included in KKR’s results.

“Our private equity portfolio and our balance sheet both appreciated 24% in 2012, outperforming the S&P 500 and MSCI World indices by over 700 basis points,” said Henry R. Kravis and George R. Roberts, Co-Chairmen and Co-Chief Executive Officers of KKR. “In addition, in 2012 we completed transactions which returned over $9 billion to all investors in our private equity funds and co-investment vehicles, the highest figure in our 36-year history, and contributed to a record annual distribution of $1.22 per common unit. We are pleased with our results.”

Note: Certain financial measures, including FRE, ENI, after-tax ENI, after-tax ENI per adjusted unit, fee related EBITDA, 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 A and B for a reconciliation of such measures to financial results prepared in accordance with GAAP. See calculation and reconciliation of total distributable earnings under “Distribution Calculation.”

GAAP RESULTS

GAAP results for the quarter and year ended December 31, 2012 included net income attributable to KKR & Co. L.P. of $96.7 million and $560.8 million, respectively, and net income attributable to KKR & Co. L.P. per common unit of $0.36 and $2.21, respectively, on a diluted basis. For the quarter and year ended December 31, 2011, net income attributable to KKR & Co. L.P. was $46.1 million and $1.9 million, respectively, and net income attributable to KKR & Co. L.P. per common unit was $0.20 and $0.01, respectively, on a diluted basis. The increases in both comparable periods were primarily due to a greater level of investment appreciation for the quarter and year ended December 31, 2012 compared to the quarter and year ended December 31, 2011. This increase in investment appreciation, which is recorded in net gains (losses) from investment activities, was partially offset by an increase in compensation and benefits expense

SEGMENT RESULTS

Private Markets

AUM was $49.1 billion as of December 31, 2012, a decrease of $0.7 billion, or 1.4%, compared to AUM of $49.8 billion as of September 30, 2012. The decrease was primarily attributable to distributions to the limited partners of our private equity funds arising from realizations. The decrease was partially offset by the appreciation in the fair value of our private equity portfolio and new capital raised.

FPAUM was $41.2 billion as of December 31, 2012, an increase of $0.8 billion, or 2.0%, compared to FPAUM of $40.4 billion as of September 30, 2012. The increase was primarily due to new capital raised, partially offset by distributions to the limited partners of our private equity funds arising from realizations.

FRE was $32.4 million for the quarter ended December 31, 2012, a decrease of $24.6 million, or 43.2%, compared to FRE of $57.0 million for the quarter ended December 31, 2011. The decrease was principally attributable to (i) a lower level of transaction fees during the quarter ended December 31, 2012, as a result of closing relatively smaller transaction fee-generating investments, which in turn produced lower transaction fees and (ii) higher compensation expense in connection with increased headcount. The decrease was partially offset by a higher level of monitoring fees as a result of new monitoring agreements with portfolio companies acquired over the past year.

FRE was $151.0 million for the year ended December 31, 2012, a decrease of $75.6 million, or 33.4%, compared to FRE of $226.6 million for year ended December 31, 2011. The decrease was primarily attributable to (i) a lower level of transaction fees during the year ended December 31, 2012 as a result of closing relatively smaller transaction fee-generating investments, which in turn produced lower transaction fees; (ii) lower monitoring fees as a result of $76.6 million of termination payments on monitoring agreements with three portfolio companies during the year ended December 31, 2011, which increased FRE by $39.7 million net of associated fee credits and (iii) higher compensation expense in connection with increased headcount.

ENI was $177.8 million for the quarter ended December 31, 2012, an increase of $68.0 million, or 61.9%, compared to ENI of $109.8 million for the quarter ended December 31, 2011. ENI was $831.7 million for the year ended December 31, 2012, an increase of $468.9 million, or 129.2%, compared to ENI of $362.8 million for the year ended December 31, 2011. The increase in both comparative periods was primarily attributable to higher net carried interest driven by a greater level of appreciation in our private equity portfolio, partially offset by the decrease in FRE discussed above.

Public Markets

AUM was $26.4 billion as of December 31, 2012, an increase of $9.9 billion, or 60.0%, compared to AUM of $16.5 billion as of September 30, 2012. FPAUM was $19.7 billion as of December 31, 2012, an increase of $9.8 billion, or 99.0%, compared to FPAUM of $9.9 billion as of September 30, 2012. The increase in both AUM and FPAUM were primarily attributable to new capital from the acquisition of Prisma and to a lesser extent net new capital raised.

FRE was $29.4 million for the quarter ended December 31, 2012, an increase of $17.6 million compared to FRE of $11.8 million for the quarter ended December 31, 2011. FRE was $80.5 million for the year ended December 31, 2012, an increase of $20.9 million compared to FRE of $59.6 million for year ended December 31, 2011. The increase in both comparable periods was primarily due to (i) higher management fees related to new capital raised as well as the acquisition of Prisma and (ii) higher incentive fees earned.

ENI was $37.4 million for the quarter ended December 31, 2012, an increase of $25.6 million compared to ENI of $11.8 million for the quarter ended December 31, 2011. The increase was primarily attributable to the increase in FRE discussed above and to a lesser extent a higher level of net carried interest recognized driven by the appreciation in the net asset value of certain carry-eligible investment vehicles.

ENI was $102.9 million for the year ended December 31, 2012, an increase of $44.9 million compared to ENI of $58.0 million for year ended December 31, 2011. The increase was principally attributable to the increase in FRE discussed above and net carried interest recognized for the year ended December 31, 2012 driven by the appreciation in the net asset value of certain carry-eligible investment vehicles. For the year ended December 31, 2011, there was a reversal of previously recognized net carried interest due to a decline in the carrying value of certain carry-eligible investment vehicles.

Capital Markets and Principal Activities

FRE was $24.2 million for the quarter ended December 31, 2012, a decrease of $23.6 million, or 49.4%, compared to FRE of $47.8 million for the quarter ended December 31, 2011. FRE was $88.3 million for the year ended December 31, 2012, a decrease of $42.6 million, or 32.5%, compared to FRE of $130.9 million for year ended December 31, 2011. The decrease in both comparative periods was primarily driven by a lower level of overall capital markets transaction activity.

ENI was $132.6 million for the quarter ended December 31, 2012, a decrease of $31.2 million, or 19.0%, compared to ENI of $163.8 million for the quarter ended December 31, 2011. The decrease was principally attributable to the decrease in FRE discussed above and to a lesser extent a lower level of investment income. While the fair value of our principal investments increased during the fourth quarter of 2012, the level of appreciation was lower than in the comparable period of 2011.

ENI was $1,196.2 million for the year ended December 31, 2012, an increase of $866.0 million compared to ENI of $330.2 million for year ended December 31, 2011. The increase was primarily driven by a higher level of appreciation in the carrying value of our principal investments, partially offset by the decrease in FRE discussed above.

CAPITAL AND LIQUIDITY

As of December 31, 2012, KKR had $1,534.3 million of cash and short-term investments on a segment basis and $500.0 million of outstanding debt obligations under its senior notes. KKR’s availability for further borrowings was approximately $750.0 million (which does not include a $500.0 million revolving credit facility for use in its capital markets business that was undrawn as of December 31, 2012).

On February 1, 2013, KKR issued $500.0 million of 5.5% senior notes due in 2043. The senior notes are rated A and A- by Fitch and Standard & Poor’s, respectively.

As of December 31, 2012, KKR’s portion of total uncalled commitments to its investment funds was $677.9 million, consisting of the following (amounts in thousands):

		Uncalled Commitments
Private Markets
North America Fund XI		$	232,100
European Fund III			174,000
2006 Fund			64,700
Asian Fund			35,400
Infrastructure			34,100
E2 Investors (Annex Fund)			14,000
Natural Resources			13,600
China Growth Fund			6,400
Other			10,800
Total Private Markets Commitments			585,100
Public Markets
Direct Lending Vehicles			33,700
Special Situations Vehicles			29,200
Mezzanine Fund			29,900
Total Public Markets Commitments			92,800
Total Uncalled Commitments		$	677,900

DISTRIBUTION

A distribution of $0.70 per common unit will be paid on March 5, 2013 to unitholders of record as of the close of business on February 19, 2013.

CONFERENCE CALL

A conference call to discuss KKR’s financial results will be held on Thursday, February 7, 2013 at 10:00 a.m. EST. 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 Public Investors 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) and +1 (404) 537-3406 (non-U.S. callers), pass code 86899275, 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 Public Investors section of KKR’s website at http://ir.kkr.com/kkr_ir/alerts.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 Public Investors 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 $75.5 billion in assets under management as of December 31, 2012. With 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 fund investors through its client relationships and capital markets platform. KKR & Co. L.P. is publicly traded on the New York Stock Exchange (NYSE: KKR), and "KKR," as used in this release, includes its subsidiaries, their managed investment funds and accounts, and/or their affiliated investment vehicles, as appropriate. 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 AUM, FPAUM, FRE, total distributable earnings, ENI, after-tax ENI, fee related EBITDA, committed dollars invested and syndicated capital, uncalled commitments, core interest expense, cash and short-term investments 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 the acquisitions or strategic partnerships such as Prisma or Nephila; 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, 2011, filed with the SEC on February 27, 2012 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 filed with the SEC on November 2, 2012, and other filings with the SEC, which are available at www.sec.gov.

KKR
CONSOLIDATED STATEMENTS OF OPERATIONS (GAAP BASIS - UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
		Quarter Ended								Year Ended
		December 31, 2012				December 31, 2011				December 31, 2012				December 31, 2011
Revenues
Fees		$	177,621			$	209,357			$	568,442			$	723,620
Expenses
Compensation and Benefits			261,454				190,832				1,280,854				868,749
Occupancy and Related Charges			14,569				15,197				58,205				54,282
General, Administrative and Other			82,249				124,108				259,729				290,974
Total Expenses			358,272				330,137				1,598,788				1,214,005
Investment Income (Loss)
Net Gains (Losses) from Investment Activities			874,507				514,580				7,871,673				981,858
Dividend Income			677,590				117,944				940,888				225,073
Interest Income			98,929				102,968				358,598				321,943
Interest Expense			(16,407	)			(20,393	)			(69,164	)			(72,758	)
Total Investment Income (Loss)			1,634,619				715,099				9,101,995				1,456,116
Income (Loss) Before Taxes			1,453,968				594,319				8,071,649				965,731
Income Taxes			5,628				21,322				43,405				89,245
Net Income (Loss)			1,448,340				572,997				8,028,244				876,486
Net Income (Loss) Attributable to
Redeemable Noncontrolling Interests			16,412				4,318				34,963				4,318
Net Income (Loss) Attributable to
Noncontrolling Interests			1,335,200				522,542				7,432,445				870,247
Net Income (Loss) Attributable to KKR & Co. L.P.		$	96,728			$	46,137			$	560,836			$	1,921
Distributions Declared per KKR & Co. L.P. Common Unit		$	0.70			$	0.32			$	1.22			$	0.74
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit
Basic		$	0.39			$	0.20			$	2.35			$	0.01
Diluted (a)		$	0.36			$	0.20			$	2.21			$	0.01
Weighted Average Common Units Outstanding
Basic			249,303,558				225,382,001				238,503,257				220,235,469
Diluted (a)			268,192,128				231,361,032				254,093,160				222,519,174

(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												Year Ended
		December 31, 2012				September 30, 2012				December 31, 2011				December 31, 2012				December 31, 2011
Fees
Management and incentive fees:
Management fees		$	144,355			$	126,483			$	127,556			$	529,107			$	515,384
Incentive fees			12,350				17,768				6,084				43,845				34,243
Management and incentive fees			156,705				144,251				133,640				572,952				549,627
Monitoring and transaction fees:
Monitoring fees			32,988				29,969				21,797				116,565				163,769
Transaction fees			76,840				75,264				128,338				240,108				349,130
Fee credits			(37,991	)			(31,707	)			(36,862	)			(105,730	)			(150,858	)
Net monitoring and transaction fees			71,837				73,526				113,273				250,943				362,041
Total fees			228,542				217,777				246,913				823,895				911,668
Expenses
Compensation and benefits			76,001				71,340				65,038				272,811				257,951
Occupancy and related charges			13,763				13,605				14,353				55,068				51,009
Other operating expenses			52,799				42,128				50,947				176,205				185,555
Total expenses (a)			142,563				127,073				130,338				504,084				494,515
Fee Related Earnings			85,979				90,704				116,575				319,811				417,153
Investment income (loss)
Gross carried interest			268,936				410,736				96,503				1,431,910				263,621
Less: allocation to KKR carry pool			(107,514	)			(169,633	)			(40,410	)			(581,206	)			(108,325	)
Less: management fee refunds (b)			(8,712	)			(61,499	)			(1,993	)			(143,723	)			(17,587	)
Net carried interest			152,710				179,604				54,100				706,981				137,709
Other investment income (loss)			110,236				240,876				117,039				1,111,122				202,758
Total investment income (loss)			262,946				420,480				171,139				1,818,103				340,467
Income (Loss) before noncontrolling interests
in Income of consolidated entities			348,925				511,184				287,714				2,137,914				757,620
Income (Loss) attributable to
noncontrolling interests			1,245				1,310				2,220				7,043				6,671
Economic Net Income (Loss)		$	347,680			$	509,874			$	285,494			$	2,130,871			$	750,949
Provision for Income Taxes			10,632				22,548				59,988				102,420				248,082
Economic Net Income (Loss), After Taxes (c)		$	337,048			$	487,326			$	225,506			$	2,028,451			$	502,867
Economic Net Income (Loss), After Taxes per Adjusted Unit (c)		$	0.48			$	0.69			$	0.33			$	2.90			$	0.73
Assets Under Management		$	75,527,500			$	66,278,700			$	59,008,600			$	75,527,500			$	59,008,600
Fee Paying Assets Under Management		$	60,846,000			$	50,266,000			$	46,397,300			$	60,846,000			$	46,397,300
Committed Dollars Invested and Syndicated Capital		$	1,715,700			$	926,000			$	2,582,600			$	4,354,900			$	6,014,000
Uncalled Commitments		$	16,071,900			$	15,845,900			$	11,400,500			$	16,071,900			$	11,400,500
Other Information
Fee Related Earnings		$	85,979			$	90,704			$	116,575			$	319,811			$	417,153
Plus: depreciation and amortization			3,580				3,273				2,528				12,499				9,925
Fee Related EBITDA		$	89,559			$	93,977			$	119,103			$	332,310			$	427,078
Distributed Earnings		$	179,412			$	187,174			$	195,725			$	582,620			$	596,306
Plus: Net realized principal investment income			366,878				145,700				(49,237	)			866,776				186,288
Total Distributable Earnings (c)		$	546,290			$	332,874			$	146,488			$	1,449,396			$	782,594
GAAP interest expense		$	16,407			$	17,868			$	20,393			$	69,164			$	72,758
Less: interest expense related to debt obligations
from investment financing arrangements			7,014				8,502				9,598				31,050				30,160
Core Interest Expense (c)		$	9,393			$	9,366			$	10,795			$	38,114			$	42,598

(a)		Excludes a $15.2 million, $17.4 million and $5.5 million charge for non-cash equity based compensation during the quarters ended December 31, 2012, September 30, 2012, and December 31, 2011, respectively, associated with equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan. Excludes a $62.9 million and $16.7 million charge for non-cash equity based compensation during the years ended December 31, 2012 and 2011, respectively, associated with equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan.
(b)		As of December 31, 2012, there is no carried interest subject to management fee refunds, which may reduce carried interest in future periods.
(c)		See definitions for after-tax ENI, adjusted units, total distributable earnings, and core interest expense under “Notes to Reportable Segments.”

KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PRIVATE MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
		Quarter Ended												Year Ended
		December 31, 2012				September 30, 2012				December 31, 2011				December 31, 2012				December 31, 2011
Fees
Management and incentive fees:
Management fees		$	104,804			$	105,035			$	106,716			$	423,921			$	430,400
Incentive fees			-				-				-				-				-
Management and incentive fees			104,804				105,035				106,716				423,921				430,400
Monitoring and transaction fees:
Monitoring fees			32,988				29,969				21,797				116,565				163,769
Transaction fees			41,231				32,788				65,148				96,454				166,654
Fee credits			(37,721	)			(26,293	)			(34,799	)			(97,362	)			(144,928	)
Net monitoring and transaction fees			36,498				36,464				52,146				115,657				185,495
Total fees			141,302				141,499				158,862				539,578				615,895
Expenses
Compensation and benefits			53,383				48,905				46,139				192,765				185,709
Occupancy and related charges			12,075				12,049				12,902				48,562				45,694
Other operating expenses			43,463				35,885				42,825				147,253				157,901
Total expenses			108,921				96,839				101,866				388,580				389,304
Fee Related Earnings			32,381				44,660				56,996				150,998				226,591
Investment income (loss)
Gross carried interest			255,296				391,168				96,115				1,392,755				266,211
Less: allocation to KKR carry pool			(102,058	)			(161,805	)			(40,255	)			(565,543	)			(109,361	)
Less: management fee refunds			(8,712	)			(61,499	)			(1,993	)			(143,723	)			(17,587	)
Net carried interest			144,526				167,864				53,867				683,489				139,263
Other investment income (loss)			1,158				1,779				(364	)			599				(549	)
Total investment income (loss)			145,684				169,643				53,503				684,088				138,714
Income (Loss) before noncontrolling interests
in Income of consolidated entities			178,065				214,303				110,499				835,086				365,305
Income (Loss) attributable to
noncontrolling interests			292				444				651				3,390				2,536
Economic Net Income (Loss)		$	177,773			$	213,859			$	109,848			$	831,696			$	362,769
Assets Under Management		$	49,127,600			$	49,771,000			$	43,627,900			$	49,127,600			$	43,627,900
Fee Paying Assets Under Management		$	41,173,000			$	40,354,200			$	37,869,700			$	41,173,000			$	37,869,700
Committed Dollars Invested		$	1,220,800			$	623,000			$	2,148,400			$	3,026,300			$	5,033,300
Uncalled Commitments		$	14,271,100			$	14,594,700			$	10,070,300			$	14,271,100			$	10,070,300

KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PUBLIC MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
		Quarter Ended												Year Ended
		December 31, 2012				September 30, 2012				December 31, 2011				December 31, 2012				December 31, 2011
Fees
Management and incentive fees:
Management fees		$	39,551			$	21,448			$	20,840			$	105,186			$	84,984
Incentive fees			12,350				17,768				6,084				43,845				34,243
Management and incentive fees			51,901				39,216				26,924				149,031				119,227
Monitoring and transaction fees:
Monitoring fees			-				-				-				-				-
Transaction fees			1,974				8,780				4,151				14,495				11,996
Fee credits			(270	)			(5,414	)			(2,063	)			(8,368	)			(5,930	)
Net monitoring and transaction fees			1,704				3,366				2,088				6,127				6,066
Total fees			53,605				42,582				29,012				155,158				125,293
Expenses
Compensation and benefits			16,097				13,997				12,166				50,705				46,133
Occupancy and related charges			1,479				1,343				1,189				5,606				4,059
Other operating expenses			6,596				3,897				3,834				18,350				15,483
Total expenses			24,172				19,237				17,189				74,661				65,675
Fee Related Earnings			29,433				23,345				11,823				80,497				59,618
Investment income (loss)
Gross carried interest			13,640				19,568				388				39,155				(2,590	)
Less: allocation to KKR carry pool			(5,456	)			(7,828	)			(155	)			(15,663	)			1,036
Less: management fee refunds			-				-				-				-				-
Net carried interest			8,184				11,740				233				23,492				(1,554	)
Other investment income (loss)			30				25				(93	)			20				505
Total investment income (loss)			8,214				11,765				140				23,512				(1,049	)
Income (Loss) before noncontrolling interests
in Income of consolidated entities			37,647				35,110				11,963				104,009				58,569
Income (Loss) attributable to
noncontrolling interests			292				233				119				1,079				599
Economic Net Income (Loss)		$	37,355			$	34,877			$	11,844			$	102,930			$	57,970
Assets Under Management		$	26,399,900			$	16,507,700			$	15,380,700			$	26,399,900			$	15,380,700
Fee Paying Assets Under Management		$	19,673,000			$	9,911,800			$	8,527,600			$	19,673,000			$	8,527,600
Committed Dollars Invested		$	226,400			$	278,300			$	434,200			$	784,800			$	980,700
Uncalled Commitments		$	1,800,800			$	1,251,200			$	1,330,200			$	1,800,800			$	1,330,200

KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT (UNAUDITED)
(Amounts in thousands)
		Quarter Ended									Year Ended
		December 31, 2012			September 30, 2012			December 31, 2011			December 31, 2012			December 31, 2011
Fees
Management and incentive fees:
Management fees		$	-		$	-		$	-		$	-		$	-
Incentive fees			-			-			-			-			-
Management and incentive fees			-			-			-			-			-
Monitoring and transaction fees:
Monitoring fees			-			-			-			-			-
Transaction fees			33,635			33,696			59,039			129,159			170,480
Fee credits			-			-			-			-			-
Net monitoring and transaction fees			33,635			33,696			59,039			129,159			170,480
Total fees			33,635			33,696			59,039			129,159			170,480
Expenses
Compensation and benefits			6,521			8,438			6,733			29,341			26,109
Occupancy and related charges			209			213			262			900			1,256
Other operating expenses			2,740			2,346			4,288			10,602			12,171
Total expenses			9,470			10,997			11,283			40,843			39,536
Fee Related Earnings			24,165			22,699			47,756			88,316			130,944
Investment income (loss)
Gross carried interest			-			-			-			-			-
Less: allocation to KKR carry pool			-			-			-			-			-
Less: management fee refunds			-			-			-			-			-
Net carried interest			-			-			-			-			-
Other investment income (loss)			109,048			239,072			117,496			1,110,503			202,802
Total investment income (loss)			109,048			239,072			117,496			1,110,503			202,802
Income (Loss) before noncontrolling interests
in Income of consolidated entities			133,213			261,771			165,252			1,198,819			333,746
Income (Loss) attributable to
noncontrolling interests			661			633			1,450			2,574			3,536
Economic Net Income (Loss)		$	132,552		$	261,138		$	163,802		$	1,196,245		$	330,210
Syndicated Capital		$	268,500		$	24,700		$	1,151,900		$	543,800		$	2,426,600

KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Quarter Ended December 31, 2012
(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		$	104,804			$	39,551			$	-		$	144,355
Incentive fees			-				12,350				-			12,350
Management and incentive fees			104,804				51,901				-			156,705
Monitoring and transaction fees:
Monitoring fees			32,988				-				-			32,988
Transaction fees			41,231				1,974				33,635			76,840
Fee credits			(37,721	)			(270	)			-			(37,991	)
Net monitoring and transaction fees			36,498				1,704				33,635			71,837
Total fees			141,302				53,605				33,635			228,542
Expenses
Compensation and benefits			53,383				16,097				6,521			76,001
Occupancy and related charges			12,075				1,479				209			13,763
Other operating expenses			43,463				6,596				2,740			52,799
Total expenses			108,921				24,172				9,470			142,563
Fee Related Earnings			32,381				29,433				24,165			85,979
Investment income (loss)
Gross carried interest			255,296				13,640				-			268,936
Less: allocation to KKR carry pool			(102,058	)			(5,456	)			-			(107,514	)
Less: management fee refunds			(8,712	)			-				-			(8,712	)
Net carried interest			144,526				8,184				-			152,710
Other investment income (loss)			1,158				30				109,048			110,236
Total investment income (loss)			145,684				8,214				109,048			262,946
Income (Loss) before noncontrolling interests
in Income of consolidated entities			178,065				37,647				133,213			348,925
Income (Loss) attributable to
noncontrolling interests			292				292				661			1,245
Economic Net Income (Loss)		$	177,773			$	37,355			$	132,552		$	347,680

KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Quarter Ended September 30, 2012
(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		$	105,035			$	21,448			$	-		$	126,483
Incentive fees			-				17,768				-			17,768
Management and incentive fees			105,035				39,216				-			144,251
Monitoring and transaction fees:
Monitoring fees			29,969				-				-			29,969
Transaction fees			32,788				8,780				33,696			75,264
Fee credits			(26,293	)			(5,414	)			-			(31,707	)
Net monitoring and transaction fees			36,464				3,366				33,696			73,526
Total fees			141,499				42,582				33,696			217,777
Expenses
Compensation and benefits			48,905				13,997				8,438			71,340
Occupancy and related charges			12,049				1,343				213			13,605
Other operating expenses			35,885				3,897				2,346			42,128
Total expenses			96,839				19,237				10,997			127,073
Fee Related Earnings			44,660				23,345				22,699			90,704
Investment income (loss)
Gross carried interest			391,168				19,568				-			410,736
Less: allocation to KKR carry pool			(161,805	)			(7,828	)			-			(169,633	)
Less: management fee refunds			(61,499	)			-				-			(61,499	)
Net carried interest			167,864				11,740				-			179,604
Other investment income (loss)			1,779				25				239,072			240,876
Total investment income (loss)			169,643				11,765				239,072			420,480
Income (Loss) before noncontrolling interests
in Income of consolidated entities			214,303				35,110				261,771			511,184
Income (Loss) attributable to
noncontrolling interests			444				233				633			1,310
Economic Net Income (Loss)		$	213,859			$	34,877			$	261,138		$	509,874

KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Quarter Ended December 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		$	106,716			$	20,840			$	-		$	127,556
Incentive fees			-				6,084				-			6,084
Management and incentive fees			106,716				26,924				-			133,640
Monitoring and transaction fees:
Monitoring fees			21,797				-				-			21,797
Transaction fees			65,148				4,151				59,039			128,338
Fee credits			(34,799	)			(2,063	)			-			(36,862	)
Net monitoring and transaction fees			52,146				2,088				59,039			113,273
Total fees			158,862				29,012				59,039			246,913
Expenses
Compensation and benefits			46,139				12,166				6,733			65,038
Occupancy and related charges			12,902				1,189				262			14,353
Other operating expenses			42,825				3,834				4,288			50,947
Total expenses			101,866				17,189				11,283			130,338
Fee Related Earnings			56,996				11,823				47,756			116,575
Investment income (loss)
Gross carried interest			96,115				388				-			96,503
Less: allocation to KKR carry pool			(40,255	)			(155	)			-			(40,410	)
Less: management fee refunds			(1,993	)			-				-			(1,993	)
Net carried interest			53,867				233				-			54,100
Other investment income (loss)			(364	)			(93	)			117,496			117,039
Total investment income (loss)			53,503				140				117,496			171,139
Income (Loss) before noncontrolling interests
in Income of consolidated entities			110,499				11,963				165,252			287,714
Income (Loss) attributable to
noncontrolling interests			651				119				1,450			2,220
Economic Net Income (Loss)		$	109,848			$	11,844			$	163,802		$	285,494

KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Year Ended December 31, 2012
(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		$	423,921			$	105,186			$	-		$	529,107
Incentive fees			-				43,845				-			43,845
Management and incentive fees			423,921				149,031				-			572,952
Monitoring and transaction fees:
Monitoring fees			116,565				-				-			116,565
Transaction fees			96,454				14,495				129,159			240,108
Fee credits			(97,362	)			(8,368	)			-			(105,730	)
Net monitoring and transaction fees			115,657				6,127				129,159			250,943
Total fees			539,578				155,158				129,159			823,895
Expenses
Compensation and benefits			192,765				50,705				29,341			272,811
Occupancy and related charges			48,562				5,606				900			55,068
Other operating expenses			147,253				18,350				10,602			176,205
Total expenses			388,580				74,661				40,843			504,084
Fee Related Earnings			150,998				80,497				88,316			319,811
Investment income (loss)
Gross carried interest			1,392,755				39,155				-			1,431,910
Less: allocation to KKR carry pool			(565,543	)			(15,663	)			-			(581,206	)
Less: management fee refunds			(143,723	)			-				-			(143,723	)
Net carried interest			683,489				23,492				-			706,981
Other investment income (loss)			599				20				1,110,503			1,111,122
Total investment income (loss)			684,088				23,512				1,110,503			1,818,103
Income (Loss) before noncontrolling interests
in Income of consolidated entities			835,086				104,009				1,198,819			2,137,914
Income (Loss) attributable to
noncontrolling interests			3,390				1,079				2,574			7,043
Economic Net Income (Loss)		$	831,696			$	102,930			$	1,196,245		$	2,130,871

KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Year Ended December 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		$	430,400			$	84,984			$	-		$	515,384
Incentive fees			-				34,243				-			34,243
Management and incentive fees			430,400				119,227				-			549,627
Monitoring and transaction fees:
Monitoring fees			163,769				-				-			163,769
Transaction fees			166,654				11,996				170,480			349,130
Fee credits			(144,928	)			(5,930	)			-			(150,858	)
Net monitoring and transaction fees			185,495				6,066				170,480			362,041
Total fees			615,895				125,293				170,480			911,668
Expenses
Compensation and benefits			185,709				46,133				26,109			257,951
Occupancy and related charges			45,694				4,059				1,256			51,009
Other operating expenses			157,901				15,483				12,171			185,555
Total expenses			389,304				65,675				39,536			494,515
Fee Related Earnings			226,591				59,618				130,944			417,153
Investment income (loss)
Gross carried interest			266,211				(2,590	)			-			263,621
Less: allocation to KKR carry pool			(109,361	)			1,036				-			(108,325	)
Less: management fee refunds			(17,587	)			-				-			(17,587	)
Net carried interest			139,263				(1,554	)			-			137,709
Other investment income (loss)			(549	)			505				202,802			202,758
Total investment income (loss)			138,714				(1,049	)			202,802			340,467
Income (Loss) before noncontrolling interests
in Income of consolidated entities			365,305				58,569				333,746			757,620
Income (Loss) attributable to
noncontrolling interests			2,536				599				3,536			6,671
Economic Net Income (Loss)		$	362,769			$	57,970			$	330,210		$	750,949

KKR
BALANCE SHEETS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except per unit amounts)
As of December 31, 2012
		Private Markets Segment				Public Markets Segment			Capital Markets and Principal Activities Segment					Total Reportable Segments
Cash and short-term investments		$	358,237			$	28,690		$	1,147,360				$	1,534,287
Investments			-				-			4,758,157		(a)			4,758,157
Unrealized carry			730,292				24,939			-					755,231
Other assets			207,047				280,472			62,119					549,638
Total assets		$	1,295,576			$	334,101		$	5,967,636				$	7,597,313
Debt obligations		$	-			$	-		$	500,000				$	500,000
Other liabilities			78,724				16,433			24,275					119,432
Total liabilities			78,724				16,433			524,275					619,432
Noncontrolling interests			1,339				739			18,619					20,697
Book value		$	1,215,513			$	316,929		$	5,424,742				$	6,957,184
Book value per adjusted unit		$	1.72			$	0.45		$	7.70				$	9.87
As of December 31, 2011
		Private Markets Segment				Public Markets Segment			Capital Markets and Principal Activities Segment					Total Reportable Segments
Cash and short-term investments		$	296,717			$	8,087		$	684,637				$	989,441
Investments			-				-			4,743,406					4,743,406
Unrealized carry			419,523				1,447			-					420,970
Other assets			139,432				58,360			63,799					261,591
Total assets		$	855,672			$	67,894		$	5,491,842				$	6,415,408
Debt obligations		$	-			$	-		$	500,000				$	500,000
Other liabilities			128,590				8,153			49,329					186,072
Total liabilities			128,590				8,153			549,329					686,072
Noncontrolling interests			(1,358	)			729			19,381					18,752
Book value		$	728,440			$	59,012		$	4,923,132				$	5,710,584
Book value per adjusted unit		$	1.06			$	0.09		$	7.14				$	8.29

(a)		See Capital Markets and Principal Activities segment schedule of investments that follows.

KKR
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT SCHEDULE OF INVESTMENTS
(Amounts in thousands, except percentage amounts)
		As of December 31, 2012
						Fair Value as
				Fair		a Percentage of
Investment		Cost		Value		Total Investments
Co-Investments in Portfolio Companies of
Private Equity Investment Vehicles:
Alliance Boots GmbH		195,640		426,561		9.0%
HCA Inc.		141,983		378,387		8.0%
The Nielsen Company B.V.		134,603		273,712		5.8%
NXP B.V.		207,964		207,388		4.4%
Samson Resources Corporation		237,514		190,012		4.0%
Dollar General Corporation		37,733		185,107		3.9%
KION Group GmbH		128,058		172,748		3.6%
ProSiebenSat.1 Media AG		226,913		144,919		3.0%
US Foods		100,000		140,000		2.9%
Biomet, Inc.		151,444		121,155		2.5%
First Data Corporation		135,258		94,681		2.0%
Energy Future Holdings Corp.		200,000		10,000		0.2%
PagesJaunes Groupe S.A.		235,201		-		0.0%
		2,132,311		2,344,670		49.3%
Private Equity Investment Vehicles
KKR 2006 Fund L.P.		380,803		436,552		9.2%
KKR European Fund III L.P.		189,441		221,393		4.7%
KKR Asian Fund L.P.		64,324		82,641		1.7%
KKR European Fund II L.P.		65,649		57,616		1.2%
KKR Millennium Fund L.P.		59,426		50,111		1.1%
KKR North America Fund XI L.P.		22,788		22,788		0.5%
KKR E2 Investors, L.P.		10,418		19,261		0.4%
KKR European Fund L.P.		47,664		4,299		0.1%
KKR China Growth Fund L.P.		3,611		4,051		0.1%
Co-Investment Vehicles		528		598		0.0%
		844,652		899,310		19.0%
Private Equity Total		2,976,963		3,243,980		68.3%
Energy & Infrastructure Investment Vehicles
Royalties and Drilling		93,755		93,755		2.0%
Infrastructure Fund		24,447		25,678		0.5%
Co-Investment Vehicles		10,718		13,217		0.3%
Natural Resources		9,747		5,796		0.1%
Energy & Infrastructure Total		138,667		138,446		2.9%
Private Markets Total		3,115,630		3,382,426		71.2%
Public Markets Investment Vehicles
Liquid Credit SMAs/Funds		187,163		194,658		4.1%
Long/Short Equities Funds		100,000		105,648		2.2%
Credit Relative Value Fund		50,000		52,507		1.1%
Direct Lending		36,739		39,649		0.8%
Special Situations Vehicles		20,148		22,172		0.5%
Mezzanine Fund		14,735		17,235		0.4%
Public Markets Total		408,785		431,869		9.1%
Other		947,040		943,862		19.7%
Total Investments		$ 4,471,455		$ 4,758,157		100.0%

KKR
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT SCHEDULE OF INVESTMENTS, CONTINUED
(Amounts in thousands, except percentage amounts)
		As of December 31, 2012
								Fair Value as
								a Percentage
					Fair			of Total
Investment		Cost			Value			Investments
Significant Aggregate Investments: (a)
Alliance Boots GmbH		$	228,769		$	491,530		10.3	%
HCA Inc.			173,443			451,752		9.5	%
The Nielsen Company B.V.			134,603			273,712		5.8	%
Dollar General Corporation			52,359			245,432		5.2	%
			589,174			1,462,426		30.8	%
Other investments			3,882,281			3,295,731		69.2	%
Total Investments		$	4,471,455		$	4,758,157		100.0	%
Investments by Geography:
North America		$	2,911,143		$	3,232,122		67.9	%
Europe			1,391,256			1,355,801		28.5	%
Asia-Pacific			169,056			170,234		3.6	%
Total Investments		$	4,471,455		$	4,758,157		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 December 31, 2012. The fair value figures include the co-investment and the limited partner and/or general partner interests in the underlying portfolio company.

KKR
ASSETS UNDER MANAGEMENT
(Amounts in thousands)
		Private Markets Segment				Public Markets Segment						Total Reportable Segments
Quarter Ended December 31, 2012
September 30, 2012		$	49,771,000			$	16,507,700					$	66,278,700
New Capital Raised			934,100				1,794,000						2,728,100
Acquisitions (a)			-				8,086,900						8,086,900
Distributions			(3,097,100	)			(485,600	)		(b)			(3,582,700	)
Foreign Exchange			17,400				-						17,400
Change in Value			1,502,200				496,900						1,999,100
December 31, 2012		$	49,127,600			$	26,399,900					$	75,527,500
Year Ended December 31, 2012
December 31, 2011		$	43,627,900			$	15,380,700					$	59,008,600
New Capital Raised			7,360,100				3,219,600						10,579,700
Acquisitions (a)			-				8,086,900						8,086,900
Distributions			(9,023,900	)			(1,543,200	)		(c)			(10,567,100	)
Net Changes in Fee Base of Certain Funds (d)			(1,327,900	)			-						(1,327,900	)
Foreign Exchange			16,000				-						16,000
Change in Value			8,475,400				1,255,900						9,731,300
December 31, 2012		$	49,127,600			$	26,399,900					$	75,527,500
KKR
FEE PAYING ASSETS UNDER MANAGEMENT
(Amounts in thousands)
		Private Markets Segment				Public Markets Segment						Total Reportable Segments
Quarter Ended December 31, 2012
September 30, 2012		$	40,354,200			$	9,911,800					$	50,266,000
New Capital Raised			1,272,000				1,559,100						2,831,100
Acquisitions (a)			-				8,078,400						8,078,400
Distributions			(551,100	)			(257,200	)		(b)			(808,300	)
Foreign Exchange			83,600				-						83,600
Change in Value			14,300				380,900						395,200
December 31, 2012		$	41,173,000			$	19,673,000					$	60,846,000
Year Ended December 31, 2012
December 31, 2011		$	37,869,700			$	8,527,600					$	46,397,300
New Capital Raised			7,451,700				2,999,200						10,450,900
Acquisitions (a)			-				8,078,400						8,078,400
Distributions			(1,089,400	)			(851,400	)		(c)			(1,940,800	)
Net Changes in Fee Base of Certain Funds (d)			(3,205,400	)			-						(3,205,400	)
Foreign Exchange			99,600				-						99,600
Change in Value			46,800				919,200						966,000
December 31, 2012		$	41,173,000			$	19,673,000					$	60,846,000

(a)		Represents AUM and FPAUM of Prisma as of October 1, 2012, the date of acquisition. These figures exclude new capital raised and distributions during the quarter ended December 31, 2012.
(b)		Includes $169.9 million of redemptions by fund investors.
(c)		Includes $421.8 million of redemptions by fund investors.
(d)		Represents the impact of including certain funds entering the post-investment period including KKR 2006 Fund L.P.

KKR
INVESTMENT VEHICLE SUMMARY* (UNAUDITED)
As of December 31, 2012
(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
North America Fund XI		9/2012		9/2018		$	6,331.2		$	5,908.7		3.9%		$	422.5		$	-				$	422.5		$	422.5
China Growth Fund		11/2010		11/2016			1,010.0			674.9		1.0%			335.1			-					335.1			370.8
E2 Investors (Annex Fund)		8/2009		11/2013			346.3			192.1		4.3%			154.2			-					154.2			303.7
European Fund III		3/2008		3/2014			6,087.7			2,410.9		4.6%			3,676.8			-					3,676.8			4,360.3
Asian Fund		7/2007		7/2013			3,983.2			860.5		2.5%			3,122.7			732.0					2,612.9			4,783.5
2006 Fund		9/2006		9/2012			17,642.2			1,315.2		2.1%			16,327.0			9,291.5					10,594.0			14,422.5
European Fund II		11/2005		10/2008			5,750.8			-		2.1%			5,750.8			2,271.7					4,091.5			4,855.1
Millennium Fund		12/2002		12/2008			6,000.0			-		2.5%			6,000.0			7,907.9					3,050.9			4,362.3
European Fund		12/1999		12/2005			3,085.4			-		3.2%			3,085.4			8,720.0					-			51.5
Total Private Equity Funds							50,236.8			11,362.3					38,874.5			28,923.1					24,937.9			33,932.2
Co-Investment Vehicles		Various		Various			2,133.5			213.1		Various			1,920.4			2,032.4					1,363.0			1,830.2
Total Private Equity							52,370.3			11,575.4					40,794.9			30,955.5					26,300.9			35,762.4
Energy & Infrastructure
Natural Resources		Various		Various			1,225.8			805.0		Various			420.8			35.2					408.1			253.7
Infrastructure		Various		Various			1,041.7			736.2		4.8%			305.5			1.7					305.5			323.9
Co-Investment Vehicles		Various		Various			2,369.8			1,154.5		Various			1,215.3			150.9					1,215.3			1,491.6
Energy & Infrastructure Total							4,637.3			2,695.7					1,941.6			187.8					1,928.9			2,069.2
Private Markets Total							57,007.6			14,271.1					42,736.5			31,143.3					28,229.8			37,831.6
Public Markets
Special Situations Vehicles		Various		Various			2,189.3			641.4		Various			1,547.9			164.2					1,547.9			1,800.4
Mezzanine Fund		3/2010		8/2015			987.0			655.8		4.6%			331.2			31.9					331.2			378.5
Direct Lending		Various		Various			668.5			503.6		Various			164.9			-					164.9			175.1
Public Markets Total							3,844.8			1,800.8					2,044.0			196.1					2,044.0			2,354.0
Grand Total						$	60,852.4		$	16,071.9				$	44,780.5		$	31,339.4				$	30,273.8		$	40,185.6

* Reflects only investment vehicles for which KKR has the ability to earn carried interest.

KKR
DISTRIBUTION CALCULATION
(Amounts in thousands, except unit and per unit amounts)
		Quarter Ended												Year Ended
		December 31, 2012				September 30, 2012				December 31, 2011				December 31, 2012				December 31, 2011
FRE (a)		$	85,979			$	90,704			$	116,575			$	319,811			$	417,153
Realized cash carry			100,992				100,145				83,226				285,424				202,115
Net realized principal investment income			366,878				145,700				(49,237	)			866,776				186,288
Less: local income taxes			(6,314	)			(2,365	)			(1,856	)			(15,572	)			(16,291	)
Less: noncontrolling interests			(1,245	)			(1,310	)			(2,220	)			(7,043	)			(6,671	)
Total Distributable Earnings			546,290				332,874				146,488				1,449,396				782,594
Less: net realized principal investment income			(366,878	)			(145,700	)			49,237				(866,776	)			(186,288	)
Distributed Earnings			179,412				187,174				195,725				582,620				596,306
Distributed Earnings to KKR & Co. L.P. (b)			66,275				66,015				65,059				206,491				193,876
Less: estimated current corporate income taxes			(8,525	)			(6,890	)			(22,924	)			(23,705	)			(57,048	)
Distributed Earnings to KKR & Co. L.P., After Taxes			57,750				59,125				42,135				182,786				136,828
Additional Distribution (c)			119,081				-				29,530				119,081				29,530
Total Distribution to KKR & Co. L.P.		$	176,831			$	59,125			$	71,665			$	301,867			$	166,358
Distribution per KKR & Co. L.P. common unit		$	0.70			$	0.24			$	0.32			$	1.22			$	0.74
Outstanding KKR & Co. L.P. common units			253,363,691				241,407,805				227,150,182

(a)		See Exhibit A for a reconciliation of such measure to financial results prepared in accordance with GAAP.
(b)		Represents the amount of distributed earnings allocable to KKR & Co. L.P. based on its ownership in the KKR business as of December 31, 2012.
(c)		Additional distribution is provided primarily from certain realizations on investments within KKR’s capital markets and principal activities segment and was calculated for certain taxes as described in our distribution policy. The amount of any additional distribution in the future should not be expected to be consistent or regularly declared.

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 net realized principal investment income, 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 purposes of KKR’s distribution policy, its distributions are expected to consist 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) non-controlling 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 unit holder’s actual U.S. or non-U.S. tax liability.

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 segment operating revenues less segment operating expenses and is used by management as an alternative measurement of the operating earnings of KKR and its business segments before investment income. 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 charges and other non-cash compensation charges borne by KKR Holdings or incurred under the KKR & Co. L.P. 2010 Equity Incentive Plan; (vi) the exclusion of certain reimbursable expenses; and (vii) the exclusion of certain non-recurring items.

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 investment income and carried interest. ENI is comprised of: (i) FRE; plus (ii) segment investment income (loss), 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 (loss) 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 (loss) relating to noncontrolling interests; and (iii) the exclusion of income taxes.

After-tax ENI is used to measure KKR’s implied ENI on a fully diluted basis. We believe this measure is useful to unitholders as it provides an indication of KKR’s ENI as if all outstanding KKR Holdings units had been exchanged for common units of KKR & Co. L.P. 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.

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 and (iii) net realized principal investment income; less (i) applicable local income taxes, if any, and (ii) noncontrolling interests. Net realized principal investment income includes, with respect to KKR’s principal investments (i) realized investment gains and losses, (ii) dividend income and (iii) interest income, net of interest expense, earned from KKR’s principal investments. KKR does not intend to distribute net realized principal investment income other than certain additional distributions that KKR may determine to make, which are intended to cover certain tax liabilities, as calculated by KKR. See “Distribution Policy.” 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 and vehicles. 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 structured finance vehicles; and (v) the fair value of other assets managed by KKR. 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 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 and vehicles, for only those funds and vehicles 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.

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 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 unitholdersas it provides additional insight into KKR’s investment of committed capital. Such amounts include: (i) capital invested by fund investors and co-investors with respect to which KKR is entitled to a fee or carried interest and (ii) capital invested by KKR’s investment funds and vehicles.

Syndicated capital is the aggregate amount of debt or equity capital in transactions originated by KKR investment funds and vehicles, which has been distributed to third parties in exchange for a fee. It does not include capital committed to such transactions by carry-yielding co-investment vehicles, which is instead reported in committed dollars invested. 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 and Principal Activities 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 and vehicles to make future investments.

Adjusted units are used as a measure of the total equity ownership of KKR that is held by KKR & Co. L.P. and KKR Holdings 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 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 private equity funds, investment vehicles 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. 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 and vehicles and other noncontrolling interest holders. Additionally, we believe this measure is useful for analyzing KKR’s ability to service its debt obligations.

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 our investment portfolio, including carried interest, as well as our 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 the equivalent GAAP amounts on a consolidated basis primarily as a result of the exclusion of ownership interests attributable to KKR Holdings L.P.

Fee related EBITDA is comprised of FRE before the impact of depreciation of fixed assets and amortization of intangible assets and is used by management as a measure of the cash earnings of KKR and its business segments before investment income. We believe this measure is useful to unitholders as it provides additional insight into the amount of cash earnings generated by KKR’s management companies and capital markets businesses.

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.

KKR
EXHIBIT A
RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. PER COMMON UNIT (GAAP BASIS - UNAUDITED)
TO AFTER TAX ENI PER ADJUSTED UNIT
(Amounts in thousands, except common unit and per common unit amounts)
		Quarter Ended			Quarter Ended			Quarter Ended
		December 31, 2012			September 30, 2012			December 31, 2011
Net income (loss) attributable to KKR & Co. L.P. per common unit		$	0.39		$	0.53		$	0.20
Weighted Average Common Units Outstanding			249,303,558			239,696,358			225,382,001
Net income (loss) attributable to KKR & Co. L.P.			96,728			127,411			46,137
Plus: Net income (loss) attributable to noncontrolling interests held by KKR Holdings L.P.			170,256			249,460			133,301
Plus: Non-cash equity based charges			70,170			122,157			83,688
Plus: Amortization of intangibles and other, net			4,898			1,234			1,046
Plus: Income taxes			5,628			9,612			21,322
Economic net income (loss)			347,680			509,874			285,494
Less: Provision for income taxes			10,632			22,548			59,988
Economic net income (loss) after taxes			337,048			487,326			225,506
Weighted Average Adjusted Units			704,805,537			702,252,548			689,335,706
Economic net income (loss) after taxes per adjusted unit		$	0.48		$	0.69		$	0.33
		Year Ended			Year Ended
		December 31, 2012			December 31, 2011
Net income (loss) attributable to KKR & Co. L.P. per common unit		$	2.35		$	0.01
Weighted Average Common Units Outstanding			238,503,257			220,235,469
Net income (loss) attributable to KKR & Co. L.P.			560,836			1,921
Plus: Net income (loss) attributable to noncontrolling interests held by KKR Holdings L.P.			1,116,740			185,352
Plus: Non-cash equity based charges			400,207			470,221
Plus: Amortization of intangibles and other, net			9,683			4,210
Plus: Income taxes			43,405			89,245
Economic net income (loss)			2,130,871			750,949
Less: Provision for income taxes			102,420			248,082
Economic net income (loss) after taxes			2,028,451			502,867
Weighted Average Adjusted Units			699,988,443			685,386,132
Economic net income (loss) after taxes per adjusted unit		$	2.90		$	0.73
RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. (GAAP BASIS - UNAUDITED)
TO ECONOMIC NET INCOME (LOSS), FEE RELATED EARNINGS AND FEE RELATED EBITDA
(Amounts in thousands)
		Quarter Ended			Quarter Ended			Quarter Ended
		December 31, 2012			September 30, 2012			December 31, 2011
Net income (loss) attributable to KKR & Co. L.P.		$	96,728		$	127,411		$	46,137
Plus: Net income (loss) attributable to noncontrolling interests held by KKR Holdings L.P.			170,256			249,460			133,301
Plus: Non-cash equity based charges			70,170			122,157			83,688
Plus: Amortization of intangibles and other, net			4,898			1,234			1,046
Plus: Income taxes			5,628			9,612			21,322
Economic net income (loss)			347,680			509,874			285,494
Plus: Income attributable to segment noncontrolling interests			1,245			1,310			2,220
Less: Investment income (loss)			262,946			420,480			171,139
Fee related earnings			85,979			90,704			116,575
Plus: depreciation and amortization			3,580			3,273			2,528
Fee related EBITDA		$	89,559		$	93,977		$	119,103
		Year Ended			Year Ended
		December 31, 2012			December 31, 2011
Net income (loss) attributable to KKR & Co. L.P.		$	560,836		$	1,921
Plus: Net income (loss) attributable to noncontrolling interests held by KKR Holdings L.P.			1,116,740			185,352
Plus: Non-cash equity based charges			400,207			470,221
Plus: Amortization of intangibles and other, net			9,683			4,210
Plus: Income taxes			43,405			89,245
Economic net income (loss)			2,130,871			750,949
Plus: Income attributable to segment noncontrolling interests			7,043			6,671
Less: Investment income (loss)			1,818,103			340,467
Fee related earnings			319,811			417,153
Plus: depreciation and amortization			12,499			9,925
Fee related EBITDA		$	332,310		$	427,078

KKR
EXHIBIT A (CONTINUED)
RECONCILIATION OF KKR & CO. L.P. PARTNERS' CAPITAL (GAAP BASIS - UNAUDITED)
TO BOOK VALUE AND BOOK VALUE PER ADJUSTED UNIT
(Amounts in thousands, except common unit and per common unit amounts)
		As of				As of
		December 31, 2012				December 31, 2011
KKR & Co. L.P. partners’ capital		$	2,004,359			$	1,328,698
Noncontrolling interests held by KKR Holdings L.P.			4,981,864				4,342,157
Equity impact of KKR Management Holdings Corp. and other			(29,039	)			39,729
Book value			6,957,184				5,710,584
Adjusted units			704,780,484				689,392,861
Book value per adjusted unit		$	9.87			$	8.29
RECONCILIATION OF CASH AND CASH EQUIVALENTS (GAAP BASIS - UNAUDITED)
TO CASH AND SHORT-TERM INVESTMENTS (SEGMENT BASIS)
(Amounts in thousands)
		As of				As of
		December 31, 2012				December 31, 2011
Cash and cash equivalents		$	1,230,464			$	843,261
Liquid short-term investments			303,823				146,180
Cash and short-term investments		$	1,534,287			$	989,441

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
		December 31, 2012		September 30, 2012		December 31, 2011
Weighted Average GAAP Common Units Outstanding - Basic		249,303,558		239,696,358		225,382,001
Weighted Average Unvested Common Units(a)		18,888,570		17,950,264		5,979,031
Weighted Average GAAP Common Units Outstanding - Diluted		268,192,128		257,646,622		231,361,032
Adjustments:
Weighted Average KKR Holdings Units(b)		436,613,409		444,605,926		457,974,674
Weighted Average Adjusted Units		704,805,537		702,252,548		689,335,706
		Year Ended
		December 31, 2012		December 31, 2011
Weighted Average GAAP Common Units Outstanding - Basic		238,503,257		220,235,469
Weighted Average Unvested Common Units(a)		15,589,903		2,283,705
Weighted Average GAAP Common Units Outstanding - Diluted		254,093,160		222,519,174
Adjustments:
Weighted Average KKR Holdings Units(b)		445,895,283		462,866,958
Weighted Average Adjusted Units		699,988,443		685,386,132
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
		December 31, 2012		December 31, 2011
GAAP Common Units Outstanding - Basic		253,363,691		227,150,182
Unvested Common Units(a)		18,863,517		6,028,444
GAAP Common Units Outstanding - Diluted		272,227,208		233,178,626
Adjustments:
KKR Holdings Units(b)		432,553,276		456,214,235
Adjusted Units		704,780,484		689,392,861

(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.

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: KKR & Co. L.P.