KKR & Co. L.P. Announces Fourth Quarter and Full Year 2010 Results

Assets under management (“AUM”) totaled $61.0 billion as of December 31, 2010, up 16.8% from $52.2 billion as of December 31, 2009.

Fee related earnings (“FRE”) were $95.1 million and $318.3 million for the fourth quarter and year ended December 31, 2010, respectively, up from FRE of $87.5 million and pro forma1 FRE of $247.4 million in the comparable periods of 2009.

Economic net income (“ENI”) was $714.6 million and $2,139.8 million for the fourth quarter and year ended December 31, 2010, respectively, up from ENI of $515.3 million and pro forma ENI of $1,953.9 million in the comparable periods of 2009.

GAAP net income attributable to KKR & Co. L.P. was $180.6 million and $333.2 million for the fourth quarter and year ended December 31, 2010, respectively2.

Book value was $5.7 billion on a segment basis as of December 31, 2010, representing $8.38 per adjusted unit.

After-tax ENI was $1.02 and $2.83 per adjusted unit for the fourth quarter and year ended December 31, 2010, respectively.

KKR & Co. L.P. declares a fourth quarter distribution of $0.29 per common unit, bringing total distributions for 2010 results to $0.60 per common unit.

NEW YORK--()--KKR & Co. L.P. (NYSE: KKR) today reported its fourth quarter and full year 2010 results. ENI was $2.1 billion for the year, an increase of 9.5% versus 2009 driven by accelerated performance across each of KKR’s businesses. The continued appreciation of KKR’s private equity investments, by 11% for the quarter and 33% for the full year, was the key contributor to the strong results.

AUM and fee paying assets under management (“FPAUM”) ended the year at $61.0 billion and $46.0 billion, respectively. The strong growth over the prior quarter and year was a result of continued success in capital raising and significant investment appreciation.

“We continue to show great progress in the two areas that drive our business: investment performance and capital raising. Our investment returns across all strategies compared favorably to their benchmarks. Our private equity funds returned 33% for the year, significantly outperforming the S&P 500 return of 15%, while each of our credit strategies also beat benchmark indices. In addition, despite a challenging fundraising environment in 2010, we raised $5 billion of capital to support our China growth equity, oil & gas, infrastructure, mezzanine, special situations and other strategies. All of this provides us with strong momentum heading into 2011,” said Henry R. Kravis and George R. Roberts, Co-Founders, Co-Chairmen and Co-Chief Executive Officers of KKR.

GAAP Results

GAAP results for the quarter and year ended December 31, 2010 included net income attributable to KKR & Co. L.P. of $180.6 million and $333.2 million, respectively, and net income per common unit attributable to KKR & Co. L.P. of $0.86 and $1.62, respectively. For the quarter and year ended December 31, 2009, net income (loss) attributable to KKR & Co. L.P. was ($78.2) million and $849.7 million, respectively.

The quarter over quarter increase is primarily due to a higher level of appreciation of KKR’s investments and a one-time recognition of non-cash compensation charges in connection with the Business Combination and related transactions in the fourth quarter of 2009.

The year over year decrease is primarily due to certain adjustments applicable to periods after October 1, 2009 as a result of the Business Combination and related transactions including: (i) the allocation of earnings of KKR to KKR Holdings L.P. (the vehicle through which KKR principals own interests in KKR), (ii) the recognition of non-cash compensation charges, and (iii) the recognition of corporate income taxes. These factors were partially offset by the inclusion of income from KKR’s principal investments for all of 2010.

Total Reportable Segments

AUM was $61.0 billion as of December 31, 2010, an increase of $5.5 billion or 9.9% compared to AUM of $55.5 billion as of September 30, 2010. The increase was primarily due to appreciation in the fair value of KKR’s private equity portfolio as well as new capital raised, partially offset by distributions to limited partners arising from realizations.

FPAUM was $46.0 billion as of December 31, 2010, an increase of $3.3 billion or 7.7% compared to FPAUM of $42.7 billion as of September 30, 2010. The increase was primarily due to new capital raised across many of KKR’s strategies.

FRE was $95.1 million for the quarter ended December 31, 2010, an increase of $7.6 million or 8.7% compared to FRE of $87.5 million for the quarter ended December 31, 2009. The increase is primarily due to higher capital markets fees as a result of increased activity and incentive fees earned in the public markets segment. These increases were partially offset by lower monitoring fees in the private markets segment as a result of a termination payment on a monitoring agreement with a portfolio company received during the fourth quarter of 2009.

For the year ended December 31, 2010, FRE was $318.3 million, an increase of $70.9 million or 28.7% compared to pro forma FRE of $247.4 million for the year ended December 31, 2009. The increase was primarily due to (i) higher capital markets fees as a result of increased activity, (ii) higher incentive fees earned in the public markets segment, and (iii) higher transaction fees in the private markets segment as a result of more transactions closing. These increases were partially offset by higher compensation expense as a result of improved performance and the expansion of KKR’s business as well as lower monitoring fees as a result of monitoring agreement termination payments received during 2009.

ENI was $714.6 million for the quarter ended December 31, 2010, an increase of $199.3 million or 38.7% compared to ENI of $515.3 million for the quarter ended December 31, 2009. The increase primarily reflects a higher level of appreciation of KKR’s private equity portfolio, which drove increases in both net carried interest and the income from principal investments.

For the year ended December 31, 2010, ENI was $2,139.8 million, an increase of $185.9 million or 9.5% compared to pro forma ENI of $1,953.9 million for the year ended December 31, 2009. The increase primarily reflects a higher level of net carried interest and the growth in FRE discussed above.

Private Markets

AUM in the private markets segment was $46.2 billion as of December 31, 2010, an increase of $4.3 billion or 10.3% compared to AUM of $41.9 billion as of September 30, 2010. The increase was primarily due to appreciation in the fair value of KKR’s private equity portfolio as well as new capital raised, partially offset by distributions to limited partners arising from realizations.

FPAUM in the private markets segment was $38.2 billion as of December 31, 2010, an increase of $2.2 billion or 6.1% compared to FPAUM of $36.0 billion as of September 30, 2010. The increase was primarily due to new capital raised.

FRE in the private markets segment was $41.1 million for the quarter ended December 31, 2010, a decrease of $28.1 million or 40.6% compared to FRE of $69.2 million for the quarter ended December 31, 2009. The decrease was primarily due to (i) lower monitoring fees as a result of a $46.1 million termination payment on a monitoring agreement with a portfolio company during the fourth quarter of 2009, which impacted FRE by $28.6 million net of associated fee credits, and (ii) higher compensation and other operating expenses in connection with the expansion of KKR’s business and increased transaction activity. These downward drivers were partially offset by higher transaction fees as a result of more transactions closing.

FRE in the private markets segment was $182.3 million for the year ended December 31, 2010, a decrease of $34.7 million or 16.0% compared to pro forma FRE of $217.0 million for the year ended December 31, 2009. The decrease was primarily due to (i) lower monitoring fees as a result of $72.2 million in payments received during 2009 related to the termination of monitoring agreements with portfolio companies, which impacted FRE by $37.8 million net of associated fee credits, and (ii) higher compensation and other operating expenses in connection with the expansion of KKR’s business and increased transaction activity. These downward drivers were partially offset by higher transaction fees as a result of more transactions closing.

ENI in the private markets segment was $262.0 million for the quarter ended December 31, 2010, an increase of $116.4 million or 79.9% compared to ENI of $145.6 million for the quarter ended December 31, 2009. The increase was primarily due to higher net carried interest resulting from a higher level of appreciation of KKR’s private equity portfolio.

ENI in the private markets segment was $784.6 million for the year ended December 31, 2010, an increase of $123.1 million or 18.6% compared to pro forma ENI of $661.5 million for the year ended December 31, 2009. The increase was primarily due to higher net carried interest driven by certain private equity funds that were not in a carry-earning position during 2009 earning carried interest in 2010 as a result of appreciation above their cost basis.

Public Markets

AUM in the public markets segment was $14.8 billion as of December 31, 2010, an increase of $1.2 billion or 8.8% compared to AUM of $13.6 billion as of September 30, 2010. The increase was primarily due to new capital raised during the quarter and appreciation in the net asset value of certain vehicles.

FPAUM in the public markets segment was $7.8 billion as of December 31, 2010, an increase of $1.1 billion or 16.4% compared to FPAUM of $6.7 billion as of September 30, 2010. The increase was primarily due to new capital raised during the quarter and appreciation in the net asset value of certain vehicles.

FRE in the public markets segment was $16.3 million for the quarter ended December 31, 2010, an increase of $13.9 million compared to FRE of $2.4 million for the quarter ended December 31, 2009. For the year ended December 31, 2010, FRE was $57.0 million, an increase of $45.2 million compared to pro forma FRE of $11.8 million for the year ended December 31, 2009. The increase in both comparative periods was primarily due to (i) higher incentive fees and (ii) higher transaction fees arising primarily from new strategies that drive such fees.

ENI in the public markets segment was $17.8 million for the quarter ended December 31, 2010, an increase of $16.3 million compared to ENI of $1.5 million for the quarter ended December 31, 2009. For the year ended December 31, 2010, ENI was $60.1 million, an increase of $53.7 million compared to pro forma ENI of $6.4 million for the year ended December 31, 2009. The increase in both comparative periods was primarily due to the growth in FRE discussed above.

Capital Markets and Principal Activities

FRE in the capital markets and principal activities segment was $37.7 million for the quarter ended December 31, 2010, an increase of $21.9 million compared to FRE of $15.8 million for the quarter ended December 31, 2009. For the year ended December 31, 2010, FRE was $79.1 million, an increase of $60.4 million compared to pro forma FRE of $18.7 million for the year ended December 31, 2009. The increase in both comparative periods was primarily due to an increase in 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 $434.9 million for the quarter ended December 31, 2010, an increase of $66.7 million or 18.1% compared to ENI of $368.2 million for the quarter ended December 31, 2009. The increase was primarily due to a higher level of investment income.

For the year ended December 31, 2010, ENI was $1,295.1 million, an increase of $9.1 million or 0.7% compared to pro forma ENI of $1,286.0 million for the year ended December 31, 2009. The increase was primarily due to the growth in FRE discussed above partially offset by a lower level of investment income. While the fair value of KKR’s principal investments increased in 2010, the overall level of appreciation was slightly lower than in 2009.

CAPITAL AND LIQUIDITY

As of December 31, 2010, KKR had an available cash balance of $756.3 million and $500.0 million of outstanding debt obligations. On February 22, 2011, KKR entered into an amended and restated credit agreement with HSBC Bank plc, which will become effective upon the satisfaction of certain customary closing conditions. Upon effectiveness, the current availability for borrowings under this facility will be reduced from $1.0 billion to $700.0 million, and the scheduled maturity will be extended by three years to expire on the fifth anniversary of the date of closing. The rates for borrowings and the facility fee will remain the same. Following the amendment, 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 December 31, 2010).

As of December 31, 2010, KKR’s portion of total uncalled commitments to its investment funds was $923.7 million, consisting of the following (amounts in thousands):

  Commitments

Private Markets

2006 Fund $ 362,684
European Fund III 300,540
Asian Fund 117,396
Infrastructure Fund 50,000
E2 Investors (Annex Fund) 30,833
China Growth Fund 8,506
Natural Resources I 5,413
Other Private Markets Commitments 1,264
Total Private Markets Commitments 876,636
 

Public Markets

Mezzanine Fund 34,100
Capital Solutions Vehicles 13,000
Total Public Markets Commitments 47,100
Total Uncalled Commitments $ 923,736
 

DISTRIBUTION

A distribution of $0.29 per common unit will be paid on March 21, 2011 to unitholders of record as of the close of business on March 7, 2011.

OTHER

KKR will hold its first investor day on March 15, 2011. Additional details will follow in a press release that will be issued prior to the event. The investor day will be broadcast live over the Internet and will be accessible by all interested parties.

CONFERENCE CALL

A conference call to discuss KKR’s financial results will be held on Wednesday, February 23, 2011 at 10:00 a.m. EST. The conference call may be accessed by dialing (877) 857-6144 (U.S. callers) or +1 (719) 325-4932 (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 2815232, 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 December 31, 2010. 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 prospectus filed with the SEC on October 5, 2010 and other filings with the SEC, which are available at www.sec.gov.

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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 On October 1, 2009, KKR & Co. L.P. and KKR & Co. (Guernsey) L.P. completed a transaction to combine their businesses (the “Business Combination”). Amounts indicated in this press release as being presented on a pro forma basis give effect to the Business Combination and related transactions as if they had been completed on January 1, 2009.

2 For the years ended December 31, 2010 and 2009, the GAAP financial information is not directly comparable as GAAP financial information prior to October 1, 2009 did not reflect certain adjustments that are applicable as a result of the Business Combination.

KKR
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS (GAAP BASIS - UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
     
 
Quarter Ended Year Ended
December 31, 2010 December 31, 2009 December 31, 2010 December 31, 2009
Revenues
Fees $ 146,267   $ 129,856   $ 435,386   $ 331,271  
Expenses
Employee Compensation and Benefits 299,123 686,021 1,344,455 838,072
Occupancy and Related Charges 10,124 9,896 39,692 38,013
General, Administrative and Other 81,377 124,498 311,147 264,396
Fund Expenses   28,278     18,218     67,369     55,229  
Total Expenses   418,902     838,633     1,762,663     1,195,710  
Investment Income (Loss)
Net Gains (Losses) from Investment Activities 2,986,845 1,959,537 7,755,090 7,505,005
Dividend Income 441,781 3,831 1,250,293 186,324
Interest Income 55,766 45,137 226,824 142,117
Interest Expense   (18,706 )   (18,797 )   (53,099 )   (79,638 )
Total Investment Income (Loss)   3,465,686     1,989,708     9,179,108     7,753,808  
Income (Loss) Before Taxes 3,193,051 1,280,931 7,851,831 6,889,369
Income Taxes   14,362     31,193     75,360     36,998  
Net Income (Loss) 3,178,689 1,249,738 7,776,471 6,852,371
Less: Net Income (Loss) Attributable to
Noncontrolling Interests in Consolidated Entities 2,586,697 1,444,655 6,544,016 6,119,382
Less: Net Income (Loss) Attributable to
Noncontrolling Interests Held by KKR Holdings L.P.   411,413     (116,696 )   899,277     (116,696 )
Net Income (Loss) Attributable to KKR & Co. L.P. $ 180,579   $ (78,221 ) $ 333,178   $ 849,685  
 
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit
Basic $ 0.86 $ (0.38 ) $ 1.62
Diluted (a) $ 0.86 $ (0.38 ) $ 1.62
Weighted Average Common Units
Basic 209,383,219 204,902,226 206,031,682
Diluted (a) 209,413,219 204,902,226 206,039,244

______________________________________________________________________________________________________________

Note: Prior to the Business Combination and related transactions, there was no single capital structure upon which to calculate historical earnings per common unit since KKR’s business was conducted through a large number of entities for which there was no single holding entity. Accordingly, earnings per common unit has not been presented for periods prior to the Transactions.

(a) KKR Holdings units have been excluded from the calculation of diluted earnings per common unit given that the exchange of these units would proportionally increase KKR & Co. L.P.’s interests in KKR’s business and would have an anti-dilutive effect on earnings per common unit as a result of certain tax benefits KKR & Co. L.P. is assumed to receive upon the exchange.

 
KKR
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
Actual Actual Actual Actual Pro Forma*
December 31, 2010 September 30, 2010 December 31, 2009 December 31, 2010 December 31, 2009
Fees
Management and incentive fees:
Management fees $ 119,043 $ 112,545 $ 113,615 $ 453,286 $ 437,716
Incentive fees   8,427     9,555     -     38,832     4,472  
Management and incentive fees   127,470     122,100     113,615     492,118     442,188  
 
Monitoring and transaction fees:
Monitoring fees 22,108 21,780 68,383 86,932 158,243
Transaction fees 86,774 40,634 39,842 220,383 91,828
Fee credits   (21,671 )   (13,683 )   (26,260 )   (64,899 )   (73,901 )
Net monitoring and transaction fees   87,211     48,731     81,965     242,416     176,170  
 
Total fees   214,681     170,831     195,580     734,534     618,358  
 
Expenses
Employee compensation and benefits 55,594 49,056 48,018 206,334 168,597
Occupancy and related charges 10,124 10,373 9,896 39,715 38,013
Other operating expenses   53,872     41,896     50,199     170,163     164,331  
Total expenses   119,590     101,325     108,113     416,212     370,941  
 
Fee Related Earnings   95,091     69,506     87,467     318,322     247,417  
 
Investment income (loss)
Gross carried interest 416,442 237,923 139,034 1,207,070 602,427
Less: allocation to KKR carry pool (169,305 ) (91,156 ) (40,077 ) (455,872 ) (153,827 )
Less: management fee refunds   (24,412 )   (17,387 )   (22,720 )   (143,446 )   (22,720 )

Net carried interest

222,725 129,380 76,237 607,752 425,880
Other investment income (loss)   398,389     120,006     352,576     1,218,128     1,283,338  
Total investment income (loss)   621,114     249,386     428,813     1,825,880     1,709,218  
 
Income (Loss) before noncontrolling interests
in Income of consolidated entities 716,205 318,892 516,280 2,144,202 1,956,635
Income (Loss) attributable to
noncontrolling interests   1,592     1,567     1,025     4,409     2,691  
 
Economic Net Income (Loss) $ 714,613   $ 317,325   $ 515,255   $ 2,139,793   $ 1,953,944  
 
 
Provision for Income Taxes 17,400 47,784 97,014 210,196
 
Economic Net Income, After Taxes (a) $ 697,213   $ 269,541   $ 418,241   $ 1,929,597  
 
Economic Net Income, After Taxes per Adjusted Unit (b) $ 1.02 $ 0.39 $ 0.61 $ 2.83
                     
Assets Under Management $ 60,997,500 $ 55,498,500 $ 52,204,200 $ 60,997,500 $ 52,204,200
Fee Paying Assets Under Management $ 46,011,100 $ 42,705,200 $ 42,779,800 $ 46,011,100 $ 42,779,800
Committed Dollars Invested $ 2,691,000 $ 540,400 $ 456,700 $ 5,253,300 $ 2,107,700
Uncalled Commitments   $ 14,074,700     $ 13,750,900     $ 14,544,427     $ 14,074,700     $ 14,544,427  
                     

Other Information

Fee Related Earnings $ 95,091 $ 69,506 $ 87,467 $ 318,322 $ 247,417
Plus: Depreciation and Amortization   2,790     2,674     3,191     11,664     9,799  
Fee Related EBITDA $ 97,881   $ 72,180   $ 90,658   $ 329,986   $ 257,216  
 
GAAP interest expense $ 18,706 $ 10,432 $ 18,797 $ 53,099 $ 79,638
Less: interest expense related to debt obligations
from investment financing arrangements   7,535     6,849     9,673   $ 28,622   $ 42,458  
Core Interest Expense (c) $ 11,171   $ 3,583   $ 9,124   $ 24,477   $ 37,180  

____________________________________________________________________________________________________

(a)

   

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.

(b)

Adjusted units represents 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.

(c)

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.

* All amounts indicated in this press release as being presented on a pro forma basis give effect to the Business Combination and related transactions as if they were completed on January 1, 2009. See notes to reportable segments on page 22 of this press release.

 
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PRIVATE MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
           
Quarter Ended Year Ended
Actual Actual Actual Actual Pro Forma*
December 31, 2010 September 30, 2010 December 31, 2009 December 31, 2010 December 31, 2009
Fees
Management and incentive fees:
Management fees $ 102,684 $ 98,337 $ 99,221 $ 396,227 $ 387,112
Incentive fees   -     -     -     -     -  

Management and incentive fees

  102,684     98,337     99,221     396,227     387,112  
 
Monitoring and transaction fees:
Monitoring fees 22,108 21,780 68,383 86,932 158,243
Transaction fees 30,942 19,816 20,269 96,000 57,699
Fee credits   (15,673 )   (12,941 )   (26,260 )   (52,563 )   (73,901 )
Net monitoring and transaction fees   37,377     28,655     62,392     130,369     142,041  
 
Total fees   140,061     126,992     161,613     526,596     529,153  
 
Expenses
Employee compensation and benefits 42,396 37,861 39,399 159,561 136,465
Occupancy and Related Charges 9,206 9,513 9,080 36,395 34,747
Other operating expenses   47,392     36,733     43,911     148,357     140,989  
Total expenses   98,994     84,107     92,390     344,313     312,201  
 
Fee Related Earnings   41,067     42,885     69,223     182,283     216,952  
 
Investment income (loss)
Gross carried interest 414,025 236,792 139,034 1,202,070 602,427
Less: allocation to KKR carry pool (168,338 ) (90,704 ) (40,077 ) (453,872 ) (153,827 )
Less: management fee refunds   (24,412 )   (17,387 )   (22,720 )   (143,446 )   (22,720 )
Net carried interest 221,275 128,701 76,237 604,752 425,880
Other investment income (loss)   (111 )   2,524     605     (1,643 )   20,621  
Total investment income (loss)   221,164     131,225     76,842     603,109     446,501  
 
Income (Loss) before noncontrolling interests
in Income of consolidated entities 262,231 174,110 146,065 785,392 663,453
Income (Loss) attributable to
noncontrolling interests   259     394     497     839     1,973  
 
Economic Net Income (Loss) $ 261,972   $ 173,716   $ 145,568   $ 784,553   $ 661,480  
 
 
Assets Under Management $ 46,223,900 $ 41,878,700 $ 38,842,900 $ 46,223,900 $ 38,842,900
Fee Paying Assets Under Management $ 38,186,700 $ 36,032,300 $ 36,484,400 $ 38,186,700 $ 36,484,400
Committed Dollars Invested $ 2,371,500 $ 349,500 $ 456,700 $ 4,555,700 $ 2,107,700
Uncalled Commitments $ 12,625,900 $ 12,495,400 $ 13,728,100 $ 12,625,900 $ 13,728,100

_________________________________________________________________________________________________________________________________________________

* All amounts indicated in this press release as being presented on a pro forma basis give effect to the Business Combination and related transactions as if they were completed on January 1, 2009. See notes to reportable segments on page 22 of this press release.

 
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PUBLIC MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
           
Quarter Ended Year Ended
Actual Actual Actual Actual Pro Forma*
December 31, 2010 September 30, 2010 December 31, 2009 December 31, 2010 December 31, 2009
Fees
Management and incentive fees:
Management fees $ 16,359 $ 14,208 $ 14,394 $ 57,059 $ 50,604
Incentive fees   8,427     9,555     -     38,832     4,472  

Management and incentive fees

  24,786     23,763     14,394     95,891     55,076  
 
Monitoring and transaction fees:
Monitoring fees - - - - -
Transaction fees 9,292 1,672 - 19,117 -
Fee credits   (5,998 )   (742 )   -     (12,336 )   -  
Net monitoring and transaction fees   3,294     930     -     6,781     -  
 
Total fees   28,080     24,693     14,394     102,672     55,076  
 
Expenses
Employee compensation and benefits 7,586 7,708 6,909 29,910 22,677
Occupancy and related charges 612 615 624 2,375 2,483
Other operating expenses   3,580     3,160     4,444     13,430     18,104  
Total expenses   11,778     11,483     11,977     45,715     43,264  
 
Fee Related Earnings   16,302     13,210     2,417     56,957     11,812  
 
Investment income (loss)
Gross carried interest 2,417 1,131 - 5,000 -
Less: allocation to KKR carry pool (967 ) (452 ) - (2,000 ) -
Less: management fee refunds   -     -     -     -     -  
Net carried interest 1,450 679 - 3,000 -
Other investment income (loss)   188     148     (952 )   718     (5,259 )
Total investment income (loss)   1,638     827     (952 )   3,718     (5,259 )
 
Income (Loss) before noncontrolling interests
in Income of consolidated entities 17,940 14,037 1,465 60,675 6,553
Income (Loss) attributable to
noncontrolling interests   157     125     15     537     109  
 
Economic Net Income (Loss) $ 17,783   $ 13,912   $ 1,450   $ 60,138   $ 6,444  
 
Assets Under Management $ 14,773,600 $ 13,619,800 $ 13,361,300 $ 14,773,600 $ 13,361,300
Fee Paying Assets Under Management $ 7,824,400 $ 6,672,900 $ 6,295,400 $ 7,824,400 $ 6,295,400
Committed Dollars Invested $ 319,500 $ 190,900 $ - $ 697,600 $ -
Uncalled Commitments $ 1,448,800 $ 1,255,500 $ 816,327 $ 1,448,800 $ 816,327

_________________________________________________________________________________________________________________________________________________

* All amounts indicated in this press release as being presented on a pro forma basis give effect to the Business Combination and related transactions as if they were completed on January 1, 2009. See notes to reportable segments on page 22 of this press release.

 
KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT (UNAUDITED)
(Amounts in thousands)
         
Quarter Ended Year Ended
Actual Actual Actual Actual Pro Forma*
December 31, 2010 September 30, 2010 December 31, 2009 December 31, 2010 December 31, 2009
Fees
Management and incentive fees:
Management fees $ - $ - $ - $ - $ -
Incentive fees   -   -   -   -   -
Management and incentive fees   -   -   -   -   -
 
Monitoring and transaction fees:
Monitoring fees - - - - -
Transaction fees 46,540 19,146 19,573 105,266 34,129
Fee credits   -   -   -   -   -
Net monitoring and transaction fees   46,540   19,146   19,573   105,266   34,129
 
Total fees   46,540   19,146   19,573   105,266   34,129
 
Expenses
Employee compensation and benefits 5,612 3,487 1,710 16,863 9,455
Occupancy and related charges 306 245 192 945 783
Other operating expenses   2,900   2,003   1,844   8,376   5,238
Total expenses   8,818   5,735   3,746   26,184   15,476
 
Fee Related Earnings   37,722   13,411   15,827   79,082   18,653
 
Investment income (loss)
Gross carried interest - - - - -
Less: allocation to KKR carry pool - - - - -
Less: management fee refunds   -   -   -   -   -
Net carried interest - - - - -
Other investment income (loss)   398,312   117,334   352,923   1,219,053   1,267,976
Total investment income (loss)   398,312   117,334   352,923   1,219,053   1,267,976
 
Income (Loss) before noncontrolling interests
in Income of consolidated entities 436,034 130,745 368,750 1,298,135 1,286,629
Income (Loss) attributable to
noncontrolling interests   1,176   1,048   513   3,033   609
 
Economic Net Income (Loss) $ 434,858 $ 129,697 $ 368,237 $ 1,295,102 $ 1,286,020

_________________________________________________________________________________________________________________________________________________

* All amounts indicated in this press release as being presented on a pro forma basis give effect to the Business Combination and related transactions as if they were completed on January 1, 2009. See notes to reportable segments on page 22 of this press release.

 
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS - ACTUAL (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
Employee 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 - ACTUAL (UNAUDITED)
Quarter Ended September 30, 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 $ 98,337 $ 14,208 $ - $ 112,545
Incentive fees   -     9,555     -   9,555  
Management and incentive fees   98,337     23,763     -   122,100  
 
Monitoring and transaction fees:
Monitoring fees 21,780 - - 21,780
Transaction fees 19,816 1,672 19,146 40,634
Fee credits   (12,941 )   (742 )   -   (13,683 )
Net monitoring and transaction fees   28,655     930     19,146   48,731  
 
Total fees   126,992     24,693     19,146   170,831  
 
Expenses
Employee compensation and benefits 37,861 7,708 3,487 49,056
Occupancy and related charges 9,513 615 245 10,373
Other operating expenses   36,733     3,160     2,003   41,896  
Total expenses   84,107     11,483     5,735   101,325  
 
Fee Related Earnings   42,885     13,210     13,411   69,506  
 
Investment income (loss)
Gross carried interest 236,792 1,131 - 237,923
Less: allocation to KKR carry pool (90,704 ) (452 ) - (91,156 )
Less: management fee refunds   (17,387 )   -     -   (17,387 )
Net carried interest 128,701 679 - 129,380
Other investment income (loss)   2,524     148     117,334   120,006  
Total investment income (loss)   131,225     827     117,334   249,386  
 
Income (Loss) before noncontrolling interests
in Income of consolidated entities 174,110 14,037 130,745 318,892
Income (Loss) attributable to
noncontrolling interests 394 125 1,048 1,567
       
Economic Net Income (Loss) $ 173,716   $ 13,912   $ 129,697 $ 317,325  
 
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS - ACTUAL (UNAUDITED)
Quarter Ended December 31, 2009
(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 $ 99,221 $ 14,394 $ - $ 113,615
Incentive fees   -     -     -   -  
Management and incentive fees   99,221     14,394     -   113,615  
 
Monitoring and transaction fees:
Monitoring fees 68,383 - - 68,383
Transaction fees 20,269 - 19,573 39,842
Fee credits   (26,260 )   -     -   (26,260 )
Net monitoring and transaction fees   62,392     -     19,573   81,965  
 
Total fees   161,613     14,394     19,573   195,580  
 
Expenses
Employee compensation and benefits 39,399 6,909 1,710 48,018
Occupancy and related charges 9,080 624 192 9,896
Other operating expenses   43,911     4,444     1,844   50,199  
Total expenses   92,390     11,977     3,746   108,113  
 
Fee Related Earnings   69,223     2,417     15,827   87,467  
 
Investment income (loss)
Gross carried interest 139,034 - - 139,034
Less: allocation to KKR carry pool (40,077 ) - - (40,077 )
Less: management fee refunds   (22,720 )   -     -   (22,720 )
Net carried interest 76,237 - - 76,237
Other investment income (loss)   605     (952 )   352,923   352,576  
Total investment income (loss)   76,842     (952 )   352,923   428,813  
 
Income (Loss) before noncontrolling interests
in Income of consolidated entities 146,065 1,465 368,750 516,280
Income (Loss) attributable to
noncontrolling interests 497 15 513 1,025
       
Economic Net Income (Loss) $ 145,568   $ 1,450   $ 368,237 $ 515,255  
     
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS - ACTUAL (UNAUDITED)
Year 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 396,227 $ 57,059 $ - $ 453,286
Incentive fees   -     38,832     -   38,832  
Management and incentive fees   396,227     95,891     -   492,118  
 
Monitoring and transaction fees:
Monitoring fees 86,932 - - 86,932
Transaction fees 96,000 19,117 105,266 220,383
Fee credits   (52,563 )   (12,336 )   -   (64,899 )
Net monitoring and transaction fees   130,369     6,781     105,266   242,416  
 
Total fees   526,596     102,672     105,266   734,534  
 
Expenses
Employee compensation and benefits 159,561 29,910 16,863 206,334
Occupancy and related charges 36,395 2,375 945 39,715
Other operating expenses   148,357     13,430     8,376   170,163  
Total expenses   344,313     45,715     26,184   416,212  
 
Fee Related Earnings   182,283     56,957     79,082   318,322  
 
Investment income (loss)
Gross carried interest 1,202,070 5,000 - 1,207,070
Less: allocation to KKR carry pool (453,872 ) (2,000 ) - (455,872 )
Less: management fee refunds   (143,446 )   -     -   (143,446 )
Net carried interest 604,752 3,000 - 607,752
Other investment income (loss)   (1,643 )   718     1,219,053   1,218,128  
Total investment income (loss)   603,109     3,718     1,219,053   1,825,880  
 
Income (Loss) before noncontrolling interests
in Income of consolidated entities 785,392 60,675 1,298,135 2,144,202
Income (Loss) attributable to
noncontrolling interests 839 537 3,033 4,409
       
Economic Net Income (Loss) $ 784,553   $ 60,138   $ 1,295,102 $ 2,139,793  
     
KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS - PRO FORMA* (UNAUDITED)
Year Ended December 31, 2009
(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 $ 387,112 $ 50,604 $ - $ 437,716
Incentive fees   -     4,472     -   4,472  
Management and incentive fees   387,112     55,076     -   442,188  
 
Monitoring and transaction fees:
Monitoring fees 158,243 - - 158,243
Transaction fees 57,699 - 34,129 91,828
Fee credits   (73,901 )   -     -   (73,901 )
Net monitoring and transaction fees   142,041     -     34,129   176,170  
 
Total fees   529,153     55,076     34,129   618,358  
 
Expenses
Employee compensation and benefits 136,465 22,677 9,455 168,597
Occupancy and related charges 34,747 2,483 783 38,013
Other operating expenses   140,989     18,104     5,238   164,331  
Total expenses   312,201     43,264     15,476   370,941  
 
Fee Related Earnings   216,952     11,812     18,653   247,417  
 
Investment income (loss)
Gross carried interest 602,427 - - 602,427
Less: allocation to KKR carry pool (153,827 ) - - (153,827 )
Less: management fee refunds   (22,720 )   -     -   (22,720 )
Net carried interest 425,880 - - 425,880
Other investment income (loss)   20,621     (5,259 )   1,267,976   1,283,338  
Total investment income (loss)   446,501     (5,259 )   1,267,976   1,709,218  
 
Income (Loss) before noncontrolling interests
in Income of consolidated entities 663,453 6,553 1,286,629 1,956,635
Income (Loss) attributable to
noncontrolling interests 1,973 109 609 2,691
       
Economic Net Income (Loss) $ 661,480   $ 6,444   $ 1,286,020 $ 1,953,944  

_________________________________________________________________________________________________________________________________________________

* All amounts indicated in this press release as being presented on a pro forma basis give effect to the Business Combination and related transactions as if they were completed on January 1, 2009. See notes to reportable segments on page 22 of this press release.

 
KKR
BALANCE SHEETS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except per unit amounts)
   
As of December 31, 2010
 

Capital Markets

 

 

and Principal

 

Private Markets

Public Markets

Activities

Total Reportable

Segment   Segment   Segment   Segments
 
Cash and cash equivalents $ 229,729 $ 10,007 $ 516,544 $ 756,280
Investments - - 4,831,798 (a) 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
 
 
 
As of December 31, 2009

 

Capital Markets

 

 

 

and Principal

 

Private Markets

Public Markets

Activities

Total Reportable

Segment   Segment   Segment   Segments
 
Cash and cash equivalents $ 51,015 $ 9,089 $ 496,554 $ 556,658
Investments - - 4,108,359 4,108,359
Unrealized carry 156,149 - - 156,149
Other assets   154,964     53,319   55,219   263,502
Total assets $ 362,128   $ 62,408 $ 4,660,132 $ 5,084,668
 
Debt obligations $ - $ - $ 733,697 $ 733,697
Other liabilities   84,936     12,300   85,802   183,038
Total liabilities   84,936     12,300   819,499   916,735
 
Noncontrolling interests 130 527 14,392 15,049
       
Partners' capital $ 277,062   $ 49,581 $ 3,826,241 $ 4,152,884
 
Book value per adjusted unit (b) $ 0.41 $ 0.07 $ 5.60 $ 6.08

_______________________________________________________________________________

(a)

 

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

(b)

Adjusted units represents 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 December 31, 2010

 

 

Fair Value as
Fair a Percentage

Investment

Cost

Value of Investments
 
Private Equity Investments:
Co-investments in portfolio companies of
private equity funds:
Dollar General Corporation $ 164,291 $ 575,862 11.9 %
HCA Inc. 201,444 436,473 9.0
Alliance Boots GmbH. 301,352 304,192 6.3
The Nielsen Company B.V. 156,839 235,258 4.9
NXP B.V. 250,000 198,253 4.1
Biomet, Inc. 151,443 151,443 3.1
U.S. Foodservice, Inc. 100,000 120,000 2.5
ProSiebenSat.1 Media AG 226,913 106,731 2.2
First Data Corporation 135,258 81,155 1.7
KION Group GmbH. 128,058 55,199 1.1
Energy Future Holdings Corp. 200,000 40,000 0.9
PagesJaunes Groupe S.A. 235,201 - -
Capmark Financial Group Inc.   137,321   - -
  2,388,120   2,304,566 47.7 %
Private equity funds:
KKR 2006 Fund L.P. 1,080,930 1,148,646 23.8 %
KKR Asian Fund L.P. 177,996 237,606 4.9
KKR European Fund III, Limited Partnership 183,368 193,090 4.0
KKR European Fund, Limited Partnership 144,133 189,240 3.9
KKR Millennium Fund L.P. 195,164 181,989 3.8
KKR European Fund II, Limited Partnership 95,974 83,923 1.7
KKR E2 Investors, L.P. 9,432 13,334 0.3
KKR China Growth Fund   1,479   1,479 -
  1,888,476   2,049,307 42.4 %
 
Other Investments   505,820   477,925 9.9 %
 
Total Investments $ 4,782,416 $ 4,831,798 100.0 %
     
KKR
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT SCHEDULE OF INVESTMENTS, CONTINUED
(Amounts in thousands, except percentage amounts)
 
As of December 31, 2010

 

 

Fair Value as
Fair a Percentage

Investment

Cost

Value of Investments
 
Significant Aggregate Investments: (a)
Dollar General Corporation $ 227,972 $ 767,168 15.9 %
HCA Inc. 255,307 540,618 11.2
Alliance Boots GmbH 426,523 437,905 9.1
The Nielsen Company B.V. 172,841 257,662 5.3
Biomet, Inc.   242,866   242,866 5.0
1,325,509 2,246,219 46.5
Other portfolio companies (b) 2,951,087 2,107,654 43.6
Other investments   505,820   477,925 9.9
$ 4,782,416 $ 4,831,798 100.0 %
 
 
Investments by Geography:
North America $ 2,613,189 $ 3,071,011 63.6 %
Europe 1,738,313 1,250,258 25.9
Asia Pacific   430,914   510,529 10.5
$ 4,782,416 $ 4,831,798 100.0 %
 
 
Investments by Industry:
Healthcare $ 992,269 $ 1,286,435 26.6 %
Retail 544,719 1,093,883 22.6
Financial Services 999,425 693,866 14.4
Media/Telecom 811,348 541,846 11.2
Technology 532,138 538,496 11.1
Industrial 326,163 305,948 6.3
Energy 454,412 213,564 4.4
Consumer Products 100,850 124,543 2.6
Other   21,092   33,217 0.8
$ 4,782,416 $ 4,831,798 100.0 %

_______________________________________________________________________________

(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, 2010. 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 December 31, 2010.

 
KKR
ASSETS UNDER MANAGEMENT AND FEE PAYING ASSETS UNDER MANAGEMENT
(Amounts in thousands)
     
 
 
Assets Under Management

 

 

Private Markets

Public Markets

Total Reportable

Segment   Segment   Segments
Quarter Ended December 31, 2010
 
AUM as of September 30, 2010 $ 41,878,700 $ 13,619,800 $ 55,498,500
New Capital Raised 2,483,100 993,200 3,476,300
Distributions (1,400,500) (59,100) (1,459,600)
Foreign Exchange (45,900) - (45,900)
Change in Value 3,308,500 219,700 3,528,200
AUM as of December 31, 2010 $ 46,223,900 $ 14,773,600 $ 60,997,500
 
Year Ended December 31, 2010
 
AUM as of December 31, 2009 $ 38,842,900 $ 13,361,300 $ 52,204,200
New Capital Raised 3,025,500 1,970,100 4,995,600
Distributions (4,085,200) (1,281,700) (5,366,900)
Foreign Exchange (274,800) - (274,800)
Change in Value 8,715,500 723,900 9,439,400
AUM as of December 31, 2010 $ 46,223,900 $ 14,773,600 $ 60,997,500
 
 
 
Fee Paying Assets Under Management

 

 

Private Markets

Public Markets

Total Reportable

Segment   Segment   Segments
Quarter Ended December 31, 2010
 
FPAUM as of September 30, 2010 $ 36,032,300 $ 6,672,900 $ 42,705,200
New Capital Raised 2,437,100 991,700 3,428,800
Distributions (152,000) (59,100) (211,100)
Foreign Exchange (137,900) - (137,900)
Change in Value 7,200 218,900 226,100
FPAUM as of December 31, 2010 $ 38,186,700 $ 7,824,400 $ 46,011,100
 
 
Year Ended December 31, 2010
 
FPAUM as of December 31, 2009 $ 36,484,400 $ 6,295,400 $ 42,779,800
New Capital Raised 2,971,600 1,893,000 4,864,600
Distributions (650,300) (1,281,700) (1,932,000)
Foreign Exchange (658,800) - (658,800)
Change in Value 39,800 917,700 957,500
FPAUM as of December 31, 2010 $ 38,186,700 $ 7,824,400 $ 46,011,100
 
KKR
INVESTMENT VEHICLE SUMMARY (UNAUDITED)
As of December 31, 2010
(Amounts in millions, except percentages)
                   
 
 
Investment Period Amount

Private Markets

Commencement
Date

 

End
Date

Commitment

 

Uncalled
Commitments

 

Percentage
Committed
by General
Partner

  Invested   Realized   Remaining
Cost
  Fair Value
 
Private Equity Funds
China Growth Fund 11/2010 11/2016 $ 943.8 $ 837.5 1.1 % $ 106.3 $ - $ 106.3 $ 106.3
E2 Investors (Annex Fund) 8/2009 11/2011 539.4 424.6 4.2 % 114.8 - 114.8 165.9
European Fund III 3/2008 3/2014 5,956.2 3,709.6 4.5 % 2,246.6 - 2,246.6 2,342.8
Asian Fund 7/2007 7/2013 3,983.2 1,567.6 2.5 % 2,415.6 - 2,415.6 3,442.2
2006 Fund 9/2006 9/2012 17,642.2 4,726.5 2.1 % 12,915.7 2,405.1 11,836.5 13,410.2
European Fund II 11/2005 10/2008 5,750.8 - 2.1 % 5,750.8 761.6 5,335.9 4,594.0
Millennium Fund 12/2002 12/2008 6,000.0 - 2.5 % 6,000.0 6,056.3 3,965.3 5,742.5
European Fund 12/1999 12/2005   3,085.4     - 3.2 %   3,085.4     6,525.0     492.3     2,249.4
 
Total Private Equity Funds 43,901.0 11,265.8 32,635.2 15,748.0 26,513.3 32,053.3
 
Co-Investment Vehicles Various Various 3,194.4 659.3 Various 2,535.1 316.4 2,447.8 3,057.5
Natural Resources I 3/2010 10/2013 257.5 185.8 2.9 % 71.7 - 71.7 71.7
Infrastructure Fund 9/2010 9/2016   515.0     515.0 9.7 %   -     -     -     -
 
Private Markets Total   47,867.9     12,625.9   35,242.0     16,064.4     29,032.8     35,182.5
 

Public Markets

Capital Solutions Vehicles Various Various 1,757.0 1,018.2 Various 738.8 - 738.8 787.7
Mezzanine Fund 3/2010 3/2015   558.6     430.6 8.1 %   128.0     -     128.0     125.2
 
Public Markets Total   2,315.6     1,448.8   866.8     -     866.8     912.9
 
Total $ 50,183.5   $ 14,074.7 $ 36,108.8   $ 16,064.4   $ 29,899.6   $ 36,095.4
 
KKR
DISTRIBUTION CALCULATION
(Amounts in thousands, except unit and per unit amounts)
 
Quarter Ended
December 31, 2010
 
FRE $ 95,091
Realized cash carry 68,958
Less: local income taxes (5,111 )
Less: noncontrolling interests   (1,592 )
Gross distributable earnings   157,346  
 
Distributable earnings to KKR & Co. L.P. 49,014
 
Less: estimated current corporate income taxes   (13,880 )
Net cash available for distribution $ 35,134
 
Additional distribution (a) $ 27,000
 
Total distribution $ 62,134  
 
Distribution per KKR & Co. L.P. common unit $ 0.29
 
Outstanding KKR & Co. L.P. common units   212,770,091  

___________________________________________________________________________________________________________________________________

(a)

 

Additional distribution is provided primarily from certain realizations on investments within KKR’s capital markets and principal activities segment and was calculated in accordance with our distribution policy to cover certain tax liabilities. 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 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) certain tax distributions, if any. This amount is expected to be reduced by (i) corporate and applicable local taxes, if any, (ii) noncontrolling interests, and (iii) amounts determined by KKR to be necessary or appropriate for the conduct of its business and other matters as discussed above.

The declaration and payment of any distributions are subject to the discretion of the board of directors of the general partner of KKR & Co. L.P. and the terms of its limited partnership agreement. There can be no assurance that distributions will be made as intended or at all or that such distributions will be sufficient to pay any particular KKR unit holder’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.

Business Combination

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

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

Given the significance of these adjustments, the comparisons to all periods prior to October 1, 2009 in this press release are on a pro forma basis giving effect to the adjustments above. For a further discussion of adjustments related to the Business Combination please refer to KKR & Co. L.P.’s prospectus filed on October 5, 2010, which is available at the SEC’s website at www.sec.gov.

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 combined basis as a result of: (i) the inclusion of management fees earned from consolidated funds that were eliminated in consolidation; (ii) the exclusion of expenses of consolidated funds; (iii) the exclusion of charges relating to the amortization of intangible assets; (iv) the exclusion of charges relating to carry pool allocations; (v) the exclusion of non-cash equity charges and other non-cash compensation charges 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. You should note that KKR’s calculation of AUM may differ from the calculations of other asset managers and, as a result, its measurements of AUM may not be comparable to similar measures presented by other asset managers. KKR’s definition of AUM is not based on any definition of AUM that is set forth in the agreements governing the investment funds, vehicles or accounts that it manages.

KKR

Notes to Reportable Segments (Unaudited) (Continued)

   

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

 

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

 

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

 

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

 

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

 

Management Fee Refunds represent 20% of any cash management fees earned from limited partners in the event that certain of KKR’s investment funds recognize a carried interest. At such time as the fund recognizes a carried interest in an amount sufficient to cover 20% of the management fees earned or a portion thereof, carried interest is reduced, not to exceed 20% of management fees earned. As of December 31, 2010, the amount subject to management fee refunds, which may reduce carried interest in future periods, totaled $58.7 million.

 

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

 
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 Year Ended
December 31, 2010 December 31, 2009 December 31, 2010
Total reportable segments fee related earnings $ 95,091 $ 87,467 $ 318,322
Investment income 621,114 428,813 1,825,880
Less: Income attributable to noncontrolling interests   (1,592 )   (1,025 )   (4,409 )
Economic net income (loss) 714,613 515,255 2,139,793
Income taxes (14,362 ) (31,193 ) (75,360 )
Amortization of intangibles and other, net (1,219 ) (1,066 ) (7,785 )
Non-cash equity based charges (107,040 ) (562,373 ) (824,193 )
Allocations to carry pool recorded in connection
with the Transactions - (115,540 ) -
Allocation to noncontrolling
interests held by KKR Holdings L.P.   (411,413 )   116,696     (899,277 )
Net (income) loss attributable to KKR & Co. L.P. $ 180,579   $ (78,221 ) $ 333,178  
  Year Ended
December 31, 2009 (a)
Total pro forma reportable segments fee related earnings $ 247,417
Investment income 1,709,218
Less: Income attributable to noncontrolling interests   (2,691 )
Pro forma economic net income (loss) 1,953,944
Allocation to carry pool 95,857
Carry allocated to former KKR principals 172,637
Income on capital invested by or on behalf of KKR principals prior
to completion of the Business Combination 86,452
Economic interests associated with the KKR 1996 Fund 67,163
Elimination of management fees paid by KPE prior to completion
of Business Combination 28,244
Financial results of KPE (906,492 )
Certain compensation adjustments (12,753 )
Income attributable to noncontrolling interests   1,601  
Total actual economic net income (loss) $ 1,486,653
Costs relating to the Business Combination and related transactions (34,846 )
Income taxes (36,998 )
Amortization of intangibles and other, net (3,907 )
Non-cash equity based charges (562,373 )
Allocations to carry pool recorded in connection
with the Transactions (115,540 )
Allocation to noncontrolling interests held by KKR Holdings L.P.   116,696  
Net income attributable to KKR & Co. L.P. $ 849,685  

_______________________________________________________________________________________________________________________________

(a)

 

The segment financial information for the year ended December 31, 2009 is presented on a pro forma basis to give effect to the Business Combination and related transactions as if they were completed on January 1, 2009 whereas the 2009 GAAP financial information is presented on an actual basis. Accordingly, the reconciliation of segment financial information to GAAP financial information for the year ended December 31, 2009 is presented in two parts: (i) a reconciliation of 2009 pro forma segment financial information to 2009 actual segment financial information and (ii) a reconciliation of 2009 actual segment financial information to 2009 actual GAAP information.

 
KKR

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 Year Ended
December 31, 2010 September 30, 2010 December 31, 2009 December 31, 2010
Weighted Average GAAP Common Units Outstanding - Basic 209,383,219 204,902,226 204,902,226 206,031,682
Weighted Average Unvested Common Units(a) 30,000 - - 7,562
Weighted Average GAAP Common Units Outstanding - Diluted 209,413,219 204,902,226 204,902,226 206,039,244
Adjustments:
Weighted Average KKR Holdings Units (b) 473,624,201 478,105,194 478,105,194 476,975,738
Weighted Average Adjusted Units 683,037,420 683,007,420 683,007,420 683,014,982
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, 2010 December 31, 2009
GAAP Common Units Outstanding - Basic 212,770,091 204,902,226
Unvested Common Units(a) 30,000 -
GAAP Common Units Outstanding - Diluted 212,800,091 204,902,226
Adjustments:
KKR Holdings Units (b) 470,237,329 478,105,194
Adjusted Units 683,037,420 683,007,420

____________________________________________________________________________________________________

(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.

Contacts

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

Sharing

Contacts

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