EX-99.1 2 q117earningsrelease.htm EXHIBIT 99.1 Exhibit


image5.jpg
KKR & Co. L.P. Reports First Quarter 2017 Results
_________________________________________________________________________________________________________________________________________________________________________
NEW YORK, April 27, 2017 - KKR & Co. L.P. (NYSE: KKR) today reported its first quarter 2017 results.

GAAP net income (loss) attributable to KKR & Co. L.P. common unitholders was $259.3 million for the quarter ended March 31, 2017. On a diluted basis, net income (loss) per common unit was $0.52 for the quarter ended March 31, 2017. Investment performance primarily drove GAAP net income (loss) attributable to KKR & Co. L.P. common unitholders. GAAP KKR & Co. L.P. Capital - Common Unitholders equity was $5.8 billion (1) as of March 31, 2017, or $12.63, per outstanding common unit.

After-tax Economic Net Income (Loss) and After-tax Economic Net Income (Loss) per adjusted unit were $549.9 million and $0.65, respectively, for the quarter ended March 31, 2017. After-tax Distributable Earnings and After-tax Distributable Earnings per adjusted unit eligible for distribution were $346.5 million and $0.43, respectively, for the quarter ended March 31, 2017.


Highlights

Strong investment performance primarily drove After-tax Economic Net Income of $549.9 million, or $0.65 per adjusted unit, for the first quarter of 2017

Balance sheet investments appreciated 5% for the quarter ended March 31, 2017

$5.4 billion of capital invested in the quarter driven primarily by investment activity outside of the U.S.

Book value was $10.3 billion as of March 31, 2017 or $12.80 per outstanding adjusted unit

As of March 31, 2017, Assets Under Management and Fee Paying Assets Under Management were $138 billion and $107 billion respectively, up 9% and 14%, respectively, compared to March 31, 2016. In the quarter, a final close was held on KKR Americas Fund XII and an initial close was held on KKR Asian Fund III, which are our flagship private equity funds for the Americas and Asia-Pacific regions, respectively.

KKR's regular distribution per common unit of $0.17 was declared for the quarter ended March 31, 2017



___________________________




“We had a good start to the year.  Strong investment performance together with our integrated model - the combination of our investment funds, balance sheet and capital markets capabilities - led to significant Economic Net Income and Distributable Earnings,”  said Henry R. Kravis and George R. Roberts, Co-Chairmen and Co-Chief Executive Officers of KKR. 








__________________________________________________________________________________________________________________________________________________________________________
Note: Certain financial measures, including economic net income ("ENI"), After-tax ENI, After-tax distributable earnings, book value, adjusted units and outstanding adjusted units, are not presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). See Exhibits C and D for a reconciliation of such measures to financial results prepared in accordance with GAAP.

(1) GAAP KKR & Co. L.P. Capital - Common Unitholder equity represents only that portion of the business held by KKR & Co. L.P. and does not include the economic interests that are held by KKR Holdings L.P. Our reportable segments are presented prior to giving effect to the allocation of ownership interests between KKR & Co. L.P. and KKR Holdings L.P. and as such represent the business in total.

Page 1



GAAP RESULTS COMMENTARY
Fees and Other
Fees and Other were $716.0 million for the quarter ended March 31, 2017, compared to $162.8 million for the quarter ended March 31, 2016. The net increase was primarily due to carried interest gains in the three months ended March 31, 2017 compared to carried interest losses in the three months ended March 31, 2016. Additionally, transaction fees increased driven primarily by activity in our Private Markets and Capital Markets businesses.
Expenses
Total expenses were $540.0 million for the quarter ended March 31, 2017, compared to $308.3 million for the quarter ended March 31, 2016. The increase was primarily due to a higher level of carry pool allocations reflecting appreciation in the value of our private equity portfolio as compared to unrealized losses in the first quarter of 2016.
Total Investment Income (Loss)
Total investment income (loss) was $662.5 million for the quarter ended March 31, 2017, compared to a loss of ($612.9) million for the quarter ended March 31, 2016. The investment gains in the current period were primarily due to an increase in the value of KKR's investment portfolio, the most significant of which was in our credit portfolio including investments held at certain consolidated credit funds. The investment losses in the prior period were primarily due to a decrease in the value of KKR's investment portfolio, the most significant of which was in our private equity and credit portfolios.
Net Income (Loss) Attributable to KKR & Co. L.P. Common Unitholders
Net Income (Loss) Attributable to KKR & Co. L.P. Common Unitholders was $259.3 million for the quarter ended March 31, 2017, compared to a loss of ($329.9) million for the quarter ended March 31, 2016. The increase was primarily due to the drivers of investment income and carried interest gains partially offset by higher expenses, as described above.

TOTAL REPORTABLE SEGMENTS RESULTS COMMENTARY
Segment Revenues
Total segment revenues were $1,022.7 million for the quarter ended March 31, 2017, up significantly compared to total segment revenues of ($347.6) million for the quarter ended March 31, 2016. Total management, monitoring and transaction fees, net, were $375.5 million, a 34% increase compared to the quarter ended March 31, 2016, driven primarily by an increase in transaction fees in our Capital Markets segment together with an increase in management fees in our Private Markets and Public Markets segments. Reflecting underlying performance in our carry-paying funds and balance sheet investments, total performance income was $348.5 million and total investment income was $298.7 million for the quarter ended March 31, 2017, compared to ($124.9) million and ($529.6) million, respectively, in the quarter ended March 31, 2016. Performance income and investment income gains in the first quarter of 2017 were largely driven by appreciation in KKR's private equity and alternative credit portfolios. For the quarter ended March 31, 2017, KKR's private equity portfolio appreciated 4.7%.
Economic Net Income
ENI was $668.5 million for the quarter ended March 31, 2017, compared to ENI of ($506.9) million for the quarter ended March 31, 2016. The increase was primarily attributable to higher total segment revenues as described above, partially offset by higher total compensation and benefits reflecting a higher level of fees and carried interest generated in the first quarter of 2017.
AUM and FPAUM
AUM was $137.6 billion as of March 31, 2017, an increase of $8.0 billion, compared to AUM of $129.6 billion as of December 31, 2016. New capital raised and an increase in value in our private equity and alternative credit businesses were offset partially by distributions to limited partners of our private equity funds arising from realizations and by distributions made in our Public Markets segment.
FPAUM was $107.1 billion as of March 31, 2017, an increase of $5.6 billion, compared to FPAUM of $101.5 billion as of December 31, 2016. The increase was primarily attributable to new capital raised in our Private Markets segment reflecting our Asian Fund III entering its investment period at the end of the quarter and to a lesser extent new capital raised in our Public Markets segment. This increase was partially offset by distributions in our Public Markets segment and distributions to limited partners of our private equity funds arising from realizations. Additionally, our Asian Fund II entered its post investment period at the end of the quarter, resulting in a decrease in its fee base.

Page 2



DISTRIBUTIONS AND OTHER
A distribution of $0.17 per common unit has been declared, which will be paid on May 23, 2017 to holders of record of common units as of the close of business on May 8, 2017. Under KKR's current distribution policy, KKR intends to make equal quarterly distributions of $0.17 per unit to holders of its common units.
A distribution of $0.421875 per Series A Preferred Unit has been declared and set aside for payment on June 15, 2017 to holders of record of Series A Preferred Units as of the close of business on June 1, 2017. A distribution of $0.406250 per Series B Preferred Unit has been declared and set aside for payment on June 15, 2017 to holders of record of Series B Preferred Units as of the close of business on June 1, 2017.
The declaration and payment of any future distributions on preferred or common units 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 future distributions will be made as intended or at all, that unitholders will receive sufficient distributions to satisfy payment of their tax liabilities as limited partners of KKR or that any particular distribution policy for common units will be maintained.
Since October 27, 2015, KKR has authorized a total of $750 million to repurchase its common units, of which $459 million has been spent to repurchase 31.7 million common units as of April 21, 2017. On April 3, 2017, KKR canceled equity awards representing 1.9 million common units to satisfy tax obligations of $35 million in connection with their vesting, bringing cumulative cancellations of equity awards representing 7.1 million common units to satisfy tax obligations of $114 million. In total, 38.8 million common units have been retired on a fully-diluted basis over this period. Common units may be repurchased from time to time in open market transactions, in privately negotiated transactions or otherwise.
On March 30, 2017, KKR Financial Holdings LLC, a subsidiary of KKR ("KFN"), issued $375.0 million par amount of 5.500% Senior Unsecured Notes (the “5.500% Notes”) in a private placement. The 5.500% Notes will mature on March 30, 2032. KFN may redeem the 5.500% Notes in whole, but not in part, at a redemption price equal to 100% of the outstanding principal amount plus accrued and unpaid interest to, but excluding, the date of redemption on or after March 30, 2022.

On April 24, 2017, KFN redeemed all of its outstanding 7.500% Senior Notes due 2042 (the “7.500% Notes”) for cash, at a redemption price equal to 100% of the principal amount of the 7.500% Notes plus unpaid and accrued interest.  As of March 31, 2017, there was $115 million aggregate principal amount of the 7.500% Notes outstanding.  On November 15, 2016, KFN had redeemed its $258.8 million 8.375% Senior Notes due 2041 (the "8.375% Notes”) at a redemption price equal to 100% of the principal amount of the 8.375% Notes plus unpaid and accrued interest. 

In total, through these transactions, KFN has redeemed $373.8 million of its outstanding debt obligations with weighted average interest cost of 8.1% and refinanced them with the 5.500% Notes, resulting in $9.7 million of future annual interest expense savings.
CONFERENCE CALL
A conference call to discuss KKR's financial results will be held on Thursday, April 27, 2017 at 10:00 a.m. ET. The conference call may be accessed by dialing (877) 303-2917 (U.S. callers) or +1 (253) 237-1135 (non-U.S. callers); a pass code is not required. Additionally, the conference call will be broadcast live over the Internet and may be accessed through the Investor Center section of KKR's website at http://ir.kkr.com/kkr_ir/kkr_events.cfm. A replay of the live broadcast will be available on KKR's website or by dialing (855) 859-2056 (U.S. callers) or +1 (404) 537-3406 (non-U.S. callers), pass code 90743839, beginning approximately two hours after the broadcast.
From time to time, KKR may use its website as a channel of distribution of material company information. Financial and other important information regarding KKR is routinely posted and accessible on the Investor Center for KKR & Co. L.P. at http://ir.kkr.com/kkr_ir/kkr_events.cfm. In addition, you may automatically receive email alerts and other information about KKR by enrolling your email address at the “Email Alerts” area of the Investor Center on the website.
A slide presentation containing supplemental commentary about KKR's financial results for the fiscal quarter ended March 31, 2017 may be accessed through the Investor Center of the KKR website at http://ir.kkr.com/kkr_ir/kkr_events.cfm. The presentation will be referenced on the conference call discussed above.


Page 3



ABOUT KKR
KKR is a leading global investment firm that manages investments across multiple asset classes including private equity, energy, infrastructure, real estate, credit and hedge funds. KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people, and driving growth and value creation at the asset level. KKR invests its own capital alongside its partners' capital and brings opportunities to others through its capital markets business. References to KKR’s investments may include the activities of its sponsored funds. For additional information about KKR & Co. L.P. (NYSE: KKR), please visit KKR's website at www.kkr.com and on Twitter @KKR_Co.
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, including the statements with respect to the declaration and payment of distributions in future quarters and the timing, manner and volume of repurchase of common units pursuant to its repurchase program. The forward-looking statements are based on KKR’s beliefs, assumptions and expectations, 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, ENI, after-tax ENI, after-tax distributable earnings, capital invested, syndicated capital, uncalled commitments, cash and short-term investments, fee related earnings, fee and yield segment EBITDA, core interest expense 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 volatility of the capital markets; failure to realize the benefits of or changes in KKR’s business strategies including the ability to realize the anticipated synergies from acquisitions, strategic partnerships or other transactions; 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. All forward looking statements speak only as of the date hereof. 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, 2016, filed with the SEC on February 24, 2017, quarterly reports on Form 10-Q for subsequent quarters and other filings with the SEC, which are available at www.sec.gov.
___________________________

CONTACT INFORMATION
Investor Relations:                        
Kohlberg Kravis Roberts & Co. L.P.                 
Craig Larson                        
Tel: +1-877-610-4910 (U.S.) / +1-212-230-9410            
investor-relations@kkr.com                     

Media:
Kohlberg Kravis Roberts & Co. L.P.
Kristi Huller
Tel: +1-212-750-8300
media@kkr.com

Page 4



KKR
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (GAAP BASIS - UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
 
March 31, 2017
 
March 31, 2016
Revenues
 
 
 
 
Fees and Other
 
$
715,952

 
$
162,805

Expenses
 
 
 
 
Compensation and Benefits
 
402,963

 
125,489

Occupancy and Related Charges
 
14,851

 
16,566

General, Administrative and Other
 
122,200

 
166,268

Total Expenses
 
540,014

 
308,323

Investment Income (Loss)
 
 
 
 
Net Gains (Losses) from Investment Activities
 
558,448

 
(735,223
)
Dividend Income
 
9,924

 
63,213

Interest Income
 
280,980

 
230,476

Interest Expense
 
(186,854
)
 
(171,394
)
Total Investment Income (Loss)
 
662,498

 
(612,928
)
 
 
 
 
 
Income (Loss) Before Taxes
 
838,436

 
(758,446
)
 
 
 
 
 
Income Tax (Benefit)
 
40,542

 
1,890

 
 
 
 
 
Net Income (Loss)
 
797,894

 
(760,336
)
 
 
 
 
 
Net Income (Loss) Attributable to
 
 
 
 
Redeemable Noncontrolling Interests
 
20,933

 
(38
)
Net Income (Loss) Attributable to
 
 
 
 
Noncontrolling Interests
 
509,277

 
(430,359
)
 
 
 
 
 
Net Income (Loss) Attributable to KKR & Co. L.P.
 
267,684

 
(329,939
)
 
 
 
 
 
Net Income (Loss) Attributable to Series A Preferred Unitholders
 
5,822

 

Net Income (Loss) Attributable to Series B Preferred Unitholders
 
2,519

 

 
 
 
 
 
Net Income (Loss) Attributable to KKR & Co. L.P. Common Unitholders
 
$
259,343

 
$
(329,939
)
 
 
 
 
 
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit
 
 
 
 
Basic
 
$
0.57

 
$
(0.73
)
Diluted (1)
 
$
0.52

 
$
(0.73
)
Weighted Average Common Units Outstanding
 
 
 
 
Basic
 
453,695,846

 
450,262,143

Diluted (1)
 
496,684,340

 
450,262,143

 
 
 
 
 



















_______________________________________________________________________________________________________________________________________________________________________________________

(1) KKR Holdings L.P. units have been excluded from the calculation of diluted earnings per common unit since the exchange of these units would not dilute KKR’s respective ownership interests in the KKR Group Partnerships. For the three months ended March 31, 2016, unvested common units and other securities are excluded from the calculation of diluted earnings per common unit because inclusion of such unvested common units and other securities would be anti-dilutive having the effect of decreasing the loss per common unit.

Page 5



KKR
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (GAAP BASIS - UNAUDITED)
(Amounts in thousands, except common unit and per common unit amounts)
 
 
 
 
 
 
 
 
 
 
As of
 
 
March 31, 2017
 
December 31, 2016
 
 
 
 
 
Assets
 
 
 
 
Cash and Cash Equivalents
 
$
2,758,398

 
$
2,508,902

Investments
 
34,225,324

 
31,409,765

Other Assets
 
4,651,990

 
5,084,230

Total Assets
 
41,635,712

 
39,002,897

 
 
 
 
 
Liabilities and Equity
 
 
 
 
Debt Obligations
 
19,625,439

 
18,544,075

Other Liabilities
 
3,722,475

 
3,340,739

Total Liabilities
 
23,347,914

 
21,884,814

 
 
 
 
 
Redeemable Noncontrolling Interests
 
781,428

 
632,348

 
 
 
 
 
Equity
 
 
 
 
Series A Preferred Units
 
332,988

 
332,988

Series B Preferred Units
 
149,566

 
149,566

KKR & Co. L.P. Capital - Common Unitholders
 
5,755,354

 
5,457,279

Noncontrolling Interests
 
11,268,462

 
10,545,902

Total Equity
 
17,506,370

 
16,485,735

Total Liabilities and Equity
 
$
41,635,712

 
$
39,002,897

 
 
 
 
 
KKR & Co. L.P. Capital Per Outstanding Common Unit - Basic
 
$
12.63

 
$
12.06



































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KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
 
 
 
 
 
 
 
 
Quarter Ended
 
 
March 31, 2017
 
December 31, 2016
 
March 31, 2016
Segment Revenues
 
 
 
 
 
 
Management, Monitoring and Transaction Fees, Net
 
 
 
 
 
 
Management Fees
 
$
208,284

 
$
198,137

 
$
194,600

Monitoring Fees
 
13,220

 
12,228

 
12,037

Transaction Fees
 
243,035

 
68,271

 
96,085

Fee Credits
 
(89,017
)
 
(22,356
)
 
(22,807
)
Total Management, Monitoring and Transaction Fees, Net
 
375,522

 
256,280

 
279,915

Performance Income (Loss)
 
 
 
 
 
 
Realized Incentive Fees
 
1,686

 
23,449

 
1,593

Realized Carried Interest
 
206,204

 
503,176

 
97,288

Unrealized Carried Interest
 
140,626

 
(285,616
)
 
(223,805
)
Total Performance Income (Loss)
 
348,516

 
241,009

 
(124,924
)
Investment Income (Loss)
 
 
 
 
 
 
Net Realized Gains (Losses)
 
79,451

 
969

 
(24,183
)
Net Unrealized Gains (Losses)
 
204,036

 
141,276

 
(564,991
)
Total Realized and Unrealized
 
283,487

 
142,245

 
(589,174
)
Interest Income and Dividends
 
56,882

 
69,101

 
108,120

Interest Expense
 
(41,709
)
 
(44,264
)
 
(48,544
)
Net Interest and Dividends
 
15,173

 
24,837

 
59,576

Total Investment Income (Loss)
 
298,660

 
167,082

 
(529,598
)
Total Segment Revenues
 
1,022,698

 
664,371

 
(374,607
)
Segment Expenses
 
 
 
 
 
 
Compensation and Benefits
 
 
 
 
 
 
Cash Compensation and Benefits
 
139,435

 
95,260

 
100,899

Realized Performance Income Compensation
 
88,067

 
215,650

 
39,552

Unrealized Performance Income Compensation
 
57,214

 
(112,786
)
 
(86,642
)
Total Compensation and Benefits
 
284,716

 
198,124

 
53,809

Occupancy and Related Charges
 
14,369

 
14,914

 
15,950

Other Operating Expenses
 
53,498

 
67,806

 
61,886

Total Segment Expenses
 
352,583

 
280,844

 
131,645

Income (Loss) attributable to noncontrolling interests
 
1,584

 
334

 
667

Economic Net Income (Loss)
 
668,531

 
383,193

 
(506,919
)
Equity-based Compensation
 
49,943

 
37,970

 
49,961

Pre-tax Economic Net Income (Loss)
 
618,588

 
345,223

 
(556,880
)
Provision for Income Tax (Benefit)
 
60,325

 
(2,335
)
 
(3,892
)
Preferred Distributions
 
8,341

 
8,341

 

After-tax Economic Net Income (Loss)
 
$
549,922

 
$
339,217

 
$
(552,988
)
 
 
 
 
 
 
 
After-tax Economic Net Income (Loss) Per Adjusted Unit
 
$
0.65

 
$
0.40

 
$
(0.65
)
Weighted Average Adjusted Units (Fully Diluted Basis)
 
849,270,924

 
839,268,845

 
847,972,012

 
 
 
 
 
 
 
Other Operating Measures (1):
 
 
 
 
 
 
Fee Related Earnings
 
$
221,989

 
$
116,407

 
$
140,998

After-tax Distributable Earnings
 
$
346,467

 
$
389,874

 
$
168,732

 
 
 
 
 
 
 
Assets Under Management
 
$
137,616,300

 
$
129,555,700

 
$
126,388,900

Fee Paying Assets Under Management
 
$
107,131,100

 
$
101,473,400

 
$
93,719,700

Capital Invested and Syndicated Capital
 
$
6,559,100

 
$
2,461,500


$
3,167,800

Uncalled Commitments
 
$
41,222,800

 
$
37,791,300


$
34,496,300

 
 
 
 
 
 
 


_______________________________________________________________________________________________________________________________________________________________________________________
Note: See "Notes to Reportable Segments" for more information about certain non-GAAP financial measures and Exhibits C and D for a reconciliation of such measures to the financial results presented in accordance with GAAP.

(1) See Exhibit A "Other Financial Information" for the definition and calculation of Fee Related Earnings and After-tax Distributable Earnings.

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KKR
SCHEDULE OF SEGMENT REVENUES AND OTHER SELECTED FINANCIAL INFORMATION (UNAUDITED)
(Amounts in thousands)
 
 
 
PRIVATE MARKETS
 
 
 
 
 
Quarter Ended
 
 
March 31, 2017
 
December 31, 2016
 
March 31, 2016
Segment Revenues
 
 
 
 
 
 
Management, Monitoring and Transaction Fees, Net
 
 
 
 
 
 
Management Fees
 
$
123,512

 
$
112,046

 
$
117,798

Monitoring Fees
 
13,220

 
12,228

 
12,037

Transaction Fees
 
117,882

 
18,581

 
37,398

Fee Credits
 
(85,650
)
 
(10,537
)
 
(22,596
)
Total Management, Monitoring and Transaction Fees, Net
 
168,964

 
132,318

 
144,637

Performance Income (Loss)
 
 
 
 
 
 
Realized Incentive Fees
 

 

 

Realized Carried Interest
 
206,204

 
503,176

 
93,450

Unrealized Carried Interest
 
123,506

 
(284,674
)
 
(194,699
)
Total Performance Income (Loss)
 
329,710

 
218,502

 
(101,249
)
Investment Income (Loss)
 
 
 
 
 
 
Net Realized Gains (Losses)
 

 

 

Net Unrealized Gains (Losses)
 

 

 

Total Realized and Unrealized
 

 

 

Interest Income and Dividends
 

 

 

Interest Expense
 

 

 

Net Interest and Dividends
 

 

 

Total Investment Income (Loss)
 

 

 

Total Segment Revenues
 
$
498,674

 
$
350,820

 
$
43,388

 
 
 
 
 
 
 
Assets Under Management
 
$
80,197,600

 
$
73,815,500

 
$
71,056,700

Fee Paying Assets Under Management
 
$
56,667,600

 
$
52,204,800

 
$
46,008,000

Capital Invested 
 
$
4,484,200


$
868,700


$
2,084,200

Uncalled Commitments
 
$
35,071,700


$
31,478,700


$
26,903,200



PUBLIC MARKETS
 
 
 
 
 
Quarter Ended
 
 
March 31, 2017
 
December 31, 2016
 
March 31, 2016
Segment Revenues
 
 
 
 
 
 
Management, Monitoring and Transaction Fees, Net
 
 
 
 
 
 
Management Fees
 
$
84,772

 
$
86,091

 
$
76,802

Monitoring Fees
 

 

 

Transaction Fees
 
4,056

 
12,387

 
1,132

Fee Credits
 
(3,367
)
 
(11,819
)
 
(211
)
Total Management, Monitoring and Transaction Fees, Net
 
85,461

 
86,659

 
77,723

Performance Income (Loss)
 
 
 
 
 
 
Realized Incentive Fees
 
1,686

 
23,449

 
1,593

Realized Carried Interest
 

 

 
3,838

Unrealized Carried Interest
 
17,120

 
(942
)
 
(29,106
)
Total Performance Income (Loss)
 
18,806

 
22,507

 
(23,675
)
Investment Income (Loss)
 
 
 
 
 
 
Net Realized Gains (Losses)
 

 

 

Net Unrealized Gains (Losses)
 

 

 

Total Realized and Unrealized
 

 

 

Interest Income and Dividends
 

 

 

Interest Expense
 

 

 

Net Interest and Dividends
 

 

 

Total Investment Income (Loss)
 

 

 

Total Segment Revenues
 
$
104,267

 
$
109,166

 
$
54,048

 
 
 
 
 
 
 
Assets Under Management
 
$
57,418,700

 
$
55,740,200

 
$
55,332,200

Fee Paying Assets Under Management
 
$
50,463,500

 
$
49,268,600

 
$
47,711,700

Capital Invested
 
$
893,600


$
1,592,800


$
418,300

Uncalled Commitments
 
$
6,151,100


$
6,312,600


$
7,593,100





Page 8



KKR
SCHEDULE OF SEGMENT REVENUES AND OTHER SELECTED FINANCIAL INFORMATION (UNAUDITED)
(Amounts in thousands)
 
 
 
 
 
 
 
CAPITAL MARKETS
 
 
 
 
 
Quarter Ended
 
 
March 31, 2017
 
December 31, 2016
 
March 31, 2016
Segment Revenues
 
 
 
 
 
 
Management, Monitoring and Transaction Fees, Net
 
 
 
 
 
 
Management Fees
 
$

 
$

 
$

Monitoring Fees
 

 

 

Transaction Fees
 
121,097

 
37,303

 
57,555

Fee Credits
 

 

 

Total Management, Monitoring and Transaction Fees, Net
 
121,097

 
37,303

 
57,555

Performance Income (Loss)
 
 
 
 
 
 
Realized Incentive Fees
 

 

 

Realized Carried Interest
 

 

 

Unrealized Carried Interest
 

 

 

Total Performance Income (Loss)
 

 

 

Investment Income (Loss)
 
 
 
 
 
 
Net Realized Gains (Losses)
 

 

 

Net Unrealized Gains (Losses)
 

 

 

Total Realized and Unrealized
 

 

 

Interest Income and Dividends
 

 

 

Interest Expense
 

 

 

Net Interest and Dividends
 

 

 

Total Investment Income (Loss)
 

 

 

Total Segment Revenues
 
$
121,097

 
$
37,303

 
$
57,555

 
 
 
 
 
 
 
Syndicated Capital
 
$
1,181,300


$


$
665,300


PRINCIPAL ACTIVITIES
 
 
 
 
 
Quarter Ended
 
 
March 31, 2017
 
December 31, 2016
 
March 31, 2016
Segment Revenues
 
 
 
 
 
 
Management, Monitoring and Transaction Fees, Net
 
 
 
 
 
 
Management Fees
 
$

 
$

 
$

Monitoring Fees
 

 

 

Transaction Fees
 

 

 

Fee Credits
 

 

 

Total Management, Monitoring and Transaction Fees, Net
 

 

 

Performance Income (Loss)
 
 
 
 
 
 
Realized Incentive Fees
 

 

 

Realized Carried Interest
 

 

 

Unrealized Carried Interest
 

 

 

Total Performance Income (Loss)
 

 

 

Investment Income (Loss)
 
 
 
 
 
 
Net Realized Gains (Losses)
 
79,451

 
969

 
(24,183
)
Net Unrealized Gains (Losses)
 
204,036

 
141,276

 
(564,991
)
Total Realized and Unrealized
 
283,487

 
142,245

 
(589,174
)
Interest Income and Dividends
 
56,882

 
69,101

 
108,120

Interest Expense
 
(41,709
)
 
(44,264
)
 
(48,544
)
Net Interest and Dividends
 
15,173

 
24,837

 
59,576

Total Investment Income (Loss)
 
298,660

 
167,082

 
(529,598
)
Total Segment Revenues
 
$
298,660

 
$
167,082

 
$
(529,598
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Page 9



KKR
BALANCE SHEET
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except per unit amounts)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of
 
 
 
 
March 31, 2017
 
 
 
December 31, 2016
 
 
Cash and Short-term Investments
 
$
3,383,032

 
 
 
$
3,387,673

 
 
Investments
 
7,709,739

 
(1) 
 
6,958,873

 
 
Unrealized Carry
 
1,306,737

 
(2) 
 
1,213,692

 
(2) 
Other Assets
 
1,777,727

 
 
 
1,611,678

 
 
Corporate Real Estate
 
161,225

 
 
 
161,225

 
 
Total Assets
 
$
14,338,460

 
 
 
$
13,333,141

 
 
 
 
 
 
 
 
 
 
 
Debt Obligations - KKR (ex-KFN)
 
$
2,000,000

 
 
 
$
2,000,000

 
 
Debt Obligations - KFN
 
754,767

 
 
 
398,560

 
 
Preferred Shares - KFN
 
373,750

 
 
 
373,750

 
 
Other Liabilities
 
362,426

 
 
 
244,676

 
 
Total Liabilities
 
3,490,943

 
 
 
3,016,986

 
 
 
 
 
 
 
 
 
 
 
Noncontrolling Interests
 
21,167

 
 
 
19,564

 
 
Preferred Units
 
500,000

 
 
 
500,000

 
 
 
 
 
 
 
 
 
 
 
Book Value
 
$
10,326,350

 
 
 
$
9,796,591

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Book Value Per Outstanding Adjusted Unit (3)
 
$
12.80

 
 
 
$
12.15

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Last Twelve Months Ended
 
 
 
 
March 31, 2017
 
 
 
December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
Return on Equity (After-tax Economic Net Income (Loss) ) (4)
 
18%
 
 
 
6%
 
 
 
 
 
 
 
 
 
 
 
Return on Equity (After-tax Distributable Earnings) (5)
 
18%
 
 
 
16%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

_______________________________________________________________________________________________________________________________________________________________________________________
Note: As of March 31, 2017, KKR had a $1.0 billion revolving credit facility, which was undrawn. In addition, KKR has a $500.0 million revolving credit facility for use in its capital markets business, which was undrawn as of March 31, 2017. As of March 31, 2017, KKR’s portion of total uncalled commitments to its investment funds was $3.5 billion. See Exhibit B for details.

(1) See schedule of investments that follows on the next page.

(2) The following table provides unrealized carry by segment:
 
 
As of
 
 
 
 
March 31, 2017
 
 
 
December 31, 2016
 
 
Private Markets
 
$
1,222,184

 
 
 
$
1,141,610

 
 
Public Markets
 
84,553

 
 
 
72,082

 
 
Total
 
$
1,306,737

 
 
 
$
1,213,692

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(3) See reconciliation in Exhibit D for calculation of Outstanding Adjusted Units.

(4) Return on Equity (After-tax Economic Net Income (Loss) ) measures the amount of after-tax economic net income generated as a percentage of capital invested in KKR’s business. Return on equity is calculated by dividing After-tax Economic Net Income (Loss) on a trailing twelve-month basis by the average book value during the period. We believe this measure is useful to unitholders as it provides a measure of the overall profitability of KKR’s businesses as a percentage of net assets in KKR's business.
(5) Return on Equity (After-tax Distributable Earnings) measures the amount of income excluding the impact of mark-to-market gain (losses) generated as a percentage of capital invested in KKR’s business. It is calculated by dividing after-tax distributable earnings on a trailing twelve-month basis by the average book value during the period. We believe this measure is useful to unitholders as it provides a measure of the overall profitability of KKR’s businesses, excluding the impact of mark-to-market gains (losses), as a percentage of net assets in KKR's business.

Page 10



KKR
SCHEDULE OF INVESTMENTS (1)
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except percentage amounts)
 
 
As of March 31, 2017
 
 
 
Investments
 
Fair
Value
 
 
 
Private Equity Co-Investments and Other Equity
 
$
1,981,106

Private Equity Funds
 
1,150,455

Private Equity Total
 
3,131,561

 
 
 
Energy
 
572,895

Real Estate (3)
 
769,919

Infrastructure
 
273,199

Real Assets Total
 
1,616,013

 
 
 
 
 
 
Special Situations
 
852,955

Direct Lending
 
124,016

Mezzanine
 
24,931

Alternative Credit Total
 
1,001,902

CLOs (4)
 
596,706

Liquid Credit
 
160,637

Specialty Finance
 
221,659

Credit Total
 
1,980,904

 
 
 
 
 
 
Other
 
981,261

 
 
 
Total Investments
 
$
7,709,739

 
 
 
q117earning_chart-53483.jpg

 
 
As of March 31, 2017
 
 
 
 
 
Significant Investments: (5)
 
Fair
Value
 
Fair Value as a
Percentage of
Total Investments
First Data Corporation (NYSE: FDC)
 
$
1,191,388

 
15.5
%
KKR Real Estate Finance Trust Inc.
 
289,723

 
3.8
%
WMIH Corp. (NASDAQ: WMIH)
 
215,431

 
2.8
%
Oil Field Services Investment
 
161,887

 
2.1
%
Natural Gas Midstream Investment
 
158,218

 
2.0
%
Total Significant Investments
 
2,016,647

 
26.2
%
 
 
 
 
 
Other Investments
 
5,693,092

 
73.8
%
Total Investments
 
$
7,709,739

 
100.0
%
 
 
 
 
 


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

(2) General partner commitments in our funds are included in the various asset classes shown above. Private Equity and Other Equity includes KKR private equity funds, co-investments alongside such KKR sponsored private equity funds and other opportunistic investments. However, equity investments in other asset classes, such as real estate, special situations and energy appear in these other asset classes.  Other Credit consists of liquid credit and specialty finance strategies.

(3) Includes our ownership of approximately $289.7 million in KKR Real Estate Finance Trust Inc. that is not held for investment purposes and is held at cost.

(4) Includes approximately $260.2 million of CLOs that are not held for investment purposes and are held at cost.

(5) The significant investments include the top five investments (other than investments expected to be syndicated or transferred in connection with new fundraising) based on their fair values as of March 31, 2017. The fair value figures include the co-investment and the limited partner and/or general partner interests held by KKR in the underlying investment, if applicable.

Page 11



KKR
ASSETS UNDER MANAGEMENT (UNAUDITED)
(Amounts in thousands)
 
 
 
 
 
 
 
 
 
Private
Markets
Segment
 
Public
Markets
Segment
 
Total
Reportable
Segments
Quarter Ended March 31, 2017
 
 
 
 
 
 
December 31, 2016
 
$
73,815,500

 
$
55,740,200

 
$
129,555,700

New Capital Raised
 
6,290,900

 
2,249,200

 
8,540,100

Distributions
 
(1,866,500
)
 
(1,709,200
)
(1) 
(3,575,700
)
Change in Value
 
1,957,700

 
1,138,500

 
3,096,200

March 31, 2017
 
$
80,197,600

 
$
57,418,700

 
$
137,616,300

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trailing Twelve Months Ended March 31, 2017
 
 
 
 
 
 
March 31, 2016
 
$
71,056,700

 
$
55,332,200

 
$
126,388,900

New Capital Raised
 
15,904,400

 
10,801,100

 
26,705,500

Distributions
 
(14,405,300
)
 
(10,916,500
)
(2) 
(25,321,800
)
Change in Value
 
7,641,800

 
2,201,900

 
9,843,700

March 31, 2017
 
$
80,197,600

 
$
57,418,700

 
$
137,616,300

 
 
 
 
 
 
 


KKR
FEE PAYING ASSETS UNDER MANAGEMENT (UNAUDITED)
(Amounts in thousands)
 
 
 
 
 
 
 
 
 
Private
Markets
Segment
 
Public
Markets
Segment
 
Total
Reportable
Segments
Quarter Ended March 31, 2017
 
 
 
 
 
 
December 31, 2016
 
$
52,204,800

 
$
49,268,600

 
$
101,473,400

New Capital Raised
 
6,913,600

 
2,664,800

 
9,578,400

Distributions
 
(545,500
)
 
(2,140,700
)
(1) 
(2,686,200
)
Net Changes in Fee Base of Certain Funds (3)
 
(2,041,500
)
 

 
(2,041,500
)
Change in Value
 
136,200

 
670,800

 
807,000

March 31, 2017
 
$
56,667,600

 
$
50,463,500

 
$
107,131,100

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Trailing Twelve Months Ended March 31, 2017
 
 
 
 
 
 
March 31, 2016
 
$
46,008,000

 
$
47,711,700

 
$
93,719,700

New Capital Raised
 
20,519,800

 
12,869,600

 
33,389,400

Distributions
 
(5,472,000
)
 
(11,499,500
)
(2) 
(16,971,500
)
Net Changes in Fee Base of Certain Funds (3)
 
(4,587,900
)
 

 
(4,587,900
)
Change in Value
 
199,700

 
1,381,700

 
1,581,400

March 31, 2017
 
$
56,667,600

 
$
50,463,500

 
$
107,131,100

 
 
 
 
 
 
 



_______________________________________________________________________________________________________________________________________________________________________________________
(1) Includes $1,037.8 million of redemptions by fund investors.
(2) Includes $6,081.4 million of redemptions by fund investors.
(3) Represents the impact of certain funds entering their post-investment period.

Page 12



KKR
INVESTMENT VEHICLE SUMMARY (1) (UNAUDITED)
As of March 31, 2017
(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 and Growth Funds
 
 
 
 
 
 
 
 
 
Asian Fund III (2)
4/2017
4/2023
$
5,787.8

$
5,787.8

8.6%
$

$

$

$

Americas Fund XII (2)
1/2017
1/2023
13,500.0

13,500.0

7.4%




Next Generation Technology Growth Fund (2)
3/2016
3/2021
658.9

568.2

22.5%
90.7


90.7

114.6

European Fund IV (2)
12/2014
12/2020
3,444.6

2,271.6

5.8%
1,181.8


1,181.8

1,268.2

Asian Fund II (2)
4/2013
4/2017
5,825.0

2,022.9

1.3%
4,687.2

948.1

3,778.5

6,032.0

North America Fund XI (2)
9/2012
1/2017
8,718.4

1,242.0

2.9%
8,790.8

3,549.7

6,527.5

10,203.6

China Growth Fund
11/2010
11/2016
1,010.0


1.0%
1,010.0

442.9

764.3

962.6

E2 Investors (Annex Fund)
8/2009
11/2013
195.8


4.9%
195.8

195.7

18.1

1.8

European Fund III
3/2008
3/2014
6,113.6

786.3

4.7%
5,327.3

6,198.0

2,417.9

3,571.1

Asian Fund
7/2007
4/2013
3,983.3


2.5%
3,945.9

7,506.0

924.0

977.9

2006 Fund
9/2006
9/2012
17,642.2

337.7

2.1%
17,304.5

23,366.2

6,190.5

9,517.4

European Fund II
11/2005
10/2008
5,750.8


2.1%
5,750.8

8,455.4


70.4

Millennium Fund
12/2002
12/2008
6,000.0


2.5%
6,000.0

13,305.4

444.9

629.0

Total Private Equity and Growth Funds
 
 
78,630.4

26,516.5

 
54,284.8

63,967.4

22,338.2

33,348.6

 
 
 
 
 
 
 
 
 
 
Co-Investment Vehicles and Other (2)
Various
Various
8,300.1

3,214.5

Various
5,281.2

3,153.7

3,841.8

4,912.2

 
 
 
 
 
 
 
 
 
 
Total Private Equity and Growth
 
 
86,930.5

29,731.0

 
59,566.0

67,121.1

26,180.0

38,260.8

 
 
 
 
 
 
 
 
 
 
Real Assets
 
 
 
 
 
 
 
 
 
Energy Income and Growth Fund
9/2013
9/2018
1,974.2

746.4

12.9%
1,253.9

222.5

1,080.4

1,016.1

Natural Resources Fund
Various
Various
887.4

2.8

Various
884.5

96.6

809.9

183.2

Global Energy Opportunities (2)
Various
Various
979.2

645.6

Various
373.0

58.8

258.9

266.8

Global Infrastructure Investors (2)
9/2011
10/2014
1,039.9

75.9

4.8%
994.9

656.3

649.5

858.1

Global Infrastructure Investors II (2)
10/2014
10/2020
3,025.8

1,805.5

4.1%
1,263.1

45.4

1,217.8

1,267.4

Real Estate Partners Americas (2)
5/2013
5/2017
1,229.1

668.6

16.3%
898.5

633.5

560.1

629.3

Real Estate Partners Europe (2)
9/2015
6/2020
691.7

569.3

9.1%
122.4


122.4

130.7

Co-Investment Vehicles and Other
Various
Various
1,829.6

687.7

Various
1,141.9

466.3

1,139.6

1,340.2

Real Assets
 
 
11,656.9

5,201.8

 
6,932.2

2,179.4

5,838.6

5,691.8

 
 
 
 
 
 
 
 
 
 
Unallocated Commitments
 
 
138.9

138.9

Various




 
 
 
 
 
 
 
 
 
 
Private Markets Total
 
 
98,726.3

35,071.7

 
66,498.2

69,300.5

32,018.6

43,952.6

 
 
 
 
 
 
 
 
 
 
Public Markets (3)
 
 
 
 
 
 
 
 
 
Special Situations Fund
12/2012
1/2016
2,274.3

109.1

11.6%
2,165.2

542.2

1,986.2

2,194.9

Special Situations Fund II
12/2014
3/2019
3,195.4

2,273.0

9.0%
922.4


922.4

868.3

Mezzanine Partners
3/2010
3/2015
1,022.8

108.9

4.4%
913.9

782.9

503.5

453.2

Lending Partners
12/2011
12/2014
460.2

54.9

15.2%
405.3

260.0

329.8

255.2

Lending Partners II
6/2014
6/2017
1,335.9

468.8

3.7%
867.1

163.9

867.1

946.3

Lending Partners Europe
3/2015
3/2019
847.6

602.7

5.0%
244.9

21.7

244.9

270.9

Other Alternative Credit Vehicles
Various
Various
5,930.1

2,533.7

Various
3,396.4

1,817.4

2,425.1

2,676.4

 
 
 
 
 
 
 
 
 
 
Public Markets Total
 
 
15,066.3

6,151.1

 
8,915.2

3,588.1

7,279.0

7,665.2

 
 
 
 
 
 
 
 
 
 
Grand Total
 
 
$
113,792.6

$
41,222.8

 
$
75,413.4

$
72,888.6

$
39,297.6

$
51,617.8

_______________________________________________________________________________________________________________________________________________________________________________________
(1) Reflects investment vehicles for which KKR has the ability to earn carried interest and excludes open ended funds, managed accounts, CLOs and certain other investment vehicles where KKR earns an incentive fee.
(2) The “Invested” and “Realized” columns include the amounts of any realized investments that restored the unused capital commitments of the fund investors, if any.
(3) The "Commitment" and "Uncalled Commitments" columns include income that is eligible to be reinvested if permitted under the terms of the investment vehicle agreements.

Page 13



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.
Adjusted units are used as a measure of the total common equity ownership of KKR that is held by KKR & Co. L.P. (including equity awards issued under the KKR & Co. L.P. 2010 Equity Incentive Plan (the "Equity Incentive Plan"), but excluding preferred units), KKR Holdings and other holders of securities exchangeable into common units of KKR & Co. L.P. and represent the fully diluted common unit count using the if-converted method. We believe this measure is useful to unitholders as it provides an indication of the total common equity ownership of KKR as if all outstanding KKR Holdings units, equity awards issued under the Equity Incentive Plan and other exchangeable securities had been exchanged for common units of KKR & Co. L.P. The Series A and Series B Preferred Units are not exchangeable for common units of KKR & Co. L.P.
Adjusted units eligible for distribution represents the portion of total adjusted units that is eligible to receive a distribution. We believe this measure is useful to unitholders as it provides insight into the calculation of amounts available for distribution on a per unit basis. Adjusted units eligible for distribution is used in the calculation of after-tax distributable earnings per unit.
After-tax distributable earnings is used by management as an operating measure of the earnings excluding mark-to-market gains (losses) of KKR. KKR believes this measure is useful to unitholders as it provides a supplemental measure to assess performance, excluding the impact of mark-to-market gains (losses). After-tax distributable earnings excludes certain realized investment losses to the extent unrealized losses on these investments were recognized prior to the combination with KPE on October 1, 2009. After-tax distributable earnings does not represent and is not used to calculate actual distributions under KKR’s distribution policy.
Assets under management ("AUM") represent the assets managed by KKR or by its strategic partners from which KKR is entitled to receive fees or a carried interest (either currently or upon deployment of capital) 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 strategic partnerships. 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; (ii) uncalled capital commitments from these funds, including uncalled capital commitments from which KKR is currently not earning management fees or carried interest; (iii) the fair value of investments in KKR's co-investment vehicles; (iv) the par value of outstanding CLOs (excluding CLOs wholly-owned by KKR); (v) KKR's pro-rata portion of the AUM managed by strategic partnerships in which KKR holds a minority ownership interest and (vi) the fair value of other assets managed by KKR. The pro-rata portion of the AUM managed by strategic partnerships is calculated based on KKR’s percentage ownership interest in such entities multiplied by such entity’s respective AUM. 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.
Book value is a measure of the net assets of KKR’s reportable segments and is used by management primarily in assessing the unrealized value of KKR’s investments and other assets, including carried interest. 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 and to the holders of the Series A and Series B Preferred Units.
Capital invested is the aggregate amount of capital invested by (i) KKR’s investment funds, (ii) KKR's Principal Activities segment as a co-investment, if any, alongside KKR’s investment funds, and (iii) KKR's Principal Activities segment in connection with a syndication transaction conducted by KKR's Capital Markets segment, if any.  Capital invested is used as a measure of investment activity at KKR during a given period. We believe this measure is useful to unitholders as it provides a measure of capital deployment across KKR’s business segments.  Capital invested includes investments made using investment financing arrangements like credit facilities, as applicable.  Capital invested excludes (i) investments in liquid credit strategies, (ii) capital invested by KKR’s Principal Activities segment that is not a co-investment alongside KKR’s investment funds, and (iii) capital invested by KKR’s Principal Activities segment that is not invested in connection with a syndication transaction by KKR’s Capital Markets segment. Capital syndicated by KKR's Capital Markets segment to third parties other than KKR’s investment funds or Principal Activities segment is not included in capital invested.  See also syndicated capital. In the fourth quarter of 2016, the capital invested metric was changed to include capital invested by KKR's Principal Activities segment and all prior periods in this report have been adjusted.
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.

Page 14



Economic net income (loss) (“ENI”) is a measure of profitability for KKR’s reportable segments and is used by management as an alternative measurement of the operating and investment earnings of KKR and its business segments. We believe this measure is useful to unitholders as it provides additional insight into the overall profitability of KKR’s businesses inclusive of carried interest, incentive fees and related carry pool allocations and investment income. ENI is comprised of total segment revenues less total segment expenses and certain economic interests in KKR’s segments held by third parties. For a reconciliation of total segment revenues, total segment expenses and ENI to the most directly comparable amounts recognized under GAAP, see reconciliations at Exhibit C. Pre-tax Economic Net Income (Loss) represents Economic Net Income (Loss) after equity-based compensation. After-tax Economic Net Income (Loss) represents Economic Net Income (Loss) after equity-based compensation, provision for income taxes and preferred distributions.
Fee paying AUM ("FPAUM") represents only those assets under management of KKR or its strategic partners from which KKR receives management fees. We believe this measure is useful to unitholders as it provides additional insight into the capital base upon which KKR earns management fees. 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 and commitments from which KKR does not receive a fee are excluded (i.e., assets and commitments with respect to which it receives only carried interest or is otherwise not currently receiving a fee) 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.
Investments is a term used solely for purposes of financial presentation of a portion of KKR’s balance sheet and includes majority ownership of subsidiaries that operate KKR’s asset management and broker-dealer businesses, including the general partner interests of KKR’s investment funds.
Outstanding adjusted units represents the portion of total adjusted units that would receive assets of KKR if it were to be liquidated as of a particular date. Outstanding adjusted units is used to calculate book value per outstanding adjusted unit, which we believe is useful to unitholders as it provides a measure of net assets of KKR’s reportable segments on a per unit basis.
Realized performance income compensation is the amount allocated to performance income compensation is equal to 40% of the carried interest and incentive fees earned by our investment funds, and, beginning with the quarter ended September 30, 2016, includes 40% of the management fees that would have been subject to a management fee refund for investment funds that have a preferred return.
Syndicated capital is generally the aggregate amount of capital in transactions originated by KKR and its investment funds and carry-yielding co-investment vehicles, which has been distributed to third parties in exchange for a fee. It does not include (i) capital invested in such transactions by KKR investment funds and carry-yielding co-investment vehicles, which is instead reported in capital invested (ii) debt capital that is arranged as part of the acquisition financing of transactions originated by KKR investment funds and (iii) debt capital that is either underwritten or arranged on a best efforts basis. Syndicated capital is used as a measure of investment activity for KKR during a given period, and we believe that this measure is useful to unitholders as it provides additional insight into levels of syndication activity in KKR's Capital Markets segment and across KKR's investment platform.
Uncalled commitments are used as a measure of unfunded capital commitments that KKR’s investment funds and carry-paying co-investment vehicles have received from partners to contribute capital to fund future investments. We believe this measure is useful to unitholders as it provides additional insight into the amount of capital that is available to KKR’s investment funds to make future investments. Uncalled commitments are not reduced for investments completed using fund-level investment financing arrangements.






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KKR
EXHIBIT A
 
 
 
 
 
 
 
 
 
 
 
 
 
 
OTHER FINANCIAL INFORMATION (UNAUDITED)
(Amounts in thousands)
 
 
 
 
 
Quarter Ended
 
 
March 31, 2017
 
December 31, 2016
 
March 31, 2016
Fee Related Earnings
 
 
 
 
 
 
Management, Monitoring and Transaction Fees, Net
 
$
375,522

 
$
256,280

 
$
279,915

Less: Cash Compensation and Benefits
 
139,435

 
95,260

 
100,899

Less: Occupancy and Related Charges
 
14,369

 
14,914

 
15,950

Less: Other Operating expenses
 
53,498

 
67,806

 
61,886

Plus: Expenses of Principal Activities Segment
 
53,769

 
38,107

 
39,818

Fee Related Earnings (1)
 
221,989

 
116,407

 
140,998

Plus: Net Interest and Dividends
 
15,173

 
24,837

 
59,576

Plus: Depreciation and Amortization
 
4,177

 
4,020

 
3,887

Plus: Core Interest Expense
 
29,162

 
28,900

 
29,105

Less: Expenses of Principal Activities Segment
 
53,769

 
38,107

 
39,818

Fee and Yield Segment EBITDA (2)
 
216,732

 
136,057

 
193,748

Plus: Realized Performance Income (Loss), net
 
119,823

 
310,975

 
59,329

Plus: Net Realized Gains (Losses)
 
79,451

 
969

 
(24,183
)
Total Segment EBITDA (2)
 
$
416,006

 
$
448,001

 
$
228,894

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distributable Earnings
 
 
 
 
 
 
Management, Monitoring and Transaction Fees, Net
 
$
375,522

 
$
256,280

 
$
279,915

Realized Performance Income (Loss)
 
207,890

 
526,625

 
98,881

Realized Investment Income (Loss)
 
94,624

 
25,806

 
35,393

Total Distributable Segment Revenues
 
$
678,036

 
$
808,711

 
$
414,189

Less: Total Distributable Segment Expenses and Other
 
296,953

 
393,964

 
218,954

Less: Corporate and Local Income Taxes Paid
 
26,275

 
16,532

 
26,503

Less: Preferred Distributions
 
8,341

 
8,341

 

After-tax Distributable Earnings
 
$
346,467

 
$
389,874

 
$
168,732

 
 
 
 
 
 
 
Per Adjusted Unit Eligible for Distribution
 
$
0.43

 
$
0.48

 
$
0.21

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core Interest Expense
 
 
 
 
 
 
GAAP Interest Expense
 
$
186,854

 
$
182,141

 
$
171,394

Less: Interest expense related to debt obligations of consolidated investment funds, CLOs and other
 
145,145

 
137,877

 
122,850

Segment Interest Expense
 
41,709

 
44,264

 
48,544

Less: Interest Expense related to debt obligations from KFN and other
 
12,547

 
15,364

 
19,439

Core Interest Expense (3)
 
$
29,162

 
$
28,900

 
$
29,105

 
 
 
 
 
 
 
____________________________________________________________________________________________________________________________________________________________________________________
(1) Fee related earnings (“FRE”) is a measure of the operating earnings of KKR and its business segments before performance income, related performance income compensation and investment income. KKR believes this measure is useful to unitholders as it provides additional insight into the operating profitability of KKR's fee generating management companies and capital markets businesses.
(2) Fee and Yield Segment EBITDA and Total Segment EBITDA may be useful in evaluating KKR's ability to service its debt. Fee and Yield Segment EBITDA provides insight into the amount of KKR’s distributable earnings before the impact of interest expense, significant portions of which tend to be more recurring than realized carried interest and realized investment income from quarter to quarter. Total Segment EBITDA represents Fee and Yield Segment EBITDA plus the addition of realized performance income and realized investment income.
(3) Core interest expense is used by management as an alternative measurement of interest expense incurred by KKR on a segment basis and excludes interest expense related to debt obligations from investment financing arrangements related to certain of KKR’s investment funds, investment vehicles and principal investments and also excludes interest expense incurred by KFN. The financing arrangements excluded from core interest expense are not direct obligations of the general partners of KKR’s private equity funds or its management companies, and in the case of debt obligations of KFN are non-recourse to KKR beyond the assets of KFN. KKR believes this measure is useful to unitholders as it provides an indication of the amount of interest expense borne by KKR excluding interest expense that is allocated to KKR’s investment funds, other noncontrolling interest holders and KFN. Additionally, we believe this measure is useful for analyzing KKR’s ability to service its debt obligations other than the debt obligations of KFN.

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KKR
EXHIBIT B
 
 
KKR'S PORTION OF TOTAL UNCALLED COMMITMENTS TO ITS INVESTMENT FUNDS (UNAUDITED)
(Amounts in thousands)
 
 
 
 
 
Uncalled
Commitments
Private Markets
 
Americas Fund XII
$
1,000,000

Asian Fund III
500,000

European Fund IV
128,600

Next Generation Technology Growth Fund
127,900

Real Estate Partners Americas
108,800

Energy Income and Growth
96,500

Global Infrastructure Investors II
74,500

Real Estate Partners Europe
52,300

North America Fund XI
33,600

Asian Fund II
25,800

Other Private Markets Vehicles
983,500

Total Private Markets Commitments
3,131,500

 
 
Public Markets
 
Special Situations Fund II
203,700

Lending Partners Europe
30,400

Lending Partners II
17,500