FAIR VALUE MEASUREMENTS (Tables)

3 Months Ended

Mar. 31, 2013

Schedule of investments and other financial instruments measured at fair value

Assets, at fair value:

	March 31, 2013
	Quoted Prices in Active Markets for Identical Assets (Level I)		Significant Other Observable Inputs (Level II)		Significant Unobservable Inputs (Level III)		Total
Private Equity	$	7,352,491	$	469,672	$	26,673,255	$	34,495,418
Fixed Income	—		2,334,037		1,443,494		3,777,531
Real Assets	—		—		1,995,970		1,995,970
Other	681,860		261,588		228,632		1,172,080
Total	8,034,351		3,065,297		30,341,351		41,440,999

Foreign Exchange Forward Contracts	—		215,082		—		215,082
Foreign Currency Options	—		8,546		—		8,546
Other Derivatives	—		3,158		—		3,158
Total Assets	$	8,034,351	$	3,292,083	$	30,341,351	$	41,667,785

	December 31, 2012
	Quoted Prices in Active Markets for Identical Assets (Level I)		Significant Other Observable Inputs (Level II)		Significant Unobservable Inputs (Level III)		Total
Private Equity	$	8,015,680	$	364,543	$	25,734,400	$	34,114,623
Fixed Income	—		1,809,021		1,587,046		3,396,067
Real Assets	—		—		1,775,683		1,775,683
Other	648,108		323,306		239,230		1,210,644
Total	8,663,788		2,496,870		29,336,359		40,497,017

Foreign Exchange Forward Contracts	—		137,786		—		137,786
Foreign Currency Options	—		4,992		—		4,992
Other Derivatives	—		882		—		882
Total Assets	$	8,663,788	$	2,640,530	$	29,336,359	$	40,640,677

Liabilities, at fair value:

	March 31, 2013
	Quoted Prices in Active Markets for Identical Assets (Level I)		Significant Other Observable Inputs (Level II)		Significant Unobservable Inputs (Level III)		Total

Securities Sold Short	$	374,859	$	51,895	$	—	$	426,754
Foreign Currency Options	—		1,310		—		1,310
Foreign Exchange Forward Contracts	—		99,739		—		99,739
Unfunded Revolver Commitments	—		2,603		—		2,603
Other Derivatives	—		2,753		—		2,753
Total Liabilities	$	374,859	$	158,300	$	—	$	533,159

	December 31, 2012
	Quoted Prices in Active Markets for Identical Assets (Level I)		Significant Other Observable Inputs (Level II)		Significant Unobservable Inputs (Level III)		Total

Securities Sold Short	$	321,977	$	28,376	$	—	$	350,353
Foreign Currency Options	—		3,362		—		3,362
Foreign Exchange Forward Contracts	—		229,314		—		229,314
Unfunded Revolver Commitments	—		2,568		—		2,568
Other Derivatives	—		3,751		—		3,751
Total Liabilities	$	321,977	$	267,371	$	—	$	589,348

Schedule of changes in private equity, fixed income, real assets and other investments measured and reported at fair value for which Level III inputs have been used to determine fair value

	Three Months Ended March 31, 2013
	Private Equity		Fixed Income			Real Assets		Other			Total Level III Investments

Balance, Beginning of Period	$	25,734,400	$	1,587,046		$	1,775,683	$	239,230		$	29,336,359
Transfers In (1)	—		8,936			—		—			8,936
Transfers Out (2)	—		(78,227		)	—		(19,264		)	(97,491		)
Purchases	335,111		131,818			184,477		6,827			658,233
Sales	—		(203,732		)	—		(17,051		)	(220,783		)
Settlements	—		27,945			—		—			27,945
Net Realized Gains (Losses)	—		5,369			—		6,944			12,313
Net Unrealized Gains (Losses)	603,744		(35,661		)	35,810		11,946			615,839
Balance, End of Period	$	26,673,255	$	1,443,494		$	1,995,970	$	228,632		$	30,341,351

Changes in Net Unrealized Gains (Losses) included in Net Gains (Losses) from Investment Activities (including foreign exchange gains and losses attributable to foreign-denominated investments) related to Investments still held at Reporting Date	$	603,744	$	(26,661	)	$	35,810	$	11,946		$	624,839

	Three Months Ended March 31, 2012
	Private Equity			Fixed Income			Real Assets			Other		Total Level III Investments

Balance, Beginning of Period	$	20,384,253		$	1,016,759		$	1,526,732		$	96,179	$	23,023,923
Transfers In (1)	—			311			—			1,061		1,372
Transfers Out (2)	—			(12,627		)	—			—		(12,627		)
Purchases	406,604			166,470			4,752			5,999		583,825
Sales	(22,465		)	(34,360		)	—			—		(56,825		)
Settlements	—			(10,652		)	—			—		(10,652		)
Net Realized Gains (Losses)	22,465			7,242			—			—		29,707
Net Unrealized Gains (Losses)	1,534,659			23,206			(98,275		)	19,222		1,478,812
Balance, End of Period	$	22,325,516		$	1,156,349		$	1,433,209		$	122,461	$	25,037,535

Changes in Net Unrealized Gains (Losses) included in Net Gains (Losses) from Investment Activities (including foreign exchange gains and losses attributable to foreign-denominated investments) related to Investments still held at Reporting Date	$	1,557,124		$	26,373		$	(98,275	)	$	19,222	$	1,504,444

(1) The Transfers In noted in the tables above for fixed income and other investments are principally attributable to certain investments that experienced an insignificant level of market activity during the period and thus were valued in the absence of observable inputs.

(2) The Transfers Out noted in the tables above for fixed income and other investments are principally attributable to certain investments that experienced a higher level of market activity during the period and thus were valued using observable inputs.

Summary of valuation methodologies used for assets, measured at fair value and categorized within Level III

Fair Value
March 31, 2013

Valuation
Methodologies

Unobservable Input(s) (1)

Weighted
Average (2)

Range

Impact to Valuation
from an
Increase in Input (3)

Private Equity Investments

26,673,255

Healthcare

5,304,198

Inputs to both market comparable and discounted cash flow

Illiquidity Discount

5% - 15%

Decrease

Weight Ascribed to Market Comparables

50%

50% - 50%

(4)

Weight Ascribed to Discounted Cash Flow

50%

50% - 50%

(5)

Market comparables

Enterprise Value/LTM EBITDA Multiple

8x - 11x

Increase

Enterprise Value/Forward EBITDA Multiple

8x - 10x

Increase

Discounted cash flow

Weighted Average Cost of Capital

8% - 10%

Decrease

Enterprise Value/LTM EBITDA Exit Multiple

11x

9x -12x

Increase

Retail

3,735,858

Inputs to both market comparable and discounted cash flow

Illiquidity Discount

5% - 20%

Decrease

Weight Ascribed to Market Comparables

52%

0% - 67%

(4)

Weight Ascribed to Discounted Cash Flow

48%

33% - 100%

(5)

Market comparables

Enterprise Value/LTM EBITDA Multiple

6x - 13x

(6)

Increase

Enterprise Value/Forward EBITDA Multiple

6x - 10x

(6)

Increase

Discounted cash flow

Weighted Average Cost of Capital

10%

8% - 25%

Decrease

Enterprise Value/LTM EBITDA Exit Multiple

6x - 8x

Increase

Technology

3,399,222

Inputs to both market comparable and discounted cash flow

Illiquidity Discount

10%

5% - 15%

Decrease

Weight Ascribed to Market Comparables

50%

50% - 50%

(4)

Weight Ascribed to Discounted Cash Flow

50%

50% - 50%

(5)

Market comparables

Enterprise Value/LTM EBITDA Multiple

10x

5x - 12x

Increase

Enterprise Value/Forward EBITDA Multiple

10x

8x - 12x

Increase

Discounted cash flow

Weighted Average Cost of Capital

11%

7% - 14%

Decrease

Enterprise Value/LTM EBITDA Exit Multiple

6x - 10x

Increase

Manufacturing

3,340,070

Inputs to both market comparable and discounted cash flow

Illiquidity Discount

10%

10% - 15%

Decrease

Weight Ascribed to Market Comparables

45%

33% - 67%

(4)

Weight Ascribed to Discounted Cash Flow

55%

33% - 67%

(5)

Market comparables

Enterprise Value/LTM EBITDA Multiple

11x

8x - 13x

Increase

Enterprise Value/Forward EBITDA Multiple

10x

8x - 12x

Increase

Discounted cash flow

Weighted Average Cost of Capital

12%

10% - 19%

Decrease

Enterprise Value/LTM EBITDA Exit Multiple

6x - 11x

Increase

Consumer Products

3,174,444

Inputs to both market comparable and discounted cash flow

Illiquidity Discount

11%

10% - 15%

Decrease

Weight Ascribed to Market Comparables

50%

50% - 50%

(4)

Weight Ascribed to Discounted Cash Flow

50%

50% - 50%

(5)

Market comparables

Enterprise Value/LTM EBITDA Multiple

12x

8x - 16x

Increase

Enterprise Value/Forward EBITDA Multiple

10x

7x - 12x

Increase

Discounted cash flow

Weighted Average Cost of Capital

11%

8% - 21%

Decrease

Enterprise Value/LTM EBITDA Exit Multiple

10x

6x - 11x

Increase

Other

7,719,463

Inputs to both market comparable and discounted cash flow

Illiquidity Discount

10%

5% - 20%

Decrease

Weight Ascribed to Market Comparables

51%

25% - 100%

(4)

Weight Ascribed to Discounted Cash Flow

49%

0% - 75%

(5)

Market comparables

Enterprise Value/LTM EBITDA Multiple

11x

6x - 16x

Increase

Enterprise Value/Forward EBITDA Multiple

6x - 13x

Increase

Control Premium

0% - 20%

(7)

Increase

Discounted cash flow

Weighted Average Cost of Capital

10%

8% - 18%

Decrease

Enterprise Value/LTM EBITDA Exit Multiple

10x

5x - 12x

Increase

Real Assets

1,995,970

Natural Resources/Infrastructure

1,668,151

Discounted cash flow

Weighted Average Cost of Capital

11%

6% - 22%

Decrease

Enterprise Value/LTM EBITDA Exit Multiple

7x - 11x

Increase

Real Estate

327,819

Inputs to direct income capitalization and discounted cash flow

Weight Ascribed to Direct Income Capitalization

10%

0% - 50%

(9)

Weight Ascribed to Discounted Cash Flow

90%

50% - 100%

(5)

Direct Income Capitalization

Current Capitalization Rate

7% - 8%

Decrease

Discounted cash flow

Unlevered Discount Rate

15%

9% - 23%

Decrease

Fixed Income Investments

1,443,494

(8)

Yield Analysis

Discount Margin

962 bps

650 - 1961 bps

Decrease

Yield

4% - 20%

Decrease

Net Leverage

1x - 11x

Decrease

Illiquidity Discount

1% - 15%

Decrease

In the table above, Other, within private equity investments, represents the following industries: Chemicals, Education, Financial Services, Forestry, Media, Services, Technology, Telecommunications, Transportation and Recycling. None of these industries represents more than 10% of total Level III private equity investments as of March 31, 2013.

(1) In determining certain of these inputs, management evaluates a variety of factors including economic conditions, industry and market developments, market valuations of comparable companies and company specific developments including exit strategies and realization opportunities. Management has determined that market participants would take these inputs into account when valuing the investments. LTM means Last Twelve Months and EBITDA means Earnings Before Interest Taxes Depreciation and Amortization.

(2) Inputs were weighted based on the fair value of the investments included in the range.

(3) Unless otherwise noted, this column represents the directional change in the fair value of the Level III investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect. Significant increases and decreases in these inputs in isolation could result in significantly higher or lower fair value measurements.

(4) The directional change from an increase in the weight ascribed to the market comparables approach would increase the fair value of the Level III investments if the market comparables approach results in a higher valuation than the discounted cash flow approach. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow approach.

(5) The directional change from an increase in the weight ascribed to the discounted cash flow approach would increase the fair value of the Level III investments if the discounted cash flow approach results in a higher valuation than the market comparables approach. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables approach.

(6) Ranges shown exclude inputs relating to a single portfolio company that was determined to lack comparability with other investments in KKR’s private equity portfolio. This portfolio company had a fair value representing less than 0.5% of the total fair value of Private Equity Investments and had an Enterprise Value/LTM EBITDA Multiple and Enterprise Value/Forward EBITDA Multiple of 25x and 18x, respectively. The exclusion of this investment does not impact the weighted average.

(7) Level III private equity investments whose valuations include a control premium represent less than 1% of total Level III private equity investments. The valuations for the remaining investments do not include a control premium.

(8) Amounts include $121.5 million of investments that were valued using dealer quotes or third party valuation firms.

(9) The directional change from an increase in the weight ascribed to the direct income capitalization approach would increase the fair value of the Level III investments if the direct income capitalization approach results in a higher valuation than the discounted cash flow approach. The opposite would be true if the direct income capitalization approach results in a lower valuation than the discounted cash flow approach.

- Definition

Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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