KKR & Co. L.P. Announces Second Quarter 2014 Results

  KKR & Co. L.P. Announces Second Quarter 2014 Results             Exit Activity Drives Record Total Distributable Earnings  GAAP net income (loss) attributable to KKR & Co. L.P. was $178.2 million and $388.3 million for the quarter and six months ended June 30, 2014, respectively, up from $15.1 million and $208.6 million in the comparable periods of 2013.  Total distributable earnings was $701.0 million and $1,147.8 million for the quarter and six months ended June 30, 2014, respectively, up from $403.8 million and $694.4 million in the comparable periods of 2013.  Distribution per common unit was $0.67 and $1.10 for the quarter and six months ended June 30, 2014, respectively, up from $0.42 and $0.69 in the comparable periods of 2013.  Economic net income (“ENI”) was $501.6 million and $1,131.8 million for the quarter and six months ended June 30, 2014, respectively, up from $144.4 million and $792.2 million in the comparable periods of 2013.  ENI after taxes per adjusted unit was $0.62 and $1.43 for the quarter and six months ended June 30, 2014, respectively, up from $0.18 and $1.06 in the comparable periods of 2013. ^ (1)  ENI after taxes and equity-based charges per adjusted unit was $0.57 and $1.32 for the quarter and six months ended June 30, 2014, respectively, up from $0.15 and $0.99 for the quarter and six months ended June 30, 2013. ^(1)  Fee and yield earnings were $154.2 million and $317.0 million for the quarter and six months ended June 30, 2014, respectively, up from $101.0 million and $188.5 million in the comparable periods of 2013.  Book value was $10.4 billion on a total reportable segment basis as of June 30, 2014 or $12.52 per adjusted unit.  Return on equity and cash return on equity were 28.7% and 22.2%, respectively, on a trailing twelve month basis.  Assets under management (“AUM”) and fee paying assets under management (“FPAUM”) totaled $98.0 billion and $79.7 billion as of June 30, 2014, respectively.  Previously announced acquisition of KFN has closed.  Business Wire  NEW YORK -- July 24, 2014  KKR & Co. L.P. (NYSE:KKR) today reported its second quarter 2014 results.  On April 30, 2014, KKR completed its acquisition of KKR Financial Holdings LLC (“KFN”). Through the acquisition, KKR increased the scale, liquidity, and yield profile of its balance sheet and added over $2 billion of net assets to support the continued growth of its business.  For the three, six and trailing twelve months ended June 30, 2014, the carrying value of our private equity portfolio appreciated 5.0%, 9.3%, and 23.7%, respectively.  KKR declares a distribution of $0.67 per common unit, which includes $0.41 of realized cash carry, the 17^th consecutive quarter that realized cash carry has been a component of the distribution.  “Our realization activity in the second quarter drove the highest cash carry and total distributable earnings we’ve reported since going public, contributing to a quarterly distribution of $0.67. Additionally, our cash flow generation, investment performance, and balance sheet income resulted in a 29% return on equity and 22% cash return on equity over the last twelve months,” said Henry R. Kravis and George R. Roberts, Co-Chairmen and Co-Chief Executive Officers of KKR. “We also closed the KFN acquisition in the second quarter, bringing us recurring cash earnings and more permanent capital to grow the firm.”  _________________________________________________________________________________________________  Note: Certain financial measures, including FRE, ENI, after-tax ENI, ENI after taxes and equity-based charges, fee and yield earnings, book value, cash and short-term investments and adjusted units, are not presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). See Exhibits A and B for a reconciliation of such measures to financial results prepared in accordance with GAAP.  (1) Prospectively, KKR plans to only report ENI after taxes and equity-based charges per adjusted unit  GAAP RESULTS  GAAP results for the quarter and six months ended June 30, 2014, included net income attributable to KKR & Co. L.P. of $178.2 million and $388.3 million, respectively, and net income attributable to KKR & Co. L.P. per common unit of $0.43 and $1.06, respectively, on a diluted basis. For the quarter and six months ended June 30, 2013, net income attributable to KKR & Co. L.P. was $15.1 million and $208.6 million, respectively, and net income attributable to KKR & Co. L.P. per common unit was $0.05 and $0.72, respectively, on a diluted basis. The increases in both comparable periods were primarily due to (i) an increase in investment income; (ii) higher transaction fees; and (iii) an increase in KKR & Co. L.P.’s ownership percentage in the KKR business.  SEGMENT RESULTS*  Private Markets  AUM was $59.4 billion as of June 30, 2014, a decrease of $1.1 billion, or 1.8%, compared to AUM of $60.5 billion as of March 31, 2014. The decrease was primarily attributable to distributions to the limited partners of our private equity funds arising from realizations which were partially offset by appreciation in the fair value of our private equity portfolio and new capital raised.  FPAUM was $46.2 billion as of June 30, 2014, a decrease of $2.0 billion, or 4.1%, compared to FPAUM of $48.2 billion as of March 31, 2014. The decrease was primarily attributable to the bankruptcy filing of Energy Future Holdings during the second quarter, and to a lesser extent, distributions to the limited partners of our private equity funds arising from realizations. These decreases were partially offset by new capital raised.  Total segment revenues were $642.9 million for the quarter ended June 30, 2014, an increase of $445.1 million compared to total segment revenues of $197.8 million for the quarter ended June 30, 2013. Total segment revenues were $1,373.6 million for the six months ended June 30, 2014, an increase of $354.7 million compared to total segment revenues of $1,018.9 million for the six months ended June 30, 2013. The increase in both comparable periods was principally attributable to a higher level of net carried interest and total investment income reflecting a higher level of appreciation in our private equity portfolio.  ENI was $376.2 million for the quarter ended June 30, 2014, an increase of $297.7 million compared to ENI of $78.5 million for the quarter ended June 30, 2013. ENI was $861.6 million for the six months ended June 30, 2014, an increase of $217.1 million compared to ENI of $644.5 million for the six months ended June 30, 2013. The increase in both comparable periods was principally attributable to a higher level of net carried interest and total investment income reflecting a higher level of appreciation in our private equity portfolio. The increased total segment revenues were partially offset by higher total segment expenses reflecting an increase in allocations to the carry pool driven by a higher level of carried interest recognized during the 2014 periods.  Public Markets  AUM was $38.5 billion as of June 30, 2014, a decrease of $3.3 billion, or 7.9%, compared to AUM of $41.8 billion as of March 31, 2014. FPAUM was $33.5 billion as of June 30, 2014, a decrease of $1.9 billion, or 5.4%, compared to FPAUM of $35.4 billion as of March 31, 2014. For both AUM and FPAUM, the decreases were primarily attributable to the acquisition of KFN which decreased AUM by approximately $4.5 billion and FPAUM by approximately $2.7 billion, partially offset by new capital raised and appreciation in net asset values in our public markets strategies.  Total segment revenues were $157.2 million for the quarter ended June 30, 2014, an increase of $76.6 million compared to total segment revenues of $80.6 million for the quarter ended June 30, 2013. Total segment revenues were $302.8 million for the six months ended June 30, 2014, an increase of $117.0 million compared to total segment revenues of $185.8 million for the six months ended June 30, 2013. The increase in both comparable periods was principally attributable to higher total investment income primarily relating to the inclusion of KFN during the 2014 periods beginning on May 1, 2014 and to a lesser extent higher management fees reflecting new capital raised.  ENI was $105.6 million for the quarter ended June 30, 2014, an increase of $62.4 million compared to ENI of $43.2 million for the quarter ended June 30, 2013. ENI was $203.4 million for the six months ended June 30, 2014, an increase of $92.7 million compared to ENI of $110.7 million for the six months ended June 30, 2013. The increase in both comparable periods was principally attributable to higher total investment income primarily due to the income generated by KFN’s operations during the 2014 periods beginning on May 1, 2014 and to a lesser extent higher management fees reflecting new capital raised. These increases were partially offset by higher compensation expense.  Capital Markets and Other  Total segment revenues were $34.0 million for the quarter ended June 30, 2014, up slightly when compared to total segment revenues of $32.5 million for the quarter ended June 30, 2013. Total segment revenues were $103.2 million for the six months ended June 30, 2014, an increase of $45.6 million compared to total segment revenues of $57.6 million for the quarter ended June 30, 2013. The increase in total segment revenues in both comparable periods was primarily driven by higher overall capital markets transaction activity.  ENI was $19.8 million for the quarter ended June 30, 2014, a decrease of $3.0 million compared to ENI of $22.8 million for the quarter ended June 30, 2013. The decrease was principally attributable to higher compensation expense. ENI was $66.9 million for the six months ended June 30, 2014, an increase of $30.0 million compared to ENI of $36.9 million for the six months ended June 30, 2013. The increase was principally attributable to higher transaction fees driven by higher overall capital markets transaction activity, partially offset by higher compensation expense.  ___________________________________________________________________________________________  * All segment financial information presented in this release reflect a new presentation as of the second quarter of 2014. For example, certain investment income previously reported in our Capital Markets and Principal Activities segment (which is now named Capital Markets and Other) is now reported in either our Private Markets or Public Markets segment, depending upon the nature of such income, and economic net income is presented as total segment revenue less total segment expenses. As a result of the revised presentation, segment information for historical periods has been restated from previously published results and, consequently, is not consistent with such previously reported information. The Investor Center for KKR& Co. L.P. at http://ir.kkr.com/kkr_ir/kkr_events.cfm contains historical segment financial information for the quarter ended March 31, 2014 and each of the quarterly periods in the fiscal year ended December 31, 2013, as revised to give effect to the new presentation.  CAPITAL AND LIQUIDITY  As of June 30, 2014, KKR had $3.4 billion of cash and short-term investments and $2.5 billion of outstanding debt obligations on a total reportable segment basis. In addition, with the acquisition of KFN, KKR reports KFN’s debt obligations of $657.3 million and KFN’s 7.375% Series A LLC preferred shares of $373.8 million. KFN’s debt obligations and preferred shares are non-recourse to KKR beyond the assets of KFN. KKR’s availability for borrowings was $750.0 million (which is reduced by an outstanding letter of credit), which does not include a $500.0 million revolving credit facility for use in its capital markets business that was undrawn as of June 30, 2014.  As of June 30, 2014, KKR’s portion of total uncalled commitments to its investment funds was $976.9 million, consisting of the following (amounts in thousands):                                                                            Uncalled                                        Commitments Private Markets Energy Income and Growth Fund         $  208,600 North America Fund XI                    178,200 Real Estate Partners Americas            141,300 Asian Fund II                            62,600 European Fund III                        59,800 2006 Fund                                57,900 Infrastructure                           15,000 Natural Resources                        11,600 Other Private Equity Funds               7,700 Co-Investment Vehicles                  32,200 Total Private Markets Commitments       774,900                                        Public Markets Special Situations Vehicles              120,300 Direct Lending Vehicles                  66,300 Mezzanine Fund                           13,100 Other Credit Vehicles                   2,300 Total Public Markets Commitments        202,000                                        Total Uncalled Commitments            $  976,900                                         DISTRIBUTION  A distribution of $0.67 per common unit has been declared, comprised of (i) $0.09 per common unit from after-tax FRE, (ii) $0.41 per common unit from realized cash carry, (iii) $0.12 per common unit from KKR’s net realized investment income and (iv) $0.05 per common unit from KFN’s net realized investment income earned for the two months ended June 30, 2014. The distribution will be paid on August 19, 2014 to unitholders of record as of the close of business on August 4, 2014. Please refer to the distribution policy presented later in this release.  CONFERENCE CALL  A conference call to discuss KKR's financial results will be held onThursday, July 24, 2014at10:00 a.m. EDT. 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 athttp://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 71626990, 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.  ABOUT KKR  KKRis 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.  FORWARD-LOOKING STATEMENTS  This release contains certain forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. The forward-looking statements are based on KKR’s beliefs, assumptions and expectations of its future performance, taking into account all information currently available to it. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to KKR or are within its control. If a change occurs, KKR’s business, financial condition, liquidity and results of operations, including but not limited to AUM, FPAUM, FRE, total distributable earnings, ENI, after-tax ENI, ENI after taxes and equity-based charges, fee and yield earnings, fee and yield EBITDA, committed dollars invested and syndicated capital, uncalled commitments, core interest expense, cash and short-term investments, net realized principal investment income and book value, may vary materially from those expressed in the forward-looking statements. The following factors, among others, could cause actual results to vary from the forward-looking statements: the general volatility of the capital markets; failure to realize the benefits of or changes in KKR’s business strategies including the ability to realize the anticipated synergies from acquisitions or strategic partnerships such as Prisma, Nephila, Avoca or KFN; availability, terms and deployment of capital; availability of qualified personnel and expense of recruiting and retaining such personnel; changes in the asset management industry, interest rates or the general economy; underperformance of KKR's investments and decreased ability to raise funds; and the degree and nature of KKR’s competition. KKR does not undertake any obligation to update any forward-looking statements to reflect circumstances or events that occur after the date on which such statements were made except as required by law. In addition, KKR’s business strategy is focused on the long term and financial results are subject to significant volatility. Additional information about factors affecting KKR is available in KKR & Co. L.P.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, filed with the SEC on February 24, 2014, Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 filed with the SEC on May 7, 2014 and other filings with the SEC, which are available at www.sec.gov.                                                                     KKR CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (GAAP BASIS - UNAUDITED) (Amounts in thousands, except common unit and per common unit amounts)                                                                                          Quarter Ended                       Six Months Ended                  June 30, 2014     June 30, 2013     June 30, 2014     June 30, 2013 Revenues Fees             $ 249,370        $ 166,376        $ 552,296        $ 317,616                                                                              Expenses Compensation       358,730           200,602           689,768           531,723 and Benefits Occupancy and Related            16,059            13,878            31,467            28,399 Charges General, Administrative    210,536         77,542          337,261         171,230      and Other Total Expenses    585,325         292,022         1,058,496       731,352                                                                              Investment Income (Loss) Net Gains (Losses) from      1,971,850         98,537            3,944,030         2,368,354 Investment Activities Dividend           272,902           209,486           369,606           248,955 Income Interest           215,872           128,020           377,832           237,389 Income Interest          (65,997     )    (24,614     )    (100,728    )    (47,637     ) Expense Total Investment        2,394,627       411,429         4,590,740       2,807,061    Income (Loss)                                                                         Income (Loss)      2,058,672         285,783           4,084,540         2,393,325 Before Taxes                                                                         Income Taxes      6,176           8,525           27,878          17,881                                                                               Net Income         2,052,496         277,258           4,056,662         2,375,444 (Loss)                                                                         Net Income (Loss) Attributable to Redeemable Noncontrolling     (6,809      )     (7,800      )     3,828             16,823 Interests Net Income (Loss) Attributable to Noncontrolling     1,881,090         269,924           3,664,578         2,150,048 Interests                                                                      Net Income (Loss) Attributable     $ 178,215        $ 15,134         $ 388,256        $ 208,573      to KKR & Co. L.P.                                                                         Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit Basic            $ 0.47            $ 0.06            $ 1.16            $ 0.79 Diluted (a)      $ 0.43            $ 0.05            $ 1.06            $ 0.72 Weighted Average Common Units Outstanding Basic              377,542,161       271,983,811       335,748,498       264,555,267 Diluted (a)        410,179,838       298,078,764       367,877,049       290,104,942                                                                          ___________________________________________________________________________________________          KKR Holdings L.P. units have been excluded from the calculation of         diluted earnings per common unit given that the exchange of these (a)   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                                         Six Months Ended                  June 30, 2014     March 31, 2014    June 30, 2013     June 30, 2014     June 30, 2013 Segment Revenues Management, Monitoring and Transaction Fees, Net Management       $ 178,674         $ 195,393         $ 164,176         $ 374,067         $ 317,139 Fees Monitoring         29,610            36,363            28,907            65,973            60,975 Fees Transaction        84,305            163,516           62,785            247,821           103,084 Fees Fee Credits       (49,830     )    (84,668     )    (34,751     )    (134,498    )    (57,816     ) Total Management, Monitoring and    242,759         310,604         221,117         553,363         423,382      Transaction Fees, Net                                                                                           Performance Fees Realized Carried            555,488           193,550           269,828           749,038           357,995 Interest Incentive Fees     11,478            17,019            15,590            28,497            34,439 Unrealized Carried           (137,826    )    145,647         (206,753    )    7,821           115,229      Interest Total Performance       429,140         356,216         78,665          785,356         507,663      Fees                                                                                           Investment Income (Loss) Net Realized       221,661           181,728           147,579           403,389           301,206 Gains (Losses) Net Unrealized    (119,935    )    85,759          (139,311    )    (34,176     )    27,731       Gains (Losses) Total Realized     101,726           267,487           8,268             369,213           328,937 and Unrealized Net Interest      60,432          11,164          2,782           71,596          2,311        and Dividends Total Investment        162,158         278,651         11,050          440,809         331,248      Income (Loss)                                                                                           Total Segment     834,057         945,471         310,832         1,779,528       1,262,293    Revenues                                                                                           Segment Expenses Compensation and Benefits Cash Compensation       91,444            108,915           80,436            200,359           155,598 and Benefits Realized Allocation to      222,195           77,420            107,931           299,615           143,198 Carry Pool Unrealized Allocation to     (53,435     )    58,690          (81,395     )    5,255           52,842       Carry Pool Total Compensation       260,204           245,025           106,972           505,229           351,638 and Benefits Occupancy and related            14,757            14,189            13,067            28,946            26,389 charges Other operating         54,311          52,801          45,027          107,112         89,657       expenses Total Segment     329,272         312,015         165,066         641,287         467,684      Expenses                                                                                           Income (Loss) attributable to                3,206           3,202           1,323           6,408           2,424        noncontrolling interests                                                                                           Economic Net     $ 501,579        $ 630,254        $ 144,443        $ 1,131,833      $ 792,185      Income (Loss)                                                                                           Provision for     6,330           36,581          13,486          42,911          33,603       Income Taxes                                                                                           Economic Net Income (Loss),   $ 495,249        $ 593,673        $ 130,957        $ 1,088,922      $ 758,582      After Taxes (a)                                                                                           Equity-based      40,877          39,353          25,936          80,230          53,354       Charges                                                                                           Economic Net Income (Loss), After Taxes      $ 454,372        $ 554,320        $ 105,021        $ 1,008,692      $ 705,228      and Equity-based Charges                                                                                           Economic Net Income (Loss), After Taxes and              $ 0.57            $ 0.77            $ 0.15            $ 1.32            $ 0.99 Equity-based Charges Per Adjusted Unit                                                                                           Weighted Average Adjusted Units     800,747,528       724,579,220       715,453,358       762,873,784       713,353,287 (Fully Diluted Basis) (a)                                                                                 Assets Under     $ 97,957,900      $ 102,277,500     $ 83,500,900      $ 97,957,900      $ 83,500,900 Management Fee Paying Assets Under     $ 79,656,300      $ 83,611,600      $ 67,956,400      $ 79,656,300      $ 67,956,400 Management Committed Dollars Invested and     $ 2,345,500       $ 3,377,300       $ 1,889,400       $ 5,722,800       $ 2,713,800 Syndicated Capital Uncalled        $ 19,784,200    $ 19,985,100    $ 21,364,400    $ 19,784,200    $ 21,364,400   Commitments                                                                                 Other Information Fee Related      $ 93,725          $ 151,718         $ 98,177          $ 245,443         $ 186,177 Earnings Plus: Net interest and      60,432          11,164          2,782           71,596          2,311        dividends Fee and Yield    $ 154,157        $ 162,882        $ 100,959        $ 317,039        $ 188,488      Earnings (a) Plus: Depreciation       4,140             4,035             3,708             8,175             7,389 and amortization Plus: Core Interest          19,205          18,400          16,210          37,605          32,443       Expense Fee and Yield    $ 177,502        $ 185,317        $ 120,877        $ 362,819        $ 228,320      EBITDA (a)                                                                                           Total Distributable    $ 700,973         $ 446,808         $ 403,776         $ 1,147,781       $ 694,390 Earnings (a)                                                                                           GAAP interest    $ 65,997          $ 34,731          $ 24,614          $ 100,728         $ 47,637 expense Less: interest expense related to debt obligations from investment financing         46,792          16,331          8,404           63,123          15,194       arrangements and KFN Core Interest    $ 19,205         $ 18,400         $ 16,210         $ 37,605         $ 32,443       Expense (a)                                                                                                                                                                            _____________________________________________________________________________________________          See definitions for economic net income (loss), adjusted units, fee (a)   and yield earnings, fee and yield EBITDA, total distributable earnings         and core interest expense under “Notes to Reportable Segments.”                                                                                                                                                                        KKR STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION PRIVATE MARKETS SEGMENT (UNAUDITED) (Amounts in thousands)                                                                                                        Quarter Ended                                      Six Months Ended                  June 30, 2014    March 31, 2014   June 30, 2013    June 30, 2014    June 30, 2013 Segment Revenues Management, Monitoring and Transaction Fees, Net Management       $ 111,542        $ 123,039        $ 114,700        $ 234,581        $ 221,305 Fees Monitoring         29,610           36,363           28,907           65,973           60,975 Fees Transaction        45,340           93,020           25,231           138,360          41,643 Fees Fee Credits       (43,478    )    (80,338    )    (29,547    )    (123,816   )    (50,556    ) Total Management, Monitoring and    143,014        172,084        139,291        315,098        273,367     Transaction Fees, Net                                                                                       Performance Fees Realized Carried            555,488          168,800          269,828          724,288          357,995 Interest Incentive Fees     -                -                -                -                - Unrealized Carried           (163,564   )    145,776        (217,544   )    (17,788    )    84,039      Interest Total Performance       391,924        314,576        52,284         706,500        442,034     Fees                                                                                       Investment Income (Loss) Net Realized       207,892          176,198          148,827          384,090          297,689 Gains (Losses) Net Unrealized    (122,729   )    70,673         (138,758   )    (52,056    )    15,884      Gains (Losses) Total Realized     85,163           246,871          10,069           332,034          313,573 and Unrealized Net Interest      22,760         (2,808     )    (3,868     )    19,952         (10,066    ) and Dividends Total Investment        107,923        244,063        6,201          351,986        303,507     Income (Loss)                                                                                       Total Segment     642,861        730,723        197,776        1,373,584      1,018,908   Revenues                                                                                       Segment Expenses Compensation and Benefits Cash Compensation       56,522           66,898           51,516           123,420          99,517 and Benefits Realized Allocation to      222,195          67,520           107,931          289,715          143,198 Carry Pool Unrealized Allocation to     (63,730    )    58,743         (85,711    )    (4,987     )    40,366      Carry Pool Total Compensation       214,987          193,161          73,736           408,148          283,081 and Benefits Occupancy and related            11,764           11,560           11,143           23,324           22,568 charges Other operating         39,589         40,059         33,988         79,648         67,930      expenses Total Segment     266,340        244,780        118,867        511,120        373,579     Expenses                                                                                       Income (Loss) attributable to                335            515            411            850            809         noncontrolling interests                                                                                       Economic Net     $ 376,186       $ 485,428       $ 78,498        $ 861,614       $ 644,520     Income (Loss)                                                                             Assets Under     $ 59,417,000     $ 60,520,300     $ 54,452,400     $ 59,417,000     $ 54,452,400 Management Fee Paying Assets Under     $ 46,167,300     $ 48,211,000     $ 45,907,500     $ 46,167,300     $ 45,907,500 Management Committed Dollars          $ 1,454,400      $ 2,551,800      $ 1,314,000      $ 4,006,200      $ 1,912,500 Invested Uncalled        $ 17,109,800   $ 18,256,800   $ 19,972,800   $ 17,109,800   $ 19,972,800  Commitments                                                                                         KKR STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION PUBLIC MARKETS SEGMENT (UNAUDITED) (Amounts in thousands)                                                                                                  Quarter Ended                                      Six Months Ended                  June 30, 2014    March 31, 2014   June 30, 2013    June 30, 2014    June 30, 2013 Segment Revenues Management, Monitoring and Transaction Fees, Net Management       $ 67,132         $ 72,354         $ 49,476         $ 139,486        $ 95,834 Fees Monitoring         -                -                -                -                - Fees Transaction        7,350            6,022            7,243            13,372           10,349 Fees Fee Credits       (6,352     )    (4,330     )    (5,204     )    (10,682    )    (7,260     ) Total Management, Monitoring and    68,130         74,046         51,515         142,176        98,923      Transaction Fees, Net                                                                                       Performance Fees Realized Carried            -                24,750           -                24,750           - Interest Incentive Fees     11,478           17,019           15,590           28,497           34,439 Unrealized Carried           25,738         (129       )    10,791         25,609         31,190      Interest Total Performance       37,216         41,640         26,381         78,856         65,629      Fees                                                                                       Investment Income (Loss) Net Realized       14,284           5,479            (64        )     19,763           5,149 Gains (Losses) Net Unrealized    3,751          14,814         (741       )    18,565         9,328       Gains (Losses) Total Realized     18,035           20,293           (805       )     38,328           14,477 and Unrealized Net Interest      33,822         9,577          3,508          43,399         6,748       and Dividends Total Investment        51,857         29,870         2,703          81,727         21,225      Income (Loss)                                                                                       Total Segment     157,203        145,556        80,599         302,759        185,777     Revenues                                                                                       Segment Expenses Compensation and Benefits Cash Compensation       26,904           26,745           21,990           53,649           41,690 and Benefits Realized Allocation to      -                9,900            -                9,900            - Carry Pool Unrealized Allocation to     10,295         (53        )    4,316          10,242         12,476      Carry Pool Total Compensation       37,199           36,592           26,306           73,791           54,166 and Benefits Occupancy and related            2,544            2,172            1,615            4,716            3,157 charges Other operating         11,474         8,507          9,147          19,981         16,973      expenses Total Segment     51,217         47,271         37,068         98,488         74,296      Expenses                                                                                       Income (Loss) attributable to                385            522            378            907            733         noncontrolling interests                                                                                       Economic Net     $ 105,601       $ 97,763        $ 43,153        $ 203,364       $ 110,748     Income (Loss)                                                                             Assets Under     $ 38,540,900     $ 41,757,200     $ 29,048,500     $ 38,540,900     $ 29,048,500 Management Fee Paying Assets Under     $ 33,489,000     $ 35,400,600     $ 22,048,900     $ 33,489,000     $ 22,048,900 Management Committed Dollars          $ 724,400        $ 734,100        $ 370,800        $ 1,458,500      $ 535,700 Invested Uncalled         $ 2,674,400      $ 1,728,300      $ 1,391,600      $ 2,674,400      $ 1,391,600 Commitments Gross Dollars   $ 768,200      $ 989,700      $ 847,300      $ 1,757,900    $ 1,225,300   Invested                                                                                         KKR STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION CAPITAL MARKETS AND OTHER SEGMENT (UNAUDITED) (Amounts in thousands)                                                                                   Quarter Ended                          Six Months Ended                  June 30,      March      June 30,      June 30,      June 30,                  2014          31, 2014   2013          2014          2013 Segment Revenues Management, Monitoring and Transaction Fees, Net Management       $ -           $ -        $ -           $ -           $ - Fees Monitoring         -             -          -             -             - Fees Transaction        31,615        64,474     30,311        96,089        51,092 Fees Fee Credits       -           -         -           -           -        Total Management, Monitoring and    31,615      64,474    30,311      96,089      51,092   Transaction Fees, Net                                                                        Performance Fees Realized Carried            -             -          -             -             - Interest Incentive Fees     -             -          -             -             - Unrealized Carried           -           -         -           -           -        Interest Total Performance       -           -         -           -           -        Fees                                                                        Investment Income (Loss) Net Realized       (515    )     51         (1,184  )     (464    )     (1,632  ) Gains (Losses) Net Unrealized    (957    )    272       188         (685    )    2,519    Gains (Losses) Total Realized     (1,472  )     323        (996    )     (1,149  )     887 and Unrealized Net Interest      3,850       4,395     3,142       8,245       5,629    and Dividends Total Investment        2,378       4,718     2,146       7,096       6,516    Income (Loss)                                                                        Total Segment     33,993      69,192    32,457      103,185     57,608   Revenues                                                                        Segment Expenses Compensation and Benefits Cash Compensation       8,018         15,272     6,930         23,290        14,391 and Benefits Realized Allocation to      -             -          -             -             - Carry Pool Unrealized Allocation to     -           -         -           -           -        Carry Pool Total Compensation       8,018         15,272     6,930         23,290        14,391 and Benefits Occupancy and related            449           457        309           906           664 charges Other operating         3,248       4,235     1,892       7,483       4,754    expenses Total Segment     11,715      19,964    9,131       31,679      19,809   Expenses                                                                        Income (Loss) attributable to                2,486       2,165     534         4,651       882      noncontrolling interests                                                                        Economic Net     $ 19,792     $ 47,063   $ 22,792     $ 66,855     $ 36,917   Income (Loss)                                                              Syndicated      $ 166,700   $ 91,400  $ 204,600   $ 258,100   $ 265,600  Capital                                                                          KKR BALANCE SHEET TOTAL REPORTABLE SEGMENTS (UNAUDITED) (Amounts in thousands, except per unit amounts)                                                                                                      As of                   As of                                 June 30, 2014           December 31, 2013                                                                             Cash and short-term            $  3,375,164            $    2,161,097 investments Investments                       8,125,042    (a)          4,980,265 Unrealized carry                  1,207,172    (b)          1,179,338      (b) Other assets                     746,828                  662,357 Total assets                   $  13,454,206           $    8,983,057                                                                             Debt obligations - KKR         $  1,500,000            $    1,000,000 Debt obligations - KFN            657,310                   - Preferred shares - KFN            373,750                   - Other liabilities                356,874                  149,196 Total liabilities                2,887,934                1,149,196 Noncontrolling interests          122,686                   71,261                                                        Book value                     $  10,443,586           $    7,762,600 Book value per adjusted unit   $  12.52                $    10.83                                                                                                                                                                                                                                                                                                                                                                                    (a) See schedule of investments that follows on the next page.                                                                                                            As of                   As of (b) Unrealized Carry                                June 30, 2014           December 31, 2013 Private Markets                $  1,129,463            $    1,116,996 Public Markets                   77,709                   62,342 Total                          $  1,207,172            $    1,179,338                                                                               KKR SCHEDULE OF INVESTMENTS TOTAL REPORTABLE SEGMENTS (UNAUDITED) (Amounts in thousands, except percentage amounts)                                                                                              As of June 30, 2014                                                  Fair          Fair Value as a Investments                        Cost                        Percentage of                                                  Value         Investments                                                                 Private Equity                     $ 1,522,326   $ 2,032,431   25       % Co-Investments Private Equity Funds                970,662      1,190,723   15       % Private Equity Total                2,492,988    3,223,154   40       %                                                                 Energy                               794,981       787,389     10       % Real Estate                          280,432       293,896     3        % Infrastructure                      49,545       53,916      1        % Real Assets Total                   1,124,958    1,135,201   14       %                                                                 Other                                137,000       145,346     2        %                                                                 Private Markets Total               3,754,946    4,503,701   56       %                                                                 Special Situations                   575,752       625,272     8        % Mezzanine                            123,455       129,458     1        % Direct Lending                      52,920       58,883      1        % Alternative Credit                   752,127       813,613     10       % CLOs                                 1,590,350     1,595,038   20       % Liquid Credit                       307,869      339,196     3        % Credit Total                        2,650,346    2,747,847   33       %                                                                 Other                                58,623        59,242      1        %                                                                 Public Markets Total                2,708,969    2,807,089   34       %                                                                 Specialty Finance                    256,219       260,790     3        % Other                                513,793       553,462     7        %                                                                 Capital Markets and Other           770,012      814,252     10       % Total                                                               Total Investments                  $ 7,233,927   $ 8,125,042   100      %                                                                                                                                                                                         Significant Aggregate Portfolio Company Investments: (a) Alliance Boots GmbH                $ 228,769     $ 743,446     9        % First Data Corporation               327,212       265,062     3        % Biomet, Inc.                         164,644       213,245     3        % HCA Inc.                             35,583        172,072     2        % The Nielsen Company B.V.            52,900       171,818     2        %                                     809,108      1,565,643   19       % Other Investments                   6,424,819    6,559,399   81       % Total Investments                  $ 7,233,927   $ 8,125,042   100      %                                                                  ____________________________________________________________________________________________          The significant aggregate portfolio company investments include the         top five investments in portfolio companies based on their fair market (a)   value as of June 30, 2014. The fair value figures include the         co-investment and the limited partner and/or general partner interests         in the underlying portfolio company.                                                                                                                         KKR ASSETS UNDER MANAGEMENT* (UNAUDITED) (Amounts in thousands)                                                                                                                                                     Private               Public               Total                     Markets               Markets              Reportable                     Segment               Segment              Segments Quarter Ended June 30, 2014                                                                 March 31, 2014      $ 60,520,300          $ 41,757,200         $ 102,277,500 New Capital Raised    1,114,200             1,945,800            3,060,000 KFN Acquisition (a)   -                     (4,511,900 )         (4,511,900  ) Distributions         (4,445,200  )         (1,061,300 )   (d)   (5,506,500  ) Change in Value      2,227,700           411,100            2,638,800    June 30, 2014       $ 59,417,000         $ 38,540,900        $ 97,957,900                                                                   Six Months Ended June 30, 2014                                                                 December 31, 2013   $ 61,242,900          $ 33,077,400         $ 94,320,300 New Capital Raised    1,703,100             3,066,800            4,769,900 Acquisitions (b)      -                     8,423,000            8,423,000 KFN Acquisition (a)   -                     (4,511,900 )         (4,511,900  ) Distributions         (6,634,800  )         (2,387,600 )   (e)   (9,022,400  ) Net Changes in Fee Base of Certain       (933,800    )         -                    (933,800    ) Funds (c) Change in Value      4,039,600           873,200            4,912,800    June 30, 2014       $ 59,417,000         $ 38,540,900        $ 97,957,900                                                                   Trailing Twelve Months Ended June 30, 2014                                                                 June 30, 2013       $ 54,452,400          $ 29,048,500         $ 83,500,900 New Capital Raised    7,668,000             7,412,300            15,080,300 Acquisitions (b)      -                     8,423,000            8,423,000 KFN Acquisition (a)   -                     (4,511,900 )         (4,511,900  ) Distributions         (11,315,300 )         (3,675,000 )   (f)   (14,990,300 ) Net Changes in Fee Base of Certain       (933,800    )         -                    (933,800    ) Funds (c) Change in Value      9,545,700           1,844,000          11,389,700   June 30, 2014       $ 59,417,000         $ 38,540,900        $ 97,957,900                                                                    ______________________________________________________________________________________________  *     Exclude those assets managed by entities where KKR holds less than a         50% ownership interest.          (a)     Certain assets that were externally managed prior to the acquisition         of KFN are now reported on the balance sheet and excluded from AUM. (b)     Represents the AUM of Avoca. (c)     Represents the impact of certain funds entering the post-investment         period. (d)     Includes $745.9 million of redemptions by fund investors. (e)     Includes $1,288.4 million of redemptions by fund investors. (f)     Includes $1,771.0 million of redemptions by fund investors.    KKR FEE PAYING ASSETS UNDER MANAGEMENT* (UNAUDITED) (Amounts in thousands)                                                                              Private                Public                 Total                   Markets                Markets                Reportable                   Segment                Segment                Segments Quarter Ended June 30, 2014                                                                  March 31, 2014    $ 48,211,000           $ 35,400,600           $ 83,611,600 New Capital         921,700                1,649,100              2,570,800 Raised KFN Acquisition     -                      (2,684,700 )           (2,684,700 ) (a) Distributions       (2,940,400 )   (b)     (1,094,600 )   (e)     (4,035,000 ) Change in Value    (25,000    )          218,600              193,600     June 30, 2014     $ 46,167,300          $ 33,489,000          $ 79,656,300                                                                   Six Months Ended June 30, 2014                                                                  December 31,      $ 50,156,300           $ 27,241,200           $ 77,397,500 2013 New Capital         1,357,000              2,759,300              4,116,300 Raised Acquisitions        -                      7,971,000              7,971,000 (c) KFN Acquisition     -                      (2,684,700 )           (2,684,700 ) (a) Distributions       (4,366,900 )   (b)     (2,330,100 )   (f)     (6,697,000 ) Net Changes in Fee Base of         (964,700   )           -                      (964,700   ) Certain Funds (d) Change in Value    (14,400    )          532,300              517,900     June 30, 2014     $ 46,167,300          $ 33,489,000          $ 79,656,300                                                                   Trailing Twelve Months Ended June 30, 2014                                                                  June 30, 2013     $ 45,907,500           $ 22,048,900           $ 67,956,400 New Capital         7,193,700              7,952,500              15,146,200 Raised Acquisitions        -                      7,971,000              7,971,000 (c) KFN Acquisition     -                      (2,684,700 )           (2,684,700 ) (a) Distributions       (6,276,700 )   (b)     (3,232,300 )   (g)     (9,509,000 ) Net Changes in Fee Base of         (964,700   )           -                      (964,700   ) Certain Funds (d) Change in Value    307,500              1,433,600            1,741,100   June 30, 2014     $ 46,167,300          $ 33,489,000          $ 79,656,300                                                                                 ______________________________________________________________________________________________  *     Exclude those assets managed by entities where KKR holds less than a         50% ownership interest. (a)     Certain assets that were externally managed prior to the acquisition         of KFN are now reported on the balance sheet and excluded from AUM. (b)     Includes the reduction in FPAUM attributed to the invested capital of         Energy Future Holdings due to its bankruptcy. (c)     Represents the FPAUM of Avoca. (d)     Represents the impact of certain funds entering the post-investment         period. (e)     Includes $745.9 million of redemptions by fund investors. (f)     Includes $1,288.4 million of redemptions by fund investors. (g)     Includes $1,771.0 million of redemptions by fund investors.                                                                                                                                                                                                                                               KKR INVESTMENT VEHICLE SUMMARY ^ (a) (UNAUDITED) As of June 30, 2014 (Amounts in millions, except percentages)                                                                                                                                              Investment Period          Amount                                                                        Percentage                  Commencement  End         Commitment  Uncalled     Committed   Invested    Realized    Remaining   Remaining                  Date           Date                     Commitments   by General                             Cost         Fair Value                                                                        Partner Private Markets                                                                                                                             Private Equity Funds Asian Fund II    4/2013         4/2019      $ 5,825.0    $  4,889.8    1.3    %     $ 935.2      $ -          $ 935.2      $ 1,012.1 North America    9/2012         9/2018        8,718.4       4,712.4    2.9    %       4,006.0      95.4         4,006.0      4,583.7 Fund XI China Growth     11/2010        11/2016       1,010.0       560.2      1.0    %       449.8        32.6         432.4        512.9 Fund E2 Investors     8/2009         11/2013       209.4         13.6       4.5    %       195.8        144.4        54.5         302.6 (Annex Fund) European Fund    3/2008         3/2014        6,229.8       816.3      4.6    %       5,413.5      1,494.3      4,620.7      6,601.4 III Asian Fund       7/2007         4/2013        3,983.3       57.5       2.5    %       3,925.8      3,864.7      2,585.1      3,618.5 2006 Fund        9/2006         9/2012        17,642.2      1,067.9    2.1    %       16,574.3     12,881.7     9,538.5      15,500.0 European Fund    11/2005        10/2008       5,750.8       -          2.1    %       5,750.8      5,352.4      1,655.9      3,207.1 II Millennium       12/2002        12/2008       6,000.0       -          2.5    %       6,000.0      11,246.2     1,320.8      2,265.5 Fund European Fund    12/1999        12/2005      3,085.4     -          3.2    %      3,085.4    8,736.6    -          40.8 Total Private                                 58,454.3      12,117.7                  46,336.6     43,848.3     25,149.1     37,644.6 Equity Funds                                                                                                                             Co-Investment    Various        Various       2,903.9       780.3      Various        2,123.6      1,005.1      1,814.0      2,393.7 Vehicles                                                                                                                     Total Private                                61,358.2    12,898.0                 48,460.2   44,853.4    26,963.1   40,038.3 Equity                                                                                                                             Real Assets Energy Income and Growth       9/2013         9/2018        1,974.2       1,617.7    12.8   %       356.5        22.2         339.1        351.2 Fund Natural          Various        Various       893.8         320.9      Various        572.9        95.1         496.4        312.8 Resources Fund Global Energy    Various        Various       1,028.4       894.2      Various        134.2        6.1          134.2        108.5 Opportunities Infrastructure   Various        Various       1,042.2       259.9      4.8    %       782.3        34.1         782.3        819.7 Fund Infrastructure   Various        Various       1,355.3       250.8      Various        1,104.5      261.6        1,104.5      1,395.2 Co-Investments Real Estate Partners         5/2013         12/2016      1,229.1     868.3      16.0   %      360.8      129.2       360.4      402.2 Americas Real Assets                                  7,523.0     4,211.8                  3,311.2    548.2       3,216.9    3,389.6                                                         Private                                      68,881.2    17,109.8                 51,771.4   45,401.6   30,180.0   43,427.9 Markets Total                                                                                                                             Public Markets                                                                                                                             Special Situations       Various        Various       4,713.8       1,939.7    Various        2,774.1      981.4        2,231.4      2,660.6 Vehicles Mezzanine Fund   3/2010         8/2015        987.0         287.3      4.6    %       699.7        198.5        611.1        721.7 Direct Lending   Various        Various       1,001.9       447.4      Various        554.5        51.0         554.5        604.3 Vehicles                                                                                                                    Public Markets                               6,702.7     2,674.4                  4,028.3    1,230.9    3,397.0    3,986.6 Total                                                                                                                             Grand Total                                 $ 75,583.9  $  19,784.2                $ 55,799.7  $ 46,632.5  $ 33,577.0  $ 47,414.5                                                                                                                              _____________________________________________________________________________________________  (a)   Reflects investment vehicles for which KKR has the ability to earn         carried interest.    KKR DISTRIBUTION CALCULATION (UNAUDITED) (Amounts in thousands, except unit and per unit amounts)                                                                                                                                                                                            Quarter Ended                                         Six Months Ended                  June 30, 2014     March 31, 2014    June 30, 2013     June 30, 2014   June 30, 2013 Cash Revenues Fees             $ 254,237         $ 327,623         $ 236,707         $ 581,860       $ 457,821 Realized cash      555,488           193,550           269,828           749,038         357,995 carry Net realized investment         245,711           192,892           150,361           438,603         303,517 income - KKR Net realized investment        36,382          -               -               36,382        -          income - KFN Total Cash        1,091,818       714,065         656,896         1,805,883     1,119,333  Revenue                                                                                         Cash Expenses Compensation       91,444            108,915           80,436            200,359         155,598 and benefits Realized cash carry              222,195           77,420            107,931           299,615         143,198 allocated to carry pool Occupancy and related            14,757            14,189            13,067            28,946          26,389 charges Other operating         54,311          52,801          45,027          107,112       89,657     expenses Total Cash        382,707         253,325         246,461         636,032       414,842    Expenses                                                                                                                                                                                 Cash income (loss) before noncontrolling     709,111           460,740           410,435           1,169,851       704,491 interests and local taxes                                                                                         Less: local        (4,932      )     (10,730     )     (5,336      )     (15,662   )     (7,677    ) income taxes Less: noncontrolling    (3,206      )    (3,202      )    (1,323      )    (6,408    )    (2,424    ) interests Total Distributable      700,973           446,808           403,776           1,147,781       694,390 Earnings                                                                                         Less: estimated current           (19,025     )    (33,445     )    (25,138     )    (52,470   )    (41,865   ) corporate income taxes                                                                                         Distributable Earnings, net      681,948           413,363           378,638           1,095,311       652,525 of taxes                                                                                         Less: Undistributed net realized      (147,427    )    (115,735    )    (90,217     )    (263,162  )    (182,110  ) investment income - KKR                                                                                         Distributed      $ 534,521        $ 297,628        $ 288,421        $ 832,149      $ 470,415    Earnings                                                                                         Distributable Earnings, net of taxes per     $ 0.85            $ 0.59            $ 0.55            $ 1.44          $ 0.95 KKR & Co. L.P. common unit                                                                                         Distribution per KKR & Co.    $ 0.67            $ 0.43            $ 0.42            $ 1.10          $ 0.69 L.P. common unit                                                                                                                                                                       Components of Distribution per KKR & Co. L.P. Common unit                                                                                         After-tax FRE    $ 0.09            $ 0.15            $ 0.10            $ 0.24          $ 0.20 Realized Cash    $ 0.41            $ 0.17            $ 0.23            $ 0.58          $ 0.31 Carry Distributed Net Realized     $ 0.12            $ 0.11            $ 0.09            $ 0.23          $ 0.18 Investment Income - KKR Distributed Net Realized    $ 0.05          $ -             $ -             $ 0.05        $ -          Investment Income - KFN                                                                               Fee and yield earnings distribution    $ 0.15          $ 0.16          $ 0.10          $ 0.31        $ 0.20       per KKR & Co. L.P. common unit                                                                                         Adjusted Units Eligible For       803,719,050       696,070,615       689,795,274 Distribution                                                                                         Payout Ratio       78.4        %     72.0        %     76.2        %     76.0      %     72.1      %                                                                                          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 the KKR’s investment management business, 40% of the net realized investment income of KKR (other than KFN), and 100% of the net realized investment income of KFN, in each case 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 obligations. For purposes of KKR’s distribution policy, its distributions are expected to consist of (i) FRE, (ii) carry distributions received from KKR’s investment funds which have not been allocated as part of its carry pool, (iii) 40% of the net realized investment income from KKR (other than KFN) and (iv) 100% of the net realized investment income from KFN. This amount is expected to be reduced by (i) corporate and applicable local taxes, if any, (ii) non-controlling interests, and (iii) amounts determined by KKR to be necessary or appropriate for the conduct of its business and other matters as discussed above.  The declaration and payment of any distributions are subject to the discretion of the board of directors of the general partner of KKR & Co. L.P., which may change the distribution policy at any time, 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 unitholders will receive sufficient distributions to satisfy payment of their tax liabilities as limited partners of KKR & Co. L.P. 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.                                       KKR                     Notes to Reportable Segments (Unaudited)  The segment key performance measures that follow are used by management in making operating and resource deployment decisions as well as assessing the overall performance of each of KKR’s reportable business segments. The reportable segments for KKR’s business are presented prior to giving effect to the allocation of income (loss) between KKR & Co. L.P. and KKR Holdings L.P. and as such represent the business in total. In addition, KKR’s reportable segments are presented without giving effect to the consolidation of the funds that KKR manages.  KKR discloses the following financial measures in this earnings release that are calculated and presented using methodologies other than in accordance with GAAP. We believe that providing these performance measures on a supplemental basis to our GAAP results is helpful to unitholders in assessing the overall performance of KKR’s businesses. These financial measures should not be considered as a substitute for similar financial measures calculated in accordance with GAAP. We caution readers that these non-GAAP financial measures may differ from the calculations of other investment managers, and as a result, may not be comparable to similar measures presented by other investment managers. Reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP are included elsewhere within this earnings release.  Fee related earnings (“FRE”) is comprised (i) total management, monitoring and transaction fees, net, plus incentive fees, less (ii) cash compensation and benefits, occupancy and related charges and other operating expenses. This measure is used by management as an alternative measurement of the operating earnings of KKR and its business segments before carried interest and related carry pool allocations and investment income. We believe this measure is useful to unitholders as it provides additional insight into the operating profitability of our fee generating management companies and capital markets businesses. The components of FRE on a segment basis differ from the equivalent GAAP amounts on a consolidated basis as a result of: (i)the inclusion of management fees earned from consolidated funds that were eliminated in consolidation; (ii)the exclusion of fees and expenses of certain consolidated entities; (iii)the exclusion of charges relating to the amortization of intangible assets; (iv)the exclusion of charges relating to carry pool allocations; (v)the exclusion of non-cash equity-based charges and other non-cash compensation charges borne by KKR Holdings or incurred under the KKR& Co. L.P. 2010 Equity Incentive Plan; (vi)the exclusion of certain reimbursable expenses; and (vii)the exclusion of certain non-recurring items.  Economic net income (loss) (“ENI”) is a measure of profitability for KKR’s reportable segments and is used by management as an alternative measurement of the operating and investment earnings of KKR and its business segments. We believe this measure is useful to unitholders as it provides additional insight into the overall profitability of KKR’s businesses inclusive of carried interest and related carry pool allocations and investment income. ENI is comprised of total segment revenues; less total segment expensesand certain economic interests in KKR’s segments held by third parties. ENI differs from net income (loss) on a GAAP basis as a result of: (i)the exclusion of the items referred to in FRE above; (ii)the exclusion of investment income (loss) relating to noncontrolling interests; and (iii)the exclusion of income taxes.  Fee and Yield Earnings is comprised of FRE and net interest and dividends from KKR’s business segments. This measure is used by management as a measure of the cash earnings of KKR and its business segments investment income. We believe this measure is useful to unitholders as it provides insight into the amount of KKR’s cash earnings, significant portions of which tend to be more recurring than realized carried interest and net realized gains from quarter to quarter.  Fee and Yield EBITDA is comprised of Fee and Yield Earnings before the impact of depreciation of fixed assets and core interest expense. This is used by management as another measure of the cash earnings of KKR and its business segments investment income. We believe this measure is also useful to unitholders as it provides insight into the amount of KKR’s cash 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.  Net realized investment income – KKR refers to net cash income from (i) realized investment gains and losses excluding certain realized investment losses to the extent unrealized losses on these investments were recognized prior to the combination with KPE on October 1, 2009, (ii) dividend income, and (iii) interest income net of interest expense less certain compensation and general and administrative expenses incurred in the generation of net realized investment income in each case generated by KKR (excluding KFN). This term describes a portion of KKR’s quarterly distribution and excludes net realized investment income of KFN.  Net realized investment income – KFN refers to net cash income from (i) realized investment gains and losses, (ii) dividend income and (iii) interest income net of interest expense less certain general and administrative expenses incurred in the generation of net realized investment income in each case generated by KFN. This term describes a portion of KKR’s quarterly distribution and excludes net realized investment income of KKR.  Investments is a term used solely for purposes of financial presentation of a portion of KKR’s balance sheet and includes majority investments in subsidiaries that operate KKR’s asset management and broker-dealer businesses, including the general partner interests of KKR’s investment funds.  Total distributable earnings is the sum of (i) FRE, (ii) carry distributions received from KKR’s investment funds which have not been allocated as part of its carry pool, (iii) net realized investment income – KKR and (iv) net realized investment income – KFN; less (i) applicable local income taxes, if any, and (ii) noncontrolling interests. We believe this measure is useful to unitholders as it provides a supplemental measure to assess performance, excluding the impact of mark-to-market gains (losses), and also assess amounts available for distribution to KKR unitholders. However, total distributable earnings is not a measure that calculates actual distributions under KKR’s current distribution policy.  Assets under management (“AUM”) represent the assets from which KKR is entitled to receive fees or a carried interest and general partner capital. We believe this measure is useful to unitholders as it provides additional insight into KKR’s capital raising activities and the overall activity in its investment funds. KKR calculates the amount of AUM as of any date as the sum of: (i)the fair value of the investments of KKR’s investment funds plus uncalled capital commitments from these funds; (ii)the fair value of investments in KKR’s co-investment vehicles; (iii)the net asset value of certain of KKR's fixed income products; (iv)the value of outstanding CLOs (excluding CLOs wholly owned by KKR); and (v) the fair value of other assets managed by KKR. KKR’s definition of AUM is not based on any definition of AUM that may be set forth in the agreements governing the investment funds, vehicles or accounts that it manages or calculated pursuant to any regulatory definitions.  Fee paying AUM (“FPAUM”) represents only those assets under management from which KKR receives fees. We believe this measure is useful to unitholders as it provides additional insight into the capital base upon which KKR earns management fees. This relates to KKR’s capital raising activities and the overall activity in its investment funds, for only those funds, where KKR receives fees (i.e., excluding vehicles that receive only carried interest or general partner capital). FPAUM is the sum of all of the individual fee bases that are used to calculate KKR’s fees and differs from AUM in the following respects: (i)assets from which KKR does not receive a fee are excluded (i.e.,assets with respect to which it receives only carried interest) and (ii)certain assets, primarily in its private equity funds, are reflected based on capital commitments and invested capital as opposed to fair value because fees are not impacted by changes in the fair value of underlying investments.  Committed dollars invested is the aggregate amount of capital commitments that have been invested by KKR’s investment funds and carry-yielding co-investment vehicles and is used as a measure of investment activity for KKR and its business segments during a given period. We believe this measure is useful to unitholders as it provides additional insight into KKR’s investment of committed capital. Such amounts include: (i)capital invested by fund investors and co-investors with respect to which KKR is entitled to a carried interest and (ii)capital invested by KKR’s investment funds.  Gross dollars invested is the aggregate amount of capital that has been invested by all of KKR’s Public Markets investment vehicles in our private credit non-liquid strategies and is used as a measure of investment activity for KKR’s Public Markets in a given period. We believe this measure is useful to unitholders as it provides additional insight into KAM’s investment of capital across its private credit non-liquid strategies for all the investment vehicles which it manages. Such amounts include capital invested by fund investors and co-investors with respect to which KKR’s Public Markets business is entitled to a fee or carried interest.  Syndicated capital is generally the aggregate amount of capital in transactions originated by KKR 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 committed dollars invested and (ii) debt capital that is arranged as part of the acquisition financing of transactions originated by KKR investment funds. Syndicated capital is used as a measure of investment activity for KKR and its business segments during a given period, and we believe that this measure is useful to unitholders as it provides additional insight into levels of syndication activity in KKR’s Capital Markets and Other segment and across its investment platform.  Uncalled commitments are used as a measure of unfunded capital commitments that KKR’s investment funds and carry-paying co-investment vehicles have received from partners to contribute capital to fund future investments. We believe this measure is useful to unitholders as it provides additional insight into the amount of capital that is available to KKR’s investment funds to make future investments.  Adjusted units are used as a measure of the total equity ownership of KKR that is held primarily by KKR & Co. L.P. and KKR Holdings and represent the fully diluted unit count using the if-converted method. We believe this measure is useful to unitholders as it provides an indication of the total equity ownership of KKR as if all outstanding KKR Holdings units and other exchangeable securities had been exchanged for common units of KKR & Co. L.P.  Core interest expense is used by management as an alternative measurement of interest expense incurred by KKR on a segment basis and excludes interest expense related to debt obligations from investment financing arrangements related to certain of KKR’s private equity funds, investment vehicles and principal investments 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. On a segment basis, interest expense is included in net interest and dividends within total investment income. We believe this measure is useful to unitholders as it provides an indication of the amount of interest expense borne by KKR excluding interest expense that is allocated to KKR’s investment funds, 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.  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 investment portfolio, including carried interest, as well as KKR’s overall liquidity position. We believe this measure is useful to unitholders as it provides additional insight into the assets and liabilities of KKR excluding the assets and liabilities that are allocated to noncontrolling interest holders. Book value differs from KKR& Co. L.P. Partners’ Capital on a GAAP basis primarily as a result of the exclusion of ownership interests attributable to KKR Holdings.  Cash and short-term investments represent cash and liquid short-term investments in high-grade, short-duration cash management strategies used by KKR to generate additional yield on our excess liquidity and is used by management in evaluating KKR’s liquidity position. We believe this measure is useful to unitholders as it provides additional insight into KKR’s available liquidity. Cash and short-term investments differ from cash and cash equivalents on a GAAP basis as a result of the inclusion of liquid short-term investments in cash and short-term investments.  Return on equity measures the amount of net income generated as a percentage of capital invested in KKR’s business. Return on equity is calculated by dividing Economic Net Income (Loss), After Taxes and Equity-based Charges on a trailing twelve-month basis by the average book value during the period.  Cash return on equity measures the amount of cash income generated as a percentage of capital invested in KKR’s business. Cash return on equity is calculated by dividing Total Distributable Earnings on a trailing twelve-month basis by the average book value during the period.                                                                KKR EXHIBIT A RECONCILIATION OF NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. PER COMMON UNIT (GAAP BASIS) TO ENI AFTER TAXES AND EQUITY-BASED CHARGES PER ADJUSTED UNIT (UNAUDITED) (Amounts in thousands, except common unit and per common unit amounts)                                                                                                                                                                     Quarter Ended                                 June 30, 2014   March 31, 2014   June 30, 2013                                                                   Net income (loss) attributable to KKR &           $ 0.47          $  0.72          $ 0.06 Co. L.P. per common unit - Basic Weighted Average Common Units Outstanding -               377,542,161      293,490,461     271,983,811 Basic Net income (loss) attributable to KKR &             178,215          210,041         15,134 Co. L.P. Plus: Net income (loss) attributable to noncontrolling interests held by KKR             186,776          300,814         28,106 Holdings L.P. Plus: Non-cash equity             92,957           77,528          80,318 based charges Plus: Amortization of intangibles and other,            37,455           20,169          12,360 net Plus: Income taxes               6,176           21,702         8,525 Economic net income               501,579          630,254         144,443 (loss) Less: Provision for              6,330           36,581         13,486 income taxes Economic net income               495,249          593,673         130,957 (loss) after taxes Less: Equity-based charges associated with          40,877          39,353         25,936 the KKR & Co. L.P. 2010 equity incentive plan Economic net income (loss) after taxes and            454,372          554,320         105,021 equity-based charges Weighted Average                 800,747,528     724,579,220    715,453,358 Adjusted Units Economic net income (loss) after taxes and          $ 0.57          $  0.77          $ 0.15 equity-based charges per adjusted unit                         *Story                         too                         large*  [TRUNCATED]  
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