KKR & Co. L.P. Announces Third Quarter 2012 Results

CONFERENCE CALL

A conference call to discuss KKR’s financial results will be held on Friday, October 26, 2012 at 10:00 a.m. EDT. The conference call may be accessed by dialing [phone] (U.S. callers) or [phone] (non-U.S. callers); a pass code is not required. Additionally, the conference call will be broadcast live over the Internet and may be accessed through the Public Investors section of KKR’s website at http://ir.kkr.com/kkr_ir/kkr_events.cfm. A replay of the live broadcast will be available on KKR’s website or by dialing [phone] (U.S. callers) and [phone] (non-U.S. callers), pass code 39815272, beginning approximately two hours after the broadcast.

From time to time, KKR may use its website as a channel of distribution of material company information. Financial and other important information regarding KKR is routinely posted and accessible on the Public Investors section of KKR’s website at http://ir.kkr.com/kkr_ir/alerts.cfm . In addition, you may automatically receive email alerts and other information about KKR by enrolling your email address at the “Email Alerts” area of the Public Investors section of the website.

ABOUT KKR

Founded in 1976 and led by Henry Kravis and George Roberts, KKR is a leading global investment firm with $66.3 billion in assets under management as of September 30, 2012. With offices around the world, KKR manages assets through a variety of investment funds and accounts covering multiple asset classes. KKR seeks to create value by bringing operational expertise to its portfolio companies and through active oversight and monitoring of its investments. KKR complements its investment expertise and strengthens interactions with investors through its client relationships and capital markets platform. KKR is publicly traded on the New York Stock Exchange (NYSE: KKR). For additional information, please visit KKR’s website at www.kkr.com.

FORWARD-LOOKING STATEMENTS

This release contains certain forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. The forward-looking statements are based on KKR’s beliefs, assumptions and expectations of its future performance, taking into account all information currently available to it. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to KKR or are within its control. If a change occurs, KKR’s business, financial condition, liquidity and results of operations, including but not limited to AUM, FPAUM, FRE, total distributable earnings, ENI, after-tax ENI, fee related EBITDA, committed and syndicated dollars invested, uncalled commitments, core interest expense, cash and short-term investments and book value, may vary materially from those expressed in the forward-looking statements. The following factors, among others, could cause actual results to vary from the forward-looking statements: the general volatility of the capital markets; failure to realize the benefits of or changes in KKR’s business strategies including the ability to realize the anticipated synergies from the acquisitions such as Prisma; availability, terms and deployment of capital; availability of qualified personnel and expense of recruiting and retaining such personnel; changes in the asset management industry, interest rates or the general economy; underperformance of KKR's investments and decreased ability to raise funds; and the degree and nature of KKR’s competition. KKR does not undertake any obligation to update any forward-looking statements to reflect circumstances or events that occur after the date on which such statements were made except as required by law. In addition, KKR’s business strategy is focused on the long term and financial results are subject to significant volatility. Additional information about factors affecting KKR is available in KKR & Co. L.P.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, filed with the SEC on February 27, 2012, and 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								Nine Months Ended
		September 30, 2012				September 30, 2011				September 30, 2012				September 30, 2011
Revenues
Fees		$	162,154			$	164,808			$	390,821			$	514,263
Expenses
Compensation and Benefits			366,350				48,948				1,019,400				677,917
Occupancy and Related Charges			14,344				13,702				43,636				39,085
General, Administrative and Other			65,825				66,180				177,480				166,866
Total Expenses			446,519				128,830				1,240,516				883,868
Investment Income (Loss)
Net Gains (Losses) from Investment Activities			2,308,613				(3,339,020	)			6,997,166				467,278
Dividend Income			10,440				71,106				263,298				107,129
Interest Income			95,578				64,858				259,669				218,975
Interest Expense			(17,868	)			(17,742	)			(52,757	)			(52,365	)
Total Investment Income (Loss)			2,396,763				(3,220,798	)			7,467,376				741,017
Income (Loss) Before Taxes			2,112,398				(3,184,820	)			6,617,681				371,412
Income Taxes			9,612				11,535				37,777				67,923
Net Income (Loss)			2,102,786				(3,196,355	)			6,579,904				303,489
Net Income (Loss) Attributable to
Redeemable Noncontrolling Interests			9,994				-				18,551				-
Net Income (Loss) Attributable to
Noncontrolling Interests			1,965,381				(2,952,953	)			6,097,245				347,705
Net Income (Loss) Attributable to KKR & Co. L.P.		$	127,411			$	(243,402	)		$	464,108			$	(44,216	)
Distributions Declared per KKR & Co. L.P. Common Unit		$	0.24			$	0.10			$	0.52			$	0.42
Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit
Basic		$	0.53			$	(1.09	)		$	1.98			$	(0.20	)
Diluted (a)		$	0.49			$	(1.09	)		$	1.86			$	(0.20	)
Weighted Average Common Units Outstanding
Basic			239,696,358				222,733,648				234,876,879				218,501,107
Diluted (a)			257,646,622				222,733,648				249,359,200				218,501,107

(a)		KKR Holdings L.P. units have been excluded from the calculation of diluted earnings per common unit given that the exchange of these units would proportionally increase KKR & Co. L.P.’s interests in KKR’s business and would have an anti-dilutive effect on earnings per common unit as a result of certain tax benefits KKR & Co. L.P. is assumed to receive upon the exchange. For the three and nine months ended September 30, 2011, equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan have been excluded from the calculation of diluted earnings per common unit given the awards would have an anti-dilutive effect as a result of the net loss incurred in the respective periods.

KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except unit and per unit amounts)
					Quarter Ended												Nine Months Ended
					September 30, 2012				June 30, 2012				September 30, 2011				September 30, 2012				September 30, 2011
Fees
	Management and incentive fees:
		Management fees			$	126,483			$	129,626			$	134,049			$	384,752			$	387,828
		Incentive fees				17,768				4,057				-				31,495				28,159
			Management and incentive fees			144,251				133,683				134,049				416,247				415,987
	Monitoring and transaction fees:
		Monitoring fees				29,969				27,786				20,892				83,577				141,972
		Transaction fees				75,264				43,706				98,631				163,268				220,792
		Fee credits				(31,707	)			(16,689	)			(28,793	)			(67,739	)			(113,996	)
			Net monitoring and transaction fees			73,526				54,803				90,730				179,106				248,768
	Total fees					217,777				188,486				224,779				595,353				664,755
Expenses
	Compensation and benefits					71,340				62,746				66,663				196,810				192,913
	Occupancy and related charges					13,605				13,239				12,675				41,305				36,656
	Other operating expenses					42,128				42,729				47,199				123,406				134,608
	Total expenses (a)					127,073				118,714				126,537				361,521				364,177
Fee Related Earnings						90,704				69,772				98,242				233,832				300,578
Investment income (loss)
	Gross carried interest					410,736				282,874				(366,387	)			1,162,974				167,118
	Less: allocation to KKR carry pool					(169,633	)			(112,553	)			151,191				(473,692	)			(67,915	)
	Less: management fee refunds (b)					(61,499	)			(32,804	)			21,115				(135,011	)			(15,594	)
		Net carried interest				179,604				137,517				(194,081	)			554,271				83,609
	Other investment income (loss)					240,876				340,103				(494,412	)			1,000,886				85,719
		Total investment income (loss)				420,480				477,620				(688,493	)			1,555,157				169,328
Income (Loss) before noncontrolling interests
	in Income of consolidated entities					511,184				547,392				(590,251	)			1,788,989				469,906
Income (Loss) attributable to
	noncontrolling interests					1,310				1,277				1,840				5,798				4,451
Economic Net Income (Loss)					$	509,874			$	546,115			$	(592,091	)		$	1,783,191			$	465,455
Provision for Income Taxes						22,548				25,857				29,634				91,788				188,094
Economic Net Income (Loss), After Taxes (c)					$	487,326			$	520,258			$	(621,725	)		$	1,691,403			$	277,361
Economic Net Income (Loss), After Taxes per Adjusted Unit (c)					$	0.69			$	0.74			$	(0.91	)		$	2.42			$	0.41
Assets Under Management					$	66,278,700			$	61,488,900			$	58,720,800			$	66,278,700			$	58,720,800
Fee Paying Assets Under Management					$	50,266,000			$	47,200,500			$	46,221,200			$	50,266,000			$	46,221,200
Committed Dollars Invested and Syndicated Capital					$	926,000			$	680,200			$	2,653,200			$	2,639,200			$	4,706,100
Uncalled Commitments					$	15,845,900			$	10,610,300			$	12,807,200			$	15,845,900			$	12,807,200
Other Information
Fee Related Earnings					$	90,704			$	69,772			$	98,242			$	233,832			$	300,578
Plus: depreciation and amortization						3,273				3,093				2,147				8,919				7,397
Fee Related EBITDA					$	93,977			$	72,865			$	100,389			$	242,751			$	307,975
Distributed Earnings					$	187,174			$	104,548			$	104,395			$	403,208			$	400,581
Plus: Net realized principal investment income						145,700				301,580				81,001				499,898				235,525
Total Distributable Earnings (c)					$	332,874			$	406,128			$	185,396			$	903,106			$	636,106
GAAP interest expense					$	17,868			$	16,884			$	17,742			$	52,757			$	52,365
Less: interest expense related to debt obligations
	from investment financing arrangements					8,502				7,461				7,233				24,036				20,562
Core Interest Expense (c)					$	9,366			$	9,423			$	10,509			$	28,721			$	31,803

(a)		Excludes a $17.4 million, $14.1 million and $6.8 million charge for non-cash equity based compensation during the quarters ended September 30, 2012, June 30, 2012, and September 30, 2011, respectively, associated with equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan. Excludes a $47.8 million and $11.2 million charge for non-cash equity based compensation during the nine months ended September 30, 2012 and 2011, respectively, associated with equity awards granted under the KKR & Co. L.P. 2010 Equity Incentive Plan.
(b)		As of September 30, 2012, there is no carried interest subject to management fee refunds, which may reduce carried interest in future periods.
(c)		See definitions for after-tax ENI, adjusted units, total distributable earnings, and core interest expense under “Notes to Reportable Segments.”

KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PRIVATE MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
					Quarter Ended												Nine Months Ended
					September 30, 2012				June 30, 2012				September 30, 2011				September 30, 2012				September 30, 2011
Fees
	Management and incentive fees:
		Management fees			$	105,035			$	107,170			$	106,748			$	319,117			$	323,684
		Incentive fees				-				-				-				-				-
			Management and incentive fees			105,035				107,170				106,748				319,117				323,684
	Monitoring and transaction fees:
		Monitoring fees				29,969				27,786				20,892				83,577				141,972
		Transaction fees				32,788				10,768				40,196				55,223				101,506
		Fee credits				(26,293	)			(15,642	)			(27,229	)			(59,641	)			(110,129	)
			Net monitoring and transaction fees			36,464				22,912				33,859				79,159				133,349
	Total fees					141,499				130,082				140,607				398,276				457,033
Expenses
	Compensation and benefits					48,905				45,991				47,390				139,382				139,570
	Occupancy and related charges					12,049				11,633				11,273				36,487				32,792
	Other operating expenses					35,885				36,230				40,768				103,790				115,076
	Total expenses					96,839				93,854				99,431				279,659				287,438
Fee Related Earnings						44,660				36,228				41,176				118,617				169,595
Investment income (loss)
	Gross carried interest					391,168				291,786				(360,282	)			1,137,459				170,096
	Less: allocation to KKR carry pool					(161,805	)			(116,118	)			148,749				(463,485	)			(69,106	)
	Less: management fee refunds					(61,499	)			(32,804	)			21,115				(135,011	)			(15,594	)
		Net carried interest				167,864				142,864				(190,418	)			538,963				85,396
	Other investment income (loss)					1,779				(3,990	)			(1,942	)			(559	)			(185	)
		Total investment income (loss)				169,643				138,874				(192,360	)			538,404				85,211
Income (Loss) before noncontrolling interests
	in Income of consolidated entities					214,303				175,102				(151,184	)			657,021				254,806
Income (Loss) attributable to
	noncontrolling interests					444				358				790				3,098				1,885
Economic Net Income (Loss)					$	213,859			$	174,744			$	(151,974	)		$	653,923			$	252,921
Assets Under Management					$	49,771,000			$	45,528,100			$	43,744,400			$	49,771,000			$	43,744,400
Fee Paying Assets Under Management					$	40,354,200			$	37,858,300			$	37,936,800			$	40,354,200			$	37,936,800
Committed Dollars Invested					$	623,000			$	606,300			$	1,654,900			$	1,805,500			$	2,884,900
Uncalled Commitments					$	14,594,700			$	9,304,500			$	11,243,600			$	14,594,700			$	11,243,600

KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
PUBLIC MARKETS SEGMENT (UNAUDITED)
(Amounts in thousands)
					Quarter Ended												Nine Months Ended
					September 30, 2012				June 30, 2012				September 30, 2011				September 30, 2012				September 30, 2011
Fees
	Management and incentive fees:
		Management fees			$	21,448			$	22,456			$	27,301			$	65,635			$	64,144
		Incentive fees				17,768				4,057				-				31,495				28,159
			Management and incentive fees			39,216				26,513				27,301				97,130				92,303
	Monitoring and transaction fees:
		Monitoring fees				-				-				-				-				-
		Transaction fees				8,780				1,319				3,760				12,521				7,845
		Fee credits				(5,414	)			(1,047	)			(1,564	)			(8,098	)			(3,867	)
			Net monitoring and transaction fees			3,366				272				2,196				4,423				3,978
	Total fees					42,582				26,785				29,497				101,553				96,281
Expenses
	Compensation and benefits					13,997				9,229				12,144				34,608				33,967
	Occupancy and related charges					1,343				1,366				1,097				4,127				2,870
	Other operating expenses					3,897				3,880				3,807				11,754				11,649
	Total expenses					19,237				14,475				17,048				50,489				48,486
Fee Related Earnings						23,345				12,310				12,449				51,064				47,795
Investment income (loss)
	Gross carried interest					19,568				(8,912	)			(6,105	)			25,515				(2,978	)
	Less: allocation to KKR carry pool					(7,828	)			3,565				2,442				(10,207	)			1,191
	Less: management fee refunds					-				-				-				-				-
		Net carried interest				11,740				(5,347	)			(3,663	)			15,308				(1,787	)
	Other investment income (loss)					25				(12	)			288				(10	)			598
		Total investment income (loss)				11,765				(5,359	)			(3,375	)			15,298				(1,189	)
Income (Loss) before noncontrolling interests
	in Income of consolidated entities					35,110				6,951				9,074				66,362				46,606
Income (Loss) attributable to
	noncontrolling interests					233				123				164				787				480
Economic Net Income (Loss)					$	34,877			$	6,828			$	8,910			$	65,575			$	46,126
Assets Under Management					$	16,507,700			$	15,960,800			$	14,976,400			$	16,507,700			$	14,976,400
Fee Paying Assets Under Management					$	9,911,800			$	9,342,200			$	8,284,400			$	9,911,800			$	8,284,400
Committed Dollars Invested					$	278,300			$	73,900			$	152,300			$	558,400			$	546,500
Uncalled Commitments					$	1,251,200			$	1,305,800			$	1,563,600			$	1,251,200			$	1,563,600

KKR
STATEMENTS OF OPERATIONS AND OTHER SELECTED FINANCIAL INFORMATION
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT (UNAUDITED)
(Amounts in thousands)
					Quarter Ended										Nine Months Ended
					September 30, 2012			June 30, 2012			September 30, 2011				September 30, 2012			September 30, 2011
Fees
	Management and incentive fees:
		Management fees			$	-		$	-		$	-			$	-		$	-
		Incentive fees				-			-			-				-			-
			Management and incentive fees			-			-			-				-			-
	Monitoring and transaction fees:
		Monitoring fees				-			-			-				-			-
		Transaction fees				33,696			31,619			54,675				95,524			111,441
		Fee credits				-			-			-				-			-
			Net monitoring and transaction fees			33,696			31,619			54,675				95,524			111,441
	Total fees					33,696			31,619			54,675				95,524			111,441
Expenses
	Compensation and benefits					8,438			7,526			7,129				22,820			19,376
	Occupancy and related charges					213			240			305				691			994
	Other operating expenses					2,346			2,619			2,624				7,862			7,883
	Total expenses					10,997			10,385			10,058				31,373			28,253
Fee Related Earnings						22,699			21,234			44,617				64,151			83,188
Investment income (loss)
	Gross carried interest					-			-			-				-			-
	Less: allocation to KKR carry pool					-			-			-				-			-
	Less: management fee refunds					-			-			-				-			-
		Net carried interest				-			-			-				-			-
	Other investment income (loss)					239,072			344,105			(492,758	)			1,001,455			85,306
		Total investment income (loss)				239,072			344,105			(492,758	)			1,001,455			85,306
Income (Loss) before noncontrolling interests
	in Income of consolidated entities					261,771			365,339			(448,141	)			1,065,606			168,494
Income (Loss) attributable to
	noncontrolling interests					633			796			886				1,913			2,086
Economic Net Income (Loss)					$	261,138		$	364,543		$	(449,027	)		$	1,063,693		$	166,408
Syndicated Capital					$	24,700		$	-		$	846,000			$	275,300		$	1,274,700

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

KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Quarter Ended June 30, 2012
(Amounts in thousands)
													Capital Markets			Total
					Private Markets				Public Markets				and Principal			Reportable
					Segment				Segment				Activities Segment			Segments
Fees
	Management and incentive fees:
		Management fees			$	107,170			$	22,456			$	-		$	129,626
		Incentive fees				-				4,057				-			4,057
			Management and incentive fees			107,170				26,513				-			133,683
	Monitoring and transaction fees:
		Monitoring fees				27,786				-				-			27,786
		Transaction fees				10,768				1,319				31,619			43,706
		Fee credits				(15,642	)			(1,047	)			-			(16,689	)
			Net monitoring and transaction fees			22,912				272				31,619			54,803
	Total fees					130,082				26,785				31,619			188,486
Expenses
	Compensation and benefits					45,991				9,229				7,526			62,746
	Occupancy and related charges					11,633				1,366				240			13,239
	Other operating expenses					36,230				3,880				2,619			42,729
	Total expenses					93,854				14,475				10,385			118,714
Fee Related Earnings						36,228				12,310				21,234			69,772
Investment income (loss)
	Gross carried interest					291,786				(8,912	)			-			282,874
	Less: allocation to KKR carry pool					(116,118	)			3,565				-			(112,553	)
	Less: management fee refunds					(32,804	)			-				-			(32,804	)
		Net carried interest				142,864				(5,347	)			-			137,517
	Other investment income (loss)					(3,990	)			(12	)			344,105			340,103
		Total investment income (loss)				138,874				(5,359	)			344,105			477,620
Income (Loss) before noncontrolling interests
	in Income of consolidated entities					175,102				6,951				365,339			547,392
Income (Loss) attributable to
	noncontrolling interests					358				123				796			1,277
Economic Net Income (Loss)					$	174,744			$	6,828			$	364,543		$	546,115

KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Quarter Ended September 30, 2011
(Amounts in thousands)
													Capital Markets				Total
					Private Markets				Public Markets				and Principal				Reportable
					Segment				Segment				Activities Segment				Segments
Fees
	Management and incentive fees:
		Management fees			$	106,748			$	27,301			$	-			$	134,049
		Incentive fees				-				-				-				-
			Management and incentive fees			106,748				27,301				-				134,049
	Monitoring and transaction fees:
		Monitoring fees				20,892				-				-				20,892
		Transaction fees				40,196				3,760				54,675				98,631
		Fee credits				(27,229	)			(1,564	)			-				(28,793	)
			Net monitoring and transaction fees			33,859				2,196				54,675				90,730
	Total fees					140,607				29,497				54,675				224,779
Expenses
	Compensation and benefits					47,390				12,144				7,129				66,663
	Occupancy and related charges					11,273				1,097				305				12,675
	Other operating expenses					40,768				3,807				2,624				47,199
	Total expenses					99,431				17,048				10,058				126,537
Fee Related Earnings						41,176				12,449				44,617				98,242
Investment income (loss)
	Gross carried interest					(360,282	)			(6,105	)			-				(366,387	)
	Less: allocation to KKR carry pool					148,749				2,442				-				151,191
	Less: management fee refunds					21,115				-				-				21,115
		Net carried interest				(190,418	)			(3,663	)			-				(194,081	)
	Other investment income (loss)					(1,942	)			288				(492,758	)			(494,412	)
		Total investment income (loss)				(192,360	)			(3,375	)			(492,758	)			(688,493	)
Income (Loss) before noncontrolling interests
	in Income of consolidated entities					(151,184	)			9,074				(448,141	)			(590,251	)
Income (Loss) attributable to
	noncontrolling interests					790				164				886				1,840
Economic Net Income (Loss)					$	(151,974	)		$	8,910			$	(449,027	)		$	(592,091	)

KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Nine Months Ended September 30, 2012
(Amounts in thousands)
													Capital Markets			Total
					Private Markets				Public Markets				and Principal			Reportable
					Segment				Segment				Activities Segment			Segments
Fees
	Management and incentive fees:
		Management fees			$	319,117			$	65,635			$	-		$	384,752
		Incentive fees				-				31,495				-			31,495
			Management and incentive fees			319,117				97,130				-			416,247
	Monitoring and transaction fees:
		Monitoring fees				83,577				-				-			83,577
		Transaction fees				55,223				12,521				95,524			163,268
		Fee credits				(59,641	)			(8,098	)			-			(67,739	)
			Net monitoring and transaction fees			79,159				4,423				95,524			179,106
	Total fees					398,276				101,553				95,524			595,353
Expenses
	Compensation and benefits					139,382				34,608				22,820			196,810
	Occupancy and related charges					36,487				4,127				691			41,305
	Other operating expenses					103,790				11,754				7,862			123,406
	Total expenses					279,659				50,489				31,373			361,521
Fee Related Earnings						118,617				51,064				64,151			233,832
Investment income (loss)
	Gross carried interest					1,137,459				25,515				-			1,162,974
	Less: allocation to KKR carry pool					(463,485	)			(10,207	)			-			(473,692	)
	Less: management fee refunds					(135,011	)			-				-			(135,011	)
		Net carried interest				538,963				15,308				-			554,271
	Other investment income (loss)					(559	)			(10	)			1,001,455			1,000,886
		Total investment income (loss)				538,404				15,298				1,001,455			1,555,157
Income (Loss) before noncontrolling interests
	in Income of consolidated entities					657,021				66,362				1,065,606			1,788,989
Income (Loss) attributable to
	noncontrolling interests					3,098				787				1,913			5,798
Economic Net Income (Loss)					$	653,923			$	65,575			$	1,063,693		$	1,783,191

KKR
STATEMENTS OF OPERATIONS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
Nine Months Ended September 30, 2011
(Amounts in thousands)
													Capital Markets			Total
					Private Markets				Public Markets				and Principal			Reportable
					Segment				Segment				Activities Segment			Segments
Fees
	Management and incentive fees:
		Management fees			$	323,684			$	64,144			$	-		$	387,828
		Incentive fees				-				28,159				-			28,159
			Management and incentive fees			323,684				92,303				-			415,987
	Monitoring and transaction fees:
		Monitoring fees				141,972				-				-			141,972
		Transaction fees				101,506				7,845				111,441			220,792
		Fee credits				(110,129	)			(3,867	)			-			(113,996	)
			Net monitoring and transaction fees			133,349				3,978				111,441			248,768
	Total fees					457,033				96,281				111,441			664,755
Expenses
	Compensation and benefits					139,570				33,967				19,376			192,913
	Occupancy and related charges					32,792				2,870				994			36,656
	Other operating expenses					115,076				11,649				7,883			134,608
	Total expenses					287,438				48,486				28,253			364,177
Fee Related Earnings						169,595				47,795				83,188			300,578
Investment income (loss)
	Gross carried interest					170,096				(2,978	)			-			167,118
	Less: allocation to KKR carry pool					(69,106	)			1,191				-			(67,915	)
	Less: management fee refunds					(15,594	)			-				-			(15,594	)
		Net carried interest				85,396				(1,787	)			-			83,609
	Other investment income (loss)					(185	)			598				85,306			85,719
		Total investment income (loss)				85,211				(1,189	)			85,306			169,328
Income (Loss) before noncontrolling interests
	in Income of consolidated entities					254,806				46,606				168,494			469,906
Income (Loss) attributable to
	noncontrolling interests					1,885				480				2,086			4,451
Economic Net Income (Loss)					$	252,921			$	46,126			$	166,408		$	465,455

KKR
BALANCE SHEETS
TOTAL REPORTABLE SEGMENTS (UNAUDITED)
(Amounts in thousands, except per unit amounts)
As of September 30, 2012
									Capital
									Markets and
		Private				Public			Principal			Total
		Markets				Markets			Activities			Reportable
		Segment				Segment			Segment			Segments
Cash and short-term investments		$	309,703			$	23,188		$	1,105,414		$	1,438,305
Investments			-				-			5,077,688	(a)		5,077,688
Unrealized carry			716,512				16,755			-			733,267
Other assets			202,256				72,721			63,021			337,998
Total assets		$	1,228,471			$	112,664		$	6,246,123		$	7,587,258
Debt obligations		$	-			$	-		$	500,000		$	500,000
Other liabilities			122,520				29,242			20,146			171,908
Total liabilities			122,520				29,242			520,146			671,908
Noncontrolling interests			1,340				602			18,627			20,569
Book value		$	1,104,611			$	82,820		$	5,707,350		$	6,894,781
Book value per adjusted unit		$	1.57			$	0.12		$	8.13		$	9.82
As of December 31, 2011
									Capital
									Markets and
		Private				Public			Principal			Total
		Markets				Markets			Activities			Reportable
		Segment				Segment			Segment			Segments
Cash and short-term investments		$	296,717			$	8,087		$	684,637		$	989,441
Investments			-				-			4,743,406			4,743,406
Unrealized carry			419,523				1,447			-			420,970
Other assets			139,432				58,360			63,799			261,591
Total assets		$	855,672			$	67,894		$	5,491,842		$	6,415,408
Debt obligations		$	-			$	-		$	500,000		$	500,000
Other liabilities			128,590				8,153			49,329			186,072
Total liabilities			128,590				8,153			549,329			686,072
Noncontrolling interests			(1,358	)			729			19,381			18,752
Book value		$	728,440			$	59,012		$	4,923,132		$	5,710,584
Book value per adjusted unit		$	1.06			$	0.09		$	7.14		$	8.29

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

KKR
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT SCHEDULE OF INVESTMENTS
(Amounts in thousands, except percentage amounts)
		As of September 30, 2012
								Fair Value as
					Fair			a Percentage of
Investment		Cost			Value			Total Investments
Co-Investments in Portfolio Companies of
Private Equity Investment Vehicles:
HCA Inc.			171,227			502,908		9.9	%
Dollar General Corporation			78,220			445,973		8.8	%
Alliance Boots GmbH			195,640			401,769		7.9	%
The Nielsen Company B.V.			134,603			268,254		5.3	%
NXP B.V.			207,963			197,067		3.9	%
Samson Resources Corporation			237,514			190,012		3.7	%
US Foods			100,000			140,000		2.8	%
KION Group GmbH			128,058			133,854		2.6	%
Biomet, Inc.			151,444			121,155		2.4	%
ProSiebenSat.1 Media AG			226,913			103,626		2.0	%
First Data Corporation			135,258			94,681		1.9	%
Energy Future Holdings Corp.			200,000			10,000		0.2	%
PagesJaunes Groupe S.A.			235,201			-		0.0	%
			2,202,041			2,609,299		51.4	%
Private Equity Investment Vehicles
KKR 2006 Fund L.P.			768,248			835,730		16.5	%
KKR European Fund III L.P.			187,339			211,126		4.2	%
KKR Millennium Fund L.P.			141,384			152,528		3.0	%
KKR Asian Fund L.P.			101,759			139,888		2.8	%
KKR European Fund II L.P.			85,140			78,651		1.5	%
KKR European Fund L.P.			60,922			38,430		0.8	%
KKR E2 Investors, L.P.			12,187			21,415		0.3	%
KKR China Growth Fund L.P.			3,611			4,511		0.1	%
Co-Investment Vehicles			528			574		0.0	%
			1,361,118			1,482,853		29.2	%
Private Equity Total			3,563,159			4,092,152		80.6	%
Energy & Infrastructure Investment Vehicles
Royalties and Drilling			87,734			87,568		1.7	%
Infrastructure Fund			18,466			18,968		0.4	%
Co-Investment Vehicles			10,477			12,159		0.2	%
Natural Resources			9,802			7,560		0.1	%
Energy & Infrastructure Total			126,479			126,255		2.4	%
Private Markets Total			3,689,638			4,218,407		83.0	%
Public Markets Investment Vehicles
Liquid Credit SMAs/Funds			170,300			192,926		3.8	%
Long/Short Equities Funds			100,000			100,268		2.0	%
Credit Relative Value Fund			50,000			51,275		1.0	%
Direct Lending			37,049			39,567		0.8	%
Special Situations Vehicles			17,498			18,875		0.4	%
Mezzanine Fund			14,834			16,708		0.3	%
Public Markets Total			389,681			419,619		8.3	%
Other			445,051			439,662		8.7	%
Total Investments		$	4,524,370		$	5,077,688		100.0	%

KKR
CAPITAL MARKETS AND PRINCIPAL ACTIVITIES SEGMENT SCHEDULE OF INVESTMENTS, CONTINUED
(Amounts in thousands, except percentage amounts)
		As of September 30, 2012
								Fair Value as
								a Percentage
					Fair			of Total
Investment		Cost			Value			Investments
Significant Aggregate Investments: (a)
HCA Inc.		$	217,011		$	619,641		12.2	%
Dollar General Corporation			108,539			590,330		11.6	%
Alliance Boots GmbH			228,769			463,417		9.1	%
The Nielsen Company B.V.			148,337			293,051		5.8	%
			702,656			1,966,439		38.7	%
Other investments			3,821,714			3,111,249		61.3	%
Total Investments		$	4,524,370		$	5,077,688		100.0	%
Investments by Geography:
North America		$	2,879,868		$	3,576,476		70.5	%
Europe			1,413,961			1,255,870		24.7	%
Asia-Pacific			230,541			245,342		4.8	%
Total Investments		$	4,524,370		$	5,077,688		100.0	%
Investments by Industry:
Healthcare			701,501			1,293,013		25.5	%
Financial Services			1,206,380			1,150,483		22.7	%
Retail			363,406			865,917		17.0	%
Media/Telecom			753,184			533,645		10.5	%
Technology			385,564			396,436		7.8	%
Energy			699,463			366,875		7.2	%
Industrial			255,732			294,278		5.8	%
Consumer Products			91,635			97,255		1.9	%
Other			67,505			79,786		1.6	%
Total Investments		$	4,524,370		$	5,077,688		100.0	%

(a)		The significant aggregate investments include investments in portfolio companies with individual fair values of 5% or more of the Capital Markets and Principal Activities segment investments balance as of September 30, 2012. The fair value figures include the co-investment and the limited partner and/or general partner interests in the underlying portfolio company.

KKR
ASSETS UNDER MANAGEMENT
(Amounts in thousands)
				Private				Public				Total
				Markets				Markets				Reportable
				Segment				Segment				Segments
Quarter Ended September 30, 2012
	June 30, 2012			$	45,528,100			$	15,960,800			$	61,488,900
		New Capital Raised			5,969,100				435,200				6,404,300
		Distributions			(2,639,800	)			(205,700	)			(2,845,500	)
		Net Changes in Fee Base of Certain Funds (a)			(1,327,900	)			-				(1,327,900	)
		Foreign Exchange			61,800				-				61,800
		Change in Value			2,179,700				317,400				2,497,100
	September 30, 2012			$	49,771,000			$	16,507,700			$	66,278,700
				Private				Public				Total
				Markets				Markets				Reportable
				Segment				Segment				Segments
Nine Months Ended September 30, 2012
	December 31, 2011			$	43,627,900			$	15,380,700			$	59,008,600
		New Capital Raised			6,426,000				1,425,600				7,851,600
		Distributions			(5,926,800	)			(1,057,600	)	(b)		(6,984,400	)
		Net Changes in Fee Base of Certain Funds (a)			(1,327,900	)			-				(1,327,900	)
		Foreign Exchange			(1,400	)			-				(1,400	)
		Change in Value			6,973,200				759,000				7,732,200
	September 30, 2012			$	49,771,000			$	16,507,700			$	66,278,700
				Private				Public				Total
				Markets				Markets				Reportable
				Segment				Segment				Segments
Trailing Twelve Months Ended September 30, 2012
	September 30, 2011			$	43,744,400			$	14,976,400			$	58,720,800
		New Capital Raised			7,784,100				1,849,200				9,633,300
		Distributions			(7,970,600	)			(1,306,400	)	(c)		(9,277,000	)
		Net Changes in Fee Base of Certain Funds (a)			(1,327,900	)			-				(1,327,900	)
		Foreign Exchange			(71,600	)			-				(71,600	)
		Change in Value			7,612,600				988,500				8,601,100
	September 30, 2012			$	49,771,000			$	16,507,700			$	66,278,700

(a)		Represents the impact of including certain funds entering the post-investment period including KKR 2006 Fund L.P.
(b)		Includes $250.0 million of redemptions.
(c)		Includes $450.0 million of redemptions.

KKR
FEE PAYING ASSETS UNDER MANAGEMENT
(Amounts in thousands)
				Private				Public				Total
				Markets				Markets				Reportable
				Segment				Segment				Segments
Quarter Ended September 30, 2012
	June 30, 2012			$	37,858,300			$	9,342,200			$	47,200,500
		New Capital Raised			5,725,100				434,100				6,159,200
		Distributions			(255,100	)			(91,400	)			(346,500	)
		Net Changes in Fee Base of Certain Funds (a)			(3,205,400	)			-				(3,205,400	)
		Foreign Exchange			210,100				-				210,100
		Change in Value			21,200				226,900				248,100
	September 30, 2012			$	40,354,200			$	9,911,800			$	50,266,000
				Private				Public				Total
				Markets				Markets				Reportable
				Segment				Segment				Segments
Nine Months Ended September 30, 2012
	December 31, 2011			$	37,869,700			$	8,527,600			$	46,397,300
		New Capital Raised			6,179,700				1,440,100				7,619,800
		Distributions			(538,300	)			(594,200	)	(b)		(1,132,500	)
		Net Changes in Fee Base of Certain Funds (a)			(3,205,400	)			-				(3,205,400	)
		Foreign Exchange			16,000				-				16,000
		Change in Value			32,500				538,300				570,800
	September 30, 2012			$	40,354,200			$	9,911,800			$	50,266,000
				Private				Public				Total
				Markets				Markets				Reportable
				Segment				Segment				Segments
Trailing Twelve Months Ended September 30, 2012
	September 30, 2011			$	37,936,800			$	8,284,400			$	46,221,200
		New Capital Raised			7,457,400				1,762,400				9,219,800
		Distributions			(1,681,200	)			(838,000	)	(c)		(2,519,200	)
		Net Changes in Fee Base of Certain Funds (a)			(3,205,400	)			-				(3,205,400	)
		Foreign Exchange			(197,000	)			-				(197,000	)
		Change in Value			43,600				703,000				746,600
	September 30, 2012			$	40,354,200			$	9,911,800			$	50,266,000

(a)		Represents the impact of including certain funds entering the post-investment period including KKR 2006 Fund L.P.
(b)		Includes $250.0 million of redemptions.
(c)		Includes $450.0 million of redemptions.

KKR
INVESTMENT VEHICLE SUMMARY* (UNAUDITED)
As of September 30, 2012
(Amounts in millions, except percentages)
		Investment Period				Amount
												Percentage
												Committed by
		Commencement							Uncalled			General									Remaining			Remaining
		Date		End Date		Commitment			Commitments			Partner			Invested			Realized			Cost			Fair Value
Private Markets
Private Equity Funds
North America Fund XI		9/2012		9/2018		$	5,941.5		$	5,941.5		4.1	%		$	-		$	-		$	-		$	-
China Growth Fund		11/2010		11/2016			1,010.0			674.9		1.0	%			335.1			-			335.1			404.5
E2 Investors (Annex Fund)		8/2009		11/2012			535.8			381.6		4.2	%			154.2			-			154.2			280.2
European Fund III		3/2008		3/2014			5,901.5			2,926.9		4.6	%			2,974.6			-			2,974.6			3,298.9
Asian Fund		7/2007		7/2013			3,983.2			860.5		2.5	%			3,122.7			732.0			2,612.9			4,551.2
2006 Fund		9/2006		9/2012			17,642.2			1,315.2		2.1	%			16,327.0			7,539.4			11,887.2			15,798.2
European Fund II		11/2005		10/2008			5,750.8			-		2.1	%			5,750.8			2,140.0			4,223.2			4,508.4
Millennium Fund		12/2002		12/2008			6,000.0			-		2.5	%			6,000.0			7,391.9			3,239.0			4,897.6
European Fund		12/1999		12/2005			3,085.4			-		3.2	%			3,085.4			8,325.6			95.2			466.0
Total Private Equity Funds							49,850.4			12,100.6						37,749.8			26,128.9			25,521.4			34,205.0
Co-Investment Vehicles		Various		Various			2,133.5			220.5		Various				1,913.0			1,574.7			1,431.5			2,268.3
Total Private Equity							51,983.9			12,321.1						39,662.8			27,703.6			26,952.9			36,473.3
Energy & Infrastructure
Natural Resources		Various		Various			1,222.9			802.1		Various				420.8			26.3			412.1			322.7
Infrastructure		Various		Various			1,041.2			791.7		4.8	%			249.5			1.7			249.5			257.1
Co-Investment Vehicles		Various		Various			1,862.4			679.8		Various				1,182.6			131.2			1,182.6			1,367.7
Energy & Infrastructure Total							4,126.5			2,273.6						1,852.9			159.2			1,844.2			1,947.5
Private Markets Total							56,110.4			14,594.7						41,515.7			27,862.8			28,797.1			38,420.8
Public Markets
Special Situations Vehicles		Various		Various			1,858.1			439.6		Various				1,418.5			152.7			1,418.5			1,573.7
Mezzanine Fund		3/2010		8/2015			987.0			653.6		4.6	%			333.4			23.5			333.4			368.6
Lending Partners		12/2011		12/2014			286.8			158.0		29.0	%			128.8			-			128.8			137.6
Public Markets Total							3,131.9			1,251.2						1,880.7			176.2			1,880.7			2,079.9
Grand Total						$	59,242.3		$	15,845.9					$	43,396.4		$	28,039.0		$	30,677.8		$	40,500.7

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

KKR
DISTRIBUTION CALCULATION
(Amounts in thousands, except unit and per unit amounts)
		Quarter Ended												Nine Months Ended
		September 30,				June 30,				September 30,				September 30,				September 30,
			2012				2012				2011				2012				2011
FRE (a)		$	90,704			$	69,772			$	98,242			$	233,832			$	300,578
Realized cash carry			100,145				39,360				12,937				184,432				118,889
Net realized principal investment income			145,700				301,580				81,001				499,898				235,525
Less: local income taxes			(2,365	)			(3,307	)			(4,944	)			(9,258	)			(14,435	)
Less: noncontrolling interests			(1,310	)			(1,277	)			(1,840	)			(5,798	)			(4,451	)
Total Distributable Earnings			332,874				406,128				185,396				903,106				636,106
Less: net realized principal investment income			(145,700	)			(301,580	)			(81,001	)			(499,898	)			(235,525	)
Distributed Earnings			187,174				104,548				104,395				403,208				400,581
Distributed Earnings to KKR & Co. L.P. (b)			66,015				36,401				34,075				140,216				128,817
Less: estimated current corporate income taxes			(6,890	)			(4,268	)			(11,035	)			(15,180	)			(34,124	)
Distributed Earnings to KKR & Co. L.P., After Taxes		$	59,125			$	32,133			$	23,040			$	125,036			$	94,693
Distribution per KKR & Co. L.P. common unit			0.24				0.13				0.10				0.52				0.42
Outstanding KKR & Co. L.P. common units			241,407,805				238,155,157				222,944,668

(a)		See Exhibit A for a reconciliation of such measure to financial results prepared in accordance with GAAP.
(b)		Represents the amount of distributed earnings allocable to KKR & Co. L.P. based on its ownership in the KKR business as of September 30, 2012.

DISTRIBUTION POLICY

KKR intends to make quarterly cash distributions in amounts that in the aggregate are expected to constitute substantially all of the cash earnings of its investment management business each year in excess of amounts determined by KKR to be necessary or appropriate to provide for the conduct of its business, to make appropriate investments in its business and its investment funds and to comply with applicable law and any of its debt instruments or other agreements. KKR does not intend to distribute net realized principal investment income, other than certain additional distributions that KKR may determine to make. These additional distributions, if any, are intended to cover certain tax liabilities, as calculated by KKR. When KKR & Co. L.P. receives distributions from the KKR Group Partnerships (the holding companies of the KKR business), KKR Holdings receives its pro rata share of such distributions from the KKR Group Partnerships. For purposes of KKR’s distribution policy, its distributions are expected to consist of (i) FRE, (ii) carry distributions received from KKR’s investment funds which have not been allocated as part of its carry pool, and (iii) any additional distributions for certain taxes as described above. This amount is expected to be reduced by (i) corporate and applicable local taxes, if any, (ii) non-controlling interests, and (iii) amounts determined by KKR to be necessary or appropriate for the conduct of its business and other matters as discussed above.

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