SEGMENT REPORTING

KKR operates through four reportable business segments. These segments, which are differentiated primarily by their business objectives and investment strategies are presented below. These financial results represent the combined financial results of the KKR Group Partnerships on a segment basis.

Private Markets

Through KKR’s Private Markets segment, KKR manages and sponsors a group of private equity funds and co-investment vehicles that invest capital for long-term appreciation, either through controlling ownership of a company or strategic minority positions. KKR also manages and sponsors a group of funds and co-investment vehicles that invest capital in real assets, such as infrastructure, energy and real estate. These funds, vehicles and accounts are managed by Kohlberg Kravis Roberts & Co. L.P., an SEC registered investment adviser.

Public Markets

KKR operates and reports its combined credit and hedge funds businesses through the Public Markets segment. KKR’s credit business advises funds, CLOs, separately managed accounts, and investment companies registered under the Investment Company Act, including a business development company or BDC, undertakings for collective investment in transferable securities or UCITS, and alternative investment funds or AIFs, which invest capital in (i) leveraged credit strategies, such as leveraged loans, high yield bonds and opportunistic credit, and (ii) alternative credit strategies such as mezzanine investments, direct lending investments, special situations investments, and long/short credit investment strategies. The funds, accounts, registered investment companies and CLOs in KKR's leveraged credit and alternative credit strategies are managed by KKR Credit Advisors (US) LLC, which is an SEC-registered investment adviser, KKR Credit Advisors (Ireland), regulated by the Central Bank of Ireland, and KKR Credit Advisors (UK) LLP, regulated by the United Kingdom Financial Conduct Authority or FCA. KKR’s Public Markets segment also includes its hedge funds business that offers a variety of investment strategies, including customized hedge fund portfolios and hedge fund-of-fund solutions. The funds and accounts in our hedge fund business are managed by Prisma Capital Partners LP (KKR Prisma or Prisma), an SEC‑registered investment adviser. Through our Public Markets segment, we also have developed strategic partnerships by acquiring minority stakes in other hedge fund managers.

Capital Markets

The Capital Markets segment is comprised primarily of KKR’s global capital markets business. KKR’s capital markets business supports the firm, portfolio companies, and third-party clients by developing and implementing both traditional and non-traditional capital solutions for investments or companies seeking financing. These services include arranging debt and equity financing for transactions, placing and underwriting securities offerings and providing other types of capital markets services. When KKR underwrites an offering of securities or a loan on a firm commitment basis, KKR commits to buy and sell an issue of securities or indebtedness and generate revenue by purchasing the securities or indebtedness at a discount or for a fee. When KKR acts in an agency capacity, KKR generates revenue for arranging financing or placing securities or debt with capital markets investors. We may also provide issuers with capital markets advice on security selection, access to markets, marketing considerations, securities pricing, and other aspects of capital markets transactions in exchange for a fee. KKR Capital Markets LLC is an SEC-registered broker-dealer and a FINRA member, and KKR is also registered or authorized to carry out certain broker-dealer activities in various countries in North America, Europe, Asia-Pacific and the Middle East. KKR’s third party capital markets activities are generally carried out through Merchant Capital Solutions LLC, a joint venture with one other unaffiliated partner, and non-bank financial companies, or NBFCs, in India.

Principal Activities

Through KKR's Principal Activities segment, we manage the firm’s assets and deploy capital to support and grow our businesses.

We use KKR's Principal Activities assets to support KKR's investment management and capital markets businesses. Typically, the funds in our Private Markets and Public Markets businesses contractually require KKR, as general partner of the funds, to make sizable capital commitments from time to time. KKR also deploys Principal Activities assets in order to help establish a track record for fundraising purposes in new strategies. KKR may also use its own capital to seed investments for new funds, to bridge capital selectively for its funds’ investments or finance strategic acquisitions and partnerships, although the financial results of an acquired businesses or strategic partnership may be reported in our Public Markets segment.

Principal Activities assets also provide the required capital to fund the various commitments of the Capital Markets business when underwriting or syndicating securities, or when providing term loan commitments for transactions involving portfolio companies and for third parties. Principal Activities assets also may be utilized to satisfy regulatory requirements for the Capital Markets business and risk retention requirements for CLOs.

KKR earns the majority of its fees from subsidiaries located in the United States.

Key Performance Measure - Economic Net Income (“ENI”)

ENI is 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 and as such represents the business in total. In addition, KKR’s reportable segments are presented without giving effect to the consolidation of the funds that KKR manages.

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. ENI is comprised of total segment revenues; less total segment expenses and 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 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 non-cash equity-based charges and other non-cash compensation charges borne by KKR Holdings or incurred under the Equity Incentive Plan and other securities that are exchangeable for common units of KKR & Co. L.P.; (v) the exclusion of certain non-recurring items; (vi) the exclusion of investment income (loss) relating to noncontrolling interests; and (vii) the exclusion of income taxes.

Modification of Segment Information

KKR’s management has reevaluated the manner in which it makes operational and resource deployment decisions and assesses the overall performance of each of KKR’s operating segments. As a result, KKR has modified the presentation of its segment financial information. In addition, since becoming a public company, KKR's principal assets have grown in significance and are a meaningful contributor to its financial results.

Certain of the more significant changes between KKR’s current segment presentation and its previously reported segment presentation are described in the following commentary.

Inclusion of a Fourth Segment

All income (loss) on investments is attributed to a new fourth segment called Principal Activities. Previously, income on investments held directly by KKR was reported in the Private Markets segment, Public Markets segment or Capital Markets segment based on the character of the income generated. For example, income from private equity investments was previously included in the Private Markets segment. However, the financial results of acquired businesses and strategic partnerships have been reported in our other segments.

Expense Allocations

KKR has changed the manner in which expenses are allocated among its operating segments. Specifically, as described below, (i) a portion of expenses, except for broken deal expenses, previously reflected in the Private Markets, Public Markets or Capital Markets segments are now reflected in the Principal Activities segment and (ii) corporate expenses are allocated across all segments.

Expenses Allocated to Principal Activities

A portion of the cash compensation and benefits, occupancy and related charges and other operating expenses previously included in the Private Markets, Public Markets and Capital Markets segments is now allocated to the Principal Activities segment. The Principal Activities segment incurs its own direct costs, and an allocation from the other segments is also made to reflect the estimated amount of costs that are necessary to operate the Principal Activities segment, which are incremental to those costs incurred directly by the Principal Activities segment. The total amount of expenses (other than its direct costs) that is allocated to Principal Activities is based on the proportion of revenue earned by Principal Activities, relative to other operating segments, over the preceding four annual periods. This allocation percentage is updated annually or more frequently if there are material changes to KKR's business.

Once the total amount of expense to be allocated to the Principal Activities segment is estimated for each reporting period, the amount of this expense will be allocated from the Private Markets, Public Markets and Capital Markets segments based on the proportion of headcount in each of these three segments.

Allocations of Corporate Overhead

Corporate expenses are allocated to each of the Private Markets, Public Markets, Capital Markets and Principal Activities segments based on the proportion of revenues earned by each segment over the preceding four calendar years. In KKR's previously reported segment presentation, all corporate expenses were allocated to the Private Markets segment.

In connection with these modifications, segment information for the years ended December 31, 2014 and 2013 has been presented in conformity with KKR’s current segment presentation. Consequently, this information will not be consistent with historical segment financial results previously reported. While the modified segment presentation impacted the amount of economic net income reported by each operating segment, it had no impact on KKR’s economic net income on a total reportable segment basis.

The following tables present the financial data for KKR’s reportable segments:



	As of and for the Year Ended December 31, 2015
	Private Markets			Public Markets			Capital Markets		Principal Activities			Total Reportable Segments
Segment Revenues
Management, Monitoring and Transaction Fees, Net
Management Fees	$	465,575		$	266,458		$	—	$	—		$	732,033
Monitoring Fees	264,643			—			—		—			264,643
Transaction Fees	144,652			28,872			191,470		—			364,994
Fee Credits (1)	(195,025		)	(24,595		)	—		—			(219,620		)
Total Management, Monitoring and Transaction Fees, Net	679,845			270,735			191,470		—			1,142,050

Performance Income
Realized Incentive Fees	—			19,647			—		—			19,647
Realized Carried Interest	1,018,201			8,953			—		—			1,027,154
Unrealized Carried Interest	182,628			(19,083		)	—		—			163,545
Total Performance Income	1,200,829			9,517			—		—			1,210,346

Investment Income (Loss)
Net Realized Gains (Losses)	—			—			—		337,023			337,023
Net Unrealized Gains (Losses)	—			—			—		(391,962		)	(391,962		)
Total Realized and Unrealized	—			—			—		(54,939		)	(54,939		)
Interest Income and Dividends	—			—			—		411,536			411,536
Interest Expense	—			—			—		(203,085		)	(203,085		)
Net Interest and Dividends	—			—			—		208,451			208,451
Total Investment Income (Loss)	—			—			—		153,512			153,512

Total Segment Revenues	1,880,674			280,252			191,470		153,512			2,505,908

Segment Expenses
Compensation and Benefits
Cash Compensation and Benefits	193,995			73,863			34,562		107,572			409,992
Realized Performance Income Compensation	407,280			11,438			—		—			418,718
Unrealized Performance Income Compensation	74,560			(7,633		)	—		—			66,927
Total Compensation and Benefits	675,835			77,668			34,562		107,572			895,637
Occupancy and Related Charges	33,640			9,808			2,641		16,568			62,657
Other Operating Expenses	127,836			40,591			14,618		50,573			233,618
Total Segment Expenses	837,311			128,067			51,821		174,713			1,191,912

Income (Loss) attributable to noncontrolling interests	1,645			1,259			13,103		—			16,007

Economic Net Income (Loss)	$	1,041,718		$	150,926		$	126,546	$	(21,201	)	$	1,297,989

Total Assets	$	1,831,716		$	1,232,404		$	521,927	$	9,843,251		$	13,429,298

(1)

KKR’s agreements with the fund investors of certain of its investment funds require KKR to share with these fund investors an agreed upon percentage of certain fees, including monitoring and transaction fees received from portfolio companies (“Fee Credits”). Fund investors receive Fee Credits only with respect to monitoring and transaction fees that are allocable to the fund’s investment in the portfolio company and not, for example, any fees allocable to capital invested through co-investment vehicles. Fee Credits are calculated after deducting certain fund-related expenses and generally amount to 80% or 100% of allocable monitoring and transaction fees after fund-related expenses are recovered, although the actual percentage may vary from fund to fund as well as among different classes of investors within a fund.



	As of and for the Year Ended December 31, 2014
	Private Markets			Public Markets			Capital Markets		Principal Activities			Total Reportable Segments
Segment Revenues
Management, Monitoring and Transaction Fees, Net
Management Fees	$	453,210		$	272,833		$	—	—			$	726,043
Monitoring Fees	135,160			—			—		—			135,160
Transaction Fees	214,612			27,145			217,920		—			459,677
Fee Credits (1)	(198,680		)	(23,357		)	—		—			(222,037		)
Total Management, Monitoring and Transaction Fees, Net	604,302			276,621			217,920		—			1,098,843

Performance Income
Realized Incentive Fees	—			47,807			—		—			47,807
Realized Carried Interest	1,159,011			34,650			—		—			1,193,661
Unrealized Carried Interest	70,058			40,075			—		—			110,133
Total Performance Income	1,229,069			122,532			—		—			1,351,601

Investment Income (Loss)
Net Realized Gains (Losses)	—			—			—		628,403			628,403
Net Unrealized Gains (Losses)	—			—			—		(396,425		)	(396,425		)
Total Realized and Unrealized	—			—			—		231,978			231,978
Interest Income and Dividends	—			—			—		408,084			408,084
Interest Expense	—			—			—		(134,909		)	(134,909		)
Net Interest and Dividends	—			—			—		273,175			273,175
Total Investment Income (Loss)	—			—			—		505,153			505,153

Total Segment Revenues	1,833,371			399,153			217,920		505,153			2,955,597

Segment Expenses
Compensation and Benefits
Cash Compensation and Benefits	153,339			64,530			41,551		121,161			380,581
Realized Performance Income Compensation	463,605			32,984			—		—			496,589
Unrealized Performance Income Compensation	33,430			16,029			—		—			49,459
Total Compensation and Benefits	650,374			113,543			41,551		121,161			926,629
Occupancy and Related Charges	30,946			7,214			1,523		18,104			57,787
Other Operating Expenses	125,398			31,501			11,497		60,673			229,069
Total Segment Expenses	806,718			152,258			54,571		199,938			1,213,485

Income (Loss) attributable to noncontrolling interests	1,424			1,636			11,886		—			14,946

Economic Net Income (Loss)	$	1,025,229		$	245,259		$	151,463	$	305,215		$	1,727,166

Total Assets	$	1,658,164		$	685,809		$	462,072	$	10,405,622		$	13,211,667

(1)



	As of and for the Year Ended December 31, 2013
	Private Markets			Public Markets			Capital Markets		Principal Activities			Total Reportable Segments
Segment Revenues
Management, Monitoring and Transaction Fees, Net
Management Fees	$	459,496		$	206,134		$	—	$	—		$	665,630
Monitoring Fees	120,267			—			—		—			120,267
Transaction Fees	150,118			40,314			146,254		—			336,686
Fee Credits (1)	(136,662		)	(29,950		)	—		—			(166,612		)
Total Management, Monitoring and Transaction Fees, Net	593,219			216,498			146,254		—			955,971

Performance Income
Realized Incentive Fees	—			72,359			—		—			72,359
Realized Carried Interest	690,027			—			—		—			690,027
Unrealized Carried Interest	661,803			62,338			—		—			724,141
Total Performance Income	1,351,830			134,697			—		—			1,486,527

Investment Income (Loss)
Net Realized Gains (Losses)	—			—			—		635,633			635,633
Net Unrealized Gains (Losses)	—			—			—		301,262			301,262
Total Realized and Unrealized	—			—			—		936,895			936,895
Interest Income and Dividends	—			—			—		87,168			87,168
Interest Expense	—			—			—		(65,662		)	(65,662		)
Net Interest and Dividends	—			—			—		21,506			21,506
Total Investment Income (Loss)	—			—			—		958,401			958,401

Total Segment Revenues	1,945,049			351,195			146,254		958,401			3,400,899

Segment Expenses
Compensation and Benefits
Cash Compensation and Benefits	148,557			24,696			31,118		110,457			314,828
Realized Performance Income Compensation	276,011			28,944			—		—			304,955
Unrealized Performance Income Compensation	282,003			24,935			—		—			306,938
Total Compensation and Benefits	706,571			78,575			31,118		110,457			926,721
Occupancy and Related Charges	31,769			2,837			877		20,844			56,327
Other Operating Expenses	106,917			36,006			9,698		63,262			215,883
Total Segment Expenses	845,257			117,418			41,693		194,563			1,198,931

Income (Loss) attributable to noncontrolling interests	1,498			1,560			3,329		—			6,387

Economic Net Income (Loss)	$	1,098,294		$	232,217		$	101,232	$	763,838		$	2,195,581

Total Assets	$	1,600,433		$	360,891		$	441,012	$	6,580,721		$	8,983,057

(1)

The following tables reconcile KKR’s total reportable segments to the most directly comparable financial measures calculated and presented in accordance with GAAP:

Fees



	For the Years Ended December 31,
	2015			2014			2013
Total Segment Revenues	$	2,505,908		$	2,955,597		$	3,400,899
Management fees relating to consolidated funds and other entities	(531,027		)	(510,777		)	(487,669		)
Fee credits relating to consolidated funds	202,269			203,466			144,416
Net realized and unrealized carried interest	(1,190,699		)	(1,303,794		)	(1,414,168		)
Total investment income (loss)	(153,512		)	(505,153		)	(958,401		)
Revenue earned by oil & gas producing entities	112,328			186,876			22,105
Reimbursable expenses	66,144			55,424			41,529
Other	32,357			28,369			13,835
Fees and Other	$	1,043,768		$	1,110,008		$	762,546

Expenses



	For the Years Ended December 31,
	2015		2014		2013
Total Segment Expenses	$	1,191,912	$	1,213,485	$	1,198,931
Equity based compensation	261,579		310,403		307,514
Reimbursable expenses	103,307		92,366		58,358
Operating expenses relating to consolidated funds and other entities	65,012		93,182		26,835
Expenses incurred by oil & gas producing entities	153,611		333,123		20,442
Intangible amortization, acquisition, litigation and certain non-recurring costs	49,766		102,877		92,593
Other	46,038		50,631		62,465
Total Expenses	$	1,871,225	$	2,196,067	$	1,767,138

Income (Loss) Before Taxes



	For the Years Ended December 31,
	2015			2014			2013
Economic net income	$	1,297,989		$	1,727,166		$	2,195,581
Income tax (benefit)	(66,636		)	(63,669		)	(37,926		)
Amortization of intangibles and other, net	(47,599		)	(290,348		)	(102,789		)
Equity based compensation	(261,579		)	(310,403		)	(307,514		)
Net income (loss) attributable to noncontrolling interests held by KKR Holdings	(433,693		)	(585,135		)	(1,056,126		)
Net income (loss) attributable to KKR & Co. L.P.	$	488,482		$	477,611		$	691,226
Net income (loss) attributable to noncontrolling interests and appropriated capital	4,791,062			4,920,750			7,100,747
Net income (loss) attributable to redeemable noncontrolling interests	(4,512		)	(3,341		)	62,255
Income tax (benefit)	66,636			63,669			37,926
Income (loss) before taxes	$	5,341,668		$	5,458,689		$	7,892,154

The items that reconcile KKR’s total reportable segments to the corresponding consolidated amounts calculated and presented in accordance with GAAP for net income (loss) attributable to redeemable noncontrolling interests and income (loss) attributable to noncontrolling interests and appropriated capital are primarily attributable to the impact of the consolidation of KKR's funds and certain other entities.

Assets



	As of December 31,
	2015		2014
Total Segment Assets	$	13,429,298	$	13,211,667
Consolidation of KKR Funds, CFEs and other entities	57,581,456		52,617,368
Accounting basis difference for oil & natural gas properties	47,005		43,710
Total Assets	$	71,057,759	$	65,872,745