KKR Annual Report 2016 | Quarterlytics

Plain-text annual report

KKR & CO. INC. FORM 10-K (Annual Report) Filed 02/24/17 for the Period Ending 12/31/16 Address Telephone CIK Symbol SIC Code Industry Sector Fiscal Year 9 WEST 57TH STREET, SUITE 4200 NEW YORK, NY, 10019 212-750-8300 0001404912 KKR 6282 - Investment Advice Investment Management & Fund Operators Financials 12/31 http://www.edgar-online.com © Copyright 2020, EDGAR Online, a division of Donnelley Financial Solutions. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, a division of Donnelley Financial Solutions, Terms of Use. Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 Form 10-K ý ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.For the fiscal year ended December 31, 2016 Or o o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.For the Transition period from to . Commission File Number 001-34820 KKR & CO. L.P.(Exact name of Registrant as specified in its charter) Delaware 26-0426107(State or other Jurisdiction ofIncorporation or Organization) (I.R.S. EmployerIdentification Number) 9 West 57 th Street, Suite 4200New York, New York 10019Telephone: (212) 750-8300(Address, zip code, and telephone number, includingarea code, of registrant’s principal executive office.) Securities registered pursuant to Section 12(b) of the Act:Title of each className of each exchange on which registeredCommon units representing limitedpartner interestsNew York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well‑known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No oIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ý Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 and 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes ý No o Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required tobe submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required tosubmit and post such files). Yes ý No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S‑K is not contained herein, and will not be contained, to the bestof registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10‑K or any amendment to thisForm 10‑K. ýIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See thedefinitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:Large accelerated filer x Accelerated filer o Non-accelerated filer o Smaller reporting company o (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ýThe aggregate market value of the common units of the registrant held by non‑affiliates as of June 30, 2016, was approximately $5.4 billion . As ofFebruary 22, 2017 , there were 452,723,038 Common Units of the registrant outstanding. DOCUMENTS INCORPORATED BY REFERENCENone Table of ContentsKKR & CO. L.P. FORM 10-K For the Year Ended December 31, 2016 INDEX Page No. PART I Item 1.Business5 Item 1A.Risk Factors33 Item 1B.Unresolved Staff Comments92 Item 2.Properties93 Item 3.Legal Proceedings93 Item 4.Mine Safety Disclosures93 PART II Item 5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities94 Item 6.Selected Financial Data97 Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations99 Item 7A.Quantitative and Qualitative Disclosures About Market Risk172 Item 8.Financial Statements and Supplementary Data176 Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure252 Item 9A.Controls and Procedures252 Item 9B.Other Information252 PART III Item 10.Directors, Executive Officers and Corporate Governance253 Item 11.Executive Compensation257 Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters271 Item 13.Certain Relationships and Related Transactions, and Director Independence275 Item 14.Principal Accounting Fees and Services282 PART IV Item 15.Exhibits, Financial Statement Schedules283 SIGNATURES 2892Table of ContentsCAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This report contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, or the Securities Act, and Section 21E of theSecurities Exchange Act of 1934, or the Exchange Act, which reflect our current views with respect to, among other things, our operations and financialperformance. You can identify these forward looking statements by the use of words such as "outlook," "believe," "expect," "potential," "continue," "may,""should," "seek," "approximately," "predict," "intend," "will," "plan," "estimate," "anticipate," the negative version of these words, other comparable words or otherstatements that do not relate strictly to historical or factual matters. Without limiting the foregoing, statements regarding the declaration and payment ofdistributions on common or preferred units of KKR, the timing, manner and volume of repurchases of common units pursuant to a repurchase program, theannounced transaction to combine KKR Prisma and Pacific Alternative Asset Management Company, LLC and the expected synergies from the acquisitions orstrategic partnerships, may constitute forward-looking statements. Forward looking statements are subject to various risks and uncertainties. Accordingly, there areor will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements or cause the benefits andanticipated synergies from transactions to not be realized. We believe these factors include those described under the section entitled "Risk Factors" in this report.These factors should be read in conjunction with the other cautionary statements that are included in this report and in our other periodic filings. We do notundertake any obligation to publicly update or review any forward looking statement, whether as a result of new information, future developments or otherwise. In this report, references to "KKR," "we," "us," "our" and "our partnership" refer to KKR & Co. L.P. and its consolidated subsidiaries. Prior toKKR & Co. L.P. becoming listed on the New York Stock Exchange ("NYSE") on July 15, 2010, KKR Group Holdings L.P. ("Group Holdings") consolidated thefinancial results of KKR Management Holdings L.P. and KKR Fund Holdings L.P. (together, the "KKR Group Partnerships") and their consolidated subsidiaries.On August 5, 2014, KKR International Holdings L.P. became a KKR Group Partnership. Each KKR Group Partnership has an identical number of partner interestsand, when held together, one Class A partner interest in each of the KKR Group Partnerships together represents one KKR Group Partnership Unit. In connectionwith KKR's issuance of Series A Preferred Units and Series B Preferred Units, the KKR Group Partnerships issued preferred units with economic terms designed tomirror those of the Series A Preferred Units and Series B Preferred Units, respectively.References to "our Managing Partner" are to KKR Management LLC, which acts as our general partner and unless otherwise indicated, references to equityinterests in KKR's business, or to percentage interests in KKR's business, reflect the aggregate equity of the KKR Group Partnerships and are net of amounts thathave been allocated to our principals and other employees and non-employee operating consultants in respect of the carried interest from KKR's business as part ofour "carry pool" and certain minority interests. References to "principals" are to our senior employees and non-employee operating consultants who hold interestsin KKR's business through KKR Holdings L.P., which we refer to as "KKR Holdings," and references to our "senior principals" are to our senior employees whohold interests in our Managing Partner entitling them to vote for the election of its directors.References to non-employee operating consultants include employees of KKR Capstone and are not employees of KKR. KKR Capstone refers to a group ofentities that are owned and controlled by their senior management. KKR Capstone is not a subsidiary or affiliate of KKR. KKR Capstone operates under severalconsulting agreements with KKR and uses the "KKR" name under license from KKR.Prior to October 1, 2009, KKR's business was conducted through multiple entities for which there was no single holding entity, but were under commoncontrol of senior KKR principals, and in which senior principals and KKR's other principals and individuals held ownership interests (collectively, the "PredecessorOwners"). On October 1, 2009, we completed the acquisition of all of the assets and liabilities of KKR & Co. (Guernsey) L.P. (f/k/a KKR Private EquityInvestors, L.P. or "KPE") and, in connection with such acquisition, completed a series of transactions pursuant to which the business of KKR was reorganized intoa holding company structure. The reorganization involved a contribution of certain equity interests in KKR's business that were held by KKR's Predecessor Ownersto the KKR Group Partnerships in exchange for equity interests in the KKR Group Partnerships held through KKR Holdings. We refer to the acquisition of theassets and liabilities of KPE and to our subsequent reorganization into a holding company structure as the "KPE Transaction."In this report, the term "GAAP" refers to accounting principles generally accepted in the United States of America.3Table of ContentsWe disclose certain financial measures in this report that are calculated and presented using methodologies other than in accordance with GAAP. We believethat providing these performance measures on a supplemental basis to our GAAP results is helpful to unitholders in assessing the overall performance of KKR'sbusinesses. These financial measures should not be considered as a substitute for similar financial measures calculated in accordance with GAAP, if available. Wecaution readers that these non-GAAP financial measures may differ from the calculations of other investment managers, and as a result, may not be comparable tosimilar measures presented by other investment managers. Reconciliations of these non-GAAP financial measures to the most directly comparable financialmeasures calculated and presented in accordance with GAAP, where applicable, are included within "Consolidated Financial Statements—Note 14. SegmentReporting" and later in this report under "Management's Discussion and Analysis of Financial Condition and Results of Operations — Segment Operating andPerformance Measures" and " — Segment Balance Sheet."This report uses the terms assets under management or AUM, fee paying assets under management or FPAUM, economic net income or ENI, fee relatedearnings or FRE, distributable earnings, capital invested, syndicated capital and book value. You should note that our calculations of these financial measures andother financial measures may differ from the calculations of other investment managers and, as a result, our financial measures may not be comparable to similarmeasures presented by other investment managers. These and other financial measures are defined in the section "Management's Discussion and Analysis ofFinancial Condition & Results of Operations—Segment Operating and Performance Measures" and "— Segment Balance Sheet."References to "our funds" or "our vehicles" refer to investment funds, vehicles and accounts advised, sponsored or managed by one or more subsidiaries ofKKR including CLO and CMBS vehicles, unless the context requires otherwise. They do not include investment funds, vehicles or accounts of any hedge fundmanager with which we have formed a strategic partnership where we have acquired a non-controlling interest.Unless otherwise indicated, references in this report to our fully exchanged and diluted common units outstanding, or to our common units outstanding on afully exchanged and diluted basis, reflect (i) actual common units outstanding, (ii) common units into which KKR Group Partnership Units not held by us areexchangeable pursuant to the terms of the exchange agreement described in this report, (iii) common units issuable in respect of exchangeable equity securitiesissued in connection with the acquisition of Avoca Capital ("Avoca"), and (iv) common units issuable pursuant to any equity awards actually granted from theKKR & Co. L.P. 2010 Equity Incentive Plan, which we refer to as our "Equity Incentive Plan," but do not reflect common units available for issuance pursuant toour Equity Incentive Plan for which equity awards have not yet been granted.4Table of ContentsPART IITEM 1. BUSINESSOverview We are a leading global investment firm that manages investments across multiple asset classes including private equity, energy, infrastructure, real estate,growth equity, credit and hedge funds. We aim to generate attractive investment returns by following a patient and disciplined investment approach, employingworld‑class people, and driving growth and value creation in the assets we manage. We invest our own capital alongside the capital we manage for fund investorsand bring debt and equity investment opportunities to others through our capital markets business.Our business offers a broad range of investment management services to our fund investors and provides capital markets services to our firm, our portfoliocompanies and third parties. Throughout our history, we have consistently been a leader in the private equity industry, having completed more than 280 privateequity investments in portfolio companies with a total transaction value in excess of $530 billion as of December 31, 2016 . We have grown our firm by expandingour geographical presence and building businesses in areas, such as credit, special situations, hedge funds, collateralized loan obligations (“CLOs”), capitalmarkets, infrastructure, energy, real estate and growth equity. Our balance sheet has provided a significant source of capital in the growth and expansion of ourbusiness, and has allowed us to further align our interests with those of our fund investors. These efforts build on our core principles and industry expertise,allowing us to leverage the intellectual capital and synergies in our businesses, and to capitalize on a broader range of the opportunities we source. Additionally, wehave increased our focus on meeting the needs of our existing fund investors and in developing relationships with new investors in our funds.We conduct our business with offices throughout the world, providing us with a pre-eminent global platform for sourcing transactions, raising capital andcarrying out capital markets activities. Our growth has been driven by value that we have created through our operationally focused investment approach, theexpansion of our existing businesses, our entry into new lines of business, innovation in the products that we offer investors in our funds, an increased focus onproviding tailored solutions to our clients and the integration of capital markets distribution activities.As a global investment firm, we earn management, monitoring, transaction, incentive fees and carried interest for providing investment management,monitoring and other services to our funds, vehicles, CLOs, managed accounts and portfolio companies, and we generate transaction-specific income from capitalmarkets transactions. We earn additional investment income from investing our own capital alongside that of our fund investors, from other assets on our balancesheet and from the carried interest we receive from our funds and certain of our other investment vehicles. A carried interest entitles the sponsor of a fund to aspecified percentage of investment gains that are generated on third-party capital that is invested.Our investment teams have deep industry knowledge and are supported by a substantial and diversified capital base, an integrated global investment platform,the expertise of operating consultants, senior advisors and other advisors and a worldwide network of business relationships that provide a significant source ofinvestment opportunities, specialized knowledge during due diligence and substantial resources for creating and realizing value for stakeholders. These teamsinvest capital, a substantial portion of which is of a long duration and not subject to redemption. As of December 31, 2016 , approximately 75% of our fee payingassets under management are not subject to redemption for at least 8 years from inception, providing us with significant flexibility to grow investments and selectexit opportunities. We believe that these aspects of our business will help us continue to expand and grow our business and deliver strong investment performancein a variety of economic and financial conditions.Recent DevelopmentsOn February 6, 2017, KKR and Pacific Alternative Asset Management Company, LLC (“PAAMCO”) announced that they entered into a strategic transactionto create a new liquid alternatives investment firm by combining PAAMCO and KKR Prisma. Under the terms of the agreement, the entire businesses of bothPAAMCO and KKR Prisma will be contributed to a newly formed company that will operate independently from KKR, and KKR will retain a 39.9% stake as along-term strategic partner. This transaction is subject to the satisfaction of customary closing conditions, including the receipt of requisite regulatory approvals.Beginning with the results for the quarter ending March 31, 2017, KKR intends to increase its regular quarterly distribution to holders of its common unitsfrom $0.16 to $0.17 per common unit per quarter. There can be no assurance that future distributions will be made as intended or at all.5Table of ContentsOn February 9, 2017, KKR announced that its Managing Partner's board of directors authorized an incremental $250 million to repurchase common units. Thisamount is in addition to the $41.2 million remaining as of February 9, 2017 under the current repurchase program, which was originally announced on October 27,2015. Common units may be repurchased from time to time in open market transactions, in privately negotiated transactions or otherwise.Our FirmWith offices around the world, we have established ourselves as a leading global investment firm. We have multilingual and multicultural investment teamswith local market knowledge and significant business, investment, and operational experience in the countries in which we invest. We believe that our globalcapabilities have helped us to raise capital, capture a greater number of investment opportunities, and assist our portfolio companies in their increasing reliance onglobal markets and sourcing, while enabling us to diversify our operations.Though our operations span multiple continents and asset classes, our investment professionals are supported by an integrated infrastructure and operate undera common set of principles and business practices that are monitored by a variety of committees. The firm operates with a single culture that rewards investmentdiscipline, creativity, determination, and patience and the sharing of information, resources, expertise, and best practices across offices and asset classes. Whenappropriate, we staff transactions across multiple offices and businesses in order to take advantage of the industry‑specific expertise of our investmentprofessionals, and we hold regular meetings in which investment professionals throughout our offices share their knowledge and experiences. We believe that theability to draw on the local cultural fluency of our investment professionals while maintaining a centralized and integrated global infrastructure distinguishes usfrom other investment firms and has been a substantial contributing factor to our ability to raise funds, invest internationally and expand our businesses.Since our inception, one of our fundamental philosophies has been to align the interests of the firm and our principals with the interests of our fund investors,portfolio companies and other stakeholders. We achieve this by putting our own capital behind our ideas. As of December 31, 2016 , we and our employees andother personnel have approximately $13.0 billion invested in or committed to our own funds and portfolio companies, including $7.5 billion funded from ourbalance sheet, $2.6 billion of additional commitments from our balance sheet to investment funds, $1.7 billion in personal investments and $1.2 billion ofadditional commitments from personal investments.Our Segments Private Markets Through our Private Markets segment, we manage and sponsor a group of private equity funds and co-investment vehicles that invest capital for long-termappreciation, either through controlling ownership of a company or strategic minority positions. We also manage and sponsor a group of funds and co-investmentvehicles that invest capital in real assets, such as infrastructure, energy, real estate and growth equity. These funds, vehicles and accounts are managed by KohlbergKravis Roberts & Co. L.P., an SEC registered investment adviser. As of December 31, 2016 , the segment had $73.8 billion of AUM and FPAUM of $52.2 billion ,consisting of $41.4 billion in private equity and growth equity and $10.8 billion in real assets (including infrastructure, energy and real estate) and other strategies.Prior to 2010, FPAUM in the Private Markets segment consisted entirely of private equity funds. 6Table of Contents (1)For the years 2006 through 2008, assets under management are presented pro forma for the KPE Transaction, and therefore, exclude the net asset value of KPE and its formercommitments to our investment funds. In 2015, our definition of AUM was amended to include capital commitments for which we are eligible to receive fees or carried interest upondeployment of capital and our pro-rata portion of the AUM managed by strategic partnerships in which we hold a minority ownership interest. AUM for all prior periods has beenadjusted to include such changes.The table below presents information as of December 31, 2016 relating to our current private equity, growth equity and real asset funds and other investmentvehicles for which we have the ability to earn carried interest. This data does not reflect acquisitions or disposals of investments, changes in investment values ordistributions occurring after December 31, 2016 . 7Table of Contents Investment Period (1) Amount ($ in millions) Commencement DateEnd Date Commitment (2)UncalledCommitmentsPercentageCommitted byGeneralPartnerInvestedRealizedRemainingCost (3)RemainingFair ValuePrivate Markets Private Equity and Growth Equity Americas Fund XII1/20171/2023 $12,877.9$12,877.97.8%$—$—$—$—Next Generation Technology Growth Fund3/20163/2021 658.9568.222.5%90.7—90.7102.6European Fund IV (4)12/201412/2020 3,430.32,257.35.8%1,181.9—1,181.91,239.4Asian Fund II (4)4/20134/2019 5,825.02,789.31.3%3,867.7895.03,012.15,114.1North America Fund XI (4)9/20121/2017 8,718.41,844.52.9%8,188.33,411.35,962.88,941.9China Growth Fund11/201011/2016 1,010.0116.71.0%893.3347.9694.2920.3E2 Investors (Annex Fund)8/200911/2013 195.8—4.9%195.8195.718.16.9European Fund III3/20083/2014 6,108.3781.04.7%5,327.36,198.02,417.93,393.1Asian Fund7/20074/2013 3,983.3105.62.5%3,877.77,360.0927.2991.02006 Fund9/20069/2012 17,642.2387.22.1%17,255.022,469.16,489.510,080.2European Fund II11/200510/2008 5,750.8—2.1%5,750.88,324.135.3215.7Millennium Fund12/200212/2008 6,000.0—2.5%6,000.013,116.4471.3771.2Total Private Equity and GrowthEquity 72,200.921,727.7 52,628.562,317.521,301.031,776.4 Co-Investment Vehicles and Other (4)VariousVarious 8,178.63,554.0Various4,811.52,981.83,439.44,414.0 Total Private Equity and GrowthEquity 80,379.525,281.7 57,440.065,299.324,740.436,190.4 Real Assets Energy Income and Growth Fund9/20139/2018 1,974.21,013.412.9%960.8206.4828.2769.9Natural Resources FundVariousVarious 887.42.9Various884.596.6809.9218.4Global Energy Opportunities (4)VariousVarious 979.2675.1Various342.457.1230.0233.4Global Infrastructure Investors (4)9/201110/2014 1,039.875.94.8%994.9649.7649.4771.5Global Infrastructure Investors II (4)10/201410/2020 3,023.62,091.24.1%969.339.4929.9948.8Real Estate Partners Americas (4)5/20135/2017 1,229.1674.616.3%892.5633.5554.1596.0Real Estate Partners Europe (4)9/20156/2020 688.2593.09.1%95.2—95.2102.8Co-Investment Vehicles and OtherVariousVarious 1,674.9538.8Various1,136.1452.11,134.61,348.2 Real Assets $11,496.4$5,664.9 $6,275.7$2,134.8$5,231.3$4,989.0 Unallocated Commitments 532.1532.1Various———— Private Markets Total $92,408.0$31,478.7 $63,715.7$67,434.1$29,971.7$41,179.4 (1)The commencement date represents the date on which the general partner of the applicable fund commenced investment of the fund’s capital or the date of the first closing. The end date represents the earlier of (i) the date onwhich the general partner of the applicable fund was or will be required by the fund’s governing agreement to cease making investments on behalf of the fund, unless extended by a vote of the fund investors or (ii) the date onwhich the last investment was made.(2)The commitment represents the aggregate capital commitments to the fund, including capital commitments by third-party fund investors and the general partner. Foreign currency commitments have been converted into U.S.dollars based on (i) the foreign exchange rate at the date of purchase for each investment and (ii) the exchange rate that prevailed on December 31, 2016 , in the case of uncalled commitments.(3)The remaining cost represents the initial investment of the general partner and limited partners, with the limited partners’ investment reduced for any return of capital and realized gains from which the general partner did notreceive a carried interest.(4)The “Invested” and “Realized” columns include the amounts of any realized investments that restored the unused capital commitments of the fund investors. 8Table of ContentsPerformanceWe take a long‑term approach to Private Markets investing and measure the success of our investments over a period of years rather than months. Given theduration of these investments, the firm focuses on realized multiples of invested capital and IRRs when deploying capital in these transactions. We have more thandoubled the value of capital that we have invested in our Private Markets investment funds, turning $77.0 billion of capital into $158.2 billion of value from ourinception in 1976 to December 31, 2016 . Over this same period, the value of capital that we have invested in our Private Markets investment funds and that hasbeen realized and partially realized has grown from $59.1 billion to $141.5 billion .Amount Invested and Total Value forPrivate Markets Investment FundsAs of December 31, 2016 From our inception in 1976 through December 31, 2016 , our investment funds with at least 24 months of investment activity generated a cumulative grossIRR of 25.6%, compared to the 12.1% and 8.8% gross IRR achieved by the S&P 500 Index and MSCI World Index, respectively, over the same period, despite thecyclical and sometimes challenging environments in which we have operated. The S&P 500 Index and MSCI World Index are unmanaged indices and such returnsassume reinvestment of distributions and do not reflect any fees or expenses. Our past performance, however, may not be representative of performance in anygiven period. For example, as of March 31, 2009, the date of the lowest aggregate valuation of our private equity funds during the 2008 and 2009 market downturn,the investments in certain of our private equity funds at the time were marked down to 67% of original cost. For additional information regarding impact of marketconditions on the value and performance of our investments, see “Risk Factors-Risks Related to Our Business-Difficult market conditions can adversely affect ourbusiness in many ways, including by reducing the value or performance of the investments that we manage or by reducing the ability of our funds to raise or deploycapital, each of which could negatively impact our net income and cash flow and adversely affect our financial condition.” and “-Risks Related to the Assets WeManage-The historical returns attributable to our funds, including those presented in this report, should not be considered as indicative of the future results of ourfunds or of our future results or of any returns on our common units.”The tables below present information as of December 31, 2016 relating to the historical performance of certain of our Private Markets investment vehiclessince inception, which we believe illustrates the benefits of our investment approach. The information presented under Total Investments includes all of theinvestments made by the specified investment vehicle, while the information presented under Realized/Partially Realized Investments includes only thoseinvestments that have been disposed of or have otherwise generated disposition proceeds or current income including dividends that have been distributed9Table of Contentsby the relevant fund. This data does not reflect additional capital raised since December 31, 2016 or acquisitions or disposals of investments, changes in investmentvalues or distributions occurring after that date. Past performance is no guarantee of future results. Amount Fair Value of Investments Private Markets Investment FundsCommitmentInvested (5) Realized (5)Unrealized Total Value GrossIRR (5)Net IRR (5) Multiple ofInvestedCapital (5)($ in millions) Total Investments Legacy Funds (1) 1976 Fund$31.4$31.4 $537.2$— $537.2 39.5 %35.5 % 17.11980 Fund356.8356.8 1,827.8— 1,827.8 29.0 %25.8 % 5.11982 Fund327.6327.6 1,290.7— 1,290.7 48.1 %39.2 % 3.91984 Fund1,000.01,000.0 5,963.5— 5,963.5 34.5 %28.9 % 6.01986 Fund671.8671.8 9,080.7— 9,080.7 34.4 %28.9 % 13.51987 Fund6,129.66,129.6 14,949.2— 14,949.2 12.1 %8.9 % 2.41993 Fund1,945.71,945.7 4,143.3— 4,143.3 23.6 %16.8 % 2.11996 Fund6,011.66,011.6 12,476.9— 12,476.9 18.0 %13.3 % 2.1Subtotal - Legacy Funds16,474.516,474.5 50,269.3— 50,269.3 26.1 %19.9 % 3.1Included Funds European Fund (1999) (2)3,085.43,085.4 8,757.7— 8,757.7 26.9 %20.2 % 2.8Millennium Fund (2002)6,000.06,000.0 13,116.4771.2 13,887.6 22.0 %16.0 % 2.3European Fund II (2005) (2)5,750.85,750.8 8,324.1215.7 8,539.8 6.1 %4.5 % 1.52006 Fund (2006)17,642.217,255.0 22,469.110,080.2 32,549.3 11.4 %8.8 % 1.9Asian Fund (2007)3,983.33,877.7 7,360.0991.0 8,351.0 18.8 %13.6 % 2.2European Fund III (2008) (2)6,108.35,327.3 6,198.03,393.1 9,591.1 15.9 %10.5 % 1.8E2 Investors (Annex Fund) (2009) (2)195.8195.8 195.76.9 202.6 1.0 %0.3 % 1.0China Growth Fund (2010)1,010.0893.3 347.9920.3 1,268.2 14.2 %7.8 % 1.4Natural Resources Fund (2010)887.4884.5 96.6218.4 315.0 (31.1)%(33.6)% 0.4Global Infrastructure Investors (2011) (2) 1,039.8994.9 649.7771.5 1,421.2 12.2 %10.6 % 1.4North America Fund XI (2012)8,718.48,188.3 3,411.38,941.9 12,353.2 24.0 %18.1 % 1.5Asian Fund II (2013)5,825.03,867.7 895.05,114.1 6,009.1 31.4 %21.9 % 1.6Real Estate Partners Americas (2013)1,229.1892.5 633.5596.0 1,229.5 21.9 %16.2 % 1.4Energy Income and Growth Fund (2013)1,974.2960.8 206.4769.9 976.3 (0.7)%(4.9)% 1.0Global Infrastructure Investors II (2014) (2)3,023.6969.3 39.4948.8 988.2 2.6 %(2.3)% 1.0European Fund IV (2015) (2) (3)3,430.31,181.9 —1,239.4 1,239.4 —— —Real Estate Partners Europe (2015) (2) (3)688.295.2 —102.8 102.8 —— —Next Generation Technology Growth Fund (2016) (3)658.990.7 —102.6 102.6 —— —Americas Fund XII (2017) (3)12,877.9— —— — —— —Subtotal - Included Funds84,128.660,511.1 72,700.835,183.8 107,884.6 15.4 %11.3 % 1.8 All Funds$100,603.1$76,985.6 $122,970.1$35,183.8 $158,153.9 25.6 %18.8 % 2.1 10Table of Contents Amount Fair Value of Investments Private Markets Investment FundsCommitmentInvested (5) Realized (5)Unrealized Total Value Multiple ofInvested Capital (5)($ in millions) Realized/Partially Realized Investments (4) Legacy Funds (1) 1976 Fund$31.4$31.4 $537.2$— $537.2 17.11980 Fund356.8356.8 1,827.8— 1,827.8 5.11982 Fund327.6327.6 1,290.7— 1,290.7 3.91984 Fund1,000.01,000.0 5,963.5— 5,963.5 6.01986 Fund671.8671.8 9,080.7— 9,080.7 13.51987 Fund6,129.66,129.6 14,949.2— 14,949.2 2.41993 Fund1,945.71,945.7 4,143.3— 4,143.3 2.11996 Fund6,011.66,011.6 12,476.9— 12,476.9 2.1Subtotal - Legacy Funds16,474.516,474.5 50,269.3— 50,269.3 3.1Included Funds European Fund (1999) (2)3,085.43,085.4 8,757.7— 8,757.7 2.8Millennium Fund (2002)6,000.05,599.4 13,116.4652.3 13,768.7 2.5European Fund II (2005) (2)5,750.85,245.4 8,324.1215.7 8,539.8 1.62006 Fund (2006)17,642.211,864.5 22,469.15,846.9 28,316.0 2.4Asian Fund (2007)3,983.33,072.1 7,360.0438.3 7,798.3 2.5European Fund III (2008) (2)6,108.33,308.7 6,198.01,255.1 7,453.1 2.3E2 Investors (Annex Fund) (2009) (2)195.894.8 195.7— 195.7 2.1China Growth Fund (2010)1,010.0371.3 347.9289.8 637.7 1.7Natural Resources Fund (2010)887.4884.6 96.6218.4 315.0 0.4Global Infrastructure Investors (2011) (2)1,039.8974.6 649.7718.6 1,368.3 1.4North America Fund XI (2012)8,718.44,213.5 3,411.34,675.0 8,086.3 1.9Asian Fund II (2013)5,825.01,812.2 895.02,630.9 3,525.9 1.9Real Estate Partners Americas (2013)1,229.1688.3 633.5372.3 1,005.8 1.5Energy Income and Growth Fund (2013)1,974.2939.5 206.4735.0 941.4 1.0Global Infrastructure Investors II (2014) (2)3,023.6458.8 39.4450.4 489.8 1.1European Fund IV (2015) (2) (3) (4)3,430.3— —— — —Real Estate Partners Europe (2015) (2) (3) (4)688.2— —— — —Next Generation Technology Growth Fund (2016) (3) (4)658.9— —— — —Americas Fund XII (2017) (3) (4)12,877.9— —— — —Subtotal - Included Funds84,128.642,613.1 72,700.818,498.7 91,199.5 2.1 All Realized/Partially Realized Investments$100,603.1$59,087.6 $122,970.1$18,498.7 $141,468.8 2.4(1)These funds were not contributed to KKR as part of the KPE Transaction.(2)The capital commitments of the European Fund, European Fund II, European Fund III, E2 Investors (Annex Fund), European Fund IV, Global Infrastructure Investors, GlobalInfrastructure Investors II and Real Estate Partners Europe include euro-denominated commitments of €196.5 million, €2,597.5 million, €2,882.8 million, €55.5 million, €1,626.1 million,€30.0 million, €243.8 million and €276.6 million, respectively. Such amounts have been converted into U.S. dollars based on (i) the foreign exchange rate at the date of purchase for eachinvestment and (ii) the exchange rate prevailing on December 31, 2016 in the case of unfunded commitments.(3)The gross IRR, net IRR and multiple of invested capital are calculated for our investment funds that made their first investment at least 24 months prior to December 31, 2016 . None of theEuropean Fund IV, Real Estate Partners Europe, Americas Fund XII or Next Generation Technology Growth Fund have invested for at least 24 months as of December 31, 2016 . Wetherefore have not calculated gross IRRs, net IRRs and multiples of invested capital with respect to those funds.(4)An investment is considered partially realized when it has been disposed of or has otherwise generated disposition proceeds or current income that has been distributed by the relevant fund.In periods prior to the three months ended September 30, 2015, realized proceeds excluded current income such as dividends and interest. Realizations have not been shown for thoseinvestment funds that made their first investment more recently than 24 months prior to December 31, 2016 . We therefore have not calculated gross IRRs, net IRRs and multiples ofinvested capital with respect to the investments of those funds.(5)IRRs measure the aggregate annual compounded returns generated by a fund’s investments over a holding period. Net IRRs are calculated after giving effect to the allocation of realizedand unrealized carried interest and the payment of any applicable management fees. Gross IRRs are calculated before giving effect to the allocation of carried interest and the payment ofany applicable management fees. The multiples of invested capital measure the aggregate value generated by a fund’s investments in absolute terms. Each multiple of invested capital is calculated by adding together thetotal realized and unrealized values of a fund’s investments and dividing by the total amount of capital invested by the fund. Such amounts do not give effect to the allocation of anyrealized and unrealized returns on a fund’s investments to the fund’s general partner pursuant to a carried interest or the payment of any applicable management fees.11Table of ContentsKKR Private Markets funds may utilize third party financing facilities to provide liquidity to such funds. In such event IRRs are calculated from the time capital contributions are due fromfund investors to the time fund investors receive a related distribution from the fund, and the use of such financing facilities generally decreases the amount of invested capital that wouldotherwise be used to calculate IRRs and multiples of invested capital, which tends to increase IRRs and multiples when fair value grows over time and decrease IRRs and multiples whenfair value decreases over time. KKR Private Markets funds also generally provide in certain circumstances, which vary depending on the relevant fund documents, for a portion of capitalreturned to investors to be restored to unused commitments as recycled capital. For KKR's Private Markets funds that have a preferred return, we take into account recycled capital in thecalculation of IRRs and multiples of invested capital because the calculation of the preferred return includes the effect of recycled capital. For KKR's Private Markets funds that do not havea preferred return, we do not take recycled capital into account in the calculation of IRRs and multiples of invested capital. The inclusion of recycled capital generally causes invested andrealized amounts to be higher and IRRs and multiples of invested capital to be lower than had recycled capital not been included. The inclusion of recycled capital would reduce thecomposite net IRR of all Included Funds by 0.2% and the composite net IRR of all Legacy Funds by 0.5%, and would reduce the composite multiple of invested capital of Included Fundsby less than 0.2 and the composite multiple of invested capital of Legacy Funds by 0.4. For more information, see “Risk Factors-Risks Related to the Assets We Manage-The historical returns attributable to our funds, including those presented inthis report, should not be considered as indicative of the future results of our funds or of our future results or of any returns on our common units.”Private EquityWe are a world leader in private equity, having raised 21 funds with approximately $91.8 billion of capital commitments through December 31, 2016 . Weinvest in industry-leading franchises and attract world-class management teams. Our investment approach leverages our capital base, sourcing advantage, globalnetwork and industry knowledge. It also leverages a sizable team of operating consultants, who work exclusively with our investment professionals and portfoliocompany management teams and otherwise at our direction, as well as senior advisors and other advisors, many of whom are former chief executive officers andleaders of the business community.PortfolioThe following chart presents information concerning the amount of capital invested by private equity funds by geography through December 31, 2016 . Webelieve that this data illustrates the benefits of our business approach and our ability to source and invest in deals in multiple geographies.Our current private equity portfolio consists of 119 companies with approximately $200 billion of annual revenues. These companies are headquartered in21 countries and operate in 19 general industries which take advantage of our broad and deep industry and operating expertise. Many of these companies areleading franchises with global operations, strong management teams and attractive growth prospects, which we believe will provide benefits through a broad rangeof business conditions.12Table of ContentsInvestment ApproachOur approach to making private equity investments focuses on achieving multiples of invested capital and attractive risk-adjusted IRRs by selecting high-quality investments that may be made at attractive prices, applying rigorous standards of due diligence when making investment decisions, implementing strategicand operational changes that drive growth and value creation in acquired businesses, carefully monitoring investments, and making informed decisions whendeveloping investment exit strategies.We believe that we have achieved a leading position in the private equity industry by applying a disciplined investment approach and by building strongpartnerships with highly motivated management teams who put their own capital at risk. When making private equity investments, we seek out strong businessfranchises, attractive growth prospects, leading market positions, and the ability to generate attractive returns. In our private equity funds, we do not effecttransactions that are “hostile", meaning a target company’s board of directors makes an unfavorable recommendation with respect to the transaction or publiclyopposes the consummation of the transaction.Sourcing and Selecting InvestmentsWe have access to significant opportunities for making private equity investments as a result of our sizable capital base, global platform, and relationships withleading executives from major companies, commercial and investment banks, and other investment and advisory institutions. Members of our global networkcontact us with new investment opportunities, including a substantial number of exclusive investment opportunities and opportunities that are made available toonly a limited number of other firms. We also proactively pursue business development strategies that are designed to generate deals internally based on the depthof our industry knowledge and our reputation as a leading financial sponsor.To enhance our ability to identify and consummate private equity investments, we have organized our investment professionals in industry‑specific teams. Ourindustry teams work closely with our operating consultants and other advisors to identify businesses that can be grown and improved. These teams conduct theirown primary research, develop a list of industry themes and trends, identify companies and assets in need of operational improvement, and seek out businesses andassets that they believe will benefit from our involvement. They possess a detailed understanding of the economic drivers, opportunities for value creation, andstrategies that can be designed and implemented to improve companies across the industries in which we invest.Due Diligence and the Investment DecisionWhen an investment team determines that an investment proposal is worth consideration, the proposal is formally presented to the applicable regionalinvestment committee and the due diligence process commences if appropriate. The objective of the due diligence process is to identify attractive investmentopportunities based on the facts and circumstances surrounding an investment and to prepare a framework that may be used from the date of an acquisition to driveoperational improvement and value creation. When conducting due diligence, investment teams evaluate a number of important business, financial, tax,accounting, environmental, social, governance, legal and regulatory issues in order to determine whether an investment is suitable. While the due diligence processdiffers depending on the type of investment we make, generally, in connection with the private equity due diligence process, investment professionals spendsignificant amounts of time meeting with a company’s management and operating personnel, visiting plants and facilities, and where appropriate, speaking withother stakeholders interested in and impacted by the investment in order to understand the opportunities and risks associated with the proposed investment. Ourinvestment professionals may also use the services of outside accountants, consultants, lawyers, investment banks, and industry experts as appropriate to assistthem in this process. Investment committees monitor all due diligence practices, and the applicable investment committee must approve an investment before itmay be made.Building Successful and Competitive BusinessesPortfolio management committees are responsible for working with our investment professionals from the date on which a private equity investment is madeuntil the time it is exited in order to ensure that strategic and operational objectives are accomplished and that the performance of the investment is closelymonitored. When investing in a private equity portfolio company, we partner with management teams to execute on our investment thesis, and we rigorously trackperformance through regular monitoring of detailed operational and financial metrics as well as appropriate environmental, social and governance issues. We havedeveloped a global network of experienced managers and operating executives who assist the private equity portfolio companies in making operationalimprovements and achieving growth. We augment these resources with operational guidance from operating consultants at KKR Capstone, senior advisors, otheradvisors and investment teams, and with “100‑Day Plans” that focus the firm’s efforts and drive our strategies. We seek to emphasize efficient capitalmanagement, top‑line growth, R&D spending, geographical expansion, cost optimization, and investment for the long‑term.13Table of ContentsRealizing InvestmentsWe have developed substantial expertise for realizing private equity investments. From our inception through December 31, 2016 , the firm has generatedapproximately $123.0 billion of cash proceeds from the sale of our private equity portfolio companies in initial public offerings and secondary offerings, dividends,and sales to strategic buyers. When exiting private equity investments, our objective is to structure the exit in a manner that optimizes returns for fund investorsand, in the case of publicly traded companies, minimizes the impact that the exit has on the trading price of the company’s securities. We believe that our ability tosuccessfully realize investments is attributable in part to the strength and discipline of our portfolio management committees and capital markets business, as wellas the firm’s longstanding relationships with corporate buyers and members of the investment banking and investing communities.Private Equity Fund StructuresThe private equity funds that we sponsor and manage have finite lives and investment periods. Each fund is organized as one or more partnerships, and eachpartnership is controlled by a general partner. Private equity fund investors are limited partners who agree to contribute a specified amount of capital to the fundfrom time to time for use in qualifying investments during the investment period, which generally lasts up to six years depending on how quickly capital isdeployed. The investment period for certain funds may be terminated upon supermajority vote (based on capital commitment) of the fund’s limited partners or bythe fund’s advisory committee. The term of our private equity funds generally last for 10 to 12 years and may last up to 15 years from the date of the fund’s first orlast investment, subject to a limited number of extensions with the consent of the limited partners or the applicable advisory committee. Given the length of theinvestment periods and terms of our private equity funds and the limited conditions under which such periods can be terminated and commitments may bewithdrawn, the AUM of our private equity funds provide a long-term stable capital base.Each private equity fund’s general partner is generally entitled to a carried interest that allocates to it 20% of the net profits realized by the limited partnersfrom the fund’s investments. Our newer private equity funds, the North America Fund XI, Asian Fund II, European Fund IV and Americas Fund XII have aperformance hurdle which requires that we return 7%, compounded annually, to limited partners in the fund prior to receiving our 20% share of net profits realizedby limited partners. Such performance hurdles are subject to a catch‑up allocation to the general partner after the hurdle has been reached. Our earlier privateequity funds do not include a performance hurdle. The timing of receipt of carried interest in respect of investments of our carry funds is dictated by the terms ofthe partnership agreements that govern such funds, and is distributed to the general partner of a private equity fund only after all of the following are met: (i) arealization event has occurred (e.g., sale of a portfolio company, dividend, etc.); (ii) the vehicle has achieved positive overall investment returns since its inception,in excess of performance hurdles where applicable; and (iii) with respect to investments with a fair value below cost, cost has been returned to fund investors in anamount sufficient to reduce remaining cost to the investments’ fair value. For a fund that has a fair value above cost, overall, but has one or more investmentswhere fair value is below cost, the shortfall between cost and fair value for such investments is referred to as a “netting hole.” See “Management’s Discussion andAnalysis of Financial Condition and Results of Operations-Liquidity-Sources of Liquidity” for a discussion of netting holes. Net realized profit or loss is not nettedbetween or among funds except for the Annex Fund. In addition, the agreements governing KKR’s private equity funds generally include a “clawback” provisionthat, if triggered, may give rise to a contingent obligation that may require the general partner to return or contribute amounts to the fund for distribution to fundinvestors at the end of the life of the fund. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical AccountingPolicies-Clawback Provision”, and “Risk Factors-The “clawback” provision in our governing agreements may give rise to a contingent obligation that may requireus to return or contribute amounts to our funds and fund investors.”We enter into management agreements with our private equity funds pursuant to which we receive management fees in exchange for providing the funds withmanagement and other services. Gross management fees for our private equity funds generally range from 1% to 2% of committed capital during the fund’sinvestment period and is generally 0.75% to 1.25% of invested capital after the expiration of the fund’s investment period with subsequent reductions over time,which causes the fees to be reduced as investments are liquidated. In addition, in connection with the expiration of the investment period, a private equity fund mayestablish a reserve on its fund investors' capital commitments on which no fee is paid unless such capital is invested. These management fees are paid by privateequity fund investors, who generally contribute capital to the fund in order to allow the fund to pay the fees to us. Our private equity funds generally require thatmanagement fees be returned to fund investors before a carried interest may be paid.We also enter into monitoring agreements with our portfolio companies pursuant to which we receive periodic monitoring fees in exchange for providing themwith management, consulting, and other services, and we typically receive transaction fees for providing portfolio companies with financial, advisory and otherservices in connection with specific transactions. Monitoring agreements may provide for a termination payment following an initial public offering or change ofcontrol, if certain criteria are satisfied. In some cases, we may be entitled to other fees that are paid by an investment target upon closing a14Table of Contentstransaction or when a potential investment is not consummated. Our newer private equity fund agreements typically require us to share 100% of any monitoring,transaction and other fees that are allocable to a fund (after reduction for expenses incurred allocable to a fund from unconsummated transactions) with fundinvestors.In addition, the agreements governing our private equity funds enable investors in those funds to reduce their capital commitments available for furtherinvestments, on an investor‑by‑investor basis, in the event certain “key persons” (for example, both of Messrs. Kravis and Roberts, and, in the case of certaingeographically or product focused funds, one or more of the investment professionals focused on such funds) cease to be actively involved in the management ofthe fund. While these provisions do not allow investors in our funds to withdraw capital that has been invested or cause a fund to terminate, the occurrence of a“key man” event could cause disruption in our business, reduce the amount of capital that we have available for future investments, and make it more challengingto raise additional capital in the future.Because private equity fund investors typically are unwilling to invest their capital in a fund unless the fund’s manager also invests its own capital in thefund’s investments, our private equity fund documents generally require the general partners of the funds to make minimum capital commitments to the funds. Theamounts of these commitments, which are negotiated by fund investors, generally range from 2% to 8% of a fund’s total capital commitments at final closing, butmay be greater for certain funds pursuing newer strategies. When investments are made, the general partner contributes capital to the fund based on its fundcommitment percentage and acquires a capital interest in the investment that is not subject to a carried interest or management fees.Private Equity and Other Investment VehiclesOther Private Equity Products . We have offered significant co‑investment opportunities to both fund investors and other third parties. We have built out ourcapital markets and distribution capabilities and created new investment structures and products that allow us to syndicate a portion of the equity needed to financeacquisitions. These structures include co‑investment vehicles, which generally entitle the firm to receive management fees and/or a carried interest. In addition, wemanage certain separately managed accounts in the form of separate investment vehicles based on terms that are separately negotiated with investors in thosevehicles. We also offer multi‑strategy products, which invest in our funds, co‑investment vehicles and external funds.Growth Equity . Building upon KKR's private equity investment strategy and our four decades of global private equity investing experience, we have sourceda number of smaller growth equity opportunities. Recently we launched growth related funds for technology, media and telecommunications ("TMT") and healthcare. Our first dedicated TMT growth fund, launched in 2016, pursues growth equity investment opportunities in the technology, media and telecommunicationssector, primarily in the United States, Canada, Europe and Israel. The strategy seeks to invest in secular growth areas with structured downside protection andlimited leverage and will seek to take on execution risk as opposed to fundamental technology risk. In 2016 we also launched our first dedicated heath care growthfund to pursue growth capital investment opportunities in the health care sector, primarily in the United States. Although the specific areas in which the strategywill focus may evolve over time, we currently expect to pursue opportunities in health care companies, where our thesis will be predicated primarily oncommercializing and scaling products and/or services with unmet needs and market viability. As of December 31, 2016 , we have received $1.0 billion of capitalcommitments to our TMT and health care growth equity strategies.Real AssetsEnergyOur energy business aims to deliver current returns to fund investors through distributions generated by producing and selling oil and natural gas reserves andcapital appreciation. The goal is to provide investors with exposure to commodity prices and optionality associated with future drilling and production. Our energyplatform targets real asset investment opportunities across the upstream and midstream segments of the oil and gas industry. We have acquired and operated oil andnatural gas properties in mature basins located primarily in the United States. In acquiring these properties, which are typically considered to be non‑core by theirsellers, we seek to generate value through optimizing production, reducing operating costs, and optimizing commercial and marketing arrangements. In addition,we have completed investments in oil and gas drilling development transactions with operating companies and have also acquired mineral and royalty interests. Wework closely with external teams of technical and operational experts to assist in the selection, evaluation and operation of investments. We invest in these energystrategies through the KKR Energy Income and Growth Fund. As of December 31, 2016 , we have received $2.9 billion of capital commitments to our energyfunds and $1.0 billion of capital commitments to this strategy through separately managed accounts.15Table of ContentsInfrastructureOur infrastructure strategy seeks to achieve returns including current income through the acquisition and operational improvement of assets important to thefunctioning of the economy. We believe that the global infrastructure market provides an opportunity for the firm’s private investment, operational improvementcapabilities and stakeholder engagement. Through this strategy we have made investments in parking, alternative energy, district heating and contracted electricitygeneration, water and wastewater, locomotive transportation, midstream and telecommunications infrastructure. As of December 31, 2016 , we had received$4.1 billion of capital commitments to our infrastructure funds and $1.1 billion of capital commitments to this strategy through separately managed accounts andco-investment vehicles.Real EstateOur real estate platform targets real estate opportunities primarily in the United States and Western Europe, although we have capabilities to invest in otherareas of the world, and we have made investments in the Asia-Pacific region, including Australia and South Korea, including direct investments in real property,debt, special situations transactions and businesses with significant real estate holdings that can benefit from KKR’s operational expertise. We seek to partner withreal estate owners, lenders, operators, and developers to provide flexible capital to respond to transaction specific needs, including the outright purchase orfinancing of existing assets or companies and the funding of future development or acquisition opportunities. Through this strategy, we have made real estateinvestments in residential and commercial assets. Our real estate credit platform provides capital solutions for complex real estate transactions with a focus oncommercial mortgage-backed securities, whole loans and subordinated debt. We have also established investment platforms with strategic partners to invest incommercial real estate in Germany and the United States. As of December 31, 2016 , we have received $3.3 billion of capital commitments through our real estatefunds.Real Asset Investment ProcessOur energy, infrastructure and real estate funds have a similar investment process as that described under “-Private Equity.” Investment teams for a particularreal asset strategy formally present investments to the applicable strategy oriented investment committee, which monitors all due diligence practices and mustapprove an investment before it may be made. Most of our real asset strategies also have a portfolio management committee that works with our investmentprofessionals from the date on which an investment is made until the time it is exited in order to ensure that strategic and operational objectives are accomplishedand that the performance of the investment is closely monitored. In addition to leveraging the resources of the firm, our energy and real estate investment teamspartner with technical experts and operators to manage our real asset investments.Real Asset Fund StructuresOur energy, infrastructure and real estate funds generally have investment periods of up to 6 years and generally have a fund term of up to 13 years.Management fees for such funds range from 0.75% to 1.5% on commitments, invested capital or net asset value during the investment period and on investedcapital or net asset value for investments thereafter, subject to certain adjustments. These funds generally have performance hurdles of 8% to 10% subject to acatch‑up allocation to the general partner after the hurdle has been reached. Thereafter the general partners of such funds generally share in 10% to 20% of netprofits realized by limited partners.16Table of ContentsPublic Markets We operate and report our combined credit and hedge funds businesses through the Public Markets segment. Our credit business advises funds, CLOs,separately managed accounts, and investment companies registered under the Investment Company Act of 1940, or the Investment Company Act, includingbusiness development companies or BDCs, and alternative investments funds or AIFs, which invest capital in (i) leveraged credit strategies, including leveragedloans, high yield bonds and opportunistic credit, and (ii) alternative credit strategies, including special situations strategy and private credit strategies such asprivate credit opportunities, direct lending and revolving credit investment strategies. The funds, accounts, registered investment companies, BDCs and CLOs inour leveraged credit and alternative credit strategies, including special situations and private credit strategies are managed by KKR Credit Advisors (US) LLC,which is an SEC‑registered investment adviser, KKR Credit Advisors (Ireland) Unlimited Company, regulated by the Central Bank of Ireland, and KKR CreditAdvisors (UK) LLP, regulated by the United Kingdom Financial Conduct Authority, or FCA. Our Public Markets segment also includes our hedge funds business.Through our hedge fund business we offer a variety of investment strategies including customized hedge fund portfolios, hedge fund-of-fund solutions and directhedge funds that are managed by Prisma Capital Partners LP (KKR Prisma or Prisma), an SEC‑registered investment adviser. KKR Prisma also provides hedgefund advisory services to institutional investors. On February 6, 2017, KKR and PAAMCO announced that they entered into a strategic transaction to create a newliquid alternatives investment firm by combining PAAMCO and KKR Prisma. See "Recent Developments." In addition, our hedge fund business includes strategicpartnerships consisting of minority stakes in other hedge fund managers.We intend to continue to grow the Public Markets business by leveraging our global investment platform, experienced investment professionals and the abilityto adapt our investment strategies to different market conditions to capitalize on investment opportunities that may arise at various levels of the capital structureand across market cycles.As of December 31, 2016 , this segment had $55.7 billion of AUM, comprised of $18.8 billion of assets managed in our leveraged credit strategies, $7.0billion of assets managed in our special situations strategies, $8.9 billion of assets managed in our private credit strategies, $20.0 billion of assets managed throughour hedge fund business and $1.0 billion of assets managed in other strategies. Our private credit investments include $2.4 billion of assets managed in ourmezzanine or private credit opportunities strategy, $5.9 billion of assets managed in our direct lending strategy and $0.6 billion of assets managed in our revolvingcredit strategy. The following chart presents the growth in the AUM of our Public Markets segment from the commencement of its operations in August 2004through December 31, 2016 .17Table of Contents (1)For years 2006 through 2008, assets under management are presented pro forma for the KPE Transaction and, therefore, exclude the net asset value of KPE and its formercommitments to our investment funds. Assets under management of KKR Prisma and Avoca are included in the years on and after the completion of the respective acquisitions.(2)In 2015 our definition of AUM was amended to include (i) KKR's pro-rata portion of AUM managed by other hedge fund managers in which KKR holds a minority stake and (ii)capital commitments for which we are eligible to receive fees or carried interest upon deployment of capital. AUM for all prior periods has been adjusted to include such changes.CreditPerformanceWe generally review our performance in our credit business by investment strategy. Our leveraged credit strategies principally invest in leveraged loans andhigh yield bonds, or a combination of both. In certain cases, these strategies have meaningful track records and may be compared to widely-known indices. Thefollowing table presents information regarding larger leveraged credit strategies managed by KKR from inception to December 31, 2016 . Past performance is noguarantee of future results.18Table of ContentsLeveraged Credit Strategies: Inception-to-Date Annualized Gross Performance vs. Benchmark by Strategy($ in millions) Inception Date GrossReturns NetReturns Benchmark (1) BenchmarkGrossReturnsBank Loans Plus High Yield Jul 2008 8.34% 7.69% 65% S&P/ LSTA, 35% BoAML HY Master II Index (2) 6.52%Opportunistic Credit (3) May 2008 13.28% 11.16% BoAML HY Master II Index (3) 8.12%Bank Loans Apr 2011 5.54% 4.91% S&P/ LSTA Loan Index (4) 4.27%High Yield Apr 2011 6.77% 6.19% BoAML HY Master II Index (5) 6.45%Bank Loans Conservative Apr 2011 4.99% 4.36% S&P/ LSTA BB-B Loan Index (6) 4.31%European Leveraged Loans (7) Sep 2009 5.83% 5.31% CS Inst West European Leveraged Loan Index (8) 5.01%High Yield Conservative Apr 2011 6.42% 5.85% BoAML HY BB-B Constrained 6.41%European Credit Opportunities (7) Sept 2007 5.69% 4.78% S&P LSTA European Leveraged Loans (All Loans) 4.42% (1)The Benchmarks referred to herein include the S&P/LSTA Leveraged Loan Index (the “S&P/LSTA Loan Index”), S&P/LSTA U.S. B/BB Ratings Loan Index (the '"S&P/ LSTA BB-BLoan Index"), the Bank of America Merrill Lynch High Yield Master II Index (the “BoAML HY Master II Index”), the BofA Merrill Lynch BB-B US High Yield Index (the “BoAML HYBB-B Constrained"), the Credit Suisse Institutional Western European Leveraged Loan Index (the “CS Inst European Leveraged Loan Index"), and S&P LSTA European Leveraged Loans(All Loans). The S&P/LSTA Loan Index is a daily tradable index for the U.S. loan market that seeks to mirror the market-weighted performance of the largest institutional loans that meetcertain criteria. The S&P/ LSTA BB-B Loan Index is comprised of loans in the S&P/LSTA Loan Index, whose rating is BB+, BB, BB-, B+, B or B-. The BoAML HY Master II Index is anindex for high yield corporate bonds. It is designed to measure the broad high yield market, including lower-rated securities. The BOAML HY BB-B Constrained is a subset of the BoAMLHY Master II Index including all securities rated BB1 through B3, inclusive. The CS Inst European Leveraged Loan Index contains only institutional loan facilities priced above 90 ,excluding TL and TLa facilities and loans rated CC, C or are in default. The S&P European Leveraged Loan Index reflects the market-weighted performance of institutional leveraged loanportfolios investing in European credits. While the returns of these strategies reflect the reinvestment of income and dividends, none of the indices presented in the chart above reflect suchreinvestment, which has the effect of increasing the reported relative performance of these strategies as compared to the indices. Furthermore, these indices are not subject to managementfees, incentive allocations or expenses.(2)Performance is based on a blended composite of Bank Loans Plus High Yield strategy accounts. The Benchmark used for purposes of comparison for the Bank Loans Plus High Yieldstrategy is based on 65% S&P/LSTA Loan Index and 35% BoAML HY Master II Index.(3)The Opportunistic Credit strategy invests in high yield securities and corporate loans with no preset allocation. The Benchmark used for purposes of comparison for the OpportunisticCredit strategy presented herein is based on the BoAML HY Master II Index. Funds within this strategy may utilize third party financing facilities to enhance investment returns. In caseswhere financing facilities are used, the amounts drawn on the facility are deducted from the assets of the fund in the calculation of net asset value, which tends to increase returns when netasset value grows over time and decrease returns when net asset value decreases over time.(4)Performance is based on a composite of portfolios that primarily invest in leveraged loans. The Benchmark used for purposes of comparison for the Bank Loans strategy is based on theS&P/LSTA Loan Index.(5)Performance is based on a composite of portfolios that primarily invest in high yield securities. The Benchmark used for purposes of comparison for the High Yield strategy is based on theBoAML HY Master II Index.(6)Performance is based on a composite of portfolios that primarily invest in leveraged loans rated B-/Baa3 or higher. The Benchmark used for purposes of comparison for the Bank Loansstrategy is based on the S&P/LSTA BB/B Loan Index.(7)The returns presented are calculated based on local currency.(8)Performance is based on a composite of portfolios that primarily invest in higher quality leveraged loans. The Benchmark used for purposes of comparison for the European Senior Loansstrategy is based on the CS Inst West European Leveraged Loan Index.Our alternative credit strategies primarily invest in more illiquid instruments through private investment funds, BDCs and separately managed accounts. Thefollowing table presents information regarding our Public Markets alternative credit commingled funds where investors are subject to capital commitments frominception to December 31, 2016 . Some of these funds have been investing for less than 24 months, and thus their performance is less meaningful and not includedbelow. Past performance is no guarantee of future results.19Table of ContentsCredit Strategies: Fund Performance Amount Fair Value of Investments Public Markets Investment Funds Inception Date Commitment Invested (1) Realized (1) Unrealized Total Value GrossIRR (2) Net IRR (2) Multiple of InvestedCapital (3)($ in Millions) Special Situations Fund Dec-12 $2,274.3 $2,165.2 $542.2 $2,003.6 $2,545.8 7.1 % 4.8 % 1.2Special Situations Fund II Dec-14 3,363.6 1,090.6 15.7 922.9 938.6 (15.8)% (19.2)% 0.9Mezzanine Partners Mar-10 1,022.8 886.1 753.5 443.9 1,197.4 12.0 % 8.0 % 1.4Private Credit OpportunitiesPartners II Dec-15 548.1 — — 9.9 9.9 N/A N/A N/ALending Partners Dec-11 460.2 405.3 244.6 267.0 511.6 8.3 % 7.3 % 1.3Lending Partners II Jun-14 1,335.9 848.2 120.0 917.4 1,037.4 16.4 % 13.9 % 1.2Lending Partners Europe Mar-15 847.6 169.5 13.0 185.7 198.7 N/A N/A N/ARevolving Credit Partners May-15 510.0 — 16.1 (13.1) 3.0 N/A N/A N/AAll Funds $10,362.5 $5,564.9 $1,705.1 $4,737.3 $6,442.4 (1) Recycled capital is excluded from the amounts invested and realized. (2) These credit funds utilize third party financing facilities to provide liquidity to such funds, and in such event IRRs are calculated from the time capital contributions are due from fundinvestors to the time fund investors receive a related distribution from the fund. The use of such financing facilities generally decreases the amount of invested capital that would otherwisebe used to calculate IRRs, which tends to increase IRRs when fair value grows over time and decrease IRRs when fair value decreases over time. IRRs measure the aggregate annualcompounded returns generated by a fund’s investments over a holding period and are calculated taking into account recycled capital. Net IRRs presented are calculated after giving effect tothe allocation of realized and unrealized carried interest and the payment of any applicable management fees. Gross IRRs are calculated before giving effect to the allocation of carriedinterest and the payment of any applicable management fees. (3) The multiples of invested capital measure the aggregate value generated by a fund’s investments in absolute terms. Each multiple of invested capital is calculated by adding together thetotal realized and unrealized values of a fund’s investments and dividing by the total amount of capital invested by the investors. The use of financing facilities generally decreases theamount of invested capital that would otherwise be used to calculate multiples of invested capital, which tends to increase multiples when fair value grows over time and decrease multipleswhen fair value decreases over time. Such amounts do not give effect to the allocation of any realized and unrealized returns on a fund’s investments to the fund’s general partner pursuantto a carried interest or the payment of any applicable management fees and are calculated without taking into account recycled capital.Such past performance may not be representative of performance in any given period. For additional information regarding impact of market conditions on thevalue and performance of our investments, see “Risk Factors-Risks Related to Our Business-Difficult market conditions can adversely affect our business in manyways, including by reducing the value or performance of the investments that we manage or by reducing the ability of our funds to raise or deploy capital, each ofwhich could negatively impact our net income and cash flow and adversely affect our financial condition.” and “-Risks Related to the Assets We Manage-Thehistorical returns attributable to our funds, including those presented in this report, should not be considered as indicative of the future results of our funds or of ourfuture results or of any returns on our common units.”Investment ApproachOur approach to making investments focuses on creating investment portfolios that seek to generate attractive risk‑adjusted returns by selecting investmentsthat may be made at attractive prices, subjecting investments to regular monitoring and oversight, and, for more liquid investments, making buy and sell decisionsbased on price targets and relative value parameters. The firm employs both “top-down” and “bottom-up” analyses when making investments. Our top-downanalysis involves, as appropriate, a macro analysis of relative asset valuations, long‑term industry trends, business cycles, regulatory trends, interest rateexpectations, credit fundamentals and technical factors to target specific industry sectors and asset classes in which to invest. From a bottom‑up perspective, ourinvestment decision is predicated on an investment thesis that is developed using our proprietary resources and knowledge and due diligence.Sourcing and Selecting InvestmentsWe source investment opportunities through a variety of channels, including internal deal generation strategies and the firm’s global network of contacts atmajor companies, corporate executives, commercial and investment banks, financial intermediaries, other private equity sponsors and other investment andadvisory institutions. We are also provided with opportunities to invest in certain strategies, where appropriate, in the securities of KKR’s private equity portfoliocompanies, though there are limitations across the platform on the maximum size of such KKR-affiliated investments.20Table of ContentsDue Diligence and the Investment DecisionOnce a potential investment has been identified, our investment professionals screen the opportunity and make a preliminary determination concerningwhether we should proceed with further diligence. When evaluating the suitability of an investment for our funds, we typically employ a relative value frameworkand subject the investment to due diligence. This review considers many factors including, as appropriate, expected returns, capital structure, credit ratings,historical and projected financial data, the issuer’s competitive position, the quality and track record of the issuer’s management team, margin stability, andindustry and company trends. Investment professionals use the services of outside advisors and industry experts as appropriate to assist them in the due diligenceprocess and, when relevant and permitted, leverage the knowledge and experience of our Private Markets investment professionals. Strategy‑specific investmentcommittees monitor all due diligence practices.Monitoring InvestmentsWe monitor our portfolios of investments using, as applicable, daily, quarterly and annual analyses. Daily analyses include morning market meetings, industryand company pricing runs, industry and company reports and discussions with the firm’s Private Markets investment professionals on an as‑needed basis.Quarterly analyses include the preparation of quarterly operating results, reconciliations of actual results to projections and updates to financial models (baselineand stress cases). Annual analyses involve conducting internal audits, and testing compliance with monitoring and documentation requirements.Credit StrategiesOur credit business pursues investments in leveraged credit strategies, such as leveraged loans and high yield bonds, and alternative credit strategies, such asspecial situations, mezzanine or private credit opportunities, direct lending and revolving credit. We pursue these investments across a range of vehicles, includinginvestment funds and separately managed accounts, for which we receive a fee and in certain cases an incentive fee or carried interest.We also manage structured credit vehicles in the form of collateralized loan obligation transactions, or CLOs, that hold leveraged loans, high-yield bonds or acombination of both. CLOs are typically structured as special purpose investment vehicles which acquire, monitor and, to varying degrees, manage a pool of creditassets. The CLOs generally serve as long term financing for leveraged credit investments and as a way to minimize refinancing risk, minimize maturity risk andsecure a fixed cost of funds over an underlying market interest rate. We may receive a fee for managing certain CLOs.We also serve as the registered investment adviser or sub-adviser to registered investment companies. The management fees we are paid for managingregistered investment companies are generally subject to contractual rights that require their board of directors to provide prior notice (or, in the case of thebusiness development company, or BDC, we manage, the investment adviser) in order to terminate our investment management services.Leveraged Credit. Our leveraged credit strategies are principally directed at investing in leveraged loans, high-yield bonds or a combination of both. Ouropportunistic credit strategy seeks to deploy capital across investment themes that take advantage of credit market dislocations, spanning asset types and liquidityprofiles. We had AUM of $18.8 billion in this strategy as of December 31, 2016 .Alternative Credit. Our alternative credit strategies consist of special situations and private credit strategies.Special Situations. We seek to make opportunistic investments largely in distressed companies through our special situations investment strategy. Theseinvestments include, distressed investments (including post‑ restructuring equity), control‑oriented opportunities, rescue financing (debt or equity investmentsmade to address covenant, maturity or liquidity issues), debtor-in-possession or exit financing, and other event-driven investments in debt or equity. We had AUMof $7.0 billion in this strategy as of December 31, 2016 .Private Credit. Our private credit strategies seek to leverage the knowledge and relationships developed in the leveraged credit business. These strategiesinclude direct lending, private credit opportunities and revolving credit strategies.Direct Lending. We seek to make investments in proprietarily sourced primarily senior debt financings for middle-market companies through ourdirect lending strategy. We had AUM of $5.9 billion in this strategy as of December 31, 2016 .21Table of ContentsPrivate Credit Opportunities. Through this strategy, we seek to make mezzanine investments in directly sourced third-party mezzanine andmezzanine-like transactions and also seek asset-based credit opportunities across financial and hard assets. These investments often consist of mezzaninedebt, which generates a current yield, coupled with marginal equity exposure with additional upside potential. We had AUM of $2.4 billion in thisstrategy as of December 31, 2016 .Revolving Credit. Our revolving credit strategy invests in senior secured revolving credit facilities and had AUM of $0.6 billion in this strategy as ofDecember 31, 2016 .Hedge FundsOverviewOur hedge fund business is comprised of customized hedge fund portfolios, hedge fund-of-fund solutions and direct hedge funds managed by KKR Prisma andminority stakes in other hedge fund managers. Within our hedge funds business, as of December 31, 2016 , KKR Prisma managed $9.9 billion of AUM and ourstrategic partnerships with other hedge fund managers accounted for $10.1 billion of AUM.On February 6, 2017, KKR and PAAMCO announced that they entered into a strategic transaction to create a new liquid alternatives investment firm bycombining PAAMCO and KKR Prisma. See "Recent Developments."KKR PrismaKKR Prisma constructs and manages customized hedge fund portfolios, primarily in the form of hedge fund-of-funds vehicles, and direct hedge funds. It seeksto deliver superior performance by utilizing portfolio construction techniques and an integrated, quantitative approach to risk management. In managingcustomized hedge fund portfolios, KKR Prisma takes a specialist approach by seeking leading niche hedge fund managers in various alternative investmentstrategies. Various strategies are offered to investors, including moderate and low-volatility, equity, credit and opportunistic, in both commingled and separateaccount portfolios. For the period beginning in June 2004 through December 31, 2016 , our low volatility strategy, which consists of the majority of our hedgefund-of-funds AUM and FPAUM, generated a gross annualized return of 6.4%. In its direct hedge fund strategies, KKR Prisma aims to construct portfolios withconcentrated holdings or themes sourced from a subset of third-party hedge fund managers or by leveraging KKR's internal expertise across industries, especiallyin credit. KKR Prisma also provides hedge fund advisory services to institutional investors.Strategic PartnershipsThrough our Public Markets segment, we also have developed strategic partnerships by acquiring minority stakes in other hedge fund managers. In thisbusiness we have a 24.9% interest in Marshall Wace LLP, a leading global liquid alternatives manager, a 24.9% interest in Nephila Capital Ltd., or Nephila, aninvestment manager focused on investing in natural catastrophe and weather risk, a 24.9% interest in BlackGold Capital Management L.P., or BlackGold, acredit‑oriented investment manager focused on investing in energy and hard asset investments. We have also seeded Acion Partners Limited, a Hong Kong basedinvestment manager that manages Asian event driven investments. 22Table of ContentsPublic Markets Vehicle StructuresThe table below presents information as of December 31, 2016 , based on the investment funds, vehicles or accounts offered by our Public Markets segment. Our funds, vehicles and accounts have been sorted based upon their primary investment strategies. However, the AUM and FPAUM presented for each line in thetable includes certain investments from non-primary investment strategies, which is permitted by their investment mandates, for purposes of presenting the fees andother terms for such funds, vehicles and accounts.($ in millions) AUM FPAUM Typical ManagementFee Rate Incentive Fee /CarriedInterest PreferredReturn Durationof CapitalLeveraged Credit: Leveraged Credit SMAs/Funds $8,453 $7,829 0.35%-1.50% Various (1) Various (1) Subject to redemptionsCLO’s 8,943 8,943 0.40%-0.50% Various (1) Various (1) 10-14 Years (2)Total Leveraged Credit 17,396 16,772 Alternative Credit: (3) Special Situations 7,937 5,011 0.90%-1.75% (4) 10.00-20.00% 8.00-12.00% 8-15 Years (2)Private Credit 6,027 3,559 0.50%-1.50% 10.00-20.00% 5.00-8.00% 8-15 Years (2)Total Alternative Credit 13,964 8,570 Hedge Funds (5) 20,020 19,567 0.50%-2.00% Various (1) Various (1) Subject to redemptionsBusiness Development Companies (6) 4,360 4,360 1.00% 10.00% 7.00% 7 yearsTotal $55,740 $49,269 (1)Certain funds and CLOs are subject to a performance fee in which the manager or general partner of the funds share in up to 20% (in the majority of our hedge fund solutions business, upto 10%) of the net profits earned by investors in excess of performance hurdles (generally tied to a benchmark or index) and subject to a provision requiring the funds and vehicles to regainprior losses before any performance fee is earned.(2)Duration of capital is measured from inception. Inception dates for CLOs were between 2005 and 2016 and for separately managed accounts and funds investing in alternative creditstrategies from 2009 through 2016.(3)Our alternative credit funds generally have investment periods of 3 to 5 years and our newer alternative credit funds generally earn fees on invested capital during the investment period.(4)Lower fees on uninvested capital in certain vehicles.(5)Hedge Funds include KKR's hedge fund solutions platform and KKR's pro-rata portion of AUM and FPAUM of strategic partnerships, which consist of minority stakes in other hedge fundmanagers.(6)Consists of Corporate Capital Trust (CCT) and Corporate Capital Trust II, which are BDCs sub-advised by KKR. These vehicles invest in both leveraged credit and private creditstrategies. On or before December 2018, the CCT Board of Directors is required to consider liquidity options for shareholders which could have a range of outcomes from a public listing toasset liquidation which could affect our AUM and FPAUM. This vehicle invests in both leveraged credit and private credit strategies.Capital Markets Our Capital Markets segment is comprised primarily of our global capital markets business. Our capital markets business supports our firm, our portfoliocompanies and third-party clients by developing and implementing both traditional and non-traditional capital solutions for investments or companies seekingfinancing. These services include arranging debt and equity financing for transactions, placing and underwriting securities offerings and providing other types ofcapital markets services. When we underwrite an offering of securities or a loan on a firm commitment basis, we commit to buy and sell an issue of securities orindebtedness and generate revenue by purchasing the securities or indebtedness at a discount or for a fee. When we act in an agency capacity, we generate revenuefor 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 LLCis an SEC-registered broker-dealer and a FINRA member, and we are also registered or authorized to carry out certain broker-dealer activities in various countriesin North America, Europe, Asia-Pacific and the Middle East. Our third party capital markets activities are generally carried out through MCS Capital Markets LLC,and non-bank financial companies, or NBFCs, in India.23Table of ContentsClient & Partner GroupWe have a Client & Partner Group that is responsible for raising capital for us globally across all products, expanding our client relationships across assetclasses and across types of fund investors, developing products to meet our clients’ needs, and servicing existing fund investors and products. We also providefundraising services to fund managers in whom we have invested through our stakes business. As of December 31, 2016 , we had over 80 executives andprofessionals dedicated to our Client & Partner Group.As of December 31, 2016 , we had 996 investors in funds across all our strategies, which reflect the addition of over 120 investors during the year. On average,a fund investor is invested in approximately 1.7 of our products as of December 31, 2016 . The following charts detail our investor base by type and geography asof December 31, 2016 . _________________________(1)Based on the AUM of our Private Markets investment funds, Private Markets co‑investment vehicles, and Public Markets separately managed accounts and investment funds. Thesecharts exclude general partner commitments, assets managed through CLOs, and assets managed by other asset managers with which KKR has formed strategic partnerships whereKKR does not hold more than a 50% ownership interest. Allocations are assigned to a type or geographic region according to subscriptions received from a limited partner.Principal Activities Through our Principal Activities segment, we manage the firm’s own assets on our balance sheet and deploy capital to support and grow our businesses. OurPrincipal Activities segment uses our balance sheet assets to support our investment management and capital markets businesses. Typically, the funds in ourPrivate Markets and Public Markets businesses contractually require us, as general partner of the funds, to make sizable capital commitments from time to time.We believe our general partner commitments are indicative of the conviction we have in a given fund’s strategy, which assists us in raising new funds from limitedpartners. We also use our balance sheet to acquire investments in order to help establish a track record for fundraising purposes in new strategies. We may also useour own capital to seed investments for new funds, to bridge capital selectively for our funds’ investments or finance strategic acquisitions and partnerships,although the financial results of an acquired business or strategic partnership may be reported in our other segments.Our Principal Activities segment also provides the required capital to fund the various commitments of our Capital Markets business when underwriting orsyndicating securities, or when providing term loan commitments for transactions involving our portfolio companies and for third parties. Our Principal Activitiessegment also holds assets that may be utilized to satisfy regulatory requirements for our Capital Markets business and risk retention requirements for our CLObusiness.24Table of ContentsWe also make opportunistic investments through our Principal Activities segment, which include co-investments alongside our Private Markets and PublicMarkets funds, as well as make Principal Activities investments that do not involve our Private Markets or Public Markets funds.We endeavor to use our balance sheet strategically and opportunistically to generate an attractive risk-adjusted return on equity in a manner that is consistentwith our fiduciary duties and in compliance with applicable laws.The chart below presents the holdings of our Principal Activities segment by asset class as of December 31, 2016 .(1) General partner commitments in our funds are included in the various asset classes shown above. Assets and revenues of other asset managers with which KKR has formed strategicpartnerships where KKR does not hold more than 50% ownership interest are not included in our Principal Activities segment but are reported in the financial results of our other segments.Private Equity and Other Equity includes KKR private equity funds, co-investments alongside such KKR sponsored private equity funds and other opportunistic investments. However, equityinvestments in other asset classes, such as real estate, special situations and energy appear in these other asset classes. Other Credit consists of liquid credit and specialty finance strategies.CompetitionWe compete with other investment managers for both fund investors and investment opportunities. The firm’s competitors consist primarily of sponsors ofpublic and private investment funds, real estate development companies, business development companies, investment banks, commercial finance companies andoperating companies acting as strategic buyers. We believe that competition for fund investors is based primarily on investment performance, investor liquidity andwillingness to invest, investor perception of investment managers’ drive, focus and alignment of interest, business reputation, duration of relationships, quality ofservices, pricing, fund terms including fees, and the relative attractiveness of the types of investments that have been or are to be made. We believe thatcompetition for investment opportunities is based primarily on the pricing, terms and structure of a proposed investment and certainty of execution. In addition tothese traditional competitors within the global investment management industry, we also face competition from local and regional firms, financial institutions andsovereign wealth funds, in the various countries in which we invest. In certain emerging markets, local firms may have more established relationships with thecompanies in which we are attempting to invest. These competitors often fall into one of the aforementioned categories but in some cases may represent new typesof fund investors, including high net worth individuals, family offices and state-sponsored entities.There are numerous funds focused on private equity, real assets, growth equity, credit and hedge fund strategies that compete for investor capital. Fundmanagers have also increasingly adopted investment strategies outside of their traditional focus. For example, funds focused on credit and equity strategies havebecome active in taking control positions in companies,25Table of Contentswhile private equity funds have acquired minority equity or debt positions in publicly listed companies. This convergence could heighten competition forinvestments. Furthermore, as institutional fund investors increasingly consolidate their relationships for multiple investment products with a few investment firms,competition for capital from such institutional fund investors may become more acute.Some of the entities that we compete with as an investment firm may have greater financial, technical, marketing and other resources and more personnel thanus and, in the case of some asset classes, longer operating histories, more established relationships or greater experience. Several of our competitors also haveraised, or may raise, significant amounts of capital and have investment objectives that are similar to the investment objectives of our funds, which may createadditional competition for investment opportunities. Some of these competitors may also have lower costs of capital and access to funding sources that are notavailable to us, which may create competitive advantages for them. For example, master limited partnerships, or MLPs, which typically invest in oil and gas assets,may have a lower cost of capital than, and may compete with our energy funds for investment opportunities. In addition, some of these competitors may havehigher risk tolerances, different risk assessments or lower return thresholds, which could allow them to consider a wider range of investments and to bid moreaggressively than us for investments. Strategic buyers may also be able to achieve synergistic cost savings or revenue enhancements with respect to a targetedportfolio company, which may provide them with a competitive advantage in bidding for such investments.We expect to compete as a capital markets business primarily with investment banks and independent broker‑dealers in the North America, Europe, Asia‑Pacific and the Middle East. We principally focus our capital markets activities on the firm, our portfolio companies and fund investors, but we also seek to serviceother third parties. While we generally target customers with whom we have existing relationships, those customers may have similar relationships with the firm’scompetitors, many of whom will have access to competing securities transactions, greater financial, technical or marketing resources or more establishedreputations than us. The limited operating history of our capital markets business could make it difficult for us to compete with established investment banks orbroker‑dealers, participate in capital markets transactions of issuers or successfully grow the firm’s capital markets business over time.Competition is also intense for the attraction and retention of qualified employees and consultants. Our ability to continue to compete effectively in ourbusinesses will depend upon our ability to attract new employees and consultants and retain and motivate our existing employees and consultants.Employees, Consultants and AdvisorsAs of December 31, 2016 , we employed approximately 1,200 people worldwide:Investment Professionals368Other Professionals554Support Staff256Total Employees (1)1,178 (1) Does not include operating consultants and other consultants who provide services to us or our funds.Investment ProfessionalsOur 368 investment professionals come from diverse backgrounds in private equity, real assets, credit, hedge funds and other asset classes and includeexecutives with operations, strategic consulting, risk management, liability management and finance experience. As a group, these professionals provide us with astrong global team for identifying attractive investment opportunities, creating value, and generating superior returns.Other ProfessionalsOur 554 other professionals come from diverse backgrounds in capital markets, economics, capital raising, client services, public affairs, finance, tax, legal,compliance, human resources, and information technology. As a group, these professionals provide us with a strong team for overseeing investments andperforming capital markets activities, servicing our existing fund investors and creating relationships with new fund investors globally. Additionally, a majority ofthese other professionals are responsible for supporting the global infrastructure of KKR.KKR CapstoneWe have developed an institutionalized process for creating value in investments. As part of our effort, we utilize a team of 52 operating consultants at KKRCapstone, who are not KKR employees but work exclusively with our investment26Table of Contentsprofessionals and portfolio company management teams or our designees. With professionals in North America, Europe and the Asia‑Pacific, KKR Capstoneprovides additional expertise for assessing investment opportunities and assisting managers of portfolio companies in defining strategic priorities and implementingoperational changes. During the initial phases of an investment, KKR Capstone’s work seeks to implement our thesis for value creation. These operatingconsultants may assist portfolio companies in addressing top‑line growth, cost optimization and efficient capital allocation and in developing operating andfinancial metrics. Over time, this work shifts to identifying challenges and taking advantage of business opportunities that arise during the life of an investment.KKR Capstone is consolidated in KKR’s financial results for GAAP purposes, but is not a subsidiary or affiliate of KKR.Senior Advisors and Other AdvisorsTo complement the expertise of our investment professionals, we have a team of senior advisors and other advisors. While not KKR employees, they provideus with additional operational and strategic insights. The responsibilities of senior advisors and other advisors include serving on the boards of our portfoliocompanies, helping us source and evaluate individual investment opportunities and assisting portfolio companies with operational matters. These individualsinclude current and former chief executive officers, chief financial officers and chairmen of major corporations and leading positions of public agencies worldwide.27Table of ContentsOrganizational StructureThe following simplified diagram illustrates our organizational structure as of December 31, 2016 , unless otherwise noted. Certain entities depicted belowmay be held through intervening entities not shown in the diagram.(1)KKR Management LLC serves as the general partner of KKR & Co. L.P., which is governed by a Board of Directors consisting of a majority of independent directors. KKRManagement LLC does not hold any economic interests in KKR & Co. L.P. and is owned by senior KKR employees.(2)KKR Holdings is the holding vehicle through which certain of our current and former employees and other persons indirectly own their interest in KKR. KKR Group PartnershipUnits that are held by KKR Holdings are exchangeable for our common units on an one‑for‑one basis, subject to customary conversion rate adjustments for splits, unit distributionsand reclassifications and compliance with applicable vesting and transfer restrictions. As limited partner interests, these KKR Group Partnership Units are non‑voting and do notentitle KKR Holdings to participate in the management of our business and affairs. As of December 31, 2016, KKR Holdings had a 43.9% interest in our business indirectly throughits limited partner interests in the KKR Group Partnerships.(3)Includes holders of 13,800,000 units of our 6.75% Series A Preferred Units issued on March 17, 2016, 6,200,000 units of our 6.50% Series B Preferred Units issued on June 20, 2016and our common units.(4)KKR Holdings holds special non-economic voting units in our partnership that entitle it to cast, with respect to those limited matters that may be submitted to a vote of ourunitholders, a number of votes equal to the number of KKR Group Partnership Units that it holds from time to time.(5)KKR Group Finance Co. LLC is a wholly-owned subsidiary of KKR Management Holdings Corp. and the issuer of our $500 million aggregate principal amount of 6.375% SeniorNotes due 2020 (the “2020 Senior Notes”). The 2020 Senior Notes are guaranteed by KKR & Co. L.P. and the KKR Group Partnerships.(6)KKR Group Finance Co. II LLC is a wholly-owned subsidiary of KKR Management Holdings Corp. and the issuer of our $500 million aggregate principal amount of 5.500% SeniorNotes due 2043 (the “2043 Senior Notes”), which were issued on February 1, 2013. The 2043 Senior Notes are guaranteed by KKR & Co. L.P. and the KKR Group Partnerships.(7)KKR Group Finance Co. III LLC is a wholly‑owned subsidiary of KKR Management Holdings Corp. and the issuer of our $1,000 million aggregate principal amount of 5.125%Senior Notes due 2044 (the “2044 Senior Notes”), which were issued on May 29, 2014 and on March 18, 2015. The 2044 Senior Notes are guaranteed by KKR & Co. L.P. and theKKR Group Partnerships.(8)Because the income of KKR Management Holdings L.P. is likely to be primarily non‑qualifying income for purposes of the qualifying income exception to the publicly tradedpartnership rules, we formed KKR Management Holdings Corp., which is subject to taxation as a corporation for U.S. federal income tax purposes, to hold our KKR GroupPartnership Units in KKR Management Holdings L.P. Accordingly, our allocable share of the taxable income of KKR Management Holdings L.P. will be subject to taxation at acorporate rate. KKR Management Holdings L.P., which is treated as a partnership for U.S. federal income tax purposes, was formed to hold interests in our fee generating businessesand other assets that may28Table of Contentsnot generate qualifying income for purposes of the qualifying income exception to the publicly traded partnership rules. KKR Fund Holdings L.P., which is also treated as apartnership for U.S. federal income tax purposes, was formed to hold interests in our businesses and assets that will generate qualifying income for purposes of the qualifying incomeexception to the publicly traded partnership rules. KKR International Holdings L.P. was formed generally to hold certain non‑U.S. assets that may generate non-qualifying incomeunder the U.S. federal income tax laws applicable to publicly traded partnerships. As of February 22, 2017, KKR International Holdings L.P. holds no assets.(9)KKR Management Holdings L.P. is the parent company of Kohlberg Kravis Roberts & Co. L.P., the SEC-registered investment adviser, which in turn is generally the parent companyfor most of KKR’s other management and capital markets subsidiaries including KKR Credit Advisors (US) LLC, Prisma Capital Partners LP and KKR Capital MarketsHoldings L.P., the holding company for KKR Capital Markets LLC. KKR Fund Holdings L.P. is the parent company of KKR Credit Advisors (Ireland).(10)40% of the carried interest earned from our investment funds is allocated to a carry pool, from which carried interest is allocable to our employees and selected other individuals. Nocarried interest has been allocated with respect to co-investments acquired from KPE in the KPE Transaction. Our carry pool is supplemented by allocating for compensation 40% ofcertain other performance-based income.RegulationOur operations are subject to regulation and supervision in a number of jurisdictions. The level of regulation and supervision to which we are subject variesfrom jurisdiction to jurisdiction and is based on the type of business activity involved. We, in conjunction with our outside advisors and counsel, seek to manageour business and operations in compliance with such regulation and supervision. The regulatory and legal requirements that apply to our activities are subject tochange from time to time and may become more restrictive, which may make compliance with applicable requirements more difficult or expensive or otherwiserestrict our ability to conduct our business activities in the manner in which they are now conducted. Changes in applicable regulatory and legal requirements,including changes in their enforcement, could materially and adversely affect our business and our financial condition and results of operations. As a matter ofpublic policy, the regulatory bodies that regulate our business activities are generally responsible for safeguarding the integrity of the securities and financialmarkets and protecting fund investors who participate in those markets rather than protecting the interests of our unitholders.United StatesRegulation as an Investment AdviserWe conduct our advisory business through our investment adviser subsidiaries, including Kohlberg Kravis Roberts & Co. L.P. and its wholly‑ownedsubsidiaries KKR Credit Advisors (US) LLC and Prisma Capital Partners LP, each of which is registered as an investment adviser with the SEC under theInvestment Advisers Act. The investment advisers are subject to the anti‑fraud provisions of the Investment Advisers Act and to fiduciary duties derived from theseprovisions which apply to our relationships with our advisory clients globally, including funds that we manage. These provisions and duties impose restrictions andobligations on us with respect to our dealings with our fund investors and our investments, including for example restrictions on agency cross and principaltransactions. Our registered investment advisers are subject to periodic SEC examinations and other requirements under the Investment Advisers Act and relatedregulations primarily intended to benefit advisory clients. These additional requirements relate, among other things, to maintaining an effective and comprehensivecompliance program, recordkeeping and reporting requirements and disclosure requirements. The Investment Advisers Act generally grants the SEC broadadministrative powers, including the power to limit or restrict an investment adviser from conducting advisory activities in the event it fails to comply with federalsecurities laws. Additional sanctions that may be imposed for failure to comply with applicable requirements include the prohibition of individuals from associatingwith an investment adviser, the revocation of registrations and other censures and fines.KKR Credit Advisors (US) LLC is also subject to regulation under the Investment Company Act as an investment adviser to a registered investment company.The KKR Income Opportunities Fund is a closed‑end management company registered under the Investment Company Act. The closed‑end management companyand KKR Credit Advisors (US) LLC are subject to the Investment Company Act and the rules thereunder, which among other things regulate the relationshipbetween a registered investment company and its investment adviser and prohibit or restrict principal transactions and joint transactions.Regulation as a Broker-DealerKKR Capital Markets LLC, one of our subsidiaries, is registered as a broker-dealer with the SEC under the Exchange Act and in all 50 U.S. States and U.S.territories and is a member of the Financial Industry Regulatory Authority, or FINRA. MCS Capital Markets LLC, one of our subsidiaries, is registered as a broker-dealer with the SEC under the Exchange Act and in 35 U.S. States. As registered broker‑dealers, KKR Capital Markets LLC and MCS Capital Markets LLC aresubject to periodic SEC and FINRA examinations and reviews. A broker-dealer is subject to legal requirements covering all aspects of its securities business,including sales and trading practices, public and private securities offerings, use and safekeeping of29Table of Contentscustomers’ funds and securities, capital structure, record-keeping and retention and the conduct and qualifications of directors, officers, employees and otherassociated persons. These requirements include the SEC’s “uniform net capital rule,” which specifies the minimum level of net capital that a broker‑dealer mustmaintain, requires a significant part of the broker-dealer’s assets to be kept in relatively liquid form, imposes certain requirements that may have the effect ofprohibiting a broker-dealer from distributing or withdrawing its capital and subjects any distributions or withdrawals of capital by a broker-dealer to noticerequirements. These and other requirements also include rules that limit a broker-dealer’s ratio of subordinated debt to equity in its regulatory capital composition,constrain a broker-dealer’s ability to expand its business under certain circumstances and impose additional requirements when the broker-dealer participates insecurities offerings of affiliated entities. Violations of these requirements may result in censures, fines, the issuance of cease-and-desist orders, revocation oflicenses or registrations, the suspension or expulsion from the securities industry of the broker-dealer or its officers or employees or other similar consequences byregulatory bodies.United KingdomWe have several subsidiaries which are authorized and regulated by the United Kingdom Financial Conduct Authority, or FCA, under the Financial Servicesand Markets Act 2000, or FSMA, and are authorized in the United Kingdom with permission to engage in certain specified activities. FSMA and related rulesgovern most aspects of investment business, including sales, research and trading practices, provision of investment advice, corporate finance, use and safekeepingof client funds and securities, regulatory capital, record keeping, margin practices and procedures, approval standards for individuals, anti‑money laundering,periodic reporting and settlement procedures. The FCA is responsible for administering these requirements and our compliance with the FSMA and related rules.Violations of these requirements may result in censures, fines, imposition of additional requirements, injunctions, restitution orders, revocation or modification ofpermissions or registrations, the suspension or expulsion from certain “controlled functions” within the financial services industry of officers or employeesperforming such functions or other similar consequences.KKR Capital Markets Limited has permission to engage in a number of regulated activities regulated under FSMA, including dealing as principal or agent andarranging deals in relation to certain types of specified investments and arranging the safeguarding and administration of assets. KKR Capital Markets Limited alsobenefits from a passport under the single market directives to offer services cross border into all countries in the European Economic Area and Gibraltar. KohlbergKravis Roberts & Co. Partners LLP has permission to engage in a number of regulated activities including advising on and arranging deals relating to corporatefinance business in relation to certain types of specified investments. KKR Asset Management Partners LLP has permission to engage in a number of regulatedactivities including advising on and arranging deals in relation to certain types of specified investments. KKR Credit Advisors (UK) has permission to advise,arrange, manage and deal as agent in certain types of investments. Prisma Capital Management International LLP is authorized to carry on any investment servicesand activities on a regular basis except reception and transmission of orders in relation to one or more financial instruments or investment advice.Other JurisdictionsCertain other subsidiaries or funds that we advise are registered with, have been licensed by or have obtained authorizations to operate in their respectivejurisdictions outside of the United States. These registrations, licenses or authorizations relate to providing investment advice, broker-dealer activities, marketing ofsecurities and other regulated activities. Failure to comply with the laws and regulations governing these subsidiaries and funds that have been registered, licensedor authorized could expose us to liability and/or damage our reputation.KKR Credit Advisors (Ireland) and KKR Alternative Investment Management are regulated by the Central Bank of Ireland. KKR Credit Advisors (Ireland) isauthorized to carry out a number of regulated activities including receiving and transmitting orders, portfolio management and providing investment advice. KKRAlternative Investment Management is an authorized EU alternative investment manager permitted to conduct portfolio management, risk management and certainadministrative activities.KKR Capital Markets LLC and MCS Capital Markets LLC, respectively, are also registered as an international dealer under the Securities Act (Ontario). Thisregistration permits us to trade in non‑Canadian equity and debt securities with certain types of investors located in Ontario, Canada.KKR Capital Markets Japan Ltd., a joint stock corporation, is registered as a Type I and Type II Financial Instruments Business Operator (broker-dealer) underthe Financial Instruments and Exchange Act of Japan, and a money lender under the Money Lending Business Act of Japan.30Table of ContentsKKR MENA Limited, a Dubai International Financial Centre company, is licensed to arrange credit or deals in investments, advise on financial products orcredit, and manage assets, and is regulated by the Dubai Financial Services Authority.KKR Saudi Limited is licensed by the Capital Market Authority in Saudi Arabia and is authorized for the activity of arranging in the securities business.KKR Australia Pty Limited and KKR Australia Investment Management Pty Limited are Australian financial services licensed and are authorized to provideadvice on and deal in financial products for wholesale clients, and are regulated by the Australian Securities and Investments Commission.KKR Capital Markets Asia Limited is licensed by the Securities and Futures Commission in Hong Kong to carry on dealing in securities and advising onsecurities regulated activities.KKR Singapore Pte. Ltd. holds a capital markets services license to conduct fund management for accredited and/or institutional investors only, and isregulated by Monetary Authority of Singapore.KKR Holdings Mauritius, Ltd. and KKR Account Adviser (Mauritius), Ltd. are unrestricted investment advisers authorized to manage portfolios of securitiesand give advice on securities transactions, and are regulated by the Financial Services Commission, Mauritius.KKR Account Adviser (Mauritius), Ltd. is registered as a Foreign Portfolio Investor, or FPI, with the Securities Exchange Board of India, or SEBI, under theSEBI (Foreign Portfolio Investor) Regulations, 2014 pursuant to which it can make investments in listed and unlisted securities of Indian issuers.KKR Mauritius Direct Investments I, Ltd. is registered as a Foreign Portfolio Investor, or FPI, with SEBI under the SEBI (Foreign Portfolio Investor)Regulations, 2014 pursuant to which it can make investments in listed and unlisted securities of Indian issuers, and is incorporated as an investment holdingcompany in Mauritius regulated by the Financial Services Commission, Mauritius.KKR India Financial Services Private Limited is registered with the Reserve Bank of India as a non‑deposit taking non‑banking financial company and isauthorized to undertake lending and financing activities.KKR Capital Markets India Private Limited is licensed by the SEBI as a merchant bank that is authorized to execute capital market mandates, underwriteissues, offer investment advisory and other consultancy/advisory services. In addition, KKR Capital Markets India Private Limited is the investment manager andsponsor of four alternative investment funds, registered with SEBI under the SEBI (Alternative Investment Funds) Regulations, 2012.Silverview Investments Pte. Ltd., Silverview Portfolio Investments Pte. Ltd. (earlier known as KKR Asia II Portfolio Investors Pte. Ltd.), Moneyline PortfolioInvestments Limited are registered as a FPI with SEBI under the SEBI (Foreign Portfolio Investor) Regulations pursuant to which they can make investments inlisted and unlisted securities of Indian issuers.KKR India Asset Finance Private Limited (formerly known as Motichand Finance Private Limited) is registered with the Reserve Bank of India as anon‑deposit taking non‑banking financial company and is authorized to undertake lending and financing activities.Daena Venture Capital Investments, Ltd. is incorporated as an investment holding company in Mauritius regulated by the Financial Services Commission,Mauritius and was registered with SEBI as a foreign venture capital investor, or FVCI; however the FVCI certificated of registration has been surrendered witheffect from December 18, 2015.KKR Asia II Venture Investments Pte. Ltd. is registered with SEBI as a foreign venture capital investor, or FVCI, under the SEBI (Foreign Venture CapitalInvestors) Regulations, 2000 pursuant to which it can make certain investments in securities of Indian issuers and is incorporated as an investment holdingcompany in Singapore.From time to time, one or more of our investment funds or their related investment vehicles may be regulated as a mutual fund by the Cayman IslandsMonetary Authority, regulated as an investment limited partnership by the Central Bank of Ireland, listed on the Irish Stock Exchange, notified with the FinancialServices Agency of Japan for sale pursuant to certain private placement exemptions and/or for investment pursuant to certain exemption, registered with theFinancial Supervisory Service of the Republic of Korea, licensed by or granted in principal approval from SEBI, subject to the regulatory supervision of the31Table of ContentsCommission de Surveillance du Secteur Financier of Luxembourg, notified with the Netherlands Authority for Financial Markets for sale pursuant to certainprivate placement exemptions, or registered under the Investment Company Act.There are a number of legislative and regulatory initiatives in the United States and in Europe that could significantly affect our business. Please see “RiskFactors-Risks Related to Our Business-Extensive regulation of our businesses affects our activities and creates the potential for significant liabilities and penalties.The possibility of increased regulatory focus or legislative or regulatory changes could result in additional burdens on our business.”Website and Availability of SEC FilingsOur website address is www.kkr.com . Information on our website is not incorporated by reference herein and is not a part of this Form 10-K. We makeavailable free of charge on our website or provide a link on our website to our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reportson Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicableafter those reports are electronically filed with, or furnished to, the SEC. To access these filings, go to the “KKR & Co. L.P.” portion of our “Investor Center” pageon our website, then click on “SEC Filings”. You may also read and copy any document we file at the SEC’s public reference room located at 100 F Street, N.E.,Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. In addition these reports and the otherdocuments we file with the SEC are available at a website maintained by the SEC at www.sec.gov .From time to time, we may use our website as a channel of distribution of material information. Financial and other material information regarding ourcompany is routinely posted on and accessible at www.kkr.com . In addition, you may automatically receive e-mail alerts and other information about our companyby enrolling your e-mail address by visiting the “E-mail Alerts” section at under the “KKR & Co. L.P.” section of the “Investor Center” heading at www.kkr.com .32Table of ContentsITEM 1A. RISK FACTORS Investing in our securities involves risk. Persons investing in our securities should carefully consider the risks described below and the other informationcontained in this report and other filings that we make from time to time with the SEC, including our consolidated and combined financial statements andaccompanying notes. Any of the following risks could materially and adversely affect our business, financial condition or results of operations. Our business,financial condition or results of operations could also be adversely affected by additional factors that apply to all companies generally, as well as other risks that arenot currently known to us or that we currently view to be immaterial. In any such case, the trading price of our securities could decline and you may lose all or partof your original investment. While we attempt to mitigate known risks to the extent we believe to be practicable and reasonable, we can provide no assurance, andwe make no representation, that our mitigation efforts will be successful.Risks Related to Our BusinessDifficult market conditions can adversely affect our business in many ways, including by reducing the value or performance of the investments that we manageor by reducing the ability of our funds to raise or deploy capital, each of which could negatively impact our net income and cash flow and adversely affect ourfinancial prospects and condition.Our business and the businesses of the companies in which we invest are materially affected by conditions in the financial markets and economic conditions orevents throughout the world, such as interest rates, availability of credit, inflation rates, economic uncertainty, changes in laws (including laws relating to taxation),trade barriers, commodity prices, currency exchange rates and controls and national and international political circumstances (including wars, terrorist acts orsecurity operations). For example, the unprecedented turmoil in the global financial markets during 2008 and 2009 provoked significant volatility of securitiesprices, contraction in the availability of credit and the failure of a number of companies, including leading financing institutions, and had a material adverse effecton our businesses and the businesses of the companies in which we invest. A more recent example of volatility has occurred beginning in the late summer of 2015.The lingering effects of the 2008 global financial crisis and the rise of populist political parties and economic nationalist sentiments have led to increasingpolitical uncertainty and unpredictability in many countries. The attendant risks include greater regulatory uncertainty, for example regarding the posture ofgovernments with respect to taxation and international trade, and greater risk that trade and foreign investment may be restricted. Our business and the businessesof the companies in which we invest, in particular those that rely on cross-border activities, could be materially affected by changes to the existing trade, tariff, andforeign investment practices.Low levels of growth and high levels of government debt in major markets including the United States and Europe persists, and Europe continues toexperience high unemployment and ongoing austerity. The United Kingdom's decision to withdraw from the European Union and the possibility that additionalcountries might leave the European Union has resurfaced. A withdrawal could, among other outcomes, disrupt the free movement of goods, services and peoplebetween the United Kingdom and the European Union and significantly disrupt trade between the United Kingdom and the European Union. A withdrawal by theUnited Kingdom could also act as a catalyst for other countries to withdraw from the European Union, which may result in greater adverse economic effects.The pace of China’s growth has been slow as compared to rates before the financial crisis of 2008 to 2009, which may pose a risk to the economic stability ofChina and its major trading partners. China’s slowing also has the potential to hinder the demand for and prices of many important global commodities andconsequently reduce capital spending in industries dependent on commodity prices. Although lower commodity prices, including the falling price of oil, areexpected to benefit the economies of commodity importing countries, certain of our investments focused on the development, exploration and production of oil andnatural gas properties, as well as the sale of products or services used in the natural resources sector, have and would continue to suffer from such a decline.In addition, favorable market conditions in certain countries may have been and are dependent to some extent on continued monetary policy accommodationsfrom central banks, including the Federal Reserve. Although interest rates have been at historically low levels for the last few years, the Federal Reserve hasindicated an intention to raise interest rates in 2017, thus raising the cost of financing and possibly slowing economic growth in the United States. Furthermore,higher interest rates in the United States could also reduce the relative attractiveness of other global markets, thereby applying pressure to foreign asset values andcurrencies.Such market and economic conditions and events are outside our control and may affect the level and volatility of securities prices and liquidity and as a result,the value of our investments and our financial results. In addition, we may not be33Table of Contentsable to or may choose not to manage our exposure to these conditions and/or events. For example, as of March 31, 2009, the date of the lowest aggregate valuationof our private equity funds during the 2008 and 2009 financial market turmoil, the investments in the private equity funds contributed to us in the KPE Transactionwere marked down to 67% of original cost, and values across all geographies declined. For example, as of March 31, 2009, the European Fund II, EuropeanFund III, 2006 Fund and Asian Fund had multiples of invested capital of 0.5x, 0.6x, 0.7x and 0.8x, respectively. If not reversed, declines in the equity, commodityand debt in the markets would likely cause us to write down our investments and the investments of our funds. Our profitability may also be adversely affected byour fixed costs and the possibility that we would be unable to scale back other costs within a time frame sufficient to match any decreases in net income relating tochanges in market and economic conditions.Unfavorable market conditions may reduce opportunities for our funds to make, exit and realize value from their investments. Challenging market andeconomic conditions, including the impact of changes in tax laws and other regulatory restrictions may result in reduced opportunities for our funds to exit andrealize value from their existing investments and lower than expected returns on existing investments. Although the equity markets are not the only means bywhich we exit investments, in challenging equity markets, our funds may experience greater difficulty in realizing value from investments. In addition, whenfinancing is not available, it is difficult for potential buyers to raise sufficient capital to purchase assets in our funds’ portfolios. Consequently, we may earn lowerthan expected returns on investments, which could cause us to realize diminished or no carried interest. In addition, we may not be able to find suitable investmentsfor the funds to effectively deploy capital, which could adversely affect our ability to raise new funds because we can generally only raise capital for a successorfund following the substantial and successful deployment of capital from the existing fund.In the event of poor performance by existing funds, our ability to raise new funds is impaired. During periods of unfavorable fundraising conditions, pressuresby fund investors for lower fees, different fee sharing arrangements for transaction or other fees, and other concessions. Our newer funds, including all our newerprivate equity funds, have in recent years included performance hurdles, which require us to generate a specified return on investment prior to our right to receivecarried interest, and this requirement will likely continue and the hurdle rate could increase. The outcome of such negotiations could result in our agreement toterms that are materially less favorable to us than for prior funds we have managed. In addition, successor funds raised by us when such unfavorable circumstancesdescribed above exist would also likely result in smaller funds than our comparable predecessor funds. Fund investors may also seek to redeploy capital away fromcertain of our credit or other non‑private equity investment vehicles, which permit redemptions on relatively short notice, in order to meet liquidity needs or investin other asset classes or with other managers. Any of these developments could adversely affect our future revenues, net income, cash flow, financial condition orability to retain our employees. See “-Our inability to raise additional or successor funds could have a material adverse impact on our business” and “-Our investorsin future funds may negotiate to pay us lower management fees and the economic terms of our future funds may be less favorable to us than those of our existingfunds, which could adversely affect our revenues.”During periods of difficult market or economic conditions or slowdowns (which may occur across one or more industries, sectors or geographies), companiesin which we have invested may experience decreased revenues, financial losses, credit rating downgrades, difficulty in obtaining access to financing and increasedfunding costs. These companies may also have difficulty in expanding their businesses and operations or be unable to meet their debt service obligations or otherexpenses as they become due, including amounts payable to us. Negative financial results in our funds’ portfolio companies may result in lower investment returnsfor our investment funds, which could materially and adversely affect our operating results and cash flow. To the extent the operating performance of suchportfolio companies (as well as valuation multiples) deteriorate or do not improve, our funds may sell those assets at values that are less than we projected or evenat a loss, thereby significantly affecting those funds’ performance and consequently our operating results and cash flow and resulting in lower or no carried interestbeing paid to us. Adverse conditions may also increase the risk of default with respect to private equity, credit and other investments that we manage or theabandonment or foreclosure of our real asset investments. Even if economic and market conditions do improve broadly, adverse conditions in particular sectorsmay also cause our performance to suffer. Finally, low interest rates related to monetary stimulus, economic stagnation or deflation may negatively impactexpected returns on all types of investments as the demand for relatively higher return assets increases and the supply decreases. In addition, our Capital Markets segment generates fees through a variety of activities in connection with the issuance and placement of equity and debtsecurities and credit facilities, with the size of fees generally correlated to overall transaction sizes. As a result, the conditions in financial markets as describedabove, as well as transaction activity in our Private Markets segment and to a lesser extent, Public Markets segment, impact both the frequency and size of feesgenerated by this segment.34Table of ContentsChanges in the debt financing markets may negatively impact the ability of our investment funds, their portfolio companies and strategies pursued with ourbalance sheet assets to obtain attractive financing for their investments or refinance existing debt and may increase the cost of such financing if it is obtained,which could lead to lower‑‑yielding investments and potentially decrease our net income.In the event that our funds are unable to obtain committed debt financing for potential acquisitions or can only obtain debt at an increased interest rate or onunfavorable terms, our funds may have difficulty completing otherwise profitable acquisitions or may generate profits that are lower than would otherwise be thecase, either of which could lead to a decrease in the investment income earned by us. Any failure by lenders to provide previously committed financing can alsoexpose us to potential claims by sellers of businesses which we may have contracted to purchase. Similarly, certain of the strategies pursued using our balancesheet assets rely on the use of leverage, including the issuance of CLOs, and other secured and unsecured borrowings. Our ability to generate returns on these assetsand make cash available for distribution to our unitholders would be reduced to the extent that changes in market conditions cause the cost of our financing toincrease relative to the income that can be derived from the assets acquired and financed. Similarly, our portfolio companies regularly utilize the corporate debtmarkets in order to obtain financing for their operations. To the extent that credit markets render such financing difficult to obtain or more expensive, this maynegatively impact the operating performance of those portfolio companies and, therefore, the investment returns on our funds. In addition, to the extent thatconditions in the credit markets impair the ability of our portfolio companies to refinance or extend maturities on their outstanding debt, either on favorable termsor at all, the operating performance of those portfolio companies may be negatively impacted, which could impair the value of our investment in those portfoliocompanies and lead to a decrease in the investment income earned by us. In some cases, the inability of our portfolio companies to refinance or extend maturitiesmay result in the inability of those companies to repay debt at maturity and may cause the companies to sell assets, undergo a recapitalization or seek bankruptcyprotection, which would also likely impair the value of our investment and lead to a decrease in investment income earned by us.We have significant liquidity requirements, and adverse economic and market conditions may adversely affect our sources of liquidity, which could adverselyaffect our business operations in the future.We expect that our primary liquidity needs will consist of cash required to:•continue to grow our business, including seeding new strategies and funding our capital commitments made to existing and future funds, co‑investmentsand any net capital requirements of our capital markets companies;•warehouse investments in portfolio companies or other investments for the benefit of one or more of our funds, accounts or CLOs pending thecontribution of committed capital by the investors in such vehicles, and advancing capital to them for operational or other needs;•service debt obligations including the payment of obligations upon maturity or redemption, as well as any contingent liabilities that may give rise to futurecash payments;•fund cash operating expenses and amounts recorded for litigation matters;•pay amounts that may become due under our tax receivable agreement with KKR Holdings;•make cash distributions in accordance with our distribution policy for our common units or the terms of our preferred units;•underwrite commitments within our capital markets business;•make future purchase price payments in connection with our proprietary acquisitions, such as our strategic partnership with Marshall Wace;•acquire additional assets for our Principal Activities segment, including other businesses and corporate real estate; and•repurchase KKR & Co. L.P. common units or other securities issued by us.These liquidity requirements are significant and, in some cases, involve capital that will remain invested for extended periods of time. As of December 31,2016, we have approximately $2.6 billion of remaining unfunded capital commitments to our investment funds. Our commitments to our funds will requiresignificant cash outlays over time, and there can be no assurance that we will be able to generate sufficient cash flows from realizations of investments to fundthem. We have also35Table of Contentsused our balance sheet to provide credit support to our general partner's obligations to our funds and to support certain transactions by our funds.In addition, as of December 31, 2016, on a segment basis we had $2.8 billion of indebtedness outstanding under our credit facilities and debt securities and$3.4 billion of cash and short-term investments. This includes KFN’s debt obligations of $398.6 million and KFN’s 7.375% Series A LLC preferred shares of$373.8 million , which do not provide for recourse to KKR beyond the assets of KFN. While we have long‑term committed financings with substantial facilitylimits, the terms of those facilities will expire in 2019 and 2021, and our senior notes become due in 2020, 2043 and 2044, and any borrowings thereunder willrequire refinancing or renewal, which could result in higher borrowing costs, or issuing equity. Depending on credit or other market conditions, we may not be ableto renew all or part of these borrowings or find alternate sources of financing on commercially reasonable terms and we may not be able to raise equity. In addition,the incurrence of additional debt by us or our subsidiaries in the future could result in downgrades of our existing corporate credit ratings, which could limit theavailability of future financing and increase our costs of borrowing.In addition, the underwriting commitments for our capital markets business may require significant cash obligations, and these commitments may also putpressure on our liquidity. The holding company for our capital markets business has entered into a credit agreement that provides for revolving borrowings of up to$500 million, which can only be used in connection with our capital markets business, including placing and underwriting securities offerings. To the extent wecommit to buy and sell an issue of securities in firm commitment underwritings or otherwise, we may be required to borrow under our credit agreement for ourcapital markets business to fund such obligations, which, depending on the size and timing of the obligations, may limit our ability to enter into other underwritingarrangements or similar activities, service existing debt obligations or otherwise grow our business. Regulatory capital requirements may also limit the ability ofour broker‑dealer subsidiaries to participate in underwriting or other transactions or to allocate our capital more efficiently across our businesses.In connection with strategic partnerships with hedge fund managers like Marshall Wace, we may be obligated to make future purchase price payments basedon the respective performance of these businesses or the exercise of certain options. In addition in connection with the development of a new KKR office in NewYork City, we will be required to pay for the construction and completion of the office.In the event that our liquidity requirements were to exceed available liquid assets for the reasons specified above or for any other reason, we could be forced tosell assets or seek to raise debt or equity capital on unfavorable terms. For further discussion of our liquidity needs see “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations-Liquidity.”The “clawback” provisions in our governing agreements may give rise to a contingent obligation that may require us to return or contribute amounts to ourfunds and fund investors.The partnership documents governing our carry-paying funds, including funds relating to private equity, growth equity, infrastructure, energy, real estate,special situations, private credit opportunities, direct lending and revolving credit investments, generally include a “clawback” provision that, if triggered, may giverise to a contingent obligation requiring the general partner to return amounts to the fund for distribution to the fund investors at the end of the life of the fund.Under a clawback obligation, upon the liquidation of a fund, the general partner is required to return, typically on an after‑tax basis, previously distributed carry tothe extent that, due to the diminished performance of later investments, the aggregate amount of carry distributions received by the general partner during the termof the fund exceed the amount to which the general partner was ultimately entitled, including the effects of any performance thresholds. We would continue to besubject to the clawback obligation even if carry has been distributed to current or former employees or other personnel through our carry pool, and we would berequired to seek other sources of liquidity to fund such an obligation if such carry is not returned to us by them. Excluding carried interest received by the generalpartners of funds that were not contributed to us in the KPE Transaction, as of December 31, 2016 , no carried interest was subject to this clawback obligation,assuming that all applicable carry paying funds were liquidated at their December 31, 2016 fair values. Had the investments in such funds been liquidated at zerovalue, the clawback obligation would have been $2,204.9 million .Prior to the KPE Transaction in 2009, certain of our principals who received carried interest distributions with respect to certain private equity fundscontributed to us had personally guaranteed, on a several basis and subject to a cap, the contingent obligations of the general partners of such private equity fundsto repay amounts to fund investors pursuant to the general partners’ clawback obligations. The terms of the KPE Transaction require that our principals remainresponsible for any clawback obligations relating to carry distributions received prior to the KPE Transaction, up to a maximum of $223.6 million . Throughinvestment realizations, this amount has been reduced to $98.9 million as of December 31, 2016 . Using valuations as of December 31, 2016 , no amounts are duewith respect to the clawback obligation required to be funded by our principals.36Table of ContentsCarry distributions arising subsequent to the KPE Transaction may give rise to clawback obligations that may be allocated generally to us and our principals whoparticipate in the carry pool. In addition, guarantees of or similar arrangements relating to clawback obligations in favor of third party investors in an individualinvestment partnership by entities we own may limit distributions of carried interest more generally.Our earnings and cash flow are highly variable due to the nature of our business and we do not intend to provide earnings guidance, each of which may causethe value of interests in our business to be volatile.Our earnings are highly variable from quarter to quarter due to the volatility of investment returns of most of our funds, other investment vehicles and ourbalance sheet assets and the fees earned from our businesses. We recognize earnings on investments in our funds based on our allocable share of realized andunrealized gains (or losses) reported by such funds and for certain of our recent funds, when a performance hurdle is achieved. During times of market volatility thefair value of our funds and our balance sheet assets are more variable, and as publicly traded equity securities currently represent a significant proportion of theassets of many of our funds and balance sheet assets, volatility in the equity markets may have a significant impact on our reported results. See also "Management'sDiscussion and Analysis of Financial Condition & Results of Operations--Critical Accounting Policies -- Fair Value Measurements" for a discussion of the impactof equity markets on the value of private equity investments. A decline in realized or unrealized gains, a failure to achieve a performance hurdle or an increase inrealized or unrealized losses, would adversely affect our net income.Fee income, which we recognize when contractually earned, can vary due to fluctuations in AUM, the number of investment transactions made by our funds,the number of portfolio companies we manage, the fee provisions contained in our funds and other investment products and transactions by our capital marketsbusiness. In any particular quarter, fee income may vary significantly due to the receipt of termination of monitoring fees, transaction fees or fees received by ourcapital markets business from syndications, in particular large equity syndications. While these events occur periodically, they generally do not occur every quarterand their size and frequency are variable. On a segment basis, total management, monitoring and transaction fees, net, for the years ended December 31, 2014,2015 and 2016 were $1,098.8 million, $1,142.1 million, and $1,074.9 million respectively. We may create new funds or investment products or vary the terms ofour funds or investment products (for example our newer funds include performance hurdles), which may alter the composition or mix of our income from time totime. In particular, in our newer private equity and other funds, we have agreed to return to our fund investors all monitoring and transaction fees generated by thefund's investments, which would be expected to cause our monitoring and transaction fee income to decline if we are unable to replace the loss with other feegenerating transactions or more favorable terms in our private equity and other funds. We may also experience fluctuations in our results from quarter to quarter,including our revenue and net income, due to a number of other factors, including changes in the values of our funds’ investments, changes in the amount ofdistributions or interest earned in respect of investments, changes in our operating expenses, the degree to which we encounter competition and general economicand market conditions. In addition, our earnings and cash flows are dependent in part on the performance of KFN, a specialty finance company that we acquired in2014, and is subject to the risks to KFN’s businesses as described elsewhere in the report. Although KFN is a subsidiary of KKR, KFN has its own indebtednessand preferred shares outstanding. The terms of its indebtedness and preferred shares impose limitations on KFN’s current and future operations and may restrict itsability to make distributions to KKR. Economic net income (loss) on a segment basis for the years ended December 31, 2014, 2015 and 2016 was $1,727.2 million,$1,298.0 million and $794.4 million, respectively. Such fluctuations may lead to variability in the value of interests in our business and cause our results for aparticular period not to be indicative of our performance in future periods. It may be difficult for us to achieve steady growth in net income and cash flow on aquarterly basis, which could in turn lead to large adverse movements in the value of interests in our business.The timing and receipt of carried interest from our investment funds are unpredictable and will contribute to the volatility of our cash flows. For example, withrespect to our private equity funds, carried interest is distributed to the general partner of a private equity fund with a clawback provision only after all of thefollowing are met: (i) a realization event has occurred (e.g., sale of a portfolio company, dividend, etc.); (ii) the vehicle has achieved positive overall investmentreturns since its inception, in excess of performance hurdles where applicable; and (iii) with respect to investments with a fair value below cost, cost has beenreturned to fund investors in an amount sufficient to reduce remaining cost to the investments’ fair value. Carried interest payments from investments depend onour funds’ performance and opportunities for realizing gains, which may be limited. It takes a substantial period of time to identify attractive investmentopportunities, to raise all the funds needed to make an investment and then to realize the cash value (or other proceeds) of an investment through a sale, publicoffering or other exit. To the extent an investment is not profitable, no carried interest will be received from our funds with respect to that investment and, to theextent such investment remains unprofitable, we will only be entitled to a management fee on that investment. Furthermore, certain vehicles and separatelymanaged accounts may not provide for the payment of any carried interest at all. Even if an investment proves to be profitable, it may be several years before anyprofits can be realized in cash. We cannot predict when, or if, any realization of investments will occur. In addition, if finance providers, such as commercial37Table of Contentsand investment banks, make it difficult for potential purchasers to secure financing to purchase companies in our investment funds’ portfolio, it may decreasepotential realization events and the potential to earn carried interest. A downturn in the equity markets would also make it more difficult to exit investments byselling equity securities. If we were to have a realization event in a particular quarter, the event may have a significant impact on our cash flows during the quarterthat may not be replicated in subsequent quarters. A decline in realized or unrealized gains, or an increase in realized or unrealized losses, would adversely affectour investment income, which could further increase the volatility of our quarterly results.The timing and receipt of carried interest also varies with the life cycle of certain of our funds. Our carry paying funds that have completed their investmentperiods and are able to realize mature investments, sometimes referred to as being in a harvesting period, are more likely to make larger distributions than our carrypaying funds that are in their fund raising or investment periods that precede the harvesting period. During times when a significant portion of our assets undermanagement is attributable to carry paying funds that are not in their harvesting periods, we may receive substantially lower carried interest distributions.In addition, with respect to certain of the funds that we advise, such as hedge funds and fund of funds, we are entitled to incentive fees that are generally paidannually in June and December if the net asset value of a fund has increased over a certain pre‑determined hurdle rate or a specified high‑water mark. These fundsgenerally also have “high‑water mark” provisions whereby if the funds have experienced losses in prior periods, we will not be able to earn incentive fees withrespect to a fund investor’s account until the net asset value of the fund investor’s account exceeds the highest period end value on which incentive fees werepreviously paid. The incentive fees we earn are therefore dependent on the net asset value of these funds or vehicles, which could lead to volatility in our quarterlyresults and cash flow. Fees, including incentive fees, from KFN have been eliminated upon the completion of the KFN merger in 2014 on a segment basis.A decline in the pace or size of investment by our funds would result in our receiving less revenue from fees.The transaction and management or monitoring fees that we earn are driven in part by the pace at which our funds make investments and the size of thoseinvestments. Any decline in that pace or the size of investments would reduce our revenue from transaction and management or monitoring fees. Likewise, duringan attractive selling environment, our funds may capitalize on increased opportunities to exit investments. Any increase in the pace at which our funds exitinvestments, if not offset by new commitments and investments, would reduce future management fees. Additionally, in certain of our funds that derivemanagement fees only on the basis of invested capital, the pace at which we make investments, the length of time we hold such investment and the timing ofdisposition will directly impact our revenues. Many factors could cause such a decline in the pace of investment or the transaction and management or monitoringfees we receive, including:•the inability of our investment professionals to identify attractive investment opportunities;•competition for such opportunities among other potential acquirers;•decreased availability of capital or financing on attractive terms;•our failure to consummate identified investment opportunities because of business, regulatory or legal complexities and adverse developments in the U.S.or global economy or financial markets;•terms we may agree with or provide to our fund investors or investors in separately managed accounts with respect to fees such as increasing thepercentage of transaction or other fees we may share with our fund investors; and•new regulations, guidance or other actions provided or taken by regulatory authorities.Our inability to raise additional or successor funds (or raise successor funds of a comparable size as our predecessor funds) could have a material adverseimpact on our business.Our current private equity funds and certain other funds and investment vehicles have a finite life and a finite amount of commitments from fund investors.Once a fund nears the end of its investment period, our success depends on our ability to raise additional or successor funds in order to keep making investmentsand, over the long term, earning management fees (although our funds and investment vehicles generally continue to earn management fees at a reduced fee rateafter the expiration of their investment periods). Even if we are successful in raising successor funds, to the extent we are unable to raise successor funds of acomparable size to our predecessor funds or the extent that we are delayed in raising such a successor fund, our revenues may decrease as the investment period ofour predecessor funds expire and associated fees decrease. For example, European Fund IV is smaller than its predecessor fund, and KKR North America Fund XIwas smaller than its38Table of Contentspredecessor fund. The performance of our funds also impacts our ability to raise capital, and deterioration in the performance of our funds would result inchallenges to future fundraising. The evolving preferences of our fund investors may necessitate that alternatives to the traditional investment fund structure, suchas managed accounts, smaller funds and co‑investment vehicles, become a larger part of our business going forward. This could increase our cost of raising capitalat the scale we have historically achieved. Furthermore, in order to raise capital for new strategies and products without drawing capital away from our existingproducts, we will need to seek new sources of capital such as individual investors.Our ability to raise new funds could also be hampered if the general appeal of private equity and alternative investments were to decline. An investment in alimited partner interest in a private equity fund is less liquid than an exchange traded instrument and the returns on such investment may be more volatile than aninvestment in securities for which there is a more active and transparent market. Private equity and alternative investments could fall into disfavor as a result ofconcerns about liquidity and short-term performance. Institutional investors in funds that have suffered from decreasing returns, liquidity pressure, increasedvolatility or difficulty maintaining target asset allocations, may materially decrease or temporarily suspend making new fund investments. Such concerns could beexhibited, in particular, by public pension funds, which have historically been among the largest investors in alternative assets. Many public pension funds aresignificantly underfunded and their funding problems have been, and may in the future be, exacerbated by economic downturn. Concerns with liquidity could causesuch public pension funds to reevaluate the appropriateness of alternative investments, and other institutional investors may reduce their overall portfolioallocations to alternative investments. This could result in a smaller overall pool of available capital in our industry. There is no assurance that the amount ofcommitments investors are making to alternative investment funds will continue at recent levels or that our ability to raise capital from investors will not behampered.In addition, the asset allocation rules or regulations or investment policies to which such third‑party investors are subject, could inhibit or restrict the ability ofthird‑party investors to make investments in our investment funds. Coupled with a lack of distributions from their existing investment portfolios, many of theseinvestors may have been left with disproportionately outsized remaining commitments to, and invested capital in, a number of investment funds, which maysignificantly limit their ability to make new commitments to third‑party managed investment funds such as those advised by us.Fund investors may also seek to redeploy capital away from certain of our credit vehicles, hedge fund, fund of funds, registered investment products or otherinvestment vehicles, which permit redemptions on relatively short notice in order to meet liquidity needs or invest in other asset classes. We believe that our abilityto avoid excessive redemption levels primarily depends on our funds’ continued satisfactory performance, although redemptions may also be driven by otherfactors important to our fund investors, including their need for liquidity and compliance with investment mandates, even if our performance is superior. Investors'liquidity needs tend to be more pronounced during periods of market volatility. Investors may also deploy capital away from funds of funds if they deem this assetclass’s fee structure unattractive relative to the fees of other alternative products. Any such redemptions would decrease our AUM and revenues.In addition, the Dodd Frank Wall Street Reform and Consumer Protection Act, or Dodd Frank Act, under what has become known as the “Volcker Rule,”broadly prohibits depository institution holding companies (including foreign banks with U.S. branches, agencies or commercial lending companies and certaininsurance companies), insured depository institutions and their subsidiaries and controlled affiliates, or "banking entities," from investing in “covered funds,”including third party private equity funds like ours. Final regulations implementing the Volcker Rule were approved by the federal banking agencies, the SEC andthe CFTC on December 10, 2013. Foreign banking entities may continue to invest in private equity funds like ours under a Volcker Rule exemption for coveredfund activities and investment that occur solely outside of the United States. However U.S. banking entities have until July 21, 2017 to conform their covered fundinvestments and relationships that were in place prior to December 31, 2013 to the requirements of the final regulations (and may have until July 21, 2022 toconform investments in a private equity fund that qualifies as an "illiquid fund" and for which an extension is sought and granted), and will be limited in theirability to undertake new contractual commitments to private equity funds like ours.Banking entities have historically represented an important, although decreasing, class of investors for our funds. It is possible that other institutions will notbe available to replace this traditional source of capital for our private equity funds. Furthermore, divestitures by banking entities of interests in private equity fundsand hedge funds over the next several years to comply with the Volcker Rule may lead to lower prices in the secondary market for our fund interests, which couldhave adverse implications for our ability to raise funds from investors who may have considered the availability of secondary market liquidity as a factor indetermining whether to invest. In addition to federal law, changes in state and local law may limit investment activities of state pension plans and insurancecompanies.The number of funds raising capital varies from year to year, and in years where relatively few funds are raising capital, the growth of our AUM, FPAUM andassociated fees may be significantly lower. There is no assurance that fundraises for other new strategies or successor funds will experience similar success in thefuture.39Table of ContentsOur investors in future funds, including separately managed accounts, may negotiate to pay us lower management fees, reimburse us for fewer expenses, orchange the economic terms of our future funds, including with respect to transaction fees, management fees or monitoring fees, to be less favorable to us thanthose of our existing funds, which could adversely affect our revenues or profitability.In connection with raising new funds or securing additional investments in existing funds, we negotiate terms for such funds and investments with our fundlimited partners. The outcome of such negotiations could result in our agreement to terms that are materially less favorable to us than the terms of prior funds wehave advised or funds advised by our competitors. For example, such terms could restrict our ability to raise investment funds with investment objectives orstrategies that compete with existing funds, reduce fee revenues we earn, reduce the percentage of profits on third‑party capital in which we share, include aperformance hurdle that requires us to generate a specified return on investment prior to our right to receive carried interest or add expenses and obligations for usin managing the fund or increase our potential liabilities. For example our newer private equity funds, including Americas Fund XII, Asian Fund II and EuropeanFund IV, include a performance hurdle that requires us to generate a 7% return on investment prior to receiving our share of fund gains and our growth equity andreal asset funds have similar hurdles. Similarly, our leveraged credit funds are subject to performance hurdles generally tied to a benchmark or index, whilealternative credit funds generally have a performance hurdle of up to 8%. Furthermore, as institutional investors increasingly consolidate their relationships withinvestment firms and competition becomes more acute, we may receive more of these requests to modify the terms in our new funds. Certain of our newer fundsalso include more favorable terms for fund investors that commit to early closes for our funds. Additionally, in certain funds, we have agreed to chargemanagement fees based on invested capital or net asset value as opposed to charging management fees based on committed capital. In certain cases, we haveprovided “fee holidays” to certain investors in which we do not charge management fees for a fixed period of time (such as the first six months). Agreement toterms that are materially less favorable to us could result in a decrease in our profitability.Certain institutional investors have also publicly criticized certain fund fee and expense structures, including monitoring fees and transaction and advisoryfees. We have received and expect to continue to receive requests from a variety of fund investors and groups representing such investors to decrease fees and tomodify our carried interest and incentive fee structures, which could result in a reduction or delay in the timing of receipt of the fees and carried interest andincentive fees we earn. The SEC has focused on certain fund fees and expenses, including whether such fees and expenses were appropriately disclosed to fundlimited partners, which may cause fund investor resistance to our receipt of fees and /expenses be reimbursed to us. In our current flagship private equity funds, wehave increased the percentage of transaction and monitoring fees that are credited against fund management fees to 100% of the amount of the transaction andmonitoring fee attributable to that fund. In September of 2009, the Institutional Limited Partners Association, or “ILPA,” published a set of Private EquityPrinciples, or the “Principles,” which were revised in January 2011. The Principles were developed in order to encourage discussion between limited partners andgeneral partners regarding private equity fund partnership terms. Certain of the Principles call for enhanced alignment of interests between general partners andlimited partners through modifications of some of the terms of fund arrangements, including proposed guidelines for fees and carried interest structures. Weprovided ILPA our endorsement of the Principles, representing an indication of our general support for the efforts of ILPA.In addition, certain institutional investors, including sovereign wealth funds and public pension funds, have demonstrated an increased preference foralternatives to the traditional investment fund structure, such as managed accounts, specialized funds and co‑investment vehicles. We also have entered intostrategic partnerships with specific investors whereby we manage that investor’s capital across a variety of our products on separately negotiated terms. There canbe no assurance that such alternatives will be as profitable to us as the traditional investment fund structure, and the impact such a trend could have on our resultsof operations, if widely implemented, is unclear. Moreover, certain institutional investors are demonstrating a preference to in‑source their own investmentprofessionals and to make direct investments in alternative assets without the assistance of investment advisers like us. Such institutional investors may become ourcompetitors and could cease to be our clients.Any agreement to or changes in terms less favorable to us could adversely affect our revenues and profitability.The investment management business is intensely competitive, which could have a material adverse impact on our business.We compete as an investment manager for both fund investors and investment opportunities. The investment management business is highly fragmented, withour competitors consisting primarily of sponsors of public and private investment funds, real estate development companies, business development companies,investment banks, commercial finance companies and operating companies acting as strategic buyers of businesses. We believe that competition for fund investorsis based primarily on:40Table of Contents•investment performance;•investor liquidity and willingness to invest;•investor perception of investment managers’ drive, focus and alignment of interest;•business reputation;•the duration of relationships with fund investors;•the quality of services provided to fund investors;•pricing;•fund terms (including fees); and•the relative attractiveness of the types of investments that have been or will be made.We believe that competition for investment opportunities is based primarily on the pricing, terms and structure of a proposed investment and certainty ofexecution.A number of factors serve to increase our competitive risks:•a number of our competitors in some of our businesses may have greater financial, technical, marketing and other resources and more personnel than wedo, and, in the case of some asset classes, longer operating histories, more established relationships or greater experience;•fund investors may materially decrease their allocations in new funds due to their experiences following an economic downturn, the limited availability ofcapital, regulatory requirements or a desire to consolidate their relationships with investment firms;•some of our competitors may have better expertise or be regarded by fund investors as having better expertise in a specific asset class or geographicregion than we do;•some of our competitors have agreed to terms on their investment funds or products that may be more favorable to fund investors than our funds orproducts, such as lower management fees, greater fee sharing or higher performance hurdles for carried interest, and therefore we may be forced to matchor otherwise revise our terms to be less favorable to us than they have been in the past;•some of our funds may not perform as well as competitors’ funds or other available investment products;•our competitors have raised or may raise significant amounts of capital, and many of them have similar investment objectives and strategies to our funds,which may create additional competition for investment opportunities and may reduce the size and duration of pricing inefficiencies that many alternativeinvestment strategies seek to exploit;•some of these competitors may also have a lower cost of capital and access to funding sources that are not available to us, which may create competitivedisadvantages for us with respect to investment opportunities;•some of our competitors may have higher risk tolerances, different risk assessments or lower return thresholds, which could allow them to consider awider variety of investments and to bid more aggressively than us for investments;•some of our competitors may be subject to less regulation or less regulatory scrutiny and accordingly may have more flexibility to undertake and executecertain businesses or investments than we do and/or bear less expense to comply with such regulations than we do;•there are relatively few barriers to entry impeding the formation of new funds, including a relatively low cost of entering these businesses, and thesuccessful efforts of new entrants into our various lines of business, including major commercial and investment banks and other financial institutions,have resulted in increased competition;41Table of Contents•some fund investors may prefer to invest with an investment manager that is not publicly traded, is smaller, or manages fewer investment products; and•other industry participants will from time to time seek to recruit our investment professionals and other employees away from us.We may lose investment opportunities in the future if we do not match investment prices, structures and terms offered by competitors. Our competitors that arecorporate buyers may be able to achieve synergistic cost savings in respect of an investment, which may provide them with a competitive advantage in bidding foran investment. Alternatively, we may experience decreased investment returns and increased risks of loss if we match investment prices, structures and termsoffered by competitors. Moreover, as a result, if we are forced to compete with other investment firms on the basis of price, we may not be able to maintain ourcurrent fund fee, carried interest or other terms. There is a risk that fees and carried interest in the alternative investment management industry will decline, withoutregard to the historical performance of a manager. Fee or carried interest income reductions on existing or future funds, without corresponding decreases in our coststructure, would adversely affect our revenues and profitability.In addition, if interest rates were to rise or if market conditions for competing investment products become or are favorable and such products begin to offerrates of return superior to those achieved by our funds, the attractiveness of our funds relative to investments in other investment products could decrease. Thiscompetitive pressure could adversely affect our ability to make successful investments and limit our ability to raise future funds, either of which would adverselyimpact our business, results of operations and cash flow.Our structure implicates complex provisions of U.S. federal income tax laws for which no clear precedent or authority may be available. These structures alsoare subject to potential legislative, judicial or administrative change and differing interpretations, possibly on a retroactive basis.The U.S. federal income tax treatment of our unitholders depends in some instances on determinations of fact and interpretations of complex provisions ofU.S. federal income tax laws for which no clear precedent or authority may be available. The U.S. federal income tax rules are constantly under review by personsinvolved in the legislative process, the Internal Revenue Service, or IRS, and the U.S. Department of the Treasury, frequently resulting in revised interpretations ofestablished concepts, statutory changes, revisions to regulations and other modifications and interpretations. The present U.S. federal income tax treatment ofowning our common units may be modified by administrative, legislative or judicial interpretation at any time, and any such action may affect investments andcommitments previously made. The maintenance of the structure and tax attributes of the KKR Group Partnerships, which comprise our businesses, requiressignificant monitoring and resources. Failure to maintain this structure could result in material adverse tax consequences.Our organizational documents and agreements give the Managing Partner broad authority to modify the amended and restated partnership agreement fromtime to time as the Managing Partner determines to be necessary or appropriate, without the consent of the unitholders, to address changes in U.S. federal, state andlocal income tax regulations, legislation or interpretation. Without the consent of the unitholders, our Managing Partner may also elect to convert KKR into acorporation or cause KKR to be taxed as a corporation for U.S. federal tax purposes, if certain conditions have been satisfied. Proposed tax reforms could increasethe likelihood of such a conversion. Such a conversion could be a taxable event to our unitholders where gain or loss is recognized. In addition, a conversionwould subject all of our future net income to a level of corporate tax, which may reduce the amount of cash available for distribution or reinvestment. Finally,following a conversion, certain future payments required under our tax receivable agreement could be materially higher than they would have been had we notconverted. See "Certain Relationships and Related Transactions, and Director Independence -- Tax Receivable Agreement."The U.S. Congress has considered legislation that would have (i) in some cases after a ten‑‑year period, precluded us from qualifying as a partnership orrequired us to hold carried interest through taxable subsidiary corporations and (ii) taxed certain income and gains at increased rates. If any similar legislationwere to be enacted and apply to us, the after‑‑tax income and gain related to our business, as well as the market price of our units, could be reduced.In the past, a number of legislative and administrative proposals have been introduced and, in certain cases, have been passed by the U.S. House ofRepresentatives, that would have, in general, treated all or a portion of our carried interest as income subject to a tax rate that is higher than under current law.President Trump has expressed support for such legislation. It is unclear when or whether the U.S. Congress will pass such legislation or what provisions will beincluded in any legislation, if enacted.Some legislative and administrative proposals have provided that, for taxable years beginning after the date of enactment (or in some cases, beginning tenyears after the date of enactment), income derived with respect to carried interest would not42Table of Contentsmeet the qualifying income requirements under the publicly traded partnership rules. Therefore, if similar legislation is enacted, following such enactment (or suchten‑year period), we would be precluded from qualifying as a partnership for U.S. federal income tax purposes. If we were taxed as a U.S. corporation, oureffective tax rate would increase significantly. The federal statutory rate for corporations is currently 35%. In addition, we could be subject to increased state andlocal taxes. Furthermore, you could be subject to tax on our conversion into a corporation.States and other jurisdictions have also considered legislation to increase taxes with respect to carried interest. For example, New York has periodicallyconsidered legislation under which you could be subject to New York state income tax on income in respect of our common units as a result of certain activities ofour affiliates in New York, although it is unclear when or whether such legislation will be enacted.If the proposed legislation described above or any similar legislation were to be enacted and apply to us, the after‑tax income and gain related to our business,our ability to fund cash distributions, as well as the market price of our units, could be reduced.Additional proposed changes in the U.S. and foreign taxation of businesses could adversely affect us.Both President Trump and the Republican members of the U.S. House of Representatives have publicly stated that one of their top legislative priorities issignificant reform of the federal tax code including significant changes to taxation of business entities. Proposals by members of Congress have included, amongother things, changes to federal tax rates (including reducing the corporate rate and rates for active business income earned through partnerships), limiting interestdeductibility, allowing for the expensing of capital expenditures, use of certain border adjustments, the migration from a worldwide system of taxation to aterritorial system, and eliminating the deductibility of state and local taxes. While President Trump has expressed support for a number of these proposals, he hasalso set forth ideas for tax reform that differ in key ways. There is a substantial lack of clarity around both the timing and the details of any such tax reform. Theimpact of any potential tax reform of our business is uncertain and could be adverse. In particular, limits on interest deductibility could impair our ability tocomplete transactions by reducing the amount of debt that we are able to incur or service and reducing the profitability of our investments if not offset by otherchanges, such as a reduction in federal tax rates. In addition, in certain scenarios, tax reform could result in a significant strengthening of the U.S. dollar, whichcould adversely impact the value of our foreign investments in U.S. dollar terms.The U.S. Congress, the Organization for Economic Co‑operation and Development (or, OECD) and other government agencies in jurisdictions in which weand our affiliates invest or do business have maintained a focus on issues related to the taxation of multinational companies. The OECD is contemplating changesto numerous long‑standing tax principles through its base erosion and profit shifting (or, BEPS) project, which is focused on a number of issues, including theallocation of profits among affiliated entities in different tax jurisdictions. A number of European jurisdictions have enacted taxes on financial transactions, and theEuropean Commission has proposed legislation to harmonize these taxes under the so-called "enhanced cooperation procedure", which provides for adoption ofEU-level legislation applicable to some but not all EU Member States. Several of these proposals for reform, if enacted by the U.S. or by other countries in whichwe or our affiliates invest or do business, could adversely affect our investment returns and could reduce the cash we have available for distributions to unitholdersor for other uses by us. It is unclear what any actual legislation could provide, when it would be proposed or what its prospects for enactment could be.We depend on our founders and other key personnel, the loss of whose services could have a material adverse effect on our business, results and financialcondition.We depend on the efforts, skills, reputations and business contacts of our employees, including our founders, Henry Kravis and George Roberts, and other keypersonnel, the information and deal flow they and others generate during the normal course of their activities and the synergies among the diverse fields ofexpertise and knowledge held by our professionals. Accordingly, our success depends on the continued service of these individuals, who are not obligated toremain employed with us. The loss of the services of any of them could have a material adverse effect on our revenues, net income and cash flows and could harmour ability to maintain or grow AUM in existing funds or raise additional funds in the future.Our employees and other key personnel possess substantial experience and expertise and have strong business relationships with investors in our funds andother members of the business community. As a result, the loss of these personnel could jeopardize our relationships with investors in our funds and members ofthe business community and result in the reduction of AUM or fewer investment opportunities. For example, if any of our key personnel were to join or form acompeting firm, our business, results and financial condition could suffer.Furthermore, the agreements governing our committed capital funds generally provide that in the event certain “key persons” (for example, both ofMessrs. Kravis and Roberts for our private equity funds, and, in the case of certain43Table of Contentsgeographically or product focused funds, one or more of the executives focused on such funds) generally cease to actively manage a fund or be substantiallyinvolved in KKR activities, investors in the fund will be entitled to reduce, in whole or in part, their capital commitments available for further investments on aninvestor‑by‑investor basis. In the case of certain of our fully paid-up funds, investors may be permitted to terminate their investment in the event a "key persons"provision is triggered, which could possibly lead to a liquidation of those funds. In addition, the occurrence of such a "key person" event could cause us to agree toless favorable ongoing terms with respect to the affected fund. We periodically engage in discussions with the limited partners of our funds regarding a waiver ofsuch provisions with respect to executives involved in geographically or product focused funds whose departures have occurred or are anticipated. The occurrenceof such an event where our limited partners do not agree to a waiver of terms would likely have a significant negative impact on our revenue, net income and cashflow.If we cannot retain and motivate our employees and other key personnel and recruit, retain and motivate new employees and other key personnel, our business,results and financial condition could be adversely affected.Our most important asset is our people, and our continued success is highly dependent upon the efforts of our employees and other key personnel, and to asubstantial degree on our ability to retain and motivate our employees and other key personnel and to strategically recruit, retain and motivate new talentedemployees, including qualified investment professionals. However, we may not be successful in these efforts as the market for qualified investment professionals isextremely competitive. Our ability to recruit, retain and motivate our employees is dependent on our ability to offer highly attractive incentive opportunities. Ifpreviously proposed legislation regarding the increased taxation of carried interest were to be enacted, income and gains recognized with respect to carried interestwould be treated for U.S. federal income tax purposes as ordinary income rather than as capital gain. Such legislation would materially increase the amount oftaxes that we, our employees and other key personnel would be required to pay, thereby adversely affecting our ability to offer such attractive incentiveopportunities. See “-Risks Related to U.S. Taxation”. Similarly, changes in the United Kingdom with respect to the taxation of carried interest, including thetreatment of certain carried interest returns as income, which became effective from April 6, 2016, may impact our ability to recruit, retain and motivate employeesand key personnel in the United Kingdom. In addition, there have been proposed laws and regulations that sought to regulate the compensation of certain of ouremployees. See “-Extensive Regulation of our business affects our activities and creates the potential for significant liabilities and penalties.” The possibility ofincreased regulatory focus or legislative or regulatory changes could result in additional burdens on our business.” The loss of even a small number of ourinvestment professionals could jeopardize the performance of our funds and other investment products, which would have a material adverse effect on our resultsof operations. Efforts to retain or attract employees, including our investment professionals, may result in significant additional expenses, which could adverselyaffect our profitability.Many of our employees hold interests in our business through KKR Holdings. These individuals historically received financial benefits from our business inthe form of distributions and amounts funded by KKR Holdings and through their direct and indirect participation in the value of KKR Group Partnership Unitsheld by KKR Holdings. While all of our employees receive base salaries from us, annual cash bonuses for certain employees are borne by KKR Holdings fromcash reserves based upon distributions on a portion of KKR Group Partnership Units held by KKR Holdings. In 2016, the amount of such annual cash bonuses paidby KKR Holdings L.P. was $63.4 million. In addition, many units in KKR Holdings have been allocated to personnel, and upon their vesting distributions onvested units would belong to such personnel and not be available to fund cash bonuses. Effective with the distribution paid on March 8, 2016, with respect to thequarter ending December 31, 2015, KKR changed its distribution policy. Under the new distribution policy, KKR intends to make equal quarterly distributions toholders of its common units in a fixed amount per common unit per quarter. To the extent that distributions are made on KKR Group Partnership Units underlyingany unvested KKR Holdings units, such amounts under our distribution policy would be insufficient to fund annual cash bonus compensation. We, therefore,expect to pay an increasing portion and eventually all of the cash bonus payments from other sources, including cash from our operations and the carry pool. As aresult, either our profit margins or our employee retention or both may be adversely impacted. There can be no assurance that the carry pool will have sufficientcash available to continue to make such cash payments in the future and fluctuations from the distributions generated from the carry pool, if not offset bycompensation from other sources, including other performance-based income, could render our compensation less attractive. In any of these circumstances, ahigher percentage of our revenue may be paid out in the form of cash compensation, which would be expected to have an adverse impact on our profit margins.40% of the carried interest earned from our investment funds is currently allocated to our carry pool. Our Managing Partner is not permitted under its operatingagreement to increase the percentage of carried interest allocable to the carry pool without the consent of a majority of our independent directors. Our carry pool issupplemented by allocating for compensation 40% of the incentive fees earned from investment funds and certain management fee refunds, which percentage maybe increased without requiring the consent of a majority of our independent directors under our Managing Partner's operating agreement.We have granted and expect to grant equity awards from our Equity Incentive Plan, which has caused and causes dilution. While we evaluate the grant ofequity awards from our Equity Incentive Plan to employees on an annual basis, the size of the44Table of Contentsgrants, if any, is made at our discretion. As we increase the use of equity awards from our Equity Incentive Plan in the future, expense associated with equity basedcompensation may increase materially. For example, in 2016 in connection with compensation for the fiscal year ended December 31, 2015 we allocated equityawards relating to 13.3 million KKR & Co. L.P. common units, under the Equity Incentive Plan and in connection with compensation for the fiscal year endedDecember 31, 2016, we allocated additional equity awards relating to 13.1 million KKR & Co. L.P. common units. In 2016 KKR Holdings granted 29.4 millionKKR Holdings units to certain senior employees, non-employee operating consultants and other persons. These awards were granted from outstanding butpreviously unallocated units of KKR Holdings, and consequently these grants did not increase the number of KKR Holdings units outstanding or outstanding KKRcommon units on a fully-diluted basis. See "Executive Compensation--Compensation Discussion and Analysis--Compensation Elements--KKR Holdings MarketCondition Awards" for the terms and conditions of such KKR Holdings units. The value of the KKR Holdings units and common units may drop in value or bevolatile, which may make our equity less attractive to our employees. In July 2015, the SEC also proposed rules requiring companies to develop and enforcerecovery policies that in the event of an accounting restatement, “claw back” from current and former executive officers incentive-based compensation they wouldnot have received based on the restatement. If such rules are adopted as proposed and are deemed applicable to any component of our compensation, theeffectiveness of our compensation as a retention mechanism may be further reduced. In addition, less carried interest from the carry pool may be allocated tocertain of our employees, which may result in less cash payments to such employees. To the extent our equity incentive or carry pool programs are not effective,we may be limited in our ability to attract, retain and motivate talented employees and other key personnel and we may need to increase the level of cashcompensation that we pay.In addition, there is no guarantee that the confidentiality and restrictive covenant agreements to which our employees and other key personnel are subject,together with our other arrangements with them, will prevent them from leaving us, joining our competitors or otherwise competing with us. Depending on whichentity is a party to these agreements and/or the laws applicable to them, we may not be able to enforce them or become subject to lawsuits or other claims, andcertain of these agreements might be waived, modified or amended at any time without our consent. Even when enforceable, these agreements expire after a certainperiod of time, at which point each of our employees and other key personnel are in any event free to compete against us and solicit our fund investors andemployees. See “Certain Relationships and Related Transactions, and Director Independence-Confidentiality and Restrictive Covenant Agreements.”We strive to maintain a work environment that reinforces our culture of collaboration, motivation and alignment of interests with fund investors. If we do notcontinue to develop and implement the right processes and tools to manage our changing enterprise and maintain our culture, our ability to compete successfullyand achieve our business objectives could be impaired, which could negatively impact our business, financial condition and results of operations.Operational risks and data security breaches may disrupt our businesses, result in losses or limit our growth.We rely heavily on our financial, accounting and other data processing systems and on the systems of third parties who provide services to us. If any of thesesystems do not operate properly or are disabled, we could suffer financial loss, a disruption of our businesses, liability to our funds, regulatory intervention orreputational damage. In addition, we operate in businesses that are highly dependent on information systems and technology. For example, we face operational riskfrom errors made in the execution, confirmation or settlement of transactions. We also face operational risk from transactions not being properly recorded,evaluated or accounted for in our funds. In particular, our Public Markets business is highly dependent on our ability to process and evaluate, on a daily basis,transactions across markets and geographies in a time-sensitive, efficient and accurate manner. Our and our third party service providers' information systems andtechnology may not continue to be able to accommodate our growth, may not be suitable for new products and strategies and may be subject to security risks, andthe cost of maintaining such systems may increase from our current level. Such a failure to accommodate growth, or an increase in costs related to such informationsystems, could have a material adverse effect on our business. Furthermore, we depend on our principal offices in New York City, where most of ouradministrative personnel are located, and technology and infrastructure concentrated in New York City and other offices for the continued operation of ourbusiness. We are also dependent on an increasingly concentrated group of third party vendors that we do not control for hosting solutions and technologies. Adisaster or a disruption in the infrastructure that supports our businesses, including a disruption involving electronic communications or other services used by us,our vendors or third parties with whom we conduct business, or directly affecting our principal offices, could have a material adverse impact on our ability tocontinue to operate our business without interruption. Our business continuation or disaster recovery programs may not be sufficient to mitigate the harm that mayresult from such a disaster or disruption. In addition, insurance and other safeguards might only partially reimburse us for our losses, if at all.Our operations rely on the secure processing, storage and transmission of confidential and other information in our computer systems and networks. We facevarious security threats on a regular basis, including ongoing cyber security threats to45Table of Contentsand attacks on our information technology infrastructure that are intended to gain access to our proprietary information, destroy data or disable, degrade orsabotage our systems. Although we take protective measures and endeavor to modify them as circumstances warrant, our computer systems, software and networksmay be vulnerable to unauthorized access, theft, misuse, computer viruses or other malicious code, and other events that could have a security impact. We and ouremployees may be the target of fraudulent emails. The costs related to cyber or other security threats or disruptions may not be fully insured or indemnified byother means. In addition, cyber security has become a top priority for regulators around the world. If one or more of such events occur, this potentially couldjeopardize our or our fund investors’ or counterparties’ confidential and other information processed and stored in, and transmitted through, our computer systemsand networks, or otherwise cause interruptions or malfunctions in our, our fund investors’, our counterparties’ or third parties’ operations, which could result insignificant losses, increased costs, disruption of our business, liability to our fund investors and other counter-parties, regulatory intervention or reputationaldamage. Finally, we rely on third party service providers for certain aspects of our business, including for certain information systems, technology, administration,tax and compliance matters. Any interruption or deterioration in the performance of these third parties could impair the quality of our and our funds’ operations andcould impact our reputation and adversely affect our businesses and limit our ability to grow.Our portfolio companies also rely on data processing systems and the secure processing, storage and transmission of information, including payment andhealth information. A disruption or compromise of these systems could have a material adverse effect on the value of these businesses. Our funds may invest instrategic assets having a national or regional profile or in infrastructure assets, the nature of which could expose them to a greater risk of being subject to a terroristattack or security breach than other assets or businesses. Such an event may have adverse consequences on our investment or assets of the same type or may requireportfolio companies to increase preventative security measures or expand insurance coverage.Our organizational documents do not limit our ability to enter into new lines of businesses, and we may expand into new investment strategies, geographicmarkets and businesses, each of which may result in additional risks and uncertainties in our businesses.We intend, to the extent that market conditions warrant, to seek to grow our businesses by increasing AUM in existing businesses, pursuing new investmentstrategies, including investment opportunities in new asset classes, developing new types of investment structures and products (such as managed accounts andstructured products), and expanding into new geographic markets and businesses. We have in the past opened offices in Asia, the Middle East and Latin America,and also developed a capital markets business in the United States, Europe, the Middle East and Asia-Pacific, which we intend to grow and diversify. We have alsolaunched a number of new investment initiatives in areas such as real estate, energy, infrastructure, hedge funds and growth equity.Our organic growth strategy focuses on providing resources to foster the development of new product offerings and business strategies by our investmentprofessionals and launching successor and related products, such that our new strategies achieve a level of scale and profitability. Given our diverse platform, theseinitiatives could create conflicts of interests with existing products, increase our costs and expose us to new market risks, and legal and regulatory requirements.The success of our organic growth strategy will also depend on, among other things, our ability to correctly identify and create products that appeal to the limitedpartners of our funds and vehicles. While we have made significant expenditures to develop these new strategies and products, there is no assurance that they willachieve a satisfactory level of scale and profitability. To raise new funds and pursue new strategies, we have and expect to continue to use our balance sheet towarehouse seed investments, which may decrease the liquidity available for other parts of our business. If a new strategy or fund does not develop as anticipatedand such investments are not ultimately transferred to a fund, we may be forced to realize losses on these retained investments.We have and may continue to pursue growth through acquisitions of other investment management companies, acquisitions of critical business partners,strategic partnerships or other strategic initiatives, which may include entering into new lines of business. In addition, we expect opportunities will arise to acquireother alternative or traditional investment managers. For example, we have expanded our European credit business with our acquisition of Avoca. We have alsomade minority investments in hedge fund managers, and we have entered into joint ventures with third parties to participate in new real estate investmentstrategies. To the extent we make strategic investments or acquisitions, undertake other strategic initiatives or enter into a new line of business, we will facenumerous risks and uncertainties, including risks associated with:•our ability to successfully negotiate and enter into beneficial arrangements with our counterparties;•the required investment of capital and other resources;•the incurrence of substantial transaction-related costs including non-recurring transaction-related costs;46Table of Contents•delays or failure to complete an acquisition or other transaction in a timely manner or at all due to a failure to obtain shareholder or regulatory approvalsor satisfy any other closing conditions, which may subject us to damages or require us to pay significant costs;•lawsuits challenging an acquisition or unfavorable judgments in such lawsuits, which may prevent the closing of the transaction, cause delays, or requireus to incur substantial costs including in costs associated with the indemnification of directors;•the possibility that we have insufficient expertise to engage in such activities profitably or without incurring inappropriate amounts of risk or liability orhave not appropriately planned for such activities;•the possibility of diversion of management’s time and attention from our core business;•the possibility of disruption of our ongoing business;•the failure to realize the anticipated benefits from an acquired business or strategic partnership in a timely manner, if at all;•combining, integrating or developing operational and management systems and controls including an acquired business’s internal controls and procedures;•integration of the businesses including the employees of an acquired business;•potential increase in concentration of the investors in our funds;•disagreements with joint venture partners or other stakeholders in strategic partnerships;•the additional business risks of the acquired business and the broadening of our geographic footprint, including the risks associated with conductingoperations in foreign jurisdictions such as taxation;•properly managing conflicts of interests;•our ability to obtain requisite regulatory approvals and licenses without undue cost or delay and without being required to comply with materialrestrictions or material conditions that would be detrimental to us or to the combined organization; and•regulatory scrutiny or litigation exposure due to the activities of the third party hedge fund managers or joint venture partners.Entry into certain lines of business may subject us to new laws and regulations with which we are not familiar, or from which we are currently exempt, andmay lead to increased litigation and regulatory risk and costs. If a new business generates insufficient revenues or if we are unable to efficiently manage ourexpanded operations, our results of operations will be adversely affected. Our strategic initiatives include joint ventures or the acquisition of minority interests inthird parties, in which case we will be subject to additional risks and uncertainties in that we may be dependent upon, and subject to liability, losses or reputationaldamage relating to, systems, controls and personnel that are not under our control.We may not be successful in executing upon or managing the complexities of new investment strategies, markets and businesses, which could adversely affectour business, results of operations and financial condition.Our growth strategy is based, in part, on the expansion of our platform through selective investment in, and development or acquisition of, businesses andinvestment strategies complementary to our business. The expansion into new products and geographies has demanded greater management attention anddedication of resources to manage the increasing complexity of operations and regulatory compliance. This growth strategy involves a number of risks, includingthe risk that the expected synergies from a newly developed product or strategic alliance will not be realized, that the expected results will not be achieved, thatnew strategies are not appropriately planned for or integrated into the firm, that the new strategies may conflict, detract from or compete against our existingbusinesses, that the investment process, controls and procedures that we have developed around our existing platform will prove insufficient or inadequate or thatour information systems and technology, including related security systems, may prove to be inadequate. We have also entered into strategic partnerships andseparately managed accounts, which lack the scale of our traditional funds and are more costly to administer. The prevalence of these accounts may also presentconflicts and introduce complexity in the deployment of capital. The offering of investment products to retail investors, including any funds registered under theInvestment Company Act, may result in increased compliance and47Table of Contentslitigation costs. We may also incur significant charges in connection with such investments, which ultimately may result in significant losses and costs. Such lossescould adversely impact our business, results of operations and financial condition, as well as do harm to our professional reputation.If we are unable to syndicate the securities or indebtedness or realize returns on investments financed with our balance sheet assets, our liquidity, business,results of operations and financial condition could be adversely affected.Our balance sheet assets provide us with a significant source of capital to grow and expand our business, increase our participation in our transactions andunderwrite commitments in our capital markets business. Our balance sheet assets have provided a source of capital to underwrite loans, securities or otherfinancial instruments, which we generally expect to syndicate to third parties. To the extent that we are unable to do so, we may be required to sell suchinvestments at a significant loss or hold them indefinitely. If we are required to retain investments on our balance sheet for an extended period of time, the inabilityof our capital markets business to complete additional transactions would impair our results.We generally have a larger balance sheet than many of our competitors, and consequently, the performance of these balance sheet assets has a greater impacton our results of operations. Our success in deploying our balance sheet and generating returns on this capital will depend among other things on the availability ofsuitable opportunities after giving priority in investment opportunities to our advised investment funds and accounts, the level of competition from other companiesthat may have greater financial resources and our ability to value potential development or acquisition opportunities accurately and negotiate acceptable terms forthose opportunities. To the extent we are unsuccessful in deploying our balance sheet, our business and financial results may suffer. In addition, as our balancesheet has been a significant source of capital for new strategies, to the extent that such strategies are not successful or our balance sheet assets cease to provideadequate liquidity, we would be limited in our ability to seed new businesses or support our existing business as effectively as contemplated. See also “-If we areunable to consummate or successfully integrate additional development opportunities, acquisitions or joint ventures, we may not be able to implement our growthstrategy successfully.”Extensive regulation of our businesses affects our activities and creates the potential for significant liabilities and penalties. The possibility of increasedregulatory focus or legislative or regulatory changes could adversely affect our business.Our business is subject to extensive regulation, including periodic examinations, inquiries and investigations by governmental and self‑regulatoryorganizations in the jurisdictions in which we operate around the world. Many of these regulators, including U.S. federal and state and foreign government agenciesand self‑regulatory organizations, are empowered to impose fines, suspensions of personnel or other sanctions, including censure, the issuance of cease‑and‑desistorders or the suspension or expulsion of applicable licenses and memberships; any of the foregoing may damage our relations with existing fund investors, mayimpair our ability to raise capital for successor funds, may impair our ability to carry out certain investment strategies, or may contravene provisions concerningcompliance with law in agreements to which we are a party. Even if a sanction is not imposed or the sanction imposed against us or our personnel by a regulatorwere small in monetary amount, the adverse publicity relating to the regulatory activity or imposition of these sanctions could harm our reputation and cause us tolose existing fund investors or fail to gain new fund investors. In addition, actions by regulators against other investment managers can cause changes in businesspractices that could materially adversely affect our business, financial condition and results of operations.In particular, the private equity industry has come under increased regulatory and news media scrutiny with governmental officials and regulators, includingthe SEC, focusing on the private equity industry’s fees, allocation of expenses to funds, valuation practices, allocation of fund investment opportunities,particularly co-invest opportunities, and disclosures to fund investors. SEC focus areas in the private fund area have recently included the acceleration ofmonitoring fees, the allocation of broken-deal expenses, the disclosure, use and compensation of operating partners or consultants, outside business activities offirm principals and employees, group purchasing arrangements, disclosure of affiliated service providers, general conflicts of interest disclosures, cybersecurity,foreign bribery and corruption, policies covering insider trading and business continuity and transition planning.Any changes or potential changes in the regulatory framework applicable to our business, including the changes and potential changes described below, aswell as adverse news media attention, may impose additional expenses or capital requirements on us, limit our fundraising for our investment products, result inlimitations in the manner in which our business is conducted, have an adverse impact upon our financial condition, results of operations, reputation or prospects,impair employee retention or recruitment and require substantial attention by senior management. It is impossible to determine the extent of the impact of any newlaws, regulations, initiatives or regulatory guidance that may be proposed or may become law on our business or the markets in which we operate. If enacted, anynew regulation or regulatory framework could negatively impact our funds and us in a number of ways, including increasing our costs and the cost for our funds ofinvesting, borrowing, hedging or operating, increasing the funds’ or our regulatory operating costs, imposing additional burdens on the funds’ or our48Table of Contentsstaff, and potentially requiring the disclosure of sensitive information. In addition, we may be adversely affected by changes in the interpretation or enforcement ofexisting laws and rules by these governmental authorities and self‑regulatory organizations. New laws or regulations could make compliance more difficult or moreexpensive, affect the manner in which we conduct business and divert significant management and operational resources and attention from our business.Moreover, we anticipate the potential for an increase in regulatory investigations and new or enhanced reporting requirements of the trading and other investmentactivities of alternative investment management funds and firms, including our funds and us. Such investigations and reporting obligations will likely imposeadditional expenses on us, may require the attention of senior management and increase the complexity of managing our business and may result in fines or othersanctions if we or any of our funds are deemed to have violated any law or regulations.Regulation under the Dodd‑‑Frank Act. There have been a number of legislative and regulatory proposals affecting the financial sector in the United States. Inparticular, the Dodd‑Frank Wall Street Reform and Consumer Protection Act, or Dodd‑Frank Act, that President Obama signed into law on July 21, 2010, createda significant amount of new regulation. Among other things, the Dodd‑Frank Act:•established the Financial Stability Oversight Council, or FSOC, an inter‑agency body charged with, among other things, designating systemicallyimportant nonbank financial companies for heightened prudential supervision and making recommendations regarding the imposition of enhancedregulatory standards regarding capital, leverage, conflicts and other requirements for financial firms deemed to pose a systemic threat to U.S. financialstability;•requires private equity and hedge fund advisers to register with the SEC under the Investment Advisers Act (as described elsewhere in this report,Kohlberg Kravis Roberts & Co. L.P. and its wholly‑owned subsidiaries KKR Credit Advisors (US) LLC and Prisma Capital Partners LP are registeredwith the SEC as investment advisers under the Investment Advisers Act), to maintain extensive records and to file reports for purposes of systemic riskassessment by certain governmental bodies;•directs federal regulatory agencies to review and, in certain cases, prohibit compensation arrangements at financial institutions that give employeesincentives to engage in conduct deemed to encourage inappropriate risk taking by covered financial institutions;•requires public companies to adopt and disclose policies requiring, in the event the company is required to issue an accounting restatement, the clawbackof related incentive compensation from current and former executive officers;•restricts the ability of banking organizations to sponsor or invest in private equity and hedge funds;•granted the U.S. government resolution authority to liquidate or take emergency measures with regard to troubled financial institutions that fall outside theexisting resolution authority of the Federal Deposit Insurance Corporation, or FDIC; and•created the Consumer Financial Protection Bureau within the U.S. Federal Reserve.U.S. financial regulators have taken action to address the majority of mandatory rulemaking provisions of the Dodd-Frank Act, but these regulations remainsubject to the discretion of regulatory bodies, such as the SEC, CFTC and FSOC. For example, the following regulations have been enacted that may apply to us orour subsidiaries:•On April 3, 2012, the FSOC issued a final rule and interpretive guidance regarding the process by which it designates nonbank financial companies assystemically important. The rule and guidance detail a three‑stage review process, with the level of scrutiny increasing at each stage. During the firststage, the FSOC applies a broad set of uniform quantitative metrics to identify nonbank financial companies that warrant additional review. In this firststage, the FSOC considers whether a nonbank financial company has at least $50 billion in total consolidated assets and whether it meets other thresholdsrelating to credit default swaps outstanding, derivative liabilities, loans and bonds outstanding, a minimum leverage ratio of total consolidated assets tototal equity of 15 to 1, and a short‑term debt ratio of debt (with maturities less than 12 months) to total consolidated assets of 10%. A company that meetsboth the asset test and at least one of the other thresholds will be subject to additional review in Stage 2. While we have less than $50 billion in totalconsolidated assets as of December 31, 2016 and we believe we do not currently meet the Stage 1 criteria outlined above, those criteria as well as ourbusiness may evolve over time. Additional uncertainty is created because the FSOC retains authority to designate any nonbank financial company assystemically important, even if the company does not meet the Stage 1 criteria. The FSOC will consider in the future whether to establish “an additionalset of metrics or thresholds tailored to evaluate hedge funds and private equity firms and their advisers.”49Table of ContentsThe preamble to the final rule notes that less regulatory data is generally available for hedge funds and private equity firms, but indicates that, indeveloping any such additional metrics or thresholds, it intends to review financial disclosures that private fund advisers are required to file with the SECand CFTC, as further described below.•On December 18, 2014, the FSOC issued a notice seeking public comment on potential systemic risks from asset management products and activities,focusing in particular on (1) liquidity and redemption risks, (2) use of leverage, (3) operational functions, and (4) resolution‑related issues. On November16, 2016, the FSOC reiterated its focus on these risk areas, as well as securities lending, in a public statement on its review of asset management productsand activities. According to the notice and statement, the FSOC has not made any final determination regarding the existence or nature of any potentialrisks to financial stability posed by the asset management industry.•If the FSOC were to determine that we were a systemically important nonbank financial company, we would be subject to a heightened degree ofregulation, including more stringent standards relating to capital, leverage, liquidity, risk management, resolution planning, credit exposure reporting, andconcentration limits, restrictions on acquisitions and annual stress testing by the Federal Reserve. There can be no assurance that nonbank financial firmssuch as us will not become subject to the aforementioned restrictions or other requirements for financial firms deemed to be systemically important to thefinancial stability of the U.S. economy.•The Dodd‑Frank Act, under what has become known as the “Volcker Rule,” broadly prohibits depository institution holding companies (including foreignbanks with U.S. branches or agencies), insured depository institutions and their subsidiaries and controlled affiliates (or banking entities), from investingin third‑party private equity funds like ours. See “-Our inability to raise additional or successor funds (or raise successor funds of a comparable size as ourpredecessor funds) could have a material adverse impact on our business.”•On October 26, 2011, the SEC adopted a rule requiring certain advisers to private funds to periodically file reports on Form PF. Large private fundadvisers including advisers with at least $1.5 billion in assets under management attributable to hedge funds and advisers with at least $2 billion in assetsunder management attributable to private equity funds are subject to more detailed and in certain cases more frequent reporting requirements. Theinformation is to be used by the FSOC in monitoring risks to the U.S. financial system.•In April and May 2016, the SEC issued for public comment revised proposed rules as part of a joint rule‑making effort with other federal regulatoryagencies designed to prohibit certain incentive‑based compensation arrangements deemed to encourage inappropriate risk taking by covered financialinstitutions by providing "excessive" compensation, fees or benefits or that could lead to material losses. To date, however, the SEC has not adopted therevised proposed rules. As proposed, the rule would cover financial institutions with total consolidated assets of at least $1 billion, including investmentadvisers and broker-dealers, and provide heightened requirements for financial institutions with total consolidated assets of at least $50 billion. Dependingon the outcome of the rule making process, the application of this rule to us could require us to substantially revise our compensation strategy, increaseour compensation and other costs, and adversely affect our ability to recruit and retain qualified employees.•On June 28, 2016, the SEC proposed a rule that would require registered investment advisers to adopt and implement written business continuity plansand transition plans based upon the particular risks associated with the individual adviser’s operations and address several specified factors. While itremains to be seen what the final rule will require, compliance with such a rule may impose additional costs on us.•The Dodd‑Frank Act amended the Exchange Act to compensate and protect whistleblowers who voluntarily provide original information to the SEC andestablishes a fund to be used to pay whistleblowers who will be entitled to receive a payment equal to between 10% and 30% of certain monetarysanctions imposed in a successful government action resulting from the information provided by the whistleblower.As mandated by the Dodd‑Frank Act, the Commodity Futures Trading Commission, or CFTC, has proposed or adopted a series of rules to establish acomprehensive new regulatory framework for swaps. Under Title VII of the Dodd‑Frank Act, the CFTC has assumed regulatory authority over many types ofswaps. As a result:•Operating pooled funds, or providing investment advice to clients that trade swaps is now a basis for registration with the CFTC, absent an applicableexemption. Although not mandated by the Dodd‑Frank Act, the CFTC in 2012 issued a final rule that rescinded an exemption from CFTC registration forcommodity pool operators in connection with privately offered funds. Operating our funds in a manner consistent with one or more exemptions fromregistration with the CFTC may limit the activities of certain of our funds, and monitoring and analysis of these exemptions50Table of Contentsrequires management and operational resources and attention. Registration with the CFTC, if required, could impact our operations and add additionalcosts associated with ongoing compliance.•The Dodd‑Frank Act also imposes regulatory requirements on the trading of swaps, including requirements that most swaps be executed on an exchangeor “swap execution facility” and cleared through a central clearing house. Although these requirements presently apply only to certain classes of interestrate and credit default swaps, the CFTC is expected to mandate central execution and clearing with respect to additional classes of swaps in the future.•The CFTC issued regulations with quantitative tests and thresholds to determine whether entities are “swap dealers” or “major swap participants” thatmust register in the appropriate category and comply with capital, margin, record keeping, reporting, and business conduct rules. Our funds could becomesubject to the requirement to register as major swap participants due to changes to the funds’ investment strategy or valuations, or revisions to thethresholds for registration.•On December 5, 2016, the CFTC re-proposed rules instituting position limits on certain physical commodity futures contracts that, if finalized asproposed, would limit positions in 28 agricultural, energy and metals commodities, including swaps, futures and options that are economically equivalentto those commodity contracts. If the proposed rules are adopted in substantially the form proposed and to the extent that we do not qualify for anexemption, we may be required to aggregate the positions of our various investment funds and the positions of our portfolio companies, which in turn mayrequire us and our portfolio companies to limit our trading activities, and impact the ability of our investment funds to invest or remain invested in certainderivatives, or engage in otherwise profitable acquisitions in particular industries. The Dodd-Frank Act also requires SEC to establish position limits onsecurity-based swaps, which rules could have a similar impact on our business.•The CFTC and banking regulators have adopted, and the SEC has proposed, rules regarding margin and capital requirements for most uncleared or"over‑the‑counter" swaps. These rules generally require swap dealers and major swap participants to collect and post a minimum amount of margin whentrading with other covered entities and financial end-users. The imposition of these requirements could increase the cost of trading in the derivativemarkets, which could in turn make it more expensive and difficult for us or our funds to enter into swaps and other derivatives in the normal course of ourbusiness and reduce the effectiveness of the funds’ and our investment strategies. In certain cases, using forward transactions to hedge non-deliverablecurrencies such as the Indian rupee, South Korean won, Malaysian ringgit and Indonesian rupiah may be cost prohibitive or impractical to execute,because of the capital reserve required to be held against potential derivative liabilities. These rules could also adversely impact liquidity in derivativesmarkets, which could expose our funds and us to greater risks and reduce hedging opportunities in connection with their trading activities. The compliancedates applicable to our funds and us for the CFTC and banking margin rules are expected to be phased in through 2020, depending on the aggregatenotional amount of over-the-counter swaps traded by the funds and us. In addition, the CFTC has proposed but not adopted rules that may limit the totalamount of hedging that investment funds controlled by a single corporate group may enter into. While these rules currently apply only to agriculturalproducts, the CFTC may expand them to cover oil and gas which could materially adversely impact our private equity and energy funds.Additionally, rules adopted by the federal banking and housing agencies implementing the Dodd-Frank Act's five percent risk retention requirement fororiginators of asset-backed securities became fully effective on December 24, 2016. The risk retention rules require a "securitizer" or "sponsor" (which, in the caseof a CLO, is considered the collateral manager) to retain directly or through a majority-owned affiliate, at least 5% of the credit risk of the securitized assets. Theserules could adversely affect the profitability of our CLO activities and may adversely affect the leveraged loan market generally, including the primary orsecondary market for CLO securities, including the level of liquidity and trading of CLO securities, which in turn could adversely affect our CLO managementbusiness. In addition, certain of our affiliates have been required to execute agreements agreeing to certain undertakings intended to ensure that the CLOs complywith the risk retention rules. In the event one of our affiliates breaches one or more of such undertakings, we or such affiliates could be exposed to claims by theother parties thereto, including for any losses incurred as a result of such breach.In September 2016, the Federal Reserve issued for public comment a proposed rule that, if enacted as proposed, would impose significant capital and otherprudential requirements on the physical commodities activities of certain banking organizations. The implementation of these or other new regulations couldincrease the cost of trading in the commodities and derivative markets, which could in turn make it more expensive and difficult for us or our funds to enter intoswaps and other derivatives in the normal course of our business. Moreover, these increased regulatory responsibilities and increased costs could reduce tradinglevels in the commodities and derivative markets by a number of market participants, which could in turn adversely impact liquidity in the markets and expose ourfunds to greater risks in connection with their trading activities.51Table of ContentsAlthough it is possible that the change in administration in the United States could result in modifications and a relaxation of regulatory requirements andrestrictions adopted in response to the financial crisis, the timing and scope of such modifications remain uncertain and may not materialize.EU-Wide Regulations. The EU Alternative Investment Fund Managers Directive (AIFMD) entered into effect on July 22, 2013. The AIFMD establishes acomprehensive regulatory and supervisory framework for alternative investment fund managers (AIFMs) managing or marketing alternative investment funds(AIFs) in the EU. The AIFMD imposes various substantive requirements on authorized AIFMs including rules on the structure of remuneration for certainpersonnel that are similar to those applicable under CRD III and IV (as defined below), a threshold for regulatory capital, reporting obligations in respect ofcontrolled EU portfolio companies and increased transparency towards investors and regulators and allows authorized AIFMs to market AIFs to professionalinvestors throughout the EU under an “EU passport”. The AIFMD also imposes a new, strict depositary regime.The EU passport has been available to authorized EU AIFMs, since July 2013 but has yet to become available to non EU AIFMs. In the meantime (and until atleast 2019), non‑EU AIFMs may continue to market within the EU under the private placement regimes (NPPRs) of the individual member states, where available,subject to complying with certain minimum requirements imposed by the AIFMD and any additional requirements that individual member states may impose. In2015 and 2016, the European Securities and Markets Authority (ESMA) published advice in relation to the application of the EU passport to non-EU AIFMs andAIFs from certain jurisdictions and its opinion on the function of the EU passport for EU AIFMS and NPPRs. Upon the effectiveness of any measures adopted bythe EU Commission extending the EU passport to non-EU AIFMs and AIFs, the NPPRs allowing marketing by non-EU authorized AIFMs in certain memberstates will likely be further restricted, and NPPRs may become unavailable for marketing by non-EU authorized AIFMs in all member states as early as 2020.While our authorized EU AIFs continue to be marketed under an EU passport, the availability of the NPPRs and the uncertainty regarding the application of the EUpassport to non EU AIFMs and AIFs may adversely impact the marketing of new strategies.The AIFMD, the Level 2 Regulation and EU member state implementing measures could have an adverse effect on our businesses by, among other things,(i) imposing disclosure obligations and restrictions on distributions by EU portfolio companies of the funds we manage, (ii) potentially requiring changes in ourcompensation structures for key personnel, thereby potentially affecting our ability to recruit and retain these personnel, and (iii) generally increasing ourcompliance costs. Although a subsidiary of ours is registered as an Irish AIFM, we may not be able to benefit from the EU marketing passport for all of our fundsunder the AIFMD and the EU marketing passport may not apply to marketing to investors in the United Kingdom if and when its withdrawal from the EU becomeseffective. See "-- Brexit". In addition, there are areas of the AIFMD that are subject to legal uncertainty, including the scope of the legal structures qualifying asAIFs whose management and marketing requires authorization, and failure to comply even in areas where there is legal uncertainty can result in fines. Compliancewith the AIFMD has also increased the cost and complexity of raising capital for our funds and consequently may also slow the pace of fundraising.In July 2014, revisions to the Markets in Financial Instruments Directive (known as MiFID I), consisting of the revised directive, MiFID II, and a new relatedregulation, MiFIR, came into force. Member States are required to adopt MiFID II into their national law in 2017, and MiFID II and MiFIR will apply to ouroperations from January 2018. MiFID II and MiFIR further strengthen the EU regulatory framework for the provision of investment services and trading infinancial instruments by introducing a number of substantial reforms in regards to transaction reporting, market structure, securities trading and conduct of businessrules, including new harmonized rules for authorization of EU branches of third country firms looking to provide certain investment services in the EU. MiFID IIimplementing measures are being finalized. The application of MiFID II and MiFIR will result in new regulatory burdens, including the requirement to tradecertain derivatives on regulated trading venues. The increased regulatory burden could result in increased costs, and any failure to comply with the newrequirements, even in areas where there is legal uncertainty, could result in fines.On January 1, 2011, an amendment to the Capital Requirements Directive (CRD III) entered into force. Among other things, CRD III required EU memberstates to introduce stricter controls on remuneration for key employees and risk takers within specified credit institutions and investment firms. The CRD III wasfurther amended by the Capital Requirements Directive IV and the Capital Requirements Regulation as discussed below, which introduced a limited number ofadditional remuneration requirements, including a cap on variable remuneration. Two of our subsidiaries (established in the UK and Ireland) are subject to theremuneration‑related requirements of CRD IV and similar requirements under the AIFMD. Additionally, the European Banking Authority has published finalguidelines on sound remuneration policies under CRD IV which set out the requirements for remuneration policies, group application and proportionality, alongwith criteria for the allocation of remuneration as fixed and variable and details on the disclosures required under the Capital Requirements Regulation. Thesemeasures required changes in our compensation structures for key personnel, thereby potentially affecting these subsidiaries’ ability to recruit and retain thesepersonnel.52Table of ContentsIn 2010, the Basel Committee on Banking Supervision, an international body comprised of senior representatives of bank supervisory authorities and centralbanks from 27 countries, including the United States, finalized a comprehensive set of capital and liquidity standards, commonly referred to as “Basel III,” forinternationally active banking organizations. These new standards, which are expected to be fully phased in by 2019, are expected to require banks to hold morecapital, predominantly in the form of common equity, than under the current capital framework. In the EU, Basel III’s capital and liquidity standards have beenimplemented in a revision to CRD III and a new Capital Requirements Regulation, collectively referred to as CRD IV, which came into force on January 1, 2014.CRD IV replaced CRD III and created a single harmonized prudential rule book for banks, introducing new corporate governance rules and enhanced the powers ofregulators. Like CRD III, CRD IV applies to specified credit institutions and investment firms. CRD IV has enhanced our financial reporting obligations andsubjected us to new reporting requirements, which increases costs and the risk of non‑compliance. Compliance with Basel III may result in significant costs tobanking organizations, which, in turn, could result in higher borrowing costs for us and our portfolio companies, and may reduce access to certain types of credit.Other EU bank regulatory initiatives that could result in higher borrowing costs for us and our portfolio companies or reduce access to certain types of creditinclude the European Banking Authority's guidelines on limits to exposures to shadow banking entities which carry out banking activities outside a regulatedframework under EU law (including funds employing leverage on a substantial basis, within the meaning of AIFMD and its implementing rules, and credit funds),which entered into force on January 1, 2017, and (if adopted) guidelines on leveraged lending, proposed in November 2016 and modeled on U.S. leveraged lendingguidelines.In August 2012, the regulation on OTC Derivatives, Central Counterparties and Trade Repositories (also known as the European Market InfrastructureRegulation, or EMIR) became effective. EMIR applies to derivatives transactions in which one of the parties is established in the EU, and may in somecircumstances apply to transactions between two non‑EU counterparties where these contracts have a direct, substantial and foreseeable effect within the EU.Certain of the requirements of EMIR came into force in March 2013, and other obligations will be phased in. In particular, EMIR imposes a requirement thatcertain “standardized” OTC derivatives contracts are centrally cleared. These requirements are being phased in based on the relevant entities' activities over aperiod through December 2018. Where OTC transactions are not subject to central clearing, techniques must be employed to monitor, measure and mitigate theoperational and counterparty risks presented by the transaction. These risk mitigation techniques include trade confirmation, reconciliation processes, exchange ofmargin, and the daily mark to market of trades. Certain of these risk mitigation and reporting obligations are already in force. Initial margin requirements foruncleared trades are expected to be phased in through September 1, 2020. Variation margin requirements for uncleared trades are expected to be phased in betweenSeptember 1, 2016, and March 1, 2017. The European Commission adopted an equivalence decision for the U.S. in March 2016. However, ongoing regulatoryuncertainty regarding the interaction between U.S. and EU requirements for central clearing and related activities could result in duplicative regulatory obligationsin the two jurisdictions and could increase our costs of compliance. The implementation of any new regulations could increase the cost of trading in thecommodities and derivative markets, which could in turn make it more expensive and difficult for us or our funds to enter into swaps and other derivatives in thenormal course of our business. Moreover, these increased regulatory responsibilities and increased costs could reduce trading levels in the commodities andderivative markets by a number of market participants, which could in turn adversely impact liquidity in the markets and expose our funds to greater risks inconnection with their trading activities.A number of other EU financial regulatory initiatives have the potential to adversely affect our business. Future acquisitions by KKR or our funds could leadto application of the EU’s Financial Conglomerates Directive, which introduced a prudential regime for financial conglomerates to address perceived risksassociated with large cross‑sector businesses, and could increase the costs of investing in insurance companies and banks in the EU. Other recent EU financialregulatory initiatives include the Short Selling Regulation, which limits sovereign and naked short selling of government bonds and stocks, the Bank Recovery andResolution Directive (BRRD), which established a recovery and resolution framework for EU credit institutions and investment firms, a new regulation (CSDR) oncentral securities depositories (CSDs), which introduces common securities settlement standards across the EU and harmonizes the rules governing CSDs, and anew regulation on reporting and transparency of securities financing transactions (SFT Regulation), which requires all SFTs to be reported to trade repositories,places additional reporting requirements on investment managers, and introduces prior risk disclosures and written consent before assets are rehypothecated. A newproposed regulation on Money Market Funds (MMF) is expected to be adopted in 2017. The EU has adopted and may in the future adopt additional risk retentionand due diligence requirements in respect of various types of EU-regulated investors that, among other things, restrict investors from taking positions insecuritization, increase the capital costs of originator, sponsor or original lender of a securitization, and require retaining a larger net economic interest in thesecuritization, which may adversely affect the profitability of us, our funds or our CLOs and the leveraged loan market generally. The implementation of these newrequirements could increase our and our funds’ or CLOs' costs and the complexity of managing our business and could result in fines if we or any of our funds orCLOs were deemed to have violated any of the new regulations.53Table of ContentsIn May 2016, the European Union adopted the General Data Protection Regulation, which will impose stringent data protection requirements and will providefor significant penalties for noncompliance beginning in May 2018. Any inability, or perceived inability, to adequately address privacy and data protectionconcerns, or comply with applicable laws, regulations, policies, industry standards, contractual obligations, or other legal obligations, even if unfounded, couldresult in additional cost and liability and could damage our reputation and adversely affect our business.Brexit. In June 2016, United Kingdom voters approved an exit from the European Union, known as Brexit. It is expected that its government will beginnegotiating the terms of the United Kingdom's withdrawal from the European Union in 2017 and that the United Kingdom's withdrawal may become effective in2019. Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the United Kingdom determines which European Union lawsto replace or replicate. In addition, following the United Kingdom's withdrawal from the European Union, our EU-authorized AIFM may no longer benefit fromthe EU marketing passport to market products investors in the United Kingdom. These changes in law and uncertainty with respect to the laws and regulations inthe United Kingdom may increase the cost of raising capital, underwriting and distributing securities and conducting business generally and interfere with ourability to market our products. Changes in regulation may also impair our ability recruit, retain and motivate new employees and retain key employees. The UnitedKingdom's withdrawal could also lead to instability in the European Union, including potentially withdrawal by other Member States, which would greatly amplifythe adverse events described in this paragraph. Such changes may also materially and adversely affect the valuation of our investments located in the UnitedKingdom.Other regulations of the financial markets. Certain requirements imposed by regulators are designed primarily to ensure the integrity of the financial marketsand are not designed to protect holders of interests in our business or our funds. Consequently, these regulations often serve to limit our activities. In addition tomany of the regulations and proposed regulations described above under “-Regulation under the Dodd‑Frank Act,” and “-EU‑Wide Regulation,” U.S. federal bankregulatory agencies have issued leveraged lending guidance covering transactions characterized by a degree of financial leverage. Such guidance limits the amountor availability of debt financing and may increase the cost of financing we are able to obtain for our transactions and may cause the returns on our investments tosuffer.Regulators in the U.S. and abroad, including the Financial Stability Board, are also considering a variety of regulatory measures and recommendations thatcould affect various non‑bank financial institutions that operate outside of the regulated banking system and the activities in which they engage. These reformmeasures are generally intended to mitigate against the kind of market disruptions that prevailed in 2008 and 2009 and that ultimately affected both banks andnon‑banks. If these regulations or recommendations are adopted, they could impose additional regulatory burdens and costs, including potentially imposing capitalrequirements, limiting financing and leverage and increasing costs, in each case causing the returns on our lending and credit investment activities to suffer. Certainof our businesses may also be directly subject to such new regulation, which could cause such businesses to limit or cease engaging in certain activities.Certain of the funds and accounts we manage that engage in originating, lending and/or servicing loans, may consider investments that would subject us tostate and federal regulation, borrower disclosure requirements, limits on fees and interest rates on some loans, state lender licensing requirements and otherregulatory requirements in the conduct of their business. If our funds and accounts make these investments, they may also be subject to consumer disclosures andsubstantive requirements on consumer loan terms and other federal regulatory requirements applicable to consumer lending that are administered by the ConsumerFinancial Protection Bureau. These state and federal regulatory programs are designed to protect borrowers.State and federal regulators and other governmental entities have authority to bring administrative enforcement actions or litigation to enforce compliance withapplicable lending or consumer protection laws, with remedies that can include fines and monetary penalties, restitution of borrowers, injunctions to conform tolaw, or limitation or revocation of licenses and other remedies and penalties. In addition, lenders and servicers may be subject to litigation brought by or on behalfof borrowers for violations of laws or unfair or deceptive practices. If we enter into transactions that subject us to these risks, failure to conform to applicableregulatory and legal requirements could be costly and have a detrimental impact on certain of our funds and accounts and ultimately on usPortfolio Company Legal and Regulatory Environment. We are subject to certain laws, such as certain environmental laws, takeover laws, anti‑bribery andanti‑corruption laws, escheat or abandoned property laws, antitrust laws and data privacy and data protection laws that may impose requirements on us and ourportfolio companies as an affiliated group. As a result, we could become jointly and severally liable for all or part of fines imposed on our portfolio companies orbe fined directly for violations committed by portfolio companies, and such fines imposed directly on us could be greater than those imposed on the portfoliocompany. Moreover, portfolio companies may seek to hold us responsible if any fine imposed on them is increased because of their membership in a larger groupof affiliated companies. For example, on April 2, 2014, the European Commission announced that it had fined 11 producers of underground and submarine highvoltage power cables a total of54Table of Contents302 million euro for participation in a ten‑year market and customer sharing cartel. Fines were also imposed on parent companies of the producers involved,including Goldman Sachs, the former parent company of one of the cartel members. In addition, compliance with certain laws or contracts could also require us tocommit significant resources and capital towards information gathering and monitoring thereby increasing our operating costs. For example, because we mayindirectly hold voting securities in public utilities subject to regulation by the Federal Energy Regulatory Commission (FERC), including entities that may holdFERC authorization to charge market-based rates for sales of wholesale power and energy, we may be subject to certain FERC regulations, including regulationsrequiring us and our portfolio companies to collect, report and keep updated substantial information concerning our ownership of such voting interests and votinginterests in other related energy companies, corporate officers, and our direct and indirect investment in such utilities and related companies. Such rules maysubject our portfolio companies and us to costly and burdensome data collection and reporting requirements.In the United States, certain statutes may subject us or our funds to the liabilities of our portfolio companies. The Comprehensive Environmental Response,Compensation and Liability Act, also referred to as the Superfund, requires cleanup of sites from which there has been a release or threatened release of hazardoussubstances, and authorizes the EPA to take any necessary response action at Superfund sites, including ordering potentially responsible parties liable for the releaseto pay for such actions. Potentially responsible parties are broadly defined under CERCLA.In addition, we or certain of our investment funds could potentially be held liable under ERISA for the pension obligations of one or more of our portfoliocompanies if we or the investment fund were determined to be a “trade or business” under ERISA and deemed part of the same “controlled group” as the portfoliocompany under such rules, and the pension obligations of any particular portfolio company could be material. On March 28, 2016, a Federal District Court judge inMassachusetts ruled that two private equity funds affiliated with Sun Capital were jointly and severally responsible for unfunded pension liabilities of a Sun Capitalportfolio company. While neither fund held more than an 80% ownership interest of the portfolio company, the percentage required under existing regulations tofind liability, the court found the funds had formed a partnership-in-fact conducting a trade or business and that as a result each fund was jointly and severallyliable for the portfolio company's unfunded pension liabilities. If the rationale of this decision were to be applied by other courts, we or certain of our investmentfunds could be held liable under ERISA for certain pension obligations of portfolio companies. In addition, if the rationale of this decision were expanded to applyalso for U.S. federal income tax purposes, then certain of our investors could be subject to increased U.S. income tax liability or filing obligations in certaincontexts.Similarly, our portfolio companies may be subject to contractual obligations which may impose obligations or restrictions on their affiliates. The interpretationof such contractual provisions will depend on local laws. Given that we do not control all of our portfolio companies and that our portfolio companies generallyoperate independently of each other, there is a risk that we could contravene one or more of such laws, regulations and contractual arrangements due to limitedaccess and opportunities to monitor compliance. In addition, compliance with these laws or contracts could require us to commit significant resources and capitaltowards information gathering and monitoring thereby increasing our operating costs.Complex regulations may limit our ability to raise capital, increase the costs of our capital raising activities and may subject us to penalties .We regularly rely on exemptions in the United States from various requirements of the Securities Act, the Exchange Act, the Investment Company Act, theCommodity Exchange Act and the U.S. Employee Retirement Income Security Act of 1974, or ERISA, in conducting our investment management activities. Theseexemptions are sometimes highly complex and may in certain circumstances depend on compliance by third parties whom we do not control. If for any reasonthese exemptions were to become unavailable to us, we could become subject to additional restrictive and costly registration requirements, regulatory action, orthird party claims and our business could be materially and adversely affected. For example, in raising new funds, we typically rely on private placementexemptions from registration under the Securities Act, including Regulation D, which has been amended to prohibit issuers (including our funds) from relying oncertain of the exemptions from registration if the fund or any of its “covered persons” (including certain officers and directors, but also including certain thirdparties including, among others, promoters, placement agents and beneficial owners of 20% of outstanding voting securities of the fund) has been the subject of a“disqualifying event,” or a “bad actor,” which can include a variety of criminal, regulatory and civil matters. If any of the covered persons associated with ourfunds is subject to a disqualifying event, one or more of our funds could lose the ability to raise capital in a Rule 506 private offering for a significant period oftime, which could significantly impair our ability to raise new funds, and, therefore, could materially adversely affect our business, financial condition and resultsof operations. In addition, if certain of our employees or any potential significant investor has been the subject of a disqualifying event, we could be required toreassign or terminate such an employee or we could be required to refuse the investment of such an investor, which could impair our relationships with investors,harm our reputation, or make it more difficult to raise new funds. See also “-Risks Related to Our Organizational Structure-If we were deemed to be an “investmentcompany” subject to55Table of Contentsregulation under the Investment Company Act, applicable restrictions could make it impractical for us to continue our business as contemplated and could have amaterial adverse effect on our business.”We are and will become further subject to additional regulatory and compliance burdens as we expand our product offerings and investment platform toinclude retail investors. For example, funds in our Public Markets segment are registered under the Investment Company Act as management investmentcompanies. These funds and KKR Credit Advisors (US) LLC, which serves as their investment adviser (or in the case of a BDC, as its sub‑adviser), are subject tothe Investment Company Act and the rules thereunder, which, among other things, regulate the relationship between a registered investment company (or businessdevelopment company) and its investment adviser and prohibit or severely restrict principal transactions and joint transactions. As our business expands we may berequired to make additional registrations, including in jurisdictions outside the U.S. Compliance with these rules will increase our compliance costs and createpotential for additional liabilities and penalties the management of which would divert management’s attention from our business and investments.Rule 206(4)‑5 under the Advisers Act regarding “pay to play” practices by investment advisers involving campaign contributions and other payments togovernment clients and elected officials able to exert influence on such clients. Among other restrictions, the rule prohibits investment advisers from providingadvisory services for compensation to a government client for two years, subject to very limited exceptions, after the investment adviser, its senior executives or itspersonnel involved in soliciting investments from government entities make contributions to certain candidates and officials in position to influence the hiring of aninvestment adviser by such government client. Advisers are required to implement compliance policies designed, among other matters, to track contributions bycertain of the adviser’s employees and engagements of third parties that solicit government entities and to keep certain records in order to enable the SEC todetermine compliance with the rule. There has also been similar rule‑making on a state‑level regarding “pay to play” practices by investment advisers, including inCalifornia and New York, and FINRA has released its own set of regulations. Any failure on our part to comply with these rules could cause us to losecompensation for our advisory services or expose us to significant penalties and reputational damage.Federal, state and foreign anti‑‑corruption and sanctions laws applicable to us and our portfolio companies creates the potential for significant liabilities andpenalties and reputational harm .We are also subject to a number of laws and regulations governing payments and contributions to political persons or other third parties, including restrictionsimposed by the Foreign Corrupt Practices Act, or FCPA, as well as trade sanctions and export control laws administered by the Office of Foreign Assets Control, orOFAC, the U.S. Department of Commerce and the U.S. Department of State. The FCPA is intended to prohibit bribery of foreign governments and their officialsand political parties, and requires public companies in the United States to keep books and records that accurately and fairly reflect those companies’ transactions.OFAC, the U.S. Department of Commerce and the U.S. Department of State administer and enforce various export control laws and regulations, includingeconomic and trade sanctions based on U.S. foreign policy and national security goals against targeted foreign states, organizations and individuals. These laws andregulations relate to a number of aspects of our business, including servicing existing fund investors, finding new fund investors, and sourcing new investments, aswell as activities by the portfolio companies in our investment portfolio or other controlled investments.The Iran Threat Reduction and Syrian Human Rights Act of 2012, or ITRA, expanded the scope of U.S. sanctions against Iran and amended the Exchange Act.Specifically, Section 219 of the ITRA amended the Exchange Act to require public reporting companies to disclose in their annual or quarterly reports any dealingsor transactions the company or its affiliates engaged in during the previous reporting period involving Iran or other individuals and entities targeted by certainOFAC sanctions. In some cases, ITRA requires companies to disclose these types of transactions even if they are permissible under U.S. law or are conductedoutside of the United States by a foreign affiliate. We are required to separately file, concurrently with this annual report, a notice that such activities have beendisclosed in this annual report. The SEC is required to post this notice of disclosure on its website and send the report to the U.S. President and certain U.S.Congressional committees. The U.S. President thereafter is required to initiate an investigation and, within 180 days of initiating such an investigation, todetermine whether sanctions should be imposed. Disclosure of such activity, even if such activity is not subject to sanctions under applicable law, and anysanctions actually imposed on us or our affiliates as a result of these activities, could harm our reputation and have a negative impact on our business.Similar laws in non‑U.S. jurisdictions, such as EU sanctions or the U.K. Bribery Act, as well as other applicable anti‑bribery, anti‑corruption, anti‑moneylaundering, or sanction or other export control laws in the U.S. and abroad, may also impose stricter or more onerous requirements than the FCPA, OFAC, the U.S.Department of Commerce and the U.S. Department of State, and implementing them may disrupt our business or cause us to incur significantly more costs tocomply with those laws. Different laws may also contain conflicting provisions, making compliance with all laws more difficult. If we fail to comply with theselaws and regulations, we could be exposed to claims for damages, civil or criminal financial penalties,56Table of Contentsreputational harm, incarceration of our employees, restrictions on our operations and other liabilities, which could negatively affect our business, operating resultsand financial condition. In addition, we may be subject to successor liability for FCPA violations or other acts of bribery, or violations of applicable sanctions orother export control laws committed by companies in which we or our funds invest or which we or our funds acquire.We are subject to substantial litigation risks and may face significant liabilities and damage to our professional reputation as a result of litigation allegationsand negative publicity.The activities of our businesses, including the investment decisions we make and the activities of our employees in connection with our portfolio companies,may subject us and them to the risk of litigation by third parties, including fund investors dissatisfied with the performance or management of their funds, debt orequity holders of our portfolio companies, and a variety of other potential litigants. See the section entitled “Litigation” appearing in Note 18 “Commitments andContingencies” of our financial statements included elsewhere in this report. By way of example, we, our funds and certain of our employees are each exposed tothe risks of litigation relating to investment activities of our funds and actions taken by the officers and directors (some of whom may be KKR employees) ofportfolio companies, such as the risk of shareholder litigation by other shareholders of public companies or holders of debt instruments of companies in which ourfunds have significant investments. We are also exposed to risks of litigation, investigation or negative publicity in the event of any transactions that are alleged notto have been properly addressed.To the extent investors in our investment funds suffer losses resulting from fraud, gross negligence, willful misconduct or other similar misconduct, suchinvestors may have remedies against us, our investment funds, our employees or our affiliates. Investors in our funds do not have legal remedies against us, thegeneral partners of our funds, our funds, our employees or our affiliates solely based on their dissatisfaction with the investment performance of those funds. Whilethe general partners and investment advisers to our investment funds, including their directors, officers, employees and affiliates, are generally indemnified to thefullest extent permitted by law with respect to their conduct in connection with the management of the business and affairs of our investment funds, such indemnitygenerally does not extend to actions determined to have involved fraud, gross negligence, willful misconduct or other similar misconduct.If any civil or criminal lawsuits were brought against us and resulted in a finding of substantial legal liability or culpability, the lawsuit could materiallyadversely affect our business, financial condition or results of operations or cause significant reputational harm to us, which could seriously impact our business.We depend to a large extent on our business relationships and our reputation for integrity and high caliber professional services to attract and retain fund investorsand qualified professionals and to pursue investment opportunities for our funds. As a result, allegations of improper conduct by private litigants or regulators,whether the ultimate outcome is favorable or unfavorable to us, as well as negative publicity and press speculation about us, our investment activities or the privateequity industry in general, whether or not valid, may harm our reputation, which may be more damaging to our business than to other types of businesses.In addition, we have formed and may continue to form funds targeting retail investors, which may subject us to additional risk of litigation and regulatoryscrutiny. See-“Extensive regulation of our businesses affects our activities and creates the potential for significant liabilities and penalties. The possibility ofincreased regulatory focus or legislative or regulatory changes could adversely affect our business.” We have and expect to continue to distribute products throughnew channels, including through unaffiliated firms, we may not be able to effectively monitor or control the manner of their distribution, which could result inlitigation against us, including with respect to, among other things, claims that products distributed through such channels are distributed to customers for whomthey are unsuitable or distributed in any other inappropriate manner. The distribution of products through new channels whether directly or through marketintermediaries, including in the retail channel, could expose us to additional regulatory risk in the form of allegations of improper conduct and/or actions by stateand federal regulators against us with respect to, among other things, product suitability, conflicts of interest and the adequacy of disclosure to customers to whomour products are distributed through those channels.With a workforce composed of many highly paid professionals, we face the risk of litigation relating to claims for compensation or other damages, which may,individually or in the aggregate, be significant in amount. The cost of settling any such claims could negatively impact our business, financial condition and resultsof operations.Misconduct of our employees, our sub-contractors or by our portfolio companies could harm us by impairing our ability to attract and retain clients andsubjecting us to significant legal liability and reputational harm.There is a risk that our employees or sub-contractors could engage in misconduct that adversely affects our business. We are subject to a number of obligationsand standards arising from our business and our authority over the assets we manage. The violation of these obligations and standards by any of our employees orsub-contractors would adversely affect our clients57Table of Contentsand us. We may also be adversely affected if there is misconduct by senior management of portfolio companies in which our funds invest, even though we may beunable to control or mitigate such misconduct. Such misconduct may also negatively affect the valuation of the investments by our funds in such portfoliocompanies. Our business often requires that we deal with confidential matters of great significance to companies in which we may invest. If our employees or sub-contractors were improperly to use or disclose confidential information, we could suffer serious harm to our reputation, financial position and current and futurebusiness relationships, as well as face potentially significant litigation. It is not always possible to detect or deter such misconduct, and the precautions we take todetect and prevent this activity may not be effective in all cases. If any of our employees, our sub-contractors or the employees of portfolio companies were toengage in misconduct or were to be accused of such misconduct, our business and our reputation could be adversely affected.Underwriting, syndicating and securities placement activities expose us to risks.KKR Capital Markets LLC, or KCM, and MCS Capital Markets LLC, which are broker-dealer subsidiaries of ours, may act as an underwriter, syndicator orplacement agent in securities offerings. We may incur losses and be subject to reputational harm to the extent that, for any reason, we are unable to sell securities orindebtedness we purchased or placed as an underwriter, syndicator or placement agent at the anticipated price levels. As an underwriter, syndicator or placementagent, we also may be subject to potential liability for material misstatements or omissions in prospectuses and other offering documents relating to offerings weunderwrite, syndicate or place. In certain situations, our broker-dealer subsidiaries may have liabilities arising from transactions in which our investment fund mayparticipate as a purchaser of securities which could constitute a conflict of interest or subject us to damages or reputational harm.We are subject to risks in using prime brokers, custodians, administrators and other agents.Certain of our investment funds and our principal activities depend on the services of prime brokers, custodians, administrators and other agents to carry outcertain securities transactions.In the event of the insolvency of a prime broker and/or custodian, our funds may not be able to recover equivalent assets in full as they will rank among theprime broker’s and custodian’s unsecured creditors in relation to assets which the prime broker or custodian borrows, lends or otherwise uses. In addition, our andour funds’ cash held with a prime broker or custodian may not be segregated from the prime broker’s or custodian’s own cash, and our funds therefore may rank asunsecured creditors in relation thereto. The inability to recover assets from the prime broker or custodian could have a material impact on the performance of ourfunds and our business, financial condition and results of operations. Counterparties have generally reacted to recent market volatility by tightening theirunderwriting standards and increasing their margin requirements for all categories of financing, which has the result of decreasing the overall amount of leverageavailable and increasing the costs of borrowing. Many of our funds have credit lines, and if a lender under one or more of these credit lines were to becomeinsolvent, we may have difficulty replacing the credit line and one or more of our funds may face liquidity problems.Default risk may arise from events or circumstances that are difficult to detect, foresee or evaluate. In addition, concerns about, or a default by, one largeparticipant could lead to significant liquidity problems for other participants, which may in turn expose us to significant losses. We may not accurately anticipatethe impact of market stress or counterparty financial condition, and as a result, we may not have taken sufficient action to reduce these risks effectively.Compliance with applicable accounting requirements may materially strain our resources, materially increase our annual expenses and exposes us to otherrisks.The SEC may require in the future that we report our financial results under International Financial Reporting Standards, or IFRS, instead of underU.S. GAAP. IFRS is a set of accounting principles that has been gaining acceptance on a worldwide basis. These standards are published by the London‑ basedInternational Accounting Standards Board (“IASB”) and are more focused on objectives and principles and less reliant on detailed rules than U.S. GAAP. Today,there remain significant and material differences in several key areas between U.S. GAAP and IFRS which would affect us if we were required to prepare financialstatements in conformity with IFRS. Additionally, U.S. GAAP provides specific guidance in classes of accounting transactions for which equivalent guidance inIFRS does not exist. The adoption of IFRS is highly complex and would have an impact on many aspects and operations of KKR, including but not limited tofinancial accounting and reporting systems, internal controls, taxes, borrowing covenants and cash management. It is expected that a significant amount of time,internal and external resources and expenses over a multi‑year period would be required for this conversion.Risks Related to the Assets We ManageAs an investment manager, we sponsor and manage funds that make investments worldwide on behalf of third‑party investors and, in connection with thoseactivities, are required to deploy our own capital in those investments. The investments58Table of Contentsof these funds are subject to many risks and uncertainties which, to the extent they are material, are discussed below. In addition, we have investments on ourbalance sheet, which we manage for our own behalf. These risks, as they apply to our balance sheet investments, may have a greater impact on our results andfinancial conditions as we directly bear the full risk of our balance sheet. As a result, the gains and losses on such assets are reflected in our net income and therisks set forth below relating to the assets that we manage will directly affect our operating performance.The historical returns attributable to our funds, including those presented in this report, should not be considered as indicative of the future results of ourfunds, our balance sheet or of our future results or of any returns on our common units.We have presented in this report certain information relating to our investment returns, such as net and gross IRRs, multiples of invested capital and realizedand unrealized investment values for funds that we have sponsored and managed. The historical and potential future returns of the funds that we manage are notdirectly linked to returns on KKR Group Partnership Units.Moreover, historical returns of our funds may not be indicative of the future results that you should expect from us, which could negatively impact the fees andincentive amounts received by us from such funds. In particular, the future results of our funds or balance sheet assets may differ significantly from their historicalresults including for the following reasons:•the rates of returns of our funds reflect unrealized gains as of the applicable valuation date that may never be realized, which may adversely affect theultimate value realized from those funds’ investments;•the historical returns that we present in this report derive largely from the performance of our earlier private equity funds, whereas future fund returns willdepend increasingly on the performance of our newer funds, which may have little or no investment track record, and in particular you will not benefitfrom any value that was created in our funds prior to the KPE Transaction to the extent such value has been realized and we may be required to repayexcess amounts previously received in respect of carried interest in our funds if, upon liquidation of the fund, we have received carried interestdistributions in excess of the amount to which we were entitled;•the future performance of our funds will be affected by macroeconomic factors, including negative factors arising from disruptions in the global financialmarkets that were not prevalent in the periods relevant to the historical return data included in this report;•in some historical periods, the rates of return of some of our funds have been positively influenced by a number of investments that experienced asubstantial decrease in the average holding period of such investments and rapid and substantial increases in value following the dates on which thoseinvestments were made; the actual or expected length of holding periods related to investments is likely longer than such historical periods; those trendsand rates of return may not be repeated in the future;•our newly established funds may generate lower returns during the period that they take to deploy their capital;•our funds’ returns have benefited from investment opportunities and general market conditions in certain historical periods that may not repeatthemselves, and there can be no assurance that our current or future funds will be able to avail themselves of comparable investment opportunities ormarket conditions; and•we may create new funds and investment products in the future that reflect a different asset mix in terms of allocations among funds, investmentstrategies, geographic and industry exposure, vintage year and economic terms.In addition, our historical rates of return reflect our historical cost structure, which has varied and may vary further in the future. Certain of our newer funds,for example, have lower fee structures and also have performance hurdles. Future returns will also be affected by the risks described elsewhere in this report,including risks of the industry sectors and businesses in which a particular fund invests and changes in laws. See “-Risks Related to our Business-Difficult marketconditions can adversely affect our business in many ways, including by reducing the value or performance of the investments that we manage or by reducing theability of our funds to raise or deploy capital, each of which could negatively impact our net income and cash flow and adversely affect our financial condition.”59Table of ContentsValuation methodologies for certain assets in our funds and on our balance sheet can be subjective and the fair value of assets established pursuant to suchmethodologies may never be realized, which could result in significant losses for our funds and us.There are no readily ascertainable market prices for a substantial majority of illiquid investments of our investment funds, our finance vehicles or other assetson our balance sheet. When determining fair values of investments, we use the last reported market price as of the statement of financial condition date forinvestments that have readily observable market prices. When an investment does not have a readily available market price, the fair value of the investmentrepresents the value, as determined by us in good faith, at which the investment could be sold in an orderly disposition over a reasonable period of time betweenwilling parties other than in a forced or liquidation sale. There is no single standard for determining fair value in good faith and in many cases fair value is bestexpressed as a range of fair values from which a single estimate may be derived. When making fair value determinations for our private equity investments, wetypically use a market multiples approach that considers a specified financial measure (such as EBITDA) and/or a discounted cash flow analysis. Real assetinvestments in infrastructure, energy and real estate are valued using one or more of the discounted cash flow analysis, market comparables analysis and directincome capitalization, which in each case incorporates significant assumptions and judgments. Credit investments are valued using values obtained from dealers ormarket makers, and where these values are not available, credit investments are valued by us based on ranges of valuations determined by an independent valuationfirm.Each of these methodologies requires estimates of key inputs and significant assumptions and judgments. We also consider a range of additional factors thatwe deem relevant, including the applicability of a control premium or illiquidity discount, the presence of significant unconsolidated assets and liabilities, anyfavorable or unfavorable tax attributes, the method of likely exit, financial projections, estimates of assumed growth rates, terminal values, discount rates includingrisk free rates, capital structure, risk premiums, commodity prices and other factors, and determining these factors may involve a significant degree of ourmanagement’s judgment and the judgment of management of our portfolio companies.Because valuations, and in particular valuations of investments for which market quotations are not readily available, are inherently uncertain, may fluctuateover short periods of time and may be based on estimates, determinations of fair value may differ materially from the values that would have resulted if a readymarket had existed. Even if market quotations are available for our investments, such quotations may not reflect the value that we would actually be able to realizebecause of various factors, including possible illiquidity associated with a large ownership position, subsequent illiquidity in the market for a company’s securities,future market price volatility or the potential for a future loss in market value based on poor industry conditions or the market’s view of overall company andmanagement performance. Our partners’ capital could be adversely affected if the values of investments that we record is materially higher than the values that areultimately realized upon the disposal of the investments and changes in values attributed to investments from quarter to quarter may result in volatility in our AUMand such changes could materially affect the results of operations that we report from period to period. There can be no assurance that the investment values thatwe record from time to time will ultimately be realized and that we will be able to realize the investment values that are presented in this report.Because there is significant uncertainty in the valuation of, or in the stability of the value of, illiquid investments, the fair values of investments reflected in aninvestment fund’s or finance vehicle’s net asset value, or NAV, do not necessarily reflect the prices that would actually be obtained by us on behalf of the fund orfinance vehicle when such investments are realized. For example there may be liabilities such as unknown or uncertain tax exposures with respect to investments,especially those outside the United States, which may not be fully reflected in valuations. Realizations at values significantly lower than the values at whichinvestments have been reflected in prior fund NAVs would result in losses for the applicable fund and the loss of potential carried interest and other fees. Also, ifrealizations of our investments produce values materially different than the carrying values reflected in prior fund NAVs, fund investors may lose confidence in us,which could in turn result in difficulty in raising capital for future funds.In addition, because we value our entire portfolio only on a quarterly basis, subsequent events that may have a material impact on those valuations may not bereflected until the next quarterly valuation date.Our investments are impacted by various economic conditions that are difficult to quantify or predict, and may have a significant impact on the valuation ofour investments and, therefore, on the investment income we realize and our financial condition and results of operations.Our investments are impacted by various economic conditions that are difficult to quantify or predict and may have a significant impact on the valuation of ourinvestments and, therefore, on the investment income we realize and our financial condition and results of operations. For example,60Table of Contents•Global equity markets, which may be volatile, significantly impact the valuation of our portfolio companies and, therefore, the investment income that werecognize. For our investments that are publicly listed and thus have readily observable market prices, global equity markets have a direct impact onvaluation. For other investments, these markets have an indirect impact on valuation as we typically utilize market multiples (i.e. stock price ofcomparable companies divided by earnings or cash flow) as a critical input to ascertain fair value of our investments that do not have readily observablemarket prices. In addition, the valuation for any particular period may not be realized at the time of disposition. For example, because our private equityfunds often hold very large amounts of the securities of their portfolio companies, the disposition of these securities often takes place over a long period oftime, which can further expose us to volatility risk. In addition, the receptivity of equity markets to initial public offerings, or IPOs, as well as subsequentsecondary equity offerings by companies already public, impacts our ability to realize investment gains. Unfavorable market conditions, market volatilityand other factors may also adversely impact the performance of our hedge fund businesses and our strategic partnerships with hedge fund asset managersand the level or pace of subscriptions or redemptions from the funds in these businesses.•Changes in credit markets can also impact valuations and may have offsetting results depending on the valuation methodology used. For example, wetypically use a discounted cash flow analysis as one of the methodologies to ascertain the fair value of our investments that do not have readily observablemarket prices. If applicable interest rates rise, then the assumed cost of capital for those portfolio companies would be expected to increase under thediscounted cash flow analysis, and this effect would negatively impact their valuations if not offset by other factors. Rising U.S. interest rates may alsonegatively impact certain foreign currencies that depend on foreign capital flows. Conversely, a fall in interest rates can positively impact valuations ofcertain portfolio companies if not offset by other factors. These impacts could be substantial depending upon the magnitude of the change in interest rates.In certain cases, the valuations obtained from the discounted cash flow analysis and the other primary methodology we use, the market multiplesapproach, may yield different and offsetting results. For example, the positive impact of falling interest rates on discounted cash flow valuations mayoffset the negative impact of the market multiples valuation approach and may result in less of a decline in value than for those investments that had areadily observable market price. Finally, low interest rates related to monetary stimulus and economic stagnation may also negatively impact expectedreturns on all investments, as the demand for relatively higher return assets increases and supply decreases.•Foreign exchange rates can materially impact the valuations of our investments that are denominated in currencies other than the U.S. dollar. For example,U.S. dollar appreciation relative to other currencies is likely to cause a decrease in the dollar value of non‑U.S. investments to the extent unhedged.•Conditions in commodity markets impact the performance of our portfolio companies and other investments in a variety of ways, including through thedirect or indirect impact on the cost of the inputs used in their operations as well as the pricing and profitability of the products or services that they sell.The price of commodities has historically been subject to substantial volatility, which among other things, could be driven by economic, monetary,political or weather related factors. If our funds' operator or our portfolio companies are unable to raise prices to offset increases in the cost of rawmaterials or other inputs, or if consumers defer purchases of or seek substitutes for the products of our funds or such portfolio companies, our funds orsuch portfolio companies could experience lower operating income which may in turn reduce the valuation of such funds' investments or those portfoliocompanies. The value of energy real asset investments generally increase or decrease with the increase or decrease, respectively, of energy commodityprices and in particular with long term forecasts for such energy commodity prices. Given our investments in oil and gas companies and assets, the valueof this portfolio and the investment income we realize is sensitive to oil and gas prices. The volatility of commodity prices also makes it difficult topredict commodity price movements. Apart from our energy real asset investments, a number of our other investments may be dependent to varyingdegrees on the energy sector through, for example, the provision of equipment and services used in energy exploration and production. These companiesmay benefit from an increase or suffer from a decline in commodity prices.Changes in these factors can have a significant effect on the results of the valuation methodologies used to value our portfolio, and our reported fair values forthese assets could vary materially if these factors from prior quarters were to change significantly. See “Management’s Discussion and Analysis of FinancialCondition and Results of Operations-Business Environment.”Global and regional economic conditions have a substantial impact on the value of investments. See “-Risks Related to Our Business-Difficult marketconditions can adversely affect our business in many ways, including by reducing the value or performance of the investments that we manage or by reducing theability of our funds to raise or deploy capital, each of which could negatively impact our net income and cash flow and adversely affect our financial condition.”61Table of ContentsDependence on significant leverage in investments by our funds and our balance sheet assets could adversely affect our ability to achieve attractive rates ofreturn on those investments.Because many of our funds’ investments and our balance sheet investments often rely heavily on the use of leverage, our ability to achieve attractive rates ofreturn will depend on our continued ability to access sufficient sources of indebtedness at attractive rates. For example, our credit funds use varying degrees ofleverage when making investments. Similarly, in many private equity investments, indebtedness may constitute 70% or more of a portfolio company’s total debtand equity capitalization, including debt that may be incurred in connection with the investment, and a portfolio company’s indebtedness may also increase inrecapitalization transactions subsequent to the company’s acquisition. The absence of available sources of sufficient debt financing for extended periods of timecould therefore materially and adversely affect our funds and our portfolio companies. U.S. federal bank regulatory agencies have issued leveraged lendingguidance covering transactions characterized by a degree of financial leverage. Such guidance limits the amount or availability of debt financing and may increasethe cost of financing we are able to obtain for our transactions and may cause the returns on our investments to suffer. See also "Risks Related to Our Business -Additional proposed changes in the U.S. and foreign taxation of businesses could adversely affect us" regarding potential limits on interest deductibility.An increase in either the general levels of interest rates or in the risk spread demanded by sources of indebtedness such as we experienced during 2009 wouldmake it more expensive to finance those investments. In addition, increases in interest rates could decrease the value of fixed‑rate debt investments that our balancesheet assets, finance vehicles or our funds make. Increases in interest rates could also make it more difficult to locate and consummate private equity and otherinvestments because other potential buyers, including operating companies acting as strategic buyers, may be able to bid for an asset at a higher price due to alower overall cost of capital or their ability to benefit from a higher amount of cost savings following the acquisition of the asset. In addition, a portion of theindebtedness used to finance private equity investments often includes high-yield debt securities issued in the capital markets. Capital markets are volatile, andthere may be times when we might not be able to access those markets at attractive rates, or at all, when completing an investment.Investments in highly leveraged entities are also inherently more sensitive to declines in revenues, increases in expenses and interest rates and adverseeconomic, market and industry developments. The incurrence of a significant amount of indebtedness by an entity could, among other things:•subject the entity to a number of restrictive covenants, terms and conditions, any violation of which would be viewed by creditors as an event of defaultand could materially impact our ability to realize value from our investment;•allow even moderate reductions in operating cash flow to render it unable to service its indebtedness;•give rise to an obligation to make mandatory prepayments of debt using excess cash flow, which might limit the entity’s ability to respond to changingindustry conditions to the extent additional cash is needed for the response, to make unplanned but necessary capital expenditures or to take advantage ofgrowth opportunities;•limit the entity’s ability to adjust to changing market conditions, thereby placing it at a competitive disadvantage compared to its competitors who haverelatively less debt;•limit the entity’s ability to engage in strategic acquisitions that might be necessary to generate attractive returns or further growth; and•limit the entity’s ability to obtain additional financing or increase the cost of obtaining such financing, including for capital expenditures, working capitalor other general corporate purposes.A leveraged company’s income and equity also tend to increase or decrease at a greater rate than would otherwise be the case if money had not been borrowed.As a result, the risk of loss associated with a leveraged company is generally greater than for comparable companies with comparatively less debt. For example,leveraged companies could default on their debt obligations due to a decrease in revenues and cash flow precipitated by an economic downturn or by poor relativeperformance at such a company. Similarly, the leveraged nature of some of our investments in real assets increases the risk that a decline in the fair value of theunderlying real asset will result in their abandonment or foreclosure. For example, if the property-level debt on a particular investment has reached its maturity andthe underlying asset value has declined below its debt-level, we may, in absence of cooperation with the lender in regards to a partial debt-write-off, be forced toput the investment into liquidation. In addition, tax reform in the U.S. may limit the deductibility of interest payments. See "Risks Related to Our Business -Additional proposed changes in the U.S. and foreign taxation of businesses could adversely affect us."62Table of ContentsWhen our existing portfolio investments reach the point when debt incurred to finance those investments matures in significant amounts and must be eitherrepaid or refinanced, those investments may materially suffer if they have generated insufficient cash flow to repay maturing debt and there is insufficient capacityand availability in the financing markets to permit them to refinance maturing debt on satisfactory terms, or at all. If the financing for such purposes were to beunavailable or uneconomic when significant amounts of the debt incurred to finance our existing portfolio investments start to come due, these investments couldbe materially and adversely affected. In the event of default or potential default under applicable financing arrangements, one or more of our portfolio companiesmay go bankrupt, which could give rise to substantial investment losses, adverse claims or litigation against us or our employees and damage to our reputation.Among the sectors particularly challenged by downturns in the global credit markets, including the downturn experienced from 2008 through 2010, are theCLO and leveraged finance markets. We have significant exposure to these markets through our CLO subsidiaries, which we principally acquired in theacquisitions of KFN and Avoca. As of December 31, 2016, we indirectly hold below investment grade corporate loans and securities with an $8.5 billion estimatedfair market value through our CLO subsidiaries. Each of these subsidiaries is a special purpose company that issued to us and other investors notes secured by apool of collateral consisting primarily of corporate leveraged loans. In most cases, our CLO holdings are deeply subordinated, representing the CLO subsidiary’ssubstantial leverage, which increases both the opportunity for higher returns as well as the magnitude of losses when compared to holders or investors that rankmore senior to us in right of payment. These loans and bonds also generally involve a higher degree of risk than investment grade rated debt including the risksdescribed in the paragraphs above. Our CLO subsidiaries have historically experienced an increase in downgrades, depreciations in market value and defaults inrespect of leveraged loans in their collateral during downturns in credit markets. The CLOs’ portfolio profile tests set limits on the amount of discountedobligations a CLO can hold. During any time that a CLO issuer exceeds such a limit, the ability of the CLO’s manager to sell assets and reinvest available principalproceeds into substitute assets is restricted. In such circumstances, CLOs may fail certain over‑collateralization tests, which would cause diversions of cash flowsaway from us as holders of the more junior CLO, which may impact our cash flows. The ability of the CLOs to make interest payments to the holders of the seniornotes of those structures is highly dependent upon the performance of the CLO collateral. If the collateral in those structures were to experience a significantdecrease in cash flow due to an increased default level, payment of all principal and interest outstanding may be accelerated as a result of an event of default or byholders of the senior notes. There can be no assurance that market conditions giving rise to these types of consequences will not occur, re‑occur, subsist or becomemore acute in the future. In July 2009, KFN surrendered for cancellation approximately $298.4 million in aggregate of notes issued to it by certain of its CLOs. Thesurrendered notes were cancelled and the obligations due under such notes were deemed extinguished. Because our CLO structures involve complex collateral andother arrangements, the documentation for such structures is complex, is subject to differing interpretations and involves legal risk. These CLOs have served aslong‑term, non‑recourse financing for debt investments and as a way to minimize refinancing risk, minimize maturity risk and secure a fixed cost of funds over anunderlying market interest rate. An inability to continue to utilize CLOs or other similar financing vehicles successfully could limit our ability to fund futureinvestments, grow our business or fully execute our business strategy and our results of operations may be adversely affected.Our CLO subsidiaries regularly use significant leverage to finance their assets. An inability by such subsidiaries to continue to raise or utilize leverage, torefinance or extend the maturities of their outstanding indebtedness or to maintain adequate levels of collateral under the terms of their collateralized loanobligations could limit their ability to grow their business, reinvest principal cash, distribute cash to us or fully execute their business strategy, and our results ofoperations may be adversely affected. If these subsidiaries are unable to maintain their operating results and access to capital resources, they could face substantialliquidity problems and might be required to dispose of material assets or operations to meet debt service and other obligations. These CLO strategies and the valueof the assets of such CLO subsidiaries are also sensitive to changes in interest rates because these strategies rely on borrowed money and because the value of theunderlying portfolio loans can fall when interest rates rise. If interest rates on CLO borrowings increase and the interest rates on the portfolio do not also increase,the CLO strategy is unlikely to achieve its projected returns. Also, if interest rates increase in the future, our CLO portfolio will likely experience a reduction invalue because it would hold assets receiving below market rates of interest.Our hedge fund‑of‑funds, other credit‑ oriented funds and CLOs may choose to use leverage as part of their respective investment programs and regularlyborrow a substantial amount of their capital. The use of leverage poses a significant degree of risk and enhances the possibility of a significant loss in the value ofthe investment portfolio. A fund may borrow money from time to time to purchase or carry securities or debt obligations or may enter into derivative transactions(such as total return swaps) with counterparties that have embedded leverage. The interest expense and other costs incurred in connection with such borrowing maynot be recovered by appreciation in the securities purchased or carried and will be lost-and the timing and magnitude of such losses may be accelerated orexacerbated-in the event of a decline in the market value of such securities or debt obligations. Gains realized with borrowed funds may cause the fund’s net assetvalue to increase at a faster rate than would be the case without borrowings. However, if investment results fail to cover the cost of borrowings, the fund’s net assetvalue could also decrease faster than if there had been no borrowings.63Table of ContentsAny of the foregoing circumstances could have a material adverse effect on our financial condition, results of operations and cash flow.The due diligence process that we undertake in connection with our investments may not reveal all facts that may be relevant in connection with an investment.Before making our investments, we conduct due diligence that we deem reasonable and appropriate based on the facts and circumstances applicable to eachinvestment. The objective of the due diligence process is to identify attractive investment opportunities based on the facts and circumstances surrounding aninvestment, to identify possible risks associated with that investment and, in the case of private equity investments, to prepare a framework that may be used fromthe date of an acquisition to drive operational achievement and value creation. When conducting due diligence, we typically evaluate a number of importantbusiness, financial, tax, accounting, environmental and legal issues in determining whether or not to proceed with an investment. Outside consultants, legaladvisors, accountants and investment banks are involved in the due diligence process in varying degrees depending on the type of investment. Nevertheless, whenconducting due diligence and making an assessment regarding an investment, we rely on resources available to us, including information provided by the target ofthe investment and, in some circumstances, third‑party investigations. The due diligence process may at times be subjective with respect to newly organizedcompanies or carve-out transactions for which only limited information is available.Instances of bribery, fraud, accounting irregularities and other improper, illegal or corrupt practices can be difficult to detect, and fraud and other deceptivepractices can be widespread in certain jurisdictions. Several of our funds invest in emerging market countries that may not have established laws and regulationsthat are as stringent as in more developed nations, or where existing laws and regulations may not be consistently enforced. For example, our funds investthroughout jurisdictions that have material perceptions of corruption according to international rating standards (such as Transparency International and CorruptionPerceptions Index) such as China, India, Indonesia, Latin America, the Middle East and Africa. Due diligence on investment opportunities in these jurisdictions isfrequently more complicated because consistent and uniform commercial practices in such locations may not have developed. Bribery, fraud, accountingirregularities and corrupt practices can be especially difficult to detect in such locations.The due diligence conducted for certain of our Public Markets strategies is limited to publicly available information. Accordingly, we cannot be certain thatthe due diligence investigation that we will carry out with respect to any investment opportunity will reveal or highlight all relevant facts (including fraud, briberyand other illegal activities and contingent liabilities) that may be necessary or helpful in evaluating such investment opportunity, including the existence ofcontingent liabilities. We also cannot be certain that our due diligence investigations will result in investments being successful or that the actual financialperformance of an investment will not fall short of the financial projections we used when evaluating that investment.When we conduct due diligence in making and monitoring investments in third party hedge funds, we rely on information supplied by third party hedge fundsor by service providers to such third party hedge funds. The information we receive from them may not be accurate or complete and therefore we may not have allthe relevant facts necessary to properly assess and monitor our funds’ investment in a particular hedge fund.Our investment management activities involve investments in relatively high‑‑risk, illiquid assets, and we may fail to realize any profits from these activities fora considerable period of time or lose some or all of the capital invested.Many of our funds and our balance sheet may hold investments in securities that are not publicly traded. In many cases, our funds or we may be prohibited bycontract or by applicable securities laws from selling such securities at many points in time. Our funds or we will generally not be able to sell these securitiespublicly unless their sale is registered under applicable securities laws, or unless an exemption from such registration is available, and then only at such times whenwe do not possess material nonpublic information. The ability of many of our funds or us to dispose of investments is heavily dependent on the capital markets andin particular the public equity markets. For example, the ability to realize any value from an investment may depend upon the ability to complete an initial publicoffering of the portfolio company in which such investment is made. Even if the securities are publicly traded, large holdings of securities can often be disposed ofonly over a substantial length of time, exposing our investment returns to risks of downward movement in market prices during the intended disposition period.Moreover, because the investment strategy of many of our funds, particularly our private equity funds, often entails or having representation on our funds' publicportfolio company boards, our funds may be restricted in their ability to effect such sales during certain time periods. As certain of our funds have a finite term, wecould also be forced to dispose of investments sooner than otherwise desirable. Accordingly, under certain conditions, our funds may be forced to either sellsecurities at lower prices than they had expected to realize or defer sales that they had planned to make, potentially for a considerable period of time. Moreover, wemay determine that we may be required to sell our balance sheet assets alongside our funds’ investments at such64Table of Contentstimes. We have made and expect to continue to make significant capital investments in our current and future funds and other strategies. Contributing capital tothese funds is risky, and we may lose some or all of the principal amount of our investments.Our investments are subject to a number of inherent risks.Our results are highly dependent on our continued ability to generate attractive returns from our investments. Investments made by our private equity, credit orother investments involve a number of significant risks inherent to private equity, credit and other investing, including the following:•companies in which investments are made may have limited financial resources and may be unable to meet their obligations under their securities, whichmay be accompanied by a deterioration in the value of their equity securities or any collateral or guarantees provided with respect to their debt;•companies in which investments are made are more likely to depend on the management talents and efforts of a small group of persons and, as a result,the death, disability, resignation or termination of one or more of those persons could have a material adverse impact on their business and prospects;•companies in which private equity investments are made may be businesses or divisions acquired from larger operating entities which may require arebuilding or replacement of financial reporting, information technology, operational and other functions;•companies in which investments are made may from time to time be parties to litigation, may be engaged in rapidly changing businesses with productssubject to a substantial risk of obsolescence and may require substantial additional capital to support their operations, finance expansion or maintain theircompetitive position;•instances of bribery, fraud and other deceptive practices committed by senior management of portfolio companies in which our funds or we invest mayundermine our due diligence efforts with respect to such companies, and if such fraud is discovered, negatively affect the valuation of a fund’sinvestments as well as contribute to overall market volatility that can negatively impact a fund’s or our investment program;•our funds may make investments that they do not advantageously dispose of prior to the date the applicable fund is dissolved, either by expiration of suchfund’s term or otherwise, resulting in a lower than expected return on the investments and, potentially, on the fund itself;•our portfolio companies generally have capital structures established on the basis of financial projections based primarily on management judgments andassumptions, and general economic conditions and other factors may cause actual performance to fall short of these financial projections, which couldcause a substantial decrease in the value of our equity holdings in the portfolio company and cause our funds’ or our performance to fall short of ourexpectations;•executive officers, directors and employees of an equity sponsor may be named as defendants in litigation involving a company in which an investment ismade or is being made, and we or our funds may indemnify such executive officers, directors or employees for liability relating to such litigation;•we advise funds that invest in businesses that operate in a variety of industries that are subject to extensive domestic and foreign regulation (includingcompanies that supply services to governmental agencies), such as the telecommunications industry, the defense and government services industry, thehealthcare industry and oil and gas industry, that may involve greater risk due to rapidly changing market and governmental conditions in those sectors;•our transactions involve complex tax structuring that could be challenged or disregarded, which may result in losing treaty benefits or would otherwiseadversely impact our investments; and•significant failures of our portfolio companies to comply with laws and regulations applicable to them could affect the ability of our funds or us to investin other companies in certain industries in the future and could harm our reputation;Our investments in real assets such as real estate, infrastructure assets and energy may expose us to increased risks and liabilities and may expose ourunitholders to adverse tax consequences.Investments in real assets, which may include real estate, infrastructure assets, oil and gas properties and other energy assets, may expose us to increased risksand liabilities that are inherent in the ownership of real assets. For example,65Table of Contents•Ownership of real assets in our funds or vehicles may increase our risk of liability under environmental laws that impose, regardless of fault, joint andseveral liability for the cost of remediating contamination and compensation for damages. In addition, changes in environmental laws or regulations or theenvironmental condition of an investment may create liabilities that did not exist at the time of acquisition that would not have been foreseen. Even incases where we are indemnified by a seller with respect to an investment against liabilities arising out of violations of environmental laws and regulations,there can be no assurance as to the financial viability of the seller to satisfy such indemnities or our ability to achieve enforcement of such indemnities.•Ownership of real assets may also present additional risk of liability for personal and property injury or impose significant operating challenges and costs,for example with respect to compliance with zoning, environmental or other applicable laws.•Real asset investments may face construction risks, without limitation: (i) labor disputes, shortages of material and skilled labor, or work stoppages;(ii) slower than projected construction progress and the unavailability or late delivery of necessary equipment; (iii) less than optimal coordination withpublic utilities in the relocation of their facilities; (iv) adverse weather conditions and unexpected construction conditions; (v) accidents or the breakdownor failure of construction equipment or processes; (vi) catastrophic events such as explosions, fires, and terrorist activities, and other similar events and(vii) risks associated with holding direct or indirect interests in undeveloped land or underdeveloped real property. These risks could result in substantialunanticipated delays or expenses (which may exceed expected or forecasted budgets) and, under certain circumstances, could prevent completion ofconstruction activities once undertaken. Certain real asset investments may remain in construction phases for a prolonged period and, accordingly, maynot be cash generative for a prolonged period. Recourse against the contractor may be subject to liability caps or may be subject to default or insolvencyon the part of the contractor.•The operation of real assets is exposed to potential unplanned interruptions caused by significant catastrophic or force majeure events. These risks could,among other effects, adversely impact the cash flows available from investments in real assets, cause personal injury or loss of life, damage property, orinstigate disruptions of service. In addition, the cost of repairing or replacing damaged assets could be considerable. Repeated or prolonged serviceinterruptions may result in permanent loss of customers, litigation, or penalties for regulatory or contractual non‑compliance. Force majeure events thatare incapable of, or too costly to, cure may also have a permanent adverse effect on an investment.•The management of the business or operations of a real asset may be contracted to a third‑party management company unaffiliated with us. Although itwould be possible to replace any such operator, the failure of such an operator to adequately perform its duties or to act in ways that are in the portfoliocompany’s best interest, or the breach by an operator of applicable agreements or laws, rules, and regulations, could have an adverse effect on theinvestment’s financial condition or results of operations. Real asset investments may involve the subcontracting of design and construction activities inrespect of projects, and as a result our investments are subject to the risk that contractual provisions passing liabilities to a subcontractor could beineffective, the subcontractor fails to perform services which it has agreed to provide and in cases where a single subcontractor provides services tovarious investments, the subcontractor becomes insolvent.Without limiting the foregoing disclosure, we note that investments that we have made and will continue to make in the oil and gas industries may presentspecific environmental, safety and other inherent risks, and such investments are subject to stringent and complex foreign, federal, state and local laws, ordinancesand regulations specific to oil and gas industries, for example governing controls, taxes, transportation of oil and natural gas, exploration and production,permitting, and various conservation laws and regulations applicable to oil and natural gas production and related operations in addition to regulations governingoccupational health and safety, the discharge of materials into the environment or otherwise relating to environmental protection. Failure to comply with applicablelaws and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of remedial obligations and the issuance of ordersenjoining some or all of our operations in affected areas. These laws and regulations may also restrict the rate of oil and natural gas production below the rate thatwould otherwise be possible and increase the cost of production thus reducing profitability. Our oil and gas investments are subject to other risks, such as:•The acquisition of oil and gas properties at appropriate prices.•Currently unforeseen environmental incidents may occur or past non‑compliance with environmental laws or regulations may be discovered making itdifficult to predict the future costs or impact of compliance.•The oil and gas industries present inherent risk of personal and property injury, for which we may not be fully insured.66Table of Contents•The use of new technologies, including hydraulic fracturing.•Our estimated oil, natural gas, and natural gas liquids reserve quantities and future production rates are based on many assumptions that may prove to beinaccurate. Any material inaccuracies in these reserve estimates or the underlying assumptions will materially affect the quantities and value of ourreserves.•The performance of our energy investments depend on the skill, ability and decisions of third party operators. The success of our investment will dependon their exploitation, development, construction and drilling activities and the timing and cost of drilling, completing and operating wells. Failure of suchoperators to comply with applicable laws, rules and regulations could result in liabilities to us, reduce the value of our interest in the oil and natural gasproperties, adversely affect our cash flows and results of operations.•If commodity prices decline and remain depressed for a prolonged period, a significant portion of our development projects may become uneconomic andcause write downs of the value of our oil and natural gas properties, which may reduce the value of our energy investments, have a negative impact on ourability to use these investments as collateral or otherwise have a material adverse effect on our results of operations.Investments in real estate are subject to the risks inherent in the ownership and operation of real estate and real estate related businesses and assets. These risksinclude those associated with the burdens of ownership of real property, general and local economic conditions, changes in supply of and demand for competingproperties in an area (as a result, for instance, of overbuilding), fluctuations in the average occupancy, the financial resources of tenants, changes in building,environmental and other laws, energy and supply shortages, various uninsured or uninsurable risks, natural disasters, changes in government regulations (such asrent control), changes in real property tax rates, changes in interest rates, the reduced availability of mortgage funds which may render the sale or refinancing ofproperties difficult or impracticable, negative developments in the economy that depress travel activity, environmental liabilities, contingent liabilities ondisposition of assets, terrorist attacks, war and other factors that are beyond our control.•The success of certain investments will depend on the ability to restructure and effect improvements in the operations of the applicable properties, andthere is no assurance, we will be successful in identifying or implementing such restructuring programs and improvements.•If we acquire direct or indirect interests in undeveloped land or underdeveloped real property, which may often be non‑income producing, they will besubject to the risks normally associated with such assets and development activities, including risks relating to the availability and timely receipt of zoningand other regulatory or environmental approvals, the cost and timely completion of construction (including risks beyond the control of our fund, such asweather or labor conditions or material shortages) and the availability of both construction and permanent financing on favorable terms.•The strategy of our real estate funds may be based, in part, on the availability for purchase of assets at favorable prices, and upon the continuation orimprovement of market conditions, or on the availability of refinancing. No assurance can be given that the real estate businesses or assets can be acquiredor disposed of at favorable prices or that refinancing will be available.•Lenders in commercial real estate financing customarily will require a “bad boy” guarantee, which typically provides that the lender can recover lossesfrom the guarantors for certain bad acts, such as fraud or intentional misrepresentation, intentional waste, willful misconduct, criminal acts,misappropriation of funds, voluntary incurrence of prohibited debt and environmental losses sustained by lender. For our acquisitions, “bad boy”guarantees would generally be extended by our funds, our balance sheet or a combination of both depending on the ownership of the relevant asset. Inaddition, “bad boy” guarantees typically provide that the loan will be a full personal recourse obligation of the guarantor, for certain actions, such asprohibited transfers of the collateral or changes of control and voluntary bankruptcy of the borrower. It is expected that commercial real estate financingarrangements generally will require “bad boy” guarantees and in the event that such a guarantee is called, a fund’s or our assets could be adverselyaffected. Moreover, “bad boy” guarantees could apply to actions of the joint venture partners associated with the investments, and in certain cases the actsof such joint venture partner could result in liability to our funds or us under such guarantees.•The acquisition, ownership and disposition of real properties carry certain specific litigation risks. Litigation may be commenced with respect to aproperty acquired in relation to activities that took place prior to the acquisition of such property. In addition, at the time of disposition, other potentialbuyers may bring claims related to the asset or for due67Table of Contentsdiligence expenses or other damages. After the sale of a real estate asset, buyers may later sue our funds or us for losses associated with latent defects orother problems not uncovered in due diligence.•Our funds or we may be subject to certain risks associated with investments in particular assets. Real estate investment trusts (or REITs) be affected bychanges in the value of their underlying properties and by defaults by borrowers or tenants. REITs depend on their ability to generate cash flow to makedistributions and may be impacted by changes in tax laws or by a failure to qualify for tax‑free pass through income. Investments in real estate debtinvestments may be unsecured and subordinated to a substantial amount of indebtedness. Such debt investments may not be protected by financialcovenants. Non‑performing real estate loans may require a substantial amount of workout negotiations and/or restructuring, which may entail, amongother things, a substantial reduction in the interest rate and a substantial write-down of the principal of such loan. Investments in commercial mortgageloans are subject to risks of delinquency and foreclosure, and risks of loss. In the event of any default under a mortgage loan held directly by our fund orus, our fund or we will bear a risk of loss of principal to the extent of any deficiency between the value of the collateral and the principal to the extent ofany deficiency between the value of the collateral the principal and accrued interest of the loan. Investments in assets or businesses that are distressed mayhave little or no near term cash flow and involve a high degree of risk. Such investments subject to bankruptcy or insolvency could be subordinated ordisallowed.Infrastructure investments often involve an ongoing commitment to a municipal, state, federal or foreign government or regulatory agencies. The nature ofthese obligations exposes the owners of infrastructure investments to a higher level of regulatory control than typically imposed on other businesses. They may alsorely on complex government licenses, concessions, leases or contracts, which may be difficult to obtain or maintain. Infrastructure investments may requireoperators to manage such investments, and such operators' failure to comply with laws, including prohibitions against bribing of government officials, mayadversely affect the value of such investments and cause us serious reputational and legal harm. Revenues for such investments may rely on contractual agreementsfor the provision of services with a limited number of counterparties, and are consequently subject to counterparty default risk. The operations and cash flow ofinfrastructure investments are also more sensitive to inflation and, in certain cases, commodity price risk. Furthermore, services provided by infrastructureinvestments may be subject to rate regulations by government entities that determines or limits prices that may be charged. Similarly, users of applicable servicesor government entities in response to such users may react negatively to any adjustments in rates reducing the profitability of such infrastructure investments.In addition, investments in real assets may cause adverse tax consequences for certain non‑U.S. unitholders regarding income effectively connected with theconduct of a U.S. trade or business and the imposition of certain tax withholding. Please see “-Risks Related to U.S. Taxation-Non‑ U.S. persons face unique U.S.tax issues from owning our common units that may result in adverse tax consequences to them”. Moreover, investments in real assets may also require all ourunitholders to file tax returns and pay taxes in various state and local jurisdictions in the U.S. and abroad where these real assets are located. Please see “RisksRelated to U.S. Taxation-Holders of our common units may be subject to state, local and foreign taxes and return filing requirements as a result of owning suchcommon units”.Our growth equity strategy invests in emerging and less established companies that are heavily dependent on new technologies.Our growth equity funds may make investments in companies that are in a conceptual or early stage of development. These companies are often characterizedby short operating histories, new technologies and products, quickly evolving markets, management teams that may have limited experience working together andin many cases, negative cash flow, all of which enhance the difficulty of evaluating these investment opportunities and the ultimate success of such investments.Other substantial operational risks to which such companies are subject include uncertain market acceptance of the company’s products or services, a high degreeof regulatory risk for new or untried or untested business models, products and services, high levels of competition among similarly situated companies, newcompeting products and technology, lower barriers to entry and downward pricing pressure, lower capitalizations and fewer financial resources and the potentialfor rapid organizational or strategic change. In addition, emerging growth companies may be more susceptible to macroeconomic effects and industry downturns,and their valuations may be more volatile depending on the achievement of milestones, such as receiving a governmental license or approval. Growth equitycompanies also generally depend heavily on intellectual property rights, including patents, trademarks and proprietary products or processes. The ability toeffectively enforce patent, trademark and other intellectual property laws in a cost effective manner will affect the value of many of these companies. The presenceof patents or other proprietary rights belonging to other parties may lead to the termination of the research and development of a portfolio company’s particularproduct. In addition, if a portfolio company infringes on third-party patents or other proprietary rights, it could be prevented from using certain third-partytechnologies or forced to acquire licenses in order to obtain access to such technologies at a high cost.68Table of ContentsCertain of our funds and CLOs and our firm through our Principal Activities segment hold high‑‑yield, below investment grade or unrated debt, or securities ofcompanies that are experiencing significant financial or business difficulties, which generally entail greater risk, and if those losses are realized, it couldadversely affect our results of operations, and our cash available for distribution to unitholders.Certain of our funds and CLOs in our Public Markets segment and our firm through our Principal Activities segment invest in below investment grade orunrated debt, including corporate loans and bonds, each of which generally involves a higher degree of risk than investment grade rated debt, and may be lessliquid. Issuers of high yield or unrated debt may be highly leveraged, and their relatively high debt‑to‑equity ratios create increased risks that their operationsmight not generate sufficient cash flow to service their debt obligations. As a result, high yield or unrated debt is often less liquid than investment grade rated debt.Also, investments may be made in loans and other forms of debt that are not marketable securities and therefore are not liquid. In the absence of appropriatehedging measures, changes in interest rates generally will also cause the value of debt investments to vary inversely to such changes. The obligor of a debt securityor instrument may not be able or willing to pay interest or to repay principal when due in accordance with the terms of the associated agreement and collateral maynot be available or sufficient to cover such liabilities. Commercial bank lenders and other creditors may be able to contest payments to the holders of other debtobligations of the same obligor in the event of default under their commercial bank loan agreements. Sub‑participation interests in syndicated debt may be subjectto certain risks as a result of having no direct contractual relationship with underlying borrowers. Debt securities and instruments may be rated below investmentgrade by recognized rating agencies or unrated and face ongoing uncertainties and exposure to adverse business, financial or economic conditions and the issuer’sfailure to make timely interest and principal payments.Certain of our investment funds, especially in our special situations strategy, and our firm through our Principal Activities segment may hold interests inbusiness enterprises involved in work‑outs, liquidations, reorganizations, bankruptcies and similar transactions and may purchase high risk receivables. Aninvestment in such business enterprises entails the risk that the transaction in which such business enterprise is involved either will be unsuccessful, will takeconsiderable time or will result in a distribution of cash or a new security the value of which will be less than the purchase price to the fund of the security or otherfinancial instrument in respect of which such distribution is received. In addition, if an anticipated transaction does not in fact occur, we or the fund may berequired to sell the investment at a loss. Investments in troubled companies may also be adversely affected by U.S. federal and state and non‑U.S. laws relating to,among other things, fraudulent conveyances, voidable preferences, lender liability and a bankruptcy court’s discretionary power to disallow, subordinate ordisenfranchise particular claims. Investments in securities and private claims of troubled companies made in connection with an attempt to influence a restructuringproposal or plan of reorganization in a bankruptcy case may also involve substantial litigation, which has the potential to adversely impact us or unrelated funds orportfolio companies. Because there is substantial uncertainty concerning the outcome of transactions involving financially troubled companies, there is a potentialrisk of loss of the entire investment in such company. Such investments involve a substantial degree of risk, and a decline in value of the assets would have amaterial adverse effect on our financial performance.Our investment in Nephila is exposed to natural catastrophe and weather risk.Our investment in Nephila, an investment manager focused on investing in natural catastrophe and weather risk, is exposed to a risk of reduced revenuesresulting from natural disasters. Because catastrophic loss events are by their nature unpredictable, historical results of operations of Nephila may not be indicativeof its future results of operations. As a result of the occurrence of one or more major catastrophes in any given period, the expected returns from this investmentmay fall short of our expectations.We often pursue investment opportunities that involve business, regulatory, legal or other complexities.As an element of our investment style, we often pursue complex investment opportunities. This can often take the form of substantial business, regulatory orlegal complexity that would deter other investment managers. Our tolerance for complexity presents risks, as such transactions can be more difficult, expensive andtime consuming to finance and execute; it can be more difficult to manage or realize value from the assets acquired in such transactions; and such transactionssometimes entail a higher level of regulatory scrutiny, the application of complex tax laws or a greater risk of contingent liabilities. Our transactions involvecomplex tax structures that are costly to establish, monitor and maintain, and as we pursue a larger number of transactions across multiple assets classes and inmultiple jurisdictions, such costs will increase and the risk that a tax matter is overlooked or inadequately or inconsistently addressed will increase. Consequently,we may fail to achieve the desired tax benefit or otherwise decrease the returns of our investments or damage the reputation of our firm. Changes in law andregulation and in the enforcement of existing law and regulation, such as antitrust laws and tax laws, also adds complexity and risk to our business. Further, we,directly or through our funds, may acquire an investment that is subject to contingent liabilities, which could be unknown to us at the time of acquisition or, if theyare known to us, we may not accurately assess or69Table of Contentsprotect against the risks that they present. Acquired contingent liabilities could thus result in unforeseen losses for us or our funds. In addition, in connection withthe disposition of an investment in a portfolio company, we or a fund may be required to make representations about the business and financial affairs of suchportfolio company typical of those made in connection with the sale of a business. We or a fund may also be required to indemnify the purchasers of suchinvestment to the extent that any such representations are inaccurate. These arrangements may result in the incurrence of contingent liabilities by us or a fund, evenafter the disposition of an investment. Any of these risks could harm the performance of us or our funds.Our private equity investments are typically among the largest in the industry, which involves certain complexities and risks that are not encountered in small‑‑and medium‑‑sized investments.Our private equity funds make investments in companies with relatively large capitalizations, which involves certain complexities and risks that are notencountered in small‑ and medium‑sized investments. For example, larger transactions may be more difficult to finance and exiting larger deals may presentincremental challenges. In addition, larger transactions may pose greater challenges in implementing changes in the company’s management, culture, finances oroperations, and may entail greater scrutiny by regulators, interest groups and other third parties. These constituencies may be more active in opposing some largerinvestments by certain private equity firms.In some transactions, the amount of equity capital that is required to complete a large capitalization private equity transaction may be significant and arerequired to be structured as a consortium transaction. A consortium transaction involves an equity investment in which two or more other private equity firms servetogether or collectively as equity sponsors. While we have sought to limit where possible the amount of consortium transactions in which we have been involved,we have participated in a significant number of those transactions. Consortium transactions generally entail a reduced level of control by our firm over theinvestment because governance rights must be shared with the other consortium investors. Accordingly, we may not be able to control decisions relating to aconsortium investment, including decisions relating to the management and operation of the company and the timing and nature of any exit, which could result inthe risks described in “-Our funds have made investments in companies that we do not control, exposing us to the risk of decisions made by others with which wemay not agree.” Any of these factors could increase the risk that our larger investments could be less successful. The consequences to our investment funds of anunsuccessful larger investment could be more severe given the size of the investment. Moreover, we have significant co‑investments in such large investments, andas a result the poor performance of any such large investment may have a material adverse impact on our financial results. See “-We and certain of our funds maymake a limited number of investments, or investments that are concentrated in certain geographic regions or asset types, which could negatively affect ourperformance or the performance of our funds to the extent those concentrated investments perform poorly” and “-Because we hold interests in some of ourportfolio companies both through our management of private equity funds as well as through separate investments in those funds and direct co‑investments,fluctuation in the fair values of these portfolio companies may have a disproportionate impact on the investment income earned by us.”We and our funds have made investments in companies that we do not control, exposing us to the risk of decisions made by others with which we may notagree.We and our funds and accounts hold investments that include debt instruments and equity securities of companies that we do not control, and such investmentsmay comprise an increasing part of our business. Such instruments and securities may be acquired by our funds and accounts through trading activities or throughpurchases of securities from the issuer or we may purchase such instruments and securities on a principal basis. In addition, our funds and accounts may acquireminority equity interests, particularly when making private equity investments in Asia, making growth equity investments or sponsoring investments as part of alarge investor consortium or through many of our Public Markets funds, and may also dispose of a portion of their majority equity investments in portfoliocompanies over time in a manner that results in the funds or accounts retaining a minority investment. We and our funds, including our newer private equity funds,have made certain minority investments in publicly traded companies.We have also increasingly made minority investments in companies including hedge fund managers on our balance sheet. For example, we have investmentsin Marshall Wace LLP, Nephila Capital Ltd., BlackGold Capital Management L.P., and Acion Partners Limited. In addition, on February 6, 2017, KKR andPAAMCO announced that they entered into a strategic transaction to create a new liquid alternatives investment firm by combining PAAMCO and KKR Prisma.KKR will retain a minority investment in the newly formed company. See "Business-Recent Developments."Transactions made by companies we do not control could be viewed as unwanted, damage our reputation, and consequently impair our ability to sourcetransactions in the future. Those investments will be subject to the risk that the company in which the investment is made may make business, financial ormanagement decisions with which we do not agree or that the majority stakeholders or the management of the company may take risks or otherwise act in a mannerthat does not70Table of Contentsserve our interests. These companies may be subject to complex regulatory requirements and instances of non-compliance by them may subject us to reputationalharm or in certain cases, liability. We are also reliant on the systems and processes of these companies including for financial information and valuations of ourinvestments in or with them, including hedge fund managers and their funds, but we do not control the decisions and judgments made during such processes. Ourinvestments in hedge fund managers may subject us to additional regulatory complexities or scrutiny if we are deemed to control the company for regulatorypurposes, despite our minority interest. These asset managers may also be dependent on their founders and other key persons, and the loss of these key personnelcould adversely impact our investment. If any of the foregoing were to occur, the value of the investments held by our funds or accounts or by us could decreaseand our financial condition, results of operations and cash flow could be adversely affected.We make investments in companies that are based outside of the United States, which may expose us to additional risks not typically associated with investingin companies that are based in the United States.Many of our funds invest or have the flexibility to invest a significant portion of their assets in the equity, debt, loans or other securities of issuers that arebased outside of the United States. A substantial amount of these investments consist of private equity investments made by our private equity funds. For example,as of December 31, 2016, approximately 48% of the unrealized value of the investments of those funds and accounts was attributable to non-U.S. investments.Investing in companies that are based or have significant operations in countries outside of the United States and, in particular, in emerging markets such as Chinaand India, Eastern Europe, countries in south and southeast Asia, Brazil, Latin America and Africa, involves risks and considerations that are not typicallyassociated with investments in companies established in the United States. These risks may include the following:•the possibility of exchange control regulations, restrictions on repatriation of profit on investments or of capital invested, political and social instability,nationalization or expropriation of assets;•the imposition of non‑U.S. taxes and changes in tax law;•differences in the legal and regulatory environment, for example the recognition of information barriers, or enhanced legal and regulatory compliance;•greater levels of corruption and potential exposure to the FCPA and other laws that prohibit improper payments or offers of payments to foreigngovernments, their officials and other third parties;•violations of sanctions regimes;•limitations on borrowings to be used to fund acquisitions or dividends;•limitations on permissible counterparties in our transactions or consolidation rules that effectively restrict the types of businesses in which we may invest;•political risks generally, including political hostility to investments by foreign or private equity investors;•less liquid markets;•reliance on a more limited number of commodity inputs, service providers and/or distribution mechanisms;•adverse fluctuations in currency exchange rates and costs associated with conversion of investment principal and income from one currency into another;•higher rates of inflation;•less available current information about an issuer;•higher transaction costs;•less government supervision of exchanges, brokers and issuers;•less developed bankruptcy and other laws;71Table of Contents•greater application of concepts like equitable subordination, which may, in bankruptcy or insolvency, result in the subordination of debt or other seniorinterests held by our investment funds, vehicles or accounts in companies in which our investment funds, vehicles or accounts also hold equity interests;•difficulty in enforcing contractual obligations;•lack of uniform accounting, auditing and financial reporting standards;•less stringent requirements relating to fiduciary duties;•fewer investor protections; and•greater price volatility.As a result of the complexity of and lack of clear laws, precedent or authority with respect to the application of various income tax laws to our structures, theapplication of rules governing how transactions and structures should be reported is also subject to differing interpretations. In particular, certain jurisdictions haveeither proposed or adopted rules that seek to limit the amount of interest that may be deductible where the lender and the borrower are related parties (or wherethird party borrowings have been guaranteed by a related party) and in some cases, without regard to whether the lender is a related party, or may seek to interpretexisting rules in a more restrictive manner. In addition, the tax authorities of certain countries have sought to disallow tax deductions for transaction and certainother costs at the portfolio company level either on the basis that the entity claiming the deduction does not benefit from the costs incurred or on other grounds.These measures will most likely adversely affect portfolio companies in those jurisdictions in which our investment funds have investments, and limit the benefitsof additional investments in those countries. Our business is also subject to the risk that similar measures might be introduced in other countries in which ourinvestment funds currently have investments or plan to invest in the future, or that other legislative or regulatory measures that negatively affect their respectiveportfolio investments might be promulgated in any of the countries in which they invest.In addition, certain countries such as Australia, China, India, Japan, Brazil and South Korea, where we have made investments, have sought to tax investmentgains derived by nonresident investors, including private equity funds, from the disposition of the equity in companies operating in those countries. In some casesthis development is the result of new legislation or changes in the interpretation of existing legislation and local authority assertions that investors have a localtaxable presence or are holding companies for trading purposes rather than for capital purposes, or are not otherwise entitled to treaty benefits.Further, the tax authorities in certain countries, such as Australia, Belgium, China, India, Japan, Denmark, Germany, and South Korea have sought to deny thebenefits of income tax treaties or EU Directives with respect to withholding taxes on interest and dividends and capital gains, of nonresident entities. Benefits ofincome tax treaties or EU Directives could be denied under each country's general anti-avoidance rules or on the basis that the entity benefiting from such treaty orDirective is not the owner of the income, is a mere conduit inserted primarily to access treaty benefits or Directives, or otherwise lacks substance.These various proposals and initiatives could result in an increase in taxes paid by our funds and/or increased tax withholding with respect to our investors.In July 2013, the OECD published its Action Plan on Base Erosion and Profit Shifting ("BEPS"). The OECD released its final reports in October 2015describing measures for a reform of the international tax rules to be implemented by the member states. Some member countries have been moving forward on theBEPS agenda but, because timing of implementation and the specific measures adopted will vary among participating states, significant uncertainty remainsregarding the impact of BEPS proposals. The BEPS project looks at various different ways in which domestic tax rules around the world, and the bilateral doubletax treaties that govern the interplay between them, could be amended to address profit shifting among affiliated entities. Several of the proposed measures,including measures covering treaty abuse, the deductibility of interest expense, local nexus requirements, transfer pricing and hybrid mismatch arrangements arepotentially relevant to some of our structures and could have an adverse tax impact on our funds, investors and/or our portfolio companies. A multilateralinstrument to implement treaty-related BEPS measures was issued by the OECD in November 2016. If implemented, these proposals could result in a loss of taxtreaty benefits and increased taxes on income from our investments.As a result of the complexity of our structures, foreign jurisdictions may seek to tax an additional portion of the fee income associated with our managementadvisory activity. Foreign jurisdictions may assert that an additional amount of fee income is72Table of Contentssubject to local tax, potentially reducing our profits associated with such income, although this risk may be mitigated by the availability of foreign tax credits. Weor our funds may also inadvertently establish a taxable presence in a jurisdiction because of activities conducted there. Compliance with tax laws and structures inthese jurisdictions and the costs of adapting to changes in tax policies require significant oversight and cost.Although we expect that much of the capital commitments of our funds will be denominated in U.S. dollars, our investments and capital commitments that aredenominated in a foreign currency, such as euro, will be subject to the risk that the value of a particular currency will change in relation to one or more othercurrencies. In June 2016 the United Kingdom referendum in which voters approved an exit from the European Union resulted in significant volatility in globalstock markets and currency exchange rate fluctuations that generally resulted in the depreciation of foreign currencies against the U.S. dollar. A continueddepreciation of foreign currencies against the U.S. dollar, if not adequately hedged, and a weaker growth in the United Kingdom and European Union would reducethe value of our investments in the region thus adversely impacting our financial results. Other factors may also affect currency values such as trade balances, theability of countries to pay their national debt, levels of short‑term interest rates, differences in relative values of similar assets in different currencies, long‑termopportunities for investment and capital appreciation and political developments. We may employ hedging techniques to minimize these risks, but we can offer noassurance that such strategies will be effective or even available at all. If we engage in hedging transactions, we may be exposed to additional risks associated withsuch transactions. See “-Risk management activities may adversely affect the return on our investments.” Legal uncertainty about the funding of euro denominatedobligations following any break up of or exits from the Eurozone could also materially adversely affect a fund. More generally, a withdrawal of the UnitedKingdom from the European Union and the possible withdrawal of other countries may adversely affect the Eurozone economy, us and our funds that have andexpect to continue to invest in European companies and companies that have operations in the Eurozone. In addition, various countries and regulatory bodies mayalso implement controls on foreign exchange and outbound remittances of currency, which could also impact not only the timing and amount of capitalcontributions that are required to be made to our funds but they may also impact the value, in U.S. dollars, of our investments and investment proceeds. Forexample, China has recently implemented stricter controls on foreign exchange and outbound remittances. See "Risks Related to Our Business -- Difficult marketconditions can adversely affect our business in many ways, including by reducing the value or performance of the investments that we manage or by reducing theability of our funds to raise or deploy capital, each of which could negatively impact our net income and cash flow and adversely affect our financial prospects andcondition." See also "--Risks Related to Our Business--Extensive regulation of our businesses affects our activities and creates the potential for significantliabilities and penalties. The possibility of increased regulatory focus or legislative or regulatory changes could adversely affect our business."Third party investors in our funds with commitment‑‑based structures may not satisfy their contractual obligation to fund capital calls when requested by us,which could adversely affect a fund’s operations and performance.Investors in certain of our funds make capital commitments to those funds that the funds are entitled to call from those investors at any time during prescribedperiods. We depend on fund investors fulfilling their commitments when we call capital from them in order for such funds to consummate investments andotherwise pay their obligations (for example, management fees) when due. Any fund investor that did not fund a capital call would generally be subject to severalpossible penalties, including having a significant amount of existing investment forfeited in that fund. However, the impact of the penalty is directly correlated tothe amount of capital previously invested by the investor in the fund and if an investor has invested little or no capital, for instance early in the life of the fund, thenthe forfeiture penalty may not be as meaningful. Investors may in the future also negotiate for lesser or reduced penalties at the outset of the fund, therebyinhibiting our ability to enforce the funding of a capital call. If our fund investors were to fail to satisfy a significant amount of capital calls for any particular fundor funds, the operation and performance of those funds could be materially and adversely affected.Our equity investments and many of our debt investments often rank junior to investments made by others, exposing us to greater risk of losing our investment.In many cases, the companies in which we or our funds invest have, or are permitted to have, outstanding indebtedness or equity securities that rank senior toour or our fund’s investment. By their terms, such instruments may provide that their holders are entitled to receive payments of distributions, interest or principalon or before the dates on which payments are to be made in respect of our investment. Also, in the event of insolvency, liquidation, dissolution, reorganization orbankruptcy of a company in which an investment is made, holders of securities ranking senior to our investment would typically be entitled to receive payment infull before distributions could be made in respect of its investment. In addition, debt investments made by us or our funds in our portfolio companies may beequitably subordinated to the debt investments made by third parties in our portfolio companies. After repaying senior security holders, the company may not haveany remaining assets to use for repaying amounts owed in respect of our investment. To the extent that any assets remain, holders of claims that rank equally withour investment would be entitled to share on an equal and ratable basis in distributions that are made out of those assets.73Table of ContentsAlso, during periods of financial distress or following an insolvency, the ability of us or our funds to influence a company’s affairs and to take actions to protect aninvestment may be substantially less than that of the senior creditors.Risk management activities may adversely affect the return on our investments.When managing exposure to market risks, we employ hedging strategies or certain forms of derivative instruments to limit our exposure to changes in therelative values of investments that may result from market developments, including changes in prevailing interest rates and currency exchange rates. The scope ofrisk management activities undertaken by us is selective and varies based on the level and volatility of interest rates, prevailing foreign currency exchange rates, thetypes of investments that are made and other changing market conditions. The use of hedging transactions and other derivative instruments to reduce the effects ofa decline in the value of a position does not eliminate the possibility of fluctuations in the value of the position or prevent losses if the value of the positiondeclines. However, such activities can establish other positions designed to gain from those same developments, thereby offsetting the decline in the value of theposition. Such transactions may also limit the opportunity for gain if the value of a position increases. Moreover, it may not be possible to limit the exposure to amarket development that is so generally anticipated that a hedging or other derivative transaction cannot be entered into at an acceptable price.The success of any hedging or other derivative transactions that we enter into generally will depend on our ability to correctly predict market changes. As aresult, while we may enter into such transactions in order to reduce our exposure to market risks, unanticipated market changes may result in poorer overallinvestment performance than if the hedging or other derivative transaction had not been executed. In addition, the degree of correlation between price movementsof the instruments used in connection with hedging activities and price movements in a position being hedged may vary. Moreover, for a variety of reasons, wemay not seek or be successful in establishing a perfect correlation between the instruments used in hedging or other derivative transactions and the positions beinghedged. An imperfect correlation could prevent us from achieving the intended result and could give rise to a loss. In addition, it may not be possible to fully orperfectly limit our exposure against all changes in the value of its investments, because the value of investments is likely to fluctuate as a result of a number offactors, some of which will be beyond our control or ability to hedge.While hedging arrangements may reduce certain risks, such arrangements themselves may entail certain other risks. These arrangements may require theposting of cash collateral, including at a time when a fund has insufficient cash or illiquid assets such that the posting of the cash is either impossible or requires thesale of assets at prices that do not reflect their underlying value. Moreover, these hedging arrangements may generate significant transaction costs, includingpotential tax costs, that reduce the returns generated by a fund. The CFTC has proposed or adopted regulations governing swaps and security‑ based swaps, whichmay limit our trading activities and our ability to implement effective hedging strategies or increase the costs of compliance. See “Risks Related to Our Business-Extensive regulation of our businesses affects our activities and creates the potential for significant liabilities and penalties. The possibility of increased regulatoryfocus or legislative or regulatory changes could result in additional burdens on our business.”The assets of our funds and our firm through our Principal Activities segment may make a limited number of investments, or investments that are concentratedin certain issuers, geographic regions or asset types, which could negatively affect our performance or the performance of our funds to the extent thoseconcentrated assets perform poorly.The governing agreements of our funds contain only limited investment restrictions and only limited requirements as to diversification of fund investments,either by geographic region or asset type. Our private equity funds generally permit up to 20% of the fund to be invested in a single company. We also advise fundsthat invest in a single industry such as growth equity, energy, infrastructure or real estate. During periods of difficult market conditions or slowdowns in thesesectors or geographic regions, decreased revenues, difficulty in obtaining access to financing and increased funding costs may be exacerbated by this concentrationof investments, which would result in lower investment returns. Because a significant portion of a fund’s capital may be invested in a single investment or portfoliocompany, a loss with respect to such investment or portfolio company could have a significant adverse impact on such fund’s capital. Accordingly, a lack ofdiversification on the part of a fund could adversely affect a fund’s performance and therefore, our financial condition and results of operations.Similarly, our Principal Activities segment has significant exposures to certain issuers, industries or asset classes. Because we hold interests in some of ourportfolio companies both through our segment investments in our private equity funds and direct co‑investments, fluctuation in the fair values of these portfoliocompanies may have a disproportionate impact on the investment income earned by us as compared to other portfolio companies. In these circumstances, as wasthe case with energy investments beginning in late 2014 through and into 2016, losses may have an even greater impact on our financial condition and results ofoperations, as we would directly bear the full extent of such losses. Our Principal Activities segment also has significant exposures to a single issuer subjecting ourinvestment income and economic net income to greater volatility74Table of Contentsdepending on such companies' operating results and other idiosyncratic factors specific to that company, and in cases where we hold publicly traded securities, ouroperating results would be impacted by volatility in the public markets related to our holdings of publicly traded securities. As of December 31, 2016 , we hold asignificant aggregate investment in First Data Corporation, which represents more than 15% of our investments on a consolidated segment basis. Volatility in thestock price of First Data Corporation has had and may continue to have a significant impact on our financial results. For example, for the year ended December 31,2016, the reduction in the stock price of First Data Corporation reduced economic net income on a segment basis by approximately $180 million . See also certainsignificant investments held in our Principal Activities segment at “-- Management's Discussion and Analysis of Financial Condition and Results of Operations --Segment Analysis -- Segment Balance Sheet.”Our business activities may give rise to a conflict of interest with our funds.As we have expanded and as we continue to expand the number and scope of our businesses, we increasingly confront potential conflicts of interest relating toinvestment activities among our various funds and also our own account. For example,•In pursuing the interest of our fund investors, we may take actions that could reduce our AUM or our profits that we could otherwise realize in the shortterm.•We may be required to allocate investment opportunities among investment vehicles that may have overlapping investment objectives, including vehiclesthat may have different fee structures, and among KKR co‑investment vehicles (including vehicles in which KKR employees may investment) and thirdparty co‑investors.•We may, on behalf of our funds or KKR itself, buy, sell, hold or otherwise deal with securities or other investments that may be purchased, sold or held byour other funds or that are otherwise issued by a portfolio company in which our funds invest. Conflicts of interest may arise between a fund, on one hand,and KKR on the other or among our funds including but not limited to those relating to the purchase or sale of investments, the structuring of, or exerciseof rights with respect to investment transactions and the advice we provide to our funds. For example we may sell an investment at a different time or fordifferent consideration than our funds.•We may invest on behalf of our fund or for our own account in a portfolio company of one fund that is a competitor, service provider, supplier, customer,or other counterparty with respect to a portfolio company of another fund.•We may structure an investment in a manner that may be attractive to fund investors or to KKR Holdings L.P., from a tax perspective but that may requirecorporate taxation to unitholders.•A decision to acquire material non‑public information about a company while pursuing an investment opportunity for a particular fund or our ownaccount may result in our having to restrict the ability of other funds to take any action.•Our fiduciary obligations to our fund investors may preclude us from pursuing attractive proprietary investment opportunities, in particular as we enterinto strategic relationships with broad investment mandates similar to the investments we make with our balance sheet. Notwithstanding the foregoing, wealso allocate certain investments, which we believe are not suitable for our funds to our balance sheet.•Conflicts may arise in allocating investments, time, services, expenses or resources among the investment activities of our funds, KKR, otherKKR‑affiliated entities and the employees of KKR.•Our principals have made personal investments in a variety of our investment funds, which may result in conflicts of interest among investors of our fundsor unitholders regarding investment decisions for these funds.•The general partner’s entitlement to receive carried interest from many of our funds may create an incentive for that general partner to make riskier andmore speculative investments on behalf of a fund than would be the case in the absence of such an arrangement. In addition, for our funds that pay carriedinterest based on accrued rather than realized gains, the amount of carried interest to which the general partner is entitled and the timing of its receipt ofcarried interest will depend on the valuation by the general partner of the fund’s investment.•From time to time, one of our funds may seek to effect a purchase or sale of an investment with one or more of our other funds in a so‑called “crosstransaction”, or we as a principal may seek to effect a purchase or sale of our investment with one or more of our fund in a so-called "principaltransaction".75Table of Contents•The investors in our investment vehicles are based in a wide variety of jurisdictions and take a wide variety of forms, and consequently have diverginginterests among themselves from a regulatory, tax or legal perspective or with respect to investment policies and target risk/return profiles.•We or our affiliates, including our capital markets business, may receive fees or other compensation in connection with specific transactions or differentclients that may give rise to conflicts. The decision to take on an opportunity in one of our businesses may, as a practical matter, also limit the ability ofone or our other businesses to take advantage of other related opportunities.In addition, our funds and accounts also invest in a broad range of asset classes throughout the corporate capital structure. These investments includeinvestments in corporate loans and debt securities, preferred equity securities and common equity securities. In certain cases, we may manage separate funds oraccounts that invest in different parts of the same company’s capital structure. For example, our credit funds may invest in different classes of the same company’sdebt and may make debt investments in a company that is owned by one of our private equity funds. In those cases, the interests of our funds may not always bealigned, which could create actual or potential conflicts of interest or the appearance of such conflicts. For example, one of our private equity funds could have aninterest in pursuing an acquisition, divestiture or other transaction that, in its judgment, could enhance the value of the private equity investment, even though theproposed transaction would subject one of our credit fund’s debt investments to additional or increased risks. Finally, our ability to effectively implement a publicsecurities strategy may be limited to the extent that contractual obligations entered into in the ordinary course of our private equity business impose restrictions onour engaging in transactions that we may be interested in otherwise pursuing.We may also cause different investment funds to invest in a single portfolio company, for example where the fund that made an initial investment no longerhas capital available to invest. Conflicts may also arise where we make balance sheet investments for our own account or permit employees to invest alongside ourinvestment vehicles or our balance sheet for their own account. In certain cases, we may require that a transaction or investment be approved by fund investors ortheir advisory committees, be approved by an independent valuation expert, be subject to a fairness opinion, be based on arms‑length pricing data or be calculatedin accordance with a formula provided for in a fund’s governing documents prior to the completion of the relevant transaction to address potential conflicts ofinterest. Such instances include principal transactions where we or our affiliates warehouse an investment in a portfolio company for the benefit of one or more ofour funds or accounts pending the contribution of committed capital by the investors in such funds or accounts, follow‑on investments by a fund other than a fundwhich made an initial investment in a company or transactions in which we arrange for one of our funds or accounts to buy a security from, or sell a security to,another one of our funds or accounts.Appropriately dealing with conflicts of interest is complex and difficult and we could suffer reputational damage or potential liability if we fail, or appear tofail, to deal appropriately with conflicts as they arise. Regulatory scrutiny of, or litigation in connection with, conflicts of interest could have a material adverseeffect on our reputation which could in turn materially adversely affect our business in a number of ways, including as a result of an inability to raise additionalfunds and a reluctance of counterparties to do business with us.Investors in certain of our Public Markets funds may redeem their investments in these funds with minimal notice.Investors in our funds of funds along with those in certain of our leveraged credit investment vehicles may generally submit redemptions to redeem theirinvestments on a quarterly or monthly basis following the expiration of a specified period of time or in certain cases capital may be withdrawn earlier subject to afee, in each case subject to the applicable fund’s specific redemption provisions. For certain KKR Prisma funds managed as part of a single investor’s mandate thelength of time to redeem an investment may vary and will depend on the liquidity constraints of each KKR Prisma fund’s underlying hedge fund portfolio. Factorswhich could result in investors leaving our funds include changes in interest rates that make other investments more attractive, changes in investor perceptionregarding our focus or alignment of interest, unhappiness with a fund’s performance or investment strategy, changes in our reputation, departures or changes inresponsibilities of key investment professionals, performance and liquidity needs of fund investors. In a declining market or period of economic disruption oruncertainty, the pace of redemptions and consequent reduction in our AUM could accelerate. The decrease in revenues that would result from significantredemptions from our funds of funds or other similar investment vehicles could have a material adverse effect on our business, revenues, net income and cashflows.A portion of assets invested in our fund of hedge funds strategy are managed through separately managed accounts or entities structured for investment by oneinvestor or related investors whereby we earn management and incentive fees, and we intend to continue to seek additional separately managed account or singleentity mandates. The investment management agreements we enter into in connection with managing separately managed accounts or entities on behalf of certainclients may be terminated by such clients on as little as 30 days’ prior written notice, or less in certain prescribed circumstances. In76Table of Contentsaddition, the boards of directors of certain funds we manage could terminate our advisory engagement of those companies, on as little as 30 days’ prior writtennotice. Similarly, we provide subadvisory services to other investment advisors and managers. Such investment advisors and managers could terminate oursubadvisory agreements on as little as 30 days’ prior written notice. In the case of any such terminations, the management and incentive fees we earn in connectionwith managing such account or company would immediately cease, which could result in a significant adverse impact on our revenues.In addition, certain funds in our Public Markets business are registered under the Investment Company Act as management investment companies. Thesefunds and KKR Credit Advisors (US) LLC, which serves as their investment adviser (or, in the case of a business development company, as its sub‑adviser), aresubject to the Investment Company Act and the rules thereunder. One of these funds is a New York Stock Exchange‑listed closed‑end fund. In addition, themanagement fees we are paid for managing investment companies will generally be subject to contractual rights the company’s board of directors (or, in the case ofthe business development companies we manage, the investment adviser) has to terminate our management of an account on as short as 60 days’ prior notice.Termination of these agreements would reduce the fees we earn from the relevant funds, which could have a material adverse effect on our results of operations.Our KKR Prisma business and in the future our stake in the combined business of PAAMCO and KKR Prisma, if such transaction were to close, may subjectus to risks related to the limited rights a fund of funds manager has to withdraw, transfer or otherwise liquidate its investments.A fund of funds is subject to risks related to the limited rights it has to withdraw, transfer or otherwise liquidate its investments from the underlying hedgefunds or other funds in which it invests. Hedge funds, including those in which our fund of funds are invested and the hedge funds we offer to our fund investors,may make investments or hold trading positions in markets that are volatile and which may become illiquid. Timely divestiture or sale of trading positions can beimpaired by decreased trading volume, increased price volatility, concentrated trading positions, limitations on the ability to transfer positions in highly specializedor structured transactions to which they may be a party, and changes in industry and government regulations. It may be impossible or costly for hedge funds toliquidate positions rapidly in order to meet margin calls, withdrawal requests or otherwise, particularly if there are other market participants seeking to dispose ofsimilar assets at the same time or the relevant market is otherwise moving against a position or in the event of trading halts or daily price movement limits on themarket or otherwise.Moreover, these risks may be exacerbated for funds of funds such as those we manage. For example, if one of our funds of funds were to invest a significantportion of its assets in two or more hedge funds that each had illiquid positions in the same issuer, the illiquidity risk for our funds of hedge funds would becompounded. In 2008 many hedge funds experienced significant declines in value. In many cases, these declines in value were both provoked and exacerbated bymargin calls and forced selling of assets, often at distressed prices. Moreover, certain funds of funds were invested in hedge funds that halted redemptions in theface of illiquidity and other issues, which precluded those funds of funds from receiving their capital back on request. There can be no guarantee that such asituation would not recur, particularly in times of market distress.Terms of the governing documents may also limit a fund of funds’ ability to withdraw, transfer or otherwise liquidate their investments in underlying portfoliofunds. Under the terms of the governing documents of the relevant portfolio funds or other investments, the ability of a fund of funds or account to redeem anyamount invested therein may be subject to certain restrictions and conditions, including restrictions on the redemption of capital for an initial period, restrictions onthe amount of redemptions and the frequency with which redemptions can be made, and investment minimums that must be maintained. Additionally, portfoliofunds typically reserve the right to reduce (“gate”) or suspend redemptions, to set aside (“side pocket”) capital that cannot be redeemed for so long as an event orcircumstance has not occurred or ceased to exist, respectively, and to satisfy redemptions by making distributions in‑kind, under certain circumstances. The abilityof our funds of funds or accounts to redeem portfolio fund interests may be adversely affected to varying degrees by such restrictions depending on, among otherthings, the length of any restricted periods imposed by the portfolio fund, the amount and timing of a requested redemption in relation to the time remaining of anyrestricted periods imposed by portfolio funds, the aggregate amount of redemption requests, the next regularly scheduled redemption dates of such portfolio funds,the imposition of “gates” or suspensions, the use of “side pockets”, the decision by a portfolio fund to satisfy redemptions in‑kind, and the satisfaction of otherconditions.77Table of ContentsInvestments by our fund of funds business, other hedge funds and similar investment vehicles and strategic partnerships with hedge fund managers are subjectto numerous additional risks.Investments by one or more hedge funds and investment vehicles with similar characteristics that we currently advise or may organize in the future are subjectto numerous additional risks including the following:•Generally, there are few limitations on the execution of investment strategies of a hedge fund or fund of funds, which are subject to the sole discretion ofthe management company or the general partner of such funds.•Hedge funds may engage in short selling, which is subject to theoretically unlimited loss, in that the price of the underlying security could theoreticallyincrease without limit, thus increasing the cost of buying those securities to cover the short position. There can be no assurance that the security necessaryto cover a short position will be available for purchase. Purchasing securities to close out the short position can itself cause the prices of the securities torise further, thereby exacerbating the loss.•We may enter into credit default swaps (or CDS) as investments or hedges. CDS involve greater risks than investing in the reference obligation directly.In addition to general market risks, CDS are subject to risks related to changes in interest rates, credit spreads, credit quality and expected recovery ratesof the underlying credit instrument. A CDS is a contract in which the protection “buyer” is generally obligated to pay the protection “seller” an upfront ora periodic stream of payments over the term of the contract provided that no credit event, such as a default, on a reference obligation has occurred. If acredit event occurs, the seller generally must pay the buyer the “par value” (full notional value) of the swap in exchange for an equal face amount ofdeliverable obligations of the issuer (also known as the reference entity) of the underlying credit instrument referenced in the CDS, or, if the swap is cashsettled, the seller may be required to deliver the related net cash amount. The protection buyer will lose its investment and recover nothing should noevent of default occur. If an event of default were to occur, the value of the reference obligation received by the protection seller (if any), coupled with theperiodic payments previously received, may be less than the full notional value it pays to the buyer, resulting in a loss of value to the seller. If we act asthe protection seller in respect of a CDS contract, we would be exposed to many of the same risks of leverage described herein since if an event of defaultoccurs the seller must pay the buyer the full notional value of the reference obligation.•Hedge funds and investment vehicles with similar characteristics are exposed to the risk that a counterparty will not settle a transaction in accordance withits terms and conditions because of a dispute over the terms of the contract (whether or not bona fide) or because of a credit or liquidity problem, thuscausing the fund to suffer a loss. Counterparty risk is accentuated for contracts with longer maturities where events may intervene to prevent settlement, orwhere the fund has concentrated its transactions with a single or small group of counterparties. Generally, hedge funds and investment vehicles withsimilar characteristics are not restricted from dealing with any particular counterparty or from concentrating any or all of their transactions with onecounterparty. Moreover, the fund’s internal consideration of the creditworthiness of their counterparties may prove insufficient. The absence of aregulated market to facilitate settlement may increase the potential for losses.•Credit risk may arise through a default by one of several large institutions that are dependent on one another to meet their liquidity or operational needs,so that a default by one institution causes a series of defaults by the other institutions. This systemic risk may adversely affect the financial intermediaries(such as clearing agencies, clearing houses, banks, securities firms and exchanges) with which the hedge funds and investment vehicles with similarcharacteristics interact on a daily basis.•The efficacy of investment and trading strategies depend largely on the ability to establish and maintain an overall market position in a combination offinancial instruments. A hedge fund’s trading orders may not be executed in a timely and efficient manner due to various circumstances, includingsystems failures or human error. In such event, the funds might only be able to acquire some but not all of the components of the position, or if the overallposition were to need adjustment, the funds might not be able to make such adjustment. As a result, the funds would not be able to achieve the marketposition selected by the management company or general partner of such funds, and might incur a loss in liquidating their position.•These funds may make investments that they do not advantageously dispose of prior to the date the applicable fund is dissolved, either by expiration ofsuch fund’s term or otherwise. Although we generally expect that investments will be disposed of prior to dissolution or be suitable for in-kinddistribution at dissolution, and the general partners of the funds have a limited ability to extend the term of the fund with the consent of fund investors orthe advisory board of the fund, as applicable, our funds may have to sell, distribute or otherwise dispose of investments at a disadvantageous78Table of Contentstime as a result of dissolution. This would result in a lower than expected return on the investments and, perhaps, on the fund itself.•These funds may rely on computer programs, internal infrastructure and services, quantitative models (both proprietary models and those supplied by thirdparties) and information and data provided by third parties to trade, clear and settle securities and other transactions, among other activities, that arecritical to the oversight of certain funds’ activities. If any such models, information or data prove to be incorrect or incomplete, any decisions made inreliance thereon could expose the funds to potential risks. Any hedging based on faulty models, information or data may prove to be unsuccessful andadversely impact a fund’s profits.•Hedge fund investments are also subject to risks relating to investments in commodities, futures, options and other derivatives, the prices of which arehighly volatile and may be subject to the theoretically unlimited risk of loss in certain circumstances, including if the fund writes a call option. Pricemovements of commodities, futures and options contracts and payments pursuant to swap agreements are influenced by, among other things, interestrates, changing supply and demand relationships, trade, fiscal, monetary and exchange control programs and policies of governments and national andinternational political and economic events and policies. The value of futures, options and swap agreements also depends upon the price of thecommodities underlying them. In addition, hedge funds’ assets are subject to the risk of the failure of any of the exchanges on which their positions tradeor of their clearinghouses or counterparties. Most U.S. commodities exchanges limit fluctuations in certain commodity interest prices during a single dayby imposing “daily price fluctuation limits” or “daily limits,” the existence of which may reduce liquidity or effectively curtail trading in particularmarkets. Our fund of hedge fund business may also be subject to and may subject our firm to extensive regulations, including those of the CommodityFutures Trading Commission and the regulations described under “-Risks Related to Our Business-Extensive regulation of our businesses affects ouractivities and creates the potential for significant liabilities and penalties. The possibility of increased regulatory focus or legislative or regulatory changescould result in additional burdens on our business”.The hedge fund managers with which we have strategic partnerships are subject to the risks above. To the extent the financial condition of these hedge fundmanagers is adversely affected by these risks, our revenues, AUM and FPAUM may decline.Risks Related to Our Common UnitsAs a limited partnership, we qualify for some exemptions from the corporate governance and other requirements of the NYSE.We are a limited partnership and, as a result, qualify for exceptions from certain corporate governance and other requirements of the rules of the NYSE.Pursuant to these exceptions, limited partnerships may elect, and we have elected, not to comply with certain corporate governance requirements of the NYSE,including the requirements: (i) that the listed company have a nominating and corporate governance committee that is composed entirely of independent directors;(ii) that the listed company have a compensation committee that is composed entirely of independent directors and (iii) that the compensation committee berequired to consider certain independence factors when engaging compensation consultants, legal counsel and other committee advisers. In addition, as a limitedpartnership, we are not required to obtain unitholder approval for (a) the issuance of common units to certain related parties where the number of common unitsexceeds one percent of the outstanding common units or voting power, (b) the issuance of common units that equals or exceeds 20% of the outstanding commonunits or voting power, or (c) a change of control transaction, and we are not required to hold annual unitholder meetings. Accordingly, you do not have the sameprotections afforded to equity holders of entities that are subject to all of the corporate governance requirements of the NYSE.Our founders are able to determine or influence the outcome of any matter that may be submitted for a vote of our limited partners.Very few matters are required to be submitted to a vote of our unitholders, and generally such matters require a majority or more of all the outstanding votingunits. As of February 22, 2017, KKR Holdings owns 353,757,398 KKR Group Partnership Units, or 43.9% of the outstanding KKR Group Partnership Units.Depending upon the number of units actually voted, we believe our senior employees should generally have sufficient voting power to substantially influencematters subject to a majority or more of all outstanding voting units. Matters that require a vote of a majority of all outstanding voting units include a merger orconsolidation of our business, a sale of all or substantially all of our assets and amendments to our partnership agreement that may be material to holders of ourcommon units. In addition, our limited partnership agreement contains provisions that require a majority vote of all outstanding voting units to make certainamendments to our partnership agreement that would materially and adversely affect all holders of our common units or a particular class of holders of commonunits, and since approximately 43.9% of our voting units, as of February 22, 2017, are controlled by KKR Holdings, we believe KKR79Table of ContentsHoldings should generally have the ability to substantially influence amendments that could materially and adversely affect the holders of our common units eitheras a whole or as a particular class.The voting rights of holders of our common units are further restricted by provisions in our limited partnership agreement stating that any of our common unitsheld by a person that beneficially owns 20% or more of any class of our common units then outstanding (other than our Managing Partner or its affiliates, or adirect or subsequently approved transferee of our Managing Partner or its affiliates) cannot be voted on any matter. Our limited partnership agreement also containsprovisions limiting the ability of the holders of our common units to call meetings, to acquire information about our operations, and to influence the manner ordirection of our management. Our limited partnership agreement does not restrict our Managing Partner’s ability to take actions that may result in our partnershipbeing treated as an entity taxable as a corporation for U.S. federal (and applicable state) income tax purposes. Furthermore, holders of our common units would notbe entitled to dissenters’ rights of appraisal under our limited partnership agreement or applicable Delaware law in the event of a merger or consolidation, a sale ofsubstantially all of our assets or any other transaction or event.Our limited partnership agreement contains provisions that reduce or eliminate duties (including fiduciary duties) of our Managing Partner and limit remediesavailable to unitholders for actions that might otherwise constitute a breach of duty. It will be difficult for unitholders to successfully challenge a resolution ofa conflict of interest by our Managing Partner or by its conflicts committee.Our limited partnership agreement contains provisions that require holders of our common units to waive or consent to conduct by our Managing Partner andits affiliates that might otherwise raise issues about compliance with fiduciary duties or applicable law. For example, our limited partnership agreement providesthat when our Managing Partner is acting in its individual capacity, as opposed to in its capacity as our Managing Partner, it may act without any fiduciaryobligations to holders of our common units, whatsoever. When our Managing Partner, in its capacity as our general partner, or our conflicts committee is permittedto or required to make a decision in its “sole discretion” or “discretion” or that it deems “necessary or appropriate” or “necessary or advisable,” then our ManagingPartner or the conflicts committee will be entitled to consider only such interests and factors as it desires, including its own interests, and will have no duty orobligation (fiduciary or otherwise) to give any consideration to any interest of or factors affecting us or any holder of our common units and will not be subject toany different standards imposed by our limited partnership agreement, the Delaware Revised Uniform Limited Partnership Act, which is referred to as theDelaware Limited Partnership Act, or under any other law, rule or regulation or in equity. These standards reduce the obligations to which our Managing Partnerwould otherwise be held. See also “-We are a Delaware limited partnership, and there are provisions in our limited partnership agreement regarding exculpationand indemnification of our officers and directors that differ from the Delaware General Corporation Law (DGCL) in a manner that may be less protective of theinterests of our common unitholders.”The above modifications of fiduciary duties are expressly permitted by Delaware law. Hence, we and holders of our common units will only have recourse andbe able to seek remedies against our Managing Partner if our Managing Partner breaches its obligations pursuant to our limited partnership agreement. Unless ourManaging Partner breaches its obligations pursuant to our limited partnership agreement, we and holders of our common units will not have any recourse againstour Managing Partner even if our Managing Partner were to act in a manner that was inconsistent with traditional fiduciary duties. Furthermore, even if there hasbeen a breach of the obligations set forth in our limited partnership agreement, our limited partnership agreement provides that our Managing Partner and itsofficers and directors will not be liable to us or holders of our common units, for errors of judgment or for any acts or omissions unless there has been a final andnon‑appealable judgment by a court of competent jurisdiction determining that our Managing Partner or its officers and directors acted in bad faith or engaged infraud or willful misconduct. These provisions are detrimental to the holders of our common units because they restrict the remedies available to unitholders foractions that without such limitations might constitute breaches of duty including fiduciary duties.Whenever a potential conflict of interest exists between us and our Managing Partner, our Managing Partner may resolve such conflict of interest. If ourManaging Partner determines that its resolution of the conflict of interest is on terms no less favorable to us than those generally being provided to or availablefrom unrelated third parties or is fair and reasonable to us, taking into account the totality of the relationships between us and our Managing Partner, then it will bepresumed that in making this determination, our Managing Partner acted in good faith. A holder of our common units seeking to challenge this resolution of theconflict of interest would bear the burden of overcoming such presumption. This is different from the situation with a typical Delaware corporation, where aconflict resolution by an interested party would be presumed to be unfair and the interested party would have the burden of demonstrating that the resolution wasfair.Also, if our Managing Partner obtains the approval of the conflicts committee of our Managing Partner, the resolution will be conclusively deemed to be fairand reasonable to us and not a breach by our Managing Partner of any duties it may owe to us or holders of our common units. This is different from the situationwith a typical Delaware corporation, where a conflict resolution by a committee consisting solely of independent directors may, in certain circumstances, merelyshift the burden of80Table of Contentsdemonstrating unfairness to the plaintiff. If you purchase, receive or otherwise hold a common unit, you will be treated as having consented to the provisions setforth in our limited partnership agreement, including provisions regarding conflicts of interest situations that, in the absence of such provisions, might beconsidered a breach of fiduciary or other duties under applicable state law. As a result, unitholders will, as a practical matter, not be able to successfully challengean informed decision by the conflicts committee.We have also agreed to indemnify our Managing Partner and any of its affiliates and any member, partner, tax matters partner, officer, director, employeeagent, fiduciary or trustee of our partnership, our Managing Partner or any of our affiliates and certain other specified persons, to the fullest extent permitted bylaw, against any and all losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, penalties, interest,settlements or other amounts incurred by our Managing Partner or these other persons. We have agreed to provide this indemnification unless there has been a finaland non‑appealable judgment by a court of competent jurisdiction determining that these persons acted in bad faith or engaged in fraud or willful misconduct. Wehave also agreed to provide this indemnification for criminal proceedings.Our Managing Partner may exercise its right to call and purchase common units as provided in our limited partnership agreement or assign this right to one ofits affiliates or to us. Our Managing Partner may use its own discretion, free of fiduciary duty restrictions, in determining whether to exercise this right. As a result,a unitholder may have his common units purchased from him at an undesirable time or price. For additional information, see our limited partnership agreementfiled as an exhibit to this annual report.Any claims, suits, actions or proceedings concerning the matters described above or any other matter arising out of or relating in any way to the limitedpartnership agreement may only be brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof,any other court in the State of Delaware with subject matter jurisdiction.The market price and trading volume of our common units may be volatile, which could result in rapid and substantial losses for our common unitholders.The market price of our common units may be highly volatile, could be subject to wide fluctuations and could decline significantly in the future. In addition,the trading volume in our common units may fluctuate and cause significant price variations to occur. If the market price of our common units declinessignificantly, you may be unable to sell your common units at an attractive price, if at all. Some of the factors that could negatively affect the price of our commonunits or result in fluctuations in the price or trading volume of our common units include:•variations in our quarterly operating results, which may be substantial;•changes in the amount of our distributions or our distribution policy;•taking a long‑term perspective on making investment, operational and strategic decisions, which may result in significant and unpredictable variations inour quarterly returns;•failure to meet analysts’ earnings estimates;•publication of research reports about us or the investment management industry or the failure of securities analysts to cover our common unitssufficiently;•additions or departures of our key management and investment personnel;•adverse market reaction to any indebtedness we may incur or securities we may issue in the future;•changes in market valuations of similar companies;•speculation in the press or investment community;•changes or proposed changes in laws or regulations or differing interpretations thereof affecting our business or enforcement of these laws andregulations, or announcements relating to these matters;•a concentrated ownership of our common units or ownership of them by short-term investors;81Table of Contents•a lack of liquidity in the trading of our common units;•adverse publicity about the investment management or private equity industry generally or individual scandals, specifically; and•general market and economic conditions.An investment in our common units is not an investment in any of our funds, and the assets and revenues of our funds are not directly available to us.Our common units are only securities of KKR & Co. L.P., the holding company of the KKR business. While our historical consolidated and combinedfinancial information includes financial information, including assets and revenues, of certain funds on a consolidated basis, and our future financial informationwill continue to consolidate certain of these funds, such assets and revenues are available to the fund and not to us except to a limited extent through managementfees, carried interest or other incentive income, distributions and other proceeds arising from agreements with funds, as discussed in more detail in this report.Our common unit price may decline due to the large number of common units eligible for future sale, for exchange, and issuable pursuant to our equityincentive plan and acquisitions.The market price of our common units could decline as a result of sales of a large number of common units in the market or the perception that such salescould occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell common units in the future at a time and at aprice that we deem appropriate. As of February 22, 2017, we have 452,723,038 common units outstanding, which amount excludes common units beneficiallyowned by KKR Holdings in the form of KKR Group Partnership Units discussed below and common units available for future issuance under the KKR & Co. L.P.2010 Equity Incentive Plan.As of February 22, 2017, KKR Holdings owns 353,757,398 KKR Group Partnership Units that may be exchanged, on a quarterly basis, for our common unitson a one‑for‑one basis, subject to customary conversion rate adjustments for splits, unit distributions and reclassifications. The market price of our common unitscould decline as a result of the exchange or the perception that an exchange may occur of a large number of KKR Group Partnership Units for our common units.These exchanges, or the possibility that these exchanges may occur, also might make it more difficult for holders of our common units to sell our common units inthe future at a time and at a price that they deem appropriate.In addition, we will continue to issue additional common units pursuant to our Equity Incentive Plan, and such issuances may increase in the future as equityawards granted by KKR Holdings decrease. See "Risks Related to Our Business- If we cannot retain and motivate our principals and other key personnel andrecruit, retain and motivate new principals and other key personnel, our business, results and financial condition could be adversely affected." The total number ofcommon units which may be issued under our Equity Incentive Plan is equivalent to 15% of the number of fully exchanged and diluted common units outstandingas of the beginning of the year. The amount may be increased each year to the extent that we issue additional equity. As of February 22, 2017, KKR may issuecommon units registered on KKR's registration statement on Form S-8 (no. 333-171601) for this purpose and may also issue 24.8 million common units under theEquity Incentive Plan that were not registered on KKR’s registration statement on Form S-8. In addition previously issued awards that were canceled or arecanceled in the future, or in certain cases, withheld in respect of tax withholding obligations, are or will become available for further grant under the terms of theEquity Incentive Plan. See “Executive Compensation-KKR & Co. L.P. Equity Incentive Plan”.In addition, our limited partnership agreement authorizes us to issue an unlimited number of additional partnership securities and options, rights, warrants andappreciation rights relating to partnership securities for the consideration and on the terms and conditions established by our Managing Partner in its sole discretionwithout the approval of our unitholders. In accordance with the Delaware Limited Partnership Act and the provisions of our partnership agreement, we may alsoissue additional partner interests that have designations, preferences, rights, powers and duties that are different from, and may be senior to, those applicable to ourcommon units. Similarly, the partnership agreements of the KKR Group Partnerships authorize the general partners of the KKR Group Partnerships to issue anunlimited number of additional securities of the KKR Group Partnerships with such designations, preferences, rights, powers and duties that are different from, andmay be senior to, those applicable to the KKR Group Partnerships Units, and which may be exchangeable for KKR Group Partnership Units. In the past, we haveissued and sold common units of KKR & Co. L.P. to generate cash proceeds to pay withholding taxes, social benefit payments or similar payments payable by us inrespect of awards granted pursuant to the Equity Incentive Plan or the amount of cash delivered in respect of awards granted pursuant to the Equity Incentive Planthat are settled in cash instead of82Table of Contentscommon units. As of February 22, 2017, we may issue up to 0.8 million common units as registered on our registration statement on Form S-3 (no. 333-196059) inrespect of such withholding taxes and cash settled equity awards.We have used and in the future may continue to use common units as consideration in acquisitions and strategic investments. For example, in connection withKKR’s acquisition of KFN, KKR issued approximately 104.3 million common units of KKR & Co. L.P., in connection with KKR’s acquisition of Avoca, weissued securities exchangeable into 4.9 million common units and in connection with KKR's acquisition of Marshall Wace, we issued approximately 7.3 millioncommon units. In addition, in connection with the Marshall Wace transaction or other investments or acquisitions, we may make certain contingent payments in theform of common units. If our valuations of these transactions are not accurate or if the value of these acquisitions and investments is not realized, our distributionsper common unit and the value of our common units may decline.Risks Related to Our Organizational StructurePotential conflicts of interest may arise among our Managing Partner, our affiliates and us. Our Managing Partner and our affiliates have limited fiduciaryduties to us and the holders of KKR Group Partnership Units, which may permit them to favor their own interests to our detriment and that of the holders ofKKR Group Partnership Units.Our Managing Partner, which is our general partner, will manage the business and affairs of our business, and will be governed by a board of directors that isco‑chaired by our founders, who also serve as our Co‑Chief Executive Officers. Conflicts of interest may arise among our Managing Partner and its affiliates, onthe one hand, and us and our unitholders, on the other hand. As a result of these conflicts, our Managing Partner may favor its own interests and the interests of itsaffiliates over us and our unitholders. These conflicts include, among others, the following:•Our Managing Partner indirectly through its holding of controlling entities determines the amount and timing of the KKR Group Partnership’sinvestments and dispositions, cash expenditures, including those relating to compensation, indebtedness, issuances of additional partner interests, taxliabilities and amounts of reserves, each of which can affect the amount of cash that is available for distribution to holders of KKR Group PartnershipUnits;•Our Managing Partner is allowed to take into account the interests of parties other than us in resolving conflicts of interest, which has the effect of limitingits duties, including fiduciary duties, to us. For example, our affiliates that serve as the general partners of our funds or as broker‑dealers have fiduciaryand/or contractual obligations to our fund investors or other third parties. Such obligations may cause such affiliates to regularly take actions with respectto the allocation of investments among our investment funds (including funds that have different fee structures), the purchase or sale of investments in ourinvestment funds, the structuring of investment transactions for those funds and the advice and services we provide that comply with these fiduciary andcontractual obligations but that might adversely affect our near‑term results of operations or cash flow. Our Managing Partner will have no obligation tointervene in, or to notify us of, such actions by such affiliates;•Because certain of our principals indirectly hold their KKR Group Partnership Units through KKR Holdings L.P. and its subsidiaries, which are notsubject to corporate income taxation and we hold some of the KKR Group Partnership Units through one or more wholly‑owned subsidiaries that aretaxable as a corporation, conflicts may arise between our principals and us relating to the selection and structuring of investments or transactions,declaring distributions and other matters; without limiting the foregoing, certain investments made by us or through our funds may be determined to beheld through KKR Management Holdings L.P., which would result in less taxation to our principals who are limited partners in KKR Holdings ascompared to our unitholders;•Our Managing Partner, including its directors and officers, has limited its and their liability and reduced or eliminated its and their duties, includingfiduciary duties, under our partnership agreement to the fullest extent permitted by law, while also restricting the remedies available to holders of commonunits for actions that, without these limitations, might constitute breaches of duty, including fiduciary duties. In addition, we have agreed to indemnify ourManaging Partner, including its directors and officers, and our Managing Partner’s affiliates to the fullest extent permitted by law, except with respect toconduct involving bad faith, fraud or willful misconduct;•Our partnership agreement does not restrict our Managing Partner from paying us or our affiliates for any services rendered, or from entering intoadditional contractual arrangements with any of these entities on our behalf, so long as the terms of any such additional contractual arrangements are fairand reasonable to us as determined under our partnership agreement. Neither our limited partnership agreement nor any of the other agreements, contractsand arrangements between us on the one hand, and our Managing Partner and its affiliates on the other, are or will be the83Table of Contentsresult of arm’s‑length negotiations. The conflicts committee will be responsible for, among other things, enforcing our rights and those of our unitholdersunder certain agreements against KKR Holdings and certain of its subsidiaries and designees, a general partner or limited partner of KKR Holdings, or aperson who holds a partnership or equity interest in the foregoing entities;•Our Managing Partner and its affiliates will have no obligation to permit us to use any facilities or assets of our Managing Partner and its affiliates, exceptas may be provided in contracts entered into specifically dealing with such use. There will not be any obligation of our Managing Partner and its affiliatesto enter into any contracts of this kind.•Our Managing Partner determines how much debt we incur and whether to issue preferred securities and those decisions may adversely affect any creditratings we receive;•Our Managing Partner determines which costs incurred by it and its affiliates are reimbursable by us;•Other than as set forth in the confidentiality and restrictive covenant agreements, which in certain cases may only be agreements between our principalsand KKR Holdings and which may not be enforceable by us or otherwise waived, modified or amended, affiliates of our Managing Partner and existingand former personnel employed by our Managing Partner are not prohibited from engaging in other businesses or activities, including those that might bein direct competition with us;•Our Managing Partner controls the enforcement of obligations owed to the KKR Group Partnerships by us and our affiliates; and•Our Managing Partner or our Managing Partner conflicts committee decides whether to retain separate counsel, accountants or others to perform servicesfor us.See “Certain Relationships and Related Transactions, and Director Independence.”Certain actions by our Managing Partner’s board of directors require the approval of the Class A shares of our Managing Partner, all of which are held by oursenior employees.All of our Managing Partner’s outstanding Class A shares are held by our senior employees. Although the affirmative vote of a majority of the directors of ourManaging Partner is required for any action to be taken by our Managing Partner’s board of directors, certain specified actions approved by our Managing Partner’sboard of directors will also require the approval of a majority of the Class A shares of our Managing Partner. These actions consist of the following:•the entry into a debt financing arrangement by us in an amount in excess of 10% of our existing long‑term indebtedness (other than the entry into certainintercompany debt financing arrangements);•the issuance by our partnership or our subsidiaries of any securities that would (i) represent, after such issuance, or upon conversion, exchange or exercise,as the case may be, at least 5% on a fully diluted, as converted, exchanged or exercised basis, of any class of our or their equity securities or (ii) havedesignations, preferences, rights, priorities or powers that are more favorable than those of KKR Group Partnership Units;•the adoption by us of a shareholder rights plan;•the amendment of our limited partnership agreement or the limited partnership agreements of the KKR Group Partnerships;•the exchange or disposition of all or substantially all of our assets or the assets of any KKR Group Partnership;•the merger, sale or other combination of the partnership or any KKR Group Partnership with or into any other person;•the transfer, mortgage, pledge, hypothecation or grant of a security interest in all or substantially all of the assets of the KKR Group Partnerships;•the appointment or removal of a Chief Executive Officer or a Co‑Chief Executive Officer of our Managing Partner or our partnership;•the termination of the employment of any of our officers or the officers of any of our subsidiaries or the termination of the association of a partner withany of our subsidiaries, in each case, without cause;84Table of Contents•the liquidation or dissolution of the partnership, our Managing Partner or any KKR Group Partnership; and•the withdrawal, removal or substitution of our Managing Partner as our general partner or any person as the general partner of a KKR Group Partnership,or the transfer of beneficial ownership of all or any part of a general partner interest in our partnership or a KKR Group Partnership to any person otherthan one of its wholly-owned subsidiaries.In addition, holders representing a majority of the Class A shares of our Managing Partner have the authority to unilaterally appoint our Managing Partner’sdirectors and also have the ability to appoint the officers of our Managing Partner. Messrs. Kravis and Roberts, as the designated members of our ManagingPartner, represent a majority of the total voting power of the outstanding Class A shares, when they act together. However, neither of them controls the voting ofthe Class A shares, when acting alone.Our common unitholders do not elect our Managing Partner or vote on our Managing Partner’s directors and have limited ability to influence decisionsregarding our business.Our common unitholders do not elect our Managing Partner or its board of directors and, unlike the holders of common stock in a corporation, have onlylimited voting rights on matters affecting our business and therefore limited ability to influence decisions regarding our business. Furthermore, if our commonunitholders are dissatisfied with the performance of our Managing Partner, they have no ability to remove our Managing Partner, with or without cause.The control of our Managing Partner may be transferred to a third party without our consent.Our Managing Partner may transfer its general partner interest to a third party in a merger or consolidation or in a transfer of all or substantially all of its assetswithout our consent or the consent of our common unitholders. Furthermore, the members of our Managing Partner may sell or transfer all or part of their limitedliability company interests in our Managing Partner without our approval, subject to certain restrictions. A new general partner may not be willing or able to formnew funds and could form funds that have investment objectives and governing terms that differ materially from those of our current funds. A new owner couldalso have a different investment philosophy, employ investment professionals who are less experienced, be unsuccessful in identifying investment opportunities orhave a track record that is not as successful as our track record. If any of the foregoing were to occur, we could experience difficulty in making new investments,and the value of our existing investments, our business, our results of operations and our financial condition could materially suffer.We intend to pay periodic distributions to the holders of our common and preferred units, but our ability to do so may be limited by our holding companystructure and contractual restrictions.We intend to pay cash distributions on a quarterly basis. We are a holding company and have no material assets other than the KKR Group Partnership Unitsthat we hold through wholly‑owned subsidiaries and have no independent means of generating income. Accordingly, we intend to cause the KKR GroupPartnerships to make distributions on the KKR Group Partnership Units, including KKR Group Partnership Units that we directly or indirectly hold, in order toprovide us with sufficient amounts to fund distributions we may declare. If the KKR Group Partnerships make such distributions, other holders of KKR GroupPartnership Units, including KKR Holdings, will be entitled to receive equivalent distributions pro rata based on their KKR Group Partnership Units.The declaration and payment of any future distributions will be at the sole discretion of our Managing Partner, which may change our distribution policy at anytime. Our Managing Partner will take into account general economic and business conditions, our strategic plans and prospects, our business and investmentopportunities, our financial condition and operating results, compensation expense, working capital requirements and anticipated cash needs, debt and contractualrestrictions and obligations (including payment obligations pursuant to the tax receivable agreement), legal, tax and regulatory restrictions, restrictions or otherimplications on the payment of distributions by us to the holders of KKR Group Partnership Units or by our subsidiaries to us and such other factors as ourManaging Partner may deem relevant. Under the Delaware Limited Partnership Act, we may not make a distribution to a partner if after the distribution all ourliabilities, other than liabilities to partners on account of their partnership interests and liabilities for which the recourse of creditors is limited to specific propertyof the partnership, would exceed the fair value of our assets. If we were to make such an impermissible distribution, any limited partner who received a distributionand knew at the time of the distribution that the distribution was in violation of the Delaware Limited Partnership Act would be liable to us for the amount of thedistribution for three years. Furthermore, by paying cash distributions rather than investing that cash in our businesses, we risk slowing the pace of our growth, ornot having a sufficient amount of cash to fund our operations, new investments or unanticipated capital expenditures, should the need arise.85Table of Contents Our ability to characterize such distributions as capital gains or qualified dividend income may be limited, and you should expect that some or all of suchdistributions may be regarded as ordinary income. Our preferred units rank senior to our common units with respect to the payment of distributions. Unless distributions have been declared and paid or declaredand set apart for payment on the preferred units for a quarterly distribution period, during the remainder of that distribution period we may not declare or pay or setapart payment for distributions on any units of KKR & Co. L.P. that are junior to the preferred units, including our common units, and we may not repurchase anysuch junior units.Distributions on the preferred units are discretionary and non-cumulative. Holders of preferred units will only receive distributions of their preferred unitswhen, as and if declared by the board of directors of our Managing Partner. If distributions on a series of the preferred units have not been declared and paid for theequivalent of six or more quarterly distribution periods, whether or not consecutive, holders of the preferred units, together as a class with holders of any otherseries of parity units with like voting rights, will be entitled to vote for the election of two additional directors to the board of directors of our Managing Partner.When quarterly distributions have been declared and paid on such series of the preferred units for four consecutive quarters following such a nonpayment event, theright of the holders of the preferred units and such parity units to elect these two additional directors will cease, the terms of office of these two directors willforthwith terminate and the number of directors constituting the board of directors of our Managing Partner will be reduced accordingly. Additional risks related toour 6.75% Series A Preferred Units and 6.50% Series B Preferred Units are contained in the prospectus supplement relating to the respective securities.We will be required to pay our principals for most of the benefits relating to any additional tax depreciation or amortization deductions we may claim as aresult of the tax basis step‑‑up we receive in connection with subsequent exchanges of our common units and related transactions.We and one or more of our intermediate holding companies are required to acquire KKR Group Partnership Units from time to time pursuant to our exchangeagreement with KKR Holdings. To the extent this occurs, the exchanges are expected to result in an increase in one of our intermediate holding company’s share ofthe tax basis of the tangible and intangible assets of KKR Management Holdings L.P., primarily attributable to a portion of the goodwill inherent in our business,that would not otherwise have been available. This increase in tax basis may increase (for tax purposes) depreciation and amortization and therefore reduce theamount of income tax our intermediate holding companies would otherwise be required to pay in the future. This increase in tax basis may also decrease gain (orincrease loss) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.We are party to a tax receivable agreement with KKR Holdings requiring our intermediate holding company to pay to KKR Holdings or transferees of its KKRGroup Partnership Units 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax that the intermediate holding companies actuallyrealize as a result of this increase in tax basis, as well as 85% of the amount of any such savings the intermediate holding companies actually realize as a result ofincreases in tax basis that arise due to future payments under the agreement. A termination of the agreement or a change of control could give rise to similarpayments based on tax savings that we would be deemed to realize in connection with such events. This payment obligation will be an obligation of ourintermediate holding companies and not of either KKR Group Partnership. In the event that any of our current or future subsidiaries become taxable as corporationsand acquire KKR Group Partnership Units in the future, or if we become taxable as a corporation for U.S. federal income tax purposes, we expect that each suchentity will become subject to a tax receivable agreement with substantially similar terms. While the actual increase in tax basis, as well as the amount and timing ofany payments under this agreement, will vary depending upon a number of factors, including the timing of exchanges, the price of our common units at the time ofthe exchange, the extent to which such exchanges are taxable and the amount and timing of our taxable income, we expect that as a result of the size of theincreases in the tax basis of the tangible and intangible assets of the KKR Group Partnerships, the payments that we may be required to make to our existingowners will be substantial. The payments under the tax receivable agreement are not conditioned upon our existing owners’ continued ownership of us. We mayneed to incur debt to finance payments under the tax receivable agreement to the extent our cash resources are insufficient to meet our obligations under the taxreceivable agreement as a result of timing discrepancies or otherwise. In particular, our intermediate holding companies’ obligations under the tax receivableagreement would be effectively accelerated in the event of an early termination of the tax receivable agreement by our intermediate holding companies or in theevent of certain mergers, asset sales and other forms of business combinations or other changes of control. In these situations, our obligations under the taxreceivable agreement could have a substantial negative impact on our liquidity.Payments under the tax receivable agreement will be based upon the tax reporting positions that our Managing Partner will determine. We are not aware of anyissue that would cause the IRS to challenge a tax basis increase. However, neither KKR Holdings nor its transferees will reimburse us for any payments previouslymade under the tax receivable agreement if such tax86Table of Contentsbasis increase, or the tax benefits we claim arising from such increase, is successfully challenged by the IRS. As a result, in certain circumstances, payments toKKR Holdings or its transferees under the tax receivable agreement could be in excess of the intermediate holding companies’ cash tax savings. The intermediateholding companies’ ability to achieve benefits from any tax basis increase, and the payments to be made under this agreement, will depend upon a number offactors, as discussed above, including the timing and amount of our future income.If we were deemed to be an “investment company” subject to regulation under the Investment Company Act, applicable restrictions could make it impracticalfor us to continue our business as contemplated and could have a material adverse effect on our business.A person will generally be deemed to be an “investment company” for purposes of the Investment Company Act if:•it is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities; or•absent an applicable exemption, it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets(exclusive of U.S. government securities and cash items) on an unconsolidated basis.We believe that we are engaged primarily in the business of providing investment management services and not in the business of investing, reinvesting ortrading in securities. We regard ourselves as an investment management firm and do not propose to engage primarily in the business of investing, reinvesting ortrading in securities. Accordingly, we do not believe that we are an “orthodox” investment company as defined in Section 3(a)(1)(A) of the Investment CompanyAct and described in the first bullet point above.With regard to the provision described in the second bullet point above, we have no material assets other than our equity interests in subsidiaries, which in turnhave no material assets other than equity interests, directly or indirectly, in the KKR Group Partnerships. Through these interests, we indirectly are the sole generalpartners of the KKR Group Partnerships and indirectly are vested with all management and control over the KKR Group Partnerships. We do not believe our equityinterests in our subsidiaries are investment securities, and we believe that the capital interests of the general partners of our funds in their respective funds areneither securities nor investment securities. Accordingly, based on our determination, less than 40% of the partnership’s total assets (exclusive of U.S. governmentsecurities and cash items) on an unconsolidated basis are comprised of assets that could be considered investment securities. However, our subsidiaries have asignificant number of investment securities, and we expect to make investments in other investment securities from time to time. We monitor these holdingsregularly to confirm our continued compliance with the 40% test described in the second bullet point above. The need to comply with this 40% test may cause us torestrict our business and subsidiaries with respect to the assets in which we can invest and/or the types of securities we may issue, sell investment securities,including on unfavorable terms, acquire assets or businesses that could change the nature of our business or potentially take other actions which may be viewed asadverse by the holders of our common units, in order to ensure conformity with exceptions provided by, and rules and regulations promulgated under, theInvestment Company Act.With respect to our subsidiary KFN, we believe it is not and does not propose to be primarily engaged in the business of investing, reinvesting or trading insecurities, and we do not believe that KFN has held itself out as such. KFN conducts its operations primarily through its majority‑owned subsidiaries, each ofwhich is either outside of the definition of an investment company as defined in the Investment Company Act or excepted from such definition under theInvestment Company Act. KFN monitors its holdings regularly to confirm its continued compliance with the 40% test described in the second bullet point above,and restricts its subsidiaries with respect to the assets in which each of them can invest and/or the types of securities each of them may issue in order to ensureconformity with exceptions provided by, and rules and regulations promulgated under, the Investment Company Act. If the SEC were to disagree with KFN’streatment of one or more of its subsidiaries as being excepted from the Investment Company Act, with its determination that one or more of its other holdings arenot investment securities for purposes of the 40% test, or with its determinations as to the nature of its business or the manner in which it holds itself out, KFNand/or one or more of its subsidiaries could be required either (i) to change substantially the manner in which it conducts its operations to avoid being subject to theInvestment Company Act or (ii) to register as an investment company. Either of these would likely have a material adverse effect on KFN, its ability to service itsindebtedness and to make distributions on its shares, and on the market price of its shares and securities, and could thereby materially adversely affect our business,financial condition and results of operations.The Investment Company Act and the rules thereunder contain detailed parameters for the organization and operation of investment companies. Among otherthings, the Investment Company Act and the rules thereunder limit or prohibit transactions with affiliates, impose limitations on the issuance of debt and equitysecurities, generally prohibit the issuance of options and87Table of Contentsimpose certain governance requirements. We intend to conduct our operations so that we will not be deemed to be an investment company under the InvestmentCompany Act. If anything were to happen which would cause us to be deemed to be an investment company under the Investment Company Act, requirementsimposed by the Investment Company Act, including limitations on our capital structure, ability to transact business with affiliates and ability to compensate keyemployees, would make it impractical for us to continue our business as currently conducted, impair the agreements and arrangements between and among us,including the KKR Group Partnerships, and KKR Holdings, and materially adversely affect our business, financial condition and results of operations. In addition,we may be required to limit the amount of investments that we make as a principal, potentially divest of our investments or otherwise conduct our business in amanner that does not subject us to the registration and other requirements of the Investment Company Act.On August 31, 2011 the SEC published an advance notice of proposed rulemaking regarding Rule 3a‑7 and a concept release seeking information onSection 3(c)(5)(C), two provisions with which KKR’s subsidiaries, including KFN, must comply under the 40% test described above. Among the issues for whichthe SEC has requested comment is whether Rule 3a‑7 should be modified so that parent companies of subsidiaries that rely on Rule 3a‑7 should treat their interestsin such subsidiaries as investment securities for purposes of the 40% test. The SEC is also seeking information about the nature of entities that invest in mortgagesand mortgage‑related pools and how the SEC staff’s interpretive positions in connection with Section 3(c)(5)(C) affect these entities. Any guidance or action fromthe SEC or its staff, including changes that the SEC may ultimately propose and adopt to the way Rule 3a‑7 applies to entities or new or modified interpretivepositions related to Section 3(c)(5)(C), could further inhibit KKR’s ability, or the ability of any of its subsidiaries, including KFN, to pursue its current or futureoperating strategies, which could have a material adverse effect on us.We are a Delaware limited partnership, and there are certain provisions in our limited partnership agreement regarding exculpation and indemnification ofour officers and directors that differ from the Delaware General Corporation Law (DGCL) in a manner that may be less protective of the interests of ourcommon unitholders.Our limited partnership agreement provides that to the fullest extent permitted by applicable law our directors or officers will not be liable to us. However,under the DGCL, a director or officer would be liable to us for (i) breach of duty of loyalty to us or our shareholders, (ii) intentional misconduct or knowingviolations of the law that are not done in good faith, (iii) improper redemption of shares or declaration of dividend, or (iv) a transaction from which the directorderived an improper personal benefit. In addition, our limited partnership agreement provides that we indemnify our directors and officers for acts or omissions tothe fullest extent provided by law. However, under the DGCL, a corporation can only indemnify directors and officers for acts or omissions if the director or officeracted in good faith, in a manner he reasonably believed to be in the best interests of the corporation, and, in criminal action, if the officer or director had noreasonable cause to believe his conduct was unlawful. Accordingly, our limited partnership agreement may be less protective of the interests of our commonunitholders, when compared to the DGCL, insofar as it relates to the exculpation and indemnification of our officers and directors. See also “-Our limitedpartnership agreement contains provisions that reduce or eliminate duties (including fiduciary duties) of our limited partner and limit remedies available forunitholders for actions that might otherwise constitute a breach of duty. It will be difficult for unitholders to successfully challenge a resolution of a conflict ofinterest by our Managing Partner or by its conflicts committee.”Risks Related to U.S. TaxationIf we were treated as a corporation for U.S. federal income tax or state tax purposes, then our distributions to you would be substantially reduced and the valueof our common units could be adversely affected.The value of your investment in us depends in part on our being treated as a partnership for U.S. federal income tax purposes, which requires that 90% or moreof our gross income for every taxable year consist of qualifying income, as defined in Section 7704 of the Code, and that our partnership not be registered under theInvestment Company Act. Qualifying income generally includes dividends, interest, capital gains from the sale or other disposition of stocks and securities, gainfrom the sale or other disposition of real property, real property rents, income and gains from energy and oil and gas investments and certain other forms ofinvestment income. We intend to structure our investments so as to satisfy these requirements, including by generally holding investments that generatenon‑qualifying income through one or more subsidiaries that are treated as corporations for U.S. federal income tax purposes. Nonetheless, we may not meet theserequirements, may not correctly identify investments that should be owned through corporate subsidiaries, or current law may change so as to cause, in any of theseevents, us to be treated as a corporation for U.S. federal income tax purposes or otherwise subject us to U.S. federal income tax. We have not requested, and do notplan to request, a ruling from the IRS, on this or any other matter affecting us.If we were treated as a corporation for U.S. federal income tax purposes, we would pay U.S. federal, state and local income tax on our taxable income at theapplicable tax rates. Distributions to you would generally be taxed again as corporate88Table of Contentsdistributions, and no income, gains, losses, deductions or credits would otherwise flow through to you. Because a tax would be imposed upon us as a corporation,our distributions to you would be substantially reduced which could cause a reduction in the value of our common units. See also "Risks Related to Our Business -Our structure involves complex provisions of U.S. federal income tax laws for which no clear precedent or authority may be available. These structures also aresubject to potential legislative, judicial or administrative change and differing interpretations, possibly on a retroactive basis."Our unitholders may be subject to U.S. federal income tax on their share of our taxable income, regardless of whether they receive any cash distributions, andthey may recognize income in excess of cash distributions.As long as 90% of our gross income for each taxable year constitutes qualifying income as defined in Section 7704 of the Code and we are not registered as aninvestment company under the Investment Company Act on a continuing basis, and assuming there is no change in law, we will be treated, for U.S. federal incometax purposes, as a partnership and not as an association or a publicly traded partnership taxable as a corporation. Accordingly, each unitholder will be required totake into account its allocable share of our items of income, gain, loss and deduction. Distributions to a unitholder will generally be taxable to the unitholder forU.S. federal income tax purposes only to the extent the amount distributed exceeds the unitholder's tax basis in the unit. That treatment contrasts with the treatmentof a shareholder in a corporation. For example, a shareholder in a corporation who receives a distribution of earnings from the corporation will generally report thedistribution as dividend income for U.S. federal income tax purposes. In contrast, a holder of our units who receives a distribution of earnings from us will notreport the distribution as dividend income (and will treat the distribution as taxable only to the extent the amount distributed exceeds the unitholder's tax basis inthe units), but will instead report the holder's allocable share of items of our income for U.S. federal income tax purposes. As a result, a unitholder may be subjectto U.S. federal, state, local and possibly, in some cases, foreign income taxation on its allocable share of our items of income, gain, loss, deduction and credit(including its allocable share of those items of any entity in which we invest that is treated as a partnership or is otherwise subject to tax on a flow through basis)for each of our taxable years ending with or within the unitholder’s taxable year, regardless of whether or not such unitholder receives cash distributions. See “-Risks Related to Our Business-The U.S. Congress has considered legislation that would have (i) in some cases after a ten‑year period, precluded us from qualifyingas a partnership or required us to hold carried interest through taxable subsidiary corporations and (ii) taxed certain income and gains at increased rates. If anysimilar legislation were to be enacted and apply to us, the after‑tax income and gain related to our business, as well as the market price of our units, could bereduced.”You should not expect to receive cash distributions equal to your allocable share of our net taxable income, because, among other things, we currently have afixed distribution policy. In addition, certain of our holdings, including holdings, if any, in controlled foreign corporations, or a CFCs, passive foreign investmentcompanies, or a PFICs, or entities treated as partnerships for U.S. federal income tax purposes, may produce taxable income prior to the receipt of cash relating tosuch income, and holders of our common units that are U.S. taxpayers may be required to take such income into account in determining their taxable income. In theevent of an inadvertent termination of the partnership status for which the IRS has granted limited relief, each holder of our common units may be obligated tomake such adjustments as the IRS may require to maintain our status as a partnership. Such adjustments may require the holders of our common units to recognizeadditional amounts in income during the years in which they hold such units. In addition, because of our methods of allocating income and gain among holders ofour common units, you may be taxed on amounts that accrued economically before you became a unitholder.We can make no assurances that our cash distributions to you will be sufficient to cover your tax liability arising from your investment in us in any given year,quarter or other period. We are under no obligation to make any distribution, and we generally do not make annual tax distributions. In addition, in certaincircumstances, we may not be able to make any distributions or will only be making distributions in amounts less than your tax liability attributable to yourinvestment in us. To the extent taxable income is allocated to you in excess of the cash distributions made, the excess amount would typically be applied toincrease the tax basis of your investment in us under applicable U.S. federal tax laws. Furthermore, when we make cash distributions, we anticipate making cashdistributions on a quarterly basis while allocating taxable income on a monthly basis. As a result, if you dispose of your common units, you may be allocatedtaxable income during the time you held your common units without receiving any cash distributions corresponding to that period. Moreover, when an investmentis realized at the end of a fiscal quarter, taxable income allocable to such realization is generally made during the same taxable period, but the distribution, if any,generated by such realization may not be paid until a later period. Accordingly, you should ensure that you have sufficient cash flow from sources other than ourcash distributions to pay for all of your tax liabilities.89Table of ContentsOur interests in certain of our businesses will be held through intermediate holding companies, which will be treated as corporations for U.S. federal incometax purposes; such corporations may be liable for significant taxes and may create other adverse tax consequences, which could potentially adversely affect thevalue of our common units.In light of the publicly traded partnership rules under U.S. federal income tax laws and other requirements, we will hold our interest in certain of ourbusinesses through intermediate holding companies, which will be treated as corporations for U.S. federal income tax purposes. The intermediate holdingcompanies organized in the United States or otherwise subject to regular U.S. federal income taxation will be liable for U.S. federal income taxes at regular rates onall of their taxable income as well as applicable state, local and other taxes. These taxes would reduce the amount of distributions available to be made on ourcommon units. In addition, these taxes could be increased if the IRS were to successfully reallocate deductions or income of the related entities conducting ourbusiness. In addition, without the consent of the unitholders, our Managing Partner may also elect to convert KKR into a corporation or be taxed as a corporationfor U.S. federal income tax purposes if certain conditions have been met. See "Risks Related to Our Business - Our structure involves complex provisions of U.S.federal income tax laws for which no clear precedent or authority may be available. These structures also are subject to potential legislative, judicial oradministrative change and differing interpretations, possibly on a retroactive basis."Changes in tax information collection and sharing regimes could increase our compliance and withholding tax costsUnder legislation known as the U.S. Foreign Account Tax Compliance Act, or FATCA, U.S. withholding agents and all entities in a broadly defined class offoreign financial institutions, or FFIs, are required to comply with a complicated and expansive reporting regime or be subject to a 30% United States withholdingtax on certain U.S. payments (and beginning in 2019, a 30% withholding tax on gross proceeds from the sale of U.S. stocks and securities) and non‑U.S. entitieswhich are not FFIs are required to either certify they have no substantial U.S. beneficial ownership or to report certain information with respect to their substantialU.S. beneficial ownership or be subject to a 30% U.S. withholding tax on certain U.S. payments (and beginning in 2019, a 30% withholding tax on gross proceedsfrom the sale of U.S. stocks and securities). Some countries have implemented regimes similar to that of FATCA and other countries are participating in a multi-jurisdictional tax information regime known as CRS, or the Common Reporting Standard. Compliance with such regimes could result in increased administrativeand compliance costs for our investment entities and, in some cases, could subject our investment entities to increased withholding taxes.We may hold or acquire certain investments through an entity classified as a PFIC or CFC for U.S. federal income tax purposes.Certain of our investments may be in foreign corporations or may be acquired through a foreign subsidiary that would be classified as a corporation for U.S.federal income tax purposes. Such an entity may be PFIC for U.S. federal income tax purposes. In addition, we may hold certain investments in foreigncorporations that are treated as CFCs. Unitholders may experience adverse U.S. tax consequences as a result of holding an indirect interest in a PFIC or CFC.These investments may produce taxable income prior to the receipt of cash relating to such income, and unitholders that are U.S. taxpayers will be required to takesuch income into account in determining their gross income subject to tax. In addition, all or a portion of gain on the sale of a CFC may be taxable at ordinaryincome rates. Further, with respect to gain on the sale of and excess distributions from a PFIC for which an election for current inclusions is not made, such incomewould be taxable at ordinary income rates and be subject to an additional tax charge equivalent to an interest charge on the deferral of income inclusions from thatPFIC.Tax gain or loss on disposition of our common units could be more or less than expected.If you sell your common units, you will recognize a gain or loss equal to the difference between the amount realized and your adjusted tax basis allocated tothose common units. Prior distributions to you in excess of the total net taxable income allocated to you will have decreased the tax basis in your common units.Therefore, such excess distributions will increase your taxable gain, or decrease your taxable loss, when the common units are sold and may result in a taxable gaineven if the sale price is less than the original cost. A portion of the amount realized, whether or not representing gain, may be ordinary income to you.Unitholders may be allocated taxable gain on the disposition of certain assets, even if they did not share in the economic appreciation inherent in such assets.We and our intermediate holding companies will be allocated taxable gains and losses recognized by the KKR Group Partnerships based upon our percentageownership in each KKR Group Partnership. Our share of such taxable gains and losses generally will be allocated pro rata to our unitholders. In somecircumstances, under the U.S. federal income tax rules affecting90Table of Contentspartners and partnerships, the taxable gain or loss allocated to a unitholder may not correspond to that unitholder’s share of the economic appreciation ordepreciation in the particular asset. This is primarily an issue of the timing of the payment of tax, rather than a net increase in tax liability, because the gain or lossallocation would generally be expected to be offset as a unitholder sells units.Non-U.S. persons face unique U.S. tax issues from owning our common units that may result in adverse tax consequences to them.We expect that a portion of our income will be treated as income effectively connected with a U.S. trade or business for U.S. federal income tax purposes, orECI, with respect to non-U.S. unitholders, including by reason of investments in certain U.S. real property holding corporations, real estate investment trusts (orREITS), real estate assets and energy assets. To the extent our income is treated as ECI, non-U.S. unitholders generally would be subject to withholding tax on theirallocable share of such income, would be required to file a U.S. federal income tax return for such year reporting their allocable share of income effectivelyconnected with such trade or business and any other income treated as ECI, and would be subject to U.S. federal income tax at regular U.S. tax rates on any suchincome (state and local income taxes and filings may also apply in that event). Non-U.S. unitholders that are corporations may also be subject to a 30% branchprofits tax (potentially reduced under an applicable treaty) on their actual or deemed distributions of such income. In addition, distributions to non-U.S. unitholdersthat are attributable to profits on the sale of a U.S. real property interest may also be subject to 30% withholding tax. Also, non-U.S. unitholders may be subject to30% withholding on allocations of our income that are U.S. source fixed or determinable annual or periodic income under the Code, unless an exemption from or areduced rate of such withholding applies (under an applicable treaty of the Code) and certain tax status information is provided. Finally, if we are treated as beingengaged in a U.S. trade or business, a portion of any gain recognized by non-U.S. unitholders on the sale or exchange of common units may be treated for U.S.federal income tax purposes as ECI, and hence such non-U.S. unitholders could be subject to U.S. federal income tax on the sale or exchange of common units.Tax-exempt entities and tax-exempt or tax-deferred accounts face unique tax issues from owning common units that may result in adverse tax consequences tothem.Generally, a tax-exempt partner of a partnership would be treated as earning unrelated business taxable income, or UBTI, if the partnership regularly engagesin a trade or business that is unrelated to the exempt function of the tax-exempt partner, if the partnership derives income from debt financed property or if thepartner interest itself is debt-financed. As a result of our ownership of real estate assets and energy assets and incurrence of acquisition indebtedness we will deriveincome that constitutes UBTI. Consequently, a holder of common units that is a tax‑exempt entity (including an individual retirement account, or IRA, or a 401(k)plan participant) will likely be subject to unrelated business income tax to the extent that its allocable share of our income consists of UBTI and thus may besubject to U.S. federal income taxes and U.S. federal income tax reporting with respect to such income. In addition, a tax-exempt investor may be subject tounrelated business income tax on a sale of their common units.We cannot match transferors and transferees of common units, and we will therefore adopt certain income tax accounting conventions that may not conformwith all aspects of applicable tax requirements. The IRS may challenge this treatment, which could adversely affect the value of our common units.Because we cannot match transferors and transferees of common units, we have adopted depreciation, amortization and other tax accounting positions thatmay not conform with all aspects of existing Treasury regulations. A successful IRS challenge to those positions could adversely affect the amount of tax benefitsavailable to our unitholders. It also could affect the timing of these tax benefits or the amount of gain on the sale of common units and could have a negative impacton the value of our common units or result in audits of and adjustments to our unitholders’ tax returns.In addition, our taxable income and losses are determined and apportioned among unitholders using conventions we regard as consistent with applicable law.As a result, if you transfer your common units, you may be allocated income, gain, loss and deduction realized by us after the date of transfer. Similarly, atransferee may be allocated income, gain, loss and deduction realized by us prior to the date of the transferee’s acquisition of our common units. A transferee mayalso bear the cost of withholding tax imposed with respect to income allocated to a transferor through a reduction in the cash distributed to the transferee.The sale or exchange of 50% or more of our capital and profit interests will result in the termination of our partnership for U.S. federal income tax purposes.We will be considered to have been terminated for U.S. federal income tax purposes if there is a sale or exchange of 50% or more of the total interests in ourcapital and profits within a 12-month period. A termination of our partnership would, among91Table of Contentsother things, result in the closing of our taxable year for all unitholders and may make it more likely that we are unable to meet the qualifying income requirementsnecessary to maintain our status as a partnership for U.S. federal income tax purposes.Holders of our common units may be subject to state, local and foreign taxes and return filing requirements as a result of owning such units.In addition to U.S. federal income taxes, holders of our common units may be subject to other taxes, including state, local and foreign taxes, and estate,inheritance or intangible taxes that are imposed by the various jurisdictions in which we do business or own property now or in the future, even if the holders of ourcommon units do not reside in any of those jurisdictions. Holders of our common units may be required to file state and local income tax returns and pay state andlocal income taxes in some or all of these jurisdictions in the U.S. and abroad. Further, holders of our common units may be subject to penalties for failure tocomply with those requirements. It is the responsibility of each unitholder to file all U.S. federal, state, local and foreign tax returns that may be required of suchunitholder. In addition our investments in real assets may expose unitholders to additional adverse tax consequences. See “-Our investments in real assets such asreal estate and energy may expose us to increased risks and liabilities and may expose our unitholders to adverse tax consequences.”Certain U.S. holders of common units are subject to additional tax on “net investment income.”U.S. holders that are individuals, estates or trusts are subject to a Medicare tax of 3.8% on “net investment income” (or undistributed “net investment income,”in the case of estates and trusts) for each taxable year, with such tax applying to the lesser of such income or the excess of such person’s adjusted gross income(with certain adjustments) over a specified amount. Net investment income includes net income from interest, dividends, annuities, royalties and rents and net gainattributable to the disposition of investment property. It is anticipated that net income and gain attributable to an investment in our common units will be includedin a U.S. holder’s “net investment income” subject to this Medicare tax.We may not be able to furnish to each unitholder specific tax information within 90 days after the close of each calendar year, which means that holders ofcommon units who are U.S. taxpayers should anticipate the need to file annually a request for an extension of the due date of their income tax return.As a publicly traded partnership, our operating results, including distributions of income, dividends, gains, losses or deductions, and adjustments to carryingbasis, will be reported on Schedule K‑1 and distributed to each unitholder annually. It may require longer than 90 days after the end of our fiscal year to obtain therequisite information from all lower‑tier entities so that Schedule K‑1s may be prepared for the unitholders. For this reason, holders of common units who are U.S.taxpayers should anticipate the need to file annually with the IRS (and certain states) a request for an extension past April 15 or the otherwise applicable due dateof their income tax return for the taxable year.We may be liable for adjustments to our tax returns as a result of partnership audit legislation.Legislation enacted in 2015 that significantly changes the rules for U.S. federal income tax audits of partnerships. Such audits will continue to be conducted ata partnership level, but with respect to tax returns for taxable years beginning after December 31, 2017, unless a partnership qualifies for and affirmatively elects analternative procedure, any adjustments to the amount of tax due (including interest and penalties) will be payable by the partnership. Under the elective alternativeprocedure, a partnership would issue information returns to persons who were partners in the audited year, who would then be required to take the adjustments intoaccount in calculating their own tax liability, and the partnership would not be liable for the adjustments. If a partnership elects the alternative procedure for a givenadjustment, the amount of taxes for which its partners would be liable would be increased by any applicable penalties and a special interest charge. There can be noassurance that we will be eligible to make such an election or that we will, in fact, make such an election for any given adjustment. If we do not or are not able tomake such an elections, then (1) our then-current unitholders, in the aggregate, could indirectly bear income tax liabilities in excess of the aggregate amount oftaxes that would have been due had we elected the alternative procedure, and (2) a given unitholder may indirectly bear taxes attributable to income allocable toother unitholders or former unitholders, including taxes (as well as interest and penalties) with respect to periods prior to such holder's ownership of common units.Amounts available for distribution to our unitholders may be reduced as a result of our obligation to pay any taxes associated with an adjustment. Many issues andoverall effect of this new legislation on us are uncertain, and unitholders should consult their own tax advisors regarding all aspects of this legislation as it affectstheir particular circumstances. ITEM 1B. UNRESOLVED STAFF COMMENTSNone.92Table of ContentsITEM 2. PROPERTIESOur principal executive offices are located in leased office space at 9 West 57th Street, New York, New York. We also lease space for our other offices. Weconsider these facilities to be suitable and adequate for the management and operations of our business.On October 29, 2015, we entered into agreements relating to the construction and development of office space at 30 Hudson Yards in New York, New York toserve as our new corporate headquarters beginning in 2020. Upon the satisfaction of the conditions specified in the development agreement, we will take deliveryof the completed office space.ITEM 3. LEGAL PROCEEDINGS The section entitled “Litigation” appearing in Note 18 “Commitments and Contingencies” of our financial statements included elsewhere in this report isincorporated herein by reference.ITEM 4. MINE SAFETY DISCLOSURES Not applicable.93Table of ContentsPART IIITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESOur common units representing limited partner interests began trading on the New York Stock Exchange, or NYSE, on July 15, 2010 and are traded under thesymbol "KKR." The following table sets forth the high and low intra-day sales prices per unit of our common units, for the periods indicated, as reported by theNYSE. Sales price 2016 2015 High Low High HighFirst Quarter$15.97 $10.89 $25.04 $22.36Second Quarter$15.11 $11.90 $23.79 $22.35Third Quarter$15.43 $11.63 $24.79 $8.00Fourth Quarter$17.57 $13.58 $19.20 $14.33The number of holders of record of our common units as of February 22, 2017 was 37. This does not include the number of unitholders that hold shares in"street-name" through banks or broker-dealers.Distribution PolicyThe following table presents the distributions paid to holders of our common units at the close of business on the specified record date during fiscal 2015 and2016:Payment Date Record Date Distribution per unitMarch 6, 2015 February 20, 2015 $0.35May 18, 2015 May 4, 2015 $0.46August 18, 2015 August 3, 2015 $0.42November 24, 2015 November 6, 2015 $0.35March 8, 2016 February 22, 2016 $0.16May 19, 2016 May 5, 2016 $0.16August 19, 2016 August 5, 2016 $0.16November 22, 2016 November 4, 2016 $0.16Our distribution policy from January 1, 2015 through the nine months ended September 30, 2015 was to make quarterly cash distributions in amounts that inthe aggregate constituted substantially all of the distributable earnings of our 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 us to be necessary or appropriate toprovide for the conduct of our business, to make appropriate investments in our business and our investment funds and to comply with applicable law and any ofour debt instruments or other obligations.On October 27, 2015, KKR announced a change to its distribution policy effective beginning with the distribution declared on February 11, 2016 with respect tothe quarter ending December 31, 2015. Under this distribution policy, KKR intended to make equal quarterly distributions to holders of its common units in anamount of $0.16 per common unit per quarter. KKR's regular distribution per common unit of $0.16 was declared on February 9, 2017 for the quarter endedDecember 31, 2016.On February 9, 2017, KKR announced that KKR intends to increase its regular quarterly distribution to common unitholders from $0.16 to $0.17 per commonunit per quarter, effective beginning with the financial results to be reported for the first quarter of 2017.94Table of ContentsBecause we make our investment in our business through a holding company structure and the applicable holding companies do not own any material cash-generating assets other than their direct and indirect holdings in KKR Group Partnership Units, distributions are expected to be funded in the following manner:• First, the KKR Group Partnerships will make distributions to holders of KKR Group Partnership Units, including the holding companies through whichwe invest, in proportion to their percentage interests in the KKR Group Partnerships;• Second, the holding companies through which we invest will distribute to us the amount of any distributions that they receive from the KKR GroupPartnerships, after deducting any applicable taxes, and• Third, we will distribute to holders of our units the amount of any distributions that we receive from our holding companies through which we invest.The partnership agreements of the KKR Group Partnerships provide for cash distributions, which are referred to as tax distributions, to the partners of suchpartnerships if we determine that the taxable income of the relevant partnership will give rise to taxable income for its partners. However, holders should not expectthe KKR Group Partnerships will make any tax distributions, and there can be no assurance that, for any particular holder, our distributions will be sufficient to paysuch holder's actual U.S. or non-U.S. tax liability.The declaration and payment of any distributions are subject to the discretion of the board of directors of our Managing Partner, which may change thedistribution 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,that unitholders will receive sufficient distributions to satisfy payment of their tax liabilities as limited partners of KKR & Co. L.P. or that any particulardistribution policy will be maintained. When KKR & Co. L.P. receives distributions from the KKR Group Partnerships (the holding companies of the KKRbusiness), KKR Holdings receives its pro rata share of such distributions from the KKR Group Partnerships. Furthermore, the declaration and payment ofdistributions is subject to legal, contractual and regulatory restrictions on the payment of distributions by us or our subsidiaries, including restrictions contained inour debt agreements, and such other factors as the board of directors of our Managing Partner considers relevant including, among others, our available cash andcurrent and anticipated cash needs, including funding of investment commitments and debt service and future debt repayment obligations; general economic andbusiness conditions; our strategic plans and prospects; our results of operations and financial condition; and our capital requirements.The board of directors of our Managing Partner may change the distribution policy at any time and from time to time. We are not currently restricted by anycontract from making distributions to our unitholders, although certain of our subsidiaries are bound by credit agreements that contain certain restricted paymentand/or other covenants, which may have the effect of limiting the amount of distributions that we receive from our subsidiaries. See "Management's Discussion andAnalysis of Financial Condition and Results of Operations—Liquidity—Sources of Cash". In addition, under Section 17-607 of the Delaware Limited PartnershipAct, we will not be permitted to make a distribution if, after giving effect to the distribution, our liabilities would exceed the fair value of our assets.95Table of ContentsCommon Unit Repurchases in the Fourth Quarter of 2016The table below sets forth the information with respect to purchases made by or on behalf of KKR & Co. L.P. or any “affiliated purchaser” (as defined inRule 10b-18(a)(3) under the Securities Exchange Act of 1934) of our common units during the fourth quarter of 2016. Issuer Purchases of Common Units (amounts in thousands, except unit and per unit amounts) Total Number ofUnits Purchased Average Price PaidPer Units Cumulative Numberof Units Purchased asPart of PubliclyAnnounced Plans orPrograms (1) Approximate DollarValue of Units thatMay Yet Be PurchasedUnder the Plans orPrograms (2) Month #1(October 1, 2016 toOctober 31, 2016)362,684 $13.47 31,670,412 $41,281 Month #2(November 1, 2016 toNovember 30, 2016)3,750 $14.77 31,674,162 $41,225 Month #3(December 1, 2016 toDecember 31, 2016)— $— 31,674,162 $41,225 Total through December 31, 2016366,434 Purchases subsequent to December 31, 2016: (January 1, 2017 toFebruary 9, 2017)— $— 31,674,162 $41,225 Total through February 9, 2017366,434 (1) On October 27, 2015, KKR announced the authorization of a program providing for the repurchase by KKR of up to $500 million in the aggregate of its outstanding common units. Underthis unit repurchase program, units may be repurchased from time to time in open market transactions, in privately negotiated transactions or otherwise. The timing, manner, price and amountof any unit repurchases will be determined by KKR in its discretion and will depend on a variety of factors, including legal requirements, price and economic and market conditions. KKRexpects that the program, which has no expiration date, will be in effect until the maximum approved dollar amount has been used to repurchase common units. The program does not requireKKR to repurchase any specific number of common units, and the program may be suspended, extended, modified or discontinued at any time.(2) On February 9, 2017, KKR announced an incremental $250 million has been authorized to repurchase common units. This amount is in addition to the $41.2 million remaining as ofFebruary 9, 2017 under the existing repurchase program described above. During the fourth quarter of 2016, in addition to the units repurchased as described in the table above, (1) cash was used to pay the amount of withholdingtaxes, social benefit payments or similar payments payable by us in respect of awards granted pursuant to the Equity Incentive Plan and (2) cash was delivered inrespect of certain awards granted pursuant to the Equity Incentive Plan and Other Exchangeable Securities. These payments amounted to approximately $23.7million, and equity awards and other Exchangeable Securities representing 1,665,190 common units were canceled. Accordingly, KKR's common unit count on afully diluted basis was decreased by 1,665,190 common units in addition to the repurchases described in the table above. Additionally, during the fourth quarter of 2016, 2,929,346 KKR Group Partnership Units were exchanged by KKR Holdings and its principals for an equalnumber of our common units, resulting in an increase in our ownership of the KKR Group Partnerships and a corresponding decrease in the ownership of the KKRGroup Partnerships by KKR Holdings. 96Table of ContentsITEM 6. SELECTED FINANCIAL DATAThe following tables set forth our selected historical consolidated financial data as of and for the years ended December 31, 2016 , 2015, 2014, 2013 and 2012.We derived the selected historical consolidated financial data as of December 31, 2016 and 2015 and for the years ending December 31, 2016 , 2015 and 2014from the audited consolidated financial statements included elsewhere in this report. We derived the selected historical consolidated financial data as of December31, 2014, 2013 and 2012 and for the years ended December 31, 2013 and 2012 from our audited consolidated financial statements which are not included in thisreport. You should read the following data together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and ourconsolidated financial statements and related notes included elsewhere in this report.On January 1, 2016, KKR adopted ASU 2015-02, which resulted in the de-consolidation of most of KKR's investment funds that had been consolidated priorto such date. Effective with the adoption of ASU 2015-02, assets, liabilities, and noncontrolling interests from our investment funds that had previously beenconsolidated are no longer included in the statement of financial condition. Additionally, when an investment fund is consolidated, management fees, fee creditsand carried interest earned from consolidated funds are eliminated in consolidation and as such are not recorded in Fees and Other. The economic impact of thesemanagement fees, fee credits and carried interests that are eliminated is reflected as an adjustment to noncontrolling interests and has no impact to Net IncomeAttributable to KKR & Co. L.P. KKR adopted this guidance using the modified retrospective method. As a result, no retrospective adjustment is required and priorperiods presented under GAAP have not been impacted. For the Years Ended December 31, 2016 2015 2014 2013 2012 (all dollars are in thousands, except unit and per unit data)Statements of Operations Data: Fees and Other$1,908,093 $1,043,768 $1,110,008 $762,546 $568,442Less: Total Expenses1,695,474 1,871,225 2,196,067 1,767,138 1,598,788Total Investment Income (Loss)762,606 6,169,125 6,544,748 8,896,746 9,101,995Income (Loss) Before Taxes975,225 5,341,668 5,458,689 7,892,154 8,071,649Income Taxes24,561 66,636 63,669 37,926 43,405Net Income (Loss)950,664 5,275,032 5,395,020 7,854,228 8,028,244Net Income (Loss) Attributable to RedeemableNoncontrolling Interests(8,476) (4,512) (3,341) 62,255 34,963Net Income (Loss) Attributable to NoncontrollingInterests andAppropriated Capital649,833 4,791,062 4,920,750 7,100,747 7,432,445Net Income (Loss) Attributable to KKR & Co. L.P.309,307 488,482 477,611 691,226 560,836Net Income Attributable to Series A PreferredUnitholders17,337 — — — —Net Income Attributable to Series B Preferred Unitholders4,898 — — — —Net Income (Loss) Attributable toKKR & Co. L.P. Common Unitholders$287,072 $488,482 $477,611 $691,226 $560,836 Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit Basic$0.64 $1.09 $1.25 $2.51 $2.35Diluted$0.59 $1.01 $1.16 $2.30 $2.21Weighted Average Common Units Outstanding Basic448,905,126 448,884,185 381,092,394 274,910,628 238,503,257Diluted483,431,048 482,699,194 412,049,275 300,254,090 254,093,160 97Table of Contents For the Years Ended December 31, 2016 2015 2014 2013 2012 (all dollars are in thousands, except unit and per unit data)Statements of Financial Condition Data (period end): Total Assets$39,002,897 $71,042,339 $65,872,745 $51,427,201 $44,426,353Total Liabilities$21,884,814 $21,574,754 $14,168,684 $4,842,383 $3,020,899Redeemable Noncontrolling Interests$632,348 $188,629 $300,098 $627,807 $462,564Noncontrolling Interests$10,545,902 $43,731,774 $46,004,377 $43,235,001 $38,938,531Appropriated Capital$— $— $16,895 $— $—Total KKR & Co. L.P. Partners' Capital (1)$5,939,833 $5,547,182 $5,382,691 $2,722,010 $2,004,359 (1)Total KKR & Co. L.P. partners' capital reflects only the portion of equity attributable to KKR & Co. L.P. (56.1% interest in the KKR Group Partnerships as of December 31, 2016) anddiffers from book value reported on a segment basis primarily as a result of the exclusion of the equity impact of KKR Management Holdings Corp. and allocations of equity to KKRHoldings. KKR Holdings' 43.9% interest in the KKR Group Partnerships as of December 31, 2016 is reflected as noncontrolling interests and is not included in total KKR & Co. L.P.partners' capital. 98Table of ContentsITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the consolidated financial statements of KKR and the related notes includedelsewhere in this report. The historical consolidated financial data discussed below reflects the historical results and financial position of KKR. In addition, thisdiscussion and analysis contains forward looking statements and involves numerous risks and uncertainties, including those described under “Cautionary NoteRegarding Forward-looking Statements” and “Risk Factors.” Actual results may differ materially from those contained in any forward looking statements. Overview of Business For a discussion about our businesses, business segments and our firm, see “Item 1--Business.”Business Environment Market ConditionsGlobal Economic Conditions . As a global investment firm, we are affected by financial and economic conditions globally. Global and regional economicconditions have a substantial impact on our financial condition and results of operations, impacting the values of the investments we make, our ability to exit theseinvestments profitably and our ability to make new investments. According to Bureau of Economic Analysis as of February 2017, real GDP in the U.S. increased ata seasonally adjusted annualized rate of 1.6% for the year ended December 31, 2016 compared to 2.6% for the year ended December 31, 2015. According to theBureau of Labor Statistics, the U.S. unemployment rate was 4.7% as of December 31, 2016, down from 5.0% as of December 31, 2015. For the year endedDecember 31, 2016, Bloomberg estimates suggest that Euro Area real GDP growth was 1.6% on a year-over-year basis, compared to actual year-over-year growthof 2.0% in the prior year. On June 23, 2016, the United Kingdom held a referendum in which voters approved an exit from the European Union, commonlyreferred to as “Brexit.” The referendum has resulted in significant volatility in global stock markets and currency exchange rate fluctuations that resulted in thedepreciation of many foreign currencies against the U.S. dollar. In addition, continuing controversy and uncertainty surrounding key issues such as immigration,austerity, and globalization and risk of countries exiting the European Union continue to impair economic growth in the region and lead to financial marketvolatility. The United Kingdom's decision to withdraw from the European Union and the European Union's inability to resolve other key issues could have adverserepercussions across financial markets, which could adversely affect valuations of our investments. On a year-over-year, seasonally adjusted basis, China’sNational Bureau of Statistics indicated that real GDP grew 6.7% in the year ended December 31, 2016, slightly less than the 6.9% reported for the year endedDecember 31, 2015. Any future slowdown in China's growth could adversely impact the value of our investments in China. Furthermore, slowing Chinese growthcould create dislocations in the global economy, particularly in other emerging markets where weaker Chinese demand for imported commodities and finishedgoods could impact economic growth. In addition, the sharp correction and high volatility in China's stock market coupled with the devaluation of the Chinese yuanmay also adversely impact the value of our investments in China and make it more difficult to access capital in those markets. For a further discussion of howmarket conditions may affect our businesses, see “Risk Factors- Risks Related to Our Business - Difficult market conditions can adversely affect our business inmany ways, including by reducing the value or performance of the investments that we manage or by reducing the ability of our funds to raise or deploy capital,each of which could negatively impact our net income and cash flow and adversely affect our financial condition.” Global Equity and Credit Markets . Global equity and debt markets have a substantial effect on our financial condition and results of operations. In general, aclimate of reasonable interest rates and high levels of liquidity in the debt and equity capital markets provide a positive environment for us to generate attractiveinvestment returns in our funds that generate carry. Periods of volatility and dislocation in the capital markets present substantial risks, but also can present us withopportunities to invest at reduced valuations that position us for future growth.Many of our investments are in equities, so a change in global equity prices or in market volatility directly impacts the value of our investments and ourprofitability as well as our ability to realize investment gains and the receptiveness of fund investors to our investment products. For the year ended December 31,2016, global equity markets were positive, with the S&P 500 Index up 12.0% and the MSCI World Index up 8.2% on a total return basis including dividends.Equity market volatility as evidenced by the Chicago Board Options Exchange Market Volatility Index, or the VIX, a measure of volatility, ended at 14.0 as ofDecember 31, 2016, decreasing from 18.2 as of December 31, 2015. For a further discussion of our valuation methods, see “Risk Factors-Risks Related to theAssets We Manage - Our investments are impacted by various economic conditions that are difficult to quantify or predict, and may have a significant impact onthe valuation of our99Table of Contentsinvestments and, therefore, on the investment income we realize and our financial condition and results of operations” and “-Critical Accounting Policies-FairValue Measurements-Level III Valuation Methodologies” in this report.Many of our investments are also in credit instruments, and our funds and their portfolio companies also rely on credit financing and the ability to refinanceexisting debt. Consequently, any decrease in the value of credit instruments that we have invested in or any increase in the cost of credit financing reduces ourreturns and decreases our net income. In particular due in part to holdings of credit instruments such as CLOs on our balance sheet, the performance of the creditmarkets has had an amplified impact on our financial results, as we directly bear the full extent of losses from credit instruments on our balance sheet. Creditmarkets can also impact valuations because a discounted cash flow analysis is generally used as one of the methodologies used to ascertain the fair value of ourinvestments that do not have readily observable market prices. In addition, with respect to our credit instruments, tightened credit spreads lead to an increase in thevalue of these investments, if not offset by hedging or other factors. In addition, credit spreads generally tightened throughout the year ended December 31, 2016.Low interest rates related to monetary stimulus and economic stagnation also negatively impacts expected returns on all investments, as the demand for relativelyhigher return assets increases and supply decreases. Higher interest rates in conjunction with slower growth or weaker currencies in some emerging marketeconomies may cause the default risk of these countries to increase, and this could impact the operations or value of our investments that operate in these regions.Areas such as the Eurozone and Japan, which have ongoing central bank quantitative easing campaigns and comparatively low interest rates relative to the UnitedStates, could potentially experience further currency volatility and weakness relative to the U.S. dollar. For a further discussion of how market conditions mayaffect our businesses, see “Risk Factors- Risks Related to Our Business - Difficult market conditions can adversely affect our business in many ways, including byreducing the value or performance of the investments that we manage or by reducing the ability of our funds to raise or deploy capital, each of which couldnegatively impact our net income and cash flow and adversely affect our financial condition" and "Risks Related to the Assets We Manage - Our investments areimpacted by various economic conditions that are difficult to quantify or predict, and may have a significant impact on the valuation of our investments and,therefore, on the investment income we realize and our financial condition and results of operations."The subinvestment grade credit indices rose during the year ended December 31, 2016, with the S&P/LSTA Leveraged Loan Index up 10.2% and the BoAMLHY Master II Index up 17.5%. For the year ended December 31, 2016, 10-year government bond yields rose 17 basis points in the United States, and rose 20 basispoints in China and fell 22 basis points in Japan and 42 basis points in Germany. For further discussion of the impact of global credit markets on our financialcondition and results of operations, see “Risk Factors - Risks Related to the Assets We Manage -Changes in the debt financing markets may negatively impact theability of our investment funds, their portfolio companies and strategies pursued with our balance sheet assets to obtain attractive financing for their investments orrefinance existing debt and may increase the cost of such financing if it is obtained, which could lead to lower-yielding investments and potentially decrease our netincome,” “- Our investments are impacted by various economic conditions that are difficult to quantify or predict, and may have a significant impact on thevaluation of our investments and, therefore, on the investment income we realize and our financial condition and results of operations” and “- Because we holdinterests in some of our portfolio companies both through our management of private equity funds as well as through separate investments in those funds and directco-investments, fluctuation in the fair values of these portfolio companies may have a disproportionate impact on the investment income earned by us” and “-Critical Accounting Policies-Fair Value Measurements-Level III Valuation Methodologies” in this report.Foreign Exchange Rates . Foreign exchange rates have a substantial impact on the valuations of our investments that are denominated in currencies other thanthe U.S. dollar. Currency volatility, which has become more pronounced in recent quarters, can also affect our businesses which deal in cross‑border trade. TheU.S. dollar has appreciated against a number of currencies over recent periods, which is likely to cause a decrease in the U.S. dollar value of our non‑U.S.investments to the extent unhedged and making the exports of U.S. based companies less competitive leading to a decline in revenues. While this may cause adecrease in the U.S. dollar values of our existing assets and portfolio companies outside the United States, we also expect it to create opportunities to invest at moreattractive U.S. dollar prices in certain countries. For the year ended December 31, 2016, the euro fell 3.2% and the British pound fell 16.3% respectively, relative tothe U.S. dollar with significant depreciation following the June 23, 2016, referendum in which voters in the United Kingdom approved an exit from the EuropeanUnion. The depreciation of the British pound adversely affects the value of our pound denominated investments, to the extent unhedged and adversely affects thedollar equivalent revenues of portfolio companies with substantial pound denominated revenues. See “Risk Factors- Risks Related to Our Business - Difficultmarket conditions can adversely affect our business in many ways, including by reducing the value or performance of the investments that we manage or byreducing the ability of our funds to raise or deploy capital, each of which could negatively impact our net income and cash flow and adversely affect our financialcondition.” In China, the potential for greater depreciation of China's currency, the yuan, remains a large source of uncertainty. The cumulative devaluation of theyuan since August 2015, which effectively makes Chinese exports cheaper and imports more expensive, may impact global trade substantially for the reasonsdiscussed above. For100Table of Contentsadditional information regarding our foreign exchange rate risk, see “Quantitative and Qualitative Disclosure About Market Risk - Exchange Rate Risk”.Commodity Markets . Our Private Markets portfolio contains energy real asset investments and certain of our Public Markets strategies and products,including direct lending, special situations and CLOs, have meaningful investments in the energy sector. The value of these investments is heavily influenced bythe price of natural gas and oil, which have varied over the course of the year. During the year ended December 31, 2016, the long-term price of WTI crudeincreased approximately 13%, while the long-term price of natural gas was relatively stable. The long-term price of WTI crude oil increased from approximately$50 per barrel to $56 per barrel, and the long-term price of natural gas decreased from approximately $2.90 per mcf to $2.87 per mcf as of December 31, 2015 andDecember 31, 2016, respectively. While commodity prices have increased over the course of the year, if commodity prices decline or if a decline is not offset byother factors, we would expect the value of our energy real asset investments to be adversely impacted. In addition, because we hold certain energy assets on ourbalance sheet, which had a fair value of $0.6 billion as of December 31, 2016 , these price movements would have an amplified impact on our financial results, aswe would directly bear the full extent of such gains or losses. For additional information regarding our energy real assets, see “-Critical Accounting Policies-FairValue Measurements-Level III Valuation Methodologies-Real Asset Investments” in this report and “Risk Factors - Risks Related to the Assets We Manage -Because we hold interests in some of our portfolio companies both through our management of private equity funds as well as through separate investments inthose funds and direct co-investments, fluctuation in the fair values of these portfolio companies may have a disproportionate impact on the investment incomeearned by us”.Business ConditionsOur segment revenues consist of fees, performance income and investment income. Our ability to grow our revenues depends in part on our ability to attractnew capital and investors, our successful deployment of capital including from our balance sheet and our ability to realize investments.•Our ability to attract new capital and investors. Our ability to attract new capital and investors in our funds is driven, in part, by the extent to which theycontinue to see the alternative asset management industry generally, and our investment products specifically, as an attractive vehicle for capitalappreciation or income. Since 2010, we have expanded into strategies such as energy, infrastructure, real estate, growth equity, credit and hedge funds. Inseveral of these strategies, our first time funds have begun raising successor funds, and we expect the cost of raising such successor funds to be lower. Wehave also reached out to new clients, including retail and high net worth clients. However, fundraising continues to be competitive. While our flagshipAmericas private equity fund exceeded the size of its predecessor fund, there is no assurance that fundraises for our other flagship private equity funds orfor our newer strategies and their successor funds will experience similar success. If we are unable to successfully raise comparably sized or larger funds,our AUM, FPAUM and associated fees attributable to new capital raised in future periods may be lower than in prior years. New capital raised for thefiscal years ended December 31, 2014, 2015 and 2016 was $13.3 billion, $19.8 billion and $28.8 billion.•Our ability to successfully deploy capital. Our ability to maintain and grow our revenue base is dependent upon our ability to successfully deploy thecapital available to us and participate in capital markets transactions. Greater competition, high valuations, increased overall cost of credit and othergeneral market conditions may impact our ability to identify and execute attractive investments. Additionally, because we seek to make investments whichhave an ability to achieve our targeted returns while taking on a reasonable level of risk, we may experience periods of reduced investment activity. Wehave a long‑term investment horizon and the capital deployed in any one quarter may vary significantly from the capital deployed in any other quarter orthe quarterly average of capital deployed in any given year. Reduced levels of transaction activity also tends to result in reduced potential futureinvestment gains, lower transaction fees and lower fees for our capital markets business, which may earn fees in the syndication of equity or debt. Capitalinvested for the fiscal years ended December 31, 2014, 2015 and 2016 were $13.6 billion, $11.5 billion and $11.0 billion, and syndicated capital for thefiscal years ended December 31, 2014, 2015 and 2016 were $2.6 billion, $0.9 billion and $1.2 billion, such that 2014 reflects unusually high levels ofactivity for us on a historical basis.•Our ability to realize investments. The strength and liquidity of the U.S. and relevant global equity markets generally, and the initial public offeringmarket specifically affects the value of, and our ability to successfully exit, our equity positions in our private equity portfolio companies in a timelymanner. We may also realize investments through strategic sales. For the fiscal years ended December 31, 2014, 2015 and 2016, through exit activity inour investments, we realized carried interest of $1.2 billion, $1.0 billion and $1.3 billion. Since December 31, 2016, we have101Table of Contentsannounced or closed the strategic sales or partial sales of Panasonic Healthcare Co. Ltd (healthcare sector), Gland Pharma Limited (manufacturing sector),Asia Dairy Holdings (consumer products sector), Capsugel (manufacturing sector), China Greenland Rundong Auto Group Limited (HK: 1365) and TVSLogistics Services Limited (services sector) and have completed secondary offerings for HCA Holdings, Inc. (NYSE: HCA), Galenica AG (VTX:GALN), and US Foods Holding Corp. (NYSE: USFD). Such sales and transactions, however, are episodic and reduced levels of sale activity in futurequarters would reduce transaction fees, realized carry and distributions.Basis of Accounting We consolidate the financial results of the KKR Group Partnerships and their consolidated subsidiaries, which include the accounts of our investmentmanagement and capital markets companies, the general partners of unconsolidated funds and vehicles, general partners of certain funds that are consolidated andtheir respective consolidated funds and certain other entities including certain consolidated CLOs and commercial real estate mortgage-backed securities, or"CMBS". We refer to CLOs and CMBS as collateralized financing entities or CFEs.On January 1, 2016, KKR adopted ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis ("ASU 2015-02"). The adoptionof ASU 2015-02 resulted in the de-consolidation of most of KKR's investment funds, but did not impact net income (loss) attributable to KKR & Co. L.P. underGAAP. KKR adopted this new guidance using the modified retrospective method. As a result, no retrospective adjustment is required and prior periods presentedin this report under GAAP have not been impacted.When an entity is consolidated, we reflect the accounts of the consolidated entity, including its assets, liabilities, fees, expenses, investment income, cash flowsand other amounts, on a gross basis. While the consolidation of a consolidated fund or entity does not have an effect on the amounts of Net Income Attributable toKKR or KKR's partners' capital that KKR reports, the consolidation does significantly impact the financial statement presentation under GAAP. This is due to thefact that the accounts of the consolidated entities are reflected on a gross basis while the allocable share of those amounts that are attributable to third parties arereflected as single line items. The single line items in which the accounts attributable to third parties are recorded are presented as noncontrolling interests on theconsolidated statements of financial condition and net income attributable to noncontrolling interests on the consolidated statements of operations. In connectionwith the adoption of ASU 2015-02, and the resulting de-consolidation of most of our investment funds, KKR's financial statements under GAAP no longer reflectthe accounts of most of our investment funds and also reflect a significantly lower amount of noncontrolling interests and net income attributable to noncontrollinginterests. Accordingly, the amounts associated with the individual financial statement captions may be substantially less than those presented in prior periods. For a further discussion of our consolidation policies, see "Item 8. Financial Statements and Supplementary Data--Summary of Significant AccountingPolicies." Key Financial Measures Under GAAP Fees and Other Fees and other consist primarily of (i) transaction fees earned in connection with successful investment transactions and from capital markets activities,(ii) management and incentive fees from providing investment management services to unconsolidated funds, CLOs, other vehicles and separately managedaccounts, (iii) monitoring fees from providing services to portfolio companies, (iv) carried interest allocations to general partners of unconsolidated funds, (v)revenue earned by oil and gas-producing entities that are consolidated and (vi) consulting fees earned by entities that employ non-employee operating consultants.These fees are based on the contractual terms of the governing agreements and are recognized when earned, which coincides with the period during which therelated services are performed and in the case of transaction fees, upon closing of the transaction. Monitoring fees may provide for a termination paymentfollowing an initial public offering or change of control. These termination payments are recognized in the period when the related transaction closes.As indicated above, on January 1, 2016, KKR adopted ASU 2015-02, which resulted in the de-consolidation of most of KKR's investment funds that had beenconsolidated prior to such date. Management fees, fee credits and carried interest earned from consolidated funds are eliminated in consolidation and as such arenot recorded in Fees and Other. The economic impact of these management fees, fee credits and carried interests that are eliminated is reflected as an adjustment tononcontrolling interests and has no impact to Net Income Attributable to KKR & Co. L.P. As a result of the de-consolidation of most of our investment funds, themanagement fees, fee credits and carried interests associated with funds that had previously been consolidated are included in Fees and Other beginning on January1, 2016 as such amounts are no longer eliminated. 102Table of ContentsFor a further discussion of our fee policies, see "Item 8. Financial Statements and Supplementary Data--Summary of Significant Accounting Policies." Expenses Compensation and Benefits Compensation and benefits expense includes cash compensation consisting of salaries, bonuses, and benefits, as well as equity-based compensation consistingof charges associated with the vesting of equity-based awards, carry pool allocations and other performance-based income compensation. All employees andemployees of certain consolidated entities receive a base salary that is paid by KKR or its consolidated entities, and is accounted for as compensation and benefitsexpense. These employees are also eligible to receive discretionary cash bonuses based on performance, overall profitability and other matters. While cash bonusespaid to most employees are borne by KKR and certain consolidated entities and result in customary compensation and benefits expense, cash bonuses that are paidto certain employees are currently borne by KKR Holdings. These bonuses are funded with distributions that KKR Holdings receives on KKR Group PartnershipUnits held by KKR Holdings but are not then passed on to holders of unvested units of KKR Holdings. Because employees are not entitled to receive distributionson units that are unvested, any amounts allocated to employees in excess of an employee's vested equity interests are reflected as employee compensation andbenefits expense. These compensation charges are recorded based on the unvested portion of quarterly earnings distributions received by KKR Holdings at the timeof the distribution, but are adjusted to reflect actual payments expected to be made each year. Because KKR makes only fixed quarterly distributions, thedistributions made on KKR Group Partnership Units underlying any unvested KKR Holdings units are generally insufficient to fund annual cash bonuscompensation to the same extent as in periods prior to the fourth quarter of 2015. In addition, substantially all units in KKR Holdings have been allocated and willvest over a 5 year period, thus decreasing the amount of distributions received by KKR Holdings that are available for annual cash bonus compensation. We,therefore, expect to pay an increasing portion and eventually all of the cash bonus payments currently borne by KKR Holdings from other sources, including cashfrom our operations, the carry pool and other performance-based income compensation as described below. See "Risks Related to Our Business - If we cannotretain and motivate our principals and other key personnel and recruit, retain and motivate new principals and other key personnel, our business, results andfinancial condition could be adversely affected" regarding the adequacy of such distributions to fund future discretionary cash bonuses.With respect to KKR’s investment funds that provide for carried interest, KKR allocates 40% of the carried interest earned from such funds to its carry poolfor employees and non-employee operating consultants. In addition, our carry pool is supplemented by allocating performance-based income to compensationequal to 40% of the incentive fees earned from investment funds that provide for incentive fees and, beginning with the quarter ended September 30, 2016, forinvestment funds that have a preferred return, also includes 40% of the management fees that would have been subject to a management fee refund. Because of thedifferent ways management fees are refunded in preferred return and non-preferred return funds, this calculation of 40% of the portion of the management feessubject to refund for funds that have a preferred return is designed to allocate to compensation an amount comparable to the amount that would have been allocatedto the carry pool had the fund not had a preferred return. For a discussion of how management fees are refunded for preferred return funds and non-preferred fundssee "--Fair Value Measurements--Recognition of Carried Interest in the Statement of Operations". The amounts allocated to the carry pool and other performance-based income compensation are accounted for as compensatory profit-sharing arrangementsand recorded as compensation and benefits expense for KKR employees and general, administrative and other expense for certain non-employee consultants andservice providers in the consolidated statements of operations prepared in accordance with U.S. GAAP. General, Administrative and Other General, administrative and other expense consists primarily of professional fees paid to legal advisors, accountants, advisors and consultants, insurance costs,travel and related expenses, communications and information services, depreciation and amortization charges, changes in fair value of contingent consideration,expenses incurred by oil and gas-producing entities (including impairment charges) that are consolidated and other general and operating expenses which are notborne by fund investors and are not offset by credits attributable to fund investors' noncontrolling interests in consolidated funds. General, administrative and otherexpense also consists of costs incurred in connection with pursuing potential investments that do not result in completed transactions, a substantial portion of whichare borne by fund investors.103Table of ContentsInvestment Income (Loss) Net Gains (Losses) from Investment ActivitiesOn January 1, 2016, KKR adopted ASU 2015-02, which resulted in the de-consolidation of most of KKR's investment funds that had been consolidated priorto such date. Effective with the adoption of ASU 2015-02, the Net Gains (Losses) from Investment Activities attributed to third party limited partners in ourinvestment funds that had previously been consolidated are no longer included in the statement of operations. Net gains (losses) from investment activities consist of realized and unrealized gains and losses arising from our investment activities. A large portion of ournet gains (losses) from investment activities are related to our private equity investments. Fluctuations in net gains (losses) from investment activities betweenreporting periods is driven primarily by changes in the fair value of our investment portfolio as well as the realization of investments. The fair value of, as well asthe ability to recognize gains from, our private equity and other investments is significantly impacted by the global financial markets, which, in turn, affects the netgains (losses) from investment activities recognized in any given period. Upon the disposition of an investment, previously recognized unrealized gains and lossesare reversed and an offsetting realized gain or loss is recognized in the current period. Since our investments are carried at fair value, fluctuations between periodscould be significant due to changes to the inputs to our valuation process over time. For a further discussion of our fair value measurements and fair value ofinvestments, see "—Critical Accounting Policies—Fair Value Measurements."Dividend Income Dividend income consists primarily of distributions that we and our consolidated investment funds receive from portfolio companies in which they invest.Dividend income is recognized primarily in connection with (i) dispositions of operations by portfolio companies, (ii) distributions of excess cash generated fromoperations from portfolio companies and (iii) other significant refinancings undertaken by portfolio companies.On January 1, 2016, KKR adopted ASU 2015-02, which resulted in the de-consolidation of most of KKR's investment funds that had been consolidated priorto such date. Effective with the adoption of ASU 2015-02, dividends received from our investment funds that had previously been consolidated are not included inthe statement of operations.Interest Income Interest income consists primarily of interest that is received on our credit instruments in which we and our consolidated funds and other entities invest as wellas interest on our cash balances and other investments.On January 1, 2016, KKR adopted ASU 2015-02, which resulted in the de-consolidation of most of KKR's investment funds that had been consolidated priorto such date. Effective with the adoption of ASU 2015-02, interest income received from our investment funds that had previously been consolidated is notincluded in the statement of operations. Interest Expense On January 1, 2016, KKR adopted ASU 2015-02, which resulted in the de-consolidation of most of KKR's investment funds that had been consolidated priorto such date. Effective with the adoption of ASU 2015-02, interest expense incurred by our investment funds that had previously been consolidated is not includedin the statement of operations.Interest expense is incurred from debt issued by KKR, including debt issued by KFN which was consolidated upon completion of the acquisition of KFN,credit facilities entered into by KKR, debt securities issued by consolidated CFEs and financing arrangements at our consolidated funds entered into primarily withthe objective of managing cash flow. KFN's debt obligations are non-recourse to KKR beyond the assets of KFN. Debt securities issued by consolidated CFEs aresupported solely by the investments held at the CFE and are not collateralized by assets of any other KKR entity. Our obligations under financing arrangements atour consolidated funds are generally limited to our pro-rata equity interest in such funds. However, in some circumstances, we may provide limited guarantees ofthe obligations of our general partners in an amount equal to or in excess of our pro rata equity interest in such funds. Our management companies bear noobligations with respect to financing arrangements at our consolidated funds. See "—Liquidity". 104Table of ContentsIncome Taxes The KKR Group Partnerships and certain of their subsidiaries operate in the United States as partnerships for U.S. federal income tax purposes and ascorporate entities in non-U.S. jurisdictions. Accordingly, these entities, in some cases, are subject to New York City unincorporated business taxes, or non-U.S.income taxes. Furthermore, we hold our interest in one of the KKR Group Partnerships through KKR Management Holdings Corp., which is treated as acorporation for U.S. federal income tax purposes, and certain other subsidiaries of the KKR Group Partnerships are treated as corporations for U.S. federal incometax purposes. Accordingly, such subsidiaries of KKR, including KKR Management Holdings Corp., and of the KKR Group Partnerships are subject to U.S. federal,state and local corporate income taxes at the entity level and the related tax provision attributable to KKR's share of this income is reflected in the financialstatements. We also generate certain interest income to our unitholders and interest deductions to KKR Management Holdings Corp.We use the asset and liability method to account for income taxes in accordance with GAAP. Under this method, deferred tax assets and liabilities arerecognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax basis usingcurrently enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period when the change isenacted. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that all or a portion of the deferred tax assets will not be realized.Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is requiredin determining tax expense and in evaluating tax positions including evaluating uncertainties. We review our tax positions quarterly and adjust our tax balances asnew information becomes available. Net Income (Loss) Attributable to Noncontrolling Interests Net income (loss) attributable to noncontrolling interests represents the ownership interests that certain third parties hold in entities that are consolidated in thefinancial statements as well as the ownership interests in our KKR Group Partnerships that are held by KKR Holdings. The allocable share of income and expenseattributable to these interests is accounted for as net income (loss) attributable to noncontrolling interests. Historically, the amount of net income (loss) attributableto noncontrolling interests has been substantial and has resulted in significant charges and credits in the statements of operations. However, on January 1, 2016,KKR adopted ASU 2015-02, which resulted in the de-consolidation of most of KKR's investment funds that had been consolidated prior to such date. As a result ofthis adoption, the amount of net income (loss) attributable to noncontrolling interests is expected to be significantly lower than that reported in prior periods.However, given the consolidation of certain of our investment funds and the significant ownership interests in our KKR Group Partnerships held by KKRHoldings, we expect a portion of net income (loss) will continue to be attributed to noncontrolling interests in our business.Segment Operating and Performance Measures The segment key performance measures that follow are used by management in making operating and resource deployment decisions as well as assessing theoverall performance of each of KKR's reportable business segments. The reportable segments for KKR's business are presented prior to giving effect to theallocation 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 segmentsare presented without giving effect to the consolidation of the investment funds and CFEs that KKR manages as well as other consolidated entities that are notsubsidiaries of KKR & Co. L.P. We disclose the following financial measures in this report that are calculated and presented using methodologies other than in accordance with GAAP. Webelieve that providing these performance measures on a supplemental basis to our GAAP results is helpful to unitholders in assessing the overall performance ofKKR's businesses. These financial measures should not be considered as a substitute for similar financial measures calculated in accordance with GAAP, ifavailable. We caution readers that these non-GAAP financial measures may differ from the calculations of other investment managers, and as a result, may not becomparable to similar measures presented by other investment managers. Reconciliations of these non-GAAP financial measures to the most directly comparablefinancial measures calculated and presented in accordance with GAAP, where applicable, are included within "Financial Statements and Supplementary Data —Note 14. Segment Reporting" and later in this report under "—Segment Balance Sheet."105Table of ContentsAdjusted UnitsAdjusted units are used as a measure of the total common equity ownership of KKR that is held by KKR & Co. L.P. (including equity awards issued under theKKR & Co. L.P. 2010 Equity Incentive Plan, but excluding preferred units), KKR Holdings and other holders of securities exchangeable into common units ofKKR & Co. L.P. and represent the fully diluted common unit count using the if-converted method. We believe this measure is useful to unitholders as it providesan indication of the total common equity ownership of KKR as if all outstanding KKR Holdings units, equity awards issued under the Equity Incentive Plan andother exchangeable securities had been exchanged for common units of KKR & Co. L.P. The Series A and Series B Preferred Units are not exchangeable forcommon units of KKR & Co. L.P.Adjusted Units Eligible for DistributionAdjusted units eligible for distribution represents the portion of total adjusted units that is eligible to receive a distribution. We believe this measure is useful tounitholders as it provides insight into the calculation of amounts available for distribution on a per unit basis. Adjusted units eligible for distribution is used in thecalculation of after-tax distributable earnings per unit.After-Tax Distributable EarningsAfter-tax distributable earnings is used by management as an operating measure of the earnings excluding mark-to-market gains (losses) of KKR. KKRbelieves this measure is useful to unitholders as it provides a supplemental measure to assess performance, excluding the impact of mark-to-market gains (losses).After-tax distributable earnings excludes certain realized investment losses to the extent unrealized losses on these investments were recognized prior to thecombination with KPE on October 1, 2009. After-tax distributable earnings does not represent and is not used to calculate actual distributions under KKR’sdistribution policy.The following table presents our after-tax distributable earnings on common units for the years ended December 31, 2016 , 2015 and 2014 as described above.For a discussion of the components that drove the changes in our distributable earnings, see“—Segment Analysis.”106Table of Contents Year Ended($ in thousands except per unit data) December 31, 2016 December 31, 2015 December 31, 2014Revenues Management, Monitoring and Transaction Fees, Net $1,074,862 $1,142,050 $1,098,843Realized Performance Income (loss) 1,289,554 1,046,801 1,241,468Realized Investment Income (loss) 505,659(2) 545,474(1) 901,578Total Distributable Segment Revenues 2,870,075 2,734,325 3,241,889 Expenses Cash Compensation and Benefits 395,016 409,992 380,581Realized Performance Income Compensation 538,321 418,718 496,589Occupancy and Related Charges 62,400 62,657 57,787Other Operating Expenses 234,348 233,618 229,069Total Distributable Segment Expenses 1,230,085 1,124,985 1,164,026 Distributable Earnings Before Taxes, Noncontrolling Interests andPreferred Distributions 1,639,990 1,609,340 2,077,863 Less: Corporate and local income taxes paid 87,723 140,677 131,081Less: Income attributable to segment noncontrolling interests 2,336 16,007 14,946Less: Preferred Distributions 22,235 — — After-tax Distributable Earnings $1,527,696 $1,452,656 $1,931,836 Per Adjusted Unit Eligible for Distribution $1.89 $1.78 $2.47 (1) Amount includes a $100.0 million realized loss on a segment basis relating to the write-off of Energy Future Holdings which had previously been marked at zero on an unrealized basis. Accordingly, this write-off had no impact on our Economic Net Income during the year ended December 31, 2015.(2) Amount includes a $253.7 million realized loss relating to Samson Resources which had previously been marked at zero on an unrealized basis. Accordingly, this had no impact on ourEconomic Net Income during the year ended December 31, 2016.Assets Under Management ("AUM")Assets under management ("AUM") represent the assets managed by KKR or by its strategic partners from which KKR is entitled to receive fees or a carriedinterest (either currently or upon deployment of capital) and general partner capital. We believe this measure is useful to unitholders as it provides additionalinsight into KKR's capital raising activities and the overall activity in its investment funds and strategic partnerships. KKR calculates the amount of AUM as of anydate as the sum of: (i) the fair value of the investments of KKR's investment funds; (ii) uncalled capital commitments from these funds, including uncalled capitalcommitments from which KKR is currently not earning management fees or carried interest; (iii) the fair value of investments in KKR's co-investment vehicles;(iv) the par value of outstanding CLOs (excluding CLOs wholly-owned by KKR); (v) KKR's pro-rata portion of the AUM managed by strategic partnerships inwhich KKR holds a minority ownership interest and (vi) the fair value of other assets managed by KKR. The pro-rata portion of the AUM managed by strategicpartnerships is calculated based on KKR’s percentage ownership interest in such entities multiplied by such entity’s respective AUM. KKR's definition of AUM isnot 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 calculatedpursuant to any regulatory definitions.Book ValueBook 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’sinvestments and other assets, including carried interest. We believe this measure is useful to unitholders as it provides additional insight into the assets andliabilities of KKR excluding the assets and liabilities that are allocated to noncontrolling interest holders and to the holders of the Series A and Series B PreferredUnits.107Table of ContentsCapital InvestedCapital invested is the aggregate amount of capital invested by (i) KKR’s investment funds, (ii) KKR's Principal Activities segment as a co-investment, if any,alongside KKR’s investment funds, and (iii) the Principal Activities segment in connection with a syndication transaction conducted by KKR's Capital Marketssegment, if any. Capital invested is used as a measure of investment activity at KKR during a given period. We believe this measure is useful to unitholders as itprovides a measure of capital deployment across KKR’s business segments. Capital invested includes investments made using investment financing arrangementslike credit facilities, as applicable. Capital invested excludes (i) investments in liquid credit strategies, (ii) capital invested by KKR’s Principal Activities segmentthat is not a co-investment alongside KKR’s investment funds, and (iii) capital invested by the Principal Activities segment that is not invested in connection with asyndication transaction by KKR’s Capital Markets segment. Capital syndicated by our Capital Markets segment to third parties other than KKR’s investment fundsor Principal Activities segment is not included in capital invested. See also syndicated capital. In the fourth quarter of 2016, the capital invested metric waschanged to include capital invested by KKR's Principal Activities segment and all prior periods in this report have been adjusted.Economic Net Income (Loss) (“ENI”)Economic net income (loss) is a measure of profitability for KKR’s reportable segments and is used by management as an alternative measurement of theoperating and investment earnings of KKR and its business segments. We believe this measure is useful to unitholders as it provides additional insight into theoverall profitability of KKR’s businesses inclusive of carried interest, incentive fees and related carry pool allocations and investment income. ENI is comprised oftotal segment revenues less total segment expenses and certain economic interests in KKR’s segments held by third parties. Pre-tax Economic Net Income (Loss)represents Economic Net Income (Loss) after equity-based compensation. After-tax Economic Net Income (Loss) represents Economic Net Income (Loss) afterequity-based compensation, provision for income taxes and preferred distributions.Fee Paying AUM ("FPAUM")Fee paying AUM represents only those assets under management of KKR or its strategic partners from which KKR receives management fees. We believe thismeasure is useful to unitholders as it provides additional insight into the capital base upon which KKR earns management fees. FPAUM is the sum of all of theindividual fee bases that are used to calculate KKR's fees and differs from AUM in the following respects: (i) assets and commitments from which KKR does notreceive a fee are excluded (i.e. assets and commitments with respect to which it receives only carried interest or is otherwise not currently receiving a fee) and (ii)certain assets, primarily in its private equity funds, are reflected based on capital commitments and invested capital as opposed to fair value because fees are notimpacted by changes in the fair value of underlying investments.Fee Related Earnings ("FRE")Fee related earnings is a measure of the operating earnings of KKR and its business segments before performance income, related performance incomecompensation and investment income. KKR believes this measure may be useful to unitholders as it provides additional insight into the operating profitability ofKKR's fee generating management companies and capital markets businesses.Outstanding Adjusted UnitsOutstanding adjusted units represents the portion of total adjusted units that would receive assets of KKR if it were to be liquidated as of a particular date.Outstanding adjusted units is used to calculate book value per outstanding adjusted unit, which we believe is useful to unitholders as it provides a measure of netassets of KKR’s reportable segments on a per unit basis.Syndicated CapitalSyndicated capital is generally the aggregate amount of capital in transactions originated by KKR and its investment funds and carry-yielding co-investmentvehicles, 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 andcarry-yielding co-investment vehicles, which is instead reported in capital invested and (ii) debt capital that is arranged as part of the acquisition financing oftransactions originated by KKR investment funds. Syndicated capital is used as a measure of investment activity for KKR and its business segments during a givenperiod, and we believe that this measure is useful to unitholders as it provides additional insight into levels of syndication activity in KKR's Capital Marketssegment and across its investment platfor m .108Table of ContentsUncalled CommitmentsUncalled commitments are used as a measure of unfunded capital commitments that KKR’s investment funds and carry-paying co-investment vehicles havereceived from partners to contribute capital to fund future investments. We believe this measure is useful to unitholders as it provides additional insight into theamount of capital that is available to KKR’s investment funds to make future investments. Uncalled commitments are not reduced for investments completed usingfund-level investment financing arrangements.A reconciliation of Net Income (Loss) Attributable to KKR & Co. L.P. Common Unitholders on a GAAP basis to ENI, FRE and After-tax DistributableEarnings is provided below. Year Ended($ in thousands) December 31, 2016 December 31, 2015 December 31, 2014Net Income (Loss) Attributable to KKR & Co. L.P. Common Unitholders $287,072 $488,482 $477,611Plus: Preferred Distributions 22,235 — —Plus: Net income (loss) attributable to noncontrolling interests held by KKRHoldings L.P. 212,878 433,693 585,135Plus: Non-cash equity-based charges 264,890 261,579 310,403Plus: Amortization of intangibles, placement fees and other, net (17,267) 47,599 290,348Plus: Income tax (benefit) 24,561 66,636 63,669Economic Net Income (Loss) 794,369 1,297,989 1,727,166Plus: Income attributable to segment noncontrolling interests 2,336 16,007 14,946Less: Total investment income (loss) (78,764) 153,512 505,153Less: Net performance income (loss) 492,371 724,701 805,553Plus: Expenses of Principal Activities Segment 154,321 174,713 199,938Fee Related Earnings 537,419 610,496 631,344Plus: Net interest and dividends 134,096 208,451 273,175Less: Expenses of Principal Activities Segment 154,321 174,713 199,938Plus: Realized performance income (loss), net 751,233 628,083 744,879Plus: Net realized gains (losses) 371,563 337,023 628,403Less: Corporate and local income taxes paid 87,723 140,677 131,081Less: Preferred Distributions 22,235 — —Less: Income attributable to segment noncontrolling interests 2,336 16,007 14,946After-tax Distributable Earnings $1,527,696 $1,452,656 $1,931,836 109Table of ContentsConsolidated Results of Operations The following is a discussion of our consolidated results of operations for the years ended December 31, 2016 and 2015 . You should read this discussion inconjunction with the consolidated financial statements and related notes included elsewhere in this report. For a more detailed discussion of the factors that affectedthe results of operations of our four business segments in these periods, see “—Segment Analysis.” On January 1, 2016, KKR adopted ASU No. 2015-02,Consolidation (Topic 810): Amendments to the Consolidation Analysis ("ASU 2015-02"). The adoption of ASU 2015-02 resulted in the de-consolidation of mostof KKR's investment funds, but did not impact net income (loss) attributable to KKR & Co. L.P. KKR adopted this new guidance using the modified retrospectivemethod. As a result, no retrospective adjustment is required and prior periods presented below have not been impacted.Year ended December 31, 2016 compared to year ended December 31, 2015 Year Ended December 31, 2016 December 31, 2015 Change ($ in thousands)Revenues Fees and Other$1,908,093 $1,043,768 $864,325 Expenses Compensation and Benefits1,063,813 1,180,591 (116,778)Occupancy and Related Charges64,622 65,683 (1,061)General, Administrative and Other567,039 624,951 (57,912)Total Expenses1,695,474 1,871,225 (175,751) Investment Income (Loss) Net Gains (Losses) from Investment Activities342,897 4,672,627 (4,329,730)Dividend Income187,853 850,527 (662,674)Interest Income1,021,809 1,219,197 (197,388)Interest Expense(789,953) (573,226) (216,727)Total Investment Income (Loss)762,606 6,169,125 (5,406,519) Income (Loss) Before Taxes975,225 5,341,668 (4,366,443) Income Taxes24,561 66,636 (42,075) Net Income (Loss)950,664 5,275,032 (4,324,368) Net Income (Loss) Attributable to Redeemable Noncontrolling Interests(8,476) (4,512) (3,964)Net Income (Loss) Attributable to Noncontrolling Interests649,833 4,791,062 (4,141,229) Net Income (Loss) Attributable to KKR & Co. L.P.309,307 488,482(179,175) Less: Net Income Attributable to Series A Preferred Unitholders17,337 — 17,337Less: Net Income Attributable to Series B Preferred Unitholders4,898 — 4,898 Net Income (Loss) Attributable to KKR & Co. L.P. Common Unitholders$287,072 $488,482 $(201,410)110Table of ContentsFees and OtherFor the years ended December 31, 2016 and 2015 , fees and other consisted of the following: Year Ended December 31, 2016 December 31, 2015 ChangeManagement Fees $619,243 $201,006 $418,237Transaction Fees 350,091 354,895 (4,804)Monitoring Fees 146,967 336,159 (189,192)Fee Credits (128,707) (17,351) (111,356)Carried Interest 803,185 — 803,185Incentive Fees 8,709 16,415 (7,706)Oil and Gas Revenue 65,754 112,328 (46,574)Consulting Fees 42,851 40,316 2,535Total Fees and Other $1,908,093 $1,043,768 $864,325On January 1, 2016, KKR adopted ASU 2015-02, which resulted in the de-consolidation of most of KKR's investment funds that had been consolidated priorto such date. When an investment fund is consolidated, management fees, fee credits and carried interest earned from consolidated funds are eliminated inconsolidation and as such are not recorded in Fees and Other. The economic impact of these management fees, fee credits and carried interests that are eliminatedis reflected as an adjustment to noncontrolling interests and has no impact to Net Income Attributable to KKR & Co. L.P. As a result of the de-consolidation ofmost of our investment funds, the management fees, fee credits and carried interests associated with funds that had previously been consolidated are included inFees and Other beginning on January 1, 2016 as such amounts are no longer eliminated. For a discussion of other factors that affected fees and other, see "--Segment Analysis."The increases in carried interest, management fees and fee credits are primarily due to activity from funds that are no longer consolidated as described above.For a more detailed discussion of the factors that affected our carried interest, management fees and fee credits during the period, see “—Segment Analysis.”The carried interest gains earned during the year ended December 31, 2016 were due primarily to an overall increase in the value of our private equityportfolio. For a more detailed discussion of the factors that affected our Private Markets carried interest during the period, see “—Segment Analysis -- PrivateMarkets -- Segment Revenues -- Performance Income.”These increases were partially offset by a decrease in monitoring fees in our Private Markets business as discussed in greater detail in "--Segment Analysis --Private Markets -- Segment Revenues -- Management, Monitoring and Transaction Fees, Net."The decrease in oil and gas revenue was due primarily to lower production volumes and a lower price of oil in the year ended December 31, 2016 compared tothe year ended December 31, 2015.Compensation and Benefits ExpensesThe decrease was primarily due to lower carry pool allocations reflecting a lower level of appreciation in the value of our private equity portfolio during theyear ended December 31, 2016 compared to the year ended December 31, 2015.General Administrative and Other ExpensesThe decrease was primarily due to (i) a reduction in the fair value of the contingent consideration liability related to the acquisition of Prisma from $46.6million to zero since it was determined that it was no longer probable that the sellers (certain of whom are employees of KKR) of Prisma would be entitled to anyfuture additional payment under the arrangement, (ii) a decrease in the expenses of our consolidated oil and gas producing entities due to (a) a $54.0 millionimpairment charge incurred during the year ended December 31, 2015 compared to a $6.2 million charge incurred during the year ended December 31, 2016 and(b) a decrease in depreciation, depletion and amortization of our consolidated oil and gas producing entities caused by a lower cost basis due to previously recordedimpairments and lower production volumes compared to the111Table of Contentsprior period. These decreases were partially offset by (i) an increase in placement fees incurred in connection with capital raising activity, the most significant ofwhich relates to Americas Fund XII and (ii) financing costs incurred relating to debt at new consolidated CLOs for which the fair value option has been elected.Net Gains (Losses) from Investment ActivitiesOn January 1, 2016, KKR adopted ASU 2015-02, which resulted in the de-consolidation of most of KKR's investment funds that had been consolidated priorto such date. Effective with the adoption of ASU 2015-02, the Net Gains (Losses) from Investment Activities attributed to third party limited partners in ourinvestment funds that had previously been consolidated are not included in the statement of operations.The following is a summary of net gains (losses) from investment activities: Year Ended December 31, 2016 2015 ($ in thousands)Private Equity Investments$109,288 $5,592,970Credit & Other Investments(821,542) (661,112)Investments of Consolidated CFE's185,712 (274,944)Real Assets Investments229,398 (444,186)Debt Obligations14,665 (60,145)Other Net Gains (Losses) from Investment Activities625,376 520,044Net Gains (Losses) from Investment Activities$342,897 $4,672,627 The net gains from investment activities for the year ended December 31, 2016 were comprised of net realized gains of $347.1 million and net unrealizedlosses of $(4.2) million . For the year ended December 31, 2016 , net realized gains were comprised primarily of the net impact of (i) realized gains on sales ofprivate equity investments held directly by KKR, including the partial sales of Walgreens Boots Alliance, Inc. (NASDAQ: WBA), Zimmer Biomet Holdings, Inc.(NYSE: ZBH). and HCA Holdings, Inc. (NYSE: HCA); (ii) realized losses in connection with our investment in Samson Resources (energy sector); (iii) realizedlosses on assets held at consolidated CLOs and (iv) realized gains on debt held at consolidated CLOs. For the year ended December 31, 2016 , net unrealized losseswere driven primarily by (i) mark-to-market losses in our private equity portfolio held directly by KKR including unrealized losses in First Data Corporation(NYSE: FDC), (ii) mark-to-market losses on assets in our consolidated special situations funds, (iii) mark-to-market losses on debt held through consolidatedCMBS and (iv) the reversal of unrealized gains on the partial sales of Walgreens Boots Alliance, Inc., Zimmer Biomet Holdings, Inc. and HCA Holdings, Inc., aswell as the reversal of unrealized gains on debt realizations at our consolidated CLOs. Offsetting these unrealized losses were unrealized gains, the most significantof which were unrealized gains relating to (i) the reversal of unrealized losses in connection with our investment in Samson Resources, (ii) reversals of unrealizedlosses on asset realizations in our consolidated CLOs and (iii) mark-to-market gains on investments held through consolidated CMBS structures. For a discussionof other factors that affected KKR's investment income, see "--Segment Analysis."For the year ended December 31, 2015, the most significant driver of the net investment gains related to gains and losses at KKR's consolidated private equityfunds as discussed in greater detail in "--Segment Analysis -- Private Markets -- Segment Revenues -- Performance Income."Dividend Income On January 1, 2016, KKR adopted ASU 2015-02, which resulted in the de-consolidation of most of KKR's investment funds that had been consolidated priorto such date. Effective with the adoption of ASU 2015-02, dividends received from our investment funds that had previously been consolidated are not included inthe statement of operations.The decrease was primarily due to a decrease associated with investment funds no longer being consolidated in the 2016 period as a result of the adoption ofASU 2015-02. During the year ended December 31, 2016 significant dividends received included $51.5 million from our consolidated special situations funds anddividends from US Foods Holding Corp. of $23.4 million, Sedgwick Claims Management Services (financial services sector) of $12.7 million and PRA HealthSciences, Inc. (NASDAQ: PRAH) of $4.1 million. During the year ended December 31, 2015 we received dividends of $123.7 million from WMF (consumerproducts sector), $114.9 million from CITIC Envirotech Ltd. (SP: CEL), $86.2 million from MMI Holdings112Table of ContentsLimited (technology sector), $80.5 million from Academy Ltd. (retail sector), $65.9 million from Aricent Inc. (technology sector) and an aggregate of $379.3million of dividends from other investments. Significant dividends from portfolio companies are generally not recurring quarterly dividends, and while they mayoccur in the future, their size and frequency are variable. For a discussion of other factors that affected KKR's dividend income, see "--Segment Analysis." Interest Income On January 1, 2016, KKR adopted ASU 2015-02, which resulted in the de-consolidation of most of KKR's investment funds that had been consolidated priorto such date. Effective with the adoption of ASU 2015-02, interest income received from our investment funds that had previously been consolidated is notincluded in the statement of operations.The decrease was primarily due to investment funds (primarily those that are credit-oriented) no longer being consolidated in the 2016 period as a result of theadoption of ASU 2015-02. This decrease was partially offset by the consolidation of CMBS entities beginning in the second quarter of 2015 as well as interestearned on new CMBS loans acquired by KKR Real Estate Finance Trust Inc. For a discussion of other factors that affected KKR's interest income, see "--SegmentAnalysis."Interest Expense On January 1, 2016, KKR adopted ASU 2015-02, which resulted in the de-consolidation of most of KKR's investment funds that had been consolidated priorto such date. Effective with the adoption of ASU 2015-02, interest expense incurred by our investment funds that had previously been consolidated is not includedin the statement of operations.The increase was primarily due to (i) the consolidation of CMBS entities beginning in the second quarter of 2015, (ii) increased CMBS borrowings by KKRReal Estate Finance Trust Inc. and (iii) interest expense associated with certain notes issued by consolidated CLOs of KFN being called for redemption. Third partyCLO subordinated note holders receive the residual interest after all other payments have been made and as a result of a paydown made in August 2016, KKRrecorded interest expense of $59.9 million. In addition, an incremental $8.8 million of accelerated accretion of debt discounts was recorded in connection with thenotes of this CLO being called for redemption. These increases were partially offset by a decrease in interest expense associated with financing facilities atinvestment funds no longer being consolidated in the first half of 2016 as a result of the adoption of ASU 2015-02 and to a lesser extent the redemption of KFN's8.375% Notes due 2041 in November 2016. For a discussion of other factors that affected KKR's interest expense, see "--Segment Analysis." Income (Loss) Before Taxes The decrease for the year ended December 31, 2016, was due primarily to the adoption of ASU 2015-02 which resulted in the de-consolidation of most ofKKR's investments funds that had been consolidated prior to such date, as described above.Income TaxesThe decrease is due primarily to a lower level of fees earned by our management companies and a lower level of unrealized carried interest gains accrued bycertain fund entities during the year ended December 31, 2016.Net Income (Loss) Attributable to Noncontrolling Interests Net income attributable to noncontrolling interests for the year ended December 31, 2016 relates primarily to net income attributable to KKR Holdings L.P.representing its ownership interests in the KKR Group Partnerships and to those investment funds that we consolidate. The decrease from the prior period is dueprimarily to noncontrolling interests attributed to third party limited partners in our investment funds that had previously been consolidated, but which are notincluded in the statement of operations effective with the adoption of ASU 2015-02 on January 1, 2016. Net Income (Loss) Attributable to KKR & Co. L.P. The decrease for the year ended December 31, 2016, was due primarily to a lower level of investment income, carried interest and fee income attributable toKKR & Co. L.P. as compared to the prior year.113Table of ContentsYear ended December 31, 2015 compared to year ended December 31, 2014 Year Ended December 31, 2015 December 31, 2014 Change ($ in thousands)Revenues Fees and Other$1,043,768 $1,110,008 $(66,240) Expenses Compensation and Benefits1,180,591 1,263,852 (83,261)Occupancy and Related Charges65,683 62,564 3,119General, Administrative and Other624,951 869,651 (244,700)Total Expenses1,871,225 2,196,067 (324,842) Investment Income (Loss) Net Gains (Losses) from Investment Activities4,672,627 4,778,232 (105,605)Dividend Income850,527 1,174,501 (323,974)Interest Income1,219,197 909,207 309,990Interest Expense(573,226) (317,192) (256,034)Total Investment Income (Loss)6,169,125 6,544,748 (375,623) Income (Loss) Before Taxes5,341,668 5,458,689 (117,021) Income Tax / (Benefit)66,636 63,669 2,967 Net Income (Loss)5,275,032 5,395,020 (119,988)Net Income (Loss) Attributable to Redeemable Noncontrolling Interests(4,512) (3,341) (1,171)Net Income (Loss) Attributable to Noncontrolling Interests and Appropriated Capital4,791,062 4,920,750 (129,688) Net Income (Loss) Attributable to KKR & Co. L.P.$488,482 $477,611 $10,871Fees and Other The net decrease was primarily due to (i) an $87.5 million decrease in transaction fees, (ii) a $74.5 million decrease in revenues earned by consolidated oil andgas producing entities and (iii) a $34.3 million decrease in incentive fees. These decreases were partially offset by a $145.6 million increase in monitoring fees. Thedecrease in transaction fees was primarily attributable to a decrease in both our Private Markets segment and Capital Markets segment. In our Private Marketssegment the decreases were primarily attributable to a decrease in the average fee earned on completed investments. During the year ended December 31, 2015, inour Private Markets segment there were 37 transaction fee-generating investments paying an average fee of $3.9 million compared to 33 transaction fee-generatinginvestments paying an average fee of $6.5 million during the year ended December 31, 2014. Transaction fees vary by investment based upon a number of factors,the most significant of which are transaction size, the particular discussions as to the amount of the fees, the complexity of the transaction and KKR’s role in thetransaction. In our Capital Markets segment transaction fees decreased primarily due to a decrease in the number and size of capital markets transactions for theyear ended December 31, 2015 compared to the year ended December 31, 2014. We completed 116 capital markets transactions for the year ended December 31,2015 of which 16 represented equity offerings and 100 represented debt offerings, as compared to 139 transactions for the year ended December 31, 2014 of which15 represented equity offerings and 124 represented debt offerings. The decrease in revenue earned by consolidated oil and gas producing entities was primarily theresult of a decrease in oil prices for the year ended December 31, 2015 as compared to the prior period, and to a lesser extent, reduced production volumes thatresulted from assets sold in the third and fourth quarters of 2014, partially offset by revenues of oil and gas producing entities of KFN, which was acquired on April30, 2014. The114Table of Contentsdecrease in incentive fees was due primarily to a decrease in incentive fees received from KFN as a result of our acquisition of it on April 30, 2014, as incentivefees from KFN after that date were eliminated from segment results, as well as lower incentive fees in our hedge fund-of-funds platform and European creditplatform driven by less favorable financial performance in the current year. The increase in monitoring fees was primarily the result of $198.8 million ofmonitoring fees received during 2015 from the termination of monitoring fee arrangements in connection with the initial public offering (IPO) or partial exits ofFirst Data Corporation (NYSE: FDC), Walgreens Boots Alliance, Inc. (NASDAQ: WBA), J.M. Smucker Company (NYSE: SJM), Zimmer Biomet Holdings, Inc.(NYSE: ZBH) and GoDaddy, Inc. (NYSE: GDDY) compared to approximately $23.2 million of such fees received during the year ended December 31, 2014.These types of termination payments may occur in the future; however, they are infrequent in nature and are generally correlated with IPO and other realizationactivity in our private equity portfolio. This increase in monitoring fees from termination payments was partially offset by a decrease in recurring monitoring feesof $46.1 million. The decrease in recurring monitoring fees was primarily the result of a decrease in the number of portfolio companies paying a monitoring fee anda decrease in the average size of the fee. For the year ended December 31, 2015, we had 43 portfolio companies that were paying an average monitoring fee of $1.5million compared with 50 portfolio companies that were paying an average monitoring fee of $2.2 million for the year ended December 31, 2014. In future periods,we anticipate that recurring monitoring fees will continue to decrease as a result of realizations and other transactions such as initial public offerings, if not offsetby additional portfolio companies paying recurring monitoring fees. Expenses The decrease was primarily due to a decrease in general administrative and other expense of $244.7 million and a decrease in compensation and benefits of$83.3 million. The decrease in general administrative and other expense was primarily attributable to (i) a lower level of impairment charges relating to long-livedassets at our consolidated oil and gas producing entities during the year ended December 31, 2015 as compared to the year ended December 31, 2014, (ii) adecrease in operating expenses of our consolidated oil and gas producing entities that resulted primarily from assets sold in the third and fourth quarters of 2014and a reduction in depreciation in 2015 as a result of an impairment of the long-lived assets of these entities in the fourth quarter of 2014 and (iii) non-recurringamounts accrued for litigation in 2014. The decrease in compensation and benefits was due primarily to (i) lower carry pool allocations as a result of therecognition of a lower level of carried interest during the year ended December 31, 2015 as compared to the year ended December 31, 2014, (ii) lower equity-basedcompensation related to KKR Holdings reflecting fewer KKR Holdings units vesting for expense recognition purposes and a lower level of amounts allocated toprincipals in excess of such principal’s vested equity interests. These decreases were partially offset by (i) an increase in cash compensation reflecting a higherlevel of fees which generally results in higher compensation expense and (ii) higher equity-based compensation relating primarily to additional equity grants underthe Equity Incentive Plan. Net Gains (Losses) from Investment Activities The following is a summary of net gains (losses) from investment activities: Year Ended December 31, 2015 2014 ($ in thousands)Net Gains (Losses) from Private Equity Investments$5,592,970 $4,586,193Other Net Gains (Losses) from Investment Activities (1)(920,343) 192,039Net Gains (Losses) from Investment Activities$4,672,627 $4,778,232 (1) The 2015 amount includes a realized loss of approximately $2 billion on a consolidated basis relating to the write-off of Energy Future Holdings (energy sector) which had previously beenmarked at zero on an unrealized basis. Accordingly, this write-off had no impact on our Net Gains (Losses) from Investment Activities during the year ended December 31, 2015. 115Table of ContentsThe majority of our net gains (losses) from investment activities relate to our private equity portfolio. The following is a summary of the components of netgains (losses) from investment activities for private equity investments which illustrates the variances from the prior period. See “—Segment Analysis—PrivateMarkets Segment” for further information regarding gains and losses in our private equity portfolio. Year Ended December 31, 2015 2014 ($ in thousands)Realized Gains$4,701,511 $6,224,683Unrealized Losses from Sales of Investments and Realization of Gains (a)(4,024,214) (6,278,529)Realized Losses(248,918) (1,238,897)Unrealized Gains from Sales of Investments and Realization of Losses (b)239,587 1,233,070Unrealized Gains from Changes in Fair Value9,669,247 9,218,981Unrealized Losses from Changes in Fair Value(4,744,243) (4,573,115)Net Gains (Losses) from Investment Activities - Private Equity Investments$5,592,970 $4,586,193(a)Amounts represent the reversal of previously recognized unrealized gains in connection with realization events where such gains become realized.(b)Amounts represent the reversal of previously recognized unrealized losses in connection with realization events where such losses become realized.A significant driver of net gains (losses) from investment activities for the year ended December 31, 2015 was related to unrealized gains and losses fromchanges in fair value in our private equity investments. The net increase in the value of our private markets portfolio was driven primarily by net unrealized gainsof $1.8 billion, $1.5 billion and $0.9 billion in our 2006 Fund, North America Fund XI and Asian Fund II, respectively. For the year ended December 31, 2015, thevalue of our private equity investment portfolio increased 14.2%. This was comprised of a 19.5% increase in the share prices of various publicly held or publiclyindexed investments and a 9.3% increase in value of our privately held investments. The most significant increases in share prices of various publicly held orpublicly indexed investments were gains in Walgreens Boots Alliance, Inc., PRA Health Sciences, Inc. (NASDAQ: PRAH) and GoDaddy, Inc. These increaseswere partially offset by decreased share prices of various publicly held investments, the most significant of which were RigNet (NASDAQ: RNET), HCAHoldings, Inc. (NYSE: HCA) and CITIC Envirotech Ltd. (SP: CEL). Subsequent to December 31, 2015, world equity markets declined sharply with both the S&P500 and the MSCI World Index down on a total return basis, including dividends, as of February 22, 2016. See "--Business Environment". Our privately heldinvestments contributed the remainder of the change in value, the most significant of which were gains relating to Panasonic Healthcare Co. Ltd (healthcare sector),Capital Safety Group (industrial sector) and Alliant Insurance Services (financial services sector). The unrealized gains on our privately held investments werepartially offset by unrealized losses relating primarily to BIS Industries Ltd. (industrial sector), Acteon Group Ltd (energy sector) and Aceco TI S.A. (technologysector). The increased valuations of individual companies in our privately held investments, in the aggregate, generally related to (i) in the case of Capital SafetyGroup and Alliant Insurance Services, valuations that reflect agreements to sell these investments in whole or in part, (ii) an increase in the value of marketcomparables and (iii) individual company performance. The decreased valuations of individual companies in our privately held investments, in the aggregate,generally related to (i) individual company performance or, in certain cases, an unfavorable business outlook and (ii) a decrease in the value of marketcomparables. A significant driver of net gains (losses) from investment activities for the year ended December 31, 2014 was related to unrealized gains and losses fromchanges in fair value in our private equity investments. The net unrealized investment gains in our private equity portfolio were driven primarily by net unrealizedgains of $2.2 billion, $1.2 billion and $1.1 billion in our 2006 Fund, European Fund III and North America Fund XI, respectively. Approximately 23% of the netchange in value for the year ended December 31, 2014 was attributable to changes in share prices of various publicly-listed investments, the most significant ofwhich were gains on PRA Health Sciences, Inc., HCA Holdings, Inc., NXP Semiconductors N.V. (NASDAQ: NXPI) and Yageo Corporation (TW: 2327). Theseincreases were partially offset by decreased share prices of various publicly held investments, the most significant of which were Tarkett S.A. (PA: TKTT),ProSiebenSat.1 Media AG (XETRA: PSM) and China Greenland Rundong Auto Group Ltd (HK: 1365). Our privately‑held investments contributed the remainderof the change in value, the most significant of which were gains relating to Alliance Boots GmbH (healthcare sector), Biomet, Inc. (healthcare sector) and WILDFlavors GmbH (consumer products sector). The unrealized gains on our privately‑held investments were partially offset by unrealized losses relating primarily toNorthgate Information Solutions (technology sector), Samson Resources (energy sector) and Toys R Us (retail sector). The unrealized gains were also offset byunrealized losses in our energy assets from our Natural Resources Fund and Energy Income and Growth Fund of approximately $352 million. The increasedvaluations of individual companies in our privately‑held investments, in the aggregate, generally related to (i) an increase in the value of market comparables andindividual company performance, (ii) in the case of WILD116Table of ContentsFlavors GmbH and Biomet, Inc., an increase that primarily reflected agreements to sell these investments, with the sale of WILD Flavors GmbH completed inOctober 2014, and (iii) in the case of Alliance Boots GmbH, primarily due to an agreement to exit the investment and to a lesser extent an increase in the value of apublicly traded stock that was expected to be delivered pursuant to this agreement, which was completed on December 31, 2014. The decreased valuations ofindividual companies in our privately‑held investments, in the aggregate, generally related to individual company performance or, in certain cases, an unfavorablebusiness outlook. The decreased valuation of energy assets are generally related to decreases in commodity prices.Dividend Income During the year ended December 31, 2015 we received dividends of $123.7 million from WMF (consumer products sector), $114.9 million from CITICEnvirotech Ltd., $86.2 million from MMI Holdings Limited (technology sector), $80.5 million from Academy Ltd. (retail sector), $65.9 million from Aricent Inc.(technology sector) and an aggregate of $379.3 million of dividends from other investments. During the year ended December 31, 2014, we received dividends of$178.6 million from Visma (technology sector), $171.6 million from Capsugel (manufacturing sector), $162.1 million from Capital Safety Group, $87.7 millionfrom WMF and an aggregate of $574.5 million of dividends from other investments. Significant dividends from portfolio companies are generally not recurringquarterly dividends, and while they may occur in the future, their size and frequency are variable. Interest Income The increase was primarily due to a net increase in (i) the amount of credit instruments in our consolidated Public Markets investment vehicles, includinggrowth in our CLO platform when compared to the prior period, (ii) the consolidation of CMBS entities beginning in the second quarter of 2015, and (iii) theacquisition of KFN on April 30, 2014 which did not contribute to our interest income for the first four months of 2014.Interest Expense The increase was primarily due to (i) increased interest expense in connection with the growth of our CLO platforms, the majority of which are consolidated,(ii) interest expense on our 2044 Senior Notes issued on May 29, 2014 and an additional issuance of such notes on March 18, 2015, (iii) increased interest expenserelated to financing facilities entered into by our consolidated investment funds for purposes of financing their operating and investing activities, (iv) theconsolidation of CMBS entities beginning in the second quarter of 2015 and (v) the acquisition of KFN on April 30, 2014 which did not contribute to our interestexpense for the first four months of 2014. Income (Loss) Before Taxes The decrease was primarily due to lower investment income and lower fees and other, partially offset by lower expenses, as described above.Income Tax (Benefit)Income taxes for the year ended December 31, 2015 remained largely unchanged from the year ended December 31, 2014. Because certain investment fundsowned by the KKR Group Partnerships are subject to corporate taxes, unrealized losses recognized by those funds during 2015 offset an increase in KKR & Co.L.P.'s weighted average ownership percentage in the KKR Group Partnerships, which increased from approximately 49.5% for the year ended December 31, 2014to approximately 54.9% for the year ended December 31, 2015. The increase in ownership, primarily the result of exchanges of units in KKR Holdings for KKRcommon units during 2015, subjects a greater level of income to corporate taxes.Net Income (Loss) Attributable to Noncontrolling Interests and Appropriated Capital The decrease was primarily driven by lower investment income as described above and a decrease in KKR Holdings' weighted average ownership percentagein the KKR Group Partnerships from approximately 50.5% for the year ended December 31, 2014 to approximately 45.1% for the year ended December 31, 2015.This decrease in ownership percentage is primarily due to exchanges of units in KKR Holdings for KKR common units during the year. 117Table of ContentsNet Income (Loss) Attributable to KKR & Co. L.P. Net income attributable to KKR & Co L.P. for the year ended December 31, 2015 remained largely unchanged from the year ended December 31, 2014 due tothe net impact of lower investment income as described above, which was offset by an increase in KKR & Co. L.P's weighted average ownership percentage in theKKR Group Partnerships from approximately 49.5% for the year ended December 31, 2014 to approximately 54.9% for the year ended December 31, 2015.Consolidated Statements of Financial ConditionThe following tables provide the Consolidated Statements of Financial Condition on a GAAP Basis as of December 31, 2016 and December 31, 2015.(Amounts in thousands, except common unit and per common unit amounts) As ofDecember 31, 2016 As ofDecember 31, 2015 Assets Cash and Cash Equivalents $2,508,902 $1,047,740Investments 31,409,765 65,305,931Other 5,084,230 4,688,668Total Assets 39,002,897 71,042,339 Liabilities and Equity Debt Obligations 18,544,075 18,714,597Other Liabilities 3,340,739 2,860,157Total Liabilities 21,884,814 21,574,754 Redeemable Noncontrolling Interests 632,348 188,629 Equity Series A Preferred Units 332,988 —Series B Preferred Units 149,566 —KKR & Co. L.P. Capital - Common Unitholders 5,457,279 5,547,182Noncontrolling Interests 10,545,902 43,731,774Total Equity 16,485,735 49,278,956Total Liabilities and Equity $39,002,897 $71,042,339 KKR & Co. L.P. Capital Per Outstanding Common Unit - Basic $12.06 $12.12 118Table of ContentsConsolidated Statement of Cash Flows The accompanying consolidated statements of cash flows include the cash flows of our consolidated entities which include certain consolidated investmentfunds and CFEs notwithstanding the fact that we may hold only a minority economic interest in those funds and CFEs.On January 1, 2016, KKR adopted ASU 2015-02 which resulted in the de-consolidation of most of KKR's investment funds. KKR adopted this new guidanceusing the modified retrospective method. As a result, no retrospective adjustment is required and prior periods discussed below have not been impacted.The assets of our consolidated funds and CFEs, on a gross basis, can be substantially larger than the assets of our business and, accordingly, could have asubstantial effect on the cash flows reflected in our consolidated statements of cash flows. The primary cash flow activities of our consolidated funds and CFEsinvolve: (i) capital contributions from fund investors; (ii) using the capital of fund investors to make investments; (iii) financing certain investments withindebtedness; (iv) generating cash flows through the realization of investments; and (v) distributing cash flows from the realization of investments to fundinvestors. Because our consolidated funds and CFEs are treated as investment companies for accounting purposes, certain of these cash flow amounts are includedin our cash flows from operations.Net Cash Provided by (Used in) Operating Activities Our net cash provided by (used in) operating activities was $(1.6) billion , $0.4 billion and $1.5 billion during the years ended December 31, 2016 , 2015 and2014, respectively. These amounts primarily included: (i) proceeds from sales of investments net of purchases of investments of $(1.2) billion , $(0.7) billion and$1.0 billion during the years ended December 31, 2016 , 2015 and 2014, respectively; (ii) net realized gains (losses) on investments of $0.3 billion , $3.0 billionand $5.4 billion during the years ended December 31, 2016 , 2015 and 2014, respectively; and (iii) change in unrealized gains (losses) on investments of $(4.2)million , $1.7 billion and $(0.7) billion during the years ended December 31, 2016 , 2015 and 2014, respectively. Investment funds are, for GAAP purposes,investment companies and reflect their investments and other financial instruments at fair value. Net Cash Provided by (Used in) Investing Activities Our net cash provided by (used in) investing activities was $(62.5) million , $(425.2) million and $(22.9) million during the years ended December 31, 2016 ,2015 and 2014, respectively. Our investing activities included: (i) a change in restricted cash and cash equivalents (that primarily funds collateral requirements) of$1.4 million , $(164.6) million and $(10.8) million during the years ended December 31, 2016 , 2015 and 2014, respectively; (ii) the purchases of fixed assets of$(62.7) million , $(169.4) million and $(12.2) million during the years ended December 31, 2016 , 2015 and 2014, respectively; (iii) proceeds from sales of oil andnatural gas properties, net of development of oil and natural gas properties of $(1.3) million , $(91.1) million and $(151.4) million for the years endedDecember 31, 2016 , 2015 and 2014, respectively; and (iv) net of cash acquired of $151.5 million for the year ended December 31, 2014. Net Cash Provided by (Used in) Financing Activities Our net cash provided by (used in) financing activities was $3.1 billion , $0.2 billion and $(1.9) billion during the years ended December 31, 2016 , 2015 and2014, respectively. Our financing activities primarily included: (i) distributions to, net of contributions by, our noncontrolling and redeemable noncontrollinginterests of $0.9 billion , $(7.0) billion and $(2.7) billion during the years ended December 31, 2016 , 2015 and 2014, respectively; (ii) proceeds received net ofrepayment of debt obligations of $2.4 billion , $8.1 billion and $1.7 billion during the years ended December 31, 2016 , 2015 and 2014, respectively;(iii) distributions to our partners of $(285.4) million , $(706.6) million and $(785.0) million during the years ended December 31, 2016 , 2015 and 2014,respectively; (iv) net delivery of common units of $(50.5) million , $15.2 million and $(8.8) million during the years ended December 31, 2016 , 2015 and 2014,respectively; (v) unit repurchases of $(296.8) million and $(161.9) million during the years ended December 31, 2016 and 2015; (vi) issuance of Preferred Units of$482.6 million during the year ended December 31, 2016 and (vii) Preferred Units distributions of $(22.2) million during the year ended December 31, 2016 .119Table of ContentsSegment Analysis The following is a discussion of the results of our four reportable business segments for the years ended December 31, 2016 , 2015 and 2014. You should readthis discussion in conjunction with the information included under “—Basis of Financial Presentation—Segment Operating and Performance Measures” and theconsolidated financial statements and related notes included elsewhere in this report. As of December 31, 2015, KKR’s management reevaluated the manner in which it made operational and resource deployment decisions and assessed theoverall performance of each of KKR’s operating segments. As a result, as of December 31, 2015, KKR modified the presentation of its segment financialinformation relative to the presentation in prior periods. In addition, since becoming a public company, our Principal Activities assets have grown in significanceand are a meaningful contributor to our financial results.Certain of the more significant changes between KKR’s current segment presentation and its segment presentation reported prior to December 31, 2015, aredescribed in the following commentary.Inclusion of a Fourth SegmentAll income (loss) on investments is attributed to the Principal Activities segment. Prior to December 31, 2015, income on investments held directly by KKRwas 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 andstrategic partnerships have been reported in our other segments.Expense AllocationsAs of December 31, 2015, we have changed the manner in which expenses are allocated among our operating segments. Specifically, as described below, (i) aportion of expenses, except for broken deal expenses, previously reflected in our Private Markets, Public Markets or Capital Markets segments are now reflected inthe Principal Activities segment and (ii) corporate expenses are allocated across all segments.Expenses Allocated to Principal Activities A portion of our 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 segments 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 our 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 allocatedto Principal Activities is based on the proportion of revenue earned by Principal Activities, relative to other operating segments, over the preceding four calendaryears. This allocation percentage is updated annually or more frequently if there are material changes to our business. The method for expense allocation to be usedin 2017 to allocate expense to the Principal Activities segment is currently being re-evaluated, and the percentage used to allocate such expenses for 2017 hascurrently not been determined. Below is a summary of the allocation to Principal Activities, relative to other operating segments, for the years ended December 31,2016, 2015 and 2014:•2016 Allocation: 22.6%, based on revenues earned in 2015, 2014, 2013 and 2012•2015 Allocation: 25.4%, based on revenues earned in 2014, 2013, 2012 and 2011•2014 Allocation: 31.7%, based on revenues earned in 2013, 2012, 2011 and 2010 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 beallocated from the Private Markets, Public Markets and Capital Markets segments based on the proportion of headcount in each of these three segments.120Table of ContentsAllocations of Corporate OverheadCorporate expenses are allocated to each of the Private Markets, Public Markets, Capital Markets and Principal Activities segments based on the proportion ofrevenues earned by each segment over the preceding four calendar years. In our segment presentation reported prior to December 31, 2015, all corporate expenseswere allocated to the Private Markets segment. Below is a summary of the allocations to each of our operating segments for the years ended December 31, 2016,2015 and 2014. Expense AllocationSegment 2016 2015 2014 Private Markets 61.6% 58.7% 56.2%Public Markets 10.1% 9.8% 7.1%Capital Markets 5.7% 6.1% 5.0%Principal Activities 22.6% 25.4% 31.7%Total Reportable Segments 100.0% 100.0% 100.0% Based on revenue earned in 2015, 2014, 2013 & 2012 2014, 2013, 2012 & 2011 2013, 2012, 2011 & 2010 In connection with these modifications, segment information for the year ended December 31, 2014 has been presented in this Annual Report on Form 10-K inconformity with KKR’s current segment presentation. Consequently, this information will not be consistent with historical segment financial results previouslyreported. While the modified segment presentation impacted the amount of economic net income reported by each operating segment, it had no impact on KKR’seconomic net income on a total reportable segment basis.121Table of ContentsPrivate Markets Segment The following tables set forth information regarding the results of operations and certain key operating metrics for our Private Markets segment for the yearsended December 31, 2016 and 2015 .Year ended December 31, 2016 compared to year ended December 31, 2015 Year Ended December 31, 2016 December 31, 2015 Change ($ in thousands)Segment Revenues Management, Monitoring and Transaction Fees, Net Management Fees$466,422 $465,575 $847Monitoring Fees64,354 264,643 (200,289)Transaction Fees132,602 144,652 (12,050)Fee Credits(103,579) (195,025) 91,446Total Management, Monitoring and Transaction Fees, Net559,799 679,845 (120,046) Performance Income Realized Incentive Fees— — —Realized Carried Interest1,252,370 1,018,201 234,169Unrealized Carried Interest(416,060) 182,628 (598,688)Total Performance Income836,310 1,200,829 (364,519) Investment Income (Loss) Net Realized Gains (Losses)— — —Net Unrealized Gains (Losses)— — — Total Realized and Unrealized— — —Interest Income and Dividends— — —Interest Expense— — —Net Interest and Dividends— — —Total Investment Income (Loss)— — — Total Segment Revenues1,396,109 1,880,674 (484,565) Segment Expenses Compensation and Benefits Cash Compensation and Benefits194,240 193,995 245Realized Performance Income Compensation523,448 407,280 116,168Unrealized Performance Income Compensation(159,786) 74,560 (234,346)Total Compensation and Benefits557,902 675,835 (117,933)Occupancy and related charges35,785 33,640 2,145Other operating expenses135,425 127,836 7,589Total Segment Expenses729,112 837,311 (108,199) Income (Loss) attributable to noncontrolling interests— 1,645 (1,645) Economic Net Income (Loss)$666,997 $1,041,718 $(374,721) Assets Under Management$73,815,500 $66,028,600 $7,786,900Fee Paying Assets Under Management$52,204,800 $45,307,400 $6,897,400Capital Invested$6,344,000 $6,279,500 $64,500Uncalled Commitments$31,478,700 $22,766,300 $8,712,400122Table of ContentsSegment Revenues Management, Monitoring and Transaction Fees, Net The net decrease was primarily due to a decrease in monitoring fees of $200.3 million and a decrease in transaction fees of $12.1 million, partially offset by acorresponding decrease in fee credits of $91.4 million. The decrease in monitoring fees was primarily the result of $198.8 million of fees received during 2015from the termination of monitoring agreements in connection with the exits or partial exits of the following (i) Alliance Boots GmbH, which was acquired byWalgreens Co. and renamed Walgreens Boots Alliance, Inc. (NASDAQ: WBA) subsequent to the acquisition, (ii) Big Heart Pet Brands (consumer productssector), (iii) Biomet, Inc., which was acquired by Zimmer Holdings Inc. and renamed Zimmer Biomet Holdings, Inc. (NYSE: ZBH) subsequent to its acquisition,(iv) the IPO of Go Daddy Inc. (NYSE: GDDY) and (v) the IPO of First Data Corporation (NYSE: FDC) compared to $15.3 million of such termination paymentsduring the year ended December 31, 2016 in connection with the IPO of US Foods Holding Corp. (NYSE: USFD). The level of termination payments that wererealized in 2015 and in certain other historical periods are not expected to recur in future periods, because current monitoring agreements generally provide forsmaller termination payments than have been provided for in such historical periods. Termination payments may recur in future periods but are infrequent in natureand are generally correlated with IPO and other realization activity in our private equity portfolio. In addition, recurring monitoring fees decreased $16.8 million asa result of a decrease in the average size of the fee paid by the portfolio companies. For the year ended December 31, 2016, we had 53 portfolio companies thatwere paying an average monitoring fee of $0.9 million compared with 52 portfolio companies that were paying an average monitoring fee of $1.3 million for theyear ended December 31, 2015. The decrease in transaction fees was primarily attributable to a decrease in both the number and size of transaction fee generatinginvestments. During the year ended December 31, 2016, there were 35 investments that paid an average fee of $3.8 million compared to 37 transaction fee-generating investments paying an average fee of $3.9 million during the year ended December 31, 2015. Transaction fees vary by investment based upon a numberof factors, the most significant of which are transaction size, the particular discussions as to the amount of the fees, the complexity of the transaction and KKR’srole in the transaction. The decrease in fee credits is due primarily to a lower level of monitoring fees. The increase in management fees was primarily due to anincrease in capital raised in Global Infrastructure Investors II and Real Estate Partners Europe as well as more capital earning a fee in European Fund IV during2016 as such fund was continuing its capital raising efforts in 2015. These increases were partially offset by a decrease in management fees attributable to lowerinvested capital in our 2006 Fund, European Fund II and Asian Fund as a result of realizations. On January 1, 2017, Americas Fund XII commenced its investmentperiod and North America Fund XI entered its post investment period, the net effect of which is expected to be an increase in management fees by approximately$90 million in 2017 if not offset by other factors. On a segment basis, placement fees incurred in connection with capital raising activity are amortized as areduction of revenues. See also discussion under “- Assets Under Management” and “- Fee-Paying Assets Under Management”. Performance Income The net decrease is attributable to a lower level of carried interest primarily reflecting a lower level of net appreciation in value of our private equity portfoliocompared to the prior period.Realized carried interest for the year ended December 31, 2016 consisted primarily of realized gains from the sale or partial sale of Walgreens Boots Alliance,Inc., Alliance Tire Group B.V. (manufacturing sector) and HCA Holdings, Inc.Realized carried interest for the year ended December 31, 2015 consisted primarily of realized gains from the sales or partial sales of Walgreens BootsAlliance, Inc., Capital Safety Group and Zimmer Biomet Holdings, Inc.123Table of ContentsThe following table presents net unrealized carried interest by investment vehicle for the year ended December 31, 2016 and 2015 : Year Ended December 31, 2016 2015 ($ in thousands)Asian Fund II$146,382 $163,645North America Fund XI124,202 209,361Co-Investment Vehicles and Other33,976 (39,248)China Growth Fund7,668 31,730Real Estate Partners Americas(2,452) 14,669European Fund IV6,291 3,813E2 Investors1,453 (20,564)Global Infrastructure Investors948 6,678European Fund(4,395) (3,705)European Fund III(17,602) 42,923Millennium Fund(87,628) (26,714)Asian Fund(104,797) (116,185)European Fund II(191,071) 30,7972006 Fund(315,187) (111,965)Management Fee Refunds(13,848) (2,607) Total (1)$(416,060) $182,628(1) The above table excludes any funds for which there was no unrealized carried interest during either of the periods presented. For the year ended December 31, 2016 , the net unrealized carried interest loss of $(416.1) million included $712.2 million representing net increases in thevalue of various portfolio companies, and net unrealized losses of $(1,128.3) million primarily representing reversals of previously recognized net unrealized gainsin connection with the occurrence of realization events such as partial or full sales and management fee refunds. For the year ended December 31, 2016 , the value of our private equity investment portfolio increased 11.9%. This was comprised of a 3.9% increase in theshare prices of various publicly held or publicly indexed investments and an 18.4% increase in value of our privately held investments. The most significantincreases in share prices of various publicly held or publicly indexed investments were gains in US Foods Holding Corp. (NYSE: USFD), PRA Health SciencesInc. (NASDAQ: PRAH) and HCA Holdings, Inc. These increases were partially offset by decreased share prices of various publicly held investments, the mostsignificant of which were losses in First Data Corporation (NYSE:FDC), Walgreens Boots Alliance, Inc. (NYSE:WBA) and Qingdao Haier (CH: 600690). Ourprivately held investments contributed the remainder of the change in value, the most significant of which were gains relating to Panasonic Healthcare Co. Ltd,Capsugel (manufacturing) and Sedgwick Claims Management Services. The unrealized gains on our privately held investments were partially offset by unrealizedlosses relating primarily to Aricent Group (technology sector), OEG Management Partners Limited (energy sector) and Academy Ltd. (retail sector). The increasedvaluations of individual companies in our privately held investments, in the aggregate, generally related to (i) in the case of Panasonic Healthcare Co. Ltd,Capsugel and Sedgwick Claims Management Services, valuations that reflect agreements to sell all or a portion of these investments, (ii) an increase in the value ofmarket comparables and (iii) individual company performance. The decreased valuations of individual companies in our privately held investments, in theaggregate, generally related to (i) individual company performance or, in certain cases, an unfavorable business outlook and (ii) a decrease in the value of marketcomparables. In addition to the agreements to sell a portion of Panasonic Healthcare Co. Ltd, and all of Capsugel, as indicated above, realization activity such as dividendsand agreements to sell, including partial sales and secondary sales, subsequent to December 31, 2016 are expected, certain of which are subject to closingconditions, with respect to the following private equity portfolio companies: Asia Dairy Holdings, Galenica AG, Gland Pharma Limited, HCA Holdings, Inc.,China Greenland Rundong Auto Group Limited, TVS Logistics Services Limited, U.S. Foods Holding Corp., and National Vision, Inc. (retail sector).124Table of ContentsThe reversals of previously recognized net unrealized gains for the year ended December 31, 2016 resulted primarily from the sale or partial sales ofWalgreens Boots Alliance, Alliance Tire Group B.V. and HCA Holdings, Inc. During the year ended December 31, 2016, we recognized realized losses on SamsonResources (energy sector). This recognition of realized losses did not have a significant impact on our 2016 net carried interest because this investment had alreadybeen written down to zero value in prior periods. See "--Segment Analysis--Principal Activities Segment" and "See "--Segment Analysis--Principal ActivitiesSegment" and "--Segment Operating and Performance Measures--After-Tax Distributable Earnings" for a discussion of how our Samson Resources investmentimpacted Principal Activities and our distributable earnings. For the year ended December 31, 2015, the net unrealized carried interest income of $182.6 million included $1,021.5 million representing net increases in thevalue of various portfolio companies, which were partially offset by unrealized losses of $838.9 million primarily representing reversals of previously recognizednet unrealized gains in connection with the occurrence of realization events such as partial or full sales and management fee refunds. For the year ended December 31, 2015, the value of our private equity investment portfolio increased 14.2%. This was comprised of a 19.5% increase in theshare prices of various publicly held or publicly indexed investments and a 9.3% increase in value of our privately held investments. The most significant increasesin share prices of various publicly held or publicly indexed investments were gains in Walgreens Boots Alliance, Inc., PRA Health Sciences, Inc. (NASDAQ:PRAH) and GoDaddy, Inc. These increases were partially offset by decreased share prices of various publicly held investments, the most significant of which wereRigNet (NASDAQ: RNET), HCA Holdings, Inc. (NYSE: HCA) and CITIC Envirotech Ltd. Subsequent to December 31, 2015, world equity markets declinedsharply with both the S&P 500 and the MSCI World Index down on a total return basis, including dividends, as of February 22, 2016. See "--BusinessEnvironment". Our privately held investments contributed the remainder of the change in value, the most significant of which were gains relating to PanasonicHealthcare Co. Ltd (healthcare sector), Capital Safety Group (industrial sector) and Alliant Insurance Services (financial services sector). The unrealized gains onour privately held investments were partially offset by unrealized losses relating primarily to BIS Industries Ltd. (industrial sector), Acteon Group Ltd (energysector) and Aceco TI S.A. (technology sector). The increased valuations of individual companies in our privately held investments, in the aggregate, generallyrelated to (i) in the case of Capital Safety Group and Alliant Insurance Services, valuations that reflect agreements to sell these investments in whole or in part, (ii)an increase in the value of market comparables and (iii) individual company performance. The decreased valuations of individual companies in our privately heldinvestments, in the aggregate, generally related to (i) individual company performance or, in certain cases, an unfavorable business outlook and (ii) a decrease inthe value of market comparables. The reversals of previously recognized net unrealized gains for the year ended December 31, 2015 resulted primarily from the sale or partial sales ofWalgreens Boots Alliance, Inc., Capital Safety Group and Zimmer Biomet Holdings, Inc. During the year ended December 31, 2015, we wrote off Energy FutureHoldings (energy sector) and recognized realized losses. This write-off did not have a significant impact on our 2015 net carried interest because this investmenthad already been written down to zero value in prior periods. See "--Segment Analysis--Principal Activities Segment" and "--Segment Operating and PerformanceMeasures--After-Tax Distributable Earnings" for a discussion of how the Energy Future Holdings write-off impacted Principal Activities and our distributableearnings. Segment Expenses Compensation and Benefits The net decrease was due primarily to lower net performance income compensation resulting from a lower level of appreciation in value of our private equityportfolio as described above.Occupancy and Other Operating ExpensesThe increase is due to a higher level of expenses that are creditable to our investment funds and information technology related expenses.Economic Net Income (Loss) The decrease was primarily due to the lower levels of performance income and reduction in monitoring fees partially offset by the decrease in segmentexpenses as described above.125Table of ContentsAssets Under ManagementThe following table reflects the changes in our Private Markets AUM from December 31, 2015 to December 31, 2016 : ($ in thousands)December 31, 2015$66,028,600New Capital Raised16,170,200Distributions and Other(13,557,100)Change in Value5,173,800December 31, 2016$73,815,500AUM for the Private Markets segment was $73.8 billion at December 31, 2016 , an increase of $7.8 billion, compared to $66.0 billion at December 31, 2015.The increase was primarily attributable to new capital raised primarily in our Americas Fund XII, KKR Real Estate Finance Trust Inc., our Next GenerationTechnology Growth Fund and, to a lesser extent, an increase in the value of our Private Markets portfolio. These increases were offset by distributions to PrivateMarkets fund investors primarily as a result of realizations most notably in our 2006 Fund, Asian Fund, and European Fund III. The increase in the value of our Private Markets portfolio was driven primarily by net gains of $1.4 billion in our North American Fund XI, $1.0 billion in our2006 Fund and $0.9 billion in our European Fund III. The drivers of the overall change in value for Private Markets were a 3.9% increase in the share prices ofvarious publicly held or publicly indexed investments and an 18.4% increase in value of our privately held investments. The most significant increases in shareprices of various publicly held or publicly indexed investments were gains in US Foods Holding Corp. (NYSE: USFD), PRA Health Sciences Inc. (NASDAQ:PRAH) and HCA Holdings, Inc. These increases were partially offset by decreased share prices of various publicly held investments, the most significant of whichwere losses in First Data Corporation (NYSE:FDC), Walgreens Boots Alliance, Inc. (NYSE:WBA) and Qingdao Haier (CH: 600690). Our privately heldinvestments contributed the remainder of the change in value, the most significant of which were gains relating to Panasonic Healthcare Co. Ltd, Capsugel(manufacturing) and Sedgwick Claims Management Services. The unrealized gains on our privately held investments were partially offset by unrealized lossesrelating primarily to Aricent Group (technology sector), OEG Management Partners Limited (energy sector) and Academy Ltd. (retail sector). The increasedvaluations of individual companies in our privately held investments, in the aggregate, generally related to (i) in the case of Panasonic Healthcare Co. Ltd,Capsugel and Sedgwick Claims Management Services, valuations that reflect agreements to sell all or a portion of these investments, (ii) an increase in the value ofmarket comparables and (iii) individual company performance. The decreased valuations of individual companies in our privately held investments, in theaggregate, generally related to (i) individual company performance or, in certain cases, an unfavorable business outlook and (ii) a decrease in the value of marketcomparables.Certain investments included in our AUM are denominated in currencies other than the U.S. dollar. Those investments expose our AUM to the risk that thevalue of the investments will be affected by changes in exchange rates between the currency in which the investments are denominated and the currency in whichthe investments are made. Our policy is to minimize these risks in certain cases by employing hedging techniques, including using foreign currency options andforeign exchange forward contracts to reduce exposure to changes in exchange rates when a meaningful amount of capital has been invested in currencies otherthan the currencies in which the investments are denominated. We do not, however, hedge our currency exposure in all currencies or all investments. See “-Quantitative and Qualitative Disclosures about Market Risk -- Exchange Rate Risk” and “Risk Factors-Risks Related to the Assets We Manage--We makeinvestments in companies that are based outside of the United States, which may expose us to additional risks not typically associated with investing in companiesthat are based in the United States.” Fee-Paying Assets Under Management The following table reflects the changes in our Private Markets FPAUM from December 31, 2015 to December 31, 2016 : ($ in thousands)December 31, 2015$45,307,400New Capital Raised14,520,900Distributions and Other(5,258,000)Net Changes in Fee Base of Certain Funds(2,546,200)Change in Value180,700December 31, 2016$52,204,800126Table of ContentsFPAUM in our Private Markets segment was $52.2 billion at December 31, 2016 , an increase of $6.9 billion, compared to $45.3 billion at December 31,2015. The increase was primarily attributable to new capital raised in our Americas Fund XII, Real Estate Partners Europe, KKR Real Estate Finance Trust Inc.,and Next Generation Technology Growth Fund. These increases were partially offset by distributions and other activity and net changes in the fee base of certainfunds. Distributions and other activity primarily related to (i) realizations in our 2006 Fund, Asian Fund and European Fund III and (ii) the termination of amanagement fee agreement with respect to one client. The decreases related to net changes in fee base primarily relates to our North America Fund XI entering itspost-investment period during which it earns fees based on invested capital rather than committed capital. Additionally, upon entering its post-investment period,North America Fund XI has established a reserve on its fund investors' capital commitments on which no fee is paid unless such capital is invested. Uncalledcapital commitments from investment funds from which KKR is currently not earning management fees amounted to approximately $6.7 billion at December 31,2016, which includes capital commitments reserved for follow-on investments for funds that have completed their investment periods. This capital will generallybegin to earn management fees upon deployment of the capital or upon the commencement of the fund's investment period. The average annual management feerate associated with this capital is approximately 0.9%. We will not begin earning fees on this capital until it is deployed or the related investment periodcommences, neither of which is guaranteed. If and when such management fees are earned, which will occur over an extended period of time, a portion of existingFPAUM may cease paying fees or pay lower fees, thus offsetting a portion of any new management fees earned. On January 1, 2017, Americas Fund XIIcommenced its investment period and North America Fund XI entered its post investment period, the net effect of which is expected to be an increase inmanagement fees in 2017 if not offset by other factors. Capital Invested For the year ended December 31, 2016, capital invested in our private equity platform increased from $4.6 billion in the prior year to $5.1 billion in the currentyear. This increase was partially offset by a decrease in capital invested in our real assets and other platforms which decreased from $1.7 billion in the prior year to$1.2 billion in the current year. Generally, the portfolio companies acquired through our private equity funds have higher transaction values and result in highercapital invested relative to transactions in our real assets funds. The number of large private equity investments made in any quarter is volatile and consequently, asignificant amount of capital invested in one quarter or a few quarters may not be indicative of a similar level of capital deployment in future quarters. As ofFebruary 9, 2017, our Private Markets business had announced transactions that were subject to closing which aggregated approximately $3.0 billion. Transactionssubject to closing are subject to closing conditions which, if not satisfied, would result in a transaction not being consummated.Uncalled Commitments As of December 31, 2016 , our Private Markets segment had $31.5 billion of remaining uncalled capital commitments that could be called for investments innew transactions. The increase is due primarily to new capital raised in Americas Fund XII, partially offset by capital called from fund investors to fundinvestments during the period. 127Table of ContentsThe following tables set forth information regarding the results of operations and certain key operating metrics for our Private Markets segment for the yearsended December 31, 2015 and 2014.Year ended December 31, 2015 compared to year ended December 31, 2014 Year Ended December 31, 2015 December 31, 2014 Change ($ in thousands)Segment Revenues Management, Monitoring and Transaction Fees, Net Management Fees$465,575 $453,210 $12,365Monitoring Fees264,643 135,160 129,483Transaction Fees144,652 214,612 (69,960)Fee Credits(195,025) (198,680) 3,655Total Management, Monitoring and Transaction Fees, Net679,845 604,302 75,543 Performance Income Realized Incentive Fees— — —Realized Carried Interest1,018,201 1,159,011 (140,810)Unrealized Carried Interest182,628 70,058 112,570Total Performance Income1,200,829 1,229,069 (28,240) Investment Income (Loss) Net Realized Gains (Losses)— — —Net Unrealized Gains (Losses)— — —Total Realized and Unrealized— — —Interest Income and Dividends— — —Interest Expense— — —Net Interest and Dividends— — —Total Investment Income (Loss)— — — Total Segment Revenues1,880,674 1,833,371 47,303 Segment Expenses Compensation and Benefits Cash Compensation and Benefits193,995 153,339 40,656Realized Performance Income Compensation407,280 463,605 (56,325)Unrealized Performance Income Compensation74,560 33,430 41,130Total Compensation and Benefits675,835 650,374 25,461Occupancy and related charges33,640 30,946 2,694Other operating expenses127,836 125,398 2,438Total Segment Expenses837,311 806,718 30,593 Income (Loss) attributable to noncontrolling interests1,645 1,424 221 Economic Net Income (Loss)$1,041,718 $1,025,229 $16,489 Assets Under Management$66,028,600 $64,611,300 $1,417,300Fee Paying Assets Under Management$45,307,400 $47,262,500 $(1,955,100)Capital Invested$6,279,500 $9,202,700 $(2,923,200)Uncalled Commitments$22,766,300 $18,272,400 $4,493,900128Table of ContentsSegment Revenues Management, Monitoring and Transaction Fees, Net The net increase was primarily due to an increase in monitoring fees of $129.5 million and an increase in management fees of $12.4 million, partially offset bya decrease in transaction fees of $70.0 million. The increase in monitoring fees was primarily the result of $198.8 million of monitoring fees received during 2015from the termination of monitoring fee arrangements in connection with the initial public offering (IPO) or partial exits of First Data Corporation (NYSE: FDC),Walgreens Boots Alliance, Inc. (NASDAQ: WBA), J.M. Smucker Company (NYSE: SJM), Zimmer Biomet Holdings, Inc. (NYSE: ZBH) and GoDaddy, Inc.(NYSE: GDDY) compared to approximately $23.2 million of such fees received during the year ended December 31, 2014. These types of termination paymentsmay occur in the future; however, they are infrequent in nature and are generally correlated with IPO and other realization activity in our private equity portfolio.This increase in monitoring fees from termination payments was partially offset by a decrease in recurring monitoring fees of $46.1 million. The decrease inrecurring monitoring fees was primarily the result of a decrease in the number of portfolio companies paying a monitoring fee and a decrease in the average size ofthe fee. For the year ended December 31, 2015, we had 43 portfolio companies that were paying an average monitoring fee of $1.5 million compared with 50portfolio companies that were paying an average monitoring fee of $2.2 million for the year ended December 31, 2014. In future periods, we anticipate thatrecurring monitoring fees will continue to decrease as a result of realizations and other transactions such as initial public offerings, if not offset by additionalportfolio companies paying recurring monitoring fees. The increase in management fees was primarily due to new capital raised in European Fund IV and GlobalInfrastructure Investors II offset by a decrease in management fees attributable to lower invested capital in our European Fund II, 2006 Fund and European Fund IIIas a result of realizations. See also discussion under “- Assets Under Management” and “- Fee-Paying Assets Under Management”. The decrease in transaction feeswas primarily attributable to a decrease in the average fee earned on completed investments during the year ended December 31, 2015. During the year endedDecember 31, 2015, there were 37 transaction fee-generating investments paying an average fee of $3.9 million compared to 33 transaction fee-generatinginvestments paying an average fee of $6.5 million during the year ended December 31, 2014. Transaction fees vary by investment based upon a number of factors,the most significant of which are transaction size, the particular discussions as to the amount of the fees, the complexity of the transaction and KKR’s role in thetransaction.Performance Income The net decrease is attributable to lower net carried interest losses primarily resulting from a lower level of investment gains at carry earning funds during thecurrent period.Realized carried interest for the year ended December 31, 2015 consisted primarily of realized gains from the sales or partial sale of Walgreens Boots Alliance,Inc., Capital Safety Group and Zimmer Biomet Holdings, Inc. Realized carried interest for the year ended December 31, 2014 consisted primarily of realized gains from the sales of Oriental Brewery (consumer productssector), WILD Flavors GmbH and Versatel GmbH (telecom sector).129Table of ContentsThe following table presents net unrealized carried interest by investment vehicle for the years ended December 31, 2015 and 2014: Year Ended December 31, 2015 2014 ($ in thousands)North America Fund XI$209,361 $189,063Asian Fund II163,645 58,967European Fund III42,923 (34,914)China Growth Fund31,730 (6,346)European Fund II30,797 (112,091)Real Estate Partners Americas14,669 (662)Global Infrastructure Investors6,678 —European Fund IV3,813 —European Fund(3,705) (826)E2 Investors(20,564) (20,253)Millennium Fund(26,714) (40,489)Co-Investment Vehicles and Other(39,248) 99,0262006 Fund(111,965) 128,970Asian Fund(116,185) (176,456)Management Fee Refunds(2,607) (13,931) Total (1)$182,628 $70,058(1) The above table excludes any funds for which there was no unrealized carried interest during either of the periods presented. For the year ended December 31, 2015, the net unrealized carried interest income of $182.6 million included $1,021.5 million representing net increases in thevalue of various portfolio companies, which were partially offset by unrealized losses of $838.9 million primarily representing reversals of previously recognizednet unrealized gains in connection with the occurrence of realization events such as partial or full sales and management fee refunds. For the year ended December 31, 2015, the value of our private equity investment portfolio increased 14.2%. This was comprised of a 19.5% increase in theshare prices of various publicly held or publicly indexed investments and a 9.3% increase in value of our privately held investments. The most significant increasesin share prices of various publicly held or publicly indexed investments were gains in Walgreens Boots Alliance, Inc., PRA Health Sciences, Inc. (NASDAQ:PRAH) and GoDaddy, Inc. These increases were partially offset by decreased share prices of various publicly held investments, the most significant of which wereRigNet (NASDAQ: RNET), HCA Holdings, Inc. (NYSE: HCA) and CITIC Envirotech Ltd. (SP: CEL). Subsequent to December 31, 2015, world equity marketsdeclined sharply with both the S&P 500 and the MSCI World Index down on a total return basis, including dividends, as of February 22, 2016. See "--BusinessEnvironment". Our privately held investments contributed the remainder of the change in value, the most significant of which were gains relating to PanasonicHealthcare Co. Ltd (healthcare sector), Capital Safety Group (industrial sector) and Alliant Insurance Services (financial services sector). The unrealized gains onour privately held investments were partially offset by unrealized losses relating primarily to BIS Industries Ltd. (industrial sector), Acteon Group Ltd (energysector) and Aceco TI S.A. (technology sector). The increased valuations of individual companies in our privately held investments, in the aggregate, generallyrelated to (i) in the case of Capital Safety Group and Alliant Insurance Services, valuations that reflect agreements to sell these investments in whole or in part, (ii)an increase in the value of market comparables and (iii) individual company performance. The decreased valuations of individual companies in our privately heldinvestments, in the aggregate, generally related to (i) individual company performance or, in certain cases, an unfavorable business outlook and (ii) a decrease inthe value of market comparables. The reversals of previously recognized net unrealized gains for the year ended December 31, 2015 resulted primarily from the sale or partial sales ofWalgreens Boots Alliance, Inc., Capital Safety Group and Zimmer Biomet Holdings, Inc. During the year ended December 31, 2015, we wrote off Energy FutureHoldings (energy sector) and recognized realized losses. This write-off did not have a significant impact on our 2015 net carried interest because this investmenthad already been written down to zero value in prior periods. See "--Segment Analysis--Principal Activities Segment" and "--Liquidity--Liquidity130Table of ContentsNeeds--After-Tax Distributable Earnings" for a discussion of how the Energy Future Holdings write-off impacted Principal Activities and our distributableearnings. Subsequent to December 31, 2015, we expect to write-off our investment in Samson Resources once our losses are realized. Since this investment hasalready been written down to zero value in periods prior to December 31, 2015, this write-off is not expected to have a significant impact on our net carried interestin future periods. For the year ended December 31, 2014, the net unrealized carried interest income of $70.1 million include $1,098.2 million representing net increases in thevalue of various portfolio companies, which were partially offset by unrealized losses of $1,028.1 million primarily representing reversals of previously recognizednet unrealized gains in connection with the occurrence of realization events such as partial or full sales and management fee refunds.For the year ended December 31, 2014, the value of our private equity investment portfolio increased 12.8%. Increased share prices of various publicly heldinvestments comprised approximately 23% of the net increase in value for the year ended December 31, 2014, the most significant of which were gains on PRAHealth Sciences, Inc., HCA Holdings, Inc., NXP Semiconductors N.V. and Yageo Corporation. These increases were partially offset by decreased share prices ofvarious publicly held investments, the most significant of which were Tarkett S.A., ProSiebenSat.1 Media AG and China Greenland Rundong Auto Group Limited.Our privately‑held investments contributed the remainder of the change in value, the most significant of which were gains relating to Alliance Boots GmbH,Biomet, Inc. and WILD Flavors GmbH. The unrealized gains on our privately‑held investments were partially offset by unrealized losses relating primarily toNorthgate Information Solutions, Samson Resources and Toys R Us. The increased valuations of individual companies in our privately‑held investments, in theaggregate, generally related to (i) an increase in the value of market comparables and individual company performance, (ii) in the case of WILD Flavors GmbH andBiomet, Inc., an increase that primarily reflected agreements to sell these investments, with the sale of WILD Flavors GmbH completed in October 2014, and(iii) in the case of Alliance Boots GmbH, primarily due to an agreement to exit the investment and to a lesser extent an increase in the value of a publicly tradedstock that was expected to be delivered pursuant to this agreement, which was completed on December 31, 2014. The decreased valuations of individual companiesin our privately‑held investments, in the aggregate, generally related to individual company performance or, in certain cases, an unfavorable business outlook.The reversals of previously recognized net unrealized gains for the year ended December 31, 2014 resulted primarily from the sale of Oriental Brewery, thesale of WILD Flavors GmbH, the partial sale of HCA Holdings, Inc. and the sale of Jazz Pharmaceuticals, Inc. (NASDAQ: JAZZ). During the year endedDecember 31, 2014, we wrote off A.T.U Auto-Teile-Unger (retail sector) and U.N. RO‑RO Isletmeleri A.S. (transportation sector) and recognized realized losses.These 2014 write‑offs did not have a significant impact on our 2014 net carried interest because these interests had already been substantially written down in priorperiods. Segment Expenses Compensation and Benefits The net increase was due primarily to (i) higher cash compensation and benefits consistent with a higher level of fee income in the current period and (ii) adecrease in the amount of compensation expenses allocated from Private Markets to Principal Activities as result of a decrease in the proportion of revenue earnedby Principal Activities relative to other operating segments during 2015. These increases were partially offset by lower allocations to carry pool driven by the lowerlevels of net carried interest as discussed in "Performance Income" above.Occupancy and Other Operating Expenses The net increase was primarily driven by (i) higher allocations of corporate operating expenses to Private Markets due to an increase in both the amount ofcorporate operating expenses incurred by the firm and an increase in the proportion of revenue earned by Private Markets relative to other operating segments in2015, (ii) a decrease in the amount of operating expenses allocated from Private Markets to Principal Activities as a result of a decrease in the proportion ofrevenue earned by Principal Activities relative to other operating segments during 2015 and (iii) an increase in professional fees and other expenses. Theseincreases were partially offset by a decrease in expenses for unconsummated transactions, also known as broken deal expenses. Economic Net Income (Loss) The increase was primarily due to higher fee income, partially offset by an increase in segment expenses and a decrease in performance income as describedabove. 131Table of ContentsAssets Under Management The following table reflects the changes in our Private Markets AUM from December 31, 2014 to December 31, 2015: ($ in thousands)December 31, 2014 - As Adjusted$64,611,300New Capital Raised6,950,200Distributions(11,832,500)Change in Value6,299,600December 31, 2015$66,028,600As of December 31, 2014, AUM has been adjusted to include capital commitments for which we are eligible to receive fees or carried interest upondeployment of capital. Our reported AUM for periods prior to December 31, 2014 does not include this item.AUM for the Private Markets segment was $66.0 billion at December 31, 2015, an increase of $1.4 billion, compared to $64.6 billion at December 31, 2014,on an as adjusted basis. The increase was primarily attributable to new capital raised primarily in European Fund IV and Global Infrastructure Investors II and to alesser extent an increase in value of our Private Markets portfolio. These increases were partially offset by distributions to private equity fund investors of $11.8billion comprised of $6.9 billion of realized gains and $4.9 billion of return of original cost. The increase in the value of our Private Markets portfolio was driven primarily by net unrealized gains of $1.8 billion, $1.5 billion and $0.9 billion in our 2006Fund, North America Fund XI and Asian Fund II, respectively. This was comprised of a 19.5% increase in the share prices of various publicly held or publiclyindexed investments and a 9.3% increase in value of our privately held investments. The most significant increases in share prices of various publicly held orpublicly indexed investments were gains in Walgreens Boots Alliance, Inc., PRA Health Sciences, Inc. (NASDAQ: PRAH) and GoDaddy, Inc. These increaseswere partially offset by decreased share prices of various publicly held investments, the most significant of which were RigNet (NASDAQ: RNET), HCAHoldings, Inc. (NYSE: HCA) and CITIC Envirotech Ltd. (SP: CEL). Subsequent to December 31, 2015, world equity markets declined sharply with both the S&P500 and the MSCI World Index down on a total return basis, including dividends, as of February 22, 2016. See "--Business Environment". Our privately heldinvestments contributed the remainder of the change in value, the most significant of which were gains relating to Panasonic Healthcare Co. Ltd (healthcare sector),Capital Safety Group (industrial sector) and Alliant Insurance Services (financial services sector). The unrealized gains on our privately held investments werepartially offset by unrealized losses relating primarily to BIS Industries Ltd. (industrial sector), Acteon Group Ltd (energy sector) and Aceco TI S.A. (technologysector). The increased valuations of individual companies in our privately held investments, in the aggregate, generally related to (i) in the case of Capital SafetyGroup and Alliant Insurance Services, valuations that reflect agreements to sell these investments in whole or in part, (ii) an increase in the value of marketcomparables and (iii) individual company performance. The decreased valuations of individual companies in our privately held investments, in the aggregate,generally related to (i) individual company performance or, in certain cases, an unfavorable business outlook and (ii) a decrease in the value of marketcomparables. Fee-Paying Assets Under Management The following table reflects the changes in our Private Markets FPAUM from December 31, 2014 to December 31, 2015: ($ in thousands)December 31, 2014$47,262,500New Capital Raised3,896,100Distributions and Other(5,545,200)Change in Value(306,000)December 31, 2015$45,307,400 FPAUM in our Private Markets segment was $45.3 billion at December 31, 2015, a decrease of $2.0 billion, compared to $47.3 billion at December 31, 2014.The decrease was primarily attributable to distributions to private equity fund investors and a reduction in FPAUM attributable to the invested capital of SamsonResources due to its bankruptcy proceedings which is included within distributions and other in the table above. These decreases were partially offset by newcapital raised of $3.9 billion primarily in our European Fund IV and Global Infrastructure Investors II funds. 132Table of ContentsCapital Invested The decrease was due to a decrease in the amount of capital invested in our private equity platform, which was partially offset by an increase in capitalinvested in our real assets platforms (real estate, energy and infrastructure). For the years ended December 31, 2015 and 2014, capital invested in our private equityplatform was $4.6 billion and $7.8 billion, respectively, and capital invested in our real assets platforms was $1.7 billion and $1.4 billion, respectively. Generally,the operating companies acquired through our private equity business have higher transaction values and result in higher capital invested relative to transactions inour real assets businesses. The number of large private equity investments made in any quarter is volatile and consequently, a significant amount of capital investedin one quarter or a few quarters may not be indicative of a similar level of capital deployment in future quarters.Uncalled Commitments As of December 31, 2015, our Private Markets segment had $22.8 billion of remaining uncalled capital commitments that could be called for investments innew transactions.133Table of ContentsPublic Markets Segment The following tables set forth information regarding the results of operations and certain key operating metrics for our Public Markets segment for the yearsended December 31, 2016 and 2015 .Year ended December 31, 2016 compared to year ended December 31, 2015 Year Ended December 31, 2016 December 31, 2015 Change ($ in thousands)Segment Revenues Management, Monitoring and Transaction Fees, Net Management Fees $331,440 $266,458 $64,982Monitoring Fees — — —Transaction Fees 30,155 28,872 1,283Fee Credits (28,049) (24,595) (3,454)Total Management, Monitoring and Transaction Fees, Net 333,546 270,735 62,811 Performance Income Realized Incentive Fees 33,346 19,647 13,699Realized Carried Interest 3,838 8,953 (5,115)Unrealized Carried Interest (4,312) (19,083) 14,771Total Performance Income 32,872 9,517 23,355 Investment Income (Loss) Net Realized Gains (Losses) — — —Net Unrealized Gains (Losses) — — — Total Realized and Unrealized — — —Interest Income and Dividends — — —Interest Expense — — —Net Interest and Dividends — — —Total Investment Income (Loss) — — — Total Segment Revenues 366,418 280,252 86,166 Segment Expenses Compensation and Benefits Cash Compensation and Benefits 77,017 73,863 3,154Realized Performance Income Compensation 14,873 11,438 3,435Unrealized Performance Income Compensation (1,724) (7,633) 5,909Total Compensation and Benefits 90,166 77,668 12,498Occupancy and related charges 9,517 9,808 (291)Other operating expenses 38,439 40,591 (2,152)Total Segment Expenses 138,122 128,067 10,055 Income (Loss) attributable to noncontrolling interests — 1,259 (1,259) Economic Net Income (Loss) $228,296 $150,926 $77,370 Assets Under Management $55,740,200 $53,515,700 $2,224,500Fee Paying Assets Under Management $49,268,600 $46,413,100 $2,855,500Capital Invested $4,642,200 $5,244,900 $(602,700)Uncalled Commitments $6,312,600 $6,690,800 $(378,200) 134Table of ContentsSegment Revenues Management, Monitoring and Transaction Fees, Net The net increase was primarily due to an increase in management fees of $65.0 million which included $40.2 million of increased management fees earnedrelating to our strategic investment in Marshall Wace LP and its affiliates ("Marshall Wace") which was completed in the fourth quarter of 2015 and highermanagement fees relating to an increase in capital invested in our Special Situations Fund II, Lending Partners II Fund, and Lending Partners Europe Fund, as wellas new capital raised primarily in Corporate Capital Trust (a private BDC sub-advised by KKR). This increase was partially offset by a decrease in managementfees in our hedge funds solutions business as a result of a reduction in fee paying AUM due to redemptions as well as our Mezzanine Fund entering its post-investment period, when it earns fees at a lower rate and on invested rather than committed capital.Performance Income The net increase was primarily attributable to higher incentive fees and a lower level of net carried interest losses compared to the prior period. Incentive feesincreased due primarily to higher incentive fees relating to our strategic partnership with Marshall Wace which was completed in the fourth quarter of 2015 andhigher incentive fees at Corporate Capital Trust reflecting favorable investment performance. These incentive fee increases were partially offset by a lower level ofincentive fees in our hedge funds solutions business driven by less favorable financial performance in 2016. Incentive fees are typically determined for the twelve-month periods ending in either the second or fourth quarters of the calendar year, however, such fees may be determined quarterly or at other points during the yearfor certain strategies. Whether incentive fees from KKR vehicles or strategic partnerships are payable in any given period, and the amount of such incentive feepayments, if any, depends on the investment performance of the vehicle and as a result is expected to vary significantly from period to period. The lower level ofnet carried interest losses was primarily the result of (i) carried interest losses in the prior year in our Special Situations Fund compared to no carried interest in thecurrent year and (ii) increased carried interest in our Lending Partners II Fund, partially offset by (iii) carried interest losses in our Mezzanine Fund and LendingPartners Fund in 2016.Segment Expenses Compensation and Benefits The increase was primarily due to higher net performance income compensation in connection with a higher level of realized incentive fees for the year endedDecember 31, 2016 as compared the year ended December 31, 2015 as described above. To a lesser extent there was an increase in cash compensation and benefitsprimarily due to a higher level of management fees which generally results in higher compensation expense. Occupancy and Other Operating Expenses The decrease was primarily driven by a reduction reflecting the cost to exit office space during 2015. Economic Net Income (Loss) The increase is primarily attributable to the increase in management fees and performance income partially offset by an increase in compensation and benefitsexpense as described above. Assets Under Management The following table reflects the changes in our Public Markets AUM from December 31, 2015 to December 31, 2016 : ($ in thousands)December 31, 2015$53,515,700New Capital Raised12,623,100Distributions(4,720,400)Redemptions(6,258,300)Change in Value580,100December 31, 2016$55,740,200135Table of ContentsAUM in our Public Markets segment totaled $55.7 billion at December 31, 2016 , an increase of $2.2 billion compared to AUM of $53.5 billion at December31, 2015. The increase for the period was primarily due to new capital raised of $12.6 billion across multiple strategies most notably $3.1 billion in our CLOs, $2.5billion in our strategic partnerships in hedge fund managers, $2.1 billion in our liquid credit strategies and $1.7 billion in our hedge fund solutions business.Partially offsetting these increases were redemptions and distributions of $11.0 billion from certain investment vehicles across multiple strategies including ourCLOs, our hedge fund solutions business, certain separately managed accounts and our strategic partnerships. For the year ended December 31, 2016, within ourhedge funds business, new capital raised has outpaced redemptions within our strategic partnership platform, while redemptions have outpaced new capital raisedin our hedge fund solutions platform. Fee-Paying Assets Under Management The following table reflects the changes in our Public Markets FPAUM from December 31, 2015 to December 31, 2016 : ($ in thousands)December 31, 2015$46,413,100New Capital Raised13,681,200Distributions(4,864,700)Redemptions(6,258,300)Change in Value297,300December 31, 2016$49,268,600 FPAUM in our Public Markets segment was $49.3 billion at December 31, 2016 , an increase of $2.9 billion compared to FPAUM of $46.4 billion atDecember 31, 2015. The increase was primarily due to new capital raised of $13.7 billion across multiple strategies most notably $3.1 billion in our CLOs, $2.5billion in our strategic partnerships in hedge fund managers, $2.0 billion in our liquid credit strategies and $1.7 billion in our hedge fund solutions business. Newcapital raised includes capital that was raised in previous periods but began earning fees upon deployment of capital. Partially offsetting these increases wereredemptions and distributions of $11.1 billion from certain investment vehicles across multiple strategies including our CLOs, hedge fund solutions business,certain separately managed accounts and our strategic partnerships. For the year ended December 31, 2016, within our hedge fund business, new capital raised hasoutpaced redemptions with our strategic partnerships with hedge fund managers, while redemptions have outpaced new capital raised in our hedge fund solutionsplatform. Uncalled capital commitments from investment funds from which KKR is currently not earning management fees amounted to approximately $4.2billion. This capital will generally begin to earn management fees upon deployment of the capital or upon the commencement of the fund's investment period. Theaverage annual management fee rate associated with this capital is approximately 1.2%. We will not begin earnings fees on this capital until it is deployed or therelated investment period commences, neither of which is guaranteed. If and when such management fees are earned, which will occur over an extended period oftime, a portion of existing FPAUM may cease paying fees or pay lower fees, thus offsetting a portion of any new management fees earned. Capital Invested Capital invested decreased in the year ended December 31, 2016 compared to the year ended December 31, 2015. The decrease is primarily due to a lowerlevel of net capital deployed in our special situations strategy partially offset by a higher level of net capital deployed in our mezzanine or private creditopportunities strategy.Uncalled Commitments As of December 31, 2016 , our Public Markets segment had $6.3 billion of uncalled capital commitments that could be called for investments in newtransactions. The decrease from December 31, 2015 is due to capital called from limited partners to fund investments during the period, partially offset by newcapital raised primarily in Special Situations Fund II, Private Credit Opportunities Partners II Fund and a co-invest vehicle investing across multiple strategies.136Table of ContentsThe following tables set forth information regarding the results of operations and certain key operating metrics for our Public Markets segment for the yearsended December 31, 2015 and 2014.Year ended December 31, 2015 compared to year ended December 31, 2014 Year Ended December 31, 2015 December 31, 2014 Change ($ in thousands)Segment Revenues Management, Monitoring and Transaction Fees, Net Management Fees $266,458 $272,833 $(6,375)Monitoring Fees — — —Transaction Fees 28,872 27,145 1,727Fee Credits (24,595) (23,357) (1,238)Total Management, Monitoring and Transaction Fees, Net 270,735 276,621 (5,886) Performance Income Realized Incentive Fees 19,647 47,807 (28,160)Realized Carried Interest 8,953 34,650 (25,697)Unrealized Carried Interest (19,083) 40,075 (59,158)Total Performance Income 9,517 122,532 (113,015) Investment Income (Loss) Net Realized Gains (Losses) — — —Net Unrealized Gains (Losses) — — —Total Realized and Unrealized — — —Interest Income and Dividends — — —Interest Expense — — —Net Interest and Dividends — — —Total Investment Income (Loss) — — — Total Segment Revenues 280,252 399,153 (118,901) Segment Expenses Compensation and Benefits Cash Compensation and Benefits 73,863 64,530 9,333Realized Performance Income Compensation 11,438 32,984 (21,546)Unrealized Performance Income Compensation (7,633) 16,029 (23,662)Total Compensation and Benefits 77,668 113,543 (35,875)Occupancy and related charges 9,808 7,214 2,594Other operating expenses 40,591 31,501 9,090Total Segment Expenses 128,067 152,258 (24,191) Income (Loss) attributable to noncontrolling interests 1,259 1,636 (377) Economic Net Income (Loss) $150,926 $245,259 $(94,333) Assets Under Management $53,515,700 $42,508,000 $11,007,700Fee Paying Assets Under Management $46,413,100 $38,594,700 $7,818,400Capital Invested $5,244,900 $4,425,600 $819,300Uncalled Commitments $6,690,800 $2,841,300 $3,849,500 137Table of ContentsSegment Revenues Management, Monitoring and Transaction Fees, Net The net decrease was primarily due to a decrease in management fees of $6.4 million. The decrease in management fees was due primarily to (i) a decrease inmanagement fees received from KFN as a result of our acquisition of it on April 30, 2014, as management fees from KFN after that date were eliminated fromsegment results, (ii) redemptions in our hedge funds business and (iii) our mezzanine fund entering its post-investment period where it earns fees at a lower rateand on invested rather than committed capital. These decreases were partially offset by management fees earned from new capital raised primarily in CorporateCapital Trust as well as management fees earned relating to our investment in Marshall Wace which was completed in the fourth quarter of 2015. Performance Income The net decrease was primarily attributable to net carried interest losses in 2015 and a lower level of incentive fees. The net carried interest losses wereprimarily due to losses in our special situations strategy accounts and funds as well as lower overall appreciation in our mezzanine and direct lending strategiesduring 2015. The decrease in incentive fees is due primarily to a decrease in incentive fees received from KFN as a result of our acquisition of it on April 30, 2014,as incentive fees from KFN after that date were eliminated from segment results, as well as lower incentive fees in our hedge fund-of-funds platform and Europeancredit platform driven primarily by less favorable financial performance in the current year. Incentive fees are typically determined for the twelve-month periodsending in either the second or fourth quarters of the calendar year, however, such fees may also be determined quarterly or at other points during the year. Whetheran incentive fee from KKR vehicles is payable in any given period, and the amount of an incentive fee payment, if any, depends on the investment performance ofthe vehicle and as a result are expected to vary significantly from period to period. Segment Expenses Compensation and Benefits The decrease was primarily due to (i) reversals of unrealized performance income compensation in connection with net carried interest losses in 2015 incertain carry earning funds, (ii) lower appreciation in certain carry earning funds in 2015 and (iii) a decrease in realized performance income compensationreflecting the decrease in incentive fees, each of which are described above. Occupancy and Other Operating Expenses The increase was primarily driven by (i) higher occupancy costs reflecting the cost of an exit of office space during the year, (ii) higher allocations ofcorporate other operating expenses to Public Markets due to an increase in both the amount of corporate other operating expenses incurred by the firm and anincrease in the proportion of revenue earned by Public Markets relative to other operating segments in 2015 and (iii) a decrease in the amount of operatingexpenses allocated from Public Markets to Principal Activities as result of a decrease in the proportion of revenue earned by Principal Activities relative to otheroperating segments during 2015.Economic Net Income (Loss) The decrease is primarily attributable to the decrease in performance income and fees partially offset by lower expenses as described above. 138Table of ContentsAssets Under Management The following table reflects the changes in our Public Markets AUM from December 31, 2014 to December 31, 2015: ($ in thousands)December 31, 2014 - As Adjusted$42,508,000New Capital Raised12,926,300Acquisitions6,010,800Distributions(4,087,900)Redemptions(2,873,500)Net Changes in Fee Base of Certain Funds(238,600)Change in Value(729,400)December 31, 2015$53,515,700As of December 31, 2014, AUM has been adjusted to include (i) capital commitments for which we are eligible to receive fees or carried interest upondeployment of capital and (ii) KKR's pro-rata portion of AUM managed by other asset managers in which KKR holds a minority stake. Our reported AUM forperiods prior to December 31, 2014 does not include these items.AUM in our Public Markets segment totaled $53.5 billion at December 31, 2015, an increase of $11.0 billion compared to AUM of $42.5 billion atDecember 31, 2014, on an as adjusted basis. The increase for the period was primarily due to new capital raised across multiple strategies primarily in our CLOs,special situations strategy, hedge funds business and Corporate Capital Trust. In addition, in the fourth quarter of 2015, KKR acquired 24.9% of Marshall Wace,resulting in the inclusion of KKR's pro-rata portion of the AUM managed by Marshall Wace. Partially offsetting these increases were (i) redemptions anddistributions of $7.0 billion from certain investment vehicles across multiple strategies including our hedge funds business, strategic partnerships and CLOs, (ii)decreases in value of $0.7 billion primarily in our European credit platform related to foreign currency fluctuations and (iii) a net change in fee base of $0.2 billionreflecting our Mezzanine Fund entering its post-investment period. Fee-Paying Assets Under Management The following table reflects the changes in our Public Markets FPAUM from December 31, 2014 to December 31, 2015: ($ in thousands)December 31, 2014 - As Adjusted$38,594,700New Capital Raised9,212,400Acquisitions6,010,800Distributions(3,455,800)Redemptions(2,873,500)Net Changes in Fee Base of Certain Funds(325,200)Change in Value(750,300)December 31, 2015$46,413,100As of December 31, 2014, FPAUM has been adjusted to include KKR's pro-rata portion of AUM managed by other asset managers in which KKR holds aminority stake. Our reported AUM for periods prior to December 31, 2014 does not include this item.FPAUM in our Public Markets segment was $46.4 billion at December 31, 2015, an increase of $7.8 billion compared to FPAUM of $38.6 billion atDecember 31, 2014, on an as adjusted basis. The increase was primarily due to new capital raised of $9.2 billion across multiple strategies primarily in our CLOs,special situations strategy, hedge funds business and Corporate Capital Trust. In addition, in the fourth quarter of 2015, KKR acquired 24.9% of Marshall Wace,resulting in the inclusion of KKR's pro-rata portion of the FPAUM managed by Marshall Wace. Partially offsetting these increases were (i) decreases of $6.3billion relating to redemptions and distributions from certain investment vehicles across multiple strategies primarily in CLOs, our hedge funds platform andstrategic partnerships, (ii) decreases in value primarily in our European credit and hedge fund platforms related to foreign currency fluctuations and (iii) a netchange in fee base of $0.3 billion reflecting our Mezzanine Fund entering its post-investment period.Capital Invested The increase is primarily due to a higher level of investment activity in our direct lending, special situations and mezzanine strategies.139Table of ContentsUncalled Commitments As of December 31, 2015, our Public Markets segment had $6.7 billion of uncalled capital commitments that could be called for investments in newtransactions.140Table of ContentsCapital Markets The following tables set forth information regarding the results of operations and certain key operating metrics for our Capital Markets segment for the yearsended December 31, 2016 and 2015 .Year ended December 31, 2016 compared to year ended December 31, 2015 Year Ended December 31, 2016 December 31, 2015 Change ($ in thousands)Segment Revenues Management, Monitoring and Transaction Fees, Net Management Fees $— $— $—Monitoring Fees — — —Transaction Fees 181,517 191,470 (9,953)Fee Credits — — —Total Management, Monitoring and Transaction Fees, Net 181,517 191,470 (9,953) Performance Income Realized Incentive Fees — — —Realized Carried Interest — — —Unrealized Carried Interest — — —Total Performance Income — — — Investment Income (Loss) Net Realized Gains (Losses) — — —Net Unrealized Gains (Losses) — — — Total Realized and Unrealized — — —Interest Income and Dividends — — —Interest Expense — — —Net Interest and Dividends — — —Total Investment Income (Loss) — — — Total Segment Revenues 181,517 191,470 (9,953) Segment Expenses Compensation and Benefits Cash Compensation and Benefits 29,552 34,562 (5,010)Realized Performance Income Compensation — — —Unrealized Performance Income Compensation — — —Total Compensation and Benefits 29,552 34,562 (5,010)Occupancy and related charges 2,474 2,641 (167)Other operating expenses 14,994 14,618 376Total Segment Expenses 47,020 51,821 (4,801) Income (Loss) attributable to noncontrolling interests 2,336 13,103 (10,767) Economic Net Income (Loss) $132,161 $126,546 $5,615 Syndicated Capital $1,213,500 $868,900 $344,600 141Table of ContentsSegment Revenues Management, Monitoring and Transaction Fees, Net Transaction fees decreased due primarily to smaller transaction sizes for the year ended December 31, 2016 compared to the year ended December 31, 2015.Overall, we completed 117 capital markets transactions for the year ended December 31, 2016 of which 11 represented equity offerings and 106 represented debtofferings, as compared to 116 transactions for the year ended December 31, 2015 of which 16 represented equity offerings and 100 represented debt offerings. Weearned fees in connection with underwriting, syndication and other capital markets services. While each of the capital markets transactions that we undertake in thissegment is separately negotiated, our fee rates are generally higher with respect to underwriting or syndicating equity offerings than with respect to debt offerings,and the amount of fees that we collect for like transactions generally correlates with overall transaction sizes. Our capital markets fees are sourced from our PrivateMarkets and Public Markets businesses as well as third party companies. For the year ended December 31, 2016 approximately 28% of our transaction fees wereearned from third parties as compared to approximately 24% for the year ended December 31, 2015. Our transaction fees are comprised of fees earned from NorthAmerica, Europe, and Asia-Pacific, including India. For the year ended December 31, 2016 approximately 34% of our transaction fees were sourced internationallyas compared to approximately 44% for the year ended December 31, 2015. Our capital markets business is dependent on the overall capital markets environment,which is influenced by equity prices, credit spreads and volatility. Our capital markets business does not generate management or monitoring fees. Segment Expenses Compensation and Benefits The decrease compared to the prior period is primarily related to the reduction in transaction fees noted above. Occupancy and Other Operating Expenses The overall increase was primarily due to a lower amount of expenses allocated from the Capital Markets segment to the Principal Activities segment as aresult of a decrease in the proportion of revenue earned by Principal Activities relative to other operating segments as compared to the prior period. This increasewas offset by a reduction in the amount of rent expense allocated to the Capital Markets segment.Economic Net Income (Loss) The increase is primarily attributable to lower income attributable to noncontrolling interests and the reduction in compensation and benefits expense, whichwas partially offset by a decrease in transaction fees as described above.Syndicated Capital The increase is primarily due to an increase in the size of syndication transactions in the year ended December 31, 2016 as compared to the year endedDecember 31, 2015. Overall, we completed 8 syndication transactions for the year ended December 31, 2016 as compared to 10 syndications for the year endedDecember 31, 2015.142Table of ContentsThe following tables set forth information regarding the results of operations and certain key operating metrics for our Capital Markets segment for the yearsended December 31, 2015 and 2014.Year ended December 31, 2015 compared to year ended December 31, 2014 Year Ended December 31, 2015 December 31, 2014 Change ($ in thousands)Segment Revenues Management, Monitoring and Transaction Fees, Net Management Fees $— $— $—Monitoring Fees — — —Transaction Fees 191,470 217,920 (26,450)Fee Credits — — —Total Management, Monitoring and Transaction Fees, Net 191,470 217,920 (26,450) Performance Income Realized Incentive Fees — — —Realized Carried Interest — — —Unrealized Carried Interest — — —Total Performance Income — — — Investment Income (Loss) Net Realized Gains (Losses) — — —Net Unrealized Gains (Losses) — — —Total Realized and Unrealized — — —Interest Income and Dividends — — —Interest Expense — — —Net Interest and Dividends — — —Total Investment Income (Loss) — — — Total Segment Revenues 191,470 217,920 (26,450) Segment Expenses Compensation and Benefits Cash Compensation and Benefits 34,562 41,551 (6,989)Realized Performance Income Compensation — — —Unrealized Performance Income Compensation — — —Total Compensation and Benefits 34,562 41,551 (6,989)Occupancy and related charges 2,641 1,523 1,118Other operating expenses 14,618 11,497 3,121Total Segment Expenses 51,821 54,571 (2,750) Income (Loss) attributable to noncontrolling interests 13,103 11,886 1,217 Economic Net Income (Loss) $126,546 $151,463 $(24,917) Syndicated Capital $868,900 $2,567,300 $(1,698,400) Segment Revenues Management, Monitoring and Transaction Fees, NetTransaction fees decreased due to a decrease in the number and size of capital markets transactions for the year ended December 31, 2015 compared to theyear ended December 31, 2014. Our capital markets business does not generate management or monitoring fees. Overall, we completed 116 capital marketstransactions for the year ended December 31, 2015 of which 16 represented equity offerings and 100 represented debt offerings, as compared to 139 transactionsfor the year ended December 31, 2014 of which 15 represented equity offerings and 124 represented debt offerings. We earned fees in connection143Table of Contentswith underwriting, syndication and other capital markets services. While each of the capital markets transactions that we undertake in this segment is separatelynegotiated, our fee rates are generally higher with respect to underwriting or syndicating equity offerings than with respect to debt offerings, and the amount of feesthat we collect for like transactions generally correlates with overall transaction sizes. Our capital markets fees are sourced from our Private Markets and PublicMarkets platforms as well as third party companies. For the year ended December 31, 2015 approximately 24% of our transaction fees were earned from thirdparties as compared to 31% for the year ended December 31, 2014. Our transaction fees are comprised of fees earned from North America, Europe, and Asia-Pacific, including India. For the year ended December 31, 2015 approximately 44% of our transaction fees were sourced outside the United States as compared toapproximately 38% for the year ended December 31, 2014. Our capital markets business is dependent on the overall capital markets environment, which isinfluenced by, among other things, equity prices, credit spreads and volatility.Segment ExpensesCompensation and BenefitsThe decrease was primarily due to a decrease in cash compensation and benefits related to lower transaction fees, which generally results in lowercompensation expense.Occupancy and Other Operating ExpensesThe increase was primarily driven by higher allocations of corporate other operating expenses to Capital Markets due to an increase in both the amount ofcorporate other operating expenses incurred by the firm and to a lesser extent an increase in the proportion of revenue earned by Capital Markets relative to otheroperating segments in 2015. Additionally, there was a decrease in the amount of operating expenses allocated from Capital Markets to Principal Activities as resultof a decrease in the proportion of revenue earned by Principal Activities relative to other operating segments during 2015.Economic Net Income (Loss)The decrease is primarily attributable to the decrease in transaction fees as described above.Syndicated CapitalThe decrease is primarily due to a decrease in the size of syndication transactions in the year ended December 31, 2015 as compared to the year endedDecember 31, 2014. The 2014 amounts included the syndication of equity in First Data Corporation of approximately $1.8 billion. Overall, we completed 10syndication transactions for the year ended December 31, 2015 as compared to 8 syndication transactions for the year ended December 31, 2014.144Table of ContentsPrincipal Activities The following tables set forth information regarding the results of operations and certain key operating metrics for our Principal Activities segment for theyears ended December 31, 2016 and 2015 .Year ended December 31, 2016 compared to year ended December 31, 2015 Year Ended December 31, 2016 December 31, 2015 Change ($ in thousands)Segment Revenues Management, Monitoring and Transaction Fees, Net Management Fees $— $— $—Monitoring Fees — — —Transaction Fees — — —Fee Credits — — —Total Management, Monitoring and Transaction Fees, Net — — — Performance Income Realized Incentive Fees — — —Realized Carried Interest — — —Unrealized Carried Interest — — —Total Performance Income — — — Investment Income (Loss) Net Realized Gains (Losses) 371,563 337,023 34,540Net Unrealized Gains (Losses) (584,423) (391,962) (192,461) Total Realized and Unrealized (212,860) (54,939) (157,921)Interest Income and Dividends 322,857 411,536 (88,679)Interest Expense (188,761) (203,085) 14,324Net Interest and Dividends 134,096 208,451 (74,355)Total Investment Income (Loss) (78,764) 153,512 (232,276) Total Segment Revenues (78,764) 153,512 (232,276) Segment Expenses Compensation and Benefits Cash Compensation and Benefits 94,207 107,572 (13,365)Realized Performance Income Compensation — — —Unrealized Performance Income Compensation — — —Total Compensation and Benefits 94,207 107,572 (13,365)Occupancy and related charges 14,624 16,568 (1,944)Other operating expenses 45,490 50,573 (5,083)Total Segment Expenses 154,321 174,713 (20,392) Income (Loss) attributable to noncontrolling interests — — — Economic Net Income (Loss) $(233,085) $(21,201) $(211,884) 145Table of ContentsSegment RevenuesInvestment IncomeThe net decrease is primarily due to a higher level of realized and unrealized losses during the year ended December 31, 2016, compared to the prior periodand, to a lesser extent, a decrease in net interest and dividends of $74.4 million.For the year ended December 31, 2016, net realized gains were primarily comprised of gains from the sale of private equity investments including the sales orpartial sales of Walgreens Boots Alliance, Inc., HCA Holdings, Inc. and Zimmer Biomet Holdings, Inc., offset by our investment in Samson Resources ofapproximately $254 million, the loss from the redemption of limited partner interests in a fund managed by BlackGold Capital Management, as well as certainCLOs being called. As of December 31, 2016, KKR no longer holds any limited partner interests in BlackGold Capital Management, although we continue to ownan interest in its management company and fund general partner. Net unrealized losses were primarily attributable to mark to market losses on various PrivateMarkets investments including First Data Corporation and to a lesser extent WMIH Corp. (NASDAQ: WMIH), Walgreens Boots Alliance, Inc., mark to marketlosses on various alternative credit investments and unrealized losses on energy investments, and reversals of unrealized gains on the sales of private equityinvestments. These unrealized losses were partially offset by unrealized gains representing the reversal of unrealized losses primarily in connection with ourinvestment in Samson Resources and the limited partner interests in a fund managed by BlackGold Capital Management as described above.As of December 31, 2016, $227.4 million of investments in CLOs and our $289.7 million investment in KKR Real Estate Finance Trust Inc., our real estateinvestment trust or REIT, were carried at cost. As of December 31, 2016, the cumulative net unrealized gain or loss relating to changes in fair value for theseinvestments was a $9.1 million gain for CLOs and a $13.0 million gain for the real estate investment trust.Since April 30, 2014, the date we completed our acquisition of KFN, the amount of invested capital in our CLOs has decreased. As of December 31, 2016, thenotes issued by all six legacy CLOs held by KFN have been called for redemption. These legacy CLOs held by KFN, which were issued prior to 2012, were largerin total transaction size relative to those that were issued subsequently. The size of new CLOs and the frequency of CLO issuances will depend on marketconditions. CLO issuances typically increase when the spread between the value of CLO assets and liabilities generates an attractive return to KKR and othersubordinated note holders, such as KKR. In the case where demand for loans leads to tighter spreads or if interest rates for the liabilities increase, the return tosubordinated note holders would be less attractive, and the issuance of CLOs would be expected to generally decline. Consequently, since April 30, 2014, theamount of interest income and dividends from our CLOs has declined. While the size of our CLO portfolio may continue to decline in the near term, along withthe levels of associated interest income and dividends, as we have called for redemption all notes issued by all six legacy CLOs held by KFN, we do not expect therate of decline in the near term to be as significant as in recent quarters. Based on the above factors combined with alternative investment opportunities, we mayselectively redeploy capital to other assets outside of CLOs and credit into other asset classes such as private equity.For the year ended December 31, 2015, net realized gains were comprised primarily of gains from the sale of private equity investments, generally heldthrough or alongside our funds, including the sales or partial sales of Walgreens Boots Alliance, Inc., The Nielsen Company B.V. (NYSE: NLSN), Zimmer BiometHoldings, Inc. and Kion GmbH (XETRA: KGX). These realized gains were partially offset by realized losses on the sale or write-off of other private equityinvestments, generally held through or alongside our funds, including the write-off of Energy Future Holdings. Realized investment losses from balance sheetinvestments that were already written down as of October 1, 2009 that have been excluded from net realized gains (losses) above related to Energy Future Holdingsand amounted to approximately $100 million for the year ended December 31, 2015. Net unrealized losses were primarily attributable to (i) the reversal of gains onsales of private equity investments noted in the realized gains commentary above and (ii) overall reductions in value of our investments in CLOs, energyinvestments in working interests in oil and gas producing properties and special situations investments. A decrease in the value of our CLO portfolio wasexperienced in each quarter of 2015 and was due primarily to a decrease in the market value of underlying collateral as well as a reduction in overall market pricesfor these securities. With respect to our energy portfolio, a decrease in value was experienced in three of four quarters during 2015 and is due primarily to a drop inlong‑term oil, condensate, natural gas liquids, and natural gas prices during the year ended December 31, 2015. Offsetting these unrealized losses were unrealizedgains resulting from increases in value of various investments, most notably First Data Corporation, Walgreens Boots Alliance, Inc. and WMIH Corp., as well asthe reversal of unrealized losses related to the write-off of Energy Future Holdings, Corp.For the year ended December 31, 2016, net interest and dividends were comprised of (i) $186.7 million of interest income which consists primarily of interestthat is received from our Public Markets investments including CLOs and other credit investments and to a lesser extent our cash balances and other assets, (ii)$136.2 million of dividend income from distributions146Table of Contentsreceived primarily through our private equity investments, real estate investments including our investment in our REIT and Public Markets investments and (iii)$188.8 million of interest expense primarily relating to the senior notes outstanding for KKR and KFN.For the year ended December 31, 2015, net interest and dividends were comprised of (i) $316.5 million of interest income which consists primarily of interestthat is received from interest yielding CLOs and credit investments and, to a lesser extent, from our cash balances and other assets, (ii) $95.0 million of dividendincome received primarily from distributions received through our investment funds and other assets and (iii) $203.1 million of interest expense primarily relatingto the senior notes outstanding for KKR and KFN.The net decrease in net interest and dividends is due primarily to the lower amount of capital invested in CLOs described above, partially offset by a higherlevel of dividends in the 2016 period.Segment ExpensesCompensation and BenefitsThe decrease was primarily due to a lower amount of compensation and benefits expenses allocated from the other operating segments to Principal Activities,as well as a lower amount of corporate compensation allocated to Principal Activities, in each case as a result of a decrease in the proportion of revenue earned byPrincipal Activities relative to other operating segments. This decrease was partially offset by an increase in the absolute amount of expenses eligible to beallocated from the other operating segments to Principal Activities. See "-Segment Analysis" for a discussion of expense allocations among segments.Occupancy and Other Operating ExpensesThe decrease was primarily driven by a decrease in the amount of occupancy and other operating expenses allocated from the other operating segmentsprimarily as a result of a decrease in the proportion of revenue earned by Principal Activities relative to other operating segments.Economic Net Income (Loss)The economic net loss for the year ended December 31, 2016 was primarily driven by the net investment losses as described above. Most notably for the yearended December 31, 2016, the reduction in the stock price of First Data Corporation from $16.02 per share to $14.19 per share that is held directly in the PrincipalActivities segment reduced ENI by approximately $142 million.147Table of ContentsThe following tables set forth information regarding the results of operations for our Principal Activities segment for the years ended December 31, 2015 and2014.Year ended December 31, 2015 compared to year ended December 31, 2014 Year Ended December 31, 2015 December 31, 2014 Change ($ in thousands)Segment Revenues Management, Monitoring and Transaction Fees, Net Management Fees $— $— $—Monitoring Fees — — —Transaction Fees — — —Fee Credits — — —Total Management, Monitoring and Transaction Fees, Net — — — Performance Income Realized Incentive Fees — — —Realized Carried Interest — — —Unrealized Carried Interest — — —Total Performance Income — — — Investment Income (Loss) Net Realized Gains (Losses) 337,023 628,403 (291,380)Net Unrealized Gains (Losses) (391,962) (396,425) 4,463Total Realized and Unrealized (54,939) 231,978 (286,917)Interest Income and Dividends 411,536 408,084 3,452Interest Expense (203,085) (134,909) (68,176)Net Interest and Dividends 208,451 273,175 (64,724)Total Investment Income (Loss) 153,512 505,153 (351,641) Total Segment Revenues 153,512 505,153 (351,641) Segment Expenses Compensation and Benefits Cash Compensation and Benefits 107,572 121,161 (13,589)Realized Performance Income Compensation — — —Unrealized Performance Income Compensation — — —Total Compensation and Benefits 107,572 121,161 (13,589)Occupancy and related charges 16,568 18,104 (1,536)Other operating expenses 50,573 60,673 (10,100)Total Segment Expenses 174,713 199,938 (25,225) Income (Loss) attributable to noncontrolling interests — — — Economic Net Income (Loss) $(21,201) $305,215 $(326,416) 148Table of ContentsSegment Revenues Investment Income The net decrease is primarily due to a decrease in total realized and unrealized gains of $286.9 million, as well as a decrease in net interest and dividends of$64.7 million.For the year ended December 31, 2015, net realized gains were comprised primarily of gains from the sale of private equity investments, generally heldthrough or alongside our funds, including the sales or partial sales of Walgreens Boots Alliance, Inc., The Nielsen Company B.V. (NYSE: NLSN), Zimmer BiometHoldings, Inc. and Kion GmbH (XETRA: KGX). These realized gains were partially offset by realized losses on the sale or write-off of other private equityinvestments, generally held through or alongside our funds, including the write-off of Energy Future Holdings. Realized investment losses from balance sheetinvestments that were already written down as of October 1, 2009 that have been excluded from net realized gains (losses) above related to Energy Future Holdingsand amounted to approximately $100 million for the year ended December 31, 2015. Net unrealized losses were primarily attributable to (i) the reversal of gains onsales of private equity investments noted in the realized gains commentary above and (ii) overall reductions in value of our investments in CLOs, energyinvestments in working interests in oil and gas producing properties and special situations investments. A decrease in the value of our CLO portfolio wasexperienced in each quarter of 2015 and was due primarily to a decrease in the market value of underlying collateral as well as a reduction in overall market pricesfor these securities. With respect to our energy portfolio, a decrease in value was experienced in three of four quarters during 2015 and was due primarily to a dropin long‑term oil, condensate, natural gas liquids, and natural gas prices during the year ended December 31, 2015. Offsetting these unrealized losses wereunrealized gains resulting from increases in value of various investments, most notably First Data Corporation, Walgreens Boots Alliance, Inc. and WMI HoldingsCorp. (NASDAQ: WMIH), as well as the reversal of unrealized losses related to the write-off of Energy Future Holdings, Corp.As of December 31, 2015, we held $96.6 million of investments in CLOs that are not held for investment purposes and are carried at cost. For the year endedDecember 31, 2015, the unrealized loss relating to changes in fair value for these investments in CLOs was $7.6 million. Prior to the quarter ended September 30,2015, all CLOs were carried at fair value.For the year ended December 31, 2014, net realized gains were comprised primarily of gains from the sale of private equity investments, generally heldthrough or alongside our funds, including the sales or partial sales of HCA Holdings, Inc., NXP Semiconductors N.V. and The Nielsen Company B.V. Netunrealized losses are primarily related to (i) the reversal of gains on sales of private equity investments noted in the realized gains commentary above, (ii) declinesin value of various investments in working interests in oil and gas producing properties, (iii) a decline in value for Samson Resources, (iv) overall reductions invalue of our investments in CLOs, driven primarily by a decrease in the market value of underlying collateral and (v) a decline in value of investments in specialtyfinance companies. For the year ended December 31, 2014, mark-to-market unrealized losses reflected in net unrealized losses relating to our energy investmentsin working interests in oil and gas producing properties were approximately $149 million, the majority of which occurred in the fourth quarter of 2014 primarily asa result of a decline in oil and gas prices. These unrealized losses and reversals of gains upon realization events were partially offset by unrealized gains resultingfrom increases in value of various private equity investments including First Data Corporation, Alliance Boots GmbH and Biomet, Inc.For the year ended December 31, 2015, interest income and dividends were comprised of (i) $316.5 million of interest income which consists primarily ofinterest that is received from interest yielding CLOs and credit investments and, to a lesser extent, from our cash balances and other assets and (ii) $95.0 million ofdividend income received primarily from distributions received through our investment funds and other assets. For the year ended December 31, 2014, interestincome and dividends were comprised of (i) $241.7 million of interest income which consists primarily of interest that is received from interest yielding CLOs andcredit investments and, to a lesser extent, from our cash balances and other assets and (ii) $166.4 million of dividend income received primarily from distributionsreceived through our investment funds and other assets, including approximately $84 million received from our energy investments in working interests in oil andgas producing properties. The increase from the prior period is primarily due to more significant levels of investments in interest yielding CLOs and creditinvestments, which were largely offset by a decrease in dividend income from our private equity and energy investments portfolio. The increase in interest expense is primarily due to our 2044 Senior Notes issued on May 29, 2014 and an additional issuance of such notes on March 18,2015, as well as the debt obligations of KFN acquired on April 30, 2014 which did not contribute to our interest expense for the first four months of 2014.149Table of ContentsSegment Expenses Compensation and BenefitsThe decrease was primarily due to a decrease in the amount of compensation and benefits expenses allocated from the other operating segments to PrincipalActivities, as well as a lower amount of corporate compensation allocated to Principal Activities, in each case as a result of a decrease in the proportion of revenueearned by Principal Activities relative to other operating segments during 2015. Partially offsetting these decreases was an increase in the aggregate compensationand benefits expense in our other operating segments that are allocable to the Principal Activities segment. See “-Segment Analysis-Private Markets”, “-SegmentAnalysis-Public Markets” and “-Segment Analysis-Capital Markets” for additional information regarding the compensation and benefit expenses of these othersegments, and “-Segment Analysis" for a discussion of expense allocations among segments.Occupancy and Other Operating ExpensesThe decrease was primarily driven by a decrease in the amount of occupancy and other operating expenses allocated from the other operating segments as aresult of a decrease in the proportion of revenue earned by Principal Activities relative to other operating segments during 2015. Economic Net Income (Loss) The decrease is primarily attributable to the decrease in investment income as described above.Segment Balance Sheet Our segment balance sheet is the balance sheet of KKR & Co. L.P. and its subsidiaries on a segment basis which includes, but is not limited to, our investmentmanagement companies, broker-dealer companies, general partners of our investment funds and KFN. Our segment balance sheet excludes the assets and liabilitiesof our investment funds and CFEs and other consolidated entities that are not subsidiaries of KKR & Co. L.P. Investments Investments is a term used solely for purposes of financial presentation of a portion of KKR's balance sheet and includes majority ownership of subsidiariesthat operate KKR's asset management and other businesses, including the general partner interests of KKR's investment funds.Cash and Short-Term Investments Cash and short-term investments represent cash and liquid short-term investments in high-grade, short-duration cash management strategies used by KKR togenerate additional yield on our excess liquidity and is used by management in evaluating KKR's liquidity position. We believe this measure is useful tounitholders as it provides additional insight into KKR's available liquidity. Cash and short-term investments differ from cash and cash equivalents on a GAAP basisas a result of the inclusion of liquid short-term investments in cash and short-term investments. The impact that these liquid short-term investments have on cashand cash equivalents on a GAAP basis is reflected in the consolidated statements of cash flows within cash flows from operating activities. Accordingly, theexclusion of these investments from cash and cash equivalents on a GAAP basis has no impact on cash provided (used) by operating activities, investing activitiesor financing activities. 150Table of ContentsThe following tables present information with respect to our segment balance sheet as of December 31, 2016 and December 31, 2015 : As of As of December 31, 2016 December 31, 2015 ($ in thousands, except per unit amounts)Cash and Short-term Investments $3,387,673 $1,287,650Investments 6,958,873 8,958,089Unrealized Carry (1) 1,213,692 1,415,478Other Assets 1,611,678 1,613,139Corporate Real Estate 161,225 154,942Total Assets $13,333,141 $13,429,298 Debt Obligations - KKR (ex-KFN) $2,000,000 $2,000,000Debt Obligations - KFN 398,560 657,310Preferred Shares - KFN 373,750 373,750Other Liabilities 244,676 291,537Total Liabilities 3,016,986 3,322,597 Noncontrolling Interests 19,564 127,472Preferred Units 500,000 — Book Value $9,796,591 $9,979,229 Book Value Per Outstanding Adjusted Unit $12.15 $12.18 (1) Unrealized Carry Private Markets $1,141,610 $1,340,556Public Markets 72,082 74,922Total $1,213,692 $1,415,478 151Table of ContentsThe following table presents the holdings of our segment balance sheet by asset class as of December 31, 2016 : As of December 31, 2016 Investments Cost FairValue Fair Value as aPercentage ofTotal Investments Private Equity Co-Investments and Other Equity $1,474,090 $1,733,215 24.9% Private Equity Funds 923,992 1,087,783 15.6% Private Equity Total 2,398,082 2,820,998 40.5% Energy 964,210 559,050 8.0% Real Estate (1) 727,061 747,562 10.8% Infrastructure 210,658 223,953 3.2% Real Assets Total 1,901,929 1,530,565 22.0% Special Situations 850,582 713,733 10.3% Direct Lending 92,550 88,918 1.3% Mezzanine 24,004 23,856 0.3% Alternative Credit Total 967,136 826,507 11.9% CLOs (1) 962,629 585,078 8.4% Liquid Credit 173,492 180,620 2.6% Specialty Finance 294,857 202,837 2.9% Credit Total 2,398,114 1,795,042 25.8% Other 831,653 812,268 11.7% Total Investments $7,529,778 $6,958,873 100.0% As of December 31, 2016 Significant Investments: (2) Cost FairValue Fair Value as a Percentage of Total Investments First Data Corporation (NYSE: FDC) $1,031,827 $1,094,159 15.7% KKR Real Estate Finance Trust Inc. 289,723 289,723 4.2% WMIH Corp. (NASDAQ: WMIH) 221,412 220,896 3.2% Natural Gas Midstream Investment 128,733 134,478 1.9% Oil & Gas Royalties Investment 114,374 119,700 1.7% Total Significant Investments 1,786,069 1,858,956 26.7% Other Investments 5,743,709 5,099,917 73.3% Total Investments $7,529,778 $6,958,873 100.0% (1) Includes approximately $227.4 million and $289.7 million of CLOs and our ownership of KKR Real Estate Finance Trust Inc., respectively, that arenot held for investment purposes and are held at cost. (2) The significant investments include the top five investments (other than investments expected to be syndicated or transferred in connection with newfundraising) based on their fair values as of December 31, 2016. The fair value figures include the co-investment and the limited partner and/or generalpartner interests held by KKR in the underlying investment, if applicable. 152Table of ContentsThe following tables provide reconciliations of KKR’s GAAP Consolidated Statements of Financial Condition to Total Reportable Segments Balance Sheet asof December 31, 2016 and December 31, 2015.As of December 31, 2016(Amounts in thousands)CONSOLIDATED STATEMENTS OFFINANCIAL CONDITION (GAAP BASIS) 1 2 3 4 5 TOTAL REPORTABLE SEGMENTSBALANCE SHEET Assets Cash and Cash Equivalents$2,508,902 — — 878,771 — — $3,387,673Cash and Short-termInvestmentsInvestments31,409,765 (22,249,206) (987,994) (1,213,692) — — 6,958,873Investments — — 1,213,692 — — 1,213,692Unrealized CarryOther Assets5,084,230 (2,118,364) — (1,039,996) — (314,192) 1,611,678Other Assets — — 161,225 — — 161,225Corporate Real EstateTotal Assets$39,002,897 (24,367,570) (987,994) — — (314,192) $13,333,141 Liabilities and Equity Debt Obligations18,544,075 (16,145,515) — (398,560) — — 2,000,000Debt Obligations - KKR (ex-KFN) — — 398,560 — — 398,560Debt Obligations - KFN — — 373,750 — — 373,750Preferred Shares - KFNOther Liabilities3,340,739 (1,945,039) (987,994) — — (163,030) 244,676Other LiabilitiesTotal Liabilities21,884,814 (18,090,554) (987,994) 373,750 — (163,030) 3,016,986 Redeemable NoncontrollingInterests632,348 (632,348) — — — — Equity Series A Preferred Units332,988 — — (332,988) — — Series B Preferred Units149,566 — — (149,566) — — KKR & Co. L.P. Capital -Common Unitholders5,457,279 118,635 — (17,446) 4,389,285 (151,162) 9,796,591Book ValueNoncontrolling Interests10,545,902 (5,763,303) — (373,750) (4,389,285) — 19,564Noncontrolling Interests — — 500,000 — — 500,000Preferred UnitsTotal Liabilities andEquity$39,002,897 (24,367,570) (987,994) — — (314,192) $13,333,141 1IMPACT OF CONSOLIDATION OF INVESTMENT VEHICLES AND OTHER ENTITIES2CARRY POOL RECLASSIFICATION 3OTHER RECLASSIFICATIONS 4NONCONTROLLING INTERESTS HELD BY KKR HOLDINGS L.P. AND OTHER 5EQUITY IMPACT OF KKR MANAGEMENT HOLDINGS CORP. 153Table of ContentsAs of December 31, 2015(Amounts in thousands)CONSOLIDATED STATEMENTS OFFINANCIAL CONDITION (GAAPBASIS) 1 2 3 4 5 TOTAL REPORTABLE SEGMENTSBALANCE SHEET Assets Cash and Cash Equivalents$1,047,740 — — 239,910 — — $1,287,650Cash and Short-termInvestmentsInvestments65,305,931 (53,733,364) (1,199,000) (1,415,478) — — 8,958,089Investments — — 1,415,478 — — 1,415,478Unrealized CarryOther Assets4,688,668 (2,406,048) — (394,852) — (274,629) 1,613,139Other Assets — — 154,942 — — 154,942Corporate Real EstateTotal Assets$71,042,339 (56,139,412) (1,199,000) — — (274,629) $13,429,298 Liabilities and Equity Debt Obligations18,714,597 (16,057,287) — (657,310) — — 2,000,000Debt Obligations - KKR (ex-KFN) — — 657,310 — — 657,310Debt Obligations - KFN — — 373,750 — — 373,750Preferred Shares - KFNOther Liabilities2,860,157 (1,228,091) (1,199,000) — — (141,529) 291,537Other LiabilitiesTotal Liabilities21,574,754 (17,285,378) (1,199,000) 373,750 — (141,529) 3,322,597 RedeemableNoncontrolling Interests188,629 (188,629) — — — — Equity Series A Preferred Units— — — — — — Series B Preferred Units— — — — — — —Preferred UnitsKKR & Co. L.P. Capital -Common Unitholders5,547,182 133,208 — — 4,431,939 (133,100) 9,979,229Book ValueNoncontrolling Interests43,731,774 (38,798,613) — (373,750) (4,431,939) — 127,472Noncontrolling InterestsTotal Liabilities andEquity$71,042,339 (56,139,412) (1,199,000) — — (274,629) $13,429,298 1IMPACT OF CONSOLIDATION OF INVESTMENT VEHICLES AND OTHER ENTITIES 2CARRY POOL RECLASSIFICATION 3OTHER RECLASSIFICATIONS 4NONCONTROLLING INTERESTS HELD BY KKR HOLDINGS L.P. AND OTHER 5EQUITY IMPACT OF KKR MANAGEMENT HOLDINGS CORP. 154Table of ContentsThe following tables provide reconciliations of KKR’s GAAP Common Units Outstanding - Basic to Outstanding Adjusted Units. As ofAs of December 31, 2016December 31, 2015GAAP Common Units Outstanding - Basic452,380,335457,834,875Adjustments: Unvested Common Units (1)37,519,43623,212,300Other Exchangeable Securities (2)4,600,3204,689,610GAAP Common Units Outstanding - Diluted494,500,091485,736,785Adjustments: KKR Holdings Units (3)353,757,398361,346,588Adjusted Units848,257,489847,083,373Adjustments: Unvested Common Units and Unvested Other Exchangeable Securities(37,519,436)(24,060,289)Adjusted Units Eligible for Distribution810,738,053823,023,084Adjustments: Vested Other Exchangeable Securities (2)(4,600,320)(3,841,621)Outstanding Adjusted Units806,137,733819,181,463 (1) Represents equity awards granted under the Equity Incentive Plan. The issuance of common units of KKR & Co. L.P. pursuant to awards under the Equity Incentive Plandilutes KKR common unitholders and KKR Holdings pro rata in accordance with their respective percentage interests in the KKR business. Year-end 2016 equity awards weregranted before December 31, 2016 (except for awards to our named executive officers), rather than, as has been historical practice, after the end of the year. As a result, adjustedunits increased in the fourth quarter of 2016, rather than in the first quarter of 2017.(2) Represents securities in a subsidiary of a KKR Group Partnership and of KKR & Co. L.P. that are exchangeable into KKR & Co. L.P. common units issued in connectionwith the acquisition of Avoca.(3) Common units that may be issued by KKR & Co. L.P. upon exchange of units in KKR Holdings L.P. for KKR common units.Liquidity We manage our liquidity and capital requirements by focusing on our cash flows before the consolidation of our funds and CFEs and the effect of changes inshort term assets and liabilities, which we anticipate will be settled for cash within one year. Our primary cash flow activities on a segment basis typically involve:(i) generating cash flow from operations; (ii) generating income from investment activities, by investing in investments that generate yield (namely interest anddividends) as well as the sale of investments and other assets; (iii) funding capital commitments that we have made to, and advancing capital to, our funds andCLOs; (iv) developing and funding new investment strategies, investment products and other growth initiatives, including acquisitions; (v) underwriting andfunding commitments in our capital markets business; (vi) distributing cash flow to our unitholders, certain holders of certain exchangeable securities and holdersof our Series A and Series B Preferred Units; and (vii) paying borrowings, interest payments and repayments under credit agreements, our senior notes and otherborrowing arrangements. See "-Liquidity - Liquidity Needs - Distributions."Sources of Liquidity Our primary sources of liquidity consist of amounts received from: (i) our operating activities, including the fees earned from our funds, portfolio companies,and capital markets transactions; (ii) realizations on carried interest from our investment funds; (iii) interest and dividends from investments that generate yield,including our investments in CLOs; (iv) realizations on and sales of investments and other assets, including the transfers of investments for fund formations and(v) borrowings under our credit facilities, debt offerings and other borrowing arrangements. In addition, we may generate cash proceeds from sales of equitysecurities. With respect to our private equity funds, carried interest is distributed to the general partner of a private equity fund with a clawback provision only after all ofthe following are met: (i) a realization event has occurred (e.g., sale of a portfolio company,155Table of Contentsdividend, etc.); (ii) the vehicle has achieved positive overall investment returns since its inception, in excess of performance hurdles where applicable; and (iii) withrespect to investments with a fair value below cost, cost has been returned to fund investors in an amount sufficient to reduce remaining cost to the investments' fairvalue. As of December 31, 2016 , certain of our funds had met the first and second criteria, as described above, but did not meet the third criteria. In these cases,carried interest accrues on the consolidated statement of operations, but will not be distributed in cash to us as the general partner of an investment fund upon arealization event. For a fund that has a fair value above cost, overall, but has one or more investments where fair value is below cost, the shortfall between cost andfair value for such investments is referred to as a "netting hole." When netting holes are present, realized gains on individual investments that would otherwiseallow the general partner to receive carried interest distributions are instead used to return invested capital to our funds' limited partners in an amount equal to thenetting hole. Once netting holes have been filled with either (a) return of capital equal to the netting hole for those investments where fair value is below cost, or(b) increases in the fair value of those investments where fair value is below cost, then realized carried interest will be distributed to the general partner upon arealization event. A fund that is in a position to pay cash carry refers to a fund for which carried interest is expected to be paid to the general partner upon the nextmaterial realization event, which includes funds with no netting holes as well as funds with a netting hole that is sufficiently small in size such that the nextmaterial realization event would be expected to result in the payment of carried interest. As of December 31, 2016 , a netting hole in excess of $50 million existed at our European Fund IV for $100.9 million. In accordance with the criteria set forthabove, other funds currently have and may in the future develop netting holes, and netting holes for those and other funds may otherwise increase or decrease in thefuture.We have access to funding under various credit facilities, other borrowing arrangements and other sources of liquidity that we have entered into with majorfinancial institutions or which we receive from the capital markets. The following describes these sources of liquidity. Revolving Credit Agreements, Senior Notes, KFN Debt Obligations & KFN SecuritiesFor a discussion of KKR's debt obligations, including our revolving credit agreements, senior notes, KFN debt obligations and KFN securities, see Note 10"Debt Obligations" to the audited financial statements included elsewhere in this report. The information presented below supplements and updates, and should beread in conjunction with, such information. No amounts were borrowed under our corporate credit agreement for the year ended December 31, 2016 .KCM Credit AgreementKKR Capital Markets maintains a revolving credit agreement with a major financial institution, or the KCM Credit Agreement, for use in KKR’s capitalmarkets business. This financial institution also holds an ownership interest in our capital markets business. The KCM Credit Agreement provides for revolvingborrowings of up to $500 million with a $500 million sublimit for letters of credit.On March 30, 2016, the KCM Credit Agreement was amended to extend the maturity date from March 30, 2017 to March 30, 2021. If a borrowing is made onthe KCM Credit Agreement, the interest rate will vary depending on the type of borrowing requested. If the borrowing is a eurocurrency loan, it will be based onthe LIBOR plus the applicable margin which ranges initially between 1.25% and 2.50%, depending on the amount and tenor of the borrowing. If the borrowing isan ABR loan, it will be based on the prime rate plus the applicable margin which ranges initially between 0.25% and 1.50% depending on the amount and tenor ofthe borrowing. Borrowings under this facility may only be used for KKR’s capital markets business, and its only obligors are entities involved in our capitalmarkets business, and its liabilities are non-recourse to other parts of KKR.For the year ended December 31, 2016 , a total of $848 million was borrowed and $848 million was repaid under the KCM Credit Agreement. For the yearended December 31, 2015, a total of $97 million was borrowed and $124 million was repaid under the KCM Credit Agreement. Amounts borrowed under theKCM Credit Agreement are generally repaid within 3 months.KFN Issued 8.375% Notes Due 2041On November 15, 2011, KFN issued $258.8 million par amount of 8.375% Senior Notes, or KFN 2041 Senior Notes, resulting in net proceeds to KFN of$250.7 million . The notes traded under the ticker symbol “KFH” on the NYSE. Interest on the 8.375% Senior Notes was payable quarterly in arrears onFebruary 15, May 15, August 15 and November 15 of each year. The KFN 2041 Senior Notes would have matured on November 15, 2041 if not redeemed orrepurchased in accordance with their terms prior to such date.156Table of ContentsOn November 15, 2016, KFN redeemed all of the outstanding 8.375% Senior Notes due 2041 for cash. The redemption price equaled 100% of the principalamount of the KFN 2041 Senior Notes plus unpaid interest accrued thereon to, but excluding, the redemption date, in accordance with the terms of the KFN 2041Senior Notes.Preferred UnitsOn March 17, 2016, KKR & Co. L.P. issued 13,800,000 units of 6.75% Series A Preferred Units and on June 20, 2016, KKR issued 6,200,000 units of 6.50%Series B Preferred Units, in each case, in an underwritten public offering. The Series A Preferred Units and Series B Preferred Units trade on the NYSE under thesymbols "KKR PRA" and "KKR PRB", respectively. The terms of the preferred units are set forth in the limited partnership agreement of KKR & Co. L.P.If declared, distributions on the preferred units are payable quarterly on March 15, June 15, September 15 and December 15 of each year, at a rate per annumequal to 6.75%, in the case of the Series A Preferred Units, and 6.50% in the case of the Series B Preferred Units. Distributions on the preferred units arediscretionary and non-cumulative. Holders of preferred units will only receive distributions on such units when, as and if declared by the board of directors of thegeneral partner of KKR & Co. L.P. We have no obligation to declare or pay any distribution for any distribution period, whether or not distributions on any seriesof preferred units are declared or paid for any other distribution period. Unless distributions have been declared and paid (or declared and set apart for payment) on the preferred units for a quarterly distribution period, we may notdeclare or pay distributions on, or repurchase, any units of KKR & Co. L.P. that are junior to the preferred units, including our common units, during suchdistribution period. A distribution period begins on a distribution payment date and extends to, but excludes, the next distribution payment date. See "--LiquidityNeeds--Distributions" for a discussion of the distributions declared on the Series A and Series B Preferred Units.If KKR & Co. L.P. dissolves, then the holders of the Series A Preferred Units and Series B Preferred Units are entitled to receive payment of a $25.00liquidation preference per preferred unit, plus declared and unpaid distributions, if any, to the extent that we have sufficient gross income (excluding any grossincome attributable to the sale or exchange of capital assets) such that holders of such preferred units have capital account balances equal to such liquidationpreference, plus declared and unpaid distributions, if any. The Series A and Series B Preferred Units do not have a maturity date. However, the Series A Preferred Units may be redeemed at our option, in whole or inpart, at any time on or after June 15, 2021, at a price of $25.00 per Series A Preferred Unit, plus declared and unpaid distributions, if any. The Series B PreferredUnits may be redeemed at our option, in whole or in part, at any time on or after September 15, 2021, at a price of $25.00 per Series B Preferred Unit, plus declaredand unpaid distributions, if any. Holders of preferred units have no right to require the redemption of such units. If a certain change of control event with a ratings downgrade occurs prior to June 15, 2021, the Series A Preferred Units may be redeemed at our option, inwhole but not in part, upon at least 30 days’ notice, within 60 days of the occurrence of such change of control event, at a price of $25.25 per Series A PreferredUnit, plus declared and unpaid distributions, if any. If a certain change of control event with a ratings downgrade occurs prior to September 15, 2021, the Series BPreferred Units may be redeemed at our option, in whole but not in part, upon at least 30 days’ notice, within 60 days of the occurrence of such change of controlevent, at a price of $25.25 per Series B Preferred Unit, plus declared and unpaid distributions, if any. If such a change of control event occurs (whether before, onor after June 15, 2021, in the case of the Series A Preferred Units and September 15, 2021, in the case of the Series B Preferred Units) and we do not give suchnotice, the distribution rate per annum on the applicable series of preferred units will increase by 5.00%, beginning on the 31st day following such change ofcontrol event.The Series A and Series B Preferred Units are not convertible into common units of KKR & Co. L.P. and have no voting rights, except that holders ofpreferred units have certain voting rights in limited circumstances relating to the election of directors following the failure to declare and pay distributions, certainamendments to the terms of the preferred units, and the creation of preferred units that are senior to the Series A Preferred Units and Series B Preferred Units.In connection with the issuance of the preferred units, the KKR Group Partnerships issued for the benefit of KKR & Co. L.P. two series of preferred units witheconomic terms that mirror those of each series of preferred units.Common UnitsOn May 16, 2014, KKR & Co. L.P. filed a registration statement with the Securities and Exchange Commission for the sale by us from time to time of up to5,000,000 common units of KKR & Co. L.P. to generate cash proceeds (a) up to (1) the157Table of Contentsamount of withholding taxes, social benefit payments or similar payments payable by us in respect of awards granted pursuant to the Equity Incentive Plan, and(2) the amount of cash delivered in respect of awards granted pursuant to the Equity Incentive Plan that are settled in cash instead of common units; and (b) to theextent the net proceeds from the sale of common units exceeds the amounts due under clause (a), for general corporate purposes. The administrator of the EquityIncentive Plan is expected to reduce the maximum number of common units eligible to be issued under the Equity Incentive Plan by the number of common unitsissued and sold pursuant to this Registration Statement, as applicable, unless such reduction is already provided for with respect to such awards under the terms ofthe Equity Incentive Plan. The Securities and Exchange Commission declared the registration statement effective on June 4, 2014. As of December 31, 2016 ,4,173,039 common units have been issued and sold under the registration statement and are included in our basic common units outstanding as of December 31,2016 . During 2016, we canceled 3.6 million granted equity awards for approximately $53 million to satisfy tax obligations in connection with their vesting.Liquidity Needs We expect that our primary liquidity needs will consist of cash required to:•continue to grow our business, including seeding new strategies and funding our capital commitments made to existing and future funds, co-investments and any net capital requirements of our capital markets companies; •warehouse investments in portfolio companies or other investments for the benefit of one or more of our funds, vehicles, accounts or CLOs pendingthe contribution of committed capital by the investors in such vehicles, and advancing capital to them for operational or other needs;•service debt obligations including the payment of obligations upon maturity or redemption, as well as any contingent liabilities that may give rise tofuture cash payments;•fund cash operating expenses, including litigation matters; •pay amounts that may become due under our tax receivable agreement with KKR Holdings; •make cash distributions in accordance with our distribution policy for our common units or the terms of our preferred units; •underwrite commitments within our capital markets business;•make future purchase price payments in connection with our proprietary investments, such as our strategic partnership with Marshall Wace; •acquire additional assets for our Principal Activities segment, including other businesses and corporate real estate; and•repurchase KKR & Co. L.P. common units pursuant to the unit repurchase program announced on October 27, 2015 and amended on February 9,2017.KKR & Co. L.P. Unit Repurchase ProgramOn October 27, 2015, KKR announced the authorization of a program providing for the repurchase by KKR of up to $500 million in the aggregate of itsoutstanding common units. Under this unit repurchase program, units may be repurchased from time to time in open market transactions, in privately negotiatedtransactions or otherwise. The timing, manner, price and amount of any unit repurchases will be determined by KKR in its discretion and will depend on a varietyof factors, including legal requirements, price and economic and market conditions. KKR expects that the program, which has no expiration date, will be in effectuntil the maximum approved dollar amount has been used to repurchase common units. The program does not require KKR to repurchase any specific number ofcommon units, and the program may be suspended, extended, modified or discontinued at any time. Since inception of the unit repurchase program throughFebruary 9, 2017, KKR has repurchased and canceled approximately 31.7 million outstanding common units for approximately $459 million. In addition, onFebruary 9, 2017, KKR announced an incremental $250 million has been authorized to repurchase common units. This amount is in addition to the $41 millionremaining as of February 9, 2017 under the current repurchase program. For additional information regarding units repurchased during the fourth quarter of 2016,see "--Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities."158Table of ContentsCapital CommitmentsThe agreements governing our active investment funds generally require the general partners of the funds to make minimum capital commitments to suchfunds, which usually range from 2% to 8% of a fund's total capital commitments at final closing; however, the size of our general partner commitment to certainfunds pursuing newer strategies may exceed this range. The following table presents our uncalled commitments to our active investment funds as of December 31,2016 : UncalledCommitmentsPrivate Markets($ in thousands)Americas Fund XII$1,000,000Energy Income and Growth130,900European Fund IV128,600Next Generation Technology Growth Fund127,800Real Estate Partners Americas109,800Global Infrastructure Investors II86,400Real Estate Partners Europe54,100North America Fund XI49,900Asian Fund II35,700Co-Investment Vehicles23,500Other Private Markets Funds441,500Total Private Markets Commitments2,188,200 Public Markets Special Situations Fund12,100Special Situations Fund II203,700Mezzanine Partners5,900Lending Partners8,600Lending Partners II18,100Lending Partners Europe34,100Other Alternative Credit Vehicles114,200Total Public Markets Commitments396,700 Total Uncalled Commitments$2,584,900 As of December 31, 2016 , KKR had unfunded commitments consisting of (i) $2,584.9 million , as shown above, to its active investment funds, (ii) $610.2million in connection with commitments by KKR's capital markets business and (iii) other investment commitments of $70.5 million . Whether these amounts areactually funded, in whole or in part depends on the terms of such commitments, including the satisfaction or waiver of any conditions to funding. Prisma Capital Partners On October 1, 2012, KKR acquired all of the equity interests of Prisma subject to potential purchase price payments in 2014 and 2017. At the time of theacquisition, KKR may have become contingently obligated to make future purchase price payments in 2017 based on whether the Prisma business grows to achievecertain operating performance metrics when measured in such year. During the fourth quarter of 2016, KKR determined that it was no longer probable that thesellers (certain of whom are employees of KKR) of Prisma Capital Partners LP and its affiliates would be entitled to any future additional payment under thecontingent consideration arrangement. Consequently, as of December 31, 2016, KKR has reduced the fair value of the contingent consideration liability to zero .Additionally, on February 6, 2017, KKR and Pacific Alternative Asset Management Company, LLC, or PAAMCO, announced that they entered into a strategictransaction to create a new liquid alternatives investment firm by combining PAAMCO and KKR Prisma. Under the terms of the agreement, the entire businessesof both PAAMCO and KKR Prisma will be contributed to a newly formed company that will operate independently from KKR, and KKR will retain a 39.9% stakeas a long-term strategic partner. This transaction is subject to the satisfaction of customary closing conditions, including the receipt of requisite regulatoryapprovals.159Table of ContentsMerchant Capital SolutionsMerchant Capital Solutions LLC, or MCS, formerly known as MerchCap Solutions LLC, was a joint venture partnership with Stone Point Capital. During theyear ended December 31, 2016, MCS became a consolidated subsidiary of KKR, and KKR has fully redeemed Stone Point Capital's interest in MCS.Investment in Marshall Wace LLPOn November 2, 2015, KKR entered into a long-term strategic relationship with Marshall Wace LLP and its affiliates and acquired a 24.9% interest inMarshall Wace through a combination of cash and common units. Subject to the exercise of a put option by Marshall Wace or a call option by KKR, at subsequentclosings to occur in the second, third and fourth years following the initial closing described above, and subject to satisfaction or waiver of certain closingconditions, including regulatory approvals, KKR may at each such closing subscribe (or be required to subscribe) for an incremental 5% equity interest, forultimate aggregate ownership of up to 39.9% of Marshall Wace. The exercise of such options would require the use of cash and/or KKR common units. KKR'sinvestment in Marshall Wace is accounted for using the equity method of accounting.Tax Receivable AgreementWe and certain intermediate holding companies that are taxable corporations for U.S. federal, state and local income tax purposes, may be required to acquireKKR Group Partnership Units from time to time pursuant to our exchange agreement with KKR Holdings. KKR Management Holdings L.P. made an electionunder Section 754 of the Internal Revenue Code that will remain in effect for each taxable year in which an exchange of KKR Group Partnership Units for commonunits occurs, which may result in an increase in our intermediate holding companies' share of the tax basis of the assets of the KKR Group Partnerships at the timeof an exchange of KKR Group Partnership Units. Certain of these exchanges are expected to result in an increase in our intermediate holding companies' share ofthe tax basis of the tangible and intangible assets of the KKR Group Partnerships, primarily attributable to a portion of the goodwill inherent in our business thatwould not otherwise have been available. This increase in tax basis may increase depreciation and amortization deductions for tax purposes and therefore reducethe amount of income tax our intermediate holding companies would otherwise be required to pay in the future. This increase in tax basis may also decrease gain(or increase loss) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.We have entered into a tax receivable agreement with KKR Holdings, which requires our intermediate holding companies to pay to KKR Holdings, or tocurrent and former principals who have exchanged KKR Holdings units for KKR common units as transferees of KKR Group Partnership Units, 85% of theamount of cash savings, if any, in U.S. federal, state and local income tax that the intermediate holding companies realize as a result of the increase in tax basisdescribed above, as well as 85% of the amount of any such savings the intermediate holding companies realize as a result of increases in tax basis that arise due tofuture payments under the agreement. We expect our intermediate holding companies to benefit from the remaining 15% of cash savings, if any, in income tax thatthey realize. A termination of the agreement or a change of control could give rise to similar payments based on tax savings that we would be deemed to realize inconnection with such events. In the event that other of our current or future subsidiaries become taxable as corporations and acquire KKR Group Partnership Unitsin the future, or if we become taxable as a corporation for U.S. federal income tax purposes, we expect that each will become subject to a tax receivable agreementwith substantially similar terms.These payment obligations are obligations of our intermediate holding companies and not the KKR Group Partnerships. As such, cash payments received bycommon unitholders may vary from those received by holders of KKR Group Partnership Units held by KKR Holdings and its current and former principals to theextent payments are made to those parties under the tax receivable agreement. Payments made under the tax receivable agreement are required to be made within90 days of the filing of the tax returns of our intermediate holding companies, which may result in a timing difference between the tax savings received by KKR'sintermediate holdings companies and the cash payments made to the selling holders of KKR Group Partnership Units.For the years ended December 31, 2016 , 2015 and 2014, cash payments that have been made under the tax receivable agreement were $5.0 million, $5.7million and $5.7 million, respectively. As of December 31, 2016 , $4.2 million of cumulative income tax savings have been realized. See "-Liquidity-OtherLiquidity Needs- Contractual Obligations, Commitments and Contingencies" for a discussion of amounts payable and cumulative cash payments made under thisagreement.Distributions160Table of ContentsA distribution of $0.16 per common unit has been declared, which will be paid on March 7, 2017 to holders of record of common units as of the close ofbusiness on February 21, 2017 . Under KKR's current distribution policy for its common units, KKR has made equal quarterly distributions to holders of commonunits in an amount of $0.16 per common unit per quarter. Beginning with the financial results to be reported for the first quarter of 2017, KKR intends, subject tothe limitations below, to increase its quarterly distribution to common unitholders to $0.17 per common unit per quarter.A distribution of $0.421875 per Series A Preferred Unit has been declared and set aside for payment on March 15, 2017 to holders of record of Series APreferred Units as of the close of business on March 1, 2017. A distribution of $0.406250 per Series B Preferred Unit has been declared and set aside for paymenton March 15, 2017 to holders of record of Series B Preferred Units as of the close of business on March 1, 2017.The declaration and payment of any future distributions on preferred or common units are subject to the discretion of the board of directors of the generalpartner of KKR and the terms of its limited partnership agreement. There can be no assurance that future distributions will be made as intended or at all, thatunitholders will receive sufficient distributions to satisfy payment of their tax liabilities as limited partners of KKR or that any particular distribution policy forcommon units will be maintained. Furthermore, the declaration and payment of distributions by the KKR Group Partnerships and our other subsidiaries may alsobe subject to legal, contractual and regulatory restrictions, including restrictions contained in our debt agreements and the preferred units of the KKR GroupPartnerships.When KKR & Co. L.P. receives distributions from the KKR Group Partnerships (the holding companies of the KKR business), KKR Holdings receives its prorata share of such distributions from the KKR Group Partnerships. Other Liquidity Needs We may also be required to fund various underwriting and fronting commitments in our capital markets business in connection with the underwriting of loans,securities or other financial instruments. We generally expect that these commitments will be syndicated to third parties or otherwise fulfilled or terminated,although we may in some instances elect to retain a portion of the commitments for our own investment.Contractual Obligations, Commitments and Contingencies on a Consolidated Basis In the ordinary course of business, we and our consolidated funds and CFEs enter into contractual arrangements that may require future cash payments. Thefollowing table sets forth information relating to anticipated future cash payments as of December 31, 2016 . Payments due by PeriodTypes of Contractual Obligations <1 Year 1-3 Years 3-5 Years >5 Years Total ($ in millions)Uncalled commitments to investment funds (1) $6,577.2 $— $— $— $6,577.2Debt payment obligations (2) 111.8 1,675.2 1,289.7 15,293.8 18,370.5Interest obligations on debt (3) 629.3 1,186.7 1,098.2 3,956.5 6,870.7Underwriting commitments (4) 473.3 — — — 473.3Lending commitments (5) 136.9 — — — 136.9Other commitments (6) 39.3 29.1 0.3 1.8 70.5Lease obligations 52.5 97.3 54.0 12.4 216.2Corporate real estate (7) — 292.5 — — 292.5Total $8,020.3 $3,280.8 $2,442.2 $19,264.5 $33,007.8(1)These uncalled commitments represent amounts committed by our consolidated investment funds, which include amounts committed by KKR and our fundinvestors, to fund the purchase price paid for each investment made by our investment funds which are actively investing. Because capital contributions aredue on demand, the above commitments have been presented as falling due within one year. However, given the size of such commitments and the rates atwhich our investment funds make investments, we expect that the capital commitments presented above will be called over a period of several years. See"—Liquidity—Liquidity Needs."(2)Amounts include (i) the 2020 Senior Notes, 2043 Senior Notes and 2044 Senior Notes of $2.0 billion gross of unamortized discount, (ii) KFN 2042 SeniorNotes of $0.1 billion , net of unamortized premium, (iii) KFN Junior161Table of ContentsSubordinated Notes of $0.3 billion , gross of unamortized discount, (iv) financing arrangements entered into by our consolidated funds with the objective ofproviding liquidity to the funds of $2.4 billion (v) debt securities issued by our consolidated CLOs of $8.5 billion and (vi) debt securities issued by ourconsolidated CMBS entities of $5.1 billion . KFN's debt obligations are non-recourse to KKR beyond the assets of KFN. Debt securities issued byconsolidated CLOs and CMBS entities are supported solely by the investments held at the CLO and CMBS vehicles and are not collateralized by assets ofany other KKR entity. Obligations under financing arrangements entered into by our consolidated funds are generally limited to our pro-rata equity interestin such funds. Our management companies bear no obligations to repay any financing arrangements at our consolidated funds.(3)These interest obligations on debt represent estimated interest to be paid over the maturity of the related debt obligation, which has been calculated assumingthe debt outstanding at December 31, 2016 is not repaid until its maturity. Future interest rates are assumed to be those in effect as of December 31, 2016 ,including both variable and fixed rates, as applicable, provided for by the relevant debt agreements. The amounts presented above include accrued intereston outstanding indebtedness.(4)Represents various commitments in our capital markets business in connection with the underwriting of loans, securities and other financial instruments.These commitments are shown net of amounts syndicated.(5)Represents obligations in our capital markets business to lend under various revolving credit facilities.(6)Represents investment commitments of KFN.(7)Represents the purchase price due upon delivery of a new KKR office being constructed, all or a portion of which represents construction financing obtainedby the developer and may be refinanced upon delivery of the completed office. The commitment table above excludes contractual amounts owed under the tax receivable agreement because the ultimate amount and timing of the amountsdue are not presently known. As of December 31, 2016 , a payable of $128.1 million has been recorded in due to affiliates in the consolidated financial statementsrepresenting management's best estimate of the amounts currently expected to be owed under the tax receivable agreement. As of December 31, 2016 ,approximately $24.0 million of cumulative cash payments have been made under the tax receivable agreement. See "—Liquidity Needs—Tax ReceivableAgreement." Contractual Obligations, Commitments and Contingencies on an Unconsolidated Basis In the ordinary course of business, we enter into contractual arrangements that may require future cash payments. The following table sets forth informationrelating to anticipated future cash payments as of December 31, 2016 on an unconsolidated basis before the consolidation of funds and CFEs. This table differsfrom the table presented above which sets forth contractual commitments on a consolidated basis principally because this table excludes the obligations of ourconsolidated funds and CFEs. Payments due by PeriodTypes of Contractual Obligations <1 Year 1-3 Years 3-5 Years >5 Years Total ($ in millions)Uncalled commitments to investment funds (1) $2,584.9 $— $— $— $2,584.9Debt payment obligations (2) — — 500.0 1,898.5 2,398.5Interest obligations on debt (3) 130.6 257.5 225.5 2,058.9 2,672.5Underwriting commitments (4) 473.3 — — — 473.3Lending commitments (5) 136.9 — — — 136.9Other commitments (6) 39.3 29.1 0.3 1.8 70.5Lease obligations 52.5 97.3 54.0 12.4 216.2Corporate real estate (7) — 292.5 — — 292.5Total $3,417.5 $676.4 $779.8 $3,971.6 $8,845.3(1)These uncalled commitments represent amounts committed by us to fund a portion of the purchase price paid for each investment made by our investmentfunds which are actively investing. Because capital contributions are due on162Table of Contentsdemand, the above commitments have been presented as falling due within one year. However, given the size of such commitments and the rates at whichour investment funds make investments, we expect that the capital commitments presented above will be called over a period of several years. See "—Liquidity—Liquidity Needs." (2)Represents the 2020 Senior Notes, 2043 Senior Notes, 2044 Senior Notes, KFN 2042 Senior Notes, and KFN Junior Subordinated Notes which arepresented gross of unamortized discounts and net of unamortized premiums. KFN's debt obligations are non-recourse to KKR beyond the assets of KFN.(3)These interest obligations on debt represent estimated interest to be paid over the maturity of the related debt obligation, which has been calculated assumingthe debt outstanding at December 31, 2016 is not repaid until its maturity. Future interest rates are assumed to be those in effect as of December 31, 2016 ,including both variable and fixed rates, as applicable, provided for by the relevant debt agreements. The amounts presented above include accrued intereston outstanding indebtedness.(4)Represents various commitments in our capital markets business in connection with the underwriting of loans, securities and other financial instruments.These commitments are shown net of amounts syndicated.(5)Represents obligations in our capital markets business to lend under various revolving credit facilities.(6)Represents investment commitments of KFN.(7)Represents the purchase price due upon delivery of a new KKR office being constructed in New York, all or a portion of which represents constructionfinancing obtained by the developer and may be refinanced upon delivery of the completed office. The commitment table above excludes contractual amounts owed under the tax receivable agreement, because the ultimate amount and timing of the amountsdue are not presently known. As of December 31, 2016 , a payable of $128.1 million has been recorded in due to affiliates in the consolidated financial statementsrepresenting management's best estimate of the amounts currently expected to be owed under the tax receivable agreement. As of December 31, 2016 ,approximately $24.0 million of cumulative cash payments have been made under the tax receivable agreement. See "—Liquidity Needs—Tax ReceivableAgreement." We may incur contingent liabilities for claims that may be made against us in the future. We enter into contracts that contain a variety of representations,warranties and covenants, including indemnifications. For example, certain of our investment funds and KFN have provided certain indemnities relating toenvironmental and other matters and have provided nonrecourse carve-out guarantees for fraud, willful misconduct and other customary wrongful acts, each inconnection with the financing of certain real estate investments that we have made. In addition, we have also provided credit support to certain of our subsidiaries’obligations in connection with a limited number of investment vehicles that we manage. For example, KKR has guaranteed the obligations of a general partner topost collateral on behalf of its investment vehicle in connection with such vehicle’s derivative transactions, and we have also agreed to be liable for certaininvestment losses and/or for providing liquidity in the events specified in the governing documents of another investment vehicle. Our maximum exposure underthese arrangements is currently unknown as our liabilities for these matters would require a claim to be made against us in the future. The partnership documents governing our carry-paying funds, including funds and vehicles relating to private equity, mezzanine, infrastructure, energy, directlending and special situations investments, generally include a "clawback" provision that, if triggered, may give rise to a contingent obligation requiring the generalpartner to return amounts to the fund for distribution to the fund investors at the end of the life of the fund. Under a clawback obligation, upon the liquidation of afund, the general partner is required to return, typically on an after-tax basis, previously distributed carry to the extent that, due to the diminished performance oflater investments, the aggregate amount of carry distributions received by the general partner during the term of the fund exceed the amount to which the generalpartner was ultimately entitled, including the effects of any performance thresholds. Excluding carried interest received by the general partners of funds that werenot contributed to us in the KPE Transaction, as of December 31, 2016 , no carried interest was subject to this clawback obligation, assuming that all applicablecarry paying funds were liquidated at their December 31, 2016 fair values. Had the investments in such funds been liquidated at zero value, the clawback obligationwould have been $2,204.9 million . Carried interest is recognized in the statement of operations based on the contractual conditions set forth in the agreementsgoverning the fund as if the fund were terminated and liquidated at the reporting date and the fund's investments were realized at the then estimated fair values.Amounts earned pursuant to carried interest are earned by the general partner of those funds to the extent that cumulative investment returns are positive and whereapplicable, preferred return thresholds have been met. If these investment amounts163Table of Contentsearned decrease or turn negative in subsequent periods, recognized carried interest will be reversed and to the extent that the aggregate amount of carrydistributions received by the general partner during the term of the fund exceed the amount to which the general partner was ultimately entitled, a clawbackobligation would be recorded. For funds that are consolidated, this clawback obligation, if any, is reflected as an increase in noncontrolling interests in theconsolidated statements of financial condition. For funds that are not consolidated, this clawback obligation, if any, is reflected as a reduction of our investmentbalance as this is where carried interest is initially recorded. Prior to the KPE Transaction in 2009, certain principals who received carried interest distributions with respect to certain private equity funds contributed to ushad personally guaranteed, on a several basis and subject to a cap, the contingent obligations of the general partners of such private equity funds to repay amountsto fund investors pursuant to the general partners' clawback obligations. The terms of the KPE Transaction require that principals remain responsible for anyclawback obligations relating to carry distributions received prior to the KPE Transaction, up to a maximum of $223.6 million . Through investment realizations,the principals' potential exposure has been reduced to $98.9 million as of December 31, 2016 . Using valuations as of December 31, 2016 , no amounts are due withrespect to the clawback obligation required to be funded by principals. Carry distributions arising subsequent to the KPE Transaction may give rise to clawbackobligations that may be allocated generally to us and to persons who participate in the carry pool. In addition, guarantees of or similar arrangements relating toclawback obligations in favor of third party investors in an individual investment partnership by entities we own may limit distributions of carried interest moregenerally. Off Balance Sheet Arrangements Other than contractual commitments and other legal contingencies incurred in the normal course of our business, we do not have any off-balance sheetfinancings or liabilities.Critical Accounting Policies The preparation of our consolidated financial statements in accordance with GAAP requires our management to make estimates and judgments that affect thereported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of fees, expenses and investment income. Ourmanagement bases these estimates and judgments on available information, historical experience and other assumptions that we believe are reasonable under thecircumstances. However, these estimates, judgments and assumptions are often subjective and may be impacted negatively based on changing circumstances orchanges in our analyses. If actual amounts are ultimately different from those estimated, judged or assumed, revisions are included in the consolidated financialstatements in the period in which the actual amounts become known. We believe our critical accounting policies could potentially produce materially differentresults if we were to change underlying estimates, judgments or assumptions.The following discussion details certain of our critical accounting policies. For a full discussion of all critical accounting policies, please see the notes to theconsolidated financial statements "--Item 8. Consolidated Financial Statements--Summary of Significant Accounting Policies." Fair Value Measurements Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date under current market conditions. Except for certain of KKR's equity method investments and debt obligations, KKR's investments and otherfinancial instruments are recorded at fair value or at amounts whose carrying values approximate fair value. Where available, fair value is based on observablemarket prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation techniques are applied. Thesevaluation techniques involve varying levels of management estimation and judgment, the degree of which is dependent on a variety of factors.GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observability used in measuring financialinstruments at fair value. Market price observability is affected by a number of factors, including the type of financial instrument, the characteristics specific to thefinancial instrument and the state of the marketplace, including the existence and transparency of transactions between market participants. Financial instrumentswith readily available quoted prices in active markets generally will have a higher degree of market price observability and a lesser degree of judgment used inmeasuring fair value.Financial instruments measured and reported at fair value are classified and disclosed based on the observability of inputs used in the determination of fairvalues, as follows: 164Table of ContentsLevel I Pricing inputs are unadjusted, quoted prices in active markets for identical assets or liabilities as of the measurement date. The types of financial instrumentsincluded in this category are publicly-listed equities, credit investments and securities sold short.We classified 8.2% of total investments measured and reported at fair value as Level I at December 31, 2016 . Level II Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the measurement date, and fair value isdetermined through the use of models or other valuation methodologies. The types of financial instruments included in this category are credit investments,investments and debt obligations of consolidated CLO entities, convertible debt securities indexed to publicly-listed securities, less liquid and restricted equitysecurities and certain over-the-counter derivatives such as foreign currency option and forward contracts.We classified 38.6% of total investments measured and reported at fair value as Level II at December 31, 2016 . Level III Pricing inputs are unobservable for the financial instruments and include situations where there is little, if any, market activity for the financial instrument. Theinputs into the determination of fair value require significant management judgment or estimation. The types of financial instruments generally included in thiscategory are private portfolio companies, real assets investments, credit investments, equity method investments for which the fair value option was elected andinvestments and debt obligations of consolidated CMBS entities.We classified 53.2% of total investments measured and reported at fair value as Level III at December 31, 2016 . The valuation of our Level III investments atDecember 31, 2016 represents management's best estimate of the amounts that we would anticipate realizing on the sale of these investments in an orderlytransaction at such date. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair valuehierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair valuemeasurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment andconsideration of factors specific to the asset. A significant decrease in the volume and level of activity for the asset or liability is an indication that transactions or quoted prices may not be representativeof fair value because in such market conditions there may be increased instances of transactions that are not orderly. In those circumstances, further analysis oftransactions or quoted prices is needed, and a significant adjustment to the transactions or quoted prices may be necessary to estimate fair value. The availability of observable inputs can vary depending on the financial asset or liability and is affected by a wide variety of factors, including, for example,the type of instrument, whether the instrument has recently been issued, whether the instrument is traded on an active exchange or in the secondary market, andcurrent market conditions. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fairvalue requires more judgment. Accordingly, the degree of judgment exercised by us in determining fair value is greatest for instruments categorized in Level III.The variability and availability of the observable inputs affected by the factors described above may cause transfers between Levels I, II, and III, which werecognize at the beginning of the reporting period. Investments and other financial instruments that have readily observable market prices (such as those traded on a securities exchange) are stated at the lastquoted sales price as of the reporting date. We do not adjust the quoted price for these investments, even in situations where we hold a large position and a salecould reasonably affect the quoted price.Management’s determination of fair value is based upon the methodologies and processes described below and may incorporate assumptions that aremanagement’s best estimates after consideration of a variety of internal and external factors. Level II Valuation Methodologies 165Table of ContentsCredit Investments: These instruments generally have bid and ask prices that can be observed in the marketplace. Bid prices reflect the highest price that KKRand others are willing to pay for an instrument. Ask prices represent the lowest price that KKR and others are willing to accept for an instrument. For financialassets and liabilities whose inputs are based on bid-ask prices obtained from third party pricing services, fair value may not always be a predetermined point in thebid-ask range. KKR’s policy is generally to allow for mid-market pricing and adjusting to the point within the bid-ask range that meets KKR’s best estimate of fairvalue.Investments and Debt Obligations of Consolidated CLO Vehicles: Investments of consolidated CLO vehicles are valued using the same valuation methodologyas described above for credit investments. Under ASU 2014-13, KKR measures CLO debt obligations on the basis of the fair value of the financial assets of theCLO. Securities indexed to publicly-listed securities: The securities are typically valued using standard convertible security pricing models. The key inputs into thesemodels that require some amount of judgment are the credit spreads utilized and the volatility assumed. To the extent the company being valued has otheroutstanding debt securities that are publicly-traded, the implied credit spread on the company’s other outstanding debt securities would be utilized in the valuation.To the extent the company being valued does not have other outstanding debt securities that are publicly-traded, the credit spread will be estimated based on theimplied credit spreads observed in comparable publicly-traded debt securities. In certain cases, an additional spread will be added to reflect an illiquidity discountdue to the fact that the security being valued is not publicly-traded. The volatility assumption is based upon the historically observed volatility of the underlyingequity security into which the convertible debt security is convertible and/or the volatility implied by the prices of options on the underlying equity security.Restricted Equity Securities: The valuation of certain equity securities is based on an observable price for an identical security adjusted for the effect of arestriction.Derivatives: The valuation incorporates observable inputs comprising yield curves, foreign currency rates and credit spreads. Level III Valuation Methodologies Financial assets and liabilities categorized as Level III consist primarily of the following: Private Equity Investments: We generally employ two valuation methodologies when determining the fair value of a private equity investment. The firstmethodology is typically a market comparables analysis that considers key financial inputs and recent public and private transactions and other available measures.The second methodology utilized is typically a discounted cash flow analysis, which incorporates significant assumptions and judgments. Estimates of key inputsused in this methodology include the weighted average cost of capital for the investment and assumed inputs used to calculate terminal values, such as exitEBITDA multiples. In certain cases the results of the discounted cash flow approach can be significantly impacted by these estimates. Other inputs are also used inboth methodologies. Also, as discussed in greater detail under "—Business Environment" in this report and "Risk Factors—Risks Related to the Assets We Manage—Our investments are impacted by various economic conditions that are difficult to quantify or predict, but may have a significant adverse impact on the value ofour investments" in our Annual Report, a change in interest rates could have a significant impact on valuations. In addition, when a definitive agreement has beenexecuted to sell an investment, KKR generally considers a significant determinant of fair value to be the consideration to be received by KKR pursuant to theexecuted definitive agreement. Upon completion of the valuations conducted using these methodologies, a weighting is ascribed to each method, and an illiquidity discount is typicallyapplied where appropriate. The ultimate fair value recorded for a particular investment will generally be within a range suggested by the two methodologies, exceptthat the value may be higher or lower than such range in the case of investments being sold pursuant to an executed definitive agreement. When determining the weighting ascribed to each valuation methodology, we consider, among other factors, the availability of direct market comparables, theapplicability of a discounted cash flow analysis, the expected hold period and manner of realization for the investment, and in the case of investments being soldpursuant to an executed definitive agreement, we estimated probability of such a sale being completed. These factors can result in different weightings amonginvestments in the portfolio and in certain instances may result in up to a 100% weighting to a single methodology. Across the total Level III private equityinvestment portfolio, including investments in both consolidated and unconsolidated investment funds, approximately 69% of the fair value is derived frominvestments that are valued based exactly 50% on market comparables and 50% on a discounted cash flow analysis. Less than 5% of the fair value of this Level IIIprivate equity investment portfolio is derived from investments that are valued either based 100% on market comparables or 100% on a166Table of Contentsdiscounted cash flow analysis. As of December 31, 2016, the overall weights ascribed to the market comparables methodology, the discounted cash flowmethodology and a methodology based on pending sales for this portfolio of Level III private equity investments were 38%, 44% and 18%, respectively. When an illiquidity discount is to be applied, we seek to take a uniform approach across our portfolio and generally apply a minimum 5% discount to allprivate equity investments. We then evaluate such private equity investments to determine if factors exist that could make it more challenging to monetize theinvestment and, therefore, justify applying a higher illiquidity discount. These factors generally include (i) whether we are unable to freely sell the portfoliocompany or conduct an initial public offering of the portfolio company due to the consent rights of a third party or similar factors, (ii) whether the portfoliocompany is undergoing significant restructuring activity or similar factors and (iii) characteristics about the portfolio company regarding its size and/or whether theportfolio company is experiencing, or expected to experience, a significant decline in earnings. These factors generally make it less likely that a portfolio companywould be sold or publicly offered in the near term at a price indicated by using just a market multiples and/or discounted cash flow analysis, and these factors tendto reduce the number of opportunities to sell an investment and/or increase the time horizon over which an investment may be monetized. Depending on theapplicability of these factors, we determine the amount of any incremental illiquidity discount to be applied above the 5% minimum, and during the time we holdthe investment, the illiquidity discount may be increased or decreased, from time to time, based on changes to these factors. The amount of illiquidity discountapplied at any time requires considerable judgment about what a market participant would consider and is based on the facts and circumstances of each individualinvestment. Accordingly, the illiquidity discount ultimately considered by a market participant upon the realization of any investment may be higher or lower thanthat estimated by us in our valuations.In the case of growth equity investments, enterprise values may be determined using the market comparables analysis and discounted cash flow analysisdescribed above. A scenario analysis may also be conducted to subject the estimated enterprise values to a downside, base and upside case, which involvessignificant assumptions and judgments. A milestone analysis may also be conducted to assess the current level of progress towards value drivers that we havedetermined to be important, which involves significant assumptions and judgments. The enterprise value in each case may then be allocated across the investment’scapital structure to reflect the terms of the security and subjected to probability weightings. In certain cases, the values of growth equity investments may be basedon recent or expected financings. Real Assets Investments: Real asset investments in infrastructure, energy and real estate are valued using one or more of the discounted cash flow analysis,market comparables analysis and direct income capitalization, which in each case incorporates significant assumptions and judgments. Infrastructure investmentsare generally valued using the discounted cash flow analysis. Key inputs used in this methodology can include the weighted average cost of capital and assumedinputs used to calculate terminal values, such as exit EBITDA multiples. Energy investments are generally valued using a discounted cash flow analysis. Keyinputs used in this methodology that require estimates include the weighted average cost of capital. In addition, the valuations of energy investments generallyincorporate both commodity prices as quoted on indices and long-term commodity price forecasts, which may be substantially different from, and are currentlyhigher than, commodity prices on certain indices for equivalent future dates. Certain energy investments do not include an illiquidity discount. Long-termcommodity price forecasts are utilized to capture the value of the investments across a range of commodity prices within the energy investment portfolio associatedwith future development and to reflect a range of price expectations. Real estate investments are generally valued using a combination of direct incomecapitalization and discounted cash flow analysis. Key inputs used in such methodologies that require estimates include an unlevered discount rate and currentcapitalization rate, and certain real estate investments do not include a minimum illiquidity discount. The valuations of real assets investments also use other inputs. On a segment basis, our energy real asset investments in oil and gas producing properties as of December 31, 2016 had a fair value of approximately $559million . Based on this fair value, we estimate that an immediate, hypothetical 10% decline in the fair value of these energy investments from one or more adversemovements to the investments' valuation inputs would result in a decline in investment income of $55.9 million and a decline in net income attributable toKKR & Co. L.P. of $31.4 million, after deducting amounts that are attributable to noncontrolling interests held by KKR Holdings L.P. As of December 31, 2016 ,if we were to value our energy investments using only the commodity prices as quoted on indices and did not use long-term commodity price forecasts, and alsoheld all other inputs to their valuation constant, we estimate that investment income would have been approximately $37 million lower, resulting in a lower amountof net income attributable to KKR & Co. L.P. of approximately 56.1% of the overall decrease in investment income, after deducting amounts that are attributable tononcontrolling interests held by KKR Holdings L.P.These hypothetical declines relate only to investment income. There would be no current impact on KKR's carried interest since all of the investment fundswhich hold these types of energy investments have investment values that are either below their cost or not currently accruing carried interest. Additionally, therewould be no impact on fees since fees earned from167Table of Contentsinvestment funds which hold investments in oil and gas producing properties are based on either committed capital or capital invested.For GAAP purposes, where KKR holds energy investments consisting of working interests in oil and gas producing properties directly and not through aninvestment fund, such working interests are consolidated based on the proportion of the working interests held by us. Accordingly, we reflect the assets, liabilities,revenues, expenses, investment income and cash flows of the consolidated working interests on a gross basis and changes in the value of these energy investmentsare not reflected as unrealized gains and losses in the consolidated statements of operations. Accordingly, a change in fair value for these investments does notresult in a decrease in net gains (losses) from investment activities, but may result in an impairment charge reflected in general, administrative and other expenses.For segment purposes, these directly held working interests are treated as investments and changes in value are reflected in our segment results as unrealized gainsand losses.Credit Investments: Credit investments are valued using values obtained from dealers or market makers, and where these values are not available, creditinvestments are generally valued by us based on ranges of valuations determined by an independent valuation firm. Valuation models are based on discounted cashflow analyses, for which the key inputs are determined based on market comparables, which incorporate similar instruments from similar issuers. Other Investments: With respect to other investments including equity method investments for which the fair value election has been made, we generallyemploy the same valuation methodologies as described above for private equity investments when valuing these other investments. Investments and Debt Obligations of Consolidated CMBS Vehicles: Under ASU 2014-13, we measure CMBS investments on the basis of the fair value of thefinancial liabilities of the CMBS. Debt obligations of consolidated CMBS vehicles are valued based on discounted cash flow analyses. The key input is theexpected yield of each CMBS security using both observable and unobservable factors, which may include recently offered or completed trades and publishedyields of similar securities, security-specific characteristics (e.g. securities ratings issued by nationally recognized statistical rating organizations, credit support byother subordinate securities issued by the CMBS and coupon type) and other characteristics. Key unobservable inputs that have a significant impact on our Level III investment valuations as described above are included in Note 5 "Fair ValueMeasurements" of the financial statements included elsewhere in this report. We utilize several unobservable pricing inputs and assumptions in determining the fairvalue of our Level III investments. These unobservable pricing inputs and assumptions may differ by investment and in the application of our valuationmethodologies. Our reported fair value estimates could vary materially if we had chosen to incorporate different unobservable pricing inputs and other assumptionsor, for applicable investments, if we only used either the discounted cash flow methodology or the market comparables methodology instead of assigning aweighting to both methodologies. For valuations determined for periods other than at year end, various inputs may be estimated prior to the end of the relevantperiod. Level III Valuation Process The valuation process involved for Level III measurements is completed on a quarterly basis and is designed to subject the valuation of Level III investmentsto an appropriate level of consistency, oversight, and review.For Private Markets investments classified as Level III, investment professionals prepare preliminary valuations based on their evaluation of financial andoperating data, company specific developments, market valuations of comparable companies and other factors. These preliminary valuations are reviewed by anindependent valuation firm engaged by KKR to perform certain procedures in order to assess the reasonableness of KKR’s valuations annually for all Level IIIinvestments in Private Markets and quarterly for investments other than certain investments, which have values less than pre-set value thresholds and which in theaggregate comprise less than 5% of the total value of KKR’s Level III Private Markets investments. The valuations of certain real asset investments are determinedsolely by an independent valuation firm without the preparation of preliminary valuations by our investment professionals, and instead such independent valuationfirm relies on valuation information available to it as a broker or valuation firm. For credit investments and debt obligations of consolidated CMBS vehicles, anindependent valuation firm is generally engaged by KKR with respect to most investments classified as Level III. The valuation firm either provides a valuationrange from which KKR’s investment professionals select a point in the range to determine the preliminary valuation or performs certain procedures in order toassess the reasonableness and provide positive assurance of KKR’s valuations. After reflecting any input from the independent valuation firm, the valuationproposals are submitted to their respective valuation sub-committees. As of December 31, 2016, less than 6% of the total value of our Level III credit investmentsare not valued with the engagement of an independent valuation firm.168Table of ContentsKKR has a global valuation committee comprised of senior employees including investment professionals and professionals from business operationsfunctions, and includes our Chief Financial Officer, General Counsel and Chief Compliance Officer. The global valuation committee is assisted by valuation sub-committees and investment professionals for each business strategy. All preliminary Level III valuations are reviewed and approved by the valuation sub-committees for private equity, real estate, energy and infrastructure and credit, as applicable. When Level III valuations are required to be performed on hedge fundinvestments, a valuation sub-committee for hedge funds reviews these valuations. The valuation sub-committees are responsible for the review and approval ofvaluations in their respective business lines on a quarterly basis. The members of the valuation sub-committees are comprised of investment professionals,including the heads of each respective strategy, and professionals from business operations functions such as legal, compliance and finance, who are not primarilyresponsible for the management of the investments.The global valuation committee provides general oversight of the valuation sub-committees. The global valuation committee is responsible for coordinatingand implementing the firm’s valuation process to ensure consistency in the application of valuation principles across portfolio investments and between periods.All valuations are subject to approval by the global valuation committee. When valuations are approved by the global valuation committee after reflecting anyinput from it, the valuations of Level III investments, as well as the valuations of Level I and Level II investments, are presented to the audit committee of theboard of directors of the general partner of KKR & Co. L.P. and are then reported to the board of directors. As of December 31, 2016 , upon completion by, where applicable, an independent valuation firm of certain limited procedures requested to be performed bythem on certain investments, the independent valuation firm concluded that the fair values, as determined by KKR, of those investments reviewed by them werereasonable. The limited procedures did not involve an audit, review, compilation or any other form of examination or attestation under generally accepted auditingstandards and were not conducted on all Level III investments. We are responsible for determining the fair value of investments in good faith, and the limitedprocedures performed by an independent valuation firm are supplementary to the inquiries and procedures that we are required to undertake to determine the fairvalue of the commensurate investments. As described above, Level II and Level III investments were valued using internal models with significant unobservable inputs and our determinations of thefair values of these investments may differ materially from the values that would have resulted if readily observable inputs had existed. Additional external factorsmay cause those values, and the values of investments for which readily observable inputs exist, to increase or decrease over time, which may create volatility inour earnings and the amounts of assets and partners' capital that we report from time to time. Changes in the fair value of investments impacts the amount of carried interest that is recognized as well as the amount of investment income that isrecognized for investments held directly and through our consolidated funds as described below. We estimate that an immediate 10% decrease in the fair value ofinvestments held directly and through consolidated investment funds generally would result in a commensurate change in the amount of net gains (losses) frominvestment activities for investments held directly and through investment funds and a more significant impact to the amount of carried interest recognized,regardless of whether the investment was valued using observable market prices or management estimates with significant unobservable pricing inputs. Withrespect to consolidated investment funds, the impact that the consequential decrease in investment income would have on net income attributable to KKR wouldgenerally be significantly less than the amount described above, given that a majority of the change in fair value of our consolidated funds would be attributable tononcontrolling interests and therefore we are only impacted to the extent of our carried interest and our balance sheet investments. As of December 31, 2016 , there were no investments which represented greater than 5% of total investments on a GAAP basis. On a segment basis, as ofDecember 31, 2016 , investments which represented greater than 5% of total reportable segments investments consisted of only First Data Corporation valued at$1,094.2 million . Our investment income can be impacted by volatility in the public markets related to our holdings of publicly traded securities, including oursizable holdings of First Data Corporation (NYSE: FDC). For the year ended December 31, 2016 , the reduction in the stock price of First Data Corporationreduced economic net income on a segment basis by approximately $180 million . See "--Business Environment" for a discussion on the impact of global equitymarkets on our financial condition and "--Segment Balance Sheet" for additional information regarding our largest holdings on a segment basis. Recognition of Investment Income On January 1, 2016, KKR adopted ASU 2015-02, which resulted in the de-consolidation of most of KKR's investment funds that had been consolidated priorto such date. As a result of this adoption, the Net Gains (Losses) from Investment169Table of ContentsActivities attributed to third party limited partners in our investment funds that had previously been consolidated are not included in the statement of operationseffective with the adoption of ASU 2015-02 on January 1, 2016.Investment income consists primarily of the net impact of: (i) realized and unrealized gains and losses on investments, (ii) dividends, (iii) interest income,(iv) interest expense and (v) foreign exchange gains and losses relating to mark-to-market activity on foreign exchange forward contracts, foreign currency options,foreign denominated debt and debt securities issued by consolidated CFEs. Unrealized gains or losses resulting from the aforementioned activities are included innet gains (losses) from investment activities. Upon disposition of an instrument that is marked-to-market, previously recognized unrealized gains or losses arereversed and a realized gain or loss is recognized. While this reversal generally does not significantly impact the net amounts of gains (losses) that we recognizefrom investment activities, it affects the manner in which we classify our gains and losses for reporting purposes. Subsequent to the adoption of ASU 2015-02, certain of our investment funds continue to be consolidated. When a fund is consolidated, the portion of ourfunds' investment income that is allocable to our carried interests and capital investments is not shown in the consolidated financial statements. For funds that areconsolidated, all investment income (loss), including the portion of a funds' investment income (loss) that is allocable to KKR's carried interest, is included ininvestment income (loss) on the consolidated statements of operations. The carried interest that KKR retains in net income (loss) attributable to KKR & Co. L.P. isreflected as an adjustment to net income (loss) attributable to noncontrolling interests. However, because certain of our funds remain consolidated and because wehold a minority economic interest in these funds' investments, our share of the investment income is less than the total amount of investment income presented inthe consolidated financial statements for these consolidated funds. Recognition of Carried Interest in the Statement of Operations Carried interest entitles the general partner of a fund to a greater allocable share of the fund's earnings from investments relative to the capital contributed bythe general partner and correspondingly reduces noncontrolling interests' attributable share of those earnings. Carried interest is earned by the general partner ofthose funds to the extent that cumulative investment returns are positive and where applicable, preferred return thresholds have been met. If these investmentreturns decrease or turn negative in subsequent periods, recognized carried interest will be reversed and reflected as losses in the statement of operations. For fundsthat are not consolidated, amounts earned pursuant to carried interest are included in fees and other in the consolidated statements of operations. Amounts earnedpursuant to carried interest at consolidated funds are eliminated from fees and other upon consolidation of the fund and are included as investment income (loss) innet gains (losses) from investment activities along with all of the other investment gains and losses at the consolidated fund.On January 1, 2016, KKR adopted ASU 2015-02, which resulted in the de-consolidation of most of KKR's investment funds that had been consolidated priorto such date. As a result of this adoption, most of the carried interest earned from unconsolidated funds is no longer eliminated in consolidation and is reflected infees and other subsequent to the adoption. Carried interest is recognized in the statement of operations based on the contractual conditions set forth in the agreements governing the fund as if the fundwere terminated and liquidated at the reporting date and the fund's investments were realized at the then estimated fair values. Due to the extended durations of ourprivate equity funds, we believe that this approach results in income recognition that best reflects our periodic performance in the management of those funds.Amounts earned pursuant to carried interest are earned by the general partner of those funds to the extent that cumulative investment returns are positive and whereapplicable, preferred return thresholds have been met. If these investment amounts earned decrease or turn negative in subsequent periods, recognized carriedinterest will be reversed and to the extent that the aggregate amount of carry distributions received by the general partner during the term of the fund exceed theamount to which the general partner was ultimately entitled, a clawback obligation would be recorded. For funds that are not consolidated, this clawbackobligation, if any, is reflected as a reduction of our investment balance as this is where carried interest is initially recorded. For funds that are consolidated, thisclawback obligation, if any, is reflected as an increase in noncontrolling interests in the consolidated statements of financial condition.Prior to January 1, 2016, most of our historical private equity funds that provide for carried interest do not have a preferred return. For these funds, themanagement company is required to refund up to 20% of any management fees earned from its limited partners in the event that the fund recognizes carriedinterest. At such time as the fund recognizes carried interest in an amount sufficient to cover 20% of the management fees earned or a portion thereof, a liabilitydue to the fund’s limited partners is recorded and revenue is reduced for the amount of the carried interest recognized, not to exceed 20% of the management feesearned. The refunds to the limited partners are paid, and liabilities relieved, at such time that the underlying investment is sold and the associated carried interest isrealized. In the event that a fund’s carried interest is not sufficient to cover all or a portion170Table of Contentsof the amount that represents 20% of the earned management fees, such management fees would be retained and not returned to the funds’ limited partners.Most of our newer investment funds that provide for carried interest, however, have a preferred return. In this case, the management company does not refundthe management fees earned from the limited partners of the fund as described above. Instead, the management fee is effectively returned to the limited partnersthrough a reduction of the realized gain on which carried interest is calculated. To calculate the carried interest, KKR calculates whether a preferred return has beenachieved based on an amount that includes all of the management fees paid by the limited partners as well as the other capital contributions and expenses paid bythem to date. To the extent the fund has exceeded the preferred return at the time of a realization event, and subject to any other conditions for the payment ofcarried interest like netting holes, carried interest is distributed to the general partner. Until the preferred return is achieved, no carried interest is recorded.Thereafter, the general partner is entitled to a catch up allocation such that the general partner’s carried interest is paid in respect of all of the fund’s net gains,including the net gains used to pay the preferred return, until the general partner has received the full percentage amount of carried interest that the general partneris entitled to under the terms of the fund. In general, investment funds that entitle the management company to receive an incentive fee have a preferred return andare calculated on a similar basis that takes into account management fees paid.Recently Issued Accounting Pronouncements For a full discussion of recently issued accounting pronouncements, please see the notes to the consolidated financial statements "--Item 8. ConsolidatedFinancial Statements--Summary of Significant Accounting Policies."171Table of ContentsItem 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our exposure to market risks primarily relates to movements in the fair value of investments, including the effect that those movements have on ourmanagement fees, carried interest and net gains from investment activities. The fair value of investments may fluctuate in response to changes in the values ofinvestments, foreign currency exchange rates and interest rates. Additionally, interest rate movements can adversely impact the amount of interest income wereceive on credit instruments bearing variable rates and could also impact the amount of interest that we pay on debt obligations bearing variable rates.The quantitative information provided in this section was prepared using estimates and assumptions that management believes are appropriate in order toprovide a reader with an indication of the directional impact that a hypothetical adverse movement in certain risks would have on net income attributable to KKR &Co. L.P. In all cases, these directional impacts are presented after deducting amounts that are attributable to noncontrolling interests held by KKR Holdings L.P. Asof December 31, 2016 , KKR & Co. L.P. and KKR Holdings L.P. held interests in our business of 56.1% and 43.9% , respectively. The actual impact of ahypothetical adverse movement in these risks could be materially different from the amounts shown below.The firm uses various committees to help manage market risk and general business risks.Management of Market RiskWhen we commit capital of a certain amount from our balance sheet to investments or transactions, a balance sheet committee of senior employees, includingour two Co-Chief Executive Officers, the Chief Financial Officer and Chief Administrative Officer, must approve the investment or transaction before it may bemade. The committee may delegate authority to other employees subject to maximum commitment sizes or other limitations determined by the committee. Inaddition, this committee supervises activities governing KKR's capital structure, liquidity, and the composition of our balance sheet.Certain securities transactions by our capital markets business are subject to risk tolerance limits, regulatory capital requirements and the review and approvalof one or more committees in compliance with rules applicable to broker-dealers pursuant to the Securities Exchange Act of 1934. When our capital is committedto capital markets transactions, after diligence is conducted, such transactions are subject to the review and approval of a capital markets underwriting committee.These transactions are also subject to risk tolerance limits. The risk tolerance limits establish the level of investment we may make in a single company or type oftransaction, for example and are designed to avoid undue concentration and risk exposure. Regulatory capital requirements also place limits on the size of securitiesunderwritings the capital markets business can conduct based on quantitative measure of assets, liabilities and certain off-balance-sheet items. Aggregate balancesheet risk and capital deployed for transactions are monitored on an ongoing basis by the balance sheet committee referenced above.With respect to the funds and other investment vehicles through which we make investments for our fund investors, KKR manages risk by subjectingtransactions to the review and approval of an applicable investment committee, and then a portfolio management committee (or other designated senior employees)regularly monitors these investments. Before making an investment, investment professionals identify risks in due diligence, evaluating, among other things,business, financial, legal and regulatory issues, financial data and other information. An investment team presents the investment and its identified risks to aninvestment committee, which must approve each investment before it may be made. If an investment is made, a portfolio management committee (or otherdesignated senior employees) is responsible for working with our investment professionals to monitor the investment on an ongoing basis.Management of General Business RiskKKR has a global risk committee comprised of senior employees from across our business segments and across business operations, and includes our ChiefAdministrative Officer, Chief Financial Officer, General Counsel and Chief Compliance Officer. The risk committee monitors and evaluates KKR's generalbusiness risks. The Chief Administrative Officer, who also serves as the chairman of the risk committee, regularly reports to our Co-Chief Executive Officers andquarterly to the Audit Committee, which is the chief committee that monitors risk on behalf of the Board of Directors.KKR's global conflicts committee is responsible for analyzing and addressing new or potential conflicts of interest that may arise in KKR's business, includingconflicts relating to specific transactions and circumstances as well as those implicit in the overall activities of KKR and its various businesses and monitorscompliance matters. Our Chief Administrative Officer, Chief Financial Officer, General Counsel and Chief Compliance Officer are members of this committee.172Table of ContentsKKR's management committee is responsible for evaluating certain matters affecting the business of KKR. It consists of our Co-Chief Executive Officers,Chief Administrative Officer, Chief Financial Officer, General Counsel and other senior employees across our business segments and across business operations,and is chaired by our Chief Administrative Officer.Changes in Fair ValueThe majority of our investments are reported at fair value. Net changes in the fair value of investments impact the net gains (losses) from investment activitiesin our consolidated statements of operations. Based on investments held as of December 31, 2016 , we estimate that an immediate 10% decrease in the fair value ofinvestments generally would result in a commensurate change in the amount of net gains (losses) from investment activities (except that carried interest wouldlikely be more significantly impacted), regardless of whether the investment was valued using observable market prices or management estimates with significantunobservable pricing inputs. The impact that the consequential decrease in investment income would have on net income attributable to KKR & Co. L.P. wouldgenerally be significantly less than the amount described above, given that a significant portion of the change in fair value would be attributable to noncontrollinginterests and therefore we are only impacted to the extent of our carried interest and our balance sheet investments and to a lesser extent our management fees.Because of this, the quantitative information that follows represents the impact that a reduction to each of the income streams shown below would have on netincome attributable to KKR & Co. L.P. before income taxes. The actual impact to individual line items within the consolidated statements of operations woulddiffer from the amounts shown below as a result of (i) the inclusion of amounts attributable to KKR Holdings L.P. in individual line items within the consolidatedstatement of operations, (ii) the elimination of management fees and carried interest and (iii) the gross-up of net gains (losses) from investment activities, in eachcase as a result of the consolidation of certain investment funds and CFEs.Based on the fair value of investments as of December 31, 2016 , we estimate that an immediate, hypothetical 10% decline in the fair value of investmentswould result in declines in net income attributable to KKR & Co. L.P. before income taxes in 2017 from reductions in the following items, if not offset by otherfactors: Year Ended December 31, 2016 Management fees Carried Interest, Net ofCarry Pool Allocation Net Gains/(Losses) FromInvestment ActivitiesExcluding CarriedInterest ($ in thousands) 10% Decline in Fair Value of Investments (1)$9,367(2) $239,709(3) $393,423(3) (1)An immediate, hypothetical 10% decline in the fair value of investments would also impact our ability to earn incentive fees. Since the majority of our incentive fees are earned atDecember 31st or June 30th of each calendar year and are not subject to clawback, a 10% decline in fair value would generally result in the recognition of no incentive fees on aprospective basis and result in lower net income relative to prior years where such incentive fees may have been earned. (2)Represents an annualized reduction in management fees. (3)Decrease would impact our statement of operations in a single quarter. With respect to carried interest, for purposes of this analysis the impact of preferred returns are ignored.Management FeesOur management fees in our Private Markets investment funds are generally calculated based on the amount of capital committed or invested by a fund, asdescribed under "Business—Our Segments—Private Markets." Accordingly, movements in the fair value of investments do not significantly affect the amount offees we may charge in Private Markets funds. Management fees in our infrastructure funds are calculated based on net asset value, or NAV, of the fund and insome cases, we additionally earn management fees on the fund's remaining commitment.In the case of our Public Markets business, management fees are often calculated based on the average NAV of the fund for that particular period, althoughcertain funds in our Public Markets segment have management fees based on the amount of capital invested. In the case of our CLO vehicles, management fees arecalculated based on the collateral of the vehicle. The collateral is based on the par value of the investments and cash on hand.To the extent that management fees are calculated based on the NAV of the fund's investments, the amount of fees that we may charge will be increased ordecreased in direct proportion to the effect of changes in the fair value of the fund's173Table of Contentsinvestments. The proportion of our management fees that are based on NAV depends on the number and type of funds in existence. For the year endedDecember 31, 2016 , the fund management fees that were recognized based on the NAV of the applicable funds was approximately 28%.Publicly Traded SecuritiesOur investment funds and KKR's balance sheet hold certain investments in portfolio companies whose securities are publicly traded. The market prices ofsecurities may be volatile and are likely to fluctuate due to a number of factors beyond our control. These factors include actual or anticipated fluctuations in thequarterly and annual results of such companies or of other companies in the industries in which they operate, market perceptions concerning the availability ofadditional securities for sale, general economic, social or political developments, industry conditions, changes in government regulation, shortfalls in operatingresults from levels forecasted by securities analysts, the general state of the securities markets and other material events, such as significant management changes,re-financings, acquisitions and dispositions. In addition, although a substantial portion of our investments are comprised of investments in portfolio companieswhose securities are not publicly traded, the value of these privately held investments may also fluctuate as our Level III investments are valued in part using amarket comparables analysis. Consequently due to similar factors beyond our control as described above for portfolio companies whose securities are publiclytraded, the value of these Level III investments may fluctuate with market prices. See "--Management's Discussion and Analysis of Financial Condition and Resultsof Operations--Business Environment".Exchange Rate RiskOur investment funds, CLO vehicles and KKR's balance sheet hold investments denominated in currencies other than the U.S. dollar. Those investmentsexpose us and our fund investors to the risk that the value of the investments will be affected by changes in exchange rates between the currency in which theinvestments are denominated and the currency in which the investments are made. Additionally, a portion of our management fees are denominated in non-U.S.dollar currencies. Our policy is to minimize these risks by employing hedging techniques, including using foreign currency options and foreign exchange forwardcontracts to reduce exposure to future changes in exchange rates when a meaningful amount of capital has been invested in currencies other than the currencies inwhich the investments are denominated.Our primary exposure to exchange rate risk relates to movements in the value of exchange rates between the U.S. dollar and other currencies in which ourinvestments are denominated (including euros, British pounds, Japanese yen, among others), net of the impact of foreign exchange hedging strategies. Thequantitative information that follows represents the impact that a reduction to each of the income streams shown below would have on net income attributable toKKR & Co. L.P. before income taxes. The actual impact to individual line items within the statements of operations would differ from the amounts shown below asa result of (i) the inclusion of amounts attributable to KKR Holdings L.P. in individual line items within the consolidated statement of operations, (ii) theelimination of management fees and carried interest and (iii) the gross-up of net gains (losses) from investment activities, in each case as a result of theconsolidation of certain investment funds and CLO vehicles.We estimate that an immediate, hypothetical 10% decline in the exchange rates between the U.S. dollar and all of the major foreign currencies in which ourinvestments were denominated as of December 31, 2016 (i.e. an increase in the value of the U.S. dollar against these foreign currencies) would result in declines innet income attributable to KKR & Co. L.P. before income taxes in 2017 from reductions in the following items, net of the impact of foreign exchange hedgingstrategies, if not offset by other factors: Year Ended December 31, 2016 Carried Interest, Net ofCarry Pool Allocation Net Gains/(Losses) FromInvestment ActivitiesExcluding Carried Interest ($ in thousands) 10% Decline in Foreign Currencies Against the U.S. Dollar (1) $27,519(2) $13,207(2) (1)An immediate, hypothetical 10% decline in exchange rates between the U.S. dollar and all of the major foreign currencies in which our investments were denominated would onlymarginally impact our ability to earn incentive fees since the majority of our funds in which we are entitled to earn incentive fees are denominated in U.S. dollars. Additionally,the impact on our management fees that are denominated in non-US dollar currencies considering the impact of foreign exchange hedging strategies employed would not beexpected to be material. (2)Decrease would impact our statement of operations in a single quarter. With respect to carried interest, for purposes of this analysis the impact of preferred returns are ignored. 174Table of ContentsInterest Rate RiskValuation of InvestmentsChanges in credit markets and in particular, interest rates, can impact investment valuations, particularly our Level III investments, and may have offsettingresults depending on the valuation methodology used. For example, we typically use a discounted cash flow analysis as one of the methodologies to ascertain thefair value of our investments that do not have readily observable market prices. If applicable interest rates rise, then the assumed cost of capital for those portfoliocompanies would be expected to increase under the discounted cash flow analysis, and this effect would negatively impact their valuations if not offset by otherfactors. Conversely, a fall in interest rates can positively impact valuations of certain portfolio companies if not offset by other factors. These impacts could besubstantial depending upon the magnitude of the change in interest rates. In certain cases, the valuations obtained from the discounted cash flow analysis and theother primary methodology we use, the market multiples approach, may yield different and offsetting results. For example, the positive impact of falling interestrates on discounted cash flow valuations may offset the negative impact of the market multiples valuation approach and may result in less of a decline in value thanfor those investments that had a readily observable market price. Finally, low interest rates related to monetary stimulus and economic stagnation may alsonegatively impact expected returns on all investments, as the demand for relatively higher return assets increases and supply decreases.Interest IncomeWe and certain consolidated funds, including CLOs hold credit investments that generate interest income based on variable interest rates. We are exposed tointerest rate risk relating to investments that generate yield since a meaningful portion of credit investments held by us and our consolidated funds, including CLOsearn income based on variable interest rates. However, the contractual interest rate structure for a large portion of our credit investments bearing variable rates have"floors" which establish a minimum rate of interest that will be earned. In the current low interest rate environment, a large portion of the credit investments heldby us and our consolidated funds, including CLOs are earning interest at the contractual floor and therefore, for these investments, a decrease in variable interestrates would not impact the amount of interest income earned. With respect to consolidated funds and CLOs, the impact on net income attributable to KKR & Co.L.P. resulting from a decrease of a hypothetical 100 basis points in variable interest rates used in the recognition of interest income would not be expected to bematerial since (i) many variable rate credit investments are subject to floors as described above and (ii) a substantial portion of this decrease would be attributableto noncontrolling interests. With respect to credit investments held by KKR outside of the consolidated funds and CLOs, all of the interest income earned inures toKKR & Co. L.P., however a large portion of these investments are subject to floors as described above. Accordingly, the impact on net income attributable to KKR& Co. L.P. resulting from a decrease of a hypothetical 100 basis points in variable interest rates used in the recognition of interest income would not be expected tobe material.Interest ExpenseWe and certain consolidated funds, including CLOs have debt obligations that include revolving credit agreements, certain investment financing arrangementsand debt securities issued by CLO vehicles that accrue interest at variable rates. Changes in these rates would affect the amount of interest payments that ourconsolidated funds, including CLOs would have to make. With respect to consolidated funds and CLOs, the impact on net income attributable to KKR & Co. L.P.resulting from an increase of a hypothetical 100 basis points in variable interest rates used in the recognition of interest expense would not be expected to bematerial since a substantial portion of this increase would be attributable to noncontrolling interests. With respect to debt obligations held by KKR and not in theconsolidated funds or CLOs, as of December 31, 2016 , KKR had debt obligations outstanding with a par amount of approximately $284 million that accruesinterest at a variable rate. The impact on net income attributable to KKR & Co. L.P. resulting from an increase of a hypothetical 100 basis points in variable interestrates used in the recognition of interest expense would not be expected to be material.Credit RiskWe are party to agreements providing for various financial services and transactions that contain an element of risk in the event that the counterparties areunable to meet the terms of such agreements. In these agreements, we depend on these counterparties to make payment or otherwise perform. We generallyendeavor to minimize our risk of exposure by limiting the counterparties with which we enter into financial transactions to reputable financial institutions. Inaddition, availability of financing from financial institutions may be uncertain due to market events, and we may not be able to access these financing markets.175Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAINDEX TO CONSOLIDATED FINANCIAL STATEMENTSReport of Independent Registered Public Accounting Firm177Consolidated Statements of Financial Condition as of December 31, 2016 and 2015178Consolidated Statements of Operations for the Years Ended December 31, 2016, 2015 and 2014180Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2016, 2015 and 2014181Consolidated Statements of Changes in Equity for the Years Ended December 31, 2016, 2015 and 2014182Consolidated Statements of Cash Flows for the Years Ended December 31, 2016, 2015 and 2014183Notes to Consolidated Financial Statements185176Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Unitholders of KKR & Co. L.P.:We have audited the accompanying consolidated statements of financial condition of KKR & Co. L.P. and subsidiaries (the "Company") as of December 31, 2016and 2015, and the related consolidated statements of operations, comprehensive income (loss), changes in equity, and cash flows for each of the three years in theperiod ended December 31, 2016. Our audits also included the financial statement schedule listed in the Index at Item 15. We also have audited the Company'sinternal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by theCommittee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for these financial statements and financialstatement schedules, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financialreporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on thesefinancial statements and financial statement schedules and an opinion on the Company's internal control over financial reporting based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internalcontrol over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, andevaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal controlover financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal controlbased on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our auditsprovide a reasonable basis for our opinions.A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principalfinancial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receiptsand expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on thefinancial statements.Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls,material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of theinternal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or thatthe degree of compliance with the policies or procedures may deteriorate.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of KKR & Co. L.P. andsubsidiaries as of December 31, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31,2016, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, whenconsidered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. Also,in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the criteriaestablished in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.As discussed in Note 2 to the consolidated financial statements, the Company has changed its accounting policy for the consolidation of legal entities on January 1,2016 due to the adoption of ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis./s/ Deloitte & Touche LLPNew York, New YorkFebruary 24, 2017177Table of ContentsKKR & CO. L.P.CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Amounts in Thousands, Except Unit Data) December 31, 2016 December 31, 2015Assets Cash and Cash Equivalents$2,508,902 $1,047,740Cash and Cash Equivalents Held at Consolidated Entities1,624,758 1,472,120Restricted Cash and Cash Equivalents212,155 267,628Investments31,409,765 65,305,931Due from Affiliates250,452 139,783Other Assets2,996,865 2,809,137Total Assets$39,002,897 $71,042,339 Liabilities and Equity Debt Obligations$18,544,075 $18,714,597Due to Affiliates359,479 144,807Accounts Payable, Accrued Expenses and Other Liabilities2,981,260 2,715,350Total Liabilities21,884,814 21,574,754 Commitments and Contingencies Redeemable Noncontrolling Interests632,348 188,629 Equity Series A Preferred Units(13,800,000 units issued and outstanding as of December 31, 2016)332,988 —Series B Preferred Units(6,200,000 units issued and outstanding as of December 31, 2016)149,566 —KKR & Co. L.P. Capital - Common Unitholders(452,380,335 and 457,834,875 common units issued and outstanding as of December 31, 2016 and 2015,respectively)5,457,279 5,547,182Total KKR & Co. L.P. Partners' Capital5,939,833 5,547,182Noncontrolling Interests10,545,902 43,731,774Total Equity16,485,735 49,278,956Total Liabilities and Equity$39,002,897 $71,042,339 See notes to consolidated financial statements.178Table of ContentsKKR & CO. L.P. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Continued) (Amounts in Thousands) The following presents the portion of the consolidated balances presented in the consolidated statements of financial condition attributable to consolidatedvariable interest entities (“VIEs”) as of December 31, 2016 and December 31, 2015 . KKR's consolidated VIEs consist primarily of certain collateralized financingentities (“CFEs”) holding collateralized loan obligations ("CLOs") and commercial real estate mortgage-backed securities ("CMBS”) and certain investment funds.With respect to consolidated VIEs, the following assets may only be used to settle obligations of these consolidated VIEs and the following liabilities are only theobligations of these consolidated VIEs. The noteholders, limited partners and other creditors of these VIEs have no recourse to KKR’s general assets. Additionally,KKR has no right to the benefits from, nor does KKR bear the risks associated with, the assets held by these VIEs beyond KKR’s beneficial interest therein andany fees generated from the VIEs. There are neither explicit arrangements nor does KKR hold implicit variable interests that would require KKR to provide anymaterial ongoing financial support to the consolidated VIEs, beyond amounts previously committed, if any. December 31, 2016 Consolidated CFEs Consolidated KKRFunds and OtherEntities TotalAssets Cash and Cash Equivalents Held at Consolidated Entities$1,158,641 $466,117 $1,624,758Restricted Cash and Cash Equivalents86,777 95,105 181,882Investments13,950,897 8,979,341 22,930,238Due from Affiliates— 5,555 5,555Other Assets153,283 430,326 583,609Total Assets$15,349,598 $9,976,444 $25,326,042 Liabilities Debt Obligations$13,858,288 $1,612,799 $15,471,087Due to Affiliates— — —Accounts Payable, Accrued Expenses and Other Liabilities722,714 316,121 1,038,835Total Liabilities$14,581,002 $1,928,920 $16,509,922 December 31, 2015 Consolidated CFEs Consolidated KKRFunds and OtherEntities TotalAssets Cash and Cash Equivalents Held at Consolidated Entities$975,433 $— $975,433Investments12,735,309 — 12,735,309Other Assets133,953 — 133,953Total Assets$13,844,695 $— $13,844,695 Liabilities Debt Obligations$12,365,222 $— $12,365,222Accounts Payable, Accrued Expenses and Other Liabilities546,129 — 546,129Total Liabilities$12,911,351 $— $12,911,351See notes to consolidated financial statements.179Table of ContentsKKR & CO. L.P.CONSOLIDATED STATEMENTS OF OPERATIONS(Amounts in Thousands, Except Unit Data) For the Years Ended December 31, 2016 2015 2014Revenues Fees and Other $1,908,093 $1,043,768 $1,110,008 Expenses Compensation and Benefits 1,063,813 1,180,591 1,263,852Occupancy and Related Charges 64,622 65,683 62,564General, Administrative and Other 567,039 624,951 869,651Total Expenses 1,695,474 1,871,225 2,196,067 Investment Income (Loss) Net Gains (Losses) from Investment Activities 342,897 4,672,627 4,778,232Dividend Income 187,853 850,527 1,174,501Interest Income 1,021,809 1,219,197 909,207Interest Expense (789,953) (573,226) (317,192)Total Investment Income (Loss) 762,606 6,169,125 6,544,748 Income (Loss) Before Taxes 975,225 5,341,668 5,458,689 Income Tax / (Benefit) 24,561 66,636 63,669 Net Income (Loss) 950,664 5,275,032 5,395,020Net Income (Loss) Attributable to Redeemable Noncontrolling Interests (8,476) (4,512) (3,341)Net Income (Loss) Attributable to Noncontrolling Interests 649,833 4,791,062 4,920,750Net Income (Loss) Attributable to KKR & Co. L.P. 309,307 488,482 477,611 Net Income Attributable to Series A Preferred Unitholders 17,337 — —Net Income Attributable to Series B Preferred Unitholders 4,898 — — Net Income (Loss) Attributable to KKR & Co. L.P. Common Unitholders $287,072 $488,482 $477,611 Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit Basic$0.64 $1.09 $1.25Diluted$0.59 $1.01 $1.16Weighted Average Common Units Outstanding Basic448,905,126 448,884,185 381,092,394Diluted 483,431,048 482,699,194 412,049,275See notes to consolidated financial statements.180Table of ContentsKKR & CO. L.P.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)(Amounts in Thousands) For the Years Ended December 31, 2016 2015 2014Net Income (Loss) $950,664 $5,275,032 $5,395,020 Other Comprehensive Income (Loss), Net of Tax: Foreign Currency Translation Adjustments (34,583) (27,176) (37,119) Comprehensive Income (Loss) 916,081 5,247,856 5,357,901 Less: Comprehensive Income (Loss) Attributable to Redeemable Noncontrolling Interests (8,476) (4,512) (3,341)Less: Comprehensive Income (Loss) Attributable to Noncontrolling Interests 634,813 4,771,152 4,897,831 Comprehensive Income (Loss) Attributable to KKR & Co. L.P. $289,744 $481,216 $463,411 See notes to consolidated financial statements.181Table of ContentsKKR & CO. L.P. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Amounts in Thousands, Except Unit Data) KKR & Co. L.P. CommonUnitsCapital -CommonUnitholdersAccumulatedOtherComprehensiveIncome (Loss)TotalCapital -CommonUnitsCapital -Series APreferredUnitsCapital -Series BPreferredUnits NoncontrollingInterests AppropriatedCapital TotalEquity RedeemableNoncontrollingInterestsBalance at January 1, 2014288,143,327$2,727,909$(5,899)$2,722,010$—$— $43,235,001 $— $45,957,011 $627,807Net Income (Loss) 477,611 477,611 4,929,337 (8,587) 5,398,361 (3,341)Other Comprehensive Income (Loss)-Foreign Currency Translation (Net of Tax) (14,200)(14,200) (20,725) (2,194) (37,119) Exchange of KKR Holdings L.P. Units andOther Securities to KKR & Co. L.P. CommonUnits and transfers of CLO beneficialinterests to appropriated capital27,228,991332,479(833)331,646 (359,322) 27,676 — Tax Effects Resulting from Exchange ofKKR Holdings L.P. Units and delivery ofKKR & Co. L.P. Common Units 46,31152846,839 46,839 Net Delivery of Common Units - EquityIncentive Plan9,952,634(8,757) (8,757) (8,757) Equity Based Compensation 158,927 158,927 151,476 310,403 Acquisitions108,005,5882,453,610 2,453,610 435,478 2,889,088 Capital Contributions — 11,236,018 11,236,018 148,355Capital Distributions (784,995) (784,995) (13,602,886) (14,387,881) (472,723)Balance at December 31, 2014433,330,540$5,403,095$(20,404)$5,382,691$—$— $46,004,377 $16,895 $51,403,963 $300,098Net Income (Loss) 488,482 488,482 4,791,062 5,279,544 (4,512)Other Comprehensive Income (Loss)-ForeignCurrency Translation (Net of Tax) (7,266)(7,266) (19,910) (27,176) Cumulative-effect adjustment from adoptionof accounting policies (307) (307) (16,895) (17,202) Exchange of KKR Holdings L.P. Units andOther Securities to KKR & Co. L.P. CommonUnits16,095,538207,114(1,483)205,631 (205,631) — Tax Effects Resulting from Exchange of KKRHoldings L.P. Units and delivery of KKR &Co. L.P. Common Units 18,24435418,598 18,598 Net Delivery of Common Units-EquityIncentive Plan10,964,14415,245 15,245 15,245 Equity Based Compensation 186,346 186,346 75,233 261,579 Common Units Issued in Connection with thePurchase of an Investment7,364,545126,302 126,302 126,302 Unit Repurchases(9,919,892)(161,929) (161,929) (161,929) Capital Contributions — 6,274,296 6,274,296 193,269Capital Distributions (706,611) (706,611) (13,187,653) (13,894,264) (300,226)Balance at December 31, 2015457,834,875$5,575,981$(28,799)$5,547,182$—$— $43,731,774 $— $49,278,956 $188,629Net Income (Loss) 287,072 287,07217,3374,898 649,833 959,140 (8,476)Other Comprehensive Income (Loss)- ForeignCurrency Translation (Net of Tax) (19,563)(19,563) (15,020) (34,583) Deconsolidation of Funds — (34,240,240) (34,240,240) Exchange of KKR Holdings L.P. Units andOther Securities to KKR & Co. L.P. CommonUnits7,627,57891,357(830)90,527 (90,527) — Tax Effects Resulting from Exchange of KKRHoldings L.P. Units and delivery of KKR &Co. L.P. Common Units (1,495)96(1,399) (1,399) Net Delivery of Common Units - EquityIncentive Plan8,672,152(50,515) (50,515) (50,515) Equity Based Compensation 186,227 186,227 78,663 264,890 Unit Repurchases(21,754,270)(296,844) (296,844) (296,844) Equity Issued in connection with PreferredUnit Offering —332,988149,566 482,554 Capital Contributions — 2,525,635 2,525,635 479,031Capital Distributions (285,408) (285,408)(17,337)(4,898) (2,094,216) (2,401,859) (26,836)Balance at December 31, 2016452,380,335$5,506,375$(49,096)$5,457,279$332,988$149,566 $10,545,902 $— $16,485,735 $632,348 See notes to consolidated financial statements.182Table of ContentsKKR & CO. L.P.CONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in Thousands) For the Years Ended December 31, 20162015 2014Operating Activities Net Income (Loss)$950,664 $5,275,032 $5,395,020Adjustments to Reconcile Net Income (Loss) to Net Cash Provided (Used) by Operating Activities: Equity Based Compensation264,890 261,579 310,403Net Realized (Gains) Losses on Investments(347,097) (3,001,884) (5,433,586)Change in Unrealized (Gains) Losses on Investments4,200 (1,670,743) 655,354Carried Interest Allocated as a result of Changes in Fund Fair Value(803,185) — —Other Non-Cash Amounts(34,620) (78,522) 73,061Cash Flows Due to Changes in Operating Assets and Liabilities: Change in Cash and Cash Equivalents Held at Consolidated Entities(435,417) (160,092) (166,275)Change in Due from / to Affiliates(79,372) 15,264 (3,368)Change in Other Assets(555,666) 605,305 (150,131)Change in Accounts Payable, Accrued Expenses and Other Liabilities648,737 (187,661) (156,176)Investments Purchased(20,824,349) (27,936,898) (37,935,909)Proceeds from Investments19,649,033 27,264,024 38,900,257Net Cash Provided (Used) by Operating Activities(1,562,182) 385,404 1,488,650 Investing Activities Change in Restricted Cash and Cash Equivalents1,409 (164,637) (10,849)Purchase of Fixed Assets(62,663) (169,419) (12,163)Development of Oil and Natural Gas Properties(2,122) (95,959) (233,777)Proceeds from Sale of Oil and Natural Gas Properties858 4,863 82,423Net Cash Acquired— — 151,491Net Cash Provided (Used) by Investing Activities(62,518) (425,152) (22,875) Financing Activities Distributions to Partners(285,408) (706,611) (784,995)Distributions to Redeemable Noncontrolling Interests(26,836) (300,226) (472,723)Contributions from Redeemable Noncontrolling Interests479,031 193,269 148,355Distributions to Noncontrolling Interests(2,086,577) (13,187,653) (13,602,886)Contributions from Noncontrolling Interests2,496,352 6,274,296 11,196,066Issuance of Preferred Units (net of issuance costs)482,554 — —Preferred Unit Distributions(22,235) — —Net Delivery of Common Units - Equity Incentive Plan(50,515) 15,245 (8,757)Unit Repurchases(296,844) (161,929) —Proceeds from Debt Obligations7,895,320 14,014,510 5,433,135Repayment of Debt Obligations(5,482,133) (5,926,162) (3,728,195)Financing Costs Paid(16,847) (45,331) (34,078)Net Cash Provided (Used) by Financing Activities3,085,862 169,408 (1,854,078) Net Increase/(Decrease) in Cash and Cash Equivalents1,461,162 129,660 (388,303)Cash and Cash Equivalents, Beginning of Period1,047,740 918,080 1,306,383Cash and Cash Equivalents, End of Period$2,508,902 $1,047,740 $918,080 See notes to consolidated financial statements.183Table of ContentsKKR & CO. L.P.CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)(Amounts in Thousands) For the Years Ended December 31, 2016 2015 2014Supplemental Disclosures of Cash Flow Information Payments for Interest$773,032 $485,739 $195,055Payments for Income Taxes$33,526 $40,468 $47,138Supplemental Disclosures of Non-Cash Investing and Financing Activities Non-Cash Contributions of Equity Based Compensation$264,890 $261,579 $310,403Non-Cash Contributions from Noncontrolling Interests$29,283 $— $39,952Non-Cash Distributions to Noncontrolling Interests$(7,639) $— $—Cumulative effect adjustment from adoption of accounting guidance$— $(17,202) $—Debt Obligations - Net Gains (Losses), Translation and Other$228,405 $226,577 $328,464Tax Effects Resulting from Exchange of KKR Holdings L.P. Units and delivery of KKR & Co. L.P.Common Units$(1,399) $18,598 $46,839Impairments of Oil and Natural Gas Properties$6,191 $53,926 $220,063Gains on Sales of Oil and Natural Gas Properties$12,286 $— $16,924Net Assets Acquired Cash and Cash Equivalents Held at Consolidated Entities$— $— $765,231Restricted Cash and Cash Equivalents$— $— $35,038Investments$— $— $9,225,660Other Assets$— $— $885,314Debt Obligations$— $— $7,538,726Accounts Payable, Accrued Expenses and Other Liabilities$— $— $616,979Changes in Consolidation including Adoption of ASU 2015-02 Cash and Cash Equivalents Held at Consolidated Entities$(270,458) $— $—Restricted Cash and Cash Equivalents$(54,064) $— $—Investments$(35,686,489) $— $—Due From Affiliates$147,427 $— $—Other Assets$(532,226) $— $—Debt Obligations$(2,355,305) $— $—Due to Affiliates$329,083 $— $—Accounts Payable, Accrued Expenses and Other Liabilities$(129,348) $— $—Noncontrolling Interests$(34,240,240) $— $— See notes to consolidated financial statements.184Table of ContentsKKR & CO. L.P.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(All Amounts in Thousands, Except Unit, Per Unit Data, and Except Where Noted)1. ORGANIZATION KKR & Co. L.P. (NYSE: KKR), together with its consolidated subsidiaries (“KKR”), is a leading global investment firm that manages investments acrossmultiple asset classes including private equity, energy, infrastructure, real estate, growth equity, credit and hedge funds. KKR aims to generate attractiveinvestment returns by following a patient and disciplined investment approach, employing world class people, and driving growth and value creation at the assetlevel. KKR invests its own capital alongside the capital it manages for fund investors and brings debt and equity investment opportunities to others through itscapital markets business. KKR & Co. L.P. was formed as a Delaware limited partnership on June 25, 2007 and its general partner is KKR Management LLC (the “Managing Partner”).KKR & Co. L.P. is the parent company of KKR Group Limited, which is the non-economic general partner of KKR Group Holdings L.P. (“Group Holdings”), andKKR & Co. L.P. is the sole limited partner of Group Holdings. Group Holdings holds a controlling economic interest in each of (i) KKR ManagementHoldings L.P. (“Management Holdings”) through KKR Management Holdings Corp., a Delaware corporation which is a domestic corporation for U.S. federalincome tax purposes, (ii) KKR Fund Holdings L.P. (“Fund Holdings”) directly and through KKR Fund Holdings GP Limited, a Cayman Island limited companywhich is a disregarded entity for U.S. federal income tax purposes, and (iii) KKR International Holdings L.P. (“International Holdings”, and together withManagement Holdings and Fund Holdings, the “KKR Group Partnerships”) directly and through KKR Fund Holdings GP Limited. Group Holdings also ownscertain economic interests in Management Holdings through a wholly owned Delaware corporate subsidiary of KKR Management Holdings Corp. and certaineconomic interests in Fund Holdings through a Delaware partnership of which Group Holdings is the general partner with a 99% economic interest and KKRManagement Holdings Corp. is a limited partner with a 1% economic interest. KKR & Co. L.P., through its indirect controlling economic interests in the KKRGroup Partnerships, is the holding partnership for the KKR business. KKR & Co. L.P. both indirectly controls the KKR Group Partnerships and indirectly holds Class A partner units in each KKR Group Partnership (collectively,“KKR Group Partnership Units”) representing economic interests in KKR’s business. The remaining KKR Group Partnership Units are held by KKRHoldings L.P. (“KKR Holdings”), which is not a subsidiary of KKR. As of December 31, 2016 , KKR & Co. L.P. held approximately 56.1% of the KKR GroupPartnership Units and principals through KKR Holdings held approximately 43.9% of the KKR Group Partnership Units. The percentage ownership in the KKRGroup Partnerships will continue to change as KKR Holdings and/or principals exchange units in the KKR Group Partnerships for KKR & Co. L.P. common unitsor when KKR & Co. L.P. otherwise issues or repurchases KKR & Co. L.P. common units. The KKR Group Partnerships also have outstanding equity interests thatprovide for our carry pool and preferred units with economic terms that mirror the preferred units issued by KKR & Co. L.P.For acquisitions KKR made during the year ended December 31, 2014, see Note 15 "Acquisitions".The following table presents the effect of changes in the ownership interest in the KKR Group Partnerships on KKR: For the Years Ended December 31, 2016 2015 2014Net income (loss) attributable to KKR & Co. L.P.$309,307 $488,482 $477,611Transfers from noncontrolling interests: Exchange of KKR Group Partnership units held by KKR Holdings L.P.(a)90,910 212,043 380,916Change from net income (loss) attributable to KKR & Co. L.P. and transfers from noncontrollinginterests held by KKR Holdings$400,217 $700,525 $858,527(a)Increase in KKR’s partners’ capital for exchange of 7,589,190 , 15,850,161 and 27,172,269 for the years ended December 31, 2016, 2015, and 2014, respectively, KKR GroupPartnerships units held by KKR Holdings L.P., inclusive of deferred taxes.185Notes to Consolidated Financial Statements (Continued)2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements (referred to hereafter as the “financial statements”) have been prepared in accordance with accountingprinciples generally accepted in the United States of America (“GAAP”).KKR & Co. L.P. consolidates the financial results of the KKR Group Partnerships and their consolidated subsidiaries, which include the accounts of KKR’sinvestment management and capital markets companies, the general partners of certain unconsolidated funds and vehicles, general partners of consolidated fundsand their respective consolidated funds and certain other entities including CFEs. References in the accompanying financial statements to “principals” are toKKR’s senior employees and non‑employee operating consultants who hold interests in KKR’s business through KKR Holdings.All intercompany transactions and balances have been eliminated. Use of Estimates The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of fees, expensesand investment income (loss) during the reporting periods. Such estimates include but are not limited to the valuation of investments and financial instruments.Actual results could differ from those estimates, and such differences could be material to the financial statements. Principles of Consolidation The types of entities KKR assesses for consolidation include (i) subsidiaries, including management companies, broker-dealers and general partners ofinvestment funds that KKR manages, (ii) entities that have all the attributes of an investment company, like investment funds, (iii) CFEs and (iv) other entities,including entities that employ non-employee operating consultants. Each of these entities is assessed for consolidation on a case by case basis depending on thespecific facts and circumstances surrounding that entity.Pursuant to its consolidation policy, KKR first considers whether an entity is considered a VIE and therefore whether to apply the consolidation guidanceunder the VIE model. Entities that do not qualify as VIEs are assessed for consolidation as voting interest entities (“VOEs”) under the voting interest model.KKR’s funds are, for GAAP purposes, investment companies and therefore are not required to consolidate their investments in portfolio companies even ifmajority-owned and controlled. Rather, the consolidated funds and vehicles reflect their investments at fair value as described below in “Fair ValueMeasurements.”Consolidation Policy Upon Adoption of ASU No. 2015-02 and 2016-17In February 2015, the Financial Accounting Standards Board (“FASB”) issued amended consolidation guidance with the issuance of ASU No. 2015-02,Consolidation (Topic 810): Amendments to the Consolidation Analysis ("ASU 2015-02"). KKR adopted this new guidance on January 1, 2016 using the modifiedretrospective method. As a result, no retrospective adjustment is required and prior periods presented in the financial statements have not been impacted. Theguidance in ASU 2015-02 eliminates the presumption that a general partner should consolidate a limited partnership and also changes the consolidation modelspecific to limited partnerships. The amendments also clarify how to evaluate fees paid to an asset manager or other entity that makes the decisions for theinvestment vehicle and whether such fees should be considered in determining when a VIE should be reported on an asset manager's balance sheet. These changesmodify the analysis that KKR must perform to determine whether it should consolidate certain types of legal entities.Upon adoption of ASU 2015-02, most of KKR’s investment funds were de-consolidated as of January 1, 2016 resulting in a reduction in consolidated assets,liabilities and noncontrolling interests of approximately $36.3 billion , $2.1 billion and $34.2 billion , respectively. Additionally, as a result of the de-consolidationof most of KKR’s investment funds, management fees and carried interest earned by KKR from investment funds that were previously consolidated will no longerbe eliminated. Adoption of ASU 2015-02 had no impact on KKR's partners' capital and Net Income (Loss) Attributable to KKR & Co. L.P.In October 2016, the FASB issued ASU No. 2016-17, Consolidation (Topic 810): Interests Held through Related Parties under Common Control ("ASU 2016-17"). KKR has adopted this new guidance and has applied the guidance retrospectively186Notes to Consolidated Financial Statements (Continued)beginning with the annual period in which the amendments in ASU 2015-02 were adopted, which was January 1, 2016. This guidance in ASU 2016-17 states thatreporting entities deciding whether they are primary beneficiaries no longer have to consider indirect interests held through related parties that are under commoncontrol to be the equivalent of direct interests in their entirety. Reporting entities would include those indirect interests on a proportionate basis.Consistent with the consolidation rules in effect prior to the adoption of ASU 2015-02, an entity in which KKR holds a variable interest is a VIE if any one ofthe following conditions exist: (a) the total equity investment at risk is not sufficient to permit the legal entity to finance its activities without additionalsubordinated financial support, (b) the holders of the equity investment at risk (as a group) lack either the direct or indirect ability through voting rights or similarrights to make decisions about a legal entity’s activities that have a significant effect on the success of the legal entity or the obligation to absorb the expectedlosses or right to receive the expected residual returns, or (c) the voting rights of some investors are disproportionate to their obligation to absorb the expectedlosses of the legal entity, their rights to receive the expected residual returns of the legal entity, or both and substantially all of the legal entity’s activities eitherinvolve or are conducted on behalf of an investor with disproportionately few voting rights. However, under ASU 2015-02, limited partnerships and other similarentities where unaffiliated limited partners have not been granted i) substantive participatory rights or ii) substantive rights to either dissolve the partnership orremove the general partner (“kick-out rights”) are VIEs under condition (b) above. KKR’s investment funds that are not CFEs (i) are generally limited partnerships,(ii) generally provide KKR with operational discretion and control, and (iii) generally have fund investors with no substantive rights to impact ongoing governanceand operating activities of the fund, including the ability to remove the general partner, and as such the limited partners do not hold kick-out rights. Accordingly,most of KKR’s investment funds are categorized as VIEs under ASU 2015-02.KKR consolidates all VIEs in which it is the primary beneficiary. A reporting entity is determined to be the primary beneficiary if it holds a controllingfinancial interest in a VIE. A controlling financial interest is defined as (a) the power to direct the activities of a VIE that most significantly impact the VIE’seconomic performance and (b) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from theVIE that could potentially be significant to the VIE. The consolidation guidance requires an analysis to determine (i) whether an entity in which KKR holds avariable interest is a VIE and (ii) whether KKR’s involvement, through holding interests directly or indirectly in the entity or contractually through other variableinterests (for example, management and performance related fees), would give it a controlling financial interest. Performance of that analysis requires the exerciseof judgment. Pursuant to ASU 2015-02, fees earned by KKR that are customary and commensurate with the level of effort required to provide those services, andwhere KKR does not hold other economic interests in the entity that would absorb more than an insignificant amount of the expected losses or returns of the entity,would not be considered variable interests. KKR factors in all economic interests including interests held through related parties, to determine if it holds a variableinterest. KKR determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a VIE and reconsiders that conclusion periodically.For entities that are determined not to be VIEs, these entities are generally considered VOEs and are evaluated under the voting interest model. KKRconsolidates VOEs it controls through a majority voting interest or through other means.The consolidation assessment, including the determination as to whether an entity qualifies as a VIE or VOE depends on the facts and circumstancessurrounding each entity and therefore certain of KKR’s investment funds may qualify as VIEs whereas others may qualify as VOEs.With respect to CLOs (which are generally VIEs), in its role as collateral manager, KKR generally has the power to direct the activities of the CLO that mostsignificantly impact the economic performance of the entity. In some, but not all cases, KKR, through its residual interest in the CLO may have variable intereststhat represent an obligation to absorb losses of, or a right to receive benefits from, the CLO that could potentially be significant to the CLO. In cases where KKRhas both the power to direct the activities of the CLO that most significantly impact the CLO's economic performance and the obligation to absorb losses of theCLO or the right to receive benefits from the CLO that could potentially be significant to the CLO, KKR is deemed to be the primary beneficiary and consolidatesthe CLO.With respect to CMBS vehicles (which are generally VIEs), KKR holds unrated and non-investment grade rated securities issued by the CMBS, which are themost subordinate tranche of the CMBS vehicle. The economic performance of the CMBS is most significantly impacted by the performance of the underlyingassets. Thus, the activities that most significantly impact the CMBS economic performance are the activities that most significantly impact the performance of theunderlying assets. The special servicer has the ability to manage the CMBS assets that are delinquent or in default to improve the economic performance of theCMBS. KKR generally has the right to unilaterally appoint and remove the special servicer for the CMBS and as such is considered the controlling class of theCMBS vehicle. These rights give KKR the ability to direct the activities that most significantly impact the economic performance of the CMBS. Additionally, asthe holder of the most subordinate187Notes to Consolidated Financial Statements (Continued)tranche, KKR is in a first loss position and has the right to receive benefits, including the actual residual returns of the CMBS, if any. In these cases, KKR isdeemed to be the primary beneficiary and consolidates the CMBS.Consolidation Policy Prior to the Adoption of ASU 2015-02 and 2016-17As indicated above, KKR adopted ASU 2015-02 using the modified retrospective method and as such, the prior periods presented in the financial statementshave not been impacted. The most significant changes to KKR’s consolidation policy as a result of the adoption of ASU 2015-02 pertained to its investment fundsthat are not CFEs. There were no significant changes to KKR's CFEs as a result of the adoption of ASU 2015-02.With respect to KKR’s consolidated funds that are not CFEs, KKR generally has operational discretion and control, and fund investors have no substantiverights to impact ongoing governance and operating activities of the fund, and do not have kick-out rights. As a result, prior to the adoption of ASU 2015-02, a fundwould be consolidated unless KKR had a nominal level of equity at risk. To the extent that KKR commits a nominal amount of equity to a given fund and had noobligation to fund any future losses, the equity at risk to KKR was not considered substantive and the fund was typically considered a VIE. KKR was determined tobe the primary beneficiary if its involvement, through holding interests directly or indirectly in the VIE or contractually through other variable interests (e.g.,carried interest), would be expected to absorb a majority of the VIE’s expected losses, receive a majority of the VIE’s expected residual returns, or both. In caseswhere there was minimal capital at risk, the fund investors were generally deemed to be the primary beneficiaries, and KKR did not consolidate the fund. In caseswhen KKR’s equity at risk was deemed to be substantive, the fund was generally considered to be a VOE and KKR generally consolidated the fund under the VOEmodel. As described above, subsequent to the adoption of ASU 2015-02, limited partnerships and other similar entities where unaffiliated limited partners have notbeen granted kick-out rights are deemed to be VIEs. Since substantially all of our investment funds are partnerships where limited partners are not granted kick-outrights, the adoption of ASU 2015-02 resulted in numerous entities that were previously classified as VOEs under the prior guidance becoming VIEs under the newconsolidation guidance.Under both the previous consolidation guidance and ASU 2015-02 certain of KKR’s funds and CFEs are consolidated by KKR notwithstanding the fact thatKKR has only a minority economic interest in those funds and CFEs. KKR’s financial statements reflect the assets, liabilities, fees, expenses, investment income(loss) and cash flows of the consolidated KKR funds and CFEs on a gross basis. With respect to KKR's consolidated funds, the majority of the economic interestsin those funds, which are held by fund investors or other third parties, are attributed to noncontrolling interests in the accompanying financial statements. All of themanagement fees and certain other amounts earned by KKR from those funds are eliminated in consolidation. However, because the eliminated amounts are earnedfrom and funded by noncontrolling interests, KKR’s attributable share of the net income (loss) from those funds is increased by the amounts eliminated.Accordingly, the elimination in consolidation of such amounts has no effect on net income (loss) attributable to KKR or KKR partners’ capital. With respect toconsolidated CFEs, interests held by third party investors are recorded in debt obligations.Redeemable Noncontrolling Interests Redeemable Noncontrolling Interests represent noncontrolling interests of certain investment funds and vehicles that are subject to periodic redemption byfund investors following the expiration of a specified period of time (typically between one and three years ), or may be withdrawn subject to a redemption feeduring the period when capital may not be otherwise withdrawn. Fund investors interests subject to redemption as described above are presented as RedeemableNoncontrolling Interests in the accompanying consolidated statements of financial condition and presented as Net Income (Loss) Attributable to RedeemableNoncontrolling Interests in the accompanying consolidated statements of operations. When redeemable amounts become legally payable to fund investors, they are classified as a liability and included in Accounts Payable, Accrued Expensesand Other Liabilities in the accompanying consolidated statements of financial condition. For all consolidated investment vehicles and funds in which redemptionrights have not been granted, noncontrolling interests are presented within Equity in the accompanying consolidated statements of financial condition asnoncontrolling interests.Noncontrolling Interests Noncontrolling interests represent (i) noncontrolling interests in consolidated entities and (ii) noncontrolling interests held by KKR Holdings. 188Notes to Consolidated Financial Statements (Continued)Noncontrolling Interests in Consolidated Entities Noncontrolling interests in consolidated entities represent the non-redeemable ownership interests in KKR that are held primarily by: (i)third party fund investors in KKR’s funds;(ii)third parties entitled to up to 1% of the carried interest received by certain general partners of KKR’s funds and 1% of KKR’s other profits (losses)through and including December 31, 2015;(iii)certain former principals and their designees representing a portion of the carried interest received by the general partners of KKR’s private equityfunds that was allocated to them with respect to private equity investments made during such former principals’ tenure with KKR prior to October1, 2009;(iv)certain principals and former principals representing all of the capital invested by or on behalf of the general partners of KKR’s private equityfunds prior to October 1, 2009 and any returns thereon;(v)third parties in KKR’s capital markets business;(vi)holders of exchangeable equity securities representing ownership interests in a subsidiary of a KKR Group Partnership issued in connection withthe acquisition of Avoca; and(vii)holders of the 7.375% Series A LLC Preferred Shares of KFN whose rights are limited to the assets of KFN.Noncontrolling Interests held by KKR Holdings Noncontrolling interests held by KKR Holdings include economic interests held by principals in the KKR Group Partnerships. Such principals receivefinancial benefits from KKR’s business in the form of distributions received from KKR Holdings and through their direct and indirect participation in the value ofKKR Group Partnership Units held by KKR Holdings. These financial benefits are not paid by KKR & Co. L.P. and are borne by KKR Holdings. The following table presents the calculation of noncontrolling interests held by KKR Holdings: For the Years Ended December 31, 2016 2015 2014Balance at the beginning of the period$4,347,153 $4,661,679 $5,116,761Net income (loss) attributable to noncontrolling interests held by KKR Holdings (a)212,878 433,693 585,135Other comprehensive income (loss), net of tax (b)(10,514) (14,030) (15,202)Impact of the exchange of KKR Holdings units to KKR & Co. L.P. common units (c) (89,182) (203,127) (357,551)Equity based compensation66,572 59,114 129,012Capital contributions241,748 25,573 30,402Capital distributions(475,318) (615,749) (826,878)Balance at the end of the period$4,293,337 $4,347,153 $4,661,679 (a)Refer to the table below for calculation of Net income (loss) attributable to noncontrolling interests held by KKR Holdings.(b)Calculated on a pro rata basis based on the weighted average KKR Group Partnership Units held by KKR Holdings during the reporting period. (c)Calculated based on the proportion of KKR Holdings units exchanged for KKR & Co. L.P. common units pursuant to the exchange agreement during the reporting period. Theexchange agreement provides for the exchange of KKR Group Partnership Units held by KKR Holdings for KKR & Co. L.P. common units.Net income (loss) attributable to KKR & Co. L.P. after allocation to noncontrolling interests held by KKR Holdings, with the exception of certain tax assetsand liabilities that are directly allocable to KKR Management Holdings Corp., is attributed based on the percentage of the weighted average KKR GroupPartnership Units held by KKR and KKR Holdings, each of which hold equity of the KKR Group Partnerships. However, primarily because of the (i) contributionof certain expenses borne entirely by KKR Holdings, (ii) the periodic exchange of KKR Holdings units for KKR & Co. L.P. common units pursuant to189Notes to Consolidated Financial Statements (Continued)the exchange agreement and (iii) the contribution of certain expenses borne entirely by KKR associated with the KKR & Co. L.P. 2010 Equity Incentive Plan(“Equity Incentive Plan”), equity allocations shown in the consolidated statement of changes in equity differ from their respective pro-rata ownership interests inKKR’s net assets.The following table presents net income (loss) attributable to noncontrolling interests held by KKR Holdings: For the Years Ended December 31, 2016 2015 2014Net income (loss)$950,664 $5,275,032 $5,395,020Net income (loss) attributable to Redeemable Noncontrolling Interests(8,476) (4,512) (3,341)Net income (loss) attributable to Noncontrolling Interests in consolidated entities436,955 4,357,369 4,335,615Net income (loss) attributable to Series A and Series B Preferred Unitholders22,235 — —Income tax / (benefit) attributable to KKR Management Holdings Corp.(18,937) 21,241 28,806Net income (loss) attributable to KKR & Co. L.P. Common Unitholders and KKR Holdings$481,013 $943,416 $1,091,552 Net income (loss) attributable to noncontrolling interests held by KKR Holdings$212,878 $433,693 $585,135 Investments Investments consist primarily of private equity, real assets, credit, investments of consolidated CFEs, equity method, carried interest and other investments.Investments denominated in currencies other than the U.S. dollar are valued based on the spot rate of the respective currency at the end of the reporting period withchanges related to exchange rate movements reflected as a component of Net Gains (Losses) from Investment Activities in the consolidated statements ofoperations. Security and loan transactions are recorded on a trade date basis. Further disclosure on investments is presented in Note 4 “Investments.” The following describes the types of securities held within each investment class. Private Equity - Consists primarily of equity investments in operating businesses, including growth equity investments. Real Assets - Consists primarily of investments in (i) energy related assets, principally oil and natural gas producing properties, (ii) infrastructure assets,and (iii) real estate, principally residential and commercial real estate assets and businesses. Credit - Consists primarily of investments in below investment grade corporate debt securities (primarily high yield bonds and syndicated bank loans),distressed and opportunistic debt and interests in unconsolidated CLOs. Investments of Consolidated CFEs - Consists primarily of (i) investments in below investment grade corporate debt securities (primarily high yield bondsand syndicated bank loans) held directly by the consolidated CLOs and (ii) investments in originated, fixed-rate mortgage loans held directly by theconsolidated CMBS vehicles. Equity Method - Consists primarily of (i) certain investments in private equity funds, real assets funds and credit funds, which are not consolidated and(ii) certain investments in operating companies in which KKR is deemed to exert significant influence under GAAP.Carried Interest - Consists of carried interest from unconsolidated investment funds that are allocated to KKR as the general partner of the investmentfund based on cumulative fund performance to date, and where applicable, subject to a preferred return.Other - Consists primarily of investments in common stock, preferred stock, warrants and options of companies that are not private equity, real assets,credit or investments of consolidated CFEs.Investments held by Consolidated Investment Funds190Notes to Consolidated Financial Statements (Continued)The consolidated investment funds are, for GAAP purposes, investment companies and reflect their investments and other financial instruments, includingportfolio companies that are majority-owned and controlled by KKR's investment funds, at fair value. KKR has retained this specialized accounting for theconsolidated funds in consolidation. Accordingly, the unrealized gains and losses resulting from changes in fair value of the investments and other financialinstruments held by the consolidated investment funds are reflected as a component of Net Gains (Losses) from Investment Activities in the consolidatedstatements of operations.Certain energy investments are made through consolidated investment funds, including investments in working and royalty interests in oil and natural gasproducing properties as well as investments in operating companies that operate in the energy industry. Since these investments are held through consolidatedinvestment funds, such investments are reflected at fair value as of the end of the reporting period. Investments in operating companies that are held through KKR’s consolidated investment funds are generally classified within private equity investments andinvestments in working and royalty interests in oil and natural gas producing properties are generally classified as real asset investments.Energy Investments held directly by KKRCertain energy investments are made by KKR directly in working and royalty interests in oil and natural gas producing properties and not through investmentfunds. Oil and natural gas producing activities are accounted for under the successful efforts method of accounting and such working interests are consolidatedbased on the proportion of the working interests held by KKR. Accordingly, KKR reflects its proportionate share of the underlying statements of financialcondition and statements of operations of the consolidated working interests on a gross basis and changes in the value of these working interests are not reflected asunrealized gains and losses in the consolidated statements of operations. Under the successful efforts method, exploration costs, other than the costs of drillingexploratory wells, are charged to expense as incurred. Costs that are associated with the drilling of successful exploration wells are capitalized if proved reservesare found. Lease acquisition costs are capitalized when incurred. Costs associated with the drilling of exploratory wells that do not find proved reserves, geologicaland geophysical costs and costs of certain nonproducing leasehold costs are charged to expense as incurred. Expenditures for repairs and maintenance, including workovers, are charged to expense as incurred. The capitalized costs of producing oil and natural gas properties are depleted on a field-by-field basis using the units-of production method based on the ratioof current production to estimated total net proved oil, natural gas and natural gas liquid reserves. Proved developed reserves are used in computing depletion ratesfor drilling and development costs and total proved reserves are used for depletion rates of leasehold costs. Estimated dismantlement and abandonment costs for oil and natural gas properties, net of salvage value, are capitalized at their estimated net present value andamortized on a unit-of-production basis over the remaining life of the related proved developed reserves.Whenever events or changes in circumstances indicate that the carrying amounts of oil and natural gas properties may not be recoverable, KKR evaluates oiland natural gas properties and related equipment and facilities for impairment on a field-by-field basis. The determination of recoverability is made based uponestimated undiscounted future net cash flows. The amount of impairment loss, if any, is determined by comparing the fair value, as determined by a discountedcash flow analysis, with the carrying value of the related asset. Any impairment in value is recognized when incurred and is recorded in General, Administrative,and Other expense in the consolidated statements of operations.Fair Value OptionFor certain investments and other financial instruments, KKR has elected the fair value option. Such election is irrevocable and is applied on a financialinstrument by financial instrument basis at initial recognition. KKR has elected the fair value option for certain private equity, real assets, credit, investments ofconsolidated CFEs, equity method and other financial instruments not held through a consolidated investment fund with gains and losses recorded in net income.Accounting for these investments at fair value is consistent with how KKR accounts for its investments held through consolidated investment funds. Changes in thefair value of such instruments are recognized in Net Gains (Losses) from Investment Activities in the consolidated statements of operations. Interest income oninterest bearing credit securities on which the fair value option has been elected is based on stated coupon rates adjusted for the accretion of purchase discounts andthe amortization of purchase premiums. This interest income is recorded within Interest Income in the consolidated statements of operations.191Notes to Consolidated Financial Statements (Continued)Equity MethodFor certain investments in entities over which KKR exercises significant influence but which do not meet the requirements for consolidation and for whichKKR has not elected the fair value option, KKR uses the equity method of accounting. KKR’s share of earnings (losses) from these investments is reflected as acomponent of Net Gains (Losses) from Investment Activities in the consolidated statements of operations. The carrying value of equity method investments inprivate equity funds, real assets funds and credit funds, which are not consolidated, approximate fair value, because the underlying investments of theunconsolidated investment funds are reported at fair value. The carrying value of equity method investments in certain operating companies, which KKR isdetermined to exert significant influence under GAAP and for which KKR has not elected the fair value option, is determined based on the amounts invested byKKR, adjusted for the equity in earnings or losses of the investee allocated based on KKR’s respective ownership percentage, less distributions. For equity methodinvestments, KKR records its proportionate share of the investee's earnings or losses based on the most recently available financial information of the investee,which in certain cases may lag the date of KKR's financial statements by no more than three calendar months. KKR evaluates its equity method investments forwhich KKR has not elected the fair value option for impairment whenever events or changes in circumstances indicate that the carrying amounts of suchinvestments may not be recoverable.Financial Instruments held by Consolidated CFEs As of January 1, 2015, KKR adopted the measurement alternative included in ASU 2014-13, “Measuring the Financial Assets and the Financial Liabilities of aConsolidated Collateralized Financing Entity” (“ASU 2014-13”), and has applied the amendments using a modified retrospective approach by recording acumulative-effect adjustment to equity as of January 1, 2015. Refer to the consolidated statements of changes in equity for the impact of this adjustment. Pursuantto ASU 2014-13, KKR measures both the financial assets and financial liabilities of the consolidated CFEs in its financial statements using the more observable ofthe fair value of the financial assets and the fair value of the financial liabilities.For the consolidated CLO entities, KKR has determined that the fair value of the financial assets of the consolidated CLOs are more observable than the fairvalue of the financial liabilities of the consolidated CLOs. As a result, the financial assets of the consolidated CLOs are being measured at fair value and thefinancial liabilities are being measured as: (1) the sum of the fair value of the financial assets and the carrying value of any nonfinancial assets that are incidental tothe operations of the CLOs less (2) the sum of the fair value of any beneficial interests retained by KKR (other than those that represent compensation for services)and KKR’s carrying value of any beneficial interests that represent compensation for services. The resulting amount is allocated to the individual financialliabilities (other than the beneficial interests retained by KKR).For the consolidated CMBS vehicles, KKR has determined that the fair value of the financial liabilities of the consolidated CMBS vehicles is more observablethan the fair value of the financial assets of the consolidated CMBS vehicles. As a result, the financial liabilities of the consolidated CMBS vehicles are beingmeasured at fair value and the financial assets are being measured in consolidation as: (1) the sum of the fair value of the financial liabilities (other than thebeneficial interests retained by KKR), the fair value of the beneficial interests retained by KKR and the carrying value of any nonfinancial liabilities that areincidental to the operations of the CMBS vehicles less (2) the carrying value of any nonfinancial assets that are incidental to the operations of the CMBS vehicles.The resulting amount is allocated to the individual financial assets.Under the measurement alternative pursuant to ASU 2014-13, KKR’s consolidated net income (loss) reflects KKR’s own economic interests in theconsolidated CFEs including (i) changes in the fair value of the beneficial interests retained by KKR and (ii) beneficial interests that represent compensation forservices rendered.Fair Value Measurements Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at themeasurement date. Except for certain of KKR's equity method investments (see "Equity Method" above in this Note 2 "Summary of Significant AccountingPolicies") and debt obligations (as described in Note 10 "Debt Obligations"), KKR's investments and other financial instruments are recorded at fair value or atamounts whose carrying values approximate fair value. Where available, fair value is based on observable market prices or parameters or derived from such pricesor parameters. Where observable prices or inputs are not available, valuation techniques are applied. These valuation techniques involve varying levels ofmanagement estimation and judgment, the degree of which is dependent on a variety of factors.GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observability used in measuring financialinstruments at fair value. Market price observability is affected by a number of factors, including192Notes to Consolidated Financial Statements (Continued)the type of financial instrument, the characteristics specific to the financial instrument and the state of the marketplace, including the existence and transparency oftransactions between market participants. Financial instruments with readily available quoted prices in active markets generally will have a higher degree of marketprice observability and a lesser degree of judgment used in measuring fair value.Financial instruments measured and reported at fair value are classified and disclosed based on the observability of inputs used in the determination of fairvalues, as follows: Level I - Pricing inputs are unadjusted, quoted prices in active markets for identical assets or liabilities as of the measurement date. The types of financialinstruments included in this category are publicly-listed equities, credit investments and securities sold short.Level II - Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the measurement date, and fairvalue is determined through the use of models or other valuation methodologies. The types of financial instruments included in this category are creditinvestments, investments and debt obligations of consolidated CLO entities, convertible debt securities indexed to publicly-listed securities, less liquid andrestricted equity securities and certain over-the-counter derivatives such as foreign currency option and forward contracts. Level III - Pricing inputs are unobservable for the financial instruments and include situations where there is little, if any, market activity for the financialinstrument. The inputs into the determination of fair value require significant management judgment or estimation. The types of financial instrumentsgenerally included in this category are private portfolio companies, real assets investments, credit investments, equity method investments for which the fairvalue option was elected and investments and debt obligations of consolidated CMBS entities.In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair valuehierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair valuemeasurement in its entirety. KKR’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment andconsideration of factors specific to the asset.A significant decrease in the volume and level of activity for the asset or liability is an indication that transactions or quoted prices may not be representativeof fair value because in such market conditions there may be increased instances of transactions that are not orderly. In those circumstances, further analysis oftransactions or quoted prices is needed, and a significant adjustment to the transactions or quoted prices may be necessary to estimate fair value. The availability of observable inputs can vary depending on the financial asset or liability and is affected by a wide variety of factors, including, for example,the type of instrument, whether the instrument has recently been issued, whether the instrument is traded on an active exchange or in the secondary market, andcurrent market conditions. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fairvalue requires more judgment. Accordingly, the degree of judgment exercised by KKR in determining fair value is greatest for instruments categorized in Level III.The variability and availability of the observable inputs affected by the factors described above may cause transfers between Levels I, II, and III, which KKRrecognizes at the beginning of the reporting period. Investments and other financial instruments that have readily observable market prices (such as those traded on a securities exchange) are stated at the lastquoted sales price as of the reporting date. KKR does not adjust the quoted price for these investments, even in situations where KKR holds a large position and asale could reasonably affect the quoted price. Management’s determination of fair value is based upon the methodologies and processes described below and may incorporate assumptions that aremanagement’s best estimates after consideration of a variety of internal and external factors.Level II Valuation Methodologies Credit Investments: These instruments generally have bid and ask prices that can be observed in the marketplace. Bid prices reflect the highest price that KKRand others are willing to pay for an instrument. Ask prices represent the lowest price that KKR and others are willing to accept for an instrument. For financialassets and liabilities whose inputs are based on bid-ask prices obtained from third party pricing services, fair value may not always be a predetermined point in thebid-ask range. KKR’s policy is generally to allow for mid-market pricing and adjusting to the point within the bid-ask range that meets KKR’s best estimate of fairvalue.193Notes to Consolidated Financial Statements (Continued)Investments and Debt Obligations of Consolidated CLO Vehicles: Investments of consolidated CLO vehicles are reported within Investments of ConsolidatedCFEs and are valued using the same valuation methodology as described above for credit investments. Under ASU 2014-13, KKR measures CLO debt obligationson the basis of the fair value of the financial assets of the CLO. Securities indexed to publicly-listed securities: The securities are typically valued using standard convertible security pricing models. The key inputs into thesemodels that require some amount of judgment are the credit spreads utilized and the volatility assumed. To the extent the company being valued has otheroutstanding debt securities that are publicly-traded, the implied credit spread on the company’s other outstanding debt securities would be utilized in the valuation.To the extent the company being valued does not have other outstanding debt securities that are publicly-traded, the credit spread will be estimated based on theimplied credit spreads observed in comparable publicly-traded debt securities. In certain cases, an additional spread will be added to reflect an illiquidity discountdue to the fact that the security being valued is not publicly-traded. The volatility assumption is based upon the historically observed volatility of the underlyingequity security into which the convertible debt security is convertible and/or the volatility implied by the prices of options on the underlying equity security.Restricted Equity Securities: The valuation of certain equity securities is based on an observable price for an identical security adjusted for the effect of arestriction.Derivatives: The valuation incorporates observable inputs comprising yield curves, foreign currency rates and credit spreads.Level III Valuation Methodologies Financial assets and liabilities categorized as Level III consist primarily of the following:Private Equity Investments: KKR generally employs two valuation methodologies when determining the fair value of a private equity investment. The firstmethodology is typically a market comparables analysis that considers key financial inputs and recent public and private transactions and other available measures.The second methodology utilized is typically a discounted cash flow analysis, which incorporates significant assumptions and judgments. Estimates of key inputsused in this methodology include the weighted average cost of capital for the investment and assumed inputs used to calculate terminal values, such as exitEBITDA multiples. Other inputs are also used in both methodologies. In addition, when a definitive agreement has been executed to sell an investment, KKRgenerally considers a significant determinant of fair value to be the consideration to be received by KKR pursuant to the executed definitive agreement. Upon completion of the valuations conducted using these methodologies, a weighting is ascribed to each method, and an illiquidity discount is typicallyapplied where appropriate. The ultimate fair value recorded for a particular investment will generally be within a range suggested by the two methodologies, exceptthat the value may be higher or lower than such range in the case of investments being sold pursuant to an executed definitive agreement. When determining the weighting ascribed to each valuation methodology, KKR considers, among other factors, the availability of direct market comparables,the applicability of a discounted cash flow analysis, the expected hold period and manner of realization for the investment, and in the case of investments beingsold pursuant to an executed definitive agreement, an estimated probability of such sale being completed. These factors can result in different weightings amonginvestments in the portfolio and in certain instances may result in up to a 100% weighting to a single methodology. When an illiquidity discount is to be applied, KKR seeks to take a uniform approach across its portfolio and generally applies a minimum 5% discount to allprivate equity investments. KKR then evaluates such private equity investments to determine if factors exist that could make it more challenging to monetize theinvestment and, therefore, justify applying a higher illiquidity discount. These factors generally include (i) whether KKR is unable to sell the portfolio company orconduct an initial public offering of the portfolio company due to the consent rights of a third party or similar factors, (ii) whether the portfolio company isundergoing significant restructuring activity or similar factors and (iii) characteristics about the portfolio company regarding its size and/or whether the portfoliocompany is experiencing, or expected to experience, a significant decline in earnings. These factors generally make it less likely that a portfolio company would besold or publicly offered in the near term at a price indicated by using just a market multiples and/or discounted cash flow analysis, and these factors tend to reducethe number of opportunities to sell an investment and/or increase the time horizon over which an investment may be monetized. Depending on the applicability ofthese factors, KKR determines the amount of any incremental illiquidity discount to be applied above the 5% minimum, and during the time KKR holds theinvestment, the illiquidity discount may be increased or decreased, from time to time, based on changes to these factors. The amount of illiquidity discount appliedat any time194Notes to Consolidated Financial Statements (Continued)requires considerable judgment about what a market participant would consider and is based on the facts and circumstances of each individual investment.Accordingly, the illiquidity discount ultimately considered by a market participant upon the realization of any investment may be higher or lower than thatestimated by KKR in its valuations.In the case of growth equity investments, enterprise values may be determined using the market comparables analysis and discounted cash flow analysisdescribed above. A scenario analysis may also be conducted to subject the estimated enterprise values to a downside, base and upside case, which involvessignificant assumptions and judgments. A milestone analysis may also be conducted to assess the current level of progress towards value drivers that we havedetermined to be important, which involves significant assumptions and judgments. The enterprise value in each case may then be allocated across the investment’scapital structure to reflect the terms of the security and subjected to probability weightings. In certain cases, the values of growth equity investments may be basedon recent or expected financings. Real Assets Investments: Real asset investments in infrastructure, energy and real estate are valued using one or more of the discounted cash flow analysis,market comparables analysis and direct income capitalization, which in each case incorporates significant assumptions and judgments. Infrastructure investmentsare generally valued using the discounted cash flow analysis. Key inputs used in this methodology can include the weighted average cost of capital and assumedinputs used to calculate terminal values, such as exit EBITDA multiples. Energy investments are generally valued using a discounted cash flow analysis. Keyinputs used in this methodology that require estimates include the weighted average cost of capital. In addition, the valuations of energy investments generallyincorporate both commodity prices as quoted on indices and long-term commodity price forecasts, which may be substantially different from commodity prices oncertain indices for equivalent future dates. Certain energy investments do not include an illiquidity discount. Long-term commodity price forecasts are utilized tocapture the value of the investments across a range of commodity prices within the energy investment portfolio associated with future development and to reflect arange of price expectations. Real estate investments are generally valued using a combination of direct income capitalization and discounted cash flow analysis.Key inputs used in such methodologies that require estimates include an unlevered discount rate and current capitalization rate. The valuations of real assetsinvestments also use other inputs.Credit Investments: Credit investments are valued using values obtained from dealers or market makers, and where these values are not available, creditinvestments are generally valued by KKR based on ranges of valuations determined by an independent valuation firm. Valuation models are based on discountedcash flow analyses, for which the key inputs are determined based on market comparables, which incorporate similar instruments from similar issuers.Other Investments: With respect to other investments including equity method investments for which the fair value election has been made, KKR generallyemploys the same valuation methodologies as described above for private equity investments when valuing these other investments.Investments and Debt Obligations of Consolidated CMBS Vehicles: Under ASU 2014-13, KKR measures CMBS investments, which are reported withinInvestments of Consolidated CFEs on the basis of the fair value of the financial liabilities of the CMBS. Debt obligations of consolidated CMBS vehicles arevalued based on discounted cash flow analyses. The key input is the expected yield of each CMBS security using both observable and unobservable factors, whichmay include recently offered or completed trades and published yields of similar securities, security-specific characteristics (e.g. securities ratings issued bynationally recognized statistical rating organizations, credit support by other subordinate securities issued by the CMBS and coupon type) and other characteristics. Key unobservable inputs that have a significant impact on KKR’s Level III investment valuations as described above are included in Note 5 “Fair ValueMeasurements.” KKR utilizes several unobservable pricing inputs and assumptions in determining the fair value of its Level III investments. These unobservablepricing inputs and assumptions may differ by investment and in the application of KKR’s valuation methodologies. KKR’s reported fair value estimates could varymaterially if KKR had chosen to incorporate different unobservable pricing inputs and other assumptions or, for applicable investments, if KKR only used eitherthe discounted cash flow methodology or the market comparables methodology instead of assigning a weighting to both methodologies. 195Notes to Consolidated Financial Statements (Continued)Level III Valuation ProcessThe valuation process involved for Level III measurements is completed on a quarterly basis and is designed to subject the valuation of Level III investmentsto an appropriate level of consistency, oversight, and review.For Private Markets investments classified as Level III, investment professionals prepare preliminary valuations based on their evaluation of financial andoperating data, company specific developments, market valuations of comparable companies and other factors. These preliminary valuations are reviewed by anindependent valuation firm engaged by KKR to perform certain procedures in order to assess the reasonableness of KKR’s valuations annually for all Level IIIinvestments in Private Markets and quarterly for investments other than certain investments, which have values less than pre-set value thresholds and which in theaggregate comprise less than 5% of the total value of KKR’s Level III Private Markets investments. The valuations of certain real asset investments are determinedsolely by an independent valuation firm without the preparation of preliminary valuations by our investment professionals, and instead such independent valuationfirm relies principally on valuation information available to it as a broker or valuation firm. For credit investments and debt obligations of consolidated CMBSvehicles, an independent valuation firm is generally engaged by KKR with respect to most investments classified as Level III. The valuation firm either provides avaluation range from which KKR’s investment professionals select a point in the range to determine the preliminary valuation or performs certain procedures inorder to assess the reasonableness and provide positive assurance of KKR’s valuations. After reflecting any input from the independent valuation firm, thevaluation proposals are submitted to their respective valuation sub-committees.KKR has a global valuation committee comprised of senior employees including investment professionals and professionals from business operationsfunctions, and includes our Chief Financial Officer, General Counsel and Chief Compliance Officer. The global valuation committee is assisted by valuation sub-committees and investment professionals for each business strategy. All preliminary Level III valuations are reviewed and approved by the valuation sub-committees for private equity, real estate, energy and infrastructure and credit, as applicable. When Level III valuations are required to be performed on hedge fundinvestments, a valuation sub-committee for hedge funds reviews these valuations. The valuation sub-committees are responsible for the review and approval ofvaluations in their respective business lines on a quarterly basis. The members of the valuation sub-committees are comprised of investment professionals,including the heads of each respective strategy, and professionals from business operations functions such as legal, compliance and finance, who are not primarilyresponsible for the management of the investments.The global valuation committee provides general oversight of the valuation sub-committees. The global valuation committee is responsible for coordinatingand implementing the firm’s valuation process to ensure consistency in the application of valuation principles across portfolio investments and between periods.All valuations are subject to approval by the global valuation committee. When valuations are approved by the global valuation committee after reflecting anyinput from it, the valuations of Level III investments, as well as the valuations of Level I and Level II investments, are presented to the audit committee of theboard of directors of the general partner of KKR & Co. L.P. and are then reported to the board of directors.Fees and OtherAs indicated above, on January 1, 2016, KKR adopted ASU 2015-02, which resulted in the de-consolidation of most of KKR's investment funds that had beenconsolidated prior to such date. Management fees, incentive fees, fee credits and carried interest earned from consolidated funds are eliminated in consolidationand as such are not recorded in Fees and Other. The economic impact of these management fees, incentive fees, fee credits and carried interests that are eliminatedis reflected as an adjustment to noncontrolling interests and has no impact to Net Income Attributable to KKR & Co. L.P. As a result of the de-consolidation ofmost of our investment funds, the management fees, incentive fees, fee credits and carried interests associated with funds that had previously been consolidated areincluded in Fees and Other beginning on January 1, 2016 as such amounts are no longer eliminated.Fees and other consist primarily of (i) transaction fees earned in connection with successful investment transactions and from capital markets activities,(ii) management and incentive fees from providing investment management services to unconsolidated funds, CLOs, other vehicles, and separately managedaccounts, (iii) monitoring fees from providing services to portfolio companies, (iv) carried interest allocations to general partners of unconsolidated funds,(v) revenue earned by oil and gas-producing entities that are consolidated and (vi) consulting fees earned by consolidated entities that employ non-employeeoperating consultants.196Notes to Consolidated Financial Statements (Continued)For the years ended December 31, 2016 , 2015 and 2014, respectively, fees and other consisted of the following: For the Years Ended December 31, 2016 2015 2014Management Fees$619,243 $201,006 $215,266Transaction Fees350,091 354,895 443,590Monitoring Fees146,967 336,159 190,584Fee Credits(128,707) (17,351) (18,571)Carried Interest803,185 — —Incentive Fees8,709 16,415 50,690Oil and Gas Revenue65,754 112,328 186,876Consulting Fees42,851 40,316 41,573Total Fees and Other$1,908,093 $1,043,768 $1,110,008 All revenues presented in the table above, except for oil and gas revenue and certain transaction fees earned by KKR's Capital Markets business, are earnedfrom KKR investment funds and portfolio companies. Consulting fees are earned by certain consolidated entities that employ non-employee operating consultantsfrom providing advisory and other services to portfolio companies and other companies. These fees are separately negotiated with each company for which servicesare provided and are not shared with KKR.Management FeesManagement fees are recognized in the period during which the related services are performed in accordance with the contractual terms of the relatedagreement. Management fees earned from private equity funds and certain investment funds are based upon a percentage of capital committed or capital investedduring the investment period, and thereafter generally based on remaining invested capital or net asset value. For certain other investment funds, CLOs, andseparately managed accounts, management fees are based upon the net asset value, gross assets or as otherwise defined in the respective agreements.Management fees received from KKR’s consolidated funds and vehicles are eliminated in consolidation. However, because these amounts are funded by, andearned from, noncontrolling interests, KKR’s allocated share of the net income from KKR’s consolidated funds and vehicles is increased by the amount of fees thatare eliminated. Accordingly, the elimination of these fees does not have an effect on the net income (loss) attributable to KKR or KKR partners’ capital.Private Equity FundsFor KKR’s consolidated and unconsolidated private equity funds, gross management fees generally range from 1% to 2% of committed capital during thefund’s investment period and is generally 0.75% to 1.25% of invested capital after the expiration of the fund’s investment period with subsequent reductions overtime. Typically, an investment period is defined as a period of up to six years. The actual length of the investment period is often shorter due to the earlierdeployment of committed capital.KKR’s older private equity funds, which do not have a preferred return, require the management company to refund up to 20% of any cash management feesearned from limited partners in the event that the funds recognize a carried interest. At such time as the fund recognizes a carried interest in an amount sufficient tocover 20% of the cash management fees earned or a portion thereof, a liability to the fund’s limited partners is recorded and revenue is reduced for the amount ofthe carried interest recognized, not to exceed 20% of the cash management fees earned. The refunds to the limited partners are paid, and the liabilities relieved, atsuch time that the underlying investments are sold and the associated carried interests are realized. In the event that a fund’s carried interest is not sufficient tocover all or a portion of the amount that represents 20% of the earned cash management fees, these fees would not be returned to the funds’ limited partners, inaccordance with the respective fund agreements.Other Investment FundsCertain investment funds that invest capital in real assets, credit and hedge fund strategies provide for management fees determined quarterly based on anannual rate generally ranging from 0.5% to 1.5% . Such rate may be based on the investment fund's average net asset value, capital commitments, or investedcapital.197Notes to Consolidated Financial Statements (Continued)CLOsKKR’s management agreements for its CLO vehicles provide for senior collateral management fees and subordinate collateral management fees. Seniorcollateral management fees are determined based on an annual rate ranging from 0.15% to 0.20% of collateral and subordinate collateral management fees aredetermined based on an annual rate ranging from 0.20% to 0.35% of collateral. If amounts distributable on any payment date are insufficient to pay the collateralmanagement fees according to the priority of payments, any shortfall is deferred and payable on subsequent payment dates. KKR has the right to waive all or anyportion of any collateral management fee. For the purpose of calculating the collateral management fees, collateral, the payment dates, and the priority of paymentsare terms defined in the management agreements.Transaction FeesTransaction fees are earned by KKR primarily in connection with successful investment transactions and capital markets activities. Transaction fees arerecognized in the period when the transaction closes. Fees are typically paid on or shortly after the closing of a transaction.In connection with pursuing successful portfolio company investments, KKR receives reimbursement for certain transaction‑related expenses.Transaction‑related expenses, which are reimbursed by third parties, are typically deferred until the transaction is consummated and are recorded in Other Assetson the consolidated statements of financial condition on the date incurred. The costs of successfully completed transactions are borne by the KKR investment fundsand included as a component of the investment’s cost basis. Subsequent to closing, investments are recorded at fair value each reporting period as described in thesection above titled “Investments”. Upon reimbursement from a third party, the cash receipt is recorded and the deferred amounts are relieved. No fees or expensesare recorded for these reimbursements.Monitoring FeesMonitoring fees are earned by KKR for services provided to portfolio companies and are recognized as services are rendered. These fees are generally paidbased on a fixed periodic schedule by the portfolio companies either in advance or in arrears and are separately negotiated for each portfolio company.In connection with the monitoring of portfolio companies and certain unconsolidated funds, KKR receives reimbursement for certain expenses incurred onbehalf of these entities. Costs incurred in monitoring these entities are classified as general, administrative and other expenses and reimbursements of such costs areclassified as monitoring fees. In addition, certain monitoring fee provisions may provide for a termination payment following an initial public offering or change ofcontrol. These termination payments are recognized in the period when the related transaction closes.Fee CreditsAgreements with the fund investors of certain of its investment funds require KKR to share with these fund investors an agreed upon percentage of certainfees, including monitoring and transaction fees received from portfolio companies (“Fee Credits”). Fund investors receive Fee Credits only with respect tomonitoring and transaction fees that are allocable to the fund’s investment in the portfolio company and not, for example, any fees allocable to capital investedthrough co-investment vehicles. Fee Credits are calculated after deducting certain fund-related expenses and generally amount to 80% for older funds, or 100% forour newer funds, of allocable monitoring and transaction fees after fund-related expenses are recovered, although the actual percentage may vary from fund to fundas well as among different classes of investors within a fund.Carried InterestFor certain investment fund structures, carried interest is allocated to the general partner based on cumulative fund performance to date, and where applicable,subject to a preferred return to limited partners. At the end of each reporting period, KKR calculates the carried interest that would be due to KKR for each fund,pursuant to the fund agreements, as if the fair value of the underlying investments were realized as of such date, irrespective of whether such amounts have beenrealized. As the fair value of underlying investments varies between reporting periods, it is necessary to make adjustments to amounts recorded as carried interestto reflect either (a) positive performance resulting in an increase in the carried interest allocated to the general partner or (b) negative performance that would causethe amount due to KKR to be less than the amount previously recognized as revenue, resulting in a negative adjustment to carried interest allocated to the generalpartner. In each case, it is necessary to calculate the carried interest on cumulative results compared to the carried interest recorded to date and make the requiredpositive or negative adjustments. KKR ceases to record negative carried interest allocations once previously recognized carried interest allocations for a fund havebeen fully reversed. KKR is not obligated to pay guaranteed returns or198Notes to Consolidated Financial Statements (Continued)hurdles, and therefore, cannot have negative carried interest over the life of a fund. Accrued but unpaid carried interest as of the reporting date is reflected inInvestments in the consolidated statements of financial condition.Incentive FeesIncentive fees earned on the performance of certain hedge fund structures are recognized based on fund performance, subject to the achievement of minimumreturn levels, and/or high water marks, in accordance with the respective terms set out in each fund’s governing agreements. Incentive fee rates generally rangefrom 5% to 20% . KKR does not record performance‑based incentive fees until the end of each fund’s measurement period (which is generally one year) when theperformance‑based incentive fees become fixed and determinable.Oil and Gas Revenue RecognitionOil and gas revenues are recognized when production is sold to a purchaser at fixed or determinable prices, when delivery has occurred and title hastransferred and collectability of the revenue is reasonably assured. The oil and gas producing entities consolidated by KKR follow the sales method of accountingfor natural gas revenues. Under this method of accounting, revenues are recognized based on volumes sold, which may differ from the volume to which the entityis entitled based on KKR’s working interest. An imbalance is recognized as a liability only when the estimated remaining reserves will not be sufficient to enablethe under-produced owners to recoup their entitled share through future production. Under the sales method, no receivables are recorded when these entities havetaken less than their share of production and no payables are recorded when it has taken more than its share of production unless reserves are not sufficient.Consulting FeesConsulting fees are earned by certain consolidated entities that employ non‑employee operating consultants from providing advisory and other services toportfolio companies and other companies and are recognized as the services are rendered. These fees are separately negotiated with each company for whichservices are provided and are not shared with KKR.Compensation and BenefitsCompensation and Benefits expense includes cash compensation consisting of salaries, bonuses, and benefits, as well as equity based compensation consistingof charges associated with the vesting of equity-based awards, carry pool allocations and other performance-based income compensation.All KKR employees and employees of certain consolidated entities receive a base salary that is paid by KKR or its consolidated entities, and is accounted foras Compensation and Benefits expense in the consolidated statements of operations. These employees are also eligible to receive discretionary cash bonuses basedon performance, overall profitability and other matters. While cash bonuses paid to most employees are borne by KKR and certain consolidated entities and resultin customary compensation and benefits expense, cash bonuses that are paid to certain of KKR’s principals are currently borne by KKR Holdings. These bonusesare funded with distributions that KKR Holdings receives on KKR Group Partnership Units held by KKR Holdings but are not then passed on to holders ofunvested units of KKR Holdings. Because KKR principals are not entitled to receive distributions on units that are unvested, any amounts allocated to principals inexcess of a principal’s vested equity interests are reflected as employee compensation and benefits expense. These compensation charges are recorded based on theunvested portion of quarterly earnings distributions received by KKR Holdings at the time of the distribution.Further disclosure regarding equity based compensation is presented in Note 12 “Equity Based Compensation.”Carry Pool AllocationWith respect to KKR’s active and future funds and co-investment vehicles that provide for carried interest, KKR allocates to its employees and employees ofcertain consolidated entities a portion of the carried interest earned in relation to these funds as part of its carry pool. KKR currently allocates 40% of the carry itearns from these funds and vehicles to its carry pool. These amounts are accounted for as compensatory profit‑sharing arrangements in Accounts Payable, AccruedExpenses and Other Liabilities within the accompanying consolidated statements of financial condition in conjunction with the related carried interest income andrecorded as compensation expense for KKR employees and general, administrative and other expense for certain non‑employee consultants and service providersin the consolidated statements of operations.199Notes to Consolidated Financial Statements (Continued)Profit Sharing PlanKKR provides certain profit sharing programs for KKR employees and other eligible personnel. In particular, KKR provides a 401(k) plan for eligibleemployees in the United States. For certain professionals who are participants in the 401(k) plan, KKR may, in its discretion, contribute an amount after the end ofthe plan year. For the years ended December 31, 2016, 2015 and 2014, KKR incurred expenses of $8.0 million , $7.9 million and $6.9 million , respectively, inconnection with the 401(k) plan and other profit sharing programs.General, Administrative and OtherGeneral, administrative and other expense consists primarily of professional fees paid to legal advisors, accountants, advisors and consultants, insurance costs,travel and related expenses, communications and information services, depreciation and amortization charges, changes in fair value of contingent consideration,expenses incurred by oil and gas‑producing entities (including impairment charges) that are consolidated and other general and operating expenses which are notborne by fund investors and are not offset by credits attributable to fund investors’ noncontrolling interests in consolidated funds. General, administrative and otherexpense also consists of costs incurred in connection with pursuing potential investments that do not result in completed transactions, a substantial portion of whichare borne by fund investors.Investment IncomeInvestment income consists primarily of the net impact of:(i)Realized and unrealized gains and losses on investments, securities sold short and debt obligations of consolidated CFEs which are recorded in Net Gains(Losses) from Investment Activities.(ii)Foreign exchange gains and losses relating to mark‑to‑market activity on foreign exchange forward contracts, foreign currency options and foreigndenominated debt which are recorded in Net Gains (Losses) from Investment Activities.(iii)Dividends, which are recognized on the ex‑dividend date, or, in the absence of a formal declaration of a record date, on the date it is received.(iv)Interest income, which is recognized as earned.(v)Interest expense, which is recognized as incurred.Unrealized gains or losses result from changes in fair value of investments during the period and are included in Net Gains (Losses) from InvestmentActivities. Upon disposition of an investment, previously recognized unrealized gains or losses are reversed and a realized gain or loss is recognized.Income TaxesThe consolidated entities of KKR are generally treated as partnerships or disregarded entities for U.S. and non‑U.S. tax purposes. However, certainconsolidated subsidiaries are treated as corporations for U.S. and non‑U.S tax purposes and are therefore subject to U.S. federal, state and/or local income taxes atthe entity‑level. In addition, certain consolidated entities which are treated as partnerships for U.S. tax purposes are subject to the New York City UnincorporatedBusiness Tax or other local taxes.Income taxes are accounted for using the asset and liability method of accounting. Under this method, deferred tax assets and liabilities are recognized for theexpected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax basis, using tax rates in effect for theyear in which the differences are expected to reverse. The effect on deferred assets and liabilities of a change in tax rates is recognized in income in the periodwhen the change is enacted. Deferred tax assets, which are recorded in Other Assets within the statement of financial condition, are reduced by a valuationallowance when, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Whenevaluating the realizability of the deferred tax assets, all evidence, both positive and negative, is considered. Items considered when evaluating the need for avaluation allowance include the ability to carry back losses, future reversals of existing temporary differences, tax planning strategies, and expectations of futureearnings. 200Notes to Consolidated Financial Statements (Continued)For a particular tax‑paying component of an entity and within a particular tax jurisdiction, deferred tax assets and liabilities are offset and presented as a singleamount within Other Assets or Accounts Payable, Accrued and Other Liabilities, as applicable, in the accompanying statements of financial position.KKR analyzes its tax filing positions in all of the U.S. federal, state, local and foreign tax jurisdictions where it is required to file income tax returns, as well asfor all open tax years in these jurisdictions. If, based on this analysis, KKR determines that uncertainties in tax positions exist, a reserve is established. KKRrecognizes accrued interest and penalties related to uncertain tax positions within the provision for income taxes in the consolidated statements of operations.KKR records uncertain tax positions on the basis of a two‑step process: (a) determination is made whether it is more likely than not that the tax positions willbe sustained based on the technical merits of the position and (b) those tax positions that meet the more‑likely‑than‑not threshold are recognized as the largestamount of tax benefit that is greater than 50 percent likely to be realized upon ultimate settlement with the related tax authority.Cash and Cash EquivalentsKKR considers all highly liquid short‑term investments with original maturities of 90 days or less when purchased to be cash equivalents.Cash and Cash Equivalents Held at Consolidated EntitiesCash and cash equivalents held at consolidated entities represents cash that, although not legally restricted, is not available to fund general liquidity needs ofKKR as the use of such funds is generally limited to the investment activities of KKR’s investment funds and CFEs.Restricted Cash and Cash EquivalentsRestricted cash and cash equivalents primarily represent amounts that are held by third parties under certain of KKR’s financing and derivative transactions.Due from and Due to AffiliatesKKR considers its principals and their related entities, unconsolidated funds and the portfolio companies of its funds to be affiliates for accounting purposes.Receivables from and payables to affiliates are recorded at their current settlement amount.Fixed Assets, Depreciation and AmortizationFixed assets consist primarily of corporate real estate, leasehold improvements, furniture and computer hardware. Such amounts are recorded at cost lessaccumulated depreciation and amortization and are included in Other Assets within the accompanying consolidated statements of financial condition. Depreciationand amortization are calculated using the straight‑line method over the assets’ estimated economic useful lives, which for leasehold improvements are the lesser ofthe lease terms or the life of the asset, and three to seven years for other fixed assets.201Notes to Consolidated Financial Statements (Continued)Freestanding DerivativesFreestanding derivatives are instruments that KKR and certain of its consolidated funds have entered into as part of their overall risk management andinvestment strategies. These derivative contracts are not designated as hedging instruments for accounting purposes. Such contracts may include forward, swap andoption contracts related to foreign currencies and interest rates to manage foreign exchange risk and interest rate risk arising from certain assets and liabilities. Allderivatives are recognized in Other Assets or Accounts Payable, Accrued Expenses and Other Liabilities and are presented on a gross basis in the consolidatedstatements of financial condition and measured at fair value with changes in fair value recorded in Net Gains (Losses) from Investment Activities in theaccompanying consolidated statements of operations. KKR’s derivative financial instruments contain credit risk to the extent that its counterparties may be unableto meet the terms of the agreements. KKR attempts to minimize this risk by limiting its counterparties to major financial institutions with strong credit ratings.Business Combinations Acquisitions are accounted for using the acquisition method of accounting. The purchase price of an acquisition is allocated to the assets acquired andliabilities assumed using the estimated fair values at the acquisition date. Transaction costs are expensed as incurred.Intangible Assets Intangible assets consist primarily of contractual rights to earn future fee income, including management and incentive fees, and are recorded in Other Assetsin the accompanying consolidated statements of financial condition. Identifiable finite-lived intangible assets are amortized on a straight-line basis over theirestimated useful lives and amortization expense is included within General, Administrative and Other in the accompanying consolidated statements of operations.Intangible assets are reviewed for impairment when circumstances indicate impairment may exist. As of December 31, 2016 , KKR does not have any indefinite-lived intangible assets.Goodwill Goodwill represents the excess of acquisition cost over the fair value of net tangible and intangible assets acquired in connection with an acquisition. Goodwillis assessed for impairment annually in the third quarter of each fiscal year or more frequently if circumstances indicate impairment may have occurred. Goodwill isrecorded in Other Assets in the accompanying consolidated statements of financial condition.Securities Sold ShortWhether part of a hedging transaction or a transaction in its own right, securities sold short represent obligations of KKR to deliver the specified security at thecontracted price at a future point in time, and thereby create a liability to repurchase the security in the market at the prevailing prices. The liability for suchsecurities sold short, which is recorded in Accounts Payable, Accrued Expenses and Other Liabilities in the statement of financial condition, is marked to marketbased on the current fair value of the underlying security at the reporting date with changes in fair value recorded as unrealized gains or losses in Net Gains(Losses) from Investment Activities in the accompanying consolidated statements of operations. These transactions may involve market risk in excess of theamount currently reflected in the accompanying consolidated statements of financial condition.Comprehensive Income (Loss)Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances,excluding those resulting from contributions from and distributions to owners. In the accompanying financial statements, comprehensive income represents NetIncome (Loss), as presented in the consolidated statements of operations and net foreign currency translation gains / (losses).Foreign CurrencyConsolidated entities which have a functional currency that differs from KKR’s reporting currency are primarily KKR’s investment management and capitalmarkets companies located outside the United States. Foreign currency denominated assets and liabilities are translated using the exchange rates prevailing at theend of each reporting period. Results of foreign operations are translated at the weighted average exchange rate for each reporting period. Translation adjustmentsare included as a component of accumulated other comprehensive income (loss) until realized. Foreign currency income or expenses202Notes to Consolidated Financial Statements (Continued)resulting from transactions outside of the functional currency of a consolidated entity are recorded as incurred in general, administrative and other expense in theconsolidated statements of operations.Recently Issued Accounting Pronouncements Revenue from Contracts with Customers In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers Topic 606 (“ASU 2014-09”) which has subsequently beenamended by ASU 2016-08, ASU 2016-10, and ASU 2016-12. These ASUs outline a single comprehensive model for entities to use in accounting for revenuearising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. Revenue recorded underASU 2014-09 will depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to beentitled in exchange for those goods or services. In July 2015, the FASB deferred the effective date of ASU 2014-09 to annual reporting periods beginning afterDecember 15, 2017. Early adoption will be permitted as of annual reporting periods beginning after December 15, 2016, including interim reporting periods withinthose annual periods. A full retrospective or modified retrospective approach is required. KKR is currently evaluating the impact the adoption of this guidance mayhave on its financial statements, including with respect to the timing of the recognition of carried interest.Going ConcernIn August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertaintiesabout an Entity’s Ability to Continue as a Going Concern ("ASU 2014 - 15"). This guidance pertains to management’s responsibility to evaluate whether there issubstantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The new guidance requires that managementevaluate each annual and interim reporting period whether conditions exist that give rise to substantial doubt about the entity’s ability to continue as a goingconcern within one year from the financial statement issuance date, and if so, provide related disclosures. Substantial doubt exists when conditions and events,considered in the aggregate, indicate that it is probable that a company will be unable to meet its obligations as they become due within one year after the financialstatement issuance date. The new guidance applies to all companies. The guidance is effective for annual reporting periods ending after December 15, 2016, andfor annual and interim periods thereafter. This guidance has been adopted for the year ended December 31, 2016 and there was no impact on the financialstatements.ConsolidationIn February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis ("ASU 2015-02"). Theguidance in ASU 2015-02 eliminates the presumption that a general partner should consolidate a limited partnership and changes the consolidation model specificto limited partnerships. The amendments also clarify how to treat fees paid to an asset manager or other entity that makes the decisions for the investment vehicleand whether such fees should be considered in determining when a variable interest entity should be reported on an asset manager's balance sheet. ASU 2015-02 iseffective for reporting periods starting after December 15, 2015 and for interim periods within the fiscal year. KKR adopted ASU 2015-02 on January 1, 2016. See"Principles of Consolidation" for a discussion of the impact that the adoption had on KKR's financial statements.In October 2016, the FASB issued ASU No. 2016-17, Consolidation (Topic 810): Interests Held through Related Parties under Common Control ("ASU 2016-17"). This guidance in ASU 2016-17 states that reporting entities deciding whether they are primary beneficiaries no longer have to consider indirect interests heldthrough related parties that are under common control to be the equivalent of direct interests in their entirety. Decision makers would include those indirectinterests on a proportionate basis. The guidance in the ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within thosefiscal years. Early adoption is permitted. KKR has chosen to early adopt ASU 2016-17 and has retrospectively applied the guidance in ASU 2016-17 beginning onJanuary 1, 2016 which was the date ASU 2015-02 was initially adopted.Interest - Imputation of InterestIn April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs(“ASU 2015-03”). The amended guidance requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deductionfrom the carrying amount of that debt liability rather than a deferred charge within other assets, consistent with debt discounts. In August 2015, the FASB clarifiedthat line-of-credit arrangements are outside the scope of ASU 2015-03. The amended guidance is effective for fiscal years beginning203Notes to Consolidated Financial Statements (Continued)after December 15, 2015, and interim periods within those fiscal years. KKR adopted the guidance for debt arrangements that are not line-of-credit arrangementsfor the three months ended March 31, 2016 and applied a retrospective approach. As a result of the adoption, the December 31, 2015 statement of financialcondition was impacted resulting in a reduction in deferred financing costs reported in other assets and a corresponding reduction in debt obligations of $15.4million . Adoption of this guidance had no impact on KKR & Co. L.P. Partners’ Capital and Net Income (Loss) Attributable to KKR & Co. L.P.Disclosures for Investments in Certain Entities that Calculate Net Asset Value per ShareIn May 2015, the FASB issued ASU No. 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate NetAsset Value per Share (“ASU 2015-07”). The amended guidance removes the requirement to categorize within the fair value hierarchy all investments for whichfair value is measured using the net asset value per share practical expedient. The amendments also remove the requirement to make certain disclosures for allinvestments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investmentsfor which the entity has elected to measure the fair value using that practical expedient. This guidance was adopted by KKR on January 1, 2016 and did not have amaterial impact on KKR’s financial statements.Financial InstrumentsIn January 2016, the FASB issued ASU No. 2016-01, Financial Instruments (Topic 825): Recognition and Measurement of Financial Assets and Liabilities(“ASU 2016-01”). The amended guidance (i) requires equity investments (except those accounted for under the equity method of accounting or those that result inconsolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; (ii) eliminates the requirement to disclose themethod(s) and significant assumptions used to estimate the fair value that is currently required to be disclosed for financial instruments measured at fair value; (iii)requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in theinstrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments and(iv) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans andreceivables) on the balance sheet or the accompanying notes to the financial statements. ASU 2016-01 is effective for fiscal years beginning after December 15,2017, including interim periods within those fiscal years. The amended guidance should be applied by means of a cumulative-effect adjustment to the balance sheetas of the beginning of the fiscal year of adoption. The amended guidance related to equity securities without readily determinable fair values (including thedisclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption. KKR is currently evaluating the impact of thisguidance on the financial statements.LeasesIn February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The guidance requires the recognition of lease assets and lease liabilities for thoseleases classified as operating leases under previous GAAP. The guidance retains a distinction between finance leases and operating leases. The classificationcriteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leasesand operating leases under previous GAAP. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee have notchanged significantly from previous GAAP. For operating leases, a lessee is required to do the following: (a) recognize a right-of-use asset and a lease liability,initially measured at the present value of the lease payments, in the Statement of Financial Condition, (b) recognize a single lease cost, calculated so that the cost ofthe lease is allocated over the lease term on a generally straight-line basis, and (c) classify all cash payments within operating activities in the statement of cashflows. The guidance is effective for fiscal periods beginning after December 15, 2018. Early application is permitted. KKR is currently evaluating the impact ofthis guidance on the financial statements.InvestmentsIn March 2016, the FASB issued ASU No. 2016-07, Investments - Equity Method and Joint Ventures (Topic 323): Simplifying the Transition to the EquityMethod of Accounting ("ASU 2016-07"), which simplifies the equity method of accounting by eliminating the requirement to retrospectively apply the equitymethod to an investment that subsequently qualifies for such accounting as a result of an increase in the level of ownership interest or degree of influence. ASU2016-07 is effective for all entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years, with early adoptionpermitted for all entities. Entities are required to apply the guidance prospectively to increases in the level of ownership interest or degree of influence occurringafter the ASU’s effective date. Additional transition disclosures are not required upon adoption. KKR is currently evaluating the impact of this guidance on thefinancial statements.204Notes to Consolidated Financial Statements (Continued)CompensationIn March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Shared-Based PaymentAccounting ("ASU 2016-09"), which simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublicentities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows.ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within those annual reporting periods. KKR iscurrently evaluating the impact of this guidance on the financial statements.Cash Flow ClassificationIn August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments(“ASU 2016-15”), which amends the guidance on the classification of certain cash receipts and payments in the statement of cash flows. The amended guidanceadds or clarifies guidance on eight cash flow matters: (i) debt prepayment or debt extinguishment costs, (ii) settlement of zero-coupon debt instruments or otherdebt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (iii) contingent consideration paymentsmade after a business combination, (iv) proceeds from the settlement of insurance claims, (v) proceeds from the settlement of corporate-owned life insurancepolicies, (vi) distributions received from equity method investees, (vii) beneficial interests in securitization transactions and (viii) separately identifiable cash flowsand application of the predominance principle. The guidance in the ASU is effective for fiscal years beginning after December 15, 2017, including interim periodswithin those fiscal years. Early adoption is permitted. The guidance must be applied retrospectively to all periods presented but may be applied prospectively fromthe earliest date practicable if retrospective application would be impracticable. KKR is currently evaluating the impact of this guidance on the financial statements.In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU 2016-15”), which amends the guidanceto add or clarify guidance on the classification and presentation of restricted cash in the statement of cash flows. The amended guidance requires the following: (i)restricted cash and restricted cash equivalents should be included in the cash and cash-equivalents balances in the statement of cash flows; (ii) changes in restrictedcash and restricted cash equivalents that result from transfers between cash, cash equivalents, and restricted cash and restricted cash equivalents should not bepresented as cash flow activities in the statement of cash flows; (iii) a reconciliation between the statement of financial position and the statement of cash flowsmust be disclosed when the statement of financial position includes more than one line item for cash, cash equivalents, restricted cash, and restricted cashequivalents; and (iv) the nature of the restrictions must be disclosed for material restricted cash and restricted cash equivalents amounts. The guidance in this ASUis effective for fiscal years beginning after December 15, 2017, including interim periods therein. Early adoption is permitted. The guidance must be appliedretrospectively to all periods presented. KKR is currently evaluating the impact of this guidance on the financial statements.Income TaxesIn October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-entity Transfers of Assets Other Than Inventory ("ASU 2016-16"),which removed the prohibition in ASC 740 against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets otherthan inventory. ASU 2016-16 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reportingperiods. KKR is currently evaluating the impact of this guidance on the financial statements.GoodwillIn January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU2017-4”). This guidance simplifies the accounting for goodwill impairments by eliminating the second step from the goodwill impairment test. The ASU requiresgoodwill impairments to be measured on the basis of the fair value of a reporting unit relative to the reporting unit’s carrying amount rather than on the basis of theimplied amount of goodwill relative to the goodwill balance of the reporting unit. The ASU also (i) clarifies the requirements for excluding and allocating foreigncurrency translation adjustments to reporting units related to an entity’s testing of reporting units for goodwill impairment; and (ii) clarifies that an entity shouldconsider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, ifapplicable. The guidance is effective for fiscal periods beginning after December 15, 2019. Early adoption is allowed for entities as of January 1, 2017, for annualand any interim impairment tests occurring after January 1, 2017. KKR is currently evaluating the impact of this guidance on the financial statements.205Notes to Consolidated Financial Statements (Continued)3. NET GAINS (LOSSES) FROM INVESTMENT ACTIVITIES Net Gains (Losses) from Investment Activities in the consolidated statements of operations consist primarily of the realized and unrealized gains and losses oninvestments (including foreign exchange gains and losses attributable to foreign denominated investments and related activities) and other financial instruments,including those for which the fair value option has been elected. Unrealized gains or losses result from changes in the fair value of these investments and otherfinancial instruments during a period. Upon disposition of an investment or financial instrument, previously recognized unrealized gains or losses are reversed andan offsetting realized gain or loss is recognized in the current period. The following table summarizes total Net Gains (Losses) from Investment Activities for the years ended December 31, 2016 , 2015 and 2014, respectively: For the Years Ended December 31, 2016 2015 2014 Net RealizedGains (Losses) Net UnrealizedGains (Losses) Net Realized Gains (Losses) Net Unrealized Gains (Losses) Net Realized Gains (Losses) Net Unrealized Gains (Losses)Private Equity (a)$306,180 $(196,892) $4,452,593 $1,140,377 $4,985,786 $(399,593)Credit and Other (a)(825,822) 4,280 138,915 (800,027) 323,676 (229,004)Investments of Consolidated CFEs (a)(258,430) 444,142 (54,367) (220,577) 15,921 (237,199)Real Assets (a)87,512 141,886 (2,035,727) 1,591,541 225,497 (548,788)Foreign Exchange Forward Contracts and Options (b)108,404 (7,986) 415,370 87,482 (10,620) 787,682Securities Sold Short (b)594,743 (90,607) (6,860) 3,909 (59,071) 21,057Other Derivatives (b)(49,712) 70,534 17,694 2,449 (34,319) (15,384)Debt Obligations and Other (c)384,222 (369,557) 74,266 (134,411) (13,284) (34,125)Net Gains (Losses) From Investment Activities$347,097 $(4,200) $3,001,884 $1,670,743 $5,433,586 $(655,354) (a) See Note 4 "Investments."(b) See Note 8 "Other Assets and Accounts Payable, Accrued Expenses and Other Liabilities."(c) See Note 10 "Debt Obligations."4. INVESTMENTS Investments consist of the following: December 31, 2016 December 31, 2015Private Equity$2,915,667 $36,398,474Credit4,847,936 6,300,004Investments of Consolidated CFEs13,950,897 12,735,309Real Assets1,807,128 4,048,281Equity Method2,728,995 1,730,565Carried Interest2,384,177 245,066Other2,774,965 3,848,232Total Investments$31,409,765 $65,305,931 As of December 31, 2015 , investments which represented greater than 5% of total investments consisted of Walgreens Boots Alliance, Inc. of $5.1 billion andFirst Data Corporation of $4.3 billion . As of December 31, 2016 , there were no investments which represented greater than 5% of total investments. In addition,as of December 31, 2016 and December 31, 2015 , investments totaling $16.1 billion and $14.2 billion , respectively, were pledged as direct collateral againstvarious financing arrangements. See Note 10 “Debt Obligations.” The majority of the securities underlying private equity investments represent equity securities.206Notes to Consolidated Financial Statements (Continued)Carried Interest Carried interest allocated to the general partner in respect of performance of investment funds that are not consolidated were as follows: Balance at December 31, 2015 $245,066Deconsolidation of Funds on Adoption of ASU 2015-02 2,712,962Carried Interest Allocated as a result of Changes in Fund Fair Value 803,185Cash Proceeds Received (1,377,036)Balance at December 31, 2016 $2,384,177 Equity Method Equity method investments include (i) certain investments in private equity funds, real assets funds and credit funds, which are not consolidated and (ii) certaininvestments in operating companies in which KKR is deemed to exert significant influence.Under the equity method of accounting, KKR's share of earnings (losses) from equity method investments is reflected as a component of Net Gains (Losses)from Investment Activities in the consolidated statements of operations. Because the underlying investments of unconsolidated investment funds are reported atfair value, the carrying value of these equity method investments representing KKR's interests in unconsolidated funds approximates fair value. The carrying valueof equity method investments in certain operating companies, which KKR is determined to exert significant influence, is generally determined based on theamounts invested by KKR, adjusted for the equity in earnings or losses of the investee allocated based on KKR's respective ownership percentage, lessdistributions. In some cases, KKR has elected the fair value option to account for certain of these equity method investments. With respect to equity methodinvestments where KKR has elected the fair value option, KKR's net income or loss associated with these investments predominantly represent fair valueadjustments in the investments. Changes in estimated fair value are recorded in Net Gains (Losses) from Investment Activities in the consolidated statement ofoperations.KKR evaluates each of its equity method investments to determine if any are significant as defined in the regulations promulgated by the United StatesSecurities and Exchange Commission. As of and for the years ended December 31, 2016, 2015 and 2014, no individual equity method investment held by KKRmet the significance criteria. As such, KKR is not required to present separate financial statements for any of its equity method investments.Summarized Financial InformationThe following table shows summarized financial information relating to the statements of financial condition for KKR's equity method investments assuming100% ownership as of December 31, 2016 and 2015: December 31, 2016December 31, 2015Total Assets$46,607,136$8,759,354Total Liabilities$4,368,696$2,387,866Total Equity$42,238,440$6,371,488207Notes to Consolidated Financial Statements (Continued)The following table shows summarized financial information relating to the statements of operations for KKR's equity method investments assuming 100%ownership for the years ended December 31, 2016, 2015, and 2014: For the Years Ended December 31, 2016 2015 2014Investment Related Revenues$1,195,404 $240,877 $175,343Other Revenues1,201,693 623,714 409,984Investment Related Expenses464,616 53,081 29,157Other Expenses801,342 675,293 448,096Net Realized and Unrealized Gain/(Loss) from Investments3,625,293 (307,301) 350,248Net Income (Loss)$4,756,432 $(171,084) $458,3225 . FAIR VALUE MEASUREMENTS The following tables summarize the valuation of KKR's assets and liabilities by the fair value hierarchy. Carried Interest and Equity Method Investments forwhich the fair value option has not been elected have been excluded from the tables below. Assets, at fair value: December 31, 2016 Level I Level II Level III TotalPrivate Equity$1,240,108 $116,000 $1,559,559 $2,915,667Credit— 1,557,575 3,290,361 4,847,936Investments of Consolidated CFEs— 8,544,677 5,406,220 13,950,897Real Assets— — 1,807,128 1,807,128Equity Method— 220,896 570,522 791,418Other994,677 12,715 1,767,573 2,774,965Total2,234,785 10,451,863 14,401,363 27,088,011 Foreign Exchange Contracts and Options— 240,627 — 240,627Other Derivatives— 81,593 — 81,593Total Assets$2,234,785 $10,774,083 $14,401,363 $27,410,231 December 31, 2015 Level I Level II Level III TotalPrivate Equity$16,614,008 $880,928 $18,903,538 $36,398,474Credit— 1,287,649 5,012,355 6,300,004Investments of Consolidated CFEs— 12,735,309 — 12,735,309Real Assets— — 4,048,281 4,048,281Equity Method— — 891,606 891,606Other817,328 449,716 2,581,188 3,848,232Total17,431,336 15,353,602 31,436,968 64,221,906 Foreign Exchange Contracts and Options— 635,183 — 635,183Other Derivatives— 5,703 — 5,703Total Assets$17,431,336 $15,994,488 $31,436,968 $64,862,792208Notes to Consolidated Financial Statements (Continued)Liabilities, at fair value: December 31, 2016 Level I Level II Level III TotalSecurities Sold Short$644,196 $3,038 $— $647,234Foreign Exchange Contracts and Options— 75,218 — 75,218Unfunded Revolver Commitments— 9,023 — 9,023Other Derivatives (1)— 44,015 56,000 100,015Debt Obligations of Consolidated CFEs— 8,563,547 5,294,741 13,858,288Total Liabilities$644,196 $8,694,841 $5,350,741 $14,689,778 December 31, 2015 Level I Level II Level III TotalSecurities Sold Short$286,981 $13,009 $— $299,990Foreign Exchange Contracts and Options— 83,748 — 83,748Unfunded Revolver Commitments— 15,533 — 15,533Other Derivatives— 104,518 — 104,518Debt Obligations of Consolidated CFEs— 12,365,222 — 12,365,222Total Liabilities$286,981 $12,582,030 $— $12,869,011(1)Includes options issued in connection with the acquisition of the 24.9% equity interest in Marshall Wace LLP and its affiliates to increase KKR's ownership interest to39.9% in periodic increments from 2017 to 2019. The option is valued using a Monte-Carlo simulation valuation methodology. Key inputs used in this methodologythat require estimates include Marshall Wace's dividend yield, assets under management volatility and equity volatility.209Notes to Consolidated Financial Statements (Continued)The following tables summarize changes in assets and liabilities reported at fair value for which Level III inputs have been used to determine fair value for theyears ended December 31, 2016 and 2015, respectively: For the Year Ended December 31, 2016 Level III Assets Level III Liabilities PrivateEquity Credit Investments ofConsolidatedCFEs Real Assets EquityMethod Other Total Level IIIAssets Debt Obligations ofConsolidatedCFEsBalance, Beg. of Period$18,903,538 $5,012,355 $— $4,048,281 $891,606 $2,581,188 $31,436,968 $—Transfers Out Due toDeconsolidation of Funds(17,856,098) (2,354,181) — (2,628,999) — (984,813) (23,824,091) —Transfers In— 47,536 4,343,829 — — 180,508 4,571,873 4,272,081Transfers Out(104,000) (7,482) — — (311,270) — (422,752) —Asset Purchases / Debt Issuances591,459 1,589,920 1,026,801 535,210 101,524 364,180 4,209,094 990,450Sales / Paydowns(111,018) (973,370) (32,286) (387,593) (78,088) (162,989) (1,745,344) —Settlements— 128,299 — — — — 128,299 (32,286)Net Realized Gains (Losses)(219,407) (9,786) — 87,512 3,830 (16,456) (154,307) —Net Unrealized Gains (Losses)355,085 (138,496) 67,876 152,717 (37,080) (194,045) 206,057 64,496Change in Other ComprehensiveIncome— (4,434) — — — — (4,434) —Balance, End of Period$1,559,559 $3,290,361 $5,406,220 $1,807,128 $570,522 $1,767,573 $14,401,363 $5,294,741 Changes in Net Unrealized Gains(Losses) Included in Net Gains(Losses) from InvestmentActivities related to Level IIIAssets and Liabilities still held asof the Reporting Date$127,082 $(138,335) $67,876 $180,543 $(31,130) $(217,771) $(11,735) $64,496 For the Year Ended December 31, 2015 Level III Assets Level III Liabilities PrivateEquity Credit Investments ofConsolidatedCFEs Real Assets EquityMethod Other Total Level IIIAssets Debt Obligations ofConsolidatedCFEsBalance, Beg. of Period$26,276,021 $4,192,702 $92,495 $3,130,404 $898,206 $1,234,795 $35,824,623 $7,615,340Transfers In— 45,461 108,340 — — 1,187 154,988 —Transfers Out(6,775,013) (12,860) (153,656) — — (1,710) (6,943,239) —Asset Purchases / Debt Issuances1,822,388 2,641,247 1,308 1,489,967 148,283 1,467,015 7,570,208 —Sales / Paydowns(4,698,120) (1,601,897) (3,138) (127,906) (70,749) (280,095) (6,781,905) —Settlements— 291,341 (883) — — — 290,458 —Net Realized Gains (Losses)1,806,962 (33,943) — (2,035,726) — 61,533 (201,174) —Net Unrealized Gains (Losses)471,300 (496,416) (44,466) 1,591,542 (84,134) 91,407 1,529,233 —Change in Accounting Principle (1)— — — — — — — (7,615,340)Change in Other ComprehensiveIncome— (13,280) — — — 7,056 (6,224) —Balance, End of Period$18,903,538 $5,012,355 $— $4,048,281 $891,606 $2,581,188 $31,436,968 $— Changes in Net Unrealized Gains(Losses) Included in Net Gains(Losses) from InvestmentActivities related to Level IIIAssets and Liabilities still held asof the Reporting Date$1,820,279 $(601,455) $— $(442,524) $(28,642) $55,634 $803,292 $—210Notes to Consolidated Financial Statements (Continued)(1) Upon adoption of ASU 2014-13, the debt obligations of consolidated CLOs are no longer Level III financial liabilities under the GAAP fair value hierarchy. As ofDecember 31, 2015, the debt obligations of consolidated CLOs are measured on the basis of the fair value of the financial assets of the CLO and are classified as Level IIfinancial liabilities. See Note 2 "Summary of Significant Accounting Policies". Total realized and unrealized gains and losses recorded for Level III investments are reported in Net Gains (Losses) from Investment Activities in theaccompanying consolidated statements of operations.The following table summarizes the fair value transfers between fair value levels for the years ended December 31, 2016 and 2015: For the Years Ended December 31, 2016 2015Assets, at fair value: Transfers from Level I to Level II 1 $73,600 $5,538,984Transfers from Level II to Level I 3 $— $467,766Transfers from Level II to Level III 1 $4,571,873 $154,988Transfers from Level III to Level II 2 $318,752 $168,226Transfers from Level III to Level I 3 $104,000 $6,775,013 Liabilities, at fair value: Transfers from Level II to Level III 4 $4,272,081 $—(1)Transfers out of Level I into Level II and Level II into Level III are principally attributable to certain investments that experienced an insignificant level of market activity during theperiod and thus were valued in the absence of observable inputs.(2)Transfers out of Level III and into Level II are principally attributable to certain investments that experienced a higher level of market activity during the period and thus were valuedusing observable inputs.(3)Transfers out of Level III and II into Level I are attributable to portfolio companies that are valued using their publicly traded market price.(4)Transfers out of Level II and into Level III are principally attributable to debt obligations of CMBS vehicles due to an insignificant level of market activity during the period and thuswere valued in the absence of observable inputs.211Notes to Consolidated Financial Statements (Continued)The following table presents additional information about valuation methodologies and significant unobservable inputs used for assets and liabilities that aremeasured at fair value and categorized within Level III as of December 31, 2016 : Fair ValueDecember 31,2016 ValuationMethodologies Unobservable Input(s) (1) WeightedAverage (2) Range Impact to Valuationfrom anIncrease inInput (3) Private Equity$1,559,559 Private Equity$587,053 Inputs to market comparables,discounted cash flow and transactionprice Illiquidity Discount 9.9% 5.0% - 15.0% Decrease Weight Ascribed to Market Comparables 42.7% 0.0% - 50.0% (4) Weight Ascribed to Discounted Cash Flow 45.4% 0.0% - 100.0% (5) Weight Ascribed to Transaction Price 11.9% 0.0% - 100.0% (6) Market comparables Enterprise Value/LTM EBITDA Multiple 12.6x 7.6x - 20.9x Increase Enterprise Value/Forward EBITDA Multiple 11.9x 7.1x - 21.9x Increase Discounted cash flow Weighted Average Cost of Capital 10.5% 7.9% - 14.6% Decrease Enterprise Value/LTM EBITDA Exit Multiple 10.6x 8.4x - 14.2x Increase Growth Equity$972,506 Inputs to market comparables,discounted cash flow and milestones Illiquidity Discount 14.0% 10.0% - 20.0% Decrease Weight Ascribed to Market Comparables 47.1% 0.0% - 100.0% (4) Weight Ascribed to Discounted Cash Flow 16.3% 0.0% - 75.0% (5) Weight Ascribed to Milestones 36.6% 0.0% - 100.0% (6) Scenario Weighting Base 51.9% 30.0% - 80.0% Increase Downside 24.2% 10.0% - 40.0% Decrease Upside 23.9% 10.0% - 33.3% Increase Credit$3,290,361 Yield Analysis Yield 10.5% 3.6% - 33.0% Decrease Net Leverage 4.3x 0.5x - 21.1x Decrease EBITDA Multiple 8.6x 0.1x - 24.9x Increase Investments ofConsolidated CFEs$5,406,220(9) Debt Obligations ofConsolidated CFEs$5,294,741 Discounted cash flow Yield 5.6% 1.8% - 26.5% Decrease Real Assets$1,807,128(10) Energy$915,258 Discounted cash flow Weighted Average Cost of Capital 10.5% 9.0% - 16.6% Decrease Average Price Per BOE (8) $42.19 $35.63 - $48.14 Increase Real Estate$748,282 Inputs to direct income capitalization anddiscounted cash flow Weight Ascribed to Direct Income Capitalization 28.4% 0.0% - 75.0% (7) Weight Ascribed to Discounted Cash Flow 71.6% 25.0% - 100.0% (5) Direct income capitalization Current Capitalization Rate 6.2% 3.7% - 12.0% Decrease Discounted cash flow Unlevered Discount Rate 9.5% 5.5% - 20.0% Decrease (1)In determining certain of these inputs, management evaluates a variety of factors including economic conditions, industry and market developments, market valuations of comparablecompanies and company specific developments including exit strategies and realization opportunities. Management has determined that market participants would take these inputsinto account when valuing the investments and debt obligations. LTM means last twelve months and EBITDA means earnings before interest taxes depreciation and amortization.(2)Inputs were weighted based on the fair value of the investments included in the range.(3)Unless otherwise noted, this column represents the directional change in the fair value of the Level III investments that would result from an increase to the correspondingunobservable input. A decrease to the unobservable input would have the opposite effect. Significant increases and decreases in these inputs in isolation could result in significantlyhigher or lower fair value measurements.(4)The directional change from an increase in the weight ascribed to the market comparables approach would increase the fair value of the Level III investments if the marketcomparables approach results in a higher valuation than the discounted cash flow approach and transaction price. The212Notes to Consolidated Financial Statements (Continued)opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow approach and transaction price.(5)The directional change from an increase in the weight ascribed to the discounted cash flow approach would increase the fair value of the Level III investments if the discounted cashflow approach results in a higher valuation than the market comparables approach, transaction price and direct income capitalization approach. The opposite would be true if thediscounted cash flow approach results in a lower valuation than the market comparables approach and transaction price.(6)The directional change from an increase in the weight ascribed to the transaction price or milestones would increase the fair value of the Level III investments if the transaction priceresults in a higher valuation than the market comparables and discounted cash flow approach. The opposite would be true if the transaction price results in a lower valuation than themarket comparables approach and discounted cash flow approach.(7)The directional change from an increase in the weight ascribed to the direct income capitalization approach would increase the fair value of the Level III investments if the directincome capitalization approach results in a higher valuation than the discounted cash flow approach. The opposite would be true if the direct income capitalization approach results ina lower valuation than the discounted cash flow approach.(8)The total Energy fair value amount includes multiple investments (in multiple locations throughout North America) that are held in multiple investment funds and produce varyingquantities of oil, condensate, natural gas liquids, and natural gas. Commodity price may be measured using a common volumetric equivalent where one barrel of oil equivalent, orBOE, is determined using the ratio of six thousand cubic feet of natural gas to one barrel of oil, condensate or natural gas liquids. The price per BOE is provided to show the aggregateof all price inputs for the various investments over a common volumetric equivalent although the valuations for specific investments may use price inputs specific to the asset forpurposes of our valuations. The discounted cash flows include forecasted production of liquids (oil, condensate, and natural gas liquids) and natural gas with a forecasted revenue ratioof approximately 83% liquids and 17% natural gas.(9)Under ASU 2014-13, KKR measures CMBS investments on the basis of the fair value of the financial liabilities of the CMBS vehicle. See Note 2 "Summary of SignificantAccounting Policies."(10)Includes one Infrastructure investment for $143.6 million that was valued using a discounted cash flow analysis. The significant inputs used included the weighted average cost ofcapital 7.7% and the enterprise value/LTM EBITDA Exit Multiple 11.0 x.The table above excludes equity method investments in the amount of $570.5 million , comprised primarily of interests in real estate joint ventures, whichwere valued using Level III value methodologies which are generally the same as those shown for real estate investments.The table above excludes other investments in the amount of $1,767.6 million comprised primarily of privately-held equity and equity-like securities (e.g.,warrants) in companies that are neither private equity, real assets nor credit investments. These investments were valued using Level III valuation methodologiesthat are generally the same as those shown for private equity investments.In the table above, certain private equity investments may be valued at cost for a period of time after an acquisition as the best indicator of fair value. Inaddition, certain valuations of private equity investments may be entirely or partially derived by reference to observable valuation measures for a pending orconsummated transaction. The various unobservable inputs used to determine the Level III valuations may have similar or diverging impacts on valuation. Significant increases anddecreases in these inputs in isolation and interrelationships between those inputs could result in significantly higher or lower fair value measurements as noted inthe table above.213Notes to Consolidated Financial Statements (Continued)6. FAIR VALUE OPTIONThe following table summarizes the financial instruments for which the fair value option has been elected: December 31, 2016 December 31, 2015Assets Private Equity$96,721 $211,474Credit1,392,525 936,063Investments of Consolidated CFEs13,950,897 12,735,309Real Assets247,376 90,245Equity Method791,418 891,606Other240,343 374,185 Total$16,719,280 $15,238,882 Liabilities Debt Obligations of Consolidated CFEs$13,858,288 $12,365,222 Total$13,858,288 $12,365,222The following table presents the realized and net change in unrealized gains (losses) on financial instruments on which the fair value option was elected: For the Years Ended December 31, 2016 2015 2014 Net RealizedGains (Losses) Net UnrealizedGains (Losses) Net RealizedGains (Losses) Net UnrealizedGains (Losses) Net Realized Gains (Losses) Net UnrealizedGains (Losses)Assets Private Equity$(245,014) $238,600 $111,962 $86,419 $25,613 $240,532Credit(144,854) 48,922 (22,847) (68,053) 1,591 (13,618)Investments of Consolidated CFEs(258,430) 444,142 (54,367) (220,577) 15,921 (237,199)Real Assets8,835 4,159 (200,394) 213,171 (73) (58,154)Equity Method3,830 (127,741) 7,703 (80,587) 3,478 (49,774)Other(10,361) (19,386) 9,984 (20,691) 246 1,013 Total$(645,994) $588,696 $(147,959) $(90,318) $46,776 $(117,200) Liabilities Debt Obligations of Consolidated CFEs325,548 (357,321) — (11,257) — 26,956 Total$325,548 $(357,321) $— $(11,257) $— $26,956214Table of Contents7. NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. PER COMMON UNIT For the years ended December 31, 2016 , 2015 and 2014, basic and diluted Net Income (Loss) attributable to KKR & Co. L.P. per common unit werecalculated as follows: For the Years Ended December 31, 2016 2015 2014Net Income (Loss) Attributable to KKR & Co. L.P. Common Unitholders$287,072 $488,482 $477,611Basic Net Income (Loss) Per Common Unit Weighted Average Common Units Outstanding - Basic448,905,126 448,884,185 381,092,394Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit - Basic$0.64 $1.09 $1.25Diluted Net Income (Loss) Per Common Unit Weighted Average Common Units Outstanding - Basic448,905,126 448,884,185 381,092,394Weighted Average Unvested Common Units and Other Exchangeable Securities34,525,922 33,815,009 30,956,881Weighted Average Common Units Outstanding - Diluted483,431,048 482,699,194 412,049,275Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit - Diluted$0.59 $1.01 $1.16 Weighted Average Common Units Outstanding—Diluted primarily includes unvested equity awards that have been granted under the Equity Incentive Plan aswell as exchangeable equity securities issued in connection with the acquisition of Avoca. Vesting or exchanges of these equity interests dilute KKR and KKRHoldings pro rata in accordance with their respective ownership interests in the KKR Group Partnerships. For the Years Ended December 31, 2016 2015 2014Weighted Average KKR Holdings Units Outstanding357,873,788 368,399,872 388,198,713For the years ended December 31, 2016 , 2015 and 2014, KKR Holdings units have been excluded from the calculation of Net Income (Loss) attributable toKKR & Co. L.P. per common unit - diluted since the exchange of these units would not dilute KKR’s respective ownership interests in the KKR GroupPartnerships.215Notes to Consolidated Financial Statements (Continued)8. OTHER ASSETS AND ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES Other Assets consist of the following: December 31, 2016 December 31, 2015Unsettled Investment Sales (a)$144,600 $74,862Receivables49,279 78,297Due from Broker (b)1,084,602 365,678Oil & Gas Assets, net (c)276,694 355,537Deferred Tax Assets, net286,948 275,391Interest, Dividend and Notes Receivable (d)158,511 372,699Fixed Assets, net (e)283,262 226,340Foreign Exchange Contracts and Options (f)240,627 635,183Intangible Assets, net (g)135,024 176,987Goodwill (g)89,000 89,000Derivative Assets81,593 5,703Deferred Transaction Related Expenses17,688 35,422Prepaid Taxes46,996 24,326Prepaid Expenses17,761 13,697Deferred Financing Costs10,507 65,225Other73,773 14,790Total$2,996,865 $2,809,137 (a)Represents amounts due from third parties for investments sold for which cash settlement has not occurred.(b)Represents amounts held at clearing brokers resulting from securities transactions.(c)Includes proved and unproved oil and natural gas properties under the successful efforts method of accounting, which is net of impairment write-downs, accumulateddepreciation, depletion and amortization. Depreciation, depletion and amortization amounted to $38.9 million and $69.6 million for the years ended December 31, 2016 and2015, respectively. Whenever events or changes in circumstances indicate that the carrying amounts of such oil and natural gas properties may not be recoverable, KKRevaluates its proved and unproved oil and natural gas properties and related equipment and facilities for impairment on a field-by-field basis. For the years ended December 31,2016 and 2015, KKR recorded impairment charges totaling approximately $6.2 million and $54.0 million , respectively, to write down certain of its oil and natural gasproperties. The impairment charge is recorded in General, Administrative and Other in the consolidated statements of operations. (d)Represents interest and dividend receivables and a promissory note due from a third party. The promissory note bears interest at 2.0% per annum and matures in January 2018.(e)Net of accumulated depreciation and amortization of $141,911 and $135,487 as of December 31, 2016 and December 31, 2015 , respectively. Depreciation and amortizationexpense of $16,045 , $15,418 and $15,923 for the years ended December 31, 2016 , 2015 and 2014, respectively, is included in General, Administrative and Other in theaccompanying consolidated statements of operations.(f)Represents derivative financial instruments used to manage foreign exchange risk arising from certain foreign currency denominated investments. Such instruments aremeasured at fair value with changes in fair value recorded in Net Gains (Losses) from Investment Activities in the accompanying consolidated statements of operations. SeeNote 3 “Net Gains (Losses) from Investment Activities” for the net changes in fair value associated with these instruments.(g)See Note 17 “Goodwill and Intangible Assets.” 216Notes to Consolidated Financial Statements (Continued)Accounts Payable, Accrued Expenses and Other Liabilities consist of the following: December 31, 2016 December 31, 2015Amounts Payable to Carry Pool (a)$987,994 $1,199,000Unsettled Investment Purchases (b)722,076 594,152Securities Sold Short (c) 647,234 299,990Derivative Liabilities100,015 104,518Accrued Compensation and Benefits20,764 17,765Interest Payable114,894 102,195Foreign Exchange Contracts and Options (d)75,218 83,748Accounts Payable and Accrued Expenses114,854 112,007Contingent Consideration Obligation (e)— 46,600Deferred Rent and Income19,144 21,706Taxes Payable12,514 8,770Redemptions Payable4,021 —Due to Broker (f)83,206 27,121Other Liabilities79,326 97,778Total$2,981,260 $2,715,350 (a)Represents the amount of carried interest payable to principals, professionals and other individuals with respect to KKR’s active funds and co-investment vehicles that providefor carried interest.(b)Represents amounts owed to third parties for investment purchases for which cash settlement has not occurred.(c)Represents the obligations of KKR to deliver a specified security at a future point in time. Such securities are measured at fair value with changes in fair value recorded in NetGains (Losses) from Investment Activities in the accompanying consolidated statements of operations. See Note 3 “Net Gains (Losses) from Investment Activities” for the netchanges in fair value associated with these instruments.(d)Represents derivative financial instruments used to manage foreign exchange risk arising from certain foreign currency denominated investments. Such instruments aremeasured at fair value with changes in fair value recorded in Net Gains (Losses) from Investment Activities in the accompanying consolidated statements of operations. SeeNote 3 “Net Gains (Losses) from Investment Activities” for the net changes in fair value associated with these instruments.(e)Represents potential contingent consideration related to the acquisition of Prisma. During the fourth quarter of 2016, KKR determined that it was no longer probable that thesellers (certain of whom are employees of KKR) of Prisma Capital Partners LP and its affiliates would be entitled to any future additional payment under the contingentconsideration arrangement. Consequently, as of December 31, 2016, KKR has reduced the fair value of the contingent consideration liability to zero through General,Administrative and Other on the consolidated statements of operations. For the year ended December 31, 2016, $46.6 million of expense was reversed. The final contingentconsideration payment would have been payable on July 1, 2017. The determination described above was based on the performance of Prisma Capital Partners LP and itsaffiliates' historical results and management's projections for 2017.(f)Represents amounts owed for securities transactions initiated at clearing brokers.217Notes to Consolidated Financial Statements (Continued)9. VARIABLE INTEREST ENTITIES As indicated in Note 2 "Summary of Significant Accounting Policies", on January 1, 2016, KKR adopted ASU 2015-02. Subsequent to the adoption of ASU2015-02, limited partnerships and other similar entities where unaffiliated limited partners have not been granted substantive participatory or kick-out rights aredeemed to be VIEs. Since substantially all of KKR's investment funds are partnerships where limited partners are not granted kick-out rights, the adoption of ASU2015-02 resulted in numerous entities that were previously classified as VOEs under the prior consolidation guidance becoming VIEs under ASU 2015-02. Sincemost of KKR's investment funds were de-consolidated as a result of the adoption of ASU 2015-02, the number of unconsolidated VIEs has increased significantlyfrom December 31, 2015.Consolidated VIEs KKR consolidates certain VIEs in which it is determined that KKR is the primary beneficiary as described in Note 2 "Summary of Significant AccountingPolicies" and which are predominately CFEs and certain investment funds. The primary purpose of these VIEs is to provide strategy specific investmentopportunities to earn capital gains, current income or both in exchange for management and performance based fees or carried interest. KKR’s investmentstrategies for these VIEs differ by product; however, the fundamental risks have similar characteristics, including loss of invested capital and loss of managementfees and carried interests. KKR does not provide performance guarantees and has no other financial obligation to provide funding to these consolidated VIEs,beyond amounts previously committed, if any. Unconsolidated VIEs KKR holds variable interests in certain VIEs which are not consolidated as it has been determined that KKR is not the primary beneficiary. VIEs that are notconsolidated include certain investment funds sponsored by KKR and certain CLO vehicles. Investments in Unconsolidated Investment Funds KKR’s investment strategies differ by investment fund; however, the fundamental risks have similar characteristics, including loss of invested capital and lossof management fees and carried interests. KKR’s maximum exposure to loss as a result of its investments in the unconsolidated investment funds is the carryingvalue of such investments, including KKR's capital interest and any unrealized carried interest, which was approximately $3.6 billion at December 31, 2016 .Accordingly, disaggregation of KKR’s involvement by type of unconsolidated investment fund would not provide more useful information. For theseunconsolidated investment funds in which KKR is the sponsor, KKR may have an obligation as general partner to provide commitments to such investment funds.As of December 31, 2016 , KKR's commitments to these unconsolidated investment funds was $1.7 billion . KKR has not provided any financial support other thanits obligated amount as of December 31, 2016 . Investments in Unconsolidated CLO Vehicles KKR provides collateral management services for, and has made nominal investments in, certain CLO vehicles that it does not consolidate. KKR’sinvestments in the unconsolidated CLO vehicles, if any, are carried at fair value in the consolidated statements of financial condition. KKR earns management fees,including subordinated collateral management fees, for managing the collateral of the CLO vehicles. As of December 31, 2016 , combined assets undermanagement in the pools of unconsolidated CLO vehicles were $0.9 billion . KKR’s maximum exposure to loss as a result of its investments in the residualinterests of unconsolidated CLO vehicles is the carrying value of such investments, which was $1.0 million as of December 31, 2016 . CLO investors in the CLOvehicles may only use the assets of the CLO to settle the debt of the related CLO, and otherwise have no recourse against KKR for any losses sustained in the CLOstructures. As of December 31, 2016 and 2015, the maximum exposure to loss, before allocations to the carry pool and noncontrolling interests, if any, for those VIEs inwhich KKR is determined not to be the primary beneficiary but in which it has a variable interest is as follows: December 31, 2016 December 31, 2015Investments$3,632,162 $264,277Due from (to) Affiliates, net(60,604) 4,315Maximum Exposure to Loss$3,571,558 $268,592218Table of Contents10. DEBT OBLIGATIONS KKR borrows and enters into credit agreements and issues debt for its general operating and investment purposes and certain of its investment funds borrow tomeet financing needs of their operating and investing activities. KKR consolidates and reports KFN's debt obligations which are non-recourse to KKR beyond theassets of KFN.Fund financing facilities have been established for the benefit of certain investment funds. When an investment fund borrows from the facility in which itparticipates, the proceeds from the borrowings are limited for their intended use by the borrowing investment fund. KKR’s obligations with respect to thesefinancing arrangements are generally limited to KKR’s pro-rata equity interest in such funds.In addition, certain consolidated CFE vehicles issue debt securities to third party investors which are collateralized by assets held by the CFE vehicle. Debtsecurities issued by CFEs are supported solely by the assets held at the CFEs and are not collateralized by assets of any other KKR entity. CFEs also may havewarehouse facilities with banks to provide liquidity to the CFE. The CFE's debt obligations are non-recourse to KKR beyond the assets of the CFE. KKR’s borrowings consisted of the following: December 31, 2016 December 31, 2015 FinancingAvailable BorrowingOutstanding Fair Value FinancingAvailable BorrowingOutstanding Fair Value Revolving Credit Facilities: Corporate Credit Agreement$1,000,000 $— $— $1,000,000 $— $— KCM Credit Agreement500,000 — — 500,000 — — Notes Issued: KKR Issued 6.375% Notes Due 2020 (a)— 497,804 562,960(j)— 497,217 578,510(j)KKR Issued 5.500% Notes Due 2043 (b)— 491,158 502,800(j)— 490,815 517,880(j)KKR Issued 5.125% Notes Due 2044 (c)— 990,009 955,240(j)— 988,985 994,960(j)KFN Issued 8.375% Notes Due 2041 (d)— — — — 289,660 273,965(k)KFN Issued 7.500% Notes Due 2042 (e)— 123,008 116,699(k)— 123,346 120,425(k)KFN Issued Junior Subordinated Notes (f)— 250,154 210,084 — 248,498 216,757 Other Consolidated Debt Obligations: Fund Financing Facilities and Other (g)2,039,532 2,333,654 2,333,654(l)3,465,238 3,710,854 3,710,854(l)CLO Debt Obligations (h)— 8,563,547 8,563,547 — 8,093,141 8,093,141 CMBS Debt Obligations (i)— 5,294,741 5,294,741 — 4,272,081 4,272,081 $3,539,532 $18,544,075 $18,539,725 $4,965,238 $18,714,597 $18,778,573 (a)$500 million aggregate principal amount of 6.375% senior notes of KKR due 2020.(b)$500 million aggregate principal amount of 5.500% senior notes of KKR due 2043.(c)$1.0 billion aggregate principal amount of 5.125% senior notes of KKR due 2044.(d)KKR consolidates KFN and thus reports KFN’s outstanding $259 million aggregate principal amount of 8.375% senior notes due 2041. On November 15, 2016, KFN redeemedall of its outstanding 8.375% senior notes due 2041.(e)KKR consolidates KFN and thus reports KFN’s outstanding $115 million aggregate principal amount of 7.500% senior notes due 2042. (f)KKR consolidates KFN and thus reports KFN’s outstanding $284 million aggregate principal amount of junior subordinated notes. The weighted average interest rate is 3.3%and the weighted average years to maturity is 19.8 years as of December 31, 2016 . These debt obligations are classified as Level III within the fair value hierarchy and valuedusing the same valuation methodologies as KKR’s Level III credit investments.(g)Certain of KKR’s consolidated investment funds have entered into financing arrangements with major financial institutions, generally to enable such investment funds to makeinvestments prior to or without receiving capital from fund limited partners. The weighted average interest rate is 2.4% and 2.3% as of December 31, 2016 and 2015,respectively. In addition, the weighted average years to maturity is 2.4 years and 2.5 years as of December 31, 2016 and 2015, respectively.(h)CLO debt obligations are carried at fair value and are classified as Level II within the fair value hierarchy. See Note 5 “Fair Value Measurements.”(i)CMBS debt obligations are carried at fair value and are classified as Level III within the fair value hierarchy. See Note 5 “Fair Value Measurements.”(j)The notes are classified as Level II within the fair value hierarchy and fair value is determined by third party broker quotes.219Table of Contents(k)The notes are classified as Level I within the fair value hierarchy and fair value is determined by quoted prices in active markets since the debt is publicly listed.(l)Carrying value approximates fair value given the fund financing facilities’ interest rates are variable.Revolving Credit FacilitiesCorporate Credit AgreementOn October 22, 2014, Kohlberg Kravis Roberts & Co. L.P. and the KKR Group Partnerships, as borrowers, entered into a credit agreement with certainlending institutions and HSBC Bank USA, National Association, as Administrative Agent (the "Corporate Credit Agreement"). The Corporate Credit Agreementprovides the borrowers with a senior unsecured multicurrency revolving credit facility in an aggregate principal amount of $1.0 billion , with the option to requestan increase in the facility amount of up to an additional $250 million , for an aggregate principal amount of $1.25 billion , subject to certain conditions, includingobtaining new or increased commitments from new or existing lenders. The credit facility is a five ‑year facility, scheduled to mature on October 22, 2019 , withthe borrowers’ option to extend the maturity date, subject to the consent of the applicable lenders, and the borrowers may prepay, terminate or reduce thecommitments under the credit facility at any time without penalty. Interest on borrowings under the credit facility are based on either London Interbank OfferedRate (LIBOR) or Alternate Base Rate (ABR), with the applicable margin (per annum in excess of LIBOR or the ABR) based on a corporate ratings‑based pricinggrid ranging from 69 basis points to 120 basis points (for LIBOR borrowings). Borrowings under the credit facility are guaranteed by KKR & Co. L.P. and anyother entity (other than the borrowers) that guarantees the 2020 Senior Notes, 2043 Senior Notes or the 2044 Senior Notes. The Corporate Credit Agreementreplaces a credit agreement dated February 26, 2008 , which was terminated on October 22, 2014 . For the years ended December 31, 2016 and 2015, no amountswere borrowed under the credit facility.KCM Credit AgreementKKR Capital Markets maintains a revolving credit agreement with a major financial institution (the “KCM Credit Agreement”) for use in KKR’s capitalmarkets business. The KCM Credit Agreement provides for revolving borrowings of up to $500 million with a $500 million sublimit for letters of credit.On March 30, 2016, the KCM Credit Agreement was amended to extend the maturity date from March 30, 2017 to March 30, 2021. If a borrowing is made onthe KCM Credit Agreement, the interest rate will vary depending on the type of drawdown requested. If the loan is a Eurocurrency Loan, it will be based onLIBOR plus the applicable margin which ranges initially between 1.25% and 2.50% , depending on the amount and nature of the loan. If the loan is an ABR Loan,it will be based on the prime rate plus the applicable margin which ranges initially between 0.25% and 1.50% depending on the amount and nature of the loan.Borrowings under this facility may only be used for KKR’s capital markets business, and its only obligors are entities involved in KKR's capital markets business,and its liabilities are non-recourse to other parts of KKR's business.For the year ended December 31, 2016 , $848.0 million was borrowed and $848.0 million was repaid under the credit facility. For the year endedDecember 31, 2015, $97.0 million was borrowed and $124.0 million was repaid under the credit facility. Amounts borrowed under the KCM Credit Agreement aregenerally repaid in full within 3 months.Notes IssuedKKR Issued 6.375% Notes Due 2020On September 29, 2010, KKR Group Finance Co. LLC, a subsidiary of KKR Management Holdings Corp., issued $500 million aggregate principal amount of6.375% Senior Notes (the “2020 Senior Notes”), which were issued at a price of 99.584% . The 2020 Senior Notes are unsecured and unsubordinated obligations ofKKR Group Finance Co. LLC and will mature on September 29, 2020, unless earlier redeemed or repurchased. The 2020 Senior Notes are fully andunconditionally guaranteed, jointly and severally, by KKR & Co. L.P. and the KKR Group Partnerships. The guarantees are unsecured and unsubordinatedobligations of the guarantors.The 2020 Senior Notes bear interest at a rate of 6.375% per annum, accruing from September 29, 2010. Interest is payable semi‑annually in arrears onMarch 29 and September 29 of each year.The indenture, as supplemented by a first supplemental indenture, relating to the 2020 Senior Notes includes covenants, including limitations on KKR GroupFinance Co. LLC and the guarantors’ ability to, subject to exceptions, incur indebtedness secured by liens on voting stock or profit participating equity interests oftheir subsidiaries or merge, consolidate or sell,220Table of Contentstransfer or lease assets. The indenture, as supplemented, also provides for events of default and further provides that the trustee or the holders of not less than 25%in aggregate principal amount of the outstanding 2020 Senior Notes may declare the 2020 Senior Notes immediately due and payable upon the occurrence andduring the continuance of any event of default after expiration of any applicable grace period. In the case of specified events of bankruptcy, insolvency,receivership or reorganization, the principal amount of the 2020 Senior Notes and any accrued and unpaid interest on the 2020 Senior Notes automatically becomesdue and payable. All or a portion of the 2020 Senior Notes may be redeemed at the issuer’s option in whole or in part, at any time, and from time to time, prior totheir stated maturity, at the make‑whole redemption price set forth in the 2020 Senior Notes. If a change of control repurchase event occurs, the 2020 Senior Notesare subject to repurchase by the issuer at a repurchase price in cash equal to 101% of the aggregate principal amount of the 2020 Senior Notes repurchased plus anyaccrued and unpaid interest on the 2020 Senior Notes repurchased to, but not including, the date of repurchase.KKR Issued 5.500% Notes Due 2043On February 1, 2013, KKR Group Finance Co. II LLC, a subsidiary of KKR Management Holdings Corp., issued $500 million aggregate principal amount of5.50% Senior Notes (the “2043 Senior Notes”), which were issued at a price of 98.856% . The 2043 Senior Notes are unsecured and unsubordinated obligations ofKKR Group Finance Co. II LLC and will mature on February 1, 2043, unless earlier redeemed or repurchased. The 2043 Senior Notes are fully and unconditionallyguaranteed, jointly and severally, by KKR & Co. L.P. and the KKR Group Partnerships. The guarantees are unsecured and unsubordinated obligations of theguarantors.The 2043 Senior Notes bear interest at a rate of 5.50% per annum, accruing from February 1, 2013. Interest is payable semi‑annually in arrears on February 1and August 1 of each year.The indenture, as supplemented by a first supplemental indenture, relating to the 2043 Senior Notes includes covenants, including limitations on KKR GroupFinance Co. II LLC and the guarantors’ ability to, subject to exceptions, incur indebtedness secured by liens on voting stock or profit participating equity interestsof their subsidiaries or merge, consolidate or sell, transfer or lease assets. The indenture, as supplemented, also provides for events of default and further providesthat the trustee or the holders of not less than 25% in aggregate principal amount of the outstanding 2043 Senior Notes may declare the 2043 Senior Notesimmediately due and payable upon the occurrence and during the continuance of any event of default after expiration of any applicable grace period. In the case ofspecified events of bankruptcy, insolvency, receivership or reorganization, the principal amount of the 2043 Senior Notes and any accrued and unpaid interest onthe 2043 Senior Notes automatically becomes due and payable. All or a portion of the 2043 Senior Notes may be redeemed at the issuer’s option in whole or inpart, at any time, and from time to time, prior to their stated maturity, at the make‑whole redemption price set forth in the 2043 Senior Notes. If a change of controlrepurchase event occurs, the 2043 Senior Notes are subject to repurchase by the issuer at a repurchase price in cash equal to 101% of the aggregate principalamount of the 2043 Senior Notes repurchased plus any accrued and unpaid interest on the 2043 Senior Notes repurchased to, but not including, the date ofrepurchase.KKR Issued 5.125% Notes Due 2044On May 29, 2014, KKR Group Finance Co. III LLC, a subsidiary of KKR Management Holdings Corp., issued $500 million aggregate principal amount of5.125% Senior Notes due 2044 (the “2044 Senior Notes”), which were issued at a price of 98.612% . The 2044 Senior Notes are unsecured and unsubordinatedobligations of the issuer and will mature on June 1, 2044, unless earlier redeemed or repurchased. The 2044 Senior Notes are fully and unconditionally guaranteed,jointly and severally, by KKR & Co. L.P. and the KKR Group Partnerships. The guarantees are unsecured and unsubordinated obligations of the guarantors.The 2044 Senior Notes bear interest at a rate of 5.125% per annum, accruing from May 29, 2014. Interest is payable semi‑annually in arrears on June 1 andDecember 1 of each year, commencing on December 1, 2014.On March 18, 2015, KKR Group Finance Co. III LLC issued an additional $500 million aggregate principal amount of its 2044 Notes, which were priced at101.062% . The 2044 Notes issued in March 2015 form a single series with the 2044 Notes issued in May 2014, and the terms are identical to each other except forthe issue date, issue price, the first payment date, June 1, 2015, and the date from which interest begins to accrue for the 2044 Notes issued in March 2015.The indenture, as supplemented by a first supplemental indenture, relating to the 2044 Senior Notes includes covenants, including limitations on the issuer’sand the guarantors’ ability to, subject to exceptions, incur indebtedness secured by liens on voting stock or profit participating equity interests of their subsidiariesor merge, consolidate or sell, transfer or lease assets. The indenture, as supplemented, also provides for events of default and further provides that the trustee or theholders of not less than 25% in aggregate principal amount of the outstanding 2044 Senior Notes may declare the 2044 Senior Notes immediately due and payableupon the occurrence and during the continuance of any event of default after expiration of any221Table of Contentsapplicable grace period. In the case of specified events of bankruptcy, insolvency, receivership or reorganization, the principal amount of the 2044 Senior Notesand any accrued and unpaid interest on the 2044 Senior Notes automatically becomes due and payable. All or a portion of the 2044 Senior Notes may be redeemedat the issuer’s option in whole or in part, at any time, and from time to time, prior to their stated maturity, at the make-whole redemption price set forth in the 2044Senior Notes. If a change of control repurchase event occurs, the 2044 Senior Notes are subject to repurchase by the issuer at a repurchase price in cash equal to101% of the aggregate principal amount of the 2044 Senior Notes repurchased plus any accrued and unpaid interest on the 2044 Senior Notes repurchased to, butnot including, the date of repurchase.KFN Issued 8.375% Notes Due 2041On November 15, 2011, KFN issued $258.8 million par amount of 8.375% Senior Notes (“KFN 2041 Senior Notes”), resulting in net proceeds to KFN of$250.7 million . The notes traded under the ticker symbol “KFH” on the NYSE. Interest on the 8.375% Senior Notes was payable quarterly in arrears onFebruary 15, May 15, August 15 and November 15 of each year. The KFN 2041 Senior Notes would have matured on November 15, 2041 unless previouslyredeemed or repurchased in accordance with their terms prior to such date.On November 15, 2016, KFN redeemed all of the outstanding KFN 2041 Senior Notes for cash. The redemption price equaled 100% of the principal amountof the KFN 2041 Senior Notes plus unpaid interest accrued thereon to, but excluding, the redemption date, in accordance with the terms of the KFN 2041 SeniorNotes.KFN Issued 7.500% Notes Due 2042On March 20, 2012, KFN issued $115.0 million par amount of 7.500% Senior Notes (“KFN 2042 Senior Notes”), resulting in net proceeds to KFN of $111.4million . The notes trade under the ticker symbol “KFI” on the NYSE. Interest on the 7.500% Senior Notes is payable quarterly in arrears on June 20,September 20, December 20 and March 20 of each year. The KFN 2042 Senior Notes will mature on March 20, 2042 unless previously redeemed or repurchased inaccordance with their terms prior to such date. KFN may redeem the KFN 2042 Senior Notes, in whole or in part, at any time on or after March 20, 2017 at aredemption price equal to 100% of the principal amount redeemed plus accrued and unpaid interest to the redemption date. Upon a change of control and reductionin the KFN 2042 Senior Notes’ ratings to below investment grade by two nationally recognized statistical ratings organizations, all terms as defined in theapplicable indenture, KFN will be required to make an offer to repurchase all outstanding KFN 2042 Senior Notes at a price in cash equal to 101% of the principalamount of the notes, plus accrued and unpaid interest to, but not including, the repurchase date. The KFN 2042 Senior Notes contain certain restrictions on KFN’sability to create liens over its equity interests in its subsidiaries and to merge, consolidate or sell all or substantially all of its assets, subject to qualifications andlimitations set forth in the applicable indenture. Otherwise, the Indenture does not contain any provisions that would limit KFN's ability to incur indebtedness. If anevent of default with respect to the KFN 2042 Senior Notes occurs and is continuing, the trustee or the holders of at least 25% in aggregate principal amount of thenotes then outstanding may declare the principal of the notes to be due and payable immediately.KFN Issued Junior Subordinated NotesKFN also established six 30 ‑year trusts between 2006 and 2007 for the sole purpose of issuing trust preferred securities. These trusts issued preferredsecurities to unaffiliated investors and common securities to KFN. The combined proceeds were invested by the trusts in junior subordinated notes issued by KFN.The junior subordinated notes are the sole assets of trusts and mature between 2036 and 2037. Interest is payable on the junior subordinated notes quarterly andbased on the associated trust ranges from between LIBOR plus 2.25% and LIBOR plus 2.65% . KFN may redeem the junior subordinated notes, in whole or inpart, at any time, at a redemption price equal to 100% of the principal amount redeemed plus accrued and unpaid interest to the redemption date. As of December31, 2016, the aggregate outstanding principal amount of the junior subordinated notes was approximately $283.5 million .222Table of ContentsOther Consolidated Debt ObligationsFund Financing FacilitiesCertain of KKR’s investment funds have entered into financing arrangements with financial institutions, generally to provide liquidity to such investmentfunds. These financing arrangements are generally not direct obligations of the general partners of KKR’s investment funds or its management companies. Suchborrowings have varying maturities and bear interest at floating rates. Borrowings are generally secured by the investment purchased with the proceeds of theborrowing and/or the uncalled capital commitment of each respective fund. When an investment vehicle borrows, the proceeds are available only for use by thatinvestment vehicle and are not available for the benefit of other investment vehicles or KKR. Collateral within each investment vehicle is also available onlyagainst borrowings by that investment vehicle and not against the borrowings of other investment vehicles or KKR. For the years ended December 31, 2016 and2015, $3.4 billion was borrowed and $3.4 billion was repaid and $7.2 billion was borrowed and $3.6 billion was repaid, respectively.Debt Obligations of Consolidated CFEs As of December 31, 2016 , debt obligations of consolidated CFEs consisted of the following: BorrowingOutstanding WeightedAverageInterest Rate Weighted AverageRemainingMaturity in YearsSenior Secured Notes of Consolidated CLOs$8,279,812 2.5% 10.9Subordinated Notes of Consolidated CLOs283,735 (a) 10.0Debt Obligations of Consolidated CMBS Vehicles5,294,741 4.5% 32.0 $13,858,288 (a) The subordinated notes do not have contractual interest rates but instead receive a pro rata amount of the net distributions from the excess cash flows of the respective CLOvehicle. Accordingly, weighted average borrowing rates for the subordinated notes are based on cash distributions during the period, if any.Debt obligations of consolidated CFEs are collateralized by assets held by each respective CFE vehicle and assets of one CFE vehicle may not be used tosatisfy the liabilities of another. As of December 31, 2016 , the fair value of the consolidated CFE assets was $15.3 billion . This collateral consisted of Cash andCash Equivalents Held at Consolidated Entities, Investments, and Other Assets. As part of KKR’s borrowing arrangements, KKR is subject to certain financial and operating covenants. KKR was in compliance with all of its debt covenantsin all material respects as of December 31, 2016 .Scheduled principal payments for debt obligations at December 31, 2016 are as follows: Revolving CreditFacilities Notes Issued Other ConsolidatedDebt Obligations Total2017$— $— $111,756 $111,7562018 ‑ 2019— — 1,967,711 1,967,7112020 ‑ 2021— 500,000 789,727 1,289,7272022 and Thereafter— 1,898,500 13,395,271 15,293,771 $— $2,398,500 $16,264,465 $18,662,965223Notes to Consolidated Financial Statements (Continued)11. INCOME TAXES The provision (benefit) for income taxes consists of the following: For the Years Ended December 31, 2016 2015 2014Current Federal Income Tax$(3,440) $27,978 $29,388State and Local Income Tax(443) 6,320 8,921Foreign Income Tax38,052(1) 42,036 31,972Subtotal34,169 76,334 70,281Deferred Federal Income Tax(15,032) (19,133) (6,327)State and Local Income Tax1,348 8,264 344Foreign Income Tax4,076(1) 1,171 (629)Subtotal(9,608) (9,698) (6,612)Total Income Taxes$24,561 $66,636 $63,669 (1)The foreign income tax provision was calculated on $102.1 million of pre-tax income generated in foreign jurisdictions.The following table reconciles the U.S. Federal Statutory Tax Rate to the Effective Income Tax Rate: For the Years Ended December 31, 2016 2015 2014Statutory U.S. Federal Income Tax Rate35.00 % 35.00 % 35.00 %Income not attributable to KKR Management Holdings Corp. (1)(42.68)% (36.04)% (36.36)%Foreign Income Taxes4.32 % 0.81 % 0.58 %State and Local Income Taxes0.05 % 0.21 % 0.13 %Compensation Charges Borne by KKR Holdings8.20 % 1.92 % 2.08 %Change in Valuation Allowance(1.03)% 0.29 % 0.08 %Other(1.34)% (0.94)% (0.34)%Effective Income Tax Rate2.52 % 1.25 % 1.17 % (1)Represents primarily income attributable to (i) redeemable noncontrolling interests, (ii) noncontrolling interests and appropriated capital and (iii) investment income of certain entitiesand net carried interest of certain general partners of KKR investment funds that are not controlled and consolidated by KKR Management Holdings L.P.224Notes to Consolidated Financial Statements (Continued)Deferred income taxes reflect the net tax effects of temporary differences that may exist between the carrying amounts of assets and liabilities for financialreporting purposes and the amounts used for income tax purposes using enacted tax rates in effect for the year in which the differences are expected to reverse. Asummary of the tax effects of the temporary differences is as follows: As of December 31, 2016 2015Deferred Tax Assets Fund Management Fees$59,963 $76,017Equity Based Compensation30,094 32,193KKR Holdings Unit Exchanges (1)156,624 156,202Depreciation and Amortization24,919 34,128Federal Foreign Tax Credit15,028 25,041Interest Limitation Carryforward (2)13,494 —Net Operating Loss Carryforwards33,867 —Other12,599 10,291Total Deferred Tax Assets before Valuation Allowance346,588 333,872Valuation Allowance(9,768) (19,781)Total Deferred Tax Assets336,820 314,091Deferred Tax Liabilities Investment Basis Differences / Net Unrealized Gains49,872 38,700Total Deferred Tax Liabilities49,872 38,700Total Deferred Taxes, Net$286,948 $275,391 (1)In connection with exchanges of KKR Holdings units into common units of KKR & Co. L.P., KKR records a deferred tax asset associated with an increase in KKR ManagementHoldings Corp.’s share of the tax basis of the tangible and intangible assets of KKR Management Holdings L.P. This amount is offset by an adjustment to record amounts due to KKRHoldings and principals under the tax receivable agreement, which is included within Due to Affiliates in the consolidated statements of financial condition. The net impact of theseadjustments was recorded as an adjustment to equity at the time of the exchanges.(2) Represents interest expense limitations under IRC Section 163 (j), which has an indefinite carryforward.Future realization of the above deferred tax assets is dependent on KKR generating sufficient taxable income within the period of time that the tax benefits areexpected to reverse. KKR considers projections of taxable income in evaluating its ability to utilize those deferred tax assets. In projecting its taxable income, KKRbegins with historical results and incorporates assumptions concerning the amount and timing of future pretax operating income. Those assumptions requiresignificant judgment and are consistent with the plans and estimates that KKR uses to manage its business.As of December 31, 2016, KKR has a federal net operating loss (“NOL”) carryforward of $85.7 million and a cumulative state and local NOL carryforward of$54.4 million that will begin to expire in 2036. In addition, KKR has federal foreign tax credit (“FTC”) carryforwards of $15.0 million as of December 31, 2016.The FTC carryforwards are related to taxes paid in foreign jurisdictions, which if not utilized, will begin to expire in 2024. KKR has determined that a portion ofthe FTC carryforwards will not ultimately be realized due to federal limitations on FTC utilization. Therefore, KKR has established a valuation allowance of $9.8million as of December 31, 2016 against the deferred tax asset. For all other deferred tax assets, including net operating loss carryforwards, KKR has determinedthat it is more likely than not that they will be realized and that a valuation allowance is not needed as of December 31, 2016.KKR files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, KKR is subject to examinationby federal and certain state, local and foreign tax regulators. As of December 31, 2016, the U.S. federal, state and local tax returns of KKR and its predecessorentities for the years 2010 through 2015 are open under general statute of limitations provisions and therefore subject to examination.225Notes to Consolidated Financial Statements (Continued)At December 31, 2016, 2015 and 2014, KKR’s unrecognized tax benefits, excluding related interest and penalties, were: For the Years Ended December 31, 2016 2015 2014Unrecognized Tax Benefits, beginning of period$22,792 $7,180 $6,028Gross increases in tax positions in prior periods— — 44Gross decreases in tax positions in prior periods(1,351) (116) —Gross increases in tax positions in current period22,810 15,959 1,369Lapse of statute of limitations(255) (231) (261)Unrecognized Tax Benefits, end of period$43,996 $22,792 $7,180If the above tax benefits were recognized it would reduce the annual effective income tax rate. KKR believes that there will not be a significant increase ordecrease to the tax positions within 12 months of the reporting date.The unrecognized tax benefits are recorded in Accounts Payable, Accrued Expenses and Other Liabilities. KKR recognizes interest and penalties accruedrelated to unrecognized tax benefits as income tax expense. Related to the unrecognized tax benefits, KKR accrued penalties of $0.6 million and interest of $1.2million during 2016 and in total, as of December 31, 2016, recognized a liability for penalties of $2.3 million and interest of $5.7 million . During 2015, penaltiesof $0.7 million and interest of $2.1 million were accrued and in total, as of December 31, 2015, recognized a liability for penalties of $1.7 million and interest of$4.5 million . During 2014, KKR accrued penalties of $0.2 million and interest of $1.0 million .226Notes to Consolidated Financial Statements (Continued)12. EQUITY BASED COMPENSATION The following table summarizes the expense associated with equity based compensation for the years ended December 31, 2016 , 2015 and 2014 respectively. For the Years Ended December 31, 2016 2015 2014Equity Incentive Plan Units$186,227 $186,346 $158,927KKR Holdings Principal Awards44,837 6,726 29,838Other Exchangeable Securities12,091 16,119 22,464KKR Holdings Restricted Equity Units— 132 887Discretionary Compensation21,735 52,256 98,287Total$264,890 $261,579 $310,403 Equity Incentive Plan Under the Equity Incentive Plan, KKR is permitted to grant equity awards representing ownership interests in KKR & Co. L.P. common units. Vested awardsunder the Equity Incentive Plan dilute KKR & Co. L.P. common unitholders and KKR Holdings pro rata in accordance with their respective percentage interests inthe KKR Group Partnerships.The total number of common units that may be issued under the Equity Incentive Plan is equivalent to 15% of the number of fully diluted common unitsoutstanding, subject to annual adjustment. Equity awards have been granted under the Equity Incentive Plan and are generally subject to service based vesting,typically over a three to five year period from the date of grant. In certain cases, these awards are subject to transfer restrictions and/or minimum retainedownership requirements. The transfer restriction period, if applicable, lasts for (i) one year with respect to one-half of the interests vesting on any vesting date and(ii) two years with respect to the other one-half of the interests vesting on such vesting date. While providing services to KKR, if applicable, certain of theseawards are also subject to minimum retained ownership rules requiring the award recipient to continuously hold common unit equivalents equal to at least 15% oftheir cumulatively vested awards that have the minimum retained ownership requirement. Expense associated with the vesting of these awards is based on the closing price of the KKR & Co. L.P. common units on the date of grant, discounted for thelack of participation rights in the expected distributions on unvested units, which ranges from 8% to 56% (for awards granted prior to December 31, 2015)multiplied by the number of unvested units on the grant date. The grant date fair value of a KKR & Co. L.P. common unit reflects a discount for lack of distributionparticipation rights, because equity awards are not entitled to receive distributions while unvested. The discount range for awards granted prior to December 31,2015 was based on management’s estimates of future distributions that unvested equity awards will not be entitled to receive between the grant date and the vestingdate. Therefore, units granted prior to December 31, 2015 that vest in earlier periods have a lower discount as compared to units that vest in later periods, whichhave a higher discount. The discount range will generally increase when the level of expected annual distributions increased relative to the grant date fair value of aKKR & Co. L.P. common unit. A decrease in expected annual distributions relative to the grant date fair value of a KKR & Co. L.P. common unit would generallyhave the opposite effect. KKR has made equal quarterly distributions to holders of its common units in an amount of $0.16 per common unit per quarter ( $0.64 per year) in respect ofthe first quarter of 2016 through the fourth quarter of 2016. Accordingly, for grants under the Equity Incentive Plan made subsequent to December 31, 2015 butbefore January 1, 2017, the discount for the lack of participation rights in the expected distributions on unvested units was based on the $0.64 expected annualdistribution. Beginning with the financial results for the first quarter of 2017, KKR intends to increase its quarterly distribution to common unitholders to $0.17 percommon unit per quarter or $0.68 per year.Expense is recognized on a straight line basis over the life of the award and assumes a forfeiture rate of up to 8% annually based upon expected turnover byclass of recipient.227Notes to Consolidated Financial Statements (Continued)As of December 31, 2016 , there was approximately $211.2 million of estimated unrecognized expense related to unvested awards. That cost is expected to berecognized as follows:Year Unrecognized Expense (in millions)2017 125.82018 69.42019 15.72020 0.3Total $211.2A summary of the status of unvested awards granted under the Equity Incentive Plan from January 1, 2016 through December 31, 2016 is presented below: Units WeightedAverage GrantDate Fair ValueBalance, January 1, 201623,128,228 $14.61Granted28,634,387 13.88Vested(12,245,083) 15.26Forfeited(2,019,199) 14.38Balance, December 31, 201637,498,333 $13.85 The weighted average remaining vesting period over which unvested awards are expected to vest is 1.5 years . A summary of the remaining vesting tranches of awards granted under the Equity Incentive Plan is presented below:Vesting Date UnitsApril 1, 2017 8,286,713October 1, 2017 3,598,292April 1, 2018 10,153,182October 1, 2018 2,984,883April 1, 2019 6,825,834October 1, 2019 1,519,263April 1, 2020 3,485,143October 1, 2020 245,023April 1, 2021 400,000 37,498,333KKR Holdings AwardsKKR Holdings units are exchangeable for KKR Group Partnership Units and allow for their exchange into common units of KKR & Co. L.P. on a one -for onebasis. As of December 31, 2016 and 2015, KKR Holdings owned approximately 43.9% or 353,757,398 and 44.1% , or 361,346,588 units respectively, ofoutstanding KKR Group Partnership Units. Awards for KKR Holdings units that have been granted are generally subject to service based vesting, typically over athree to five year period from the date of grant. They are also subject to transfer restrictions which last for (i) one year with respect to one-half of the interestsvesting on any vesting date and (ii) two years with respect to the other one-half of the interests vesting on such vesting date. While providing services to KKR, therecipients are also subject to minimum retained ownership rules requiring them to continuously hold 25% of their vested interests. Upon separation from KKR,award recipients are subject to the terms of a confidentiality and restrictive covenants agreement that would require the forfeiture of certain vested and unvestedunits should the terms of the agreement be violated. Holders of KKR Holdings units are not entitled to participate in distributions made on KKR Group PartnershipUnits underlying their KKR Holdings units until such units are vested.228Notes to Consolidated Financial Statements (Continued)Because KKR Holdings is a partnership, all of the 353,757,398 KKR Holdings units have been legally allocated, but the allocation of 7,480,325 of these unitshas not been communicated to each respective principal and the final allocation and terms of vesting for these units are subject to change and the exercise ofjudgment by the general partner of KKR Holdings. It was therefore determined that the grant date and service inception date had not occurred and these units donot yet meet the criteria for recognition of compensation expense. The fair value of awards granted out of KKR Holdings is based on the closing price of KKR & Co L.P. common units on the date of grant. KKR determinedthis to be the best evidence of fair value as a KKR & Co. L.P. common unit is traded in an active market and has an observable market price. Additionally, a KKRHoldings unit is an instrument with terms and conditions similar to those of a KKR & Co. L.P. common unit. Specifically, units in both KKR Holdings and KKR &Co. L.P. represent ownership interests in KKR Group Partnership Units and, subject to any vesting, minimum retained ownership requirements and transferrestrictions, each KKR Holdings unit is exchangeable into a KKR Group Partnership Unit and then into a KKR & Co. L.P. common unit on a one -for-one basis.KKR Holdings Awards give rise to equity-based compensation in the consolidated statements of operations based on the grant-date fair value of the award.KKR has made equal quarterly distributions to holders of its common units in an amount of $0.16 per common unit per quarter ( $0.64 per year) in respect of thefirst quarter of 2016 through the fourth quarter of 2016. Accordingly, for grants of KKR Holdings Awards made subsequent to December 31, 2015 but beforeJanuary 1, 2017, the discount for the lack of participation rights in the expected distributions on unvested units was based on the $0.64 expected annual distribution.Beginning with the financial results for the first quarter of 2017, KKR intends to increase its quarterly distribution to common unitholders to $0.17 per commonunit per quarter or $0.68 per year.Expense is recognized on a straight line basis over the life of the award and assumes a forfeiture rate of up to 8% annually based on expected turnover by classof recipient.ModificationOn February 25, 2016, certain senior KKR employees and non-employee operating consultants were granted approximately 28.9 million KKR Holdings unitssubject to price and service-based vesting requirements (“Original Market Condition Awards”). The Original Market Condition Awards were eligible to vestperiodically on four annual vesting dates beginning on January 1, 2018, upon satisfaction of a service-based vesting condition and market condition vestingrequirement based on the price of KKR common units reaching and maintaining certain specified price thresholds for a specified period of time. These pricethresholds ranged from $23.65 to $33.78 per common unit. None of these Original Market Condition Awards were eligible to vest prior to January 1, 2018 and ifapplicable price targets were not achieved by the close of business on January 1, 2021, any unvested Original Market Condition Awards would have beenautomatically canceled and forfeited. On November 2, 2016 the Original Market Conditions Awards were modified to eliminate the market condition vestingrequirement (“Modified Holdings Awards”). Instead, these Modified Holdings Awards from KKR Holdings have service based vesting in equal annual installmentsover a five year period beginning on May 1, 2017 and ending on May 1, 2021, subject to the grantee’s continued employment through the applicable servicevesting dates. The awards described above were granted from outstanding but previously unallocated units of KKR Holdings, and consequently these grants did not increasethe number of KKR Holdings units outstanding or outstanding KKR common units on a fully-diluted basis. If and when vested, these awards will not dilute KKR'srespective ownership interests in the KKR Group Partnerships.This modification resulted in incremental value to the recipients of $286.9 million , before consideration of estimated forfeitures, and is calculated as follows:Description Amounts (in millions)Estimated fair value of Modified Awards at modification date 1 $360.3Estimated fair value of Original Awards at modification date 2 73.4Incremental Value $286.91 Value was estimated based on the fair value of a KKR Common Unit as described above at the date of modification.2 Value was estimated based on a Monte-Carlo simulation valuation model due the existence of the market condition. Key assumptions on the date of the modification were: (i) the price of aKKR Common unit ( $14.08 ), the risk free rate ( 1.14% ), volatility ( 30% ) and dividend yield ( 4.55% ). 229Notes to Consolidated Financial Statements (Continued)This incremental value will result in compensation expense of $266.1 million , after consideration of estimated forfeitures. The sum of the incremental expenseand the remaining $54.8 million of grant date fair value expense associated with the Original Market Condition Awards, or $320.9 million , will be recognized overthe remaining vesting period of the Modified Holdings Awards, which begins in the fourth quarter of 2016 and concludes on May 1, 2021.As of December 31, 2016 , there was approximately $271.0 million of estimated unrecognized expense related to unvested KKR Holdings awards. That cost isexpected to be recognized as follows:Year Unrecognized Expense (in millions)2017 84.12018 59.32019 56.22020 53.42021 18.0Total $271.0A summary of the status of unvested awards granted under the KKR Holdings Plan from January 1, 2016 through December 31, 2016 is presented below: Units WeightedAverage GrantDate Fair ValueBalance, January 1, 20161,409,116 $7.47Original Market Condition Awards granted and modified28,875,000 12.12Granted499,571 13.25Vested(1,038,804) 7.63Forfeited(1,498,997) 11.55Balance, December 31, 201628,245,886 $12.10The weighted average remaining vesting period over which unvested awards are expected to vest is 2.2 years.A summary of the remaining vesting tranches of awards granted under the KKR Holdings Plan is presented below:Vesting Date UnitsApril 1, 2017 768,939May 1, 2017 5,200,000October 1, 2017 111,293April 1, 2018 824,999May 1, 2018 5,200,000April 1, 2019 349,143May 1, 2019 5,200,000April 1, 2020 191,512May 1, 2020 5,200,000May 1, 2021 5,200,000 28,245,886230Notes to Consolidated Financial Statements (Continued)Other Exchangeable Securities In connection with the acquisition of Avoca, KKR issued 2,545,602 equity securities of a subsidiary of a KKR Group Partnership and of KKR & Co. L.P. bothof which are exchangeable into common units of KKR & Co. L.P. on a one -for-one basis (“Other Exchangeable Securities”). Certain Other ExchangeableSecurities are subject to time based vesting (generally over a three -year period from February 19, 2014) and are not exchangeable into common units until vested,and in certain cases are subject to minimum retained ownership requirements and transfer restrictions. Consistent with grants of KKR Holdings awards and grantsmade under the KKR Equity Incentive Plan, holders of Other Exchangeable Securities are not entitled to receive distributions while unvested. The fair value of Other Exchangeable Securities is based on the closing price of KKR & Co. L.P. common units on the date of grant. KKR determined this tobe the best evidence of fair value as a KKR & Co. L.P. common unit is traded in an active market and has an observable market price. Additionally, OtherExchangeable Securities are instruments with terms and conditions similar to those of a KKR & Co. L.P. common unit. Specifically, these Other ExchangeableSecurities are exchangeable into KKR & Co. L.P. common units on a one -for-one basis upon vesting. Expense associated with the vesting of these Other Exchangeable Securities is based on the closing price of a KKR & Co. L.P. common unit on the date ofgrant, discounted for the lack of participation rights in the expected distributions on unvested Other Exchangeable Securities, which currently ranges from 8% to56% multiplied by the number of unvested Other Exchangeable Securities on the issuance date. The discount range was based on management’s estimates of futuredistributions that unvested Other Exchangeable Securities will not be entitled to receive between the issuance date and the vesting date. Therefore, OtherExchangeable Securities that vest in earlier periods have a lower discount as compared to Other Exchangeable Securities that vest in later periods, which have ahigher discount. The discount range will generally increase when the level of expected annual distributions increases relative to the issuance date fair value of aKKR & Co. L.P. common unit. A decrease in expected annual distributions relative to the grant date fair value of a KKR & Co. L.P. common unit would generallyhave the opposite effect. Expense is recognized on a straight line basis over the life of the security and assumes a forfeiture rate of up to 8% annually based uponexpected turnover by class of recipient.As of October 1, 2016, all Other Exchangeable Securities have either vested or forfeited and there is no material unrecognized expense associated with OtherExchangeable Securities as of December 31, 2016.Discretionary Compensation KKR employees and certain employees of certain consolidated entities are eligible to receive discretionary cash bonuses. While cash bonuses paid to mostemployees are borne by KKR and certain consolidated entities and result in customary compensation and benefits expense, cash bonuses that are paid to certainprincipals are currently borne by KKR Holdings. These bonuses are funded with distributions that KKR Holdings receives on KKR Group Partnership Units heldby KKR Holdings but are not then passed on to holders of unvested units of KKR Holdings. Because principals are not entitled to receive distributions on units thatare unvested, any amounts allocated to principals in excess of a principal’s vested equity interests are reflected as employee compensation and benefits expense onthe consolidated statements of operations. These compensation charges are recorded based on the unvested portion of quarterly earnings distributions received byKKR Holdings at the time of the distribution.231Notes to Consolidated Financial Statements (Continued)13. RELATED PARTY TRANSACTIONS Due from Affiliates consists of: December 31, 2016 December 31, 2015Amounts due from portfolio companies$66,940 $46,716Amounts due from unconsolidated investment funds170,219 74,409Amounts due from related entities13,293 18,658Due from Affiliates$250,452 $139,783Due to Affiliates consists of: December 31, 2016 December 31, 2015Amounts due to KKR Holdings in connection with the tax receivable agreement$128,091 $127,962Amounts due to unconsolidated investment funds230,823 —Amounts due to related entities565 16,845Due to Affiliates$359,479 $144,807 Tax Receivable AgreementKKR and certain intermediate holding companies that are taxable corporations for U.S. federal, state and local income tax purposes, may be required toacquire KKR Group Partnership Units from time to time pursuant to the exchange agreement with KKR Holdings. KKR Management Holdings L.P. made anelection under Section 754 of the Internal Revenue Code that will remain in effect for each taxable year in which an exchange of KKR Group Partnership Units forcommon units occurs, which may result in an increase in KKR’s intermediate holding companies’ share of the tax basis of the assets of the KKR GroupPartnerships at the time of an exchange of KKR Group Partnership Units. Certain of these exchanges are expected to result in an increase in KKR’s intermediateholding companies’ share of the tax basis of the tangible and intangible assets of the KKR Group Partnerships, primarily attributable to a portion of the goodwillinherent in KKR’s business that would not otherwise have been available. This increase in tax basis may increase depreciation and amortization deductions for taxpurposes and therefore reduce the amount of income tax KKR’s intermediate holding companies would otherwise be required to pay in the future. This increase intax basis may also decrease gain (or increase loss) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.KKR has entered into a tax receivable agreement with KKR Holdings, which requires KKR’s intermediate holding companies to pay to KKR Holdings, or tocurrent and former principals who have exchanged KKR Holdings units for KKR common units (as transferees of KKR Group Partnership Units), 85% of theamount of cash savings, if any, in U.S. federal, state and local income tax that the intermediate holding companies realize as a result of the increase in tax basisdescribed above, as well as 85% of the amount of any such savings the intermediate holding companies realize as a result of increases in tax basis that arise due tofuture payments under the agreement. A termination of the agreement or a change of control could give rise to similar payments based on tax savings that KKRwould be deemed to realize in connection with such events. In the event that other of KKR’s current or future subsidiaries become taxable as corporations andacquire KKR Group Partnership Units in the future, or if KKR becomes taxable as a corporation for U.S. federal income tax purposes, KKR expects that each willbecome subject to a tax receivable agreement with substantially similar terms.These payment obligations are obligations of KKR’s intermediate holding companies and not the KKR Group Partnerships and are recorded within Due toAffiliates in the accompanying consolidated statements of financial condition. As such, cash payments received by common unitholders may vary from thosereceived by holders of KKR Group Partnership Units held by KKR Holdings and KKR’s current and former principals to the extent payments are made to thoseparties under the tax receivable agreement. Payments made under the tax receivable agreement are required to be made within 90 days of the filing of the taxreturns of KKR’s intermediate holding companies which may result in a timing difference between the tax savings received by KKR’s intermediate holdingscompanies and the cash payments made to the selling holders of KKR Group Partnership Units.For the years ended December 31, 2016, 2015 and 2014, cash payments that have been made under the tax receivable agreement were $5.0 million , $5.7million and $5.7 million , respectively. KKR expects its intermediate holding companies to232Notes to Consolidated Financial Statements (Continued)benefit from the remaining 15% of cash savings, if any, in income tax that they realize. As of December 31, 2016, $4.2 million of cumulative income tax savingshave been realized.Discretionary InvestmentsCertain of KKR’s investment professionals, including its principals and other qualifying personnel are permitted to invest, and have invested, their own capitalin KKR's investment funds, portfolio companies and in its strategic partnerships with other hedge fund managers. Side-by-side investments are made on the sameterms and conditions as those acquired by the applicable investment fund, except that the side-by-side investments do not subject the investor to management fees,incentive fees or a carried interest. The cash contributed by these individuals aggregated $328.3 million , $434.9 million and $398.3 million for the years endedDecember 31, 2016, 2015 and 2014, respectively.Aircraft and Other ServicesCertain of the senior employees own aircraft that KKR uses for business purposes in the ordinary course of its operations. These senior employees paid for thepurchase of these aircraft with personal funds and bear all operating, personnel and maintenance costs associated with their operation. The hourly rates that KKRpays for the use of these aircraft are based on current market rates for chartering private aircraft of the same type. KKR incurred $5.1 million , $4.4 million and$3.4 million for the use of these aircraft for the years ended December 31, 2016, 2015 and 2014, respectively.FacilitiesCertain trusts, whose beneficiaries include children of Mr. Kravis and Mr. Roberts, and certain other senior employees who are not executive officers of KKR,are partners in a real-estate based partnership that maintains an ownership interest in KKR’s Menlo Park location. Payments made to this partnership were $7.4million , $7.3 million and $7.2 million for the years ended December 31, 2016, 2015 and 2014, respectively. 233Notes to Consolidated Financial Statements (Continued)14. SEGMENT REPORTING KKR operates through four reportable business segments. These segments, which are differentiated primarily by their business objectives and investmentstrategies, are presented below. These financial results represent the combined financial results of the KKR Group Partnerships on a segment basis. KKR earns themajority of its fees from subsidiaries located in the United States. Private Markets Through KKR’s Private Markets segment, KKR manages and sponsors a group of private equity funds and co-investment vehicles, including growth equityfunds, which invest capital for long-term appreciation, either through controlling ownership of a company or strategic minority positions. KKR also manages andsponsors investment funds and co-investment vehicles that invest capital in real assets, such as infrastructure, energy and real estate. Public Markets KKR operates and reports its combined credit and hedge funds businesses through the Public Markets segment. KKR’s credit business invests capital inleveraged credit strategies, such as leveraged loans and high yield bonds, and alternative credit strategies such as special situations, mezzanine or corporate creditopportunities, direct lending, and revolving credit. KKR’s Public Markets segment also includes its hedge funds business, which includes customized hedge fundportfolios, hedge fund-of-fund solutions and strategic partnerships consisting of minority stakes in other hedge fund managers. Capital Markets KKR’s global capital markets business supports the firm, portfolio companies, and third-party clients by developing and implementing both traditional andnon-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 afirm commitment basis, KKR commits to buy and sell an issue of securities or indebtedness and generate revenue by purchasing the securities or indebtedness at adiscount or for a fee. When KKR acts in an agency capacity, KKR generates revenue for arranging financing or placing securities or debt with capital marketsinvestors. We may also provide issuers with capital markets advice on security selection, access to markets, marketing considerations, securities pricing, and otheraspects of capital markets transactions in exchange for a fee.Principal ActivitiesThrough KKR's Principal Activities segment, we manage the firm’s assets and deploy capital to support and grow our businesses.KKR's Principal Activities segment uses its balance sheet assets to support KKR's investment management and capital markets businesses. Typically, thefunds in our Private Markets and Public Markets businesses contractually require KKR, as general partner of the funds, to make sizable capital commitments fromtime to time. KKR also uses its balance sheet to acquire investments in order to help establish a track record for fundraising purposes in new strategies. KKR mayalso 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 other segments.The Principal Activities segment also provides the required capital to fund the various commitments of KKR's Capital Markets business when underwriting orsyndicating securities, or when providing term loan commitments for transactions involving portfolio companies and for third parties. The Principal Activitiessegment also holds assets that may be utilized to satisfy regulatory requirements for the Capital Markets business and risk retention requirements for its CLOsbusiness. 234Notes to Consolidated Financial Statements (Continued)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 reportablebusiness 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. andKKR Holdings and as such represents the business in total. In addition, KKR’s reportable segments are presented without giving effect to the consolidation of thefunds 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 investmentearnings of KKR and its business segments. ENI is comprised of total segment revenues; less total segment expenses and certain economic interests in KKR’ssegments held by third parties.Modification of Segment InformationAs of December 31, 2015, KKR’s management reevaluated the manner in which it made operational and resource deployment decisions and assessed theoverall performance of each of KKR’s operating segments. As a result, as of December 31, 2015, KKR modified the presentation of its segment financialinformation relative to the presentation in prior periods. In addition, since becoming a public company, KKR's Principal Activities segment has grown insignificance and is 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 thefollowing commentary.Inclusion of a Fourth SegmentAll income (loss) on investments is attributed to the Principal Activities segment. Prior to December 31, 2015, income on investments held directly by KKRwas 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 andstrategic partnerships with hedge fund managers have been reported in our other segments.Expense AllocationsAs of December 31, 2015 KKR has changed the manner in which expenses are allocated among its operating segments. Specifically, as described below, (i) aportion of expenses, except for broken deal expenses, previously reflected in the Private Markets, Public Markets or Capital Markets segments are now reflected inthe Principal Activities segment and (ii) corporate expenses are allocated across all segments.Expenses Allocated to Principal Activities As of December 31, 2015, a portion of the cash compensation and benefits, occupancy and related charges and other operating expenses previously included inthe Private Markets, Public Markets and Capital Markets segments is now allocated to the Principal Activities segment. The Principal Activities segment incurs itsown 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 PrincipalActivities segment, which are incremental to those costs incurred directly by the Principal Activities segment. The total amount of expenses (other than its directcosts) that is allocated to Principal Activities is based on the proportion of revenue earned by Principal Activities, relative to other operating segments, over thepreceding four calendar years. 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 beallocated 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 OverheadAs of December 31, 2015, corporate expenses are allocated to each of the Private Markets, Public Markets, Capital Markets and Principal Activities segmentsbased on the proportion of revenues earned by each segment over the preceding four235Notes to Consolidated Financial Statements (Continued)calendar years. In KKR's segment presentation reported prior to December 31, 2015, all corporate expenses were allocated to the Private Markets segment.In connection with these modifications, segment information for the year ended December 31, 2014 has been presented in conformity with KKR’s currentsegment presentation. Consequently, this information will not be consistent with historical segment financial results previously reported. While the modifiedsegment 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 totalreportable segment basis. 236Notes to Consolidated Financial Statements (Continued)The following tables present the financial data for KKR’s reportable segments: As of and for the Year Ended December 31, 2016 PrivateMarkets Public Markets CapitalMarkets PrincipalActivities Total Reportable SegmentsSegment Revenues Management, Monitoring and Transaction Fees, Net Management Fees$466,422 $331,440 $— $— $797,862Monitoring Fees64,354 — — — 64,354Transaction Fees132,602 30,155 181,517 — 344,274Fee Credits(103,579) (28,049) — — (131,628)Total Management, Monitoring and Transaction Fees,Net559,799 333,546 181,517 — 1,074,862 Performance Income (Loss) Realized Incentive Fees— 33,346 — — 33,346Realized Carried Interest1,252,370 3,838 — — 1,256,208Unrealized Carried Interest(416,060) (4,312) — — (420,372)Total Performance Income (Loss)836,310 32,872 — — 869,182 Investment Income (Loss) Net Realized Gains (Losses)— — — 371,563 371,563Net Unrealized Gains (Losses)— — — (584,423) (584,423)Total Realized and Unrealized— — — (212,860) (212,860)Interest Income and Dividends— — — 322,857 322,857Interest Expense— — — (188,761) (188,761)Net Interest and Dividends— — — 134,096 134,096Total Investment Income (Loss)— — — (78,764) (78,764) Total Segment Revenues1,396,109 366,418 181,517 (78,764) 1,865,280 Segment Expenses Compensation and Benefits Cash Compensation and Benefits194,240 77,017 29,552 94,207 395,016Realized Performance Income Compensation523,448 14,873 — — 538,321Unrealized Performance Income Compensation(159,786) (1,724) — — (161,510)Total Compensation and Benefits557,902 90,166 29,552 94,207 771,827Occupancy and Related Charges35,785 9,517 2,474 14,624 62,400Other Operating Expenses135,425 38,439 14,994 45,490 234,348Total Segment Expenses729,112 138,122 47,020 154,321 1,068,575 Income (Loss) attributable to noncontrolling interests— — 2,336 — 2,336 Economic Net Income (Loss)$666,997 $228,296 $132,161 $(233,085) $794,369 Total Assets$1,645,364 $1,123,103 $354,187 $10,210,487 $13,333,141237Notes to Consolidated Financial Statements (Continued) As of and for the Year Ended December 31, 2015 PrivateMarkets PublicMarkets CapitalMarkets PrincipalActivities Total Reportable SegmentsSegment Revenues Management, Monitoring and Transaction Fees, Net Management Fees$465,575 $266,458 $— $— $732,033Monitoring Fees264,643 — — — 264,643Transaction Fees144,652 28,872 191,470 — 364,994Fee Credits(195,025) (24,595) — — (219,620)Total Management, Monitoring and Transaction Fees,Net679,845 270,735 191,470 — 1,142,050 Performance Income (Loss) Realized Incentive Fees— 19,647 — — 19,647Realized Carried Interest1,018,201 8,953 — — 1,027,154Unrealized Carried Interest182,628 (19,083) — — 163,545Total Performance Income (Loss)1,200,829 9,517 — — 1,210,346 Investment Income (Loss) Net Realized Gains (Losses)— — — 337,023 337,023Net Unrealized Gains (Losses)— — — (391,962) (391,962)Total Realized and Unrealized— — — (54,939) (54,939)Interest Income and Dividends— — — 411,536 411,536Interest Expense— — — (203,085) (203,085)Net Interest and Dividends— — — 208,451 208,451Total Investment Income (Loss)— — — 153,512 153,512 Total Segment Revenues1,880,674 280,252 191,470 153,512 2,505,908 Segment Expenses Compensation and Benefits Cash Compensation and Benefits193,995 73,863 34,562 107,572 409,992Realized Performance Income Compensation407,280 11,438 — — 418,718Unrealized Performance Income Compensation74,560 (7,633) — — 66,927Total Compensation and Benefits675,835 77,668 34,562 107,572 895,637Occupancy and Related Charges33,640 9,808 2,641 16,568 62,657Other Operating Expenses127,836 40,591 14,618 50,573 233,618Total Segment Expenses837,311 128,067 51,821 174,713 1,191,912 Income (Loss) attributable to noncontrolling interests1,645 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 $13,429,298238Notes to Consolidated Financial Statements (Continued) As of and for the Year Ended December 31, 2014 PrivateMarkets Public Markets CapitalMarkets PrincipalActivities Total Reportable SegmentsSegment Revenues Management, Monitoring and Transaction Fees, Net Management Fees$453,210 $272,833 $— $— $726,043Monitoring Fees135,160 — — — 135,160Transaction Fees214,612 27,145 217,920 — 459,677Fee Credits(198,680) (23,357) — — (222,037)Total Management, Monitoring and Transaction Fees,Net604,302 276,621 217,920 — 1,098,843 Performance Income (Loss) Realized Incentive Fees— 47,807 — — 47,807Realized Carried Interest1,159,011 34,650 — — 1,193,661Unrealized Carried Interest70,058 40,075 — — 110,133Total Performance Income (Loss)1,229,069 122,532 — — 1,351,601 Investment Income (Loss) Net Realized Gains (Losses)— — — 628,403 628,403Net Unrealized Gains (Losses)— — — (396,425) (396,425)Total Realized and Unrealized— — — 231,978 231,978Interest Income and Dividends— — — 408,084 408,084Interest Expense— — — (134,909) (134,909)Net Interest and Dividends— — — 273,175 273,175Total Investment Income (Loss)— — — 505,153 505,153 Total Segment Revenues1,833,371 399,153 217,920 505,153 2,955,597 Segment Expenses Compensation and Benefits Cash Compensation and Benefits153,339 64,530 41,551 121,161 380,581Realized Performance Income Compensation463,605 32,984 — — 496,589Unrealized Performance Income Compensation33,430 16,029 — — 49,459Total Compensation and Benefits650,374 113,543 41,551 121,161 926,629Occupancy and Related Charges30,946 7,214 1,523 18,104 57,787Other Operating Expenses125,398 31,501 11,497 60,673 229,069Total Segment Expenses806,718 152,258 54,571 199,938 1,213,485 Income (Loss) attributable to noncontrolling interests1,424 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 239Notes to Consolidated Financial Statements (Continued)The following tables reconcile KKR’s total reportable segments to the most directly comparable financial measures calculated and presented in accordancewith GAAP: Fees For the Years Ended December 31, 2016 2015 2014Total Segment Revenues$1,865,280 $2,505,908 $2,955,597Management fees relating to consolidated funds and placement fees(178,619) (531,027) (510,777)Fee credits relating to consolidated funds2,921 202,269 203,466Net realized and unrealized carried interest - consolidated funds(32,651) (1,190,699) (1,303,794)Total investment income (loss)78,764 (153,512) (505,153)Revenue earned by oil & gas producing entities65,754 112,328 186,876Reimbursable expenses81,549 66,144 55,424Other25,095 32,357 28,369Fees and Other$1,908,093 $1,043,768 $1,110,008 Expenses For the Years Ended December 31, 2016 2015 2014Total Segment Expenses$1,068,575 $1,191,912 $1,213,485Equity based compensation264,890 261,579 310,403Reimbursable expenses and placement fees148,483 103,307 92,366Operating expenses relating to consolidated funds, CFEs and other entities104,339 65,012 93,182Expenses incurred by oil & gas producing entities70,312 153,611 333,123Intangible amortization, acquisition and litigation6,647 49,766 102,877Other32,228 46,038 50,631Total Expenses$1,695,474 $1,871,225 $2,196,067 Net Income (Loss) Attributable to KKR & Co. L.P. Common Unitholders For the Years Ended December 31, 2016 2015 2014Economic net income (loss)$794,369 $1,297,989 $1,727,166Income tax(24,561) (66,636) (63,669)Amortization of intangibles, placement fees and other, net (1)17,267 (47,599) (290,348)Equity based compensation(264,890) (261,579) (310,403)Net income (loss) attributable to noncontrolling interests held by KKR Holdings(212,878) (433,693) (585,135)Preferred Unit Distributions(22,235) — —Net income (loss) Attributable to KKR & Co. L.P. Common Unitholders$287,072 $488,482 $477,611 (1) Other primarily represents the statement of operations impact of the accounting convention differences for (i) direct interests in oil & natural gas properties outside of investment funds and(ii) certain interests in consolidated CLOs and other entities. On a segment basis, direct interests in oil & natural gas properties outside of investment funds are carried at fair value with changesin fair value recorded in Economic Net Income (Loss) and certain interests in consolidated CLOs and other entities are carried at cost. See Note 2 "Summary of Significant Accounting Policies"for the GAAP accounting for these direct interests in oil and natural gas producing properties outside investment funds and interests in consolidated CLOs and other entities.The items that reconcile KKR’s total reportable segments to the corresponding consolidated amounts calculated and presented in accordance with GAAP fornet income (loss) attributable to redeemable noncontrolling interests and income (loss) attributable to noncontrolling interests are primarily attributable to theimpact of KKR Holdings L.P., KKR's consolidated funds and certain other entities.240Notes to Consolidated Financial Statements (Continued)Assets December 31, 2016 December 31, 2015Total Segment Assets$13,333,141 $13,429,298Impact of Consolidation of Investment Vehicles and Other Entities (1)24,367,570 56,139,412Carry Pool Reclassification to Liabilities987,994 1,199,000Impact of KKR Management Holdings Corp.314,192 274,629Total Assets$39,002,897 $71,042,339 (1) Includes accounting basis difference for oil & natural gas properties of $15,242 and $47,005 as of December 31, 2016 and December 31, 2015, respectively. 241Notes to Consolidated Financial Statements (Continued)15. ACQUISITIONS Acquisition of KFN On April 30, 2014, KKR completed its acquisition of KFN by an agreement and plan of merger, pursuant to which KFN became a subsidiary of KKR. KFN isa specialty finance company with expertise in a range of asset classes in which it invests, consisting primarily of corporate loans, also known as leveraged loans,high yield debt securities, interests in joint ventures and partnerships, and interests in oil and gas properties. The addition of KFN provided KKR with over $2billion of permanent equity capital to support the continued growth of its business.The total consideration paid was approximately $2.4 billion consisting entirely of the issuance of 104.3 million KKR common units as follows (amounts inthousands except unit data):Number of KKR common units issued104,340,028KKR common unit price on April 30, 2014$22.71Estimated fair value of KKR common units issued$2,369,559 The following is a summary of the estimated fair values of the assets acquired and liabilities as of April 30, 2014, the date they were assumed (amounts inthousands):Cash and cash equivalents$210,413Cash and cash equivalents held at consolidated entities614,929Restricted cash and cash equivalents35,038Investments1,235,813Investments of consolidated CLOs6,742,768Other assets642,721Other assets of consolidated CLOs133,036Total assets9,614,718 Debt obligations724,509Debt obligations of consolidated CLOs5,663,666Accounts payable, accrued expenses and other liabilities118,427Other liabilities of consolidated CLOs344,660Total liabilities6,851,262 Noncontrolling interests378,983 Fair value of Net Assets Acquired2,384,473Less: Fair value of consideration transferred2,369,559Gain on acquisition$14,914 As of April 30, 2014, the fair value of the net assets acquired exceeded the fair value of consideration transferred by approximately $14.9 million and relatesprimarily to the difference between the fair value of the assets and liabilities of CLOs consolidated by KFN. This amount has been recorded in net gains (losses)from investment activities in the consolidated statements of operations. The consolidated statement of operations for the year ended December 31, 2014 includes the financial results of KFN since the date of acquisition, April 30,2014, through December 31, 2014. During this period, KFN’s revenues and net income (loss) attributable to KKR & Co. L.P. were $57.6 million and $(113.2)million , respectively. Fees for KFN represent oil and gas revenue from working and royalty interests in oil and natural gas producing properties consolidated byKKR. Additionally, the portion of net income that is allocable to KKR reflects KKR’s approximate ownership interest in the KKR Group Partnerships afterapplicable corporate and local income taxes for the year ended December 31, 2014.KKR incurred $8.3 million of acquisition related costs through the date of closing, which were expensed as incurred and are reflected within General,Administrative and Other. 242Notes to Consolidated Financial Statements (Continued) Acquisition of Avoca Capital On February 19, 2014, KKR closed its acquisition of 100% of the equity interests of Avoca Capital and its affiliates. Avoca, now renamed KKR CreditAdvisors (Ireland), was an independent European credit investment manager with approximately $8.2 billion in assets under management at the time of acquisition.The addition of Avoca provided KKR with a greater presence in the European leveraged credit markets.The total consideration included $83.3 million in cash and $56.5 million in securities of a subsidiary of a KKR Group Partnership and of KKR & Co. L.P. thatare exchangeable into approximately 2.4 million KKR & Co. L.P. common units, at any time, at the election of the holders of the securities. In connection with thistransaction, there is no contingent consideration payable in the future. The following is a summary of the estimated fair values of the assets acquired and liabilities as of February 19, 2014, the date they were assumed:Cash and cash equivalents$24,381Investments20,905Investments of consolidated CLOs1,226,174Other assets of consolidated CLOs186,609Other assets7,370Intangible assets65,880Total assets1,531,319 Liabilities13,584Debt obligations of consolidated CLOs1,150,551Other liabilities of consolidated CLOs140,308Total liabilities1,304,443 Fair Value of Net Assets Acquired226,876Less: Fair value of subordinated notes of consolidated CLOs held by KKR prior to acquisition (a)74,029Less: Fair value of consideration transferred139,798Gain on acquisition$13,049(a)Represents subordinated notes in one of the consolidated CLOs held by KKR prior to the acquisition of Avoca. Upon acquisition of Avoca, KKR’s investment in the subordinatednotes was offset against the corresponding debt obligations of the consolidated CLO in purchase accounting.As of February 19, 2014, the fair value of the net assets acquired exceeded the fair value of consideration transferred by approximately $13.0 million andrelates primarily to the difference between the fair value of the assets and liabilities of CLOs required to be consolidated in connection with the Avocatransaction. This amount has been recorded in net gains (losses) from investment activities in the consolidated statements of operations.The consolidated statement of operations for the year ended December 31, 2014 includes the financial results of Avoca since the date of acquisition,February 19, 2014, through December 31, 2014. During this period, Avoca’s revenues and net income (loss) attributable to KKR & Co. L.P. were $39.7 millionand $(3.3) million , respectively. This net income (loss) attributable to KKR & Co. L.P. reflects amortization of intangible assets and equity based compensationcharges associated with Avoca since the date of the acquisition. Additionally, the portion of net income that is allocable to KKR reflects KKR’s approximateownership interest in the KKR Group Partnerships after applicable corporate and local income taxes for the year ended December 31, 2014. KKR incurred $4.4 million of acquisition related costs through the date of closing, which were expensed as incurred and are reflected within General,Administrative and Other.243Notes to Consolidated Financial Statements (Continued)Pro Forma Financial InformationThe information that follows provides supplemental information about pro forma revenues and net income (loss) attributable to KKR & Co. L.P. as if theacquisitions of KFN and Avoca had been consummated as of January 1, 2013 . Such information is unaudited and is based on estimates and assumptions whichKKR believes are reasonable. These results are not necessarily indicative of the consolidated statements of operations in future periods or the results that wouldhave actually been realized had KKR, KFN and Avoca been a combined entity during 2014 and 2013 (amounts in thousands except unit data). For the Years Ended December 31,Selected Pro Forma Financial Information2014 2013Revenues$1,152,397 $871,144Net Income (Loss) attributable to KKR & Co. L.P.$533,828 $820,352Net Income (Loss) attributable to KKR & Co. L.P. per common unit-basic$1.28 $2.16Net Income (Loss) attributable to KKR & Co. L.P. per common unit-diluted$1.19 $2.0016. EQUITYUnit Repurchase ProgramOn October 27, 2015, KKR announced the authorization of a program providing for the repurchase by KKR of up to $500 million in the aggregate of itsoutstanding common units. On February 9, 2017, KKR announced an incremental $250 million has been authorized to repurchase common units. This $250 millionamount is in addition to the $41.2 million remaining as of February 9, 2017 under the repurchase program. Under this common unit repurchase program, commonunits may be repurchased from time to time in open market transactions, in privately negotiated transactions or otherwise. The timing, manner, price and amount ofany unit repurchases will be determined by KKR in its discretion and will depend on a variety of factors, including legal requirements, price and economic andmarket conditions. KKR expects that the program, which has no expiration date, will be in effect until the maximum approved dollar amount has been used torepurchase common units. The program does not require KKR to repurchase any specific number of common units, and the program may be suspended, extended,modified or discontinued at any time. See Consolidated Statements of Changes in Equity for the amount of common units repurchased during the years endedDecember 31, 2016 and 2015 .Distribution Policy Beginning with the results for the quarter ending March 31, 2017, KKR intends to increase its regular quarterly distribution to holders of its common unitsfrom $0.16 to $0.17 per common unit per quarter. The declaration and payment of any distributions are subject to the discretion of the board of directors of thegeneral partner of KKR and the terms of its limited partnership agreement. There can be no assurance that distributions will be made as intended or at all, thatunitholders will receive sufficient distributions to satisfy payment of their tax liabilities as limited partners of KKR or that any particular distribution policy will bemaintained.Preferred UnitsOn March 17, 2016, KKR & Co. L.P. issued 13,800,000 units of 6.75% Series A Preferred Units, and on June 20, 2016, KKR issued 6,200,000 units of 6.50%Series B Preferred Units, in each case, in an underwritten public offering. The Series A Preferred Units and Series B Preferred Units trade on the NYSE under thesymbols "KKR PR A" and "KKR PRA B", respectively. The terms of the preferred units are set forth in the limited partnership agreement of KKR & Co. L.P.If declared, distributions on the preferred units are payable quarterly on March 15, June 15, September 15 and December 15 of each year, at a rate per annumequal to 6.75% , in the case of the Series A Preferred Units and 6.50% in the case of the Series B Preferred Units. Distributions on the preferred units arediscretionary and non-cumulative. Holders of preferred units will only receive distributions on such units when, as and if declared by the board of directors of thegeneral partner of KKR & Co. L.P. We have no obligation to declare or pay any distribution for any distribution period, whether or not distributions on any seriesof preferred units are declared or paid for any other distribution period. Unless distributions have been declared and paid (or declared and set apart for payment) on the preferred units for a quarterly distribution period, we may notdeclare or pay distributions on, or repurchase, any units of KKR & Co. L.P. that are244Notes to Consolidated Financial Statements (Continued)junior to the preferred units, including our common units, during such distribution period. A distribution period begins on a distribution payment date and extendsto, but excludes, the next distribution payment date.If KKR & Co. L.P. dissolves, then the holders of the Series A Preferred Units and Series B Preferred Units are entitled to receive payment of a $25.00liquidation preference per preferred unit, plus declared and unpaid distributions, if any, to the extent that we have sufficient gross income (excluding any grossincome attributable to the sale or exchange of capital assets) such that holders of such preferred units have capital account balances equal to such liquidationpreference, plus declared and unpaid distributions, if any. The Series A and Series B Preferred Units do not have a maturity date. However, the Series A Preferred Units may be redeemed at our option, in whole or inpart, at any time on or after June 15, 2021, at a price of $25.00 per Series A Preferred Unit, plus declared and unpaid distributions, if any. The Series B PreferredUnits may be redeemed at our option, in whole or in part, at any time on or after September 15, 2021, at a price of $25.00 per Series B Preferred Unit, plus declaredand unpaid distributions, if any. Holders of preferred units have no right to require the redemption of such units. If a certain change of control event with a ratings downgrade occurs prior to June 15, 2021, the Series A Preferred Units may be redeemed at our option, inwhole but not in part, upon at least 30 days’ notice, within 60 days of the occurrence of such change of control event, at a price of $25.25 per Series A PreferredUnit, plus declared and unpaid distributions, if any. If a certain change of control event with a ratings downgrade occurs prior to September 15, 2021, the Series BPreferred Units may be redeemed at our option, in whole but not in part, upon at least 30 days’ notice, within 60 days of the occurrence of such change of controlevent, at a price of $25.25 per Series B Preferred Unit, plus declared and unpaid distributions, if any. If such a change of control event occurs (whether before, onor after June 15, 2021, in the case of the Series A Preferred Units and September 15, 2021, in the case of the Series B Preferred Units) and we do not give suchnotice, the distribution rate per annum on the applicable series of preferred units will increase by 5.00% , beginning on the 31st day following such change ofcontrol event.The Series A and Series B Preferred Units are not convertible into common units of KKR & Co. L.P. and have no voting rights, except that holders ofpreferred units have certain voting rights in limited circumstances relating to the election of directors following the failure to declare and pay distributions, certainamendments to the terms of the preferred units, and the creation of preferred units that are senior to the Series A Preferred Units and Series B Preferred Units.In connection with the issuance of the preferred units, the KKR Group Partnerships issued for the benefit of KKR & Co. L.P. two series of preferred units witheconomic terms that mirror those of each series of preferred units.17. GOODWILL AND INTANGIBLE ASSETS Goodwill Goodwill from the acquisition of Prisma Capital Partners LP and its affiliates represents the excess of acquisition costs over the fair value of net tangible andintangible assets acquired and is primarily attributed to synergies expected to arise after the acquisition of Prisma. As of December 31, 2016 and 2015, the carryingvalue of goodwill was $89.0 million . Goodwill is recorded in Other Assets in the consolidated statements of financial condition. The carrying values of goodwillallocated to the Public Markets and Principal Activities segments were $59.0 million and $30.0 million , respectively. All of the goodwill is currently expected tobe deductible for tax purposes. See Note 8 “Other Assets and Accounts Payable, Accrued Expenses and Other Liabilities.” Intangible Assets Intangible Assets, Net consists of the following: December 31, 2016 December 31, 2015Finite-Lived Intangible Assets$253,747 $284,766Accumulated Amortization (includes foreign exchange)(118,723) (107,779)Intangible Assets, Net$135,024 $176,987 245Notes to Consolidated Financial Statements (Continued)Changes in Intangible Assets, Net consists of the following: For the Years Ended December 31, 2016 December 31, 2015Balance, Beginning of Period$176,987 $209,202Amortization Expense(26,387) (27,004)Write-Offs (1)(15,416) —Foreign Exchange(160) (5,211)Balance, End of Period$135,024 $176,987 (1) Represents the write-off of intangible assets in connection with the termination of certain management contracts. Amortization expense including foreign exchange relating to intangible assets held at December 31, 2016 is expected to be as follows:2017 $24,7512018 18,4032019 15,5152020 15,3682021 14,8672022 and thereafter 46,120 $135,024The intangible assets as of December 31, 2016 are expected to amortize over a weighted‑average period of 8.1 years.18. COMMITMENTS AND CONTINGENCIES Debt Covenants Borrowings of KKR contain various debt covenants. These covenants do not, in management’s opinion, materially restrict KKR’s operating business orinvestment strategies. KKR is in compliance with its debt covenants in all material respects as of December 31, 2016 .Investment Commitments As of December 31, 2016 , KKR had unfunded commitments consisting of (i) $2,584.9 million to its active private equity and other investment vehicles, (ii) $610.2 million in connection with commitments by KKR’s capital markets business and (iii) other investment commitments of $70.5 million . Whether theseamounts are actually funded, in whole or in part depends on the terms of such commitments, including the satisfaction or waiver of any conditions to funding.Non-cancelable Operating LeasesKKR’s non-cancelable operating leases consist primarily of leases of office space around the world. There are no material rent holidays, contingent rent, rentconcessions or leasehold improvement incentives associated with any of these property leases. In addition to base rentals, certain lease agreements are subject toescalation provisions and rent expense is recognized on a straight‑line basis over the term of the lease agreement.246Notes to Consolidated Financial Statements (Continued)As of December 31, 2016 , the approximate aggregate minimum future lease payments, net of sublease income, required on the operating leases are as follows:2017$52,484201850,453201946,846202042,5862021 and thereafter23,870Total minimum payments required$216,239Contingent Repayment Guarantees The partnership documents governing KKR’s carry-paying funds, including funds relating to private equity, infrastructure, energy, real estate, mezzanine,direct lending and special situations investments, generally include a “clawback” provision that, if triggered, may give rise to a contingent obligation requiring thegeneral partner to return amounts to the fund for distribution to the fund investors at the end of the life of the fund. Under a clawback obligation, upon theliquidation of a fund, the general partner is required to return, typically on an after-tax basis, previously distributed carry to the extent that, due to the diminishedperformance of later investments, the aggregate amount of carry distributions received by the general partner during the term of the fund exceed the amount towhich the general partner was ultimately entitled, including the effects of any performance thresholds. Excluding carried interest received by the general partners offunds that were not contributed to KKR in the acquisition of the assets and liabilities of KKR & Co. (Guernsey) L.P. (formerly known as KKR Private EquityInvestors, L.P.) on October 1, 2009 (the “KPE Transaction”), as of December 31, 2016 , no carried interest was subject to this clawback obligation, assuming thatall applicable carry paying funds were liquidated at their December 31, 2016 fair values. Had the investments in such funds been liquidated at zero value, theclawback obligation would have been $2,204.9 million . Carried interest is recognized in the statement of operations based on the contractual conditions set forth inthe agreements governing the fund as if the fund were terminated and liquidated at the reporting date and the fund’s investments were realized at the then estimatedfair values. Amounts earned pursuant to carried interest are earned by the general partner of those funds to the extent that cumulative investment returns arepositive and where applicable, preferred return thresholds have been met. If these investment amounts earned decrease or turn negative in subsequent periods,recognized carried interest will be reversed and to the extent that the aggregate amount of carry distributions received by the general partner during the term of thefund exceed the amount to which the general partner was ultimately entitled, a clawback obligation would be recorded. For funds that are consolidated, thisclawback obligation, if any, is reflected as an increase in noncontrolling interests in the consolidated statements of financial condition. For funds that are notconsolidated, this clawback obligation, if any, is reflected as a reduction of KKR’s investment balance as this is where carried interest is initially recorded. Prior to the KPE Transaction in 2009, certain principals who received carried interest distributions with respect to certain private equity funds contributed toKKR had personally guaranteed, on a several basis and subject to a cap, the contingent obligations of the general partners of such private equity funds to repayamounts to fund investors pursuant to the general partners’ clawback obligations. The terms of the KPE Transaction require that principals remain responsible forany clawback obligations relating to carry distributions received prior to the KPE Transaction, up to a maximum of $223.6 million . Through investmentrealizations, the principals' potential exposure has been reduced to $98.9 million as of December 31, 2016 . Using valuations as of December 31, 2016 , no amountsare due with respect to the clawback obligation required to be funded by principals. Carry distributions arising subsequent to the KPE Transaction may give rise toclawback obligations that may be allocated generally to KKR and persons who participate in the carry pool. In addition, guarantees of or similar arrangementsrelating to clawback obligations in favor of third party investors in an individual investment partnership by entities KKR owns may limit distributions of carriedinterest more generally. Indemnifications and Other Guarantees KKR may incur contingent liabilities for claims that may be made against it in the future. KKR enters into contracts that contain a variety of representations,warranties and covenants, including indemnifications. For example, certain of KKR’s investment funds and KFN have provided certain indemnities relating toenvironmental and other matters and have provided nonrecourse carve-out guarantees for fraud, willful misconduct and other customary wrongful acts, each inconnection with the financing of certain real estate investments that KKR has made. In addition, KKR has also provided credit support to certain of its subsidiaries’obligations in connection with a limited number of investment vehicles that KKR manages. For example, KKR has guaranteed the obligations of a general partnerto post collateral on behalf of its investment vehicle in connection with such vehicle’s derivative transactions, and KKR has also agreed to be liable for certaininvestment losses and/or for providing liquidity in the events specified in the governing documents of another investment vehicle. KKR’s maximum exposureunder247Notes to Consolidated Financial Statements (Continued)these arrangements is currently unknown and KKR's liabilities for these matters would require a claim to be made against KKR in the future. Litigation From time to time, KKR is involved in various legal proceedings, lawsuits and claims incidental to the conduct of KKR’s business. KKR’s business is alsosubject to extensive regulation, which may result in regulatory proceedings against it. KKR currently is and expects to continue to become, from time to time, subject to examinations, inquiries and investigations by various U.S. and non U.S.governmental and regulatory agencies, including but not limited to the U.S. Securities and Exchange Commission, or SEC, Department of Justice, state attorneygenerals, Financial Industry Regulatory Authority, or FINRA, and the U.K. Financial Conduct Authority. Such examinations, inquiries and investigations mayresult in the commencement of civil, criminal or administrative proceedings against KKR or its personnel. Moreover, in the ordinary course of business, KKR is and can be both the defendant and the plaintiff in numerous lawsuits with respect to acquisitions,bankruptcy, insolvency and other types of proceedings. Such lawsuits may involve claims that adversely affect the value of certain investments owned by KKR’sfunds. KKR establishes an accrued liability for legal proceedings only when those matters present loss contingencies that are both probable and reasonably estimable.In such cases, there may be an exposure to loss in excess of any amounts accrued. No loss contingency is recorded for matters where such losses are either notprobable or reasonably estimable (or both) at the time of determination. Such matters may be subject to many uncertainties, including among others (i) theproceedings may be in early stages; (ii) damages sought may be unspecified, unsupportable, unexplained or uncertain; (iii) discovery may not have been started oris incomplete; (iv) there may be uncertainty as to the outcome of pending appeals or motions; (v) there may be significant factual issues to be resolved; or (vi) theremay be novel legal issues or unsettled legal theories to be presented or a large number of parties. Consequently, management is unable to estimate a range ofpotential loss, if any, related to these matters. In addition, loss contingencies may be, in part or in whole, subject to insurance or other payments such ascontributions and/or indemnity, which may reduce any ultimate loss. It is not possible to predict the ultimate outcome of all pending legal proceedings, and some of the matters discussed above seek or may seek potentially largeand/or indeterminate amounts. As of such date, based on information known by management, management has not concluded that the final resolutions of thematters above will have a material effect upon the financial statements. However, given the potentially large and/or indeterminate amounts sought or may besought in certain of these matters and the inherent unpredictability of investigations and litigations, it is possible that an adverse outcome in certain matters could,from time to time, have a material effect on KKR’s financial results in any particular period. 248Notes to Consolidated Financial Statements (Continued)19. REGULATORY CAPITAL REQUIREMENTS KKR has registered broker-dealer subsidiaries which are subject to the minimum net capital requirements of the SEC and the FINRA. Additionally, KKRentities based in London and Ireland are subject to the regulatory capital requirements of the U.K. Financial Conduct Authority and the Central Bank of Ireland,respectively. In addition, KKR has an entity based in Hong Kong which is subject to the capital requirements of the Hong Kong Securities and Futures Ordinance,an entity based in Japan subject to the capital requirements of Financial Services Authority of Japan, and two entities based in Mumbai which are subject to capitalrequirements of the Reserve Bank of India or RBI and the Securities and Exchange Board of India or SEBI. All of these entities have continuously operated inexcess of their respective minimum regulatory capital requirements. The regulatory capital requirements referred to above may restrict KKR’s ability to withdraw capital from its registered broker-dealer entities. AtDecember 31, 2016 , approximately $89.2 million of cash at KKR’s registered broker-dealer entities may be restricted as to the payment of cash dividends andadvances to KKR. 20. QUARTERLY FINANCIAL DATA (UNAUDITED) For the Three Months Ended, March 31, 2016 June 30, 2016 September 30, 2016 December 31, 2016Statement of Operations Data: Fees and Other$162,805 $576,757 $687,056 $481,475Less: Total Expenses308,323 423,218 511,117 452,816Total Investment Income (Loss)(612,928) 125,737 809,649 440,148Income (Loss) Before Taxes(758,446) 279,276 985,588 468,807Income Tax / (Benefit)1,890 6,045 10,826 5,800Net Income (Loss)(760,336) 273,231 974,762 463,007Less: Net Income (Loss) Attributable to RedeemableNoncontrolling Interests(38) 1,533 3,121 (13,092)Less: Net Income (Loss) Attributable to NoncontrollingInterests(430,359) 172,115 611,288 296,789Net Income (Loss) Attributable to KKR & Co. L.P.(329,939) 99,583 360,353 179,310Less: Net Income Attributable to Series A PreferredUnitholders— 5,693 5,822 5,822Less: Net Income Attributable to Series B PreferredUnitholders— — 2,379 2,519Net Income (Loss) Attributable to KKR & Co. L.P. CommonUnitholders$(329,939) $93,890 $352,152 $170,969Net Income (Loss) Attributable to KKR & Co. L.P.Per Common Unit Basic$(0.73) $0.21 $0.79 $0.38Diluted$(0.73) $0.19 $0.73 $0.35Weighted Average Common Units Outstanding Basic450,262,143 448,221,538 445,989,300 451,154,845Diluted450,262,143 481,809,612 479,975,675 484,312,804249Table of Contents For the Three Months Ended, March 31, 2015 June 30, 2015 September 30, 2015 December 31, 2015Statement of Operations Data: Fees and Other$291,345 $255,874 $188,626 $307,923Less: Total Expenses515,033 554,177 276,920 525,095Total Investment Income (Loss)2,182,835 3,634,718 (1,136,991) 1,488,563Income (Loss) Before Taxes1,959,147 3,336,415 (1,225,285) 1,271,391Income Tax / (Benefit)16,138 30,547 (7,390) 27,341Net Income (Loss)1,943,009 3,305,868 (1,217,895) 1,244,050Less: Net Income (Loss) Attributable to RedeemableNoncontrolling Interests1,933 (891) (12,925) 7,371Less: Net Income (Loss) Attributable to NoncontrollingInterests1,670,569 2,930,453 (1,014,382) 1,204,422Net Income (Loss) Attributable to KKR & Co. L.P.$270,507 $376,306 $(190,588) $32,257Less: Net Income Attributable to Series A PreferredUnitholders— — — —Less: Net Income Attributable to Series B PreferredUnitholders— — — —Net Income (Loss) Attributable to KKR & Co. L.P. CommonUnitholders$270,507 $376,306 $(190,588) $32,257Net Income (Loss) Attributable to KKR & Co. L.P.Per Common Unit Basic$0.62 $0.84 $(0.42) $0.07Diluted$0.57 $0.78 $(0.42) $0.07Weighted Average Common Units Outstanding Basic434,874,820 446,794,950 452,165,697 461,374,013Diluted472,225,344 482,651,491 452,165,697 489,704,78721. SUBSEQUENT EVENTS Common Unit Distribution A distribution of $0.16 per KKR & Co. L.P. common unit was announced on February 9, 2017 , and will be paid on March 7, 2017 to common unitholders ofrecord as of the close of business on February 21, 2017 . KKR Holdings will receive its pro rata share of the distribution from the KKR Group Partnerships.Beginning with the results for the quarter ending March 31, 2017, KKR intends to increase its regular quarterly distribution to holders of its common unitsfrom $0.16 to $0.17 per common unit per quarter.Preferred Unit DistributionsA distribution of $0.421875 per Series A Preferred Unit has been declared and set aside for payment on March 15, 2017 to holders of record of Series APreferred Units as of the close of business on March 1, 2017 .A distribution of $0.406250 per Series B Preferred Unit has been declared and set aside for payment on March 15, 2017 to holders of record of Series BPreferred Units as of the close of business on March 1, 2017 .Unit Repurchase ProgramAn incremental $250 million has been authorized to repurchase common units. This amount is in addition to the $41.2 million remaining as of February 9,2017 under the current common unit repurchase program, which was originally announced on October 27, 2015. Common units may be repurchased from time totime in open market transactions, in privately negotiated transactions or otherwise.PAAMCO PrismaOn February 6, 2017, KKR and Pacific Alternative Asset Management Company, LLC (“PAAMCO”) announced that they entered into a strategic transactionto create a new liquid alternatives investment firm by combining PAAMCO and KKR250Table of ContentsPrisma. Under the terms of the agreement, the entire businesses of both PAAMCO and KKR Prisma will be contributed to a newly formed company that willoperate independently from KKR, and KKR will retain a 39.9% stake as a long-term strategic partner. This transaction is subject to the satisfaction of customaryclosing conditions, including the receipt of requisite regulatory approvals.251Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENone.Item 9A. CONTROLS AND PROCEDURES Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.Our management, with the participation of our Co-Chief Executive Officers and Chief Financial Officer, has evaluated the effectiveness of our disclosure controlsand procedures (as such term is defined in Rules 13a-15(e) and 15d- 15(e) under the Exchange Act) as of the end of the period covered by this report. Based onsuch evaluation, our Co-Chief Executive Officers and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls andprocedures are at the reasonable assurance level: (i) effective in recording, processing, summarizing, and reporting information on a timely basis that we arerequired to disclose in the reports that we file or submit under the Exchange Act; and (ii) effective in ensuring that information that we are required to disclose inthe reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Co-Chief Executive Officers andChief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.Management's Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting (asdefined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) is a process designed by, or under the supervision of, a company's principal executive andprincipal financial officers and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes thosepolicies and procedures that:• Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of managementand directors of the company; and• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that couldhave a material effect on the financial statements.Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2016 . In making this assessment, managementused the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework, thatwas issued in 2013.Based on its assessment, our management has concluded that, as of December 31, 2016 , our internal control over financial reporting is effective.Changes in Internal Control Over Financial ReportingNo changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) of the Exchange Act) occurred during the fourth quarterof 2016 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.Attestation Report of the Independent Registered Public Accounting FirmOur independent registered public accounting firm, Deloitte & Touche LLP, has issued its attestation report on our internal control over financial reportingwhich is included in Item 8. Financial Statements and Supplementary Data.ITEM 9B. OTHER INFORMATIONNone.252Table of ContentsPART IIIITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Our Managing PartnerAs is commonly the case with limited partnerships, our limited partnership agreement provides for the management of our business and affairs by a generalpartner rather than a board of directors. Our Managing Partner serves as our sole general partner. Our Managing Partner has a board of directors that is co-chairedby our founders Henry Kravis and George Roberts, who also serve as our Co-Chief Executive Officers and are authorized to appoint our other officers. OurManaging Partner does not have any economic interest in our partnership.Directors and Executive OfficersThe following table presents certain information concerning the board of directors and executive officers of our Managing Partner.NameAge Position with Managing PartnerHenry R. Kravis73 Co-Chief Executive Officer, Co-Chairman and DirectorGeorge R. Roberts73 Co-Chief Executive Officer, Co-Chairman and DirectorDavid C. Drummond53 DirectorJoseph A. Grundfest65 DirectorJohn B. Hess62 DirectorPatricia F. Russo64 DirectorThomas M. Schoewe64 DirectorRobert W. Scully67 DirectorTodd A. Fisher51 Chief Administrative OfficerWilliam J. Janetschek54 Chief Financial OfficerDavid J. Sorkin57 General Counsel and SecretaryHenry R. Kravis co-founded KKR in 1976 and is Co-Chairman and Co-Chief Executive Officer of our Managing Partner. He is actively involved inmanaging the firm and serves on regional Private Equity Investment and Portfolio Management Committees. Mr. Kravis currently serves on the boards of FirstData Corporation and ICONIQ Capital, LLC. He also serves as a director, chairman emeritus or trustee of several cultural, professional, and educationalinstitutions, including the Business Council, Claremont McKenna College, Columbia Business School, Mount Sinai Hospital, the Partnership for New York City,the Partnership Fund for New York City, Rockefeller University, Sponsors for Educational Opportunity and Tsinghua University School of Economics andManagement. Mr. Kravis founded the Kravis Leadership Institute at Claremont McKenna College, where he established the Kravis Prize in Leadership, whichhonors leadership in the non-profit sector. He earned a B.A. from Claremont McKenna College in 1967 and an M.B.A. from the Columbia Business School in1969. Mr. Kravis has more than four decades of experience financing, analyzing, and investing in public and private companies, as well as serving on the boards ofa number of KKR portfolio companies. As our co-founder and Co-Chief Executive Officer, Mr. Kravis has an intimate knowledge of KKR's business, which allowshim to provide insight into various aspects of our business and is of significant value to the board of directors. Mr. Kravis is a first cousin of Mr. Roberts.George R. Roberts co-founded KKR in 1976 and is Co-Chairman and Co-Chief Executive Officer of our Managing Partner. He is actively involved inmanaging the firm and serves on regional Private Equity Investment and Portfolio Management Committees. Mr. Roberts serves as a director or trustee of severalcultural and educational institutions, including Claremont McKenna College. He is also founder and chairman of the board of directors of REDF, a San Franciscononprofit organization. He earned a B.A. from Claremont McKenna College in 1966 and a J.D. from the University of California (Hastings) Law School in 1969.Mr. Roberts has more than four decades of experience financing, analyzing, and investing in public and private companies, as well as serving on the boards of anumber of KKR portfolio companies. As our co-founder and Co-Chief Executive Officer, Mr. Roberts has an intimate knowledge of KKR's business, which allowshim to provide insight into various aspects of our business and is of significant value to the board of directors. Mr. Roberts is a first cousin of Mr. Kravis.253Table of ContentsDavid C. Drummond has been a member of the board of directors of our Managing Partner since March 14, 2014. Mr. Drummond has served as the seniorvice president, corporate development of Alphabet Inc. (and its predecessor Google Inc.) since January 2006, as its chief legal officer since December 2006, and asits secretary since 2002. Previously, he served as Google Inc.'s vice president, corporate development and general counsel since February 2002. Prior to joiningGoogle Inc., from July 1999 to February 2002, Mr. Drummond served as chief financial officer of SmartForce, an educational software applications company.Prior to that, Mr. Drummond was a partner at the law firm of Wilson Sonsini Goodrich & Rosati. Mr. Drummond holds a Juris Doctor degree from StanfordUniversity and a Bachelor of Arts degree in history from Santa Clara University. Mr. Drummond provides significant value to the oversight and development ofour business through his management and leadership roles at a publicly-traded global technology business and his insight into legal developments affecting globalenterprises.Joseph A. Grundfest has been a member of the board of directors of our Managing Partner since July 15, 2010. Mr. Grundfest has been a member of thefaculty of Stanford Law School since 1990, where he is the William A. Franke Professor of Law and Business. He is also senior faculty of the Arthur and ToniRembe Rock Center for Corporate Governance at Stanford University; founder and director of Directors' College, a venue for the professional education ofdirectors of publicly traded corporations; and co-founder of Financial Engines, Inc., a provider of services and advice to participants in employer-sponsoredretirement plans, where he has served as a director since its inception in 1996. Mr. Grundfest was a Commissioner of the SEC from 1985 to 1990. He holds a B.A.in Economics from Yale University and a J.D. from Stanford Law School. Mr. Grundfest's knowledge and expertise in capital markets, corporate governance, andsecurities laws provides significant value to the oversight and development of our business.John B. Hess has been a member of the board of directors of our Managing Partner since July 28, 2011. Mr. Hess has been the chief executive officer of HessCorporation since 1995 and a director since 1978. He was also director of Dow Chemical Co. from 2006 to 2013. He serves as a director on the Business Council,the Trilateral Commission and the Council on Foreign Relations and on the executive committee of the American Petroleum Institute and previously served on theSecretary of Energy Advisory Board Quadrennial Review Task Force. Mr. Hess is a member of the board of trustees at the New York Public Library, Mount SinaiHospital, the Lincoln Center for the Performing Arts and the Dean's Advisors at Harvard Business School, and chairs The Harvard Business School Campaign. Mr.Hess earned a B.A. from Harvard College and an M.B.A. from Harvard Business School. Mr. Hess provides significant value to the oversight and development ofour business through his management and leadership roles at a global energy business, and his involvement with major businesses and public policy organizationsalso provides valuable perspectives for our company.Patricia F. Russo has been a member of the board of directors of our Managing Partner since April 15, 2011. Ms. Russo served as chief executive officer ofAlcatel-Lucent from 2006 to 2008. Prior to the merger of Alcatel and Lucent in 2006, she served as chairman and chief executive officer of Lucent Technologies,Inc. from 2003 to 2006, and as president and chief executive officer from 2002 to 2003. Before rejoining Lucent in 2002, Ms. Russo was president and chiefoperating officer of Eastman Kodak Company from March 2001 to December 2001. Since November 2016, Ms. Russo has served on the board of Arconic Inc.,which separated from Alcoa Inc., where Ms. Russo served as a director from 2008 to November 2016. She also has served as the chairman of Hewlett PackardEnterprise Company since 2015 and as a director of, Merck & Co., Inc. since 2009 and General Motors Company since 2009. Prior to its merger with Merck in2009, Ms. Russo served as a director of Schering-Plough since 1995, and she served as a director of Hewlett Packard Company from 2011 to November 2015. Shegraduated from Georgetown University with a bachelor's degree in political science and history, and obtained an Advanced Management Degree from HarvardBusiness School's Advanced Management Program. Ms. Russo's management and leadership experience as chief executive officer of complex global companies aswell as her experience with corporate strategy, mergers and acquisitions, and sales and marketing brings important expertise to the oversight and development ofour business. Ms. Russo also brings extensive experience in corporate governance as a member of boards and board committees of other public companies.Thomas M. Schoewe has been a member of the board of directors of our Managing Partner since March 14, 2011. Mr. Schoewe was executive vice presidentand chief financial officer for Wal-Mart Stores, Inc., a position he held from 2000 to 2010, and was employed by Walmart in a transitional capacity to January2011. Prior to his employment at Walmart, Mr. Schoewe served as senior vice president and chief financial officer for Black and Decker Corp., a position he heldfrom 1993 to 1999. Prior to that, he served for four years as Black and Decker's vice president of finance. He previously held the position of vice president ofbusiness planning and analysis. He joined Black and Decker in 1986 after serving at Chicago-based Beatrice Companies, where he was chief financial officer andcontroller of Beatrice Consumer Durables, Inc. He has served on the board of directors of Northrop Grumman Corporation and General Motors Company since2011. From 2001 to May 2012, he served on the board of directors of PulteGroup Inc., which merged with Centex Corporation in 2009 and previously served onthe Centex board. Mr. Schoewe graduated from Loyola University of Chicago with a bachelor's of business administration degree254Table of Contentsin finance. Mr. Schoewe's experience in financial reporting, accounting and controls, and business planning and analysis brings important expertise to the oversightand development of our business.Robert W. Scully has been a member of the board of directors of our Managing Partner since July 15, 2010. Mr. Scully was a member of the Office of theChairman of Morgan Stanley from 2007 until his retirement in 2009, where he had previously been co-president, chairman of global capital markets and vicechairman of investment banking. Prior to joining Morgan Stanley, he served as a managing director at Lehman Brothers and at Salomon Brothers. Mr. Scully hasserved as a director of Zoetis Inc. since June 2013, Chubb Limited since January 2016, and prior to its acquisition of Chubb Limited, a director of ACE Limitedfrom May 2014 to January 2016, and UBS Group AG since May 2016. Previously, he was a director of Bank of America Corporation from August 2009 to May2013 and a public governor of the Financial Industry Regulatory Authority, or FINRA, from October 2014 to May 2016. He has also served as a director of GMACFinancial Services and MSCI Inc. He holds an A.B. from Princeton University and an MBA from Harvard Business School. Mr. Scully's 35-year career in thefinancial services industry brings important expertise to the oversight of our business. In addition, his leadership experience with a global financial servicescompany brings an industry perspective to our business development within and outside the U.S. as well as issues such as talent development, senior clientrelationship management, strategic initiatives, risk management and audit and financial reporting.Todd A. Fisher joined KKR in 1993 and is Chief Administrative Officer of our Managing Partner. Mr. Fisher is responsible for overseeing the finance, legal,information technology, human resources, public affairs and office operations functions, coordinating with the various businesses and geographies of KKR andoverseeing the firm's efforts in real estate investments. He is a member of KKR's Real Estate Investment and Portfolio Management Committees and also chairs thefirm's Management Committee and Risk Committee. He served as a director of Maxeda B.V. until October 2015, as a director of Rockwood Holdings, Inc. untilJanuary 2013 and Northgate Information Solutions plc until 2012. Prior to joining KKR, Mr. Fisher worked for Goldman, Sachs & Co. in New York and for DrexelBurnham Lambert in Los Angeles. Mr. Fisher holds a B.A. from Brown University, an M.A. in International Affairs from Johns Hopkins University, and anM.B.A. from the Wharton School of the University of Pennsylvania. He is currently a trustee of Brown University, vice-chairman of the Board of Advisors for TheJohns Hopkins University School for Advanced International Studies, and a member of the Board of Overseas Private Investment Corporation, various committeesof the United States Holocaust Museum and the Council on Foreign Relations.William J. Janetschek joined KKR in 1997 and is Chief Financial Officer of our Managing Partner. He has also been the president and chief executive officerof KKR Financial Holdings LLC, or KFN, since June 2014 and a director of KFN since May 2014. Prior to joining KKR, he was a Tax Partner at Deloitte &Touche LLP. He holds a B.S. from St. John's University and an M.S., Taxation from Pace University. Mr. Janetschek is actively involved in the community,serving as a sponsor and member of a variety of non-profit organizations including Student Sponsor Partners and St. John's University.David J. Sorkin joined KKR in 2007 and is General Counsel and Secretary of our Managing Partner. Prior to joining KKR, Mr. Sorkin was with SimpsonThacher & Bartlett LLP for 22 years. He served as a partner at the law firm and also served on the executive committee and was one of KKR's principal outsidecounsels. He received a B.A., summa cum laude, from Williams College and a J.D., cum laude, from Harvard Law School.Independence and Composition of the Board of DirectorsOur Managing Partner's board of directors consists of eight directors, six of whom, Messrs. Drummond, Grundfest, Hess, Schoewe and Scully and Ms. Russo,are independent under NYSE rules relating to corporate governance matters and the independence standards described in our corporate governance guidelines.While we are exempt from NYSE rules relating to board independence, our Managing Partner intends to maintain a board of directors that consists of at least amajority of directors who are independent under NYSE rules relating to corporate governance matters. In addition, the board has considered transactions andrelationships between KKR and the companies and organizations on whose boards or other similar governing bodies where our directors also serve or where ourdirectors serve as executive officers.Board CommitteesOur Managing Partner's board of directors has four standing committees: an audit committee, a conflicts committee, a nominating and corporate governancecommittee and an executive committee that operate pursuant to written charters as described below. Because we are a limited partnership, our Managing Partner'sboard is not required by NYSE rules to establish a compensation committee or a nominating and corporate governance committee or to meet other substantiveNYSE corporate governance requirements. While the board has established a nominating and governance committee, we rely on available exemptions concerningthe committee's composition and mandate.255Table of ContentsAudit CommitteeThe audit committee consists of Messrs. Grundfest (Chairman), Schoewe and Scully. The purpose of the audit committee is to provide assistance to the boardof directors in fulfilling its responsibility with respect to its oversight of: (i) the quality and integrity of our financial statements, including investment valuations;(ii) our compliance with legal and regulatory requirements; (iii) our independent registered public accounting firm's qualifications, independence and performance;and (iv) the performance of our internal audit function. The members of the audit committee meet the independence standards and financial literacy requirementsfor service on an audit committee of a board of directors pursuant to the Exchange Act and NYSE rules applicable to audit committees. The Managing Partner'sboard of directors has determined that each of Messrs. Grundfest, Schoewe and Scully is an "audit committee financial expert" within the meaning of Item 407(d)(5) of Regulation S-K. The audit committee has a charter which is available at the Investor Center section of our internet website at www.kkr.com.Conflicts CommitteeThe conflicts committee consists of Messrs. Drummond, Grundfest, Hess, Schoewe and Scully and Ms. Russo. The conflicts committee is responsible forreviewing specific matters that the board of directors believes may involve a conflict of interest and for enforcing our rights under any of the exchange agreement,the tax receivable agreement, the limited partnership agreement of any KKR Group Partnership or our limited partnership agreement, which we refer collectively toas the covered agreements, against KKR Holdings and certain of its subsidiaries and designees, a general partner or limited partner of KKR Holdings, or a personwho holds a partnership or equity interest in the foregoing entities. The conflicts committee is also authorized to take any action pursuant to any authority or rightsgranted to such committee under any covered agreement or with respect to any amendment, supplement, modification or waiver to any such agreement that wouldpurport to modify such authority or rights. In addition, the conflicts committee shall approve any amendment to any of the covered agreements that in thereasonable judgment of our Managing Partner's board of directors is or will result in a conflict of interest. The conflicts committee will determine if the resolutionof any conflict of interest submitted to it is fair and reasonable to our partnership. Any matters approved by the conflicts committee will be conclusively deemed tobe fair and reasonable to our partnership and not a breach of any duties that may be owed to our unitholders. In addition, the conflicts committee may review andapprove any related person transactions, other than those that are approved pursuant to our related person policy, as described under "Certain Relationships andRelated Transactions, and Director Independence—Statement of Policy Regarding Transactions with Related Persons," and may establish guidelines or rules tocover specific categories of transactions. The members of the conflicts committee meet the independence standards under our corporate governance guidelines asrequired for service on the conflicts committee in accordance with its charter.Nominating and Corporate Governance CommitteeThe nominating and corporate governance committee consists of Messrs. Kravis, Roberts and Scully. The nominating and corporate governance committee isresponsible for identifying and recommending candidates for appointment to the board of directors and for assisting and advising the board of directors withrespect to matters relating to the general operation of the board and corporate governance matters. Mr. Scully meets the independence standards under the rules ofthe NYSE as required for service on the nominating and corporate governance committee in accordance with its charter.Executive CommitteeThe executive committee consists of Messrs. Kravis and Roberts. The purpose of the executive committee is to act, when necessary, in place of our ManagingPartner's full board of directors during periods in which the board is not in session. The executive committee is authorized and empowered to act as if it were thefull board of directors in overseeing our business and affairs, except that it is not authorized or empowered to take actions that have been specifically delegated toother board committees or to take actions with respect to: (i) the declaration of distributions on our common units; (ii) a merger or consolidation of our partnershipwith or into another entity; (iii) a sale, lease or exchange of all or substantially all of our assets; (iv) a liquidation or dissolution of our partnership; (v) any actionthat must be submitted to a vote of our Managing Partner's members or our unitholders; or (vi) any action that may not be delegated to a board committee under ourManaging Partner's limited liability company agreement or the Delaware Limited Liability Company Act.256Table of ContentsCode of Business Conduct and EthicsWe have a Code of Business Conduct and Ethics which applies to our principal executive officers, principal financial officer and principal accounting officerand is available on our internet website at www.kkr.com under the "Investor Center" section. In accordance with, and to the extent required by the rules andregulations of the Securities and Exchange Commission, we intend to disclose any amendment to or waiver of the Code of Business Conduct and Ethics on behalfof an executive officer or director either on our internet website or in a Current Report on Form 8-K filing.Corporate Governance GuidelinesOur Managing Partner's board of directors has a governance policy which addresses matters such as the board of directors' responsibilities and duties, theboard of directors' composition and compensation and director independence. The governance guidelines are available on our internet website at www.kkr.comunder the "Investor Center" section.Communications to the Board of DirectorsThe non-management members of our Managing Partner's board of directors meet regularly. At each meeting of the non-management members, the non-management directors choose a director to lead the meeting. All interested parties, including any employee or unitholder, may send communications to the non-management members of our Managing Partner's board of directors by writing to: the General Counsel, KKR & Co. L.P., 9 West 57th Street, Suite 4200, NewYork, New York 10019. Section 16(a) Beneficial Ownership Reporting ComplianceSection 16(a) of the Exchange Act, requires the executive officers and directors of our general partner, and persons who beneficially own more than tenpercent of a registered class of the Partnership's equity securities to file initial reports of ownership and reports of changes in ownership with the SEC and furnishthe Partnership with copies of all Section 16(a) forms they file. To our knowledge, based solely on our review of the copies of such reports or writtenrepresentations from such persons that they were not required to file a Form 5 to report previously unreported ownership or changes in ownership, we believe that,with respect to the fiscal year ended December 31, 2016 , such persons complied with all such filing requirements.ITEM 11. EXECUTIVE COMPENSATIONCompensation Discussion and AnalysisCompensation PhilosophyOur compensation program has three primary objectives: (1) to attract, motivate and retain our employees, (2) to align their interests with those of ourunitholders and fund investors, and (3) to reinforce our culture and values.Our employees. Our business as an investment firm is dependent on the services of our employees, including our named executive officers. Among otherthings, we depend on their ability, where applicable, to find, select and execute investments, manage and improve portfolio company operations, find and developrelationships with fund investors and other sources of capital, find, select and execute capital markets opportunities, and provide other services, and we cannotcompete without their continued employment with us. Therefore, it is important that our key employees are compensated in a manner that motivates them to excelconsistently and encourages them to remain with the firm.Alignment of interests. Management equity ownership in the businesses in which we invest has been a guiding principle throughout our firm's history, and weapply that principle to ourselves: every employee of the firm is expected to have an equity interest in KKR. This equity ownership serves to align the interests ofour employees with those of our unitholders. In addition, because we invest in and alongside our investment funds and have a carry pool from which we canallocate to our employees 40% of the carried interest that we generate through our business, we believe that our employees' interests are also aligned with those ofour investors in the funds, vehicles and accounts that we manage, which in turn benefits our unitholders. Our carry pool is supplemented by allocating forcompensation 40% of the incentive fees earned from investment funds and certain management fee refunds.Culture and values. One of our most important values is our "one- firm" approach with shared responsibility and success, and we also subscribe to a cultureof meritocracy and fairness. Therefore, compensation is based on the performance of the firm as a whole as well as on an individual's contributions to the firm. Forexample, we do not compensate people based merely on an individual's accomplishments in relation to the profits and losses of his or her business unit. In addition,we conduct, at least257Table of Contentsannually, an evaluation process based on input from a wide range of persons regarding each employee's contribution to the firm, including his or her commitmentto the firm's culture and values. We believe that using this kind of an evaluation process also promotes a measure of objectivity as a balance to a single manager'sjudgment.We refer to our two Co-Chief Executive Officers, our Chief Administrative Officer, our Chief Financial Officer and our General Counsel as our "namedexecutive officers." We believe that the elements of compensation discussed below for our named executive officers serve these primary objectives. We, as alimited partnership with no annual meeting of unitholders, are not required to conduct say-on-pay or say-on-frequency votes as provided in the Dodd-Frank Act.However, we intend periodically to review the elements of our compensation, and we may make changes to the compensation structure relating to one or morenamed executive officers based on the outcome of such reviews from time to time.KKR HoldingsEach of our named executive officers holds interests in our business through KKR Holdings, which is the entity that indirectly owns all of the outstandingKKR Group Partnership Units that are not allocable to us.KKR Holdings units are, subject to certain restrictions, exchangeable for our common units, on a one-for-one basis, and generally cannot be sold to thirdparties for monetary value unless they are first exchanged for our common units. Because KKR Holdings units are exchangeable for our common units, we believethat our named executive officers' interests are aligned with those of our unitholders.KKR Holdings, from time to time, receives distributions that are made on KKR Group Partnership Units that are held by it. To the extent such distributions arereceived on KKR Group Partnership Units that underlie any KKR Holdings units that have satisfied their respective vesting requirements, if any, at the timedistributions are declared on the underlying KKR Group Partnership Units, such distributions will be allocated and further distributed to the named executiveofficers as and when received. To the extent that such distributions are made on KKR Group Partnership Units underlying any KKR Holdings units that have notsatisfied all vesting requirements at the time distributions are declared on the underlying KKR Group Partnership Units, such distributions may be allocated orotherwise applied in such amounts and in such manner as our Co-Chief Executive Officers, acting through the general partner of KKR Holdings, may determine.KKR Holdings units generally vest over a five year period starting on May 1, 2017. See "-Compensation Elements - Year-End Bonus Compensation" for adescription of these grants. As of February 22, 2017, approximately 7.5 million KKR Holdings units remain unallocated. In 2016 , our named executive officers received distributions on their vested KKR Holdings units, as well as common units, and because these distributions arenot considered to be compensation, they have not been reported in the Summary Compensation Table.Compensation ElementsBase SalaryFor 2016 , each of our named executive officers was paid an annual salary of $300,000. We believe that the base salary of our named executive officers shouldtypically not be the most significant component of total compensation. Our Co-Chief Executive Officers determined that this amount was a sufficient minimumbase salary for our named executive officers and decided that it should be the same for all named executive officers. We are responsible for funding this basesalary.Year-End Bonus CompensationOther than their salary and certain incidental benefits noted below under "Other Compensation," our Co-Chief Executive Officers did not receive anyadditional compensation in 2016 . They have decided at this time not to receive any bonus or other amounts from us or from KKR Holdings in excess ofdistributions payable with respect to their KKR Holdings units. Instead, they have decided that year-end bonus payments from KKR Holdings for 2016 should bemade to our other employees in order to motivate and retain them for the benefit of the firm.In 2016 , our Chief Administrative Officer, Chief Financial Officer and General Counsel were awarded additional year-end compensation as bonus paymentsthat were determined by our Co-Chief Executive Officers. Our Co-Chief Executive Officers made their subjective determinations by assessing our overallperformance and the contributions that our Chief Administrative Officer, Chief Financial Officer and General Counsel made to our development and success, as afirm, during the year. Certain factors that were considered when determining the size of the bonus payments for our Chief Administrative Officer, Chief FinancialOfficer and General Counsel include (i) their respective contributions and accomplishments in 2016 in terms of258Table of Contentsdriving commercial results for the firm, leading and managing people, and living the firm's values; (ii) their respective performance and contributions relative toother senior employees at the firm, (iii) their respective performance and contributions in 2016 as compared to the prior year, and (iv) the overall financialperformance of the firm in 2016 as compared to the prior year based on certain financial measures considered by management, including but not limited todistributable earnings. More specifically, in assessing Mr. Fisher's contributions, they considered his service as the firm's Chief Administrative Officer, his role inoverseeing the growth and operations of the firm, his leadership in the development and continued growth of our real estate business and his leadership on thestrategic direction of the firm generally. In assessing Mr. Janetschek's contributions, they considered his service as the Chief Financial Officer and his leadershipand oversight of our finance, tax and accounting functions and related operations and his role with respect to strategic initiatives undertaken by the firm. Finally, inassessing Mr. Sorkin's contributions, they considered his leadership and oversight of our global legal and compliance functions and his role with respect to thestrategic initiatives undertaken by the firm. Although the firm's performance in 2016 was mixed, with stronger total distributable earnings but with less feerevenues and a net total investment loss in 2016 compared to the prior year, due to individual contributions as described above, the aggregate size of the bonusgranted to the named executive officers, consisting of their cash bonus and deferred equity bonus, with respect to fiscal 2016 was generally higher relative to thetotal bonus granted with respect to fiscal 2015. In making these determinations, our Co-Chief Executive Officers consulted with certain of our senior employeesand, with respect to the determinations for our Chief Financial Officer and General Counsel, considered the recommendations of our Chief Administrative Officer.We believe that the discretion permitted to our Co-Chief Executive Officers permits them to award bonus compensation in an amount they determine to benecessary to motivate and retain these named executive officers. Because the restricted equity units associated with the deferred equity bonus were made afterDecember 31, 2016, they do not appear in the tables below, but will appear in the tables for the year ended December 31, 2017.Once the bonus amount is determined, the bonus amount is divided into cash compensation and, for our named executive officers, a recommendation to ourManaging Partner's board of directors for an award of deferred equity bonus compensation and, in some years, additional equity compensation. The amount ofdeferred equity bonus compensation for our principals is calculated using a graduated range of percentages applied to different incremental amounts of total salaryand bonus compensation ranging from 5% to 50%. In addition, senior employees including our named executive officers are eligible, in some years, for additionalequity compensation without reference to the graduated range of percentages. Grants of additional equity compensation may be made to our named executiveofficers in order to deliver a total bonus compensation determined by our Co-Chief Executive Officers as described above, less the cash compensation and deferredequity bonus. No grants of additional equity compensation were made to our named executive officers in connection with 2016 year-end bonus compensation.However, see "--KKR Holdings Units" below for KKR Holdings units granted to our named executive officers in 2016.The cash bonus amounts paid to our Chief Administrative Officer, our Chief Financial Officer and our General Counsel for 2016 are reflected in the Bonuscolumn of the 2016 Summary Compensation Table below.The portion of the bonus payment granted to our named executive officers (other than our Co-Chief Executive Officers, who received none) as 2016 deferredequity bonus compensation consists of grants of equity awards issued under the Equity Incentive Plan. These equity awards are restricted equity units that may besettled for our common units on a one-for-one basis. See below under "Terms of Restricted Equity Units" for more information. We call these equity grants"deferred" equity bonus compensation, because our named executive officers' ability to monetize them into cash is deferred to the future when the vestingprovisions (and any applicable transfer restrictions) discussed below lapse.The number of restricted equity units granted to our named executive officers (other than our Co-Chief Executive Officers, who received none) is determinedby our Managing Partner's board of directors. As part of 2016 year-end bonus compensation, our Managing Partner's board of directors approved the followinggrants: 117,173 restricted equity units to our Chief Administrative Officer, 67,463 restricted equity units to our Chief Financial Officer, and 67,463 restrictedequity units to our General Counsel, in each case as deferred equity bonus compensation. The number of restricted equity units was determined by dividing thedollar amount of deferred equity bonus compensation recommended by the Co-Chief Executive Officers to the board of directors by the average closing price ofour common units over the ten trading days ending December 2, 2016. The restricted equity units that were granted as deferred equity bonus compensation inrespect of fiscal 2016 year-end compensation are subject to a three-year service-based vesting condition (with the first vesting event occurring on April 1, 2018).The restricted equity units for the deferred equity bonus are not subject to additional transfer restrictions after vesting or any minimum retained ownershiprequirement. Because these grants were made after December 31, 2016 and the associated restricted equity units are generally issued in the first quarter of thefollowing year, they do not appear in the tables below, but will appear in the tables for the year ended December 31, 2017.259Table of ContentsOur named executive officers along with other employees at the firm were eligible for additional equity compensation awards based on their performance andcontributions during the year as described above. Eligibility for this additional equity compensation was introduced for 2014 year-end compensation for our namedexecutive officers and grants made in February 2015 for 2014 year-end compensation are reflected in the Summary Compensation Table. While no additionalequity compensation was granted to our named executive officers in connection with either 2016 or 2015 year-end bonus compensation, these additional equitycompensation awards may become a component of our annual year-end bonus determination for our named executive officers in the future. However, see "--KKRHoldings Units" below for KKR Holdings units granted to our named executive officers in 2016.KKR Holdings UnitsOn February 25, 2016, our named executive officers (other than our Co-Chief Executive Officers, who received none) received grants of KKR Holdings units.These grants were not part of the annual compensation program, but rather the objective of these grants was to provide incremental long-term economic incentivesto retain certain senior employees, including three of our named executive officers, and to further align their interests with those of unitholders. All of the KKRHoldings units received by these named executive officers at the time of the KPE Transaction and through the awards granted in 2015 have vested, and any transferrestrictions on them had lapsed by 2016. The size of the grants were determined at the discretion of the general partner of KKR Holdings L.P., subject to theapproval of our board of directors, in light of the remaining KKR Holdings units available to be granted to them and other senior employees of the firm and takinginto consideration the roles and responsibilities of each named executive officer, including their view of each officer's potential impact on future firm performance,growth and strategic initiatives. Following the receipt of the consent of our Managing Partner's board of directors, the general partner of KKR Holdings made thefollowing grants: 900,000 KKR Holdings units to our Chief Administrative Officer, 550,000 KKR Holdings units to our Chief Financial Officer, and 550,000 KKRHoldings units to our General Counsel. The KKR Holdings units granted to our named executive officers were already outstanding but previously unallocatedunits, and consequently these grants did not increase the number of KKR Holdings units outstanding or the number of our common units outstanding on a fully-diluted basis.When granted in February 2016, these KKR Holdings units were subject to a service-based vesting condition and also a market price vesting condition underwhich vesting was conditioned on the price of KKR common units reaching and maintaining certain specified price thresholds for a specified period of time. OnNovember 2, 2016 the awards were modified by the general partner of KKR Holdings to eliminate the market condition in order to enhance the value of theseawards and improve their effectiveness as an employee retention tool. Giving effect to the November amendment, KKR Holdings units granted to these namedexecutive officers are subject to a five-year service-based vesting condition whereby the awards vest in equal annual installments beginning on May 1, 2017 andending May 1, 2021, subject to the grantee's continued employment through the applicable service vesting dates. These KKR Holdings awards are also subject toadditional transfer restrictions after vesting and a minimum retained ownership requirement. See below under "—Narrative Disclosure to Summary CompensationTable and Grants of Plan‑ Based Awards—Terms of KKR Holdings Units" for more information.Carried InterestWe have available to allocate and distribute to a carry pool 40% of the carried interest that we earn, from which our employees are eligible to receive a carriedinterest allocation. The percentage of carried interest allocable to the carry pool may be amended with the approval of a majority of our independent directors.Carry pool allocations for the named executive officers are made by first determining a total dollar value for the named executive officer's interest in the carry pool.Due to their unique status as co-founders of our firm, our Co-Chief Executive Officers determine their own allocation from the carry pool. To make this total dollarvalue determination for the other named executive officers, our Co-Chief Executive Officers take into consideration the executive officer's involvement withinvestments and impact on the portfolio, the size of the executive officer's bonus, and other factors similar to those considered when determining the size of thebonus, as described under "—Year-End Bonus Compensation". However, the total dollar value available to be allocated to the named executive officers and otheremployees is limited by the total amount of investments made by our investment funds during the fiscal year, and executive officers and other employees may notbe allocated any dollar value of carry in any given year. For our older funds, carry pool allocations were determined based on a percentage applied on aninvestment-by-investment basis. After a total dollar value, if any, for each named executive officer is determined, such dollar value was then divided by the totalallocable dollar value of investments made by our funds for the year, which yielded a certain percentage for the named executive officer. This percentage was thenapplied consistently to each investment made during the year. Because the size of each investment was different, the nominal amount of the carry pool allocationdiffered by investment, although the percentage applied to each investment was consistent. For our more recent funds, carry pool allocations are determined basedon a percentage applied on a fund-by-fund basis. The dollar value, if any, for each named executive officer is determined and then allocated to the applicable funds,and such dollar value is then divided by the total allocable dollar value of investments made by that fund for260Table of Contentsthe year to yield a percentage for that particular fund. If carry is paid prior to end of a fund's investment period, this percentage is applied at that time. At the end ofthe investment period, an adjustment would be made to account for any difference in percentages applied at the times carry was paid during the investment periodand the percentage determined for a particular fund based on the total dollar values allocated to the named executive officer for such fund divided by the totalallocable dollars invested during the entire investment period of such fund.A portion of the carried interest that is available for allocation to our employees is not immediately allocated when it becomes available and is insteadreserved. This reserved carried interest is later allocated to a discrete number of employees when it is determined that they deserve additional carried interestallocations based on their performance or pursuant to a matching program based on personal commitments made to a transaction or a fund. The carried interestallocated to the carry pool is maintained and administered by KKR Associates Holdings L.P., which, similar to KKR Holdings, is not a subsidiary of ours.Allocations are determined by our Co-Chief Executive Officers acting through the general partner of KKR Associates Holdings L.P.Carried interest, if any, from the carry pool in respect of any particular investment or fund is only paid in cash after all of the following are met: (i) arealization event has occurred (e.g., sale of a portfolio company, dividend, etc.); (ii) the vehicle has achieved positive overall investment returns since its inception,in excess of performance hurdles where applicable; and (iii) with respect to investments with a fair value below cost, cost has been returned to fund investors in anamount sufficient to reduce remaining cost to the investments' fair value. To the extent any "clawback" obligation is triggered, carried interest previouslydistributed by the fund would have to be returned to such fund, thereby reducing the named executive officer's overall compensation for any such year. A portion ofcertain carried interest payable is generally not distributed to the recipient and is instead held in escrow in order to enhance the recipient's ability to satisfy anyfuture clawback obligation. Because the amount of carried interest payable is directly tied to the realized performance of the underlying investments, we believethis fosters a strong alignment of interests among the investors in those funds and the named executive officers, and thus benefits our unitholders. In addition,several of our competitors use participation in carried interest as an important compensation element, and we believe that we must do the same in order to attractand retain the most qualified personnel.Participation in our carry pool for our employees, including our named executive officers, is subject only to service-based vesting with certain exceptions,including acceleration upon death or disability. In general, the vesting for carry pool allocations for investments made during 2013 through 2016 is annual over afour-year period (other than for our Co-Chief Executive Officers). The vesting schedules for investments made prior to 2013 range from four-year vesting (with novesting upon grant) for the most junior employees up to two-year vesting (and 50% vesting upon grant) for most senior employees. Vesting serves as anemployment retention mechanism and enhances the alignment of interests between a participant in our carry pool and the firm as well as the limited partners in ourinvestment funds. Due to their status as co-founders of our firm, our Co-Chief Executive Officers are typically completely vested in their carried interestallocations upon grant.Other CompensationOur Co-Chief Executive Officers are reimbursed by us for the use of a car and driver, and we pay for the compensation of certain personnel who administerpersonal matters for them. We believe that these benefits are appropriate in light of the time that they spend on our business, the limited compensation paid by usfor their services, and their unique status as co-founders of our firm. In addition, we also pay for certain tax preparation fees for our named executive officers.Minimum Retained OwnershipWhile employed by us, unless waived in whole or in part, each of our named executive officers is required to hold at least 25% of the cumulative amount ofKKR Holdings units that have satisfied the vesting conditions during the duration of his employment with the firm. In addition, unless waived in whole or in part,each of our named executive officers may be required, on a grant by grant basis, to hold common unit equivalents of 15% of the cumulative restricted equity unitsgranted under the Equity Incentive Plan that have satisfied the service-based vesting condition during the duration of his employment with the firm.Compensation and RiskOur compensation program includes elements that we believe discourage excessive risk-taking and align the compensation of our employees with the long-term performance of the firm. For example, other than certain equity that either immediately vested as part of the grants to all employees or our founders or thatwere made in exchange for the contribution of assets, in each case in connection with the consummation of the KPE Transaction in October 2009, a significantmajority of the equity awards granted to our employees are subject to a multi-year vesting conditions, one- and two-year post-vesting transfer261Table of Contentsrestriction periods, and/or a minimum retained ownership requirement. Because our equity awards have multi-year vesting provisions, the actual amount ofcompensation realized by the recipient will be tied to the long- term performance of our common units. Pursuant to our internal policies, our employees are notpermitted to buy or sell derivative securities, including for hedging purposes, or to engage in short-selling to hedge their economic risk of ownership. In addition,we only make cash payments of carried interest to our employees when profitable investments have been realized and after sufficient cash has been distributed tothe investors in our funds. Moreover, the general partner of a fund is required to return carried interest distributions to the fund due to, for example,underperformance by the relevant fund subsequent to the payment of such carried interest. Accordingly, the employees would be subject to a "clawback," i.e., berequired to return carried interest payments previously made to a principal, all of which further discourages excessive risk-taking by our personnel.Summary Compensation TableThe following table presents summary information concerning compensation that was paid for services rendered by our named executive officers during thefiscal years ended December 31, 2014, 2015 and 2016.In 2014, 2015 and 2016, our named executive officers received distributions based on their vested KKR Holdings units or common units. Because thesedistributions are not considered to be compensation, these distributions are not reflected as compensation in the table below. There are certain contractualarrangements we entered into with KKR Holdings at the time of the KPE Transaction in October 2009 and thereafter, including a tax receivable agreement, thatrelate to payments to our named executive officers that are not compensatory and are described in "Certain Relationships and Related Transactions, and DirectorIndependence." Because restricted equity units granted to our named executive officers as part of 2016 year-end bonus compensation were made after December31, 2016, they do not appear in the tables below, and will appear in the tables for the year ended December 31, 2017.Carried interest distributions to our named executive officers in respect of the carry pool for the years ended December 31, 2014, 2015 and 2016 are reflectedin the All Other Compensation column in the 2016 Summary Compensation Table below.262Table of Contents2016 Summary Compensation TableName and Principal Position Year Salary($) Bonus($) (1) Stock Awards ($) (2) All OtherCompensation ($) (3) Total($)Henry R. Kravis 2016 300,000 — — 63,541,599(4) 63,841,599Co-Chief Executive Officer 2015 300,000 — — 51,994,055 52,294,055 2014 300,000 — — 64,151,272 64,451,272 George R. Roberts 2016 300,000 — — 63,637,400(5) 63,937,400Co-Chief Executive Officer 2015 300,000 — — 52,064,278 52,364,278 2014 300,000 — — 64,075,416 64,375,416 Todd A. Fisher 2016 300,000 3,585,000 12,880,497 15,660,918(6) 32,426,415Chief Administrative Officer 2015 300,000 3,485,000 3,600,328 10,622,133 18,007,461 2014 300,000 2,260,000 1,589,225 12,381,439 16,530,664 William J. Janetschek 2016 300,000 2,455,000 7,813,846 5,196,063(6) 15,764,909Chief Financial Officer 2015 300,000 2,325,000 3,676,867 2,705,105 9,006,972 2014 300,000 2,455,000 674,433 3,080,524 6,509,957 David J. Sorkin 2016 300,000 2,455,000 7,841,425 1,695,934(6) 12,292,359General Counsel 2015 300,000 2,390,000 3,676,867 1,396,629 7,763,496 2014 300,000 2,455,000 649,323 1,730,754 5,135,077 (1)Represents distributions received by KKR Holdings with respect to unvested KKR Holdings units that have been distributed to the named executive officer as bonus. Thediscretionary bonus payments in 2014, 2015 and 2016 were made by KKR Holdings and accordingly were not economically borne by us. (2)Stock awards reflected in the table above for each year presented represent the value of the restricted equity units and KKR Holdings units granted in such reporting period.For the fiscal years ended December 31, 2016, 2015 and 2014, restricted equity units presented in such reporting periods relate to the equity portion of the prior year bonuscompensation and for the fiscal year ended December 31, 2014, also includes additional equity compensation, and in each case reflect the grant date fair value of restrictedequity units. For the fiscal year ended December 31, 2016, amounts relating to KKR Holdings units represent the original grant date fair value of KKR Holdings units andthe incremental fair value of such KKR Holdings units, as of the modification in November 2016. Fair value of the restricted equity units and KKR Holdings units grantedto our named executive officers and the incremental fair value relating to the modification of the KKR Holdings units are calculated in accordance with AccountingStandards Codification Topic 718, Compensation-Stock Compensation ("ASC 718"). See Note 12 "Equity Based Compensation" of the financial statements includedelsewhere in this report for additional information about the valuation assumptions with respect to all grants reflected in this column. These amounts reflect the aggregategrant date fair values calculated under ASC Topic 718 (or incremental fair values), and may not correspond to the actual value that will be recognized by our namedexecutive officers. See "--Grant of Plan-Based Awards in 2016" for additional information regarding the restricted equity units and KKR Holdings units, including themodification of such units. (3)Carried interest is presented on the basis of cash received by our named executive officers in the respective fiscal year. We believe that presenting actual cash received byour named executive officers is a more representative disclosure of their compensation than presenting accrued carried interest, because carried interest is paid only if andwhen there are profitable realization events relating to the underlying investments. Carried interest also includes amounts retained and allocated for distribution to therespective named executive officer, but not yet distributed to the named executive officer, which could be used to fund potential future clawback obligations if any were toarise. (4)Consists of $ 62,966,582 in cash payments of carried interest from the carry pool during 2016; $40,000 in fees for Mr. Kravis's service as a KKR-designated director onthe board of directors of First Data Corporation, a KKR portfolio company, during 2016; $174,800 rela ted to Mr. Kravis's use of a car and driver during 20 16; $340,217related to certain personnel who administer personal matters for Mr. Kravis during 2016; and $20,000 rela ted to tax preparation fees. SEC rules require that transportationand personnel expenses not directly and integrally related to our business be disclosed as compensation to Mr. Kravis. Because we do not separately track personnelexpenses based on whether they are incurred for business or for personal reasons, 100% of the preceding costs have been reported for Mr. Kravis. (5)Consists of $62,966,582 in cash payments of ca rried interest from the car ry pool during 2016; $230,023 re lated to Mr. Roberts's use of a car and driver during 201 6;$420,795 related to certain personnel who administer personal matters for Mr. Roberts during 2016; and $20,000 rela ted to tax preparation fees. SEC rules require thattransportation and personnel expenses not directly and integrally related to our business be disclosed as compensation to Mr. Roberts. Because we do not separately trackpersonnel expenses based on whether they are incurred for business or personal reasons, 100% of the preceding costs have been reported for Mr. Roberts. (6)Consists of cash payments of carried interest from the carry pool during 2016 and $20,000 related to tax preparation fees.263Table of ContentsGrants of Plan-Based Awards in 2016The following table provides supplemental information relating to grants of equity awards in the year ended December 31, 2016 provided in our SummaryCompensation Table.Name Grant Date All Other StockAwards: Number ofShares of Stock orUnits (#) Grant Date FairValue of Stock andOption Awards ($)(3) Henry R. Kravis — — — George R. Roberts — — — Todd A. Fisher 02/23/16 101,540(1)1,351,497 02/25/16 900,000(2)2,583,000 11/02/16 — 8,946,000(4)William J. Janetschek 02/23/16 57,727(1)768,346 02/25/16 550,000(2)1,578,500 11/02/16 — 5,467,000(4)David J. Sorkin 02/23/16 59,799(1)795,925 02/25/16 550,000(2)1,578,500 11/02/16 — 5,467,000(4) (1)The amounts represent restricted equity units granted under the Equity Incentive Plan in the year ended December 31, 2016 relating to the equity portion of the prior yearbonus compensation. Each grant of restricted equity units is subject to a service-based vesting condition over a period of three years (with the first vesting event occurringon April 1, 2017). The vesting terms of these grants are described under the caption "Narrative Disclosure to Summary Compensation Table and Grants of Plan-BasedAwards—Terms of Restricted Equity Units" below. (2)The amounts represent KKR Holdings units granted in the year ended December 31, 2016. Each grant of KKR Holdings units is subject to a service-based vestingcondition over a period of five years (with the first vesting event occurring on May 1, 2017). The vesting terms of these grants are described under the caption "NarrativeDisclosure to Summary Compensation Table and Grants of Plan-Based Awards—Terms of KKR Holdings Units" below. (3)Amounts represent the (i) grant date fair value of the restricted equity units or KKR Holdings units, as applicable, or (ii) the incremental fair value of modified KKRHoldings units, as of the modification date, as calculated in accordance with ASC Topic 718. See Note 12 "Equity Based Compensation" of the financial statementsincluded elsewhere in this report for additional information about the valuation assumptions with respect to all grants reflected in this column. These amounts reflect theaggregate grant date fair values or incremental fair values calculated under ASC Topic 718 and may not correspond to the actual value that will be recognized by ournamed executive officers. (4)On November 2, 2016, the KKR Holdings units granted on February 25, 2016 were modified. See "--Compensation Elements--KKR Holdings Units." The amounts reflectthe incremental fair value of the KKR Holdings units resulting from the modification, as described further in footnote (3) above. Narrative Disclosure to Summary Compensation Table and Grants of Plan‑‑ Based AwardsTerms of KKR Holdings UnitsThe KKR Holdings units granted to our named executive officers (other than our Co‑Chief Executive Officers, who received none) and other principals in thefiscal year ended December 31, 2016 are subject to five year service‑based vesting requirements, transfer restrictions and minimum retained ownershiprequirements.The KKR Holdings units vest in equal annual installments beginning on May 1, 2017 and ending May 1, 2021, subject to the grantee's continued employmentthrough the applicable service vesting dates. Following this initial vesting, interests remained contingently vested while they are subject to certain transferrestrictions. Unvested KKR Holdings units are not entitled to receive distributions. As of February 22, 2017, 317,952,447 outstanding KKR Holdings units havevested, constituting 90% of the KKR Holdings units outstanding. All of the KKR Holdings units granted to our named executive officers in 2009 and 2011 havevested as of the date of this filing and transfer restrictions applicable to such units lapsed by 2016.KKR Holdings units that are subject to transfer restrictions, unless waived, may not be sold, exchanged or otherwise transferred for a specified period of timefollowing the initial vesting date. The transfer restriction period typically lasts for (1) one year with respect to one‑half of the units vesting on the vesting date and(2) two years with respect to the other264Table of Contentsone‑half of the units vesting on such vesting date. Transfer restricted units become fully vested and transferable and may be exchanged into common units at theend of the transfer restriction period if the holder is not terminated for cause and has complied with the terms of his or her confidentiality and restrictive covenantagreement during the transfer restrictions period. See “Terms of Confidentiality and Restrictive Covenant Agreements” below.Because KKR Holdings is a partnership, all of the 353,757,398 KKR Holdings units have been legally allocated, but the allocation of 7,480,325 of these unitshas not been communicated to each respective principal as of December 31, 2016. The units whose allocation has not been communicated are subject toperformance‑ based vesting conditions, which include, (i) whether the principal is in good standing and has adhered to our policies and rules, (ii) performance ofassigned tasks and duties in an effective, efficient and diligent manner, (iii) contribution and commitment to the growth, development and profitability of KKR andour business, (iv) contribution and commitment to our management and general administration; (v) contribution and commitment to the culture, businessprinciples, reputation and morale of KKR as a whole and the team or teams to which the principal has been assigned, and (vi) contribution and commitment to ourrecruiting, business development, public image and marketing efforts and the professional development of our personnel. These criteria are not sufficiently specificto constitute performance conditions for accounting purposes, and the achievement, or lack thereof, will be determined based upon the exercise of judgment by thegeneral partner of KKR Holdings. Each principal will ultimately receive between zero and 100% of the units initially allocated. The allocation of these units hasnot yet been communicated to the award recipients as this was management’s decision on how to best incentivize its principals. It is anticipated that additionalservice‑based vesting conditions will be imposed at the time the allocation is initially communicated to the respective principals. We applied the guidance of ASCTopic 718 and concluded that these KKR Holdings units do not yet meet the criteria for recognition of compensation cost because neither the grant date nor theservice inception date has occurred. In reaching a conclusion that the service inception date has not occurred, we considered (1) the fact that the vesting conditionsare not sufficiently specific to constitute performance conditions for accounting purposes, (2) the significant judgment that can be exercised by the general partnerof KKR Holdings in determining whether the vesting conditions are ultimately achieved, and (3) the absence of communication to the principals of any informationrelated to the number of units they were initially allocated. The allocation of these units will be communicated to the award recipients when the performance‑basedvesting conditions have been met, and currently there is no plan as to when the communication will occur. The determination as to whether the award recipientshave satisfied the performance‑based vesting conditions is made by the general partner of KKR Holdings, and is based on multiple factors primarily related to theaward recipients’ individual performance.While employed by our firm, our principals, including our named executive officers, are also subject to minimum retained ownership rules that require them tocontinuously hold at least 25% of their cumulatively vested KKR Holdings units, unless waived.The transfer and vesting restrictions and minimum retained ownership rules applicable to KKR Holdings units may not be enforceable in all cases and can bewaived, modified or amended by KKR Holdings at any time without our consent.The terms of the KKR Holdings units described above are distinct from equity awards issuable under our Equity Incentive Plan, which are described below.Terms of Restricted Equity UnitsRestricted equity units are equity awards issuable under our Equity Incentive Plan, which after vesting, may be settled for our common units on an one‑for‑onebasis (or an amount of cash equal to the fair market value of such common units).In general, restricted equity units are subject to a service‑based vesting condition and vest in equal annual installments over a multi‑year period (generallythree to five years) from a specified date, subject to the recipient’s continued employment with us. Following this service‑based vesting, certain restricted equityunit grant agreements may also subject the common units delivered upon settlement of such restricted equity units to transfer restrictions and/or minimum retainedownership requirements. Unvested restricted equity units granted under our Equity Incentive Plan are not entitled to receive distributions.Common units delivered upon settlement of restricted equity units that are subject to transfer restrictions, unless waived, typically may not be sold, exchangedor otherwise transferred for a specified period of time following the vesting date. The transfer restriction period typically lasts for (1) one year with respect toone‑half of the units vesting on the service‑based vesting date and (2) two years with respect to the other one‑half of the units vesting on such service‑basedvesting date. Transfer restricted common units become saleable at the end of the transfer restriction period if the holder has not been terminated for cause and hasnot breached in any significant or intentional manner, as determined by the Administrator, the terms of his or her confidentiality and restrictive covenants containedin the grant agreement during the transfer restriction period. See “Terms of Confidentiality and Restrictive Covenant Agreements” below.265Table of ContentsWhile employed by our firm, our employees, including our named executive officers, may also be subject to a minimum retained ownership requirement underthe restricted equity unit grant agreement, which would obligate them to continuously hold common unit equivalents of 15% of their cumulatively vested restrictedequity units, unless waived. From time to time, the transfer restrictions and minimum retained ownership requirements applicable to restricted equity units ofcertain employees, including our named executive officers, may be transferred to such employees’ KKR Holdings units, if any, so that the total units of equitysubject to transfer restrictions and minimum retained ownership requirements are expected to be the same, unless waived.For additional information about equity awards granted under our Equity Incentive Plan, please also see “KKR & Co. L.P. Equity Incentive Plan” below.Terms of Confidentiality and Restrictive Covenant AgreementsThe confidentiality and restrictive covenant agreements with each of our named executive officers include prohibitions on them competing with us orsoliciting our clients or employees while employed by us and during a restricted period following their departure from the firm. These agreements also requirepersonnel to protect and use the firm’s confidential information only in accordance with confidentiality restrictions set forth in the agreement.The restricted periods for our Co‑Chief Executive Officers expire on (1) for voluntary terminations or terminations with cause, two years from termination and(2) for terminations without cause, one year from termination. These restricted periods are subject to reduction for any “garden leave” or “notice period” that anemployee serves prior to termination of employment. The restricted periods for our other named executive officers expire (1) in the case of the prohibitions oncompetition with us, 12 months from termination and (2) in the case of the prohibitions on the solicitation of our clients and employees, 18 months fromtermination. In cases where the named executive officer is terminated involuntarily and for reasons not constituting cause, such periods are reduced to 6 monthsand 9 months, respectively. In addition, under certain conditions the restricted periods applicable to the solicitation of our clients and employees are subject toreduction for any “garden leave” or “notice period” that an employee serves prior to termination of employment. Except for our Co-Chief Executive Officers, theseagreements also require that we, and our named executive officers, provide advance notice prior to termination of employment.Our named executive officers other than our Co‑Chief Executive Officers have entered into these confidentiality and restrictive covenant agreements with usthrough their restricted equity unit grant agreements and separately also with KKR Holdings, which is entitled to waive, modify or amend them at any time withoutour consent. However, because our Co‑Chief Executive Officers have not received any restricted equity units, their confidentiality and restrictive covenantagreements are solely with KKR Holdings. Because KKR Holdings is the party to these agreements and not us, we may not be able to enforce them, and theseagreements might be waived, modified or amended at any time without our consent.Outstanding Equity Awards at 2016 Fiscal Year‑‑EndThe following table sets forth information concerning unvested restricted equity units and KKR Holdings units for each of the named executive officers as ofDecember 31, 2016 . Stock AwardsName Number of Sharesor Units of Stockthat Have NotVested (#) Market Value of Sharesor Units of Stockthat Have NotVested ($) (1)Henry R. Kravis— —George R. Roberts— —Todd A. Fisher1,176,092 (2) $18,100,056William J. Janetschek767,832 (3) $11,816,934David J. Sorkin769,423 (4) $11,841,420 (1)These amounts are based on the closing market price of our common units on the last trading day of the year ended December 31, 2016 , of $15.39 per commonunit.(2)Includes (i) 30,422 restricted equity units granted on February 5, 2014, which will vest on April 1, 2017; (ii) 144,130 restricted equity units granted on February 23,2015, which will vest in equal installments on April 1, 2017 and April 1, 2018; (iii) 101,540 restricted equity units granted on February 23, 2016, which will vest inequal installments on April 1, 2017, April 1,266Table of Contents2018 and April 1, 2019; and (iv) 900,000 KKR Holdings units granted on February 25, 2016, which will vest in equal installments on May 1, 2017, May 1, 2018,May 1, 2019, May 1, 2020 and May 1, 2021.(3)Includes (i) 12,911 restricted equity units granted on February 5, 2014, which will vest on April 1, 2017; (ii) 147,194 restricted equity units granted on February 23,2015, which will vest in equal installments on April 1, 2017 and April 1, 2018; (iii) 57,727 restricted equity units granted on February 23, 2016, which will vest inequal installments on April 1, 2017, April 1, 2018 and April 1, 2019; and (iv) 550,000 KKR Holdings units granted on February 25, 2016, which will vest in equalinstallments on May 1, 2017, May 1, 2018, May 1, 2019, May 1, 2020 and May 1, 2021.(4)Includes (i) 12,430 restricted equity units granted on February 5, 2014, which will vest on April 1, 2017, (ii) 147,194 restricted equity units granted on February 23,2015, which will vest in equal installments on April 1, 2017 and April 1, 2018; (iii) 59,799 restricted equity units granted on February 23, 2016, which will vest inequal installments on April 1, 2017, April 1, 2018 and April 1, 2019; and (iv) 550,000 KKR Holdings units granted on February 25, 2016, which will vest in equalinstallments on May 1, 2017, May 1, 2018, May 1, 2019, May 1, 2020 and May 1, 2021.Option Exercises and Stock Vested in 2016The following table sets forth information concerning the vesting of restricted equity units held by each of our named executive officers during the year endedDecember 31, 2016 . Stock AwardsName Number ofShares Acquired onVesting (#) (1)Value Realized onVesting ($) (2)Henry R. Kravis——George R. Roberts——Todd A. Fisher151,445$2,173,236William J. Janetschek103,127$1,479,872David J. Sorkin102,647$1,472,984 (1)The amounts reflected in this column represent vested common units, a portion of which are subject to one‑ and two‑year transfer restrictions upon vesting. See "--Narrative Disclosure to Summary Compensation Table and Grants of Plan‑ Based Awards -- Terms of Restricted Equity Units" for additional terms including withrespect to the transfer of certain restrictions from the restricted equity units to employees’ KKR Holdings units.(2)These amounts are based on the closing market price of our common units on each respective vesting date.Pension Benefits for 2016We provided no pension benefits during the year ended December 31, 2016 .Nonqualified Deferred Compensation for 2016We provided no defined contribution plan for the deferral of compensation on a basis that is not tax‑qualified during the year ended December 31, 2016 .Potential Payments Upon Termination or Change in ControlUpon termination of employment, vesting generally ceases for KKR Holdings units and restricted equity units that have not vested. In addition, transferrestricted vested KKR Holdings units and, if applicable, transfer restricted equity units (which term includes the transfer restricted common units that may bedelivered upon settlement of such restricted equity units) remain subject to transfer restrictions for one‑ and two‑year periods, except as described below. See"Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" for additional information regarding KKR Holdings unitsand transfer restricted equity units of our named executive officers.An employee who retires after the first date on which his or her age plus years of service to KKR equals 80 will continue to vest in his or her unvested KKRHoldings units and restricted equity units for an additional two years following retirement,267Table of Contentssubject to compliance, if applicable, with the requirement that the holder not violate the terms and conditions of his or her confidentiality and restrictive covenantsduring the period in which such KKR Holdings unit or restricted equity unit, if applicable, remains transfer restricted over one‑ and two‑year periods. None of ournamed executive officers retired in the year ended December 31, 2016.Upon death or permanent disability, a holder of KKR Holdings units or restricted equity units becomes immediately vested in all unvested KKR Holdingsunits and restricted equity units, respectively. The values of unvested KKR Holdings units and restricted equity units held by the named executive officers as ofDecember 31, 2016 are set forth above in the Outstanding Equity Awards at 2016 Fiscal Year‑End Table.In addition, upon a change in control of KKR, a holder of KKR Holdings units and restricted equity units becomes immediately vested in all unvested KKRHoldings units and restricted equity units, respectively. As noted above, the values of unvested KKR Holdings units and restricted equity units held by the namedexecutive officers as of December 31, 2016 are set forth above in the Outstanding Equity Awards at 2016 Fiscal Year‑End Table.Upon termination of employment, vesting generally ceases for carried interest allocations. In addition, carried interest allocations become immediately vestedupon death or permanent disability.Director CompensationWe limit compensation for service on our Managing Partner’s board of directors to the independent directors. Each independent director receives (1) an annualcash retainer of $75,000, (2) an additional annual cash retainer of $15,000 if such independent director is a member of the nominating and corporate governancecommittee, (3) an additional annual cash retainer of $25,000 if such independent director is a member of the audit committee and (4) an additional annual cashretainer of $25,000 if such independent director serves as the chairman of the audit committee, which reflects an increase of $10,000 effective September 2016.Cash retainers are pro-rated if, during the calendar year, a director joins the board of directors of our Managing Partner, a director joins or resigns from a committeeor the amount of a retainer is increased. In addition, on October 26, 2016, 10,088 restricted equity units were granted to each independent director pursuant to ourEquity Incentive Plan.Name FeesEarned orPaid in Cash($)StockAwards($) (1)Total($)David C. Drummond75,000150,000225,000Joseph A. Grundfest118,130150,000268,130John B. Hess75,000150,000225,000Patricia F. Russo75,000150,000225,000Thomas M. Schoewe100,000150,000250,000Robert W. Scully115,000150,000265,000 (1)Represents the aggregate grant date fair value of restricted equity units granted to each of the independent directors during the year ended December 31, 2016 ascalculated in accordance with ASC Topic 718. See Note 12 "Equity Based Compensation" of the financial statements included elsewhere in this report foradditional information about the valuation assumptions with respect to all grants reflected in this column. These amounts reflect the aggregate grant date fair valuescalculated under ASC Topic 718 and may not correspond to the actual value that will be recognized by the independent directors. 268Table of ContentsThe following table details grants of restricted equity units to each of our independent directors of our Managing Partner in the year ended December 31, 2016 .The table includes the grant date and grant date fair value of 2016 restricted equity units and the aggregate number of unvested restricted equity units as ofDecember 31, 2016 owned by each independent director who served as a director during the year ended December 31, 2016 :Name GrantDate (1)StockAwards(#)Grant DateFair Value($) (2)Total Number ofUnvested RestrictedEquity Awards onDecember 31, 2016(#)David C. Drummond10/26/201610,088150,00010,088Joseph A. Grundfest10/26/201610,088150,00010,088John B. Hess10/26/201610,088150,00010,088Patricia F. Russo10/26/201610,088150,00010,088Thomas M. Schoewe10/26/201610,088150,00010,088Robert W. Scully10/26/201610,088150,00010,088 (1)The restricted equity awards were granted on October 26, 2016 and vest on October 1, 2017, subject to the grantee's continued service through the vesting date.(2)This column represents the grant date fair value of restricted equity units granted to each of the independent directors during the year ended December 31, 2016 ascalculated in accordance with ASC Topic 718. These amounts reflect the aggregate grant date fair values calculated under ASC Topic 718 and may not correspondto the actual value that will be recognized by the independent directors.KKR & Co. L.P. Equity Incentive PlanOur Managing Partner has adopted the KKR & Co. L.P. 2010 Equity Incentive Plan, which is referred to as the Equity Incentive Plan.AdministrationThe board of directors of our Managing Partner administers the Equity Incentive Plan. However, the board of directors of our Managing Partner may delegatesuch authority, including to a committee or subcommittee of the board of directors. Under the terms of the Equity Incentive Plan, the board of directors of ourManaging Partner, or the committee or subcommittee thereof to whom authority to administer the Equity Incentive Plan has been delegated, as the case may be, isreferred to as the Administrator. The Administrator determines who will receive awards under the Equity Incentive Plan, as well as the form of the awards, thenumber of units underlying the awards and the terms and conditions of the awards, consistent with the terms of the Equity Incentive Plan. The Administrator hasfull authority to interpret and administer the Equity Incentive Plan and its determinations will be final and binding on all parties concerned. The Administrator maydelegate the authority to grant awards and the day‑to‑day administration of the plan to any of our employees. Grants of equity awards to our named executiveofficers under our Equity Incentive Plan are made only by our Managing Partner’s board of directors.Common Units Subject to the Equity Incentive PlanThe total number of our common units that may be issued under the Equity Incentive Plan as of the effective date of the plan was equivalent to 15% of thenumber of fully diluted and exchanged common units outstanding as of such date; provided that beginning with the first fiscal year after the Equity Incentive Planbecame effective and continuing with each subsequent fiscal year occurring thereafter, the aggregate number of common units covered by the plan will beincreased, on the first day of each fiscal year of KKR & Co. L.P. occurring during the term of the plan, by a number of common units equal to the positivedifference, if any, of (x) 15% of the aggregate number of common units outstanding (on a fully‑diluted and exchanged basis) on the last day of the immediatelypreceding fiscal year minus (y) the aggregate number of common units available for issuance under the plan as of the last day of such year, unless theAdministrator should decide to increase the number of common units covered by the plan by a lesser amount on any such date.269Table of ContentsOptions and Unit Appreciation RightsThe Administrator may award non‑qualified unit options and unit appreciation rights under the Equity Incentive Plan. Options and unit appreciation rightsgranted under the Equity Incentive Plan will become vested and exercisable at such times and upon such terms and conditions as may be determined by theAdministrator at the time of grant, but no option or unit appreciation right will be exercisable for a period of more than 10 years after it is granted. The exerciseprice per common unit will be determined by the Administrator, provided that options and unit appreciation rights granted to participants who are U.S. taxpayers(i) will not be granted with an exercise price less than 100% of the fair market value per underlying common unit on the date of grant and (ii) will not be grantedunless the common unit on which it is granted constitutes equity of the participant’s “service recipient” within the meaning of Section 409A of the InternalRevenue Code of 1986, as amended. To the extent permitted by the Administrator, the exercise price of an option may be paid in cash or its equivalent, in commonunits having a fair market value equal to the aggregate exercise price and satisfying such other requirements as may be imposed by the Administrator, partly in cashand partly in common units or through net settlement in common units. As determined by the Administrator, unit appreciation rights may be settled in commonunits, cash or any combination thereof.Other Equity‑‑Based AwardsThe Administrator, in its sole discretion, may grant or sell common units, restricted common units, deferred restricted common units, phantom restrictedcommon units, and any other awards that are valued in whole or in part by reference to, or are otherwise based on the fair market value of, the common units,including restricted equity units that may be granted from time to time, to our employees, including our named executive officers. Any of these other equity‑basedawards may be in such form, and dependent on such conditions, as the Administrator determines, including without limitation the right to receive, or vest withrespect to, one or more common units (or the equivalent cash value of such units) upon the completion of a specified period of service, the occurrence of an eventand/or the attainment of performance objectives. The Administrator may, in its discretion, determine whether other equity‑based awards will be payable in cash,common units or other assets or a combination of cash, common units and other assets.Compensation Committee Interlocks and Insider ParticipationBecause we are a limited partnership, our Managing Partner’s board of directors is not required by NYSE rules to establish a compensation committee. Ourfounders, Messrs. Kravis and Roberts, serve as Co‑Chairmen of the board of directors of our Managing Partner and participated in discussions regarding executivecompensation. For a description of certain transactions between us and our founders, see “Certain Relationships and Related Transactions, and DirectorIndependence.”Compensation Committee ReportThe board of directors of our Managing Partner does not have a compensation committee. The entire board of directors has reviewed and discussed withmanagement the foregoing Compensation Discussion and Analysis and, based on such review and discussion, has determined that the Compensation Discussionand Analysis should be included in this annual report. Henry R. KravisGeorge R. RobertsDavid C. DrummondJoseph A. GrundfestJohn B. HessPatricia F. RussoThomas M. SchoeweRobert W. Scully270Table of ContentsITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSOur Common UnitsThe following table sets forth the beneficial ownership of our common units and KKR Group Partnership Units that are exchangeable for our common unitsby:•each person known to us to beneficially own more than 5% of any class of the outstanding voting securities of our partnership based on our review offilings with the SEC;•each of the directors, persons chosen to become a director and named executive officers of our Managing Partner; and•the directors, persons chosen to become a director and executive officers of our Managing Partner as a group.The numbers of common units and KKR Group Partnership Units outstanding and the percentage of beneficial ownership are based on 452,723,038 commonunits issued and outstanding and 353,757,398 KKR Group Partnership Units that are exchangeable for our common units as of February 22, 2017. Beneficialownership is in each case determined in accordance with the rules of the SEC, and includes equity securities of which that person has the right to acquire beneficialownership within 60 days of February 22, 2017. Under these rules, more than one person may be deemed a beneficial owner of the same securities and a personmay be deemed a beneficial owner of securities as to which he has no economic interest. Common UnitsBeneficially Owned (1)KKR GroupPartnership Units andSpecial Voting UnitsBeneficially Owned (2) Percentageof CombinedBeneficialName (4) Number PercentNumber Percent Ownership (3)KKR Holdings (5)(7)2,677 *353,757,398 100.0% 43.9%FMR LLC (6)40,412,832 8.9%— — 8.9Henry R. Kravis (5)(7)(8)6,965,126 1.5353,757,398 100.0 44.7George R. Roberts (5)(7)(8)5,878,998 1.3353,757,398 100.0 44.6David C. Drummond14,879 *— — *Joseph A. Grundfest49,495 *— — *John B. Hess123,095 *— — *Patricia F. Russo42,495 *— — *Thomas M. Schoewe50,095 *— — *Robert W. Scully49,495 *— — *Todd A. Fisher (9)279,518 *9,288,035 2.6 2.1William J. Janetschek (9)165,514 *3,170,827 * *David J. Sorkin (9)161,131 *3,123,593 * *Directors and executive officers as a group(11 persons)9,109,998 2.0%353,757,398 100.0% 45.0% *Less than 1.0%.(1)KKR Group Partnership Units held by KKR Holdings are exchangeable (together with the corresponding special voting units) for our common units on aone‑for‑one basis, subject to customary conversion rate adjustments for splits, unit distributions and reclassifications and compliance with lock‑ up,vesting and transfer restrictions as described under “Certain Relationships and Related Transactions, and Director Independence-Exchange Agreement.”Beneficial ownership of KKR Group Partnership Units reflected in this table has not also been reflected as beneficial ownership of our common units forwhich such KKR Group Partnership Units may be exchanged.(2)On any matters that may be submitted to a vote of our unitholders, the special voting units provide their holders with a number of votes that is equal to theaggregate number of KKR Group Partnership Units that such holders hold and entitle such holders to participate in the vote on the same basis as ourunitholders.271Table of Contents(3)This column assumes the exchange of KKR Group Partnership Units beneficially owned into common units and a number of outstanding common unitscalculated in accordance with Rule 13d‑3(d)(1) of the Exchange Act.(4)The address of each director and executive officer is c/o KKR Management LLC, 9 West 57th Street, 42nd Floor, New York, New York 10019.(5)KKR Holdings owns, beneficially or of record, an aggregate of 2,677 common units and 353,757,398 exchangeable KKR Group Partnership Units. Ourprincipals hold interests in KKR Holdings that will entitle them to participate in the value of the KKR Group Partnership Units held by KKR Holdings.KKR Holdings is a limited partnership that is controlled by KKR Holdings GP Limited, its sole general partner, which has investment control over allKKR Group Partnership Units and common units held by KKR Holdings and voting control over all special voting units held by KKR Holdings. Each ofMessrs. Kravis and Roberts disclaims beneficial ownership of the securities that may be deemed to be beneficially owned by him, except to the extent ofhis own pecuniary interest therein. Messrs. Kravis and Roberts, by virtue of their rights under the organizational documents of KKR Holdings GP Limited(the general partner of KKR Holdings), may be deemed to share dispositive and/or voting power with respect to the KKR Group Partnership Units, specialvoting units and common units held by KKR Holdings. Mr. Kravis disclaims beneficial ownership of the securities that may be deemed to be beneficiallyowned by him, except with respect to 81,709,475 KKR Group Partnership Units in which he and certain related entities have a pecuniary interest.Mr. Roberts disclaims beneficial ownership of the securities that may be deemed to be beneficially owned by him, except with respect to 86,709,475 KKRGroup Partnership Units in which he and certain related entities have a pecuniary interest. The address of KKR Holdings is c/o KKR Management LLC, 9West 57th Street, 42nd Floor, New York, New York 10019.(6)Based on a Schedule 13G/A filed with the Securities and Exchange Commission on February 14, 2017, FMR LLC and Abigail P. Johnson may be deemedto beneficially own and have the sole power to dispose or to direct the disposition of 40,412,832 common units. The address of these beneficial owners is245 Summer Street, Boston, Massachusetts 02210. Certain affiliates of Fidelity provide services to us in connection with the investment management,record keeping and administration of our Equity Incentive Plan and our retirement savings plans for which they received customary fees and expenses notin excess of $1.2 million, although certain of these fees are paid by participants in the respective plans. Affiliates of Fidelity have invested or committedto invest approximately $95.0 million as of December 31, 2016, in our investment vehicles. Fidelity and its affiliates have in the past and may in the futureparticipate in offerings, syndications or similar transactions with our capital markets business, including in certain cases where equity of KKR portfoliocompanies are offered to Fidelity’s retail and institutional brokerage customers, on the same terms and conditions provided to other participants in suchtransactions. For the year ended December 31, 2016, in connection with such transactions affiliates of Fidelity received selling concessions of less than$300,000 in the aggregate, which were borne by the underwriters in such transactions. Affiliates of Fidelity may also sell common units owned by ouremployees, including our executive officers and directors, in ordinary brokerage transactions from time to time.(7)KKR MIF Fund Holdings L.P. owns, beneficially or of record, an aggregate of 1,028,156 common units. The sole general partner of KKR MIF FundHoldings L.P. is KKR MIF Carry Holdings L.P. The sole general partner of KKR MIF Carry Holdings L.P. is KKR MIF Carry Limited. Each of KKRMIF Carry Holdings L.P. (as the sole general partner of KKR MIF Fund Holdings L.P.); KKR MIF Carry Limited (as the sole general partner of KKRMIF Carry Holdings L.P.); KKR Index Fund Investments L.P. (as the sole shareholder of KKR MIF Carry Limited); KKR IFI GP L.P. (as the sole generalpartner of KKR Index Fund Investments L.P.); KKR IFI Limited (as the sole general partner of KKR IFI GP L.P.); KKR Fund Holdings L.P. (as the soleshareholder of KKR IFI Limited); KKR Fund Holdings GP Limited (as a general partner of KKR Fund Holdings L.P.); KKR Group Holdings L.P. (as ageneral partner of KKR Fund Holdings L.P. and the sole shareholder of KKR Fund Holdings GP Limited); KKR Group Limited (as the sole generalpartner of KKR Group Holdings L.P.); KKR & Co. L.P. (as the sole shareholder of KKR Group Limited); and KKR Management LLC (as the solegeneral partner of KKR & Co. L.P.) may be deemed to be the beneficial owner of the securities. Messrs. Kravis and Roberts are the designated membersof KKR Management LLC and may be deemed to share dispositive power with respect to the common units held by KKR MIF Fund Holdings L.P. Eachof Messrs. Kravis and Roberts disclaims beneficial ownership of the securities.(8)KKR Reference Fund Investments L.P. owns, beneficially or of record, an aggregate of 3,639,010 common units. The sole general partner of KKRReference Fund Investments L.P. is KKR IFI GP L.P. Each of KKR IFI GP L.P. (as the sole general partner of KKR Reference Fund Investments L.P.);KKR IFI Limited (as the sole general partner of KKR IFI GP L.P.); KKR Fund Holdings L.P. (as the sole shareholder of KKR IFI Limited); KKR FundHoldings GP Limited (as a general partner of KKR Fund Holdings L.P.); KKR Group Holdings L.P. (as a general partner of KKR Fund Holdings L.P. andthe sole shareholder of KKR Fund Holdings GP Limited); KKR Group Limited (as the sole272Table of Contentsgeneral partner of KKR Group Holdings L.P.); KKR & Co. L.P. (as the sole shareholder of KKR Group Limited); and KKR Management LLC (as thesole general partner of KKR & Co. L.P.) may be deemed to be the beneficial owner of the securities. Messrs. Kravis and Roberts are the designatedmembers of KKR Management LLC and may be deemed to share dispositive power with respect to the common units held by KKR MIF FundHoldings L.P. Each of Messrs. Kravis and Roberts disclaims beneficial ownership of the securities.(9)The common units above for Messrs. Fisher, Janetschek and Sorkin include 136,333, 105,750 and 105,960 common units, respectively that will vestwithin 60 days of February 22, 2017.Our Managing PartnerOur Managing Partner’s outstanding limited liability company interests consist of Class A shares, which are entitled to vote on the election and removal ofdirectors and all other matters that have not been delegated to the board of directors or reserved for the vote of Class B members, and Class B shares, which areentitled to vote only with respect to any matter requiring the approval of holders of voting interests held directly or indirectly by us in the general partners of ournon‑U.S. funds. Notwithstanding the number of Class A shares held by the Class A members, under our Managing Partner’s limited liability company agreement,Messrs. Kravis and Roberts, as the designated members of KKR Management LLC, are deemed to represent a majority of the Class A shares outstanding whenacting together for purposes of voting on matters upon which holders of Class A shares are entitled to vote. Messrs. Kravis and Roberts may, in their discretion,designate one or more holders of Class A shares to hold such voting power and exercise all of the rights and duties of Messrs. Kravis and Roberts under ourManaging Partner’s limited liability company agreement. While Messrs. Kravis and Roberts historically have acted with unanimity when managing our business,they have not entered into any agreement relating to the voting of their Class A shares. All of our Managing Partner’s other Class A shares are held by our othersenior employees. Our Managing Partner’s Class B shares are divided equally among twelve employees, each of whom holds less than 10% of the voting power ofthe Class B shares. None of the shares in our Managing Partner provide these holders with economic interests in our business. See also “Risk Factors-Our limitedpartnership agreement contains provisions that reduce or eliminate duties (including fiduciary duties) of our limited partner and limit remedies available forunitholders for actions that might otherwise constitute a breach of duty. It will be difficult for unitholders to successfully challenge a resolution of a conflict ofinterest by our Managing Partner or by its conflicts committee.” In addition, see “Risk Factors-We are a Delaware limited partnership, and there are provisions inour limited partnership agreement regarding exculpation and indemnification of our officers and directors that differ from the Delaware General Corporation Law(DGCL) in a manner that may be less protective of the interests of our common unitholders.”Securities Authorized for Issuance under Equity Compensation PlansThe table set forth below provides information concerning the awards that may be issued under our Equity Incentive Plan as of December 31, 2016 . Number ofSecurities to beIssued UponExercise ofOutstanding Options,Warrants and Rights (1)Weighted‑‑AverageExercise Priceof OutstandingOptions, Warrantsand RightsNumber ofSecurities RemainingAvailable for FutureIssuance Under EquityCompensation Plans(excluding securitiesreflected in the first column) (2)Equity Compensation Plans Approved by Security Holders37,519,436—50,209,914Equity Compensation Plans Not Approved by Security Holders———Total37,519,436—50,209,914 (1)Reflects the aggregate number of restricted equity units granted under our Equity Incentive Plan and outstanding as of December 31, 2016 .(2)The aggregate number of common units covered by the Equity Incentive Plan is increased on the first day of each fiscal year during its term by a numberof units equal to the positive difference, if any, of (a) 15% of the aggregate number of common units outstanding (on a fully‑diluted basis) on the last dayof the immediately preceding fiscal273Table of Contentsyear minus (b) the aggregate number of common units available for issuance under the Equity Incentive Plan as of such date (unless the Administrator ofthe Equity Incentive Plan should decide to increase the number of common units covered by the plan by a lesser amount). We have filed a registrationstatement and intend to file additional registration statements on Form S‑8 under the Securities Act to register common units covered by the EquityIncentive Plan (including pursuant to automatic annual increases). Any such Form S‑8 registration statement will automatically become effective uponfiling. Accordingly, common units registered under such registration statement will be available for sale in the open market.274Table of ContentsITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe following description is a summary of the material terms of the agreements described below, and does not contain all of the information that you may finduseful. For additional information, you should read the copies of our investment agreement, our exchange agreement, our registration rights agreement, our taxreceivable agreement and the partnership agreements of the KKR Group Partnerships, all of which have been filed as exhibits to this report.The Investment Agreement, Indemnification and InsuranceOn August 4, 2009, we entered into an investment agreement by and among us, certain of our affiliates, KPE and certain of its affiliates, as a condition to theKPE Transaction.The investment agreement provides that the KKR Group Partnerships will indemnify us, KPE, each present and former director and officer of the generalpartner of KPE and certain other persons serving a similar role against certain matters relating to their roles at the general partner at KPE or relating to theregistration and listing of our common units.Pursuant to the investment agreement, we obtained directors' and officers' liability insurance for the benefit of the directors and officers (and former directorsand officers) of the general partner of KPE. The indemnification and insurance provisions of the agreement terminated pursuant to its terms in the year endedDecember 31, 2016.Exchange AgreementWe have entered into an exchange agreement with KKR Holdings, the entity through which certain of our employees, including Messrs. Kravis, Roberts,Fisher, Janetschek and Sorkin, hold their KKR Group Partnership Units, pursuant to which KKR Holdings or certain transferees of its KKR Group PartnershipUnits may, on a quarterly basis (subject to the terms of the exchange agreement), exchange KKR Group Partnership Units held by them (together withcorresponding special voting units) for our common units on a one-for-one basis, subject to customary conversion rate adjustments for splits, unit distributions andreclassifications. At the election of certain of our intermediate holding companies that are partners of the KKR Group Partnerships, the intermediate holdingcompanies may settle exchanges of KKR Group Partnership Units with cash in an amount equal to the fair market value of the common units that would otherwisebe deliverable in such exchanges. To the extent that KKR Group Partnership Units held by KKR Holdings or its transferees are exchanged for our common units,our interests in the KKR Group Partnerships will be correspondingly increased. Any common units received upon such exchange will be subject to any restrictionsthat were applicable to the exchanged KKR Group Partnership Units, including any applicable transfer restrictions. During the year ended December 31, 2016 ,7,589,190 KKR Group Partnership Units were exchanged for our common units pursuant to this agreement.On November 2, 2010, the exchange agreement was amended and restated to provide certain rights to cancel exchanges or limit the number of units exchangedin a given quarter. The amendments also provided that certain exchanges will be with a new subsidiary, the result of which is that the income tax character of asmall portion of income distributed to unitholders may differ from what it would have been absent the amendment. If additional taxes result from the inclusion ofthis subsidiary of ours, KKR Holdings will make payments to one of our subsidiaries in respect of those taxes.Certain interests in KKR Holdings that are held by our employees are subject to transfer restrictions and vesting requirements that, unless waived, modified oramended, limit the ability of our employees to cause KKR Group Partnership Units to be exchanged under the exchange agreement so long as applicable vestingand transfer restrictions apply. The general partner of KKR Holdings, which is controlled by our founders, will have sole authority for waiving any applicablevesting or transfer restrictions.As contemplated by the exchange agreement, a coordinated selling program has been established relating to sales of common units received pursuant to theexchanges by certain holders of KKR Holdings units. Pursuant to the program, sales generally take place quarterly, and management is permitted to establish anoverall limit on such sales based upon the trading volume of our common units or any other factor that may be considered relevant.Registration Rights AgreementIn connection with our NYSE listing, we entered into a registration rights agreement with KKR Holdings pursuant to which we granted KKR Holdings, itsaffiliates and transferees of its KKR Group Partnership Units the right, under certain circumstances and subject to certain restrictions, to require us to register underthe Securities Act our common units (and other securities convertible into or exchangeable or exercisable for our common units) held or acquired by them. Underthe275Table of Contentsregistration rights agreement, holders of registration rights will have the right to request us to register the common units received upon the exchange of their KKRHoldings units and the sale of such common units and also have the right to require us to make available shelf registration statements permitting sales of commonunits into the market from time to time over an extended period. In addition, holders of registration rights will have the ability to exercise certain piggybackregistration rights in connection with registered offerings requested by other holders of registration rights or initiated by us. On October 1, 2010, the registrationstatement we filed pursuant to this agreement was declared effective, and a post-effective amendment was declared effective on September 21, 2011. As ofDecember 31, 2016 , 353,757,398 common units remain unissued under that registration statement.Tax Receivable AgreementWe and one or more of our intermediate holding companies may be required to acquire KKR Group Partnership Units from time to time pursuant to ourexchange agreement with KKR Holdings. KKR Management Holdings L.P. has made an election under Section 754 of the Internal Revenue Code, which willremain in effect for each taxable year in which an exchange of KKR Group Partnership Units for common units occurs. Certain of these exchanges are expected toresult in an increase in certain of our intermediate holding companies' share of the tax basis of the tangible and intangible assets of the KKR Group Partnerships,primarily attributable to a portion of the goodwill inherent in our business, that would not otherwise have been available. This increase in tax basis may increasedepreciation and amortization deductions for tax purposes and therefore reduce the amount of income tax our intermediate holding companies would otherwise berequired to pay in the future. This increase in tax basis may also decrease gain (or increase loss) on future dispositions of certain capital assets to the extent taxbasis is allocated to those capital assets.We have entered into a tax receivable agreement with KKR Holdings requiring our intermediate holding companies to pay to KKR Holdings or transferees ofits KKR Group Partnership Units 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax that our intermediate holding companiesactually realize as a result of this increase in tax basis, as well as 85% of the amount of any such savings our intermediate holding companies actually realize as aresult of increases in tax basis that arise due to future payments under the agreement. A termination of the agreement or a change of control could give rise tosimilar payments based on tax savings that we would be deemed to realize in connection with such events. This payment obligation is an obligation of theintermediate holding companies and not of either KKR Group Partnership. As such, the cash distributions to common unitholders may vary from holders of KKRGroup Partnership Units (held by KKR Holdings and others) to the extent payments are made under the tax receivable agreement to exchanging holders of KKRGroup Partnership Units. As the payments reflect actual tax savings received by KKR entities, there may be a timing difference between the tax savings receivedby KKR entities and the cash payments to exchanging holders of KKR Group Partnership Units. We expect the intermediate holding companies to benefit from theremaining 15% of cash savings, if any, in income tax that they realize. In the event that other of our current or future subsidiaries become taxable as corporationsand acquire KKR Group Partnership Units in the future, or if we become taxable as a corporation for U.S. federal income tax purposes, we expect that each willbecome subject to a tax receivable agreement with substantially similar terms.For purposes of the tax receivable agreement, cash savings in income tax will be computed by comparing the actual income tax liability of our intermediateholding companies to the amount of such taxes that the y would have been required to pay had there been no increase to the tax basis of the tangible and intangibleassets of the KKR Group Partnerships as a result of the exchanges of KKR Group Partnership Units and had the intermediate holding companies not entered intothe tax receivable agreement. The term of the tax receivable agreement continues until all such tax benefits have been utilized or expired, unless the intermediateholding companies exercise their right to terminate the tax receivable agreement for an amount based on the agreed payments remaining to be made under theagreement. Estimating the amount of payments that may be made under the tax receivable agreement is by its nature imprecise, insofar as the calculation of amountspayable depends on a variety of factors. The actual increase in tax basis, as well as the amount and timing of any payments under the tax receivable agreement, willvary depending upon a number of factors, including:• the timing of exchanges—for instance, the increase in any tax deductions will vary depending on the fair market value, which may fluctuate over time,of the KKR Group Partnership Units, which will depend on the fair market value of the depreciable or amortizable assets of the KKR Group Partnershipsat the time of the transaction;• the price of our common units at the time of the exchange—the increase in any tax deductions, as well as the tax basis increase in other assets, of theKKR Group Partnerships, is directly proportional to the price of our common units at the time of the exchange;276Table of Contents• the extent to which such exchanges are taxable—if an exchange is not taxable for any reason (for instance, in the case of a charitable contribution),increased deductions will not be available; and• the amount of tax, if any, our intermediate holding company is required to pay aside from any tax benefit from the exchanges, and the timing of any suchpayment. If our intermediate holding companies do not have taxable income aside from any tax benefit from the exchanges, they will not be required tomake payments under the tax receivable agreement for that taxable year because no tax savings will have been actually realized. We expect that as a result of the amount of the increases in the tax basis of the tangible and intangible assets of the KKR Group Partnerships, assuming nomaterial changes in the relevant tax law and that we earn sufficient taxable income to realize the full tax benefit of the increased amortization of our assets, futurepayments under the tax receivable agreement will be substantial. The payments under the tax receivable agreement are not conditioned upon our principals'continued ownership of us and are required to be made within 90 days of the filing of the tax return s of our intermediate holding companies. For the year endedDecember 31, 2016 such payments made to our principals, none of whom included a member of the board of directors of our Managing Partner, wereapproximately $4.4 million. Such payments to KKR Holdings were $0.6 million and less than $0.1 million in the aggregate was paid to Messrs. Fisher, Janetschekand Sorkin as a group.The intermediate holding companies may terminate the tax receivable agreement at any time by making an early termination payment to KKR Holdings or itstransferees, based upon the net present value (based upon certain assumptions in the tax receivable agreement) of all tax benefits that would be required to be paidby the intermediate holding companies to KKR Holdings or its transferees. In addition, the tax receivable agreement provides that upon certain mergers, asset sales,other forms of combination transactions or other changes of control, the minimum obligations of our intermediate holding companies or their successor withrespect to exchanged or acquired KKR Group Partnership Units (whether exchanged or acquired before or after such transaction) would be based on certainassumptions, including that our intermediate holding companies would have sufficient taxable income to fully utilize the increased tax deductions and increased taxbasis and other benefits related to entering into the tax receivable agreement. In these situations, our obligations under the tax receivable agreement could have asubstantial negative impact on our liquidity. Decisions made by our senior principals in the course of running our business, such as with respect to mergers, asset sales, other forms of businesscombinations or other changes of control, may influence the timing and amount of payments that are received by an exchanging or selling holder of partnerinterests in the KKR Group Partnerships under the tax receivable agreement. For example, the earlier disposition of assets following an exchange or acquisitiontransaction will generally accelerate payments under the tax receivable agreement and increase the present value of such payments, and the disposition of assetsbefore an exchange or acquisition transaction will increase a principals' tax liability without giving rise to any rights of a principal to receive payments under thetax receivable agreement. Payments under the tax receivable agreement will be based upon the tax reporting positions that our Managing Partner will determine. We are not aware ofany issue that would cause the IRS to challenge a tax basis increase. However, neither KKR Holdings nor its transferees will reimburse us for any paymentspreviously made under the tax receivable agreement if such tax basis increase, or the tax benefits we claim arising from such increase, is successfully challenged bythe IRS. As a result, in certain circumstances payments to KKR Holdings or its transferees under the tax receivable agreement could be in excess of theintermediate holding companies' cash tax savings. The intermediate holding companies' ability to achieve benefits from any tax basis increase, and the payments tobe made under this agreement, will depend upon a number of factors, as discussed above, including the timing and amount of our future income.KKR Group Partnership AgreementsWe indirectly control the general partners of the KKR Group Partnerships and, through the KKR Group Partnerships and their subsidiaries, the KKR business.Because our Managing Partner operates and controls us, our Managing Partner's board of directors and our officers are ultimately responsible for all materialdecisions of the KKR Group Partnerships and the KKR Group Partnerships' businesses.Pursuant to the partnership agreements of the KKR Group Partnerships, our partnership, as the controlling general partner of KKR Fund Holdings L.P., KKRManagement Holdings L.P. and KKR International Holdings L.P., have the indirect right to determine when distributions will be made to the holders of KKRGroup Partnership Units and the amount of any such distributions.277Table of ContentsOn March 17, 2016, in connection with the issuance of the Series A Preferred Units and on June 20, 2016, in connection with the issuance of the Series BPreferred Units, the limited partnership agreements of the KKR Group Partnerships were amended to provide for preferred units with economic terms designed tomirror those of the Series A Preferred Units and Series B Preferred Units.The partnership agreements of the KKR Group Partnerships provide for tax distributions to the holders of KKR Group Partnership Units if the general partnersof the KKR Group Partnerships determine that distributions from the KKR Group Partnerships would otherwise be insufficient to cover the tax liabilities of aholder of a KKR Group Partnership Unit. Generally, these tax distributions will be computed based on our estimate of the net taxable income of the relevantpartnership allocable to a holder of a KKR Group Partnership Unit multiplied by an assumed tax rate equal to the highest effective marginal combined U.S. federal,state and local income tax rate prescribed for an individual or corporate resident in New York, New York (taking into account the nondeductibility of certainexpenses and the character of our income).The partnership agreements of the KKR Group Partnerships authorize the general partners of the KKR Group Partnerships to issue an unlimited number ofadditional securities of the KKR Group Partnerships with such designations, preferences, rights, powers and duties that are different from, and may be senior to,those applicable to the KKR Group Partnerships Units, and which may be exchangeable for KKR Group Partnership Units.Firm Use of Private AircraftCertain of our senior employees, including Messrs. Kravis and Roberts, own aircraft that we use for business purposes in the ordinary course of our operations.These senior employees paid for the purchase of these aircraft with their personal funds and bear all operating, personnel and maintenance costs associated withtheir operation. The hourly rates that we pay for the use of these aircraft are based on current market rates for chartering private aircraft of the same type. Weincurred $5.1 million for the use of these aircraft during the year ended December 31, 2016 , of which substantially all was paid to entities collectively controlledby Messrs. Kravis and Roberts.278Table of ContentsSide-By-Side and Other InvestmentsBecause fund investors typically are unwilling to invest their capital in a fund unless the fund's manager also invests its own capital in the fund's investments,our investment fund documents generally require the general partners of our investment funds to make minimum capital commitments to the funds. The amount ofthese commitments, which are negotiated by fund investors, generally range from 2% to 8% of a fund's total capital commitments at final closing, but may begreater for certain funds pursuing new strategies. When investments are made, the general partner contributes capital to the fund based on its fund commitmentpercentage and if applicable, acquires a capital interest in the investment that is not subject to a carried interest. Historically, these capital contributions have beenfunded with cash from operations that otherwise would be distributed to our employees. In connection with the KPE Transaction, we did not acquire capital interests in investments that were funded by our employees or others involved in ourbusiness prior to October 1, 2009. Rather, those capital interests were allocated to our employees or others involved in our business and are reflected in ourfinancial statements as noncontrolling interests in consolidated entities to the extent that we hold the general partner interest in the fund. Any capital contributionsthat our private equity fund general partners are required to make to a fund will be funded by us and we will be entitled to receive our allocable share of the returnsthereon.In addition, our employees and certain other qualifying personnel are permitted to invest and have invested their own capital in our funds, side-by-sideinvestments with our funds or the firm and the funds managed by our strategic partnerships with other fund managers. Side-by-side investments are investmentsgenerally made on the same terms and conditions as those available to the applicable fund or the firm and, they, together with their investments in our funds or thefunds managed by our strategic partnerships with other funds managers, are not generally subject to management fees or a carried interest. The cash invested by ouremployees and certain other qualifying personnel and their investment vehicles aggregated to $328.3 million for the year ended December 31, 2016 , of which$34.6 million, $25.9 million, $9.9 million, $3.1 million and $0.6 million was invested by Messrs. Kravis, Roberts, Fisher, Janetschek, and Sorkin and theirinvestment vehicles, respectively. These investments are not included in the accompanying consolidated financial statements. In addition, our funds invested $8.8million in 2016 from the commitments of certain investment vehicles associated with Mr. Hess. Such investments associated with Mr. Hess were made on the sameterms and conditions as for other fund investors including management fees and/or a carried interest applicable to the relevant fund. Indemnification of Directors, Officers and OthersUnder our partnership agreement, in most circumstances we will indemnify the following persons, to the fullest extent permitted by law, from and against alllosses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements or other amounts:our Managing Partner; any departing Managing Partner; any person who is or was an affiliate of our Managing Partner or any departing Managing Partner; anyperson who is or was a member, partner, tax matters partner, officer, director, employee, agent, fiduciary or trustee of our partnership or our subsidiaries, thegeneral partner or any departing general partner or any affiliate of us or our subsidiaries, our Managing Partner or any departing Managing Partner; any person whois or was serving at the request of a Managing Partner or any departing Managing Partner or any affiliate of a Managing Partner or any departing Managing Partneras an officer, director, employee, member, partner, agent, fiduciary or trustee of another person; or any person designated by our Managing Partner. We haveagreed to provide this indemnification unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining that thesepersons acted in bad faith or engaged in fraud or willful misconduct. We have also agreed to provide this indemnification for criminal proceedings. Anyindemnification under these provisions will only be out of our assets. Unless it otherwise agrees, our Managing Partner will not be personally liable for, or have anyobligation to contribute or loan funds or assets to us to enable us to effectuate, indemnification. The indemnification of the persons described above shall besecondary to any indemnification such person is entitled from another person or the relevant KKR fund to the extent applicable. We may purchase insuranceagainst liabilities asserted against and expenses incurred by persons in connection with our activities, regardless of whether we would have the power to indemnifythe person against liabilities under our partnership agreement.Each member of the board of directors, each an indemnitee has entered into an indemnification agreement with the Managing Partner and us. Eachindemnification agreement provides that the indemnitee, subject to the limitations set forth in each indemnification agreement, shall be indemnified and heldharmless by the Managing Partner on an after tax basis from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including legalfees and expenses), judgments, fines, penalties, interest, settlements or other amounts arising from any and all threatened, pending or completed claims, demands,actions, suits or proceedings, whether civil, criminal, administrative or investigative, and whether formal or informal and including appeals, in which theindemnitee may be involved, or is threatened to be involved, as a party or279Table of Contentsotherwise, by reason of being or having been or having agreed to serve as a member of the board of directors, or while serving as a member of the board ofdirectors, being or having been serving or having agreed to serve at the request of the Managing Partner as a director, officer, employee or agent (which, forpurposes hereof, shall include a trustee, partner or manager or similar capacity) of another corporation, limited liability company, partnership, joint venture, trust,employee benefit plan or other enterprise, whether arising from acts or omissions to act occurring on, before or after the date of such indemnification agreement.Each indemnification agreement provides that the indemnitee shall not be indemnified and held harmless if there has been a final and non-appealable judgmententered by an arbitral tribunal or court of competent jurisdiction determining that, in respect of the matter for which the indemnitee is seeking indemnificationpursuant to the indemnification agreement, the indemnitee acted in bad faith or engaged in fraud or willful misconduct.Guarantee of Contingent Obligations to Fund Partners; IndemnificationThe partnership documents governing KKR's carry—paying funds, including funds relating to private equity, mezzanine, infrastructure, energy, real estate,direct lending and special situations investments, generally include a "clawback" provision that, if triggered, may give rise to a contingent obligation requiring thegeneral partner to return amounts to the fund for distribution to the fund investors at the end of the life of the fund. Under a clawback obligation, upon theliquidation of a fund, the general partner is required to return, typically on an after-tax basis, previously distributed carry to the extent that, due to the diminishedperformance of later investments, the aggregate amount of carry distributions received by the general partner during the term of the fund exceed the amount towhich the general partner was ultimately entitled, including the effects of any performance thresholds. Excluding carried interest received by the general partners offunds that were not contributed to KKR in the KPE Transaction, as of December 31, 2016 , no carried interest was subject to this clawback obligation, assumingthat all applicable carry paying funds were liquidated at their December 31, 2016 fair values. Had the investments in such funds been liquidated at zero value, theclawback obligation would have been $2,204.9 million . Carried interest is recognized in the statement of operations based on the contractual conditions set forth inthe agreements governing the fund as if the fund were terminated and liquidated at the reporting date and the fund's investments were realized at the then estimatedfair values. Amounts earned pursuant to carried interest are earned by the general partner of those funds to the extent that cumulative investment returns arepositive and where applicable, preferred return thresholds have been met. If these investment amounts earned decrease or turn negative in subsequent periods,recognized carried interest will be reversed and to the extent that the aggregate amount of carry distributions received by the general partner during the term of thefund exceed the amount to which the general partner was ultimately entitled, a clawback obligation would be recorded. For funds that are consolidated, thisclawback obligation, if any, is reflected as an increase in noncontrolling interests in the consolidated statements of financial condition. For funds that are notconsolidated, this clawback obligation, if any, is reflected as a reduction of KKR's investment balance as this is where carried interest is initially recorded.Prior to the KPE Transaction in 2009, certain principals who received carried interest distributions with respect to certain private equity funds contributed toKKR had personally guaranteed, on a several basis and subject to a cap, the contingent obligations of the general partners of such private equity funds to repayamounts to fund investors pursuant to the general partners' clawback obligations. The terms of the KPE Transaction require that principals remain responsible forany clawback obligations relating to carry distributions received prior to the KPE Transaction, up to a maximum of $223.6 million . Through investmentrealizations, this amount has been reduced to $98.9 million as of December 31, 2016 . Using valuations as of December 31, 2016 , no amounts are due with respectto the clawback obligation required to be funded by principals. Carry distributions arising subsequent to the KPE Transaction may give rise to clawback obligationsthat may be allocated generally to KKR and principals who participate in the carry pool. In addition, guarantees of or similar arrangements relating to clawbackobligations in favor of third party investors in an individual investment partnership by entities KKR owns may limit distributions of carried interest more generally.280Table of ContentsFacilitiesCertain trusts, whose beneficiaries include children of Mr. Kravis and Mr. Roberts, and certain other senior employees who are not executive officers of theCompany, are partners in a real-estate based partnership that maintains an ownership interest in our Menlo Park location. Payments made from us to thispartnership aggregated $7.4 million for the year ended December 31, 2016 .Confidentiality and Restrictive Covenant AgreementsOur employees have entered into confidentiality and restrictive covenant agreements that include prohibitions on our employees competing with us orsoliciting clients or employees of our firm during a restricted period following their departure from the firm. For further information on these agreements, see"Executive Compensation—Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards in 2016 —Terms of Confidentiality andRestrictive Covenant Agreements."Other Transactions with Related PersonsWe have and may in the future continue to enter into ordinary course transactions with unaffiliated entities known to us to beneficially own more than 5% ofany class of the outstanding voting securities of our partnership. These transactions may include investments by them in our funds generally on the same terms andconditions offered to other unaffiliated fund investors and participation in our capital markets transactions, including underwritings and syndications, generally onthe same terms and conditions offered to other unaffiliated capital markets participants. See "Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters." In February 2016, after appraisals were conducted and with the approval of the conflicts committee of our board of directors, acompany owned by Mr. Kravis purchased art from KKR for $537,900.Statement of Policy Regarding Transactions with Related PersonsThe board of directors of our Managing Partner adopted a written statement of policy for our partnership regarding transactions with related persons, which werefer to as our related person policy. Our related person policy requires that a "related person" (as defined as in Item 404(a) of Regulation S-K) must promptlydisclose to our General Counsel or other designated person any "related person transaction" (defined as any transaction, arrangement or relationship, or series ofsimilar transactions, arrangements or relationships, including, without limitation, any loan, guarantee of indebtedness, transfer or lease of real estate, or use ofcompany property) that is reportable by us under Item 404(a) of Regulation S-K in which we were or are to be a participant and the amount involved exceeds$120,000 and in which any related person had or will have a direct or indirect material interest) and all material facts with respect thereto. Those individuals willthen communicate that information to the board of directors of our Managing Partner. No related person transaction will be consummated without the approval orratification of a committee of the board consisting exclusively of disinterested directors; provided, however, the conflicts committee of our board of directors haspre-approved certain ordinary course transactions with persons known to us to beneficially own more than 5% of our outstanding common units on terms generallynot less favorable as obtained from other third parties, including investments in our funds as limited partners and participation in capital markets transactions likeunderwritings and syndications, the renewal of pre-existing strategic relationships with an owner of more than 5% of our outstanding common units, the use ofaircraft owned by our senior employees for business purposes, certain investments by eligible employees in side-by-side investments with our firm and fundsmanaged by our strategic partnership with other fund managers, and certain pro rata cash contributions to the Group Partnerships for cash management purposes. Itis our policy that directors interested in a related person transaction will recuse themselves from any vote on a related person transaction in which they have aninterest. All transactions entered into prior to July 14, 2010 were not approved in accordance with this policy as they were entered into prior to the date of adoptionof the policy. All side-by-side and other investments described in this section are pre-approved in accordance with the terms of the policy.Director IndependencePlease see "Directors, Executive Officers and Corporate Governance—Independence and Composition of Board of Directors" for information on directorindependence.281Table of ContentsITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESThe following table summarizes the aggregate fees for professional services provided by Deloitte & Touche LLP, the member firms of Deloitte ToucheTohmatsu Limited or their respective affiliates (collectively, the "Deloitte Entities") for the years ended December 31, 2016 and 2015. For the Year EndedDecember 31, 2016 KKR CompletedTransactions (in thousands) Audit Fees$22,068(a) $— Audit-Related Fees$6,854(b) $6,769(d) Tax Fees$30,804(c) $5,478(d) All Other Fees$— $— For the Year EndedDecember 31, 2015 KKR CompletedTransactions (in thousands) Audit Fees$20,241(a) $— Audit-Related Fees$7,157(b) $6,102(d) Tax Fees$28,988(c) $4,619(d) All Other Fees$— $— (a)Audit Fees consisted of estimated fees for each audit year for (1) the audits of our consolidated financial statements in our Annual Report on Form 10-K and services related to, or required by, statute or regulation; (2) reviews of the interim condensed consolidated financial statements included in ourquarterly reports on Form 10-Q; and (3) comfort letters, consents and other services related to SEC and other regulatory filings. Estimate to actualadjustments for settlements of audit fees are reflected in the year audit fees are settled. (b)Audit-Related Fees primarily included merger, acquisition, and investment due diligence services for strategic acquisitions or investments in targetcompanies for in-process transactions and transactions not completed. (c)Tax Fees consisted of fees for services rendered for tax compliance, planning and advisory services as well as tax fees for merger, acquisition, andinvestment due diligence services for strategic acquisitions or investments in target companies for in-process transactions and transactions notcompleted. (d)Audit-Related and Tax Fees included merger, acquisition, and investment due diligence services for strategic acquisitions or investments in portfoliocompanies that have been completed. In addition, the Deloitte Entities provided audit, audit-related, tax and other services to the portfolio companies,which are approved directly by the portfolio company's management and are not included in the amounts presented here. Our audit committee charter, which is available on our website at www.kkr.com under "Investor Center—Unitholder (KKR & Co. L.P.)—CorporateGovernance—Audit", requires the audit committee to approve in advance all audit and non-audit related services to be provided by our independent registeredpublic accounting firm in accordance with the audit and non-audit related services pre-approval policy. All services reported in the Audit, Audit-Related, Tax, andAll Other categories above were approved by the audit committee.282Table of ContentsPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as part of this annual report.1. Financial StatementsSee Item 8 above.2. Financial Statement Schedules:See Schedule II - Valuation and Qualifying Accounts - Years Ended December 31, 2016, 2015 and 2014 of this Annual Report on Form 10-K. The otherschedules are omitted as they are not applicable or the amounts involved are not material.3. Exhibits:2.1 Merger Agreement, dated as of December 16, 2013, among KKR & Co. L.P., KKR Fund Holdings L.P., Copal Merger Sub LLC, a Delawarelimited liability company and KKR Financial Holdings LLC (incorporated by reference to Exhibit 2.1 to the KKR & Co. L.P. Current Reporton Form 8-K filed on December 17, 2013). 3.1 Certificate of Limited Partnership of the Registrant (incorporated by reference to Exhibit 3.1 to the KKR & Co. L.P. registration statement onForm S-1 (File No. 133-165414) filed on March 12, 2010 (the "Registration Statement"). 3.2 Third Amended and Restated Limited Partnership Agreement of the Registrant (incorporated by reference to Exhibit 3.1 to the KKR & Co.L.P. Current Report on Form 8-K filed on June 20, 2016). 3.3 Certificate of Formation of the Managing Partner of the Registrant (incorporated by reference to Exhibit 3.3 of the Registration Statement). 3.4 Second Amended and Restated Limited Liability Company Agreement of the Managing Partner of the Registrant (incorporated by reference toExhibit 3.1 to the KKR & Co. L.P. Quarterly Report on Form 10-Q filed on May 6, 2016). 4.1 Indenture dated as of September 29, 2010 among KKR Group Finance Co. LLC, KKR & Co. L.P., KKR Management Holdings L.P., KKRFund Holdings L.P. and The Bank of New York Mellon Trust Company, N. A., as trustee (incorporated by reference to Exhibit 4.1 to the KKR& Co. L.P. Current Report on Form 8-K filed on September 30, 2010). 4.2 First Supplemental Indenture dated as of September 29, 2010 among KKR Group Finance Co. LLC, KKR & Co. L.P., KKR ManagementHoldings L.P., KKR Fund Holdings L.P. and The Bank of New York Mellon Trust Company, N. A., as trustee (incorporated by reference toExhibit 4.2 to the KKR & Co. L.P. Current Report on Form 8-K filed on September 30, 2010). 4.3 Second Supplemental Indenture dated as of August 5, 2014 among KKR Group Finance Co. LLC, KKR & Co. L.P., KKR ManagementHoldings L.P., KKR Fund Holdings L.P., KKR International Holdings L.P. and The Bank of New York Mellon Trust Company, N.A., astrustee (incorporated by reference to Exhibit 4.1 to the KKR & Co. L.P. Quarterly Report on Form 10-Q filed on August 7, 2014). 4.4 Form of 6.375% Senior Note due 2020 (included in Exhibit 4.2 to the KKR & Co. L.P. Current Report on Form 8-K filed on September 30,2010).283Table of Contents4.5 Registration Rights Agreement of KKR & Co. L.P., dated as of October 1, 2012, by and among KKR & Co. L.P., AUSA Holding Companyand the other persons listed on the signature page thereto (incorporated by reference to Exhibit 4.1 to the KKR & Co. L.P. Quarterly Report onForm 10-Q filed on November 2, 2012). 4.6 Indenture dated as of February 1, 2013 among KKR Group Finance Co. II LLC, KKR & Co. L.P., KKR Management Holdings L.P., KKRFund Holdings L.P. and The Bank of New York Mellon Trust Company, N. A., as trustee (incorporated by reference to Exhibit 4.1 to theKKR & Co. L.P. Current Report on Form 8-K filed on February 1, 2013). 4.7 First Supplemental Indenture dated as of February 1, 2013 among KKR Group Finance Co. II LLC, KKR & Co. L.P., KKR ManagementHoldings L.P., KKR Fund Holdings L.P. and The Bank of New York Mellon Trust Company, N. A., as trustee (incorporated by reference toExhibit 4.2 to the KKR & Co. L.P. Current Report on Form 8-K filed on February 1, 2013). 4.8 Second Supplemental Indenture dated as of August 5, 2014 among KKR Group Finance Co. II LLC, KKR & Co. L.P., KKR ManagementHoldings L.P., KKR Fund Holdings L.P., KKR International Holdings L.P. and The Bank of New York Mellon Trust Company, N.A., astrustee (incorporated by reference to Exhibit 4.2 to the KKR & Co. L.P. Quarterly Report on Form 10-Q filed on August 7, 2014). 4.9 Form of 5.500% Senior Note due 2043 (included in Exhibit 4.2 to the KKR & Co. L.P. Current Report on Form 8-K filed on February 1,2013). 4.10 Registration Rights Agreement of KKR & Co. L.P. dated as of February 19, 2014, by and among KKR & Co. L.P. and the sellers of Avocalisted on the signature pages thereto (included in Exhibit 4.8 to the KKR & Co. L.P. Annual Report on Form 10-K filed on February 24, 2014). 4.11 Indenture dated as of May 29, 2014 among KKR Group Finance Co. III LLC, KKR & Co. L.P., KKR Management Holdings L.P., KKR FundHoldings L.P. and The Bank of New York Mellon Trust Company, N. A., as trustee (incorporated by reference to Exhibit 4.1 to theKKR & Co. L.P. Current Report on Form 8-K filed on May 29, 2014). 4.12 First Supplemental Indenture dated as of May 29, 2014 among KKR Group Finance Co. III LLC, KKR & Co. L.P., KKR ManagementHoldings L.P., KKR Fund Holdings L.P. and The Bank of New York Mellon Trust Company, N. A., as trustee (incorporated by reference toExhibit 4.2 to the KKR & Co. L.P. Current Report on Form 8-K filed on May 29, 2014). 4.13 Second Supplemental Indenture dated as of August 5, 2014 among KKR Group Finance Co. III LLC, KKR & Co. L.P., KKR ManagementHoldings L.P., KKR Fund Holdings L.P., KKR International Holdings L.P. and The Bank of New York Mellon Trust Company, N.A., astrustee (incorporated by reference to Exhibit 4.3 to the KKR & Co. L.P. Quarterly Report on Form 10-Q filed on August 7, 2014).4.14 Form of 5.125% Senior Note due 2044 (included in Exhibit 4.2 to the KKR & Co. L.P. Current Report on Form 8-K filed on May 29, 2014). 4.15 Form of 6.75% Series A Preferred Unit Certificate (included in Exhibit 4.1 to the KKR & Co. L.P. Current Report on Form 8-K filed on March17, 2016). 4.16 Form of 6.50% Series B Preferred Unit Certificate (included in Exhibit 4.1 to the KKR & Co. L.P. Current Report on Form 8-K filed on June20, 2016). 4.17 Indenture, dated as of November 15, 2011, between the KKR Financial Holdings LLC and Wilmington Trust, National Association, as Trustee(incorporated by reference to Exhibit 4.1 to the KKR Financial Holdings LLC Current Report on Form 8-K filed on November 15, 2011). 4.18 Second Supplemental Indenture, dated as of March 20, 2012, between KKR Financial Holdings LLC, Wilmington Trust, National Association,as Trustee and Citibank, N.A., as Authenticating Agent, Paying Agent and Security Registrar (incorporated by reference to Exhibit 4.2 to theKKR Financial Holdings LLC Current Report on Form 8-K filed on March 20, 2012).284Table of Contents 4.19 Form of 7.500% Senior Note due March 20, 2042 of KKR Financial Holdings LLC (incorporated by reference to Exhibit 4.2 to the KKRFinancial Holdings LLC Current Report on Form 8-K filed on March 20, 2012). 4.20 Share Designation of the 7.375% Series A LLC Preferred Shares of KKR Financial Holdings LLC, dated as of January 17, 2013 (incorporatedby reference to Exhibit 3.1 to the KKR Financial Holdings LLC Current Report on Form 8-K filed on January 17, 2013). 4.21 Registration Rights Agreement, dated as of November 2, 2015, by and among KKR & Co. L.P., MW Group (GP) LTD and the other personslisted on the signature pages thereto (incorporated by reference to Exhibit 4.2 of the Registration Statement on Form S-3 (No. 333-208019)filed on November 13, 2015). 10.1 Second Amended and Restated Limited Partnership Agreement of KKR Management Holdings L.P. dated October 1, 2009 (incorporated byreference to Exhibit 10.1 of the Registration Statement). 10.1.1 Amendment No. 1 to the Second Amended and Restated Limited Partnership Agreement of KKR Management Holdings L.P., dated March 17,2016 (incorporated by reference to Exhibit 10.1 to the KKR & Co. L.P. Current Report on Form 8-K filed on March 17, 2016). 10.1.2 Amendment No. 2 to the Second Amended and Restated Limited Partnership Agreement of KKR Management Holdings L.P., dated June 20,2016 (incorporated by reference to Exhibit 10.1 to the KKR & Co. L.P. Current Report on Form 8-K filed on June 20, 2016). 10.2 Second Amended and Restated Limited Partnership Agreement of KKR Fund Holdings L.P. dated October 1, 2009 (incorporated by referenceto Exhibit 10.2 of the Registration Statement). 10.2.1 Amendment to Second Amended and Restated Limited Partnership Agreement of KKR Fund Holdings L.P. dated August 5, 2014(incorporated by reference to Exhibit 10.3 to the KKR & Co. L.P. Quarterly Report on Form 10-Q filed on August 7, 2014). 10.2.2 Amendment to Second Amended and Restated Limited Partnership Agreement of KKR Fund Holdings L.P., dated March 17, 2016(incorporated by reference to Exhibit 10.2 to the KKR & Co. L.P. Current Report on Form 8-K filed on March 17, 2016). 10.2.3 Amendment to Second Amended and Restated Limited Partnership Agreement of KKR Fund Holdings L.P., dated June 20, 2016 (incorporatedby reference to Exhibit 10.2 to the KKR & Co. L.P. Current Report on Form 8-K filed on June 20, 2016). 10.3 Amended and Restated Limited Partnership Agreement of KKR International Holdings L.P., dated August 5, 2014 (incorporated by referenceto Exhibit 10.1 to the KKR & Co. L.P. Quarterly Report on Form 10-Q filed on August 7, 2014). 10.3.1 Amendment to Amended and Restated Limited Partnership Agreement of KKR International Holdings L.P., dated March 17, 2016(incorporated by reference to Exhibit 10.3 to the KKR & Co. L.P. Current Report on Form 8-K filed on March 17, 2016). 10.3.2 Amendment to Amended and Restated Limited Partnership Agreement of KKR International Holdings L.P., dated June 20, 2016 (incorporatedby reference to Exhibit 10.3 to the KKR & Co. L.P. Current Report on Form 8-K filed on June 20, 2016). 10.4 Registration Rights Agreement dated July 14, 2010, by and among KKR & Co. L.P., KKR Holdings L.P. and the persons from time to timeparty thereto (incorporated by reference to Exhibit 10.2 to the KKR & Co. L.P. Current Report on Form 8-K filed on July 20, 2010). 10.5*Form of KKR & Co. L.P. 2010 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 to Amendment No. 3 to the RegistrationStatement filed on June 3, 2010). 285Table of Contents10.6 Tax Receivable Agreement (incorporated by reference to Exhibit 10.3 to the KKR & Co. L.P. Current Report on Form 8-K filed on July 20,2010). 10.7 Amended and Restated Exchange Agreement (incorporated by reference to Exhibit 10.1 to the KKR & Co. L.P. Current Report on Form 8-Kfiled on November 3, 2010).10.8 Amendment and Joinder Agreement to Exchange Agreement, dated as of August 5, 2014 among KKR Management Holdings L.P., KKR FundHoldings L.P., KKR Holdings L.P., KKR & Co. L.P., KKR Group Holdings L.P., KKR Subsidiary Partnership L.P., KKR Group Limited, andKKR International Holdings L.P. (incorporated by reference to Exhibit 10.2 to the KKR & Co. L.P. Quarterly Report on Form 10-Q filed onAugust 7, 2014). 10.9 Credit Agreement, dated as of October 22, 2014, among Kohlberg Kravis Roberts & Co. L.P., KKR Fund Holdings L.P., KKR ManagementHoldings L.P. and KKR International Holdings L.P., the other borrowers from time to time party thereto, the guarantors from time to timeparty thereto, the lending institutions from time to time party thereto and HSBC Bank USA, National Association, as Administrative Agent(incorporated by reference to Exhibit 10.1 to the KKR & Co. L.P. Current Report on Form 8-K filed October 24, 2014). 10.10 Amendment No. 1 to Credit Agreement, dated as of August 18, 2015 by and among Kohlberg Kravis Roberts & Co. L.P. and HSBC BankUSA, National Association (incorporated by reference to Exhibit 10.1 to the KKR & Co. L.P. Quarterly Report on Form 10-Q filed November5, 2015). 10.11*Form of Confidentiality and Restrictive Covenant Agreement (Founders) (incorporated by reference to Exhibit 10.10 of the RegistrationStatement). 10.12*Form of Indemnification Agreement by and among each member of the Board of Directors of KKR Management LLC, KKRManagement LLC and KKR & Co. L.P. (incorporated by reference to Exhibit 10.4 to the KKR & Co. L.P. Current Report on Form 8-K filedon July 20, 2010). 10.13*Independent Director Compensation Program (incorporated by reference to Exhibit 10.15 of the KKR & Co. L.P. Annual Report on Form 10-K filed on March 7, 2011). 10.14*Form of Grant Certificate (incorporated by reference to Exhibit 10.3 to the KKR & Co. L.P. Quarterly Report on Form 10-Q filed on May 5,2011). 10.15*Form of Public Company Equity Unit Award Agreement of KKR & Co. L.P. (Directors) (incorporated by reference to Exhibit 10.1 of theKKR & Co. L.P. Quarterly Report on Form 10-Q filed on August 3, 2012). 10.16*Form of Public Company Holdings Unit Award Agreement of KKR & Co. L.P. (Executive Officers) (incorporated by reference toExhibit 10.17 of the KKR & Co. L.P. Annual Report on Form 10-K filed on February 27, 2015). 10.17*Form of Public Company Holdings Unit Award Agreement of KKR & Co. L.P. (Executive Officers) (incorporated by reference toExhibit 10.19 of the KKR & Co. L.P. Annual Report on Form 10-K filed on February 26, 2016). 10.18*Form of Public Company Holdings Unit Award Agreement of KKR & Co. L.P. (Executive Officers). 10.19*Form of Grant Certificate (Executive Officers). 10.20 Development Agreement, dated as of October 28, 2015, by and between ERY Developer LLC and KKR HY LLC (incorporated by referenceto Exhibit 10.23 of the KKR & Co. L.P. Annual Report on Form 10-K filed on February 26, 2016). 21.1 Subsidiaries of the Registrant 286Table of Contents23.1 Consent of Independent Registered Public Accounting Firm Relating to the Financial Statements of KKR & Co. L.P. 31.1 Certification of Co-Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, asamended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Co-Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, asamended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.3 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, asadopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Actof 2002. 32.2 Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Actof 2002. 32.3 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of2002. 99.1 Section 13(r) Disclosure 101 Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Statements of Financial Condition as of December 31, 2016and December 31, 2015, (ii) the Consolidated Statements of Operations for the years ended December 31, 2016, 2015 and 2014, (iii) theConsolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2016, 2015 and 2014, (iv) the ConsolidatedStatements of Changes in Equity for the years ended December 31, 2016, 2015 and 2014 (v) the Consolidated Statements of Cash Flows forthe years ended December 31, 2016, 2015 and 2014, and (vi) the Notes to the Consolidated Financial Statements.* Management contract or compensatory plan in which directors and/or executive officers are eligible to participate.The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than withrespect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations andwarranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may notdescribe the actual state of affairs as of the date they were made or at any other time.287Table of ContentsSCHEDULESCHEDULE II—VALUATION AND QUALIFYING ACCOUNTSValuation Allowance for Deferred Tax Assets (in thousands) Balance at Beginningof Period Tax ValuationAllowance Charged toIncome Tax Provision Tax ValuationAllowance Creditedto Income TaxProvision Balance at End ofPeriodYear Ended: December 31, 2014$— $4,153(1) $— $4,153December 31, 2015$4,153 $15,628(1) $— $19,781December 31, 2016$19,781 $— $10,013(2) $9,768 (1) Includes an increase in valuation allowance due to foreign tax credits, the benefit of which is not currently recognizable dueto uncertainty regarding realization.(2) Includes a decrease in the valuation allowance for foreign tax credits claimed as a deduction on the 2015 tax return.288Table of ContentsSIGNATURES Pursuant to requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized. Date:February 24, 2017 KKR & CO. L.P. By: KKR Management LLC, its General Partner Name:William J. Janetschek Title:Chief Financial Officer Pursuant to the requirements of the Exchange Act of 1934 this report has been signed below by the following persons on behalf of the registrant and in thecapacities indicated below on the dates indicated below. Signature Title Date /s/ HENRY R. KRAVIS Co-Chairman and Co-Chief Executive Officer Henry R. Kravis (principal executive officer) of KKR February 24, 2017 Management LLC /s/ GEORGE R. ROBERTS Co-Chairman and Co-Chief Executive Officer George R. Roberts (principal executive officer) of KKR February 24, 2017 Management LLC /s/ DAVID C. DRUMMOND Director of KKR Management LLC February 24, 2017David C. Drummond /s/ JOSEPH A. GRUNDFEST Director of KKR Management LLC February 24, 2017Joseph A. Grundfest /s/ JOHN. B. HESS Director of KKR Management LLC February 24, 2017John. B. Hess /s/ PATRICK F. RUSSO Director of KKR Management LLC February 24, 2017Patricia F. Russo /s/ THOMAS M. SCHOEWE Director of KKR Management LLC February 24, 2017Thomas M. Schoewe /s/ ROBERT W. SCULLY Director of KKR Management LLC February 24, 2017Robert W. Scully /s/ WILLIAM J. JANETSCHEK Chief Financial Officer (principal financial and accountingofficer) of KKR Management LLC February 24, 2017William J. Janetschek 289Table of ContentsINDEX TO EXHIBITS The following is a list of all exhibits filed or furnished as part of this report: 2.1 Merger Agreement, dated as of December 16, 2013, among KKR & Co. L.P., KKR Fund Holdings L.P., Copal Merger Sub LLC, a Delawarelimited liability company and KKR Financial Holdings LLC (incorporated by reference to Exhibit 2.1 to the KKR & Co. L.P. Current Reporton Form 8-K filed on December 17, 2013). 3.1 Certificate of Limited Partnership of the Registrant (incorporated by reference to Exhibit 3.1 to the KKR & Co. L.P. registration statement onForm S-1 (File No. 133-165414) filed on March 12, 2010 (the "Registration Statement"). 3.2 Third Amended and Restated Limited Partnership Agreement of the Registrant (incorporated by reference to Exhibit 3.1 to the KKR & Co.L.P. Current Report on Form 8-K filed on June 20, 2016). 3.3 Certificate of Formation of the Managing Partner of the Registrant (incorporated by reference to Exhibit 3.3 of the Registration Statement). 3.4 Second Amended and Restated Limited Liability Company Agreement of the Managing Partner of the Registrant (incorporated by reference toExhibit 3.1 to the KKR & Co. L.P. Quarterly Report on Form 10-Q filed on May 6, 2016). 4.1 Indenture dated as of September 29, 2010 among KKR Group Finance Co. LLC, KKR & Co. L.P., KKR Management Holdings L.P., KKRFund Holdings L.P. and The Bank of New York Mellon Trust Company, N. A., as trustee (incorporated by reference to Exhibit 4.1 to theKKR & Co. L.P. Current Report on Form 8-K filed on September 30, 2010). 4.2 First Supplemental Indenture dated as of September 29, 2010 among KKR Group Finance Co. LLC, KKR & Co. L.P., KKR ManagementHoldings L.P., KKR Fund Holdings L.P. and The Bank of New York Mellon Trust Company, N. A., as trustee (incorporated by reference toExhibit 4.2 to the KKR & Co. L.P. Current Report on Form 8-K filed on September 30, 2010). 4.3 Second Supplemental Indenture dated as of August 5, 2014 among KKR Group Finance Co. LLC, KKR & Co. L.P., KKR ManagementHoldings L.P., KKR Fund Holdings L.P., KKR International Holdings L.P. and The Bank of New York Mellon Trust Company, N.A., astrustee (incorporated by reference to Exhibit 4.1 to the KKR & Co. L.P. Quarterly Report on Form 10-Q filed on August 7, 2014). 4.4 Form of 6.375% Senior Note due 2020 (included in Exhibit 4.2 to the KKR & Co. L.P. Current Report on Form 8-K filed on September 30,2010). 4.5 Registration Rights Agreement of KKR & Co. L.P., dated as of October 1, 2012, by and among KKR & Co. L.P., AUSA Holding Companyand the other persons listed on the signature page thereto (incorporated by reference to Exhibit 4.1 to the KKR & Co. L.P. Quarterly Report onForm 10-Q filed on November 2, 2012). 4.6 Indenture dated as of February 1, 2013 among KKR Group Finance Co. II LLC, KKR & Co. L.P., KKR Management Holdings L.P., KKRFund Holdings L.P. and The Bank of New York Mellon Trust Company, N. A., as trustee (incorporated by reference to Exhibit 4.1 to theKKR & Co. L.P. Current Report on Form 8-K filed on February 1, 2013). 4.7 First Supplemental Indenture dated as of February 1, 2013 among KKR Group Finance Co. II LLC, KKR & Co. L.P., KKR ManagementHoldings L.P., KKR Fund Holdings L.P. and The Bank of New York Mellon Trust Company, N. A., as trustee (incorporated by reference toExhibit 4.2 to the KKR & Co. L.P. Current Report on Form 8-K filed on February 1, 2013).290Table of Contents 4.8 Second Supplemental Indenture dated as of August 5, 2014 among KKR Group Finance Co. II LLC, KKR & Co. L.P., KKR ManagementHoldings L.P., KKR Fund Holdings L.P., KKR International Holdings L.P. and The Bank of New York Mellon Trust Company, N.A., astrustee (incorporated by reference to Exhibit 4.2 to the KKR & Co. L.P. Quarterly Report on Form 10-Q filed on August 7, 2014). 4.9 Form of 5.500% Senior Note due 2043 (included in Exhibit 4.2 to the KKR & Co. L.P. Current Report on Form 8-K filed on February 1,2013). 4.10 Registration Rights Agreement of KKR & Co. L.P. dated as of February 19, 2014, by and among KKR & Co. L.P. and the sellers of Avocalisted on the signature pages thereto (included in Exhibit 4.8 to the KKR & Co. L.P. Annual Report on Form 10-K filed on February 24, 2014). 4.11 Indenture dated as of May 29, 2014 among KKR Group Finance Co. III LLC, KKR & Co. L.P., KKR Management Holdings L.P., KKR FundHoldings L.P. and The Bank of New York Mellon Trust Company, N. A., as trustee (incorporated by reference to Exhibit 4.1 to theKKR & Co. L.P. Current Report on Form 8-K filed on May 29, 2014). 4.12 First Supplemental Indenture dated as of May 29, 2014 among KKR Group Finance Co. III LLC, KKR & Co. L.P., KKR ManagementHoldings L.P., KKR Fund Holdings L.P. and The Bank of New York Mellon Trust Company, N. A., as trustee (incorporated by reference toExhibit 4.2 to the KKR & Co. L.P. Current Report on Form 8-K filed on May 29, 2014). 4.13 Second Supplemental Indenture dated as of August 5, 2014 among KKR Group Finance Co. III LLC, KKR & Co. L.P., KKR ManagementHoldings L.P., KKR Fund Holdings L.P., KKR International Holdings L.P. and The Bank of New York Mellon Trust Company, N.A., astrustee (incorporated by reference to Exhibit 4.3 to the KKR & Co. L.P. Quarterly Report on Form 10-Q filed on August 7, 2014).4.14 Form of 5.125% Senior Note due 2044 (included in Exhibit 4.2 to the KKR & Co. L.P. Current Report on Form 8-K filed on May 29, 2014). 4.15 Form of 6.75% Series A Preferred Unit Certificate (included in Exhibit 4.1 to the KKR & Co. L.P. Current Report on Form 8-K filed on March17, 2016). 4.16 Form of 6.50% Series B Preferred Unit Certificate (included in Exhibit 4.1 to the KKR & Co. L.P. Current Report on Form 8-K filed on June20, 2016). 4.17 Indenture, dated as of November 15, 2011, between the KKR Financial Holdings LLC and Wilmington Trust, National Association, as Trustee(incorporated by reference to Exhibit 4.1 to the KKR Financial Holdings LLC Current Report on Form 8-K filed on November 15, 2011). 4.18 Second Supplemental Indenture, dated as of March 20, 2012, between KKR Financial Holdings LLC, Wilmington Trust, National Association,as Trustee and Citibank, N.A., as Authenticating Agent, Paying Agent and Security Registrar (incorporated by reference to Exhibit 4.2 to theKKR Financial Holdings LLC Current Report on Form 8-K filed on March 20, 2012). 4.19 Form of 7.500% Senior Note due March 20, 2042 of KKR Financial Holdings LLC (incorporated by reference to Exhibit 4.2 to the KKRFinancial Holdings LLC Current Report on Form 8-K filed on March 20, 2012). 4.20 Share Designation of the 7.375% Series A LLC Preferred Shares of KKR Financial Holdings LLC, dated as of January 17, 2013 (incorporatedby reference to Exhibit 3.1 to the KKR Financial Holdings LLC Current Report on Form 8-K filed on January 17, 2013). 4.21 Registration Rights Agreement, dated as of November 2, 2015, by and among KKR & Co. L.P., MW Group (GP) LTD and the other personslisted on the signature pages thereto (incorporated by reference to Exhibit 4.2 of the Registration Statement on Form S-3 (No. 333-208019)filed on November 13, 2015).291Table of Contents 10.1 Second Amended and Restated Limited Partnership Agreement of KKR Management Holdings L.P. dated October 1, 2009 (incorporated byreference to Exhibit 10.1 of the Registration Statement). 10.1.1 Amendment No. 1 to the Second Amended and Restated Limited Partnership Agreement of KKR Management Holdings L.P., dated March 17,2016 (incorporated by reference to Exhibit 10.1 to the KKR & Co. L.P. Current Report on Form 8-K filed on March 17, 2016). 10.1.2 Amendment No. 2 to the Second Amended and Restated Limited Partnership Agreement of KKR Management Holdings L.P., dated June 20,2016 (incorporated by reference to Exhibit 10.1 to the KKR & Co. L.P. Current Report on Form 8-K filed on June 20, 2016). 10.2 Second Amended and Restated Limited Partnership Agreement of KKR Fund Holdings L.P. dated October 1, 2009 (incorporated by referenceto Exhibit 10.2 of the Registration Statement). 10.2.1 Amendment to Second Amended and Restated Limited Partnership Agreement of KKR Fund Holdings L.P. dated August 5, 2014(incorporated by reference to Exhibit 10.3 to the KKR & Co. L.P. Quarterly Report on Form 10-Q filed on August 7, 2014). 10.2.2 Amendment to Second Amended and Restated Limited Partnership Agreement of KKR Fund Holdings L.P., dated March 17, 2016(incorporated by reference to Exhibit 10.2 to the KKR & Co. L.P. Current Report on Form 8-K filed on March 17, 2016). 10.2.3 Amendment to Second Amended and Restated Limited Partnership Agreement of KKR Fund Holdings L.P., dated June 20, 2016 (incorporatedby reference to Exhibit 10.2 to the KKR & Co. L.P. Current Report on Form 8-K filed on June 20, 2016). 10.3 Amended and Restated Limited Partnership Agreement of KKR International Holdings L.P., dated August 5, 2014 (incorporated by referenceto Exhibit 10.1 to the KKR & Co. L.P. Quarterly Report on Form 10-Q filed on August 7, 2014). 10.3.1 Amendment to Amended and Restated Limited Partnership Agreement of KKR International Holdings L.P., dated March 17, 2016(incorporated by reference to Exhibit 10.3 to the KKR & Co. L.P. Current Report on Form 8-K filed on March 17, 2016). 10.3.2 Amendment to Amended and Restated Limited Partnership Agreement of KKR International Holdings L.P., dated June 20, 2016 (incorporatedby reference to Exhibit 10.3 to the KKR & Co. L.P. Current Report on Form 8-K filed on June 20, 2016). 10.4 Registration Rights Agreement dated July 14, 2010, by and among KKR & Co. L.P., KKR Holdings L.P. and the persons from time to timeparty thereto (incorporated by reference to Exhibit 10.2 to the KKR & Co. L.P. Current Report on Form 8-K filed on July 20, 2010). 10.5*Form of KKR & Co. L.P. 2010 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 to Amendment No. 3 to the RegistrationStatement filed on June 3, 2010). 10.6 Tax Receivable Agreement (incorporated by reference to Exhibit 10.3 to the KKR & Co. L.P. Current Report on Form 8-K filed on July 20,2010). 10.7 Amended and Restated Exchange Agreement (incorporated by reference to Exhibit 10.1 to the KKR & Co. L.P. Current Report on Form 8-Kfiled on November 3, 2010).292Table of Contents10.8 Amendment and Joinder Agreement to Exchange Agreement, dated as of August 5, 2014 among KKR Management Holdings L.P., KKR FundHoldings L.P., KKR Holdings L.P., KKR & Co. L.P., KKR Group Holdings L.P., KKR Subsidiary Partnership L.P., KKR Group Limited, andKKR International Holdings L.P. (incorporated by reference to Exhibit 10.2 to the KKR & Co. L.P. Quarterly Report on Form 10-Q filed onAugust 7, 2014). 10.9 Credit Agreement, dated as of October 22, 2014, among Kohlberg Kravis Roberts & Co. L.P., KKR Fund Holdings L.P., KKR ManagementHoldings L.P. and KKR International Holdings L.P., the other borrowers from time to time party thereto, the guarantors from time to timeparty thereto, the lending institutions from time to time party thereto and HSBC Bank USA, National Association, as Administrative Agent.(incorporated by reference to Exhibit 10.1 to the KKR & Co. L.P. Current Report on Form 8-K filed October 24, 2014). 10.10 Amendment No. 1 to Credit Agreement, dated as of August 18, 2015 by and among Kohlberg Kravis Roberts & Co. L.P. and HSBC BankUSA, National Association (incorporated by reference to Exhibit 10.1 to the KKR & Co. L.P. Quarterly Report on Form 10-Q filed November5, 2015). 10.11*Form of Confidentiality and Restrictive Covenant Agreement (Founders) (incorporated by reference to Exhibit 10.10 of the RegistrationStatement). 10.12*Form of Indemnification Agreement by and among each member of the Board of Directors of KKR Management LLC, KKRManagement LLC and KKR & Co. L.P. (incorporated by reference to Exhibit 10.4 to the KKR & Co. L.P. Current Report on Form 8-K filedon July 20, 2010). 10.13*Independent Director Compensation Program (incorporated by reference to Exhibit 10.15 of the KKR & Co. L.P. Annual Report on Form 10-K filed on March 7, 2011). 10.14*Form of Grant Certificate (incorporated by reference to Exhibit 10.3 to the KKR & Co. L.P. Quarterly Report on Form 10-Q filed on May 5,2011). 10.15*Form of Public Company Equity Unit Award Agreement of KKR & Co. L.P. (Directors) (incorporated by reference to Exhibit 10.1 of theKKR & Co. L.P. Quarterly Report on Form 10-Q filed on August 3, 2012). 10.16*Form of Public Company Holdings Unit Award Agreement of KKR & Co. L.P. (Executive Officers) (incorporated by reference toExhibit 10.17 of the KKR & Co. L.P. Annual Report on Form 10-K filed on February 27, 2015). 10.17*Form of Public Company Holdings Unit Award Agreement of KKR & Co. L.P. (Executive Officers) (incorporated by reference to Exhibit10.19 of the KKR & Co. L.P. Annual Report on Form 10-K filed on February 26, 2016). 10.18*Form of Public Company Holdings Unit Award Agreement of KKR & Co. L.P. (Executive Officers). 10.19*Form of Grant Certificate (Executive Officers). 10.20 Development Agreement, dated as of October 28, 2015, by and between ERY Developer LLC and KKR HY LLC (incorporated by referenceto Exhibit 10.23 of the KKR & Co. L.P. Annual Report on Form 10-K filed on February 26, 2016). 21.1 Subsidiaries of the Registrant 23.1 Consent of Independent Registered Public Accounting Firm Relating to the Financial Statements of KKR & Co. L.P. 293Table of Contents31.1 Certification of Co-Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, asamended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Co-Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, asamended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.3 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, asadopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Actof 2002. 32.2 Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Actof 2002. 32.3 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of2002. 99.1 Section 13(r) Disclosure 101 Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Statements of Financial Condition as of December 31, 2016and December 31, 2015, (ii) the Consolidated Statements of Operations for the years ended December 31, 2016, 2015 and 2014, (iii) theConsolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2016, 2015 and 2014, (iv) the ConsolidatedStatements of Changes in Equity for the years ended December 31, 2016, 2015 and 2014 (v) the Consolidated Statements of Cash Flows forthe years ended December 31, 2016, 2015 and 2014, and (vi) the Notes to the Consolidated Financial Statements.* Management contract or compensatory plan in which directors and/or executive officers are eligible to participate.The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than withrespect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations andwarranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may notdescribe the actual state of affairs as of the date they were made or at any other time.294Exhibit 10.18 PUBLIC COMPANY HOLDINGS UNIT AWARD AGREEMENT OF KKR & CO. L.P.(Executive Officers)CONFIDENTIAL Table of ContentsPageARTICLE I GRANT OFPUBLIC COMPANY HOLDINGS UNITS 2Section 1.1. Grantof Public Company Holdings Units; Conditions of Grant 2Section 1.2. REUsand Agreement Subject to Plan; Administrator 2ARTICLE II VESTING andSETTLEMENT OF REUS 3Section 2.1. Vesting of REUs 3Section 2.2. Settlement of REUs 4Section 2.3. NoDistribution Payments 5ARTICLE IIIRESTRICTIONS ON TRANSFERS AND OTHER LIMITATIONS 5Section 3.1. Transfer Restrictions on REUs 5Restrictive Covenants5Section 3.3. Post-Settlement Transfer Restrictions on Common Units 5Section 3.4. Transfers to Other Holders 7Section 3.5. Minimum Retained Ownership Requirement 8ARTICLE IVMISCELLANEOUS 9Section 4.1. Governing Law 9Section 4.2. Arbitration 9Section 4.3. Remedies; Recoupment; Right to Set-Off 10Section 4.4. Amendments and Waivers 10Section 4.5. Withholding 11Section 4.6. Notices 12Section 4.7. EntireAgreement; Termination of Agreement; Survival 12Section 4.8. Severability 12Section 4.9. Binding Effect 13Section 4.10. Appendices 13Section 4.11. Further Assurances 13Section 4.12. Interpretation; Defined Terms; Section 409A; Employment with Designated Service Recipient; Headings 13Section 4.13. Counterparts 14APPENDIX A DEFINITIONSA-1APPENDIX B REU GRANT CERTIFICATEB-1APPENDIX C ADDITIONAL TERMS AND CONDITIONSC-1APPENDIX D CONFIDENTIALITY AND RESTRICTIVE COVENANT OBLIGATIONSD-1APPENDIX E KKR & CO. L.P. 2010 EQUITY INCENTIVE PLANE-1i PUBLIC COMPANY HOLDINGS UNIT AWARD AGREEMENT OF KKR & CO L.P.This PUBLIC COMPANY HOLDINGS UNIT AWARD AGREEMENT (this “ Agreement ”) of KKR & CO L.P. (the “ Partnership”) is made by and between the Partnership and the undersigned (the “ Grantee ”). Capitalized terms used herein and nototherwise defined herein or in the KKR & Co. L.P. 2010 Equity Incentive Plan, as amended from time to time (the “ Plan ”), shallbe as defined in Appendix A attached hereto and the Plan is hereby attached as Appendix E and incorporated by referenceherein.RECITALSWHEREAS , the general partner of the Partnership has determined it is in the best interests of the Partnership to provide theGrantee with this Agreement pursuant to and in accordance with the terms of the Plan.NOW, THEREFORE , in consideration of the mutual promises and agreements herein made and intending to be legally boundhereby, the parties hereto agree to the following:ii ARTICLE I GRANT OF PUBLIC COMPANY HOLDINGS UNITSSection 1.1. Grant of Public Company Holdings Units; Conditions of GrantThe Partnership hereby grants to the Grantee, effective as of the Grant Date specified on the REU Grant Certificate attachedhereto as Appendix B (the “ Grant Date ”), the number of “public company holdings units”, which are restricted equity units setforth in the REU Grant Certificate attached hereto, subject to the terms and conditions of this Agreement. Each restricted equityunit that is granted pursuant to this Agreement represents the right to receive delivery of one Common Unit, subject to anyadjustment pursuant to Section 9 of the Plan (each such restricted equity unit, an “ REU ”). Notwithstanding the foregoing, thegrant of REUs hereunder is conditioned upon the Grantee’s agreement to the covenants and obligations contained in theConfidentiality and Restrictive Covenant Obligations attached hereto as Appendix D incorporated herein by reference.Section 1.2. REUs and Agreement Subject to Plan; AdministratorThis Agreement and the grant of REUs provided for herein shall be subject to the provisions of the Plan, except that if there areany express differences or inconsistencies between the provisions of the Plan and this Agreement, the provisions of thisAgreement shall govern. For the avoidance of doubt, the Partnership may delegate to any employee of the KKR Group its dutiesand powers hereunder, and any reference to the “Administrator” contained herein shall be deemed to include any such delegate.ARTICLE II VESTING AND SETTLEMENT OF REUSSection 2.1. Vesting of REUs(a)The following vesting provisions shall apply to the REUs:(i)Subject to the Grantee’s continued Employment through the Service Vesting Date or Service Vesting Dates, asapplicable, as specified in the REU Grant Certificate attached hereto, the REUs shall become vested onsuch date or dates, as applicable, as to the percentage(s) set forth in such REU Grant Certificate.(ii)If, prior to the date the REUs are vested as provided in Section 2.1(a)(i) above or otherwise terminate and areforfeited pursuant to Section 2.1(b) and (c) below: (A) the Grantee’s Employment terminates due to theGrantee’s Retirement, if applicable, then all Retirement REUs shall, in the discretion of theAdministrator, be fully vested as a result thereof; (B) the Grantee dies or experiences a Disability, thenall unvested REUs shall be vested as a result thereof, provided that if the Grantee is not an employee ofthe KKR Group, then any vesting of unvested REUs described in this clause (B) shall be in thediscretion of the Administrator; or (C) there occurs a Change in Control prior to any termination of theGrantee’s Employment,iii then all or any portion of any unvested REUs may, in the discretion of the Administrator, be vested as aresult thereof. Notwithstanding the foregoing, if the Partnership receives an opinion of counsel that therehas been a legal judgment and/or legal development in the Grantee’s jurisdiction that would likely result inthe favorable treatment applicable to the Retirement REUs pursuant to this Section 2.1(a)(ii) being deemedunlawful and/or discriminatory, then the Partnership will not apply the favorable treatment at the time theGrantee’s Employment terminates due to the Grantee’s Retirement under clause (A) above, and the REUswill be treated as set forth in Section 2.1(a)(i), 2.1(b), 2.1(c) or the other provisions of this Section 2.1(a)(ii),as applicable.(iii)All REUs that become vested under this Section 2.1(a) are eligible to be Settled pursuant to Section 2.2 of thisAgreement.(b)If the Grantee’s Employment terminates for any reason other than due to the Grantee’s death, Disability orRetirement, each as provided for in Section 2.1(a) above, all then unvested REUs (including any REUs that arenot Retirement REUs) shall immediately terminate and be forfeited without consideration, and no Common Unitsshall be delivered hereunder.(c)The Grantee’s right to vest in the REUs under the Plan, if any, will terminate effective as of the date that theGrantee is no longer actively providing services (even if still considered employed or engaged under local Law)and will not be extended by any notice period mandated under local Law (e.g., active Employment would notinclude a period of “garden leave” or similar period pursuant to local Law) except as may be otherwise agreed inwriting by the Partnership or the Designated Service Recipient with the Grantee; the Administrator shall have theexclusive discretion to determine when the Grantee is no longer actively employed or engaged for purposes of theREUs.Section 2.2. Settlement of REUs(a)To the extent that (i) an REU granted hereunder becomes vested pursuant to Section 2.1(a) above and (ii) therelated Service Vesting Date has also occurred, then with respect to such percentage of REUs set forth next tothe applicable Service Vesting Date on the REU Grant Certificate, such REU shall be Settled as soon asadministratively practicable on or following the applicable Service Vesting Date for such REU; provided that theAdministrator may determine that such Settlement may instead occur on or as soon as administratively practicableafter the first day of the next permissible trading window of Common Units that opens for employees of the KKRGroup to sell Common Units (provided that in any event such Settlement shall not be later than the time permittedunder Section 409A, if applicable). For the avoidance of doubt, the Settlement of any REUs that become vestedpursuant to Section 2.1(a)(ii) above shall not be accelerated, such that, with respect to any such REUs, only thatpercentage of such REUs that would otherwise have become vested on each applicable Service Vesting Date asset forth on the REU Grant Certificate pursuant to Section 2.1(a)(i) shall be Settled at each such Service VestingDate in accordance with the foregoing sentence. The date on which any REU is to be Settlediv hereunder is referred to as a “ Delivery Date. ” The Settlement of each REU shall be effected in accordance with,and subject to the provisions of, Section 2.2(b) below.(b)On any Delivery Date, each vested REU that is then being Settled shall be cancelled in exchange for thePartnership delivering to the Grantee either (i) the number of Common Units equal to the number of REUs that areto be Settled on such Delivery Date pursuant to Section 2.2(a) above or (ii) an amount of cash, denominated inU.S. dollars, equal to the Fair Market Value of the foregoing number of Common Units (a “ Cash Payment ”). TheAdministrator may elect in its sole discretion whether to Settle the REUs in Common Units or by a Cash Payment,and in the case of the Cash Payment, whether to have the Cash Payment delivered by the member of the KKRGroup that employs or engages the Grantee or to which the Grantee otherwise is rendering services (the “Designated Service Recipient ”).(c)Subject to the provisions of this Article II relating to the number of REUs that are to be Settled on any applicableDelivery Date and solely to the extent permitted under Section 409A, if applicable, the Partnership may imposesuch other conditions and procedures in relation to the Settlement of REUs as it may reasonably determine. Inaddition to the foregoing and notwithstanding anything else in this Agreement, the Administrator may require thatany or all of the Common Units that may be delivered to the Grantee under this Section 2.2 that the Granteeintends to sell, from time to time, may only be sold through a coordinated sales program as defined by theAdministrator.(d)Any of the foregoing payments or deliveries shall in all instances be subject to Sections 4.3 and 4.5 below, asapplicable.Section 2.3. No Distribution PaymentsThe REUs granted to the Grantee hereunder do not include the right to receive any distribution payments.ARTICLE III RESTRICTIONS ON TRANSFERS AND OTHER LIMITATIONSSection 3.1. Transfer Restrictions on REUs(a)The Grantee may not Transfer all or any portion of the Grantee’s REUs to any Other Holder (including to anyFamily Related Holder) without the prior written consent of the Administrator, which consent may be given orwithheld, or made subject to such conditions (including the receipt of such legal or tax opinions and otherdocuments that the Partnership may require) as are determined by the Administrator, in its sole discretion.(b)Any Transfer of REUs by the Grantee to Other Holders permitted by the Administrator pursuant to Section 3.1(a)shall be made in accordance with Section 3.4.v (c)Any purported Transfer of REUs that is not in accordance with this Section 3.1 is null and void.Section 3.2. Confidentiality and Restrictive CovenantsThe Grantee acknowledges and agrees that Grantee is bound by and will comply with the Confidentiality and RestrictiveCovenant Obligations contained in Appendix D, which obligations are incorporated by reference herein, and any otheragreements that the Grantee has entered into with the Designated Service Recipient, the Partnership, KKR Holdings L.P., KKRAssociates Holdings L.P., or any other member of the KKR Group, with respect to the Grantee’s obligation to keep confidentialthe nonpublic, confidential or proprietary information of the KKR Group and its Affiliates and any restrictive covenants concerningthe Grantee’s obligations not to compete with the KKR Group or solicit its clients or employees after termination of Employment),as such agreements may be amended from time to time. If the Grantee is a limited partner of KKR Holdings L.P. or KKRAssociates Holdings L.P., the Grantee further acknowledges and agrees that references to a Confidentiality and RestrictiveCovenant Agreement in the limited partnership agreements of KKR Holdings L.P. and KKR Associates Holdings L.P. shall bedeemed to include and also refer to the Confidentiality and Restrictive Covenant Obligations contained in Appendix D hereto.Section 3.3. Post-Settlement Transfer Restrictions on Common UnitsThe provisions of this Section 3.3 shall or shall not be applicable to the REUs granted to the Grantee hereunder as indicated onthe REU Grant Certificate.(a)The Grantee may not Transfer all or any portion of the Grantee’s Transfer Restricted Common Unit (as definedbelow) (including to any Family Related Holder) without the prior written consent of the Administrator, whichconsent may be given or withheld, or made subject to such conditions (including the receipt of such legal or taxopinions and other documents that the Partnership may require) as are determined by the Administrator, in its solediscretion. For the avoidance of doubt, Transfer Restricted Common Units may only be held in an account with aninstitution, and subject to terms and conditions, which have been approved by the Administrator from time to time.Any Transfer of Transfer Restricted Common Units by the Grantee to Other Holders permitted by theAdministrator pursuant to Section 3.3(a) shall be made in accordance with Section 3.4.(b)A “ Transfer Restricted Common Unit ” refers to all Common Units delivered upon Settlement of a vested REUuntil (i) the first anniversary of the Service Vesting Date related thereto, in the case of 50% of such Common Unitsand (ii) the second anniversary of such Service Vesting Date, in the case of the other 50% of such Common Units.(c)If the Grantee breaches in any significant or intentional manner, as determined by the Administrator in his solediscretion, any of the Grantee’s covenants as stated in the Confidentiality and Restrictive Covenant Obligationscontained in Appendix D, the Administrator, in his sole discretion, may direct that the Grantee forfeit all or aportion of the Transfer Restricted Common Units held by the Grantee in an amount determined by theAdministrator in his sole discretion. The Grantee hereby consents and agrees to immediately surrender anddeliver such Transfer Restricted Common Units to the Partnership, without the payment of any consideration,receipt of any further notice or fulfillment of any other condition.(d)If for any reason the Grantee’s Employment is terminated for Cause, unless otherwise determined by theAdministrator in writing, all Transfer Restricted Common Units held by the Grantee shall automatically be forfeitedby the Grantee without payment of any consideration. The Grantee hereby consents and agrees to immediatelysurrender and deliver such Transfer Restricted Common Units to the Partnership, without the payment of anyconsideration, receipt of any further notice or fulfillment of any other condition.(e)Any forfeiture of Transfer Restricted Common Units contemplated by Section 3.3(c) or Section 3.3(d) shall requireno additional procedures on the part of the Partnership or its Affiliates. The Grantee hereby acknowledges that theAdministrator may take any and all actions to reflect the forfeiture of Transfer Restricted Common Unitshereunder, including but not limited to the delivery of avi written notice to the institution contemplated in Section 3.3(a) that holds the Transfer Restricted Common Units,and agrees to take any further action to memorialize such forfeiture as the Administrator may require.(f)The Administrator may, from time to time, waive the provisions of this Section 3.3, subject to the imposition of anyconditions or further requirements, as determined by the Administrator in his sole discretion. Without limiting theforegoing, (i) the Administrator may impose equivalent transfer or forfeiture restrictions on the Grantee’s otherequity, if any, held in KKR Holdings, L.P., the Partnership or any of their respective Affiliates (or any of theirrespective equity incentive plans) to the extent that the provisions of this Section 3.3 are waived, and (ii) theGrantee hereby consents in advance to the imposition of such equivalent transfer or forfeiture restrictions forpurposes of the governing documents of Grantee’s other equity, if any, held in KKR Holdings, L.P., thePartnership or any of their respective Affiliates (or any of their respective equity incentive plans) to the extent theAdministrator waives the application of this Section 3.3 to the Transfer Restricted Common Units.(g)For the avoidance of doubt, the provisions of this Section 3.3 also apply in the event the Grantee receives a CashPayment in Settlement of a vested REU on a Delivery Date as provided in Section 2.2(b).(h)Any purported Transfer of Transfer Restricted Common Units that is not in accordance with this Section 3.3 is nulland void.Section 3.4. Transfers to Other Holders(a)Transfers of REUs or Transfer Restricted Common Units by the Grantee to Other Holders are not permittedunless the Administrator provides his prior written consent pursuant Section 3.1 or Section 3.3. Prior to a Transferof any REUs or Transfer Restricted Common Units to any Other Holder, the Other Holder must consent in writingto be bound by this Agreement as an Other Holder and deliver such consent to the Administrator.(b)If an REU or Transfer Restricted Common Unit is held by an Other Holder, such Other Holder shall be bound bythis Agreement in the same manner and to the same extent as the Grantee is bound hereby (or would be boundhereby had the Grantee continued to hold such REU or Transfer Restricted Common Unit). Any Transfer to anOther Holder must be undertaken in compliance with Section 3.1(a). For the avoidance of doubt, any vestingrequirement of Section 2.1 above that applies to an REU or transfer or forfeiture restrictions that are applicable toTransfer Restricted Common Units (including those Transfer Restricted Common Units delivered upon Settlementof a Transferred REU) held by an Other Holder shall be satisfied or deemed to be satisfied under this Article IIIonly to the extent that such vesting requirement or transfer or forfeiture restrictions, as applicable, would otherwisehave been satisfied if the REU or Transfer Restricted Common Unit had not been Transferred by the Grantee, andany REU and Transfer Restricted Common Unit, as applicable, that is held by an Other Holder shall cease to beheld by such Other Holder under this Article III if the REU or Transfer Restricted Common Unit, as applicable,would have then ceased to be held by the Grantee if the REU or Transfer Restricted Common Unit had not beenTransferred by the Grantee to such Other Holder.vii (c)In the event of a property settlement or separation agreement between the Grantee and his or her spouse, theGrantee agrees that he or she shall use reasonable efforts to retain all of his or her REUs and Transfer RestrictedCommon Units and shall reimburse his or her spouse for any interest he or she may have under this Agreementout of funds, assets or proceeds separate and distinct from his or her interest under this Agreement.Section 3.5. Minimum Retained Ownership RequirementThe provisions of this Section 3.5 shall or shall not be applicable to the REUs granted to the Grantee hereunder as indicated onthe REU Grant Certificate.(a)For so long as the Grantee retains his or her Employment, the Grantee (collectively with all Family RelatedHolders who become Other Holders, if applicable) must continuously hold an aggregate number of Common UnitEquivalents that is at least equal to fifteen percent (15%) of the cumulative amount of (x) all REUs granted to theGrantee under this Agreement and (y) all other REUs designated as “public company holdings units” that havebeen or are hereafter granted to the Grantee under the Plan, in each case that have become vested pursuant toSection 2.1(a) (or similar provision in any other “public company holdings units” grant agreement), prior to any netSettlement permitted by Section 4.5.(b)“ Common Unit Equivalents ” means any combination of: (i) REUs that are or become vested pursuant toSection 2.1 of this Agreement and Common Units delivered upon Settlement of any such REUs (even if they areTransfer Restricted Common Units) and (ii) REUs designated as “public company holdings units” granted to theGrantee under the Plan that are or become vested pursuant to a provision similar to Section 2.1 of this Agreementand Common Units delivered upon Settlement of any such REUs (even if a provision similar to the transferrestrictions on Transfer Restricted Common Units has not yet been satisfied).(c)The Administrator may, from time to time, waive the provisions of this Section 3.5, subject to the imposition of anyconditions or further requirements, as determined by the Administrator in his sole discretion. Without limiting theforegoing, (i) the Administrator may impose equivalent transfer restrictions on the Grantee’s other equity, if any,held in KKR Holdings, L.P., the Partnership or any of their respectiveAffiliates (or any of their respective equity incentive plans) to the extent that the provisions of this Section 3.5 arewaived, and (ii) the Grantee hereby consents in advance to the imposition of such equivalent transfer restrictionsfor purposes of the governing documents of Grantee’s other equity, if any, held in KKR Holdings, L.P., thePartnership or any of their respective Affiliates (or any of their respective equity incentive plans) to the extent theAdministrator waives the application of this Section 3.5 to the Common Unit Equivalents.(d)Any purported Transfer of any Common Units that would result in a violation of this Section 3.5 is null and void.Notwithstanding anything to the contrary contained in this Agreement (including, without limitation, Section 4.7)this Section 3.5 shall survive any termination of this Agreement.ARTICLE IV MISCELLANEOUSSection 4.1. Governing LawThis Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, United States ofAmerica, without giving effect to any otherwise governing principles of conflicts of law that would apply the Laws of anotherjurisdiction.Section 4.2. Arbitration(a)Any and all disputes which cannot be settled amicably, including any ancillary claims of any party, arising out of,relating to or in connection with the validity, negotiation, execution, interpretation, performance or non-performance of this Agreement (including the validity, scope and enforceability of this arbitration provision) shallbe finally settled by arbitration conducted by a single arbitrator in New York, New York in accordance with thethen-existing Rules of Arbitration of the International Chamber of Commerce. If the parties to the dispute fail toagree on the selection of an arbitrator within 30 days of the receipt of the request for arbitration, the InternationalChamber of Commerce shall make the appointment. The arbitrator shall be a lawyer and shall conduct theproceedings in the English language. Performance under this Agreement shall continue if reasonably possibleduring any arbitration proceedings. Except as required by Law or as may be reasonably required in connectionwith ancillary judicial proceedings to compel arbitration, to obtain temporary or preliminary judicial relief in aid ofarbitration, or to confirm or challenge an arbitration award, the arbitration proceedings, including any hearings,shall be confidential, and the parties shall not disclose any awards, any materials in the proceedings created forthe purpose of the arbitration, or any documents produced by another party in the proceedings not otherwise inthe public domain. Judgment on any award rendered by an arbitration tribunal may be entered in any court havingjurisdiction thereover.(b)Notwithstanding the provisions of Section 4.2(a), the Partnership may bring an action or special proceeding in anycourt of competent jurisdiction for the purpose of compelling the Grantee to arbitrate, seeking temporary orpreliminary relief in aid of an arbitration hereunder, or enforcing an arbitration award and, for the purposes of thisclause (b), the Grantee (i) expressly consents to the application of Section 4.2(c) below to any such action orproceeding, (ii) agrees that proof shall not be required that monetary damages for breach of the provisions of thisAgreement would be difficult to calculate and that remedies at law would be inadequate, and (iii) irrevocablyappoints the Secretary or General Counsel of the Partnership (or any officer of the Partnership) at the addressidentified for the Partnership as set forth in Section 4.6 below as such Grantee’s agent for service of process inconnection with any such action or proceeding and agrees that service of process upon such agent, who shallpromptly advise such Grantee of any such service of process, shall be deemed in every respect effective serviceof process upon the Grantee in any such action or proceeding.(c)EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE U.S. FEDERAL ANDSTATE COURTS LOCATED IN NEW YORK, NEW YORK FOR THE PURPOSE OF ANY JUDICIALPROCEEDING BROUGHT IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 4.2, OR ANYJUDICIAL PROCEEDING ANCILLARY TO AN ARBITRATION OR CONTEMPLATED ARBITRATION ARISINGOUT OF OR RELATING TO OR CONCERNING THIS AGREEMENT. Such ancillary judicial proceedings includeany suit, action or proceeding to compel arbitration, to obtain temporary or preliminary judicial relief in aid ofarbitration, or to confirm or challenge an arbitration award. The parties acknowledge that the forums designated bythis clause (c) haveviii a reasonable relation to this Agreement and to the parties’ relationship with one another. The parties herebywaive, to the fullest extent permitted by applicable Law, any objection which they now or hereafter may have topersonal jurisdiction or to the laying of venue of any such ancillary suit, action or proceeding referred to in thisSection 4.2 brought in any court referenced therein and such parties agree not to plead or claim the same.Section 4.3. Remedies; Recoupment; Right to Set-Off(a)The rights and remedies provided by this Agreement are cumulative and the use of any one right or remedy byany party shall not preclude or waive its right to use any or all other remedies. Said rights and remedies are givenin addition to any other rights the parties may have by Law or under the terms of any other applicable agreement.(b)To the extent required or advisable, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Actand any rules promulgated thereunder and any other similar Laws including but not limited to the EuropeanDirectives 2011/61/EU, 2013/36/EU and 2014/91/EU, the Administrator may specify in any other document or apolicy to be incorporated into this Agreement by reference, that the Grantee’s rights, payments, and benefits withrespect to REUs awarded hereunder and/or Common Units delivered to the Grantee in respect of REUs awardedhereunder shall be subject to reduction, cancellation, forfeiture or recoupment.(c)The Administrator may set-off any amounts due under this Agreement or otherwise against any amounts whichmay be owed to the Partnership or its Affiliates by the Grantee under this Agreement, any other relationship orotherwise. The Grantee hereby expressly authorizes the Partnership and its Affiliates to take any and all actionson the Grantee’s behalf (including, without limitation, payment, credit and satisfaction of amounts owed) inconnection with the set-off of any amounts owed to the Partnership or its Affiliates or otherwise.Section 4.4. Amendments and Waivers(a)This Agreement (including the Definitions contained in Appendix A attached hereto, the REU Grant Certificateattached as Appendix B hereto, the Additional Terms and Conditions attached as Appendix C hereto, theConfidentiality and Restrictive Covenant Obligations attached as Appendix D hereto, and any other provisions asmay be required to be appended to this Agreement under applicable local Law) may be amended, supplemented,waived or modified only in accordance with Section 4(c) of the Plan or Section 13 of the Plan, as applicable, or asmay be required for purposes of compliance or enforceability with applicable local Law; provided, however, thatthe REU Grant Certificate shall be deemed amended from time to time to reflect any adjustments provided forunder the Plan.(b)No failure or delay by any party in exercising any right, power or privilege hereunder (other than a failure or delaybeyond a period of time specified herein) shall operate as a waiver thereof nor shall any single or partial exercisethereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.Section 4.5. WithholdingRegardless of any action the Partnership or the Designated Service Recipient takes with respect to any or all income tax, socialinsurance, payroll tax, payment on account or other tax-related items related to the Grantee’s participation in the Plan and legallyapplicable to the Grantee (“ Tax-Related Items ”), the Grantee acknowledges that the ultimate liability for all Tax-Related Itemsis and remains the Grantee’s responsibility and may exceed the amount actually withheld by the Partnership or the DesignatedService Recipient. The Grantee further acknowledges that the Partnership and/or the Designated Service Recipient (1) make norepresentations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the REUs,including, but not limited to, the grant, vesting or Settlement of the REUs, the delivery of Common Units or a Cash Paymentupon Settlement of the REUs, the lapse of any restrictions imposed on the Grantee’s Transfer Restricted Common Units, thesubsequent sale of Common Units acquired under the Plan and the receipt of any distributions; and (2) do not commit to and areunder no obligation to structure the terms of the REUs or any aspect of the REUs to reduce or eliminate the Grantee’s liability forTax-Related Items or achieve any particular tax result. Further, if the Grantee has become subject to tax in more than onejurisdiction, the Grantee acknowledges that the Partnership and/or the Designated Service Recipient (or the Affiliate formerlyemploying, engaging or retaining the Grantee, as applicable) may be required to withhold or account for Tax-Related Items inmore than one jurisdiction.Prior to any relevant taxable or tax withholding event, as applicable, the Grantee will pay or make adequate arrangementssatisfactory to the Partnership and/or the Designated Service Recipient to satisfy all Tax-Related Items. In this regard, theGrantee authorizes the Partnership and/or the Designated Service Recipient, or their respective agents, at their discretion, tosatisfy the obligations with regard to all Tax-Related Items by one or a combination of the following:(a)withholding from the Cash Payment, the Grantee’s wages or other cash compensation paid to the Grantee by thePartnership and/or the Designated Service Recipient; or(b)withholding from proceeds of the sale of Common Units delivered upon Settlement of the REUs either through avoluntary sale or through a mandatory sale arranged by the Partnership (on the Grantee’s behalf pursuant to thisauthorization); or(c)withholding in Common Units to be delivered upon Settlement of the REUs.To avoid negative accounting treatment, the Partnership may withhold or account for Tax-Related Items by consideringapplicable minimum statutory withholding amounts or other applicable withholding rates. If the obligation for Tax-Related Items issatisfied by withholding in Common Units, for tax purposes, the Grantee is deemed to have been issued the full number ofCommon Units subject to the Settled Common Units, notwithstanding that a number of the Common Units are held back solelyfor the purpose of paying the Tax-Related Items due as a result of any aspect of the Grantee’s participation in the Plan.Finally, the Grantee shall pay to the Partnership or the Designated Service Recipient any amount of Tax-Related Items that thePartnership or the Designated Service Recipient may be required to withhold or account for as a result of the Grantee’sparticipation in the Plan that cannot be satisfied by the means previously described. The Partnership may refuse to issue ordeliver the Common Units, the Cash Payment or the proceeds of the sale of Common Units, if the Grantee fails to comply withthe Grantee’s obligations in connection with the Tax-Related Items.Section 4.6. NoticesAll notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall bedeemed to have been duly given upon receipt) by delivery in person, by courier service, by fax or by registered or certified mail(postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for aparty as shall be specified for purposes of notice given in accordance with this Section 4.6):(a)If to the Partnership, to:KKR & Co. L.P. 9 West 57th Street, Suite 4200 New York, New York 10019U.S.A. Attention: Chief Financial Officer(b)If to the Grantee, to the most recent address for the Grantee in the books and records of the Partnership or theDesignated Service Recipient.Section 4.7. Entire Agreement; Termination of Agreement; Survival(a)This Agreement constitutes the entire agreement among the parties hereto pertaining to the subject matter hereofand supersedes all prior agreements and understandings, whether oral or written, pertaining thereto. The Granteeacknowledges that the grant of REUs provided for under this Agreement is in full satisfaction of any and all grantsof equity or equity-based awards that representatives of the Partnership or its Affiliates, on or prior to the datehereof, may have informed the Grantee that such Grantee is entitled to receive.(b)This Agreement shall terminate when the Grantee and all Other Holders cease to hold any of the REUs orTransfer Restricted Common Units that have been granted or delivered, as applicable, hereunder.Notwithstanding anything to the contrary herein, this Article IV shall survive any termination of this Agreement.Section 4.8. SeverabilityIf any term or other provision of this Agreement is held to be invalid, illegal or incapable of being enforced by any rule of Law, orpublic policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long asthe economic or legal substance of the transactions is not affected in any manner materially adverse to any party. Upon adetermination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiatein good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutuallyacceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullestextent possible.Section 4.9. Binding EffectThis Agreement shall be binding upon and inure to the benefit of all of the parties and, to the extent permitted by this Agreement,their successors, executors, administrators, heirs, legal representatives and assigns.Section 4.10. AppendicesAppendices A, B, C and D constitute part of this Agreement. Notwithstanding the provisions of this Article IV, the provisions ofSections 10 through 19 (inclusive) of Appendix D shall govern solely with respect to, and shall be applicable only to theinterpretation, administration and enforcement of, the provisions of Appendix D, but not to any other provisions of this Agreementor any other of its Appendices, including but not limited to Sections 3.2 and 3.3(c) of this Agreement. For the further avoidanceof doubt, and without limiting the foregoing sentence, Sections 3.2 and 3.3(c) of this Agreement shall only be governed by, andshall only be subject to administration and enforcement under, the provisions of this Article IV, and shall not be governed by orsubject to interpretation, administration or enforcement under any of Sections 10 through 19 (inclusive) of Appendix D.Section 4.11. Further AssurancesThe Grantee shall perform all other acts and execute and deliver all other documents as may be necessary or appropriate tocarry out the purposes and intent of this Agreement.Section 4.12. Interpretation; Defined Terms; Section 409A; Employment with Designated Service Recipient; Headings(a)Throughout this Agreement, nouns, pronouns and verbs shall be construed as masculine, feminine, neuter,singular or plural, whichever shall be applicable. Unless otherwise specified, all references herein to “Articles,”“Sections” and clauses shall refer to corresponding provisions of this Agreement. The word “including” is notmeant to be exclusive, but rather shall mean “including without limitation” wherever used in this Agreement.Reference to “hereto”, “herein” and similar words is to this entire Agreement (including any Appendices) and not aparticular sentence or section of this Agreement. All references to “date” and “time” shall mean the applicable date(other than a Saturday or Sunday or any day on which the Federal Reserve Bank of New York is closed or anyday on which banks in the city of New York, New York are required to close, in which case such date refers to thenext occurring date that is not described in this parenthetical) or time in New York, New York.(b)This Section 4.12(b) applies to Grantees who are U.S. tax residents (such as, a U.S. citizen, greencard holder or aU.S. tax resident under the substantial presence test) to the extent applicable. All references to any “separationfrom service” or termination of the Employment of, or the services to be provided by, the Grantee, shall bedeemed to refer to a “separation from service” within the meaning of Section 409A, if applicable. Notwithstandinganything herein to the contrary, (i) if at the time of the Grantee’s termination of Employment the Grantee is a“specified employee” as defined in Section 409A of the Code and the deferral of the commencement of anypayments or delivery of Common Units otherwise payable or provided hereunder as a result of such termination ofemployment is necessary in order to prevent any accelerated or additional tax under Section 409A, then thePartnership will defer the commencement of the payment of any such payments or delivery hereunder (withoutany reduction in such payments or delivery of Common Units ultimately paid or provided to the Grantee) until thedate that is six months following the Grantee’s termination of Employment (or the earliest date as is permittedunder Section 409A) and (ii) if any other payments or other deliveries due to the Grantee hereunder could causethe application of an accelerated or additional tax under Section 409A, such payments or other deliveries shall bedeferred if deferral will make such payment or other delivery compliant under Section 409A, or otherwise suchpayment or other delivery shall be restructured, to the extent possible, in a manner, determined by theAdministrator, that does not cause such an accelerated or additional tax. The Partnership shall use commerciallyreasonable efforts to implement the provisions of this Section 4.12(b) in good faith; provided that none of thePartnership, the General Partner, the Administrator nor any of the Partnership’s, KKR Group’s employees,directors or representatives shall have any liability to the Grantee with respect to this Section 4.12(b).(c)For the avoidance of doubt, any references to the Employment of the Grantee in this Agreement refer solely to theEmployment of the Grantee by the Designated Service Recipient or any other member of the KKR Group. Thegrant of REUs under this Agreement in no way implies any Employment relationship with the General Partner, thePartnership or with any other member of the KKR Group, other thanthe Designated Service Recipient with which a formal Employment relationship is currently in effect with theGrantee, or any other member of the KKR Group with which a formal Employment relationship is currently in effectwith the Grantee. If the Grantee changes Employment from the Designated Service Recipient as of the Grant Dateto another member of the KKR Group, references to Designated Service Recipient hereunder shall refer to suchother member of the KKR Group with which the Grantee has Employment.(d)The headings and subheadings in this Agreement are included for convenience and identification only and are in noway intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any provisionhereof.Section 4.13. CounterpartsThis Agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, and by thedifferent parties hereto in separate counterparts, each of which when executed and delivered shall be deemed to be an originalbut all of which taken together shall constitute one and the same agreement. Copies of executed counterparts transmitted bytelecopy or other electronic transmission service shall be considered original executed counterparts for purposes of thisAgreement.[Rest of page intentionally left blank]ix IN WITNESS WHEREOF , the Partnership has executed this Agreement as of the date specified under the signature of theGrantee.KKR & CO. L.P.By: KKR MANAGEMENT LLC, its general partnerBy:x IN WITNESS WHEREOF , the undersigned Grantee has caused this counterpart signature page to this Agreement to be dulyexecuted as of the date specified under the signature of the Grantee.“GRANTEE”Electronic SignatureName: Participant NameDated: Grant DateAPPENDIX A DEFINITIONSIn addition the defined terms set forth in the Plan, the following terms shall have the following meanings for purposes of theAgreement:“ Cause ” means, with respect to the Grantee, the occurrence or existence of any of the following as determined fairly on aninformed basis and in good faith by the Administrator: (i) any act of fraud, misappropriation, dishonesty, embezzlement or similarconduct by the Grantee against any member of the KKR Group (including the Partnership), KKR Holdings L.P., KKR AssociatesHoldings L.P., a Fund, or a Portfolio Company, (ii) a Regulatory Violation that has a material adverse effect on (x) the businessof any member of the KKR Group or (y) the ability of the Grantee to function as an employee, associate or in any similar capacity(including consultant) with respect to the KKR Group, taking into account the services required of the Grantee and the nature ofthe business of the KKR Group, or (iii) a material breach by the Grantee of a material provision of any Written Policies or thedeliberate failure by the Grantee to perform the Grantee’s duties to the KKR Group, provided that in the case of this clause (iii),the Grantee has been given written notice of such breach or failure within 45 days of the KKR Group becoming aware of suchbreach or failure and, where such breach or failure is curable, the Grantee has failed to cure such breach or failure within (A) 15days of receiving notice thereof or (B) such longer period of time, not to exceed 30 days, as may be reasonably necessary tocure such breach or failure provided that the Grantee is then working diligently to cure such breach or failure. If such breach orfailure is not capable of being cured, the notice given to the Grantee may contain a date of termination that is earlier than 15days after the date of such notice.“ Disability ” means, as to any Person, such Person’s inability to perform in all material respects such Person’s duties andresponsibilities to the KKR Group by reason of a physical or mental disability or infirmity which inability is reasonably expected tobe permanent and has continued (i) for a period of six consecutive months or (ii) such shorter period as the Administrator mayreasonably determine in good faith.“ Employment ” means the Grantee’s employment or engagement (including any similar association determined by theAdministrator to constitute employment or engagement for purposes of this Agreement) with (x) the Designated ServiceRecipient or any other member of the KKR Group or (y) any consultant or service provider that provides services to any memberof the KKR Group;xi provided that in the case of clause (y), service provided as a consultant or service provider must be approved by theAdministrator in order to qualify as “Employment” hereunder.“ Family Related Holder ” means, in respect of the Grantee, any of the following: (i) such Grantee’s spouse, parents, parents-in-law, children, siblings and siblings-in-law, descendants of siblings, and grandchildren, (ii) any trust or other personal or estateplanning vehicle established by such Grantee, (iii) any charitable organization established by such Grantee and (iv) anysuccessor-in-interest to such Grantee, including but not limited to a conservator, executor or other personal representative.“ Group Partnerships ” means KKR Management Holdings L.P., a Delaware limited partnership, KKR Fund Holdings L.P., aCayman Island exempted limited partnership, and KKR International Holdings L.P., a Cayman Island exempted limitedpartnership, along with any partnership designated in the future as a “Group Partnership” by KKR & Co. L.P.“ KKR Capstone ” means (i) KKR Capstone Americas LLC, KKR Capstone EMEA LLP, KKR Capstone EMEA (International)LLP, KKR Capstone Asia Limited and any other “Capstone” branded entity that provides similar consulting services to the KKRGroup and Portfolio Companies and (ii) the direct and indirect parents and subsidiaries of the foregoing.“ KKR Group ” means the Group Partnerships, the direct and indirect parents of the Group Partnerships (the “ Parents ”), anydirect or indirect subsidiaries of the Parents or the Group Partnerships, the general partner or similar controlling entities of anyinvestment fund, account or vehicle that is managed, advised or sponsored by the KKR Group (the “ Funds ”) and any otherentity through which any of the foregoing directly or indirectly conducts its business, but shall exclude Portfolio Companies.“ Law ” means any statute, law, ordinance, regulation, rule, code, executive order, injunction, judgment, decree or other orderissued or promulgated by any national, supranational, state, federal, provincial, local or municipal government or anyadministrative or regulatory body with authority therefrom with jurisdiction over the Partnership or any Participant, as the casemay be.“ Other Holder ” means any Person that holds an REU, other than the Grantee.“ Portfolio Company ” means a company over which a Fund exercises a significant degree of control as an investor.“ Regulatory Violation ” means, with respect to the Grantee (i) a conviction of the Grantee based on a trial or by an acceptedplea of guilt or nolo contendere of any felony or misdemeanor crime involving moral turpitude, false statements, misleadingomissions, forgery, wrongful taking, embezzlement, extortion or bribery, (ii) a final determination by any court of competentjurisdiction or governmental regulatory body (or an admission by the Grantee in any settlement agreement) that the Grantee hasviolated any U.S. federal or state or comparable non-U.S. securities laws, rules or regulations or (iii) a final determination by self-regulatory organization having authority with respect to U.S. federal or state or comparable non-U.S. securities laws, rules orregulations (or an admission by the Grantee in any settlement agreement) that the Grantee has violated the written rules of suchself-regulatory organization that are applicable to any member of the KKR Group.A-1 Ver. 1/7/2014“ Retirement ” means the resignation by the Grantee of the Grantee’s Employment with the KKR Group (other than for Cause),on or after the date that the Grantee’s age, plus the Grantee’s years of Employment with the KKR Group equals at least 80;provided that such date shall be no earlier than December 31, 2012.“ Retirement REUs ” means, with respect to any Grantee whose Employment terminates due to Retirement, any REUs with aService Vesting Date that would, if the Grantee’s Employment were not so terminated, occur within two years after the date ofsuch termination due to Retirement.“ REU Grant Certificate ” means the REU Grant Certificate delivered to the Grantee and attached to this Agreement, as thesame may be modified pursuant to Section 4.4(a) of the Agreement.“ Section 409A ” means Section 409A of the U.S. Internal Revenue Code of 1986, as the same may be amended from time totime, and the applicable regulations, including temporary regulations, promulgated under such Section, as such regulations maybe amended from time to time (including corresponding provisions of succeeding regulations).“ Service Vesting Date ” means, with respect to any REU, the date set forth in the REU Grant Certificate as the “ServiceVesting Date.”“ Settle ”, “ Settled ” or “ Settlement ” means the discharge of the Partnership’s obligations in respect of an REU through thedelivery to the Grantee of (i) Common Units or (ii) a Cash Payment, in each case in accordance with Article II.“ Transfer ” or “ Transferred ” means with respect to any REU or Common Unit, any (i) sale, assignment, transfer or otherdisposition thereof or any interests therein or rights attached thereto, whether voluntarily or by operation of Law, or (ii) creation orplacement of any mortgage, claim, lien, encumbrance, conditional sales or other title retention agreement, right of first refusal,preemptive right, pledge, option, charge, security interest or other similar interest, easement, judgment or imperfection of title ofany nature whatsoever.“ Written Policies ” means the written policies of the KKR Group included in its employee manual, code of ethics andconfidential information and information barrier policies and procedures and other documents relating to the Grantee'sEmployment, association or other similar affiliation with the KKR Group.A-2 Ver. 1/7/2014APPENDIX BREU GRANT CERTIFICATEGrantee Name: Participant NameGrant Date: Grant DateNumber of REUs: Number of Awards GrantedService Vesting Date: The following sets forth each applicable Service Vesting Date uponwhich the REUs granted hereunder shall become vested, subject to the Grantee’s continued Employmentthrough each such date:Percentage of REUs that Become Vested onApplicable Service Vesting DateApplicable Service Vesting Date Vesting and Settlement of the REUs is subject to all terms and conditions contained in the Agreement to which this REU GrantCertificate is attached. Notwithstanding the foregoing:The post-settlement transfer restrictions contained in Section 3.3 of the Agreement [_] shall / [_] shall not be applicableto the REUs (and any resulting Common Units) granted under this REU Grant Certificate.The minimum retained ownership requirements contained in Section 3.5 of the Agreement [_] shall / [_] shall not beapplicable to the REUs (and any resulting Common Units) granted under this REU Grant Certificate.B - 1 APPENDIX CADDITIONAL TERMS AND CONDITIONSThe terms and conditions in this Appendix C supplement the provisions of the Agreement, unless otherwise indicated herein.Capitalized terms contained in this Appendix C and not defined herein shall have the same meaning as such terms are definedin the Agreement into which this Appendix C is incorporated by reference therein and to which this Appendix C is attached, orthe Plan, as applicable.1. Data PrivacyThe Grantee hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or otherform, of the Grantee’s personal data as described in this Agreement and any other Award materials (“Data”) by andamong, as applicable, the Designated Service Recipient, the Partnership and its Affiliates for the exclusive purpose ofimplementing, administering and managing the Grantee’s participation in the Plan.The Grantee understands that the Partnership and the Designated Service Recipient may hold certain personalinformation about the Grantee, including, but not limited to, the Grantee’s name, home address and telephone number,email address, date of birth, social insurance number, passport or other identification number (e.g. resident registrationnumber), salary, nationality, job title, any Common Units or directorships held in the Partnership, details of all REUs orany other entitlement to Common Units awarded, canceled, exercised, vested, unvested or outstanding in the Grantee’sfavor, for the exclusive purpose of implementing, administering and managing the Plan.The Grantee understands that Data will be transferred to any third parties assisting the Partnership with theimplementation, administration and management of the Plan. The Grantee understands that the recipients of the Datamay be located in the United States or elsewhere, and that the recipients’ country (e.g., the United States) may havedifferent data privacy laws and protections than the Grantee’s country. The Grantee understands that he or she mayrequest a list with the names and addresses of any potential recipients of the Data by contacting his or her local humanresources representative. The Grantee authorizes the Partnership, its subsidiaries, the Designed Service Recipient andany other possible recipients which may assist the Partnership (presently or in the future) with implementing,administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form,for the sole purpose of implementing, administering and managing his or her participation in the Plan. The Granteeunderstands that Data will be held only as long as is necessary to implement, administer and manage the Grantee’sparticipation in the Plan. The Grantee understands that he or she may, at any time, view Data, request additionalinformation about the storage and processing of Data, require any necessary amendments to Data or refuse orwithdraw the consents herein, in any case without cost, by contacting in writing his or her local human resourcesrepresentative. Further, the Grantee understands that he or she is providing the consents herein on a purely voluntarybasis. If the Grantee does not consent, or if the Grantee later seeks to revoke his or her consent, the Grantee’semployment status or service and career with the Designated Service Recipient will not be affected; the onlyconsequence of refusing or withdrawing the Grantee’s consent is that the Partnership would not be able to grant him orher REUs orC-1 other awards or administer or maintain such awards. Therefore, the Grantee understands that refusing or withdrawinghis or her consent may affect the Grantee’s ability to participate in the Plan. For more information on the consequencesof the Grantee’s refusal to consent or withdrawal of consent, the Grantee understands that he or she may contact his orher local human resources representative.2. Nature of GrantIn accepting the Award, the Grantee acknowledges, understands and agrees that:(a)the Plan is established voluntarily by the Partnership, it is discretionary in nature and it may be modified,amended, suspended or terminated by the Partnership at any time;(b)the grant of the REUs is voluntary and occasional and does not create any contractual or other right to receivefuture grants, or benefits in lieu of REUs, even if REUs have been granted in the past;(c)all decisions with respect to future grants of REUs, if any, will be at the sole discretion of the Partnership;(d)the Grantee’s participation in the Plan shall not create a right to further Employment with the Designated ServiceRecipient and shall not interfere with the ability of the Designated Service Recipient to terminate the Grantee’sEmployment or service relationship (if any) at any time;(e)the Grantee is voluntarily participating in the Plan;(f)the REUs and the Common Units subject to the REUs, and the income and value of same, are extraordinaryitems, which are outside the scope of the Grantee’s Employment or service contract, if any;(g)the REUs and the Common Units subject to the REUs, and the income and value of same, are not part of normalor expected compensation for purposes of calculating any severance, resignation, termination, redundancy,dismissal, end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits orsimilar payments;(h)the grant of REUs and the Grantee’s participation in the Plan will not be interpreted to form an Employment orservice contract or relationship with the Partnership, the Designated Service Recipient or any Affiliate;(i)the future value of the underlying Common Units is unknown, indeterminable and cannot be predicted withcertainty;(j)no claim or entitlement to compensation or damages shall arise from forfeiture of the REUs resulting fromtermination of the Grantee’s Employment (for any reason whatsoever and whether or not in breach of local laborlaws and whether or not later found to be invalid), and in consideration of the grant of REUs, the Grantee agreesnot to institute any claim against the Partnership, the Designated Service Recipient or any Affiliate;(k)unless otherwise agreed with the Partnership in writing, the REUs and the Common Units subject to the REUs,and the income and value of same, are not granted asC-2 consideration for, or in connection with, the service the Grantee may provide as a director of the DesignatedService Recipient, the Partnership or any Affiliate;(l)subject to Section 9 of the Plan, the REUs and the benefits under the Plan, if any, will not automatically transfer toanother company in the case of a merger, take-over or transfer of liability; and(m)the following provisions apply only if the Grantee is providing services outside the United States:(i)the REUs and the Common Units subject to the REUs, and the income and value of same, are not part ofnormal or expected compensation or salary for any purpose;(ii)the REUs and the Common Units subject to the REUs, and the income and value of same, are not intended toreplace any pension rights or compensation; and(iii)neither the Designated Service Recipient, the Partnership nor any Affiliate shall be liable for any foreignexchange rate fluctuation between the Grantee’s local currency and the United States Dollar that mayaffect the value of the REUs or of any amounts due to the Grantee pursuant to the vesting of the REUsor the subsequent sale of any Common Units acquired upon vesting.3. No Advice Regarding AwardThe Partnership is not providing any tax, legal or financial advice, nor is the Partnership making any recommendations regardingthe Grantee’s participation in the Plan, or the Grantee’s acquisition or sale of the underlying Common Units. The Grantee shouldconsult with his or her own personal tax, legal and financial advisors regarding his or her participation in the Plan before takingany action related to the Plan.4. LanguageIf the Grantee has received the Agreement or any other document related to the Plan translated into a language other thanEnglish and if the meaning of the translated version is different than the English version, the English version will control.5. Electronic Delivery and AcceptanceThe Partnership may, in its sole discretion, decide to deliver any documents related to current or future participation in the Planby electronic means. The Grantee hereby consents to receive such documents by electronic delivery and agrees to participate inthe Plan through an on-line or electronic system established and maintained by the Partnership or a third party designated by thePartnership.6. Restrictions on Trading in SecuritiesIn addition to any policies and procedures which govern Grantee's ability to trade in Common Units as well as other securities ofthe Partnership set forth in the Partnership's trading window policy, Grantee may be subject to additional securities trading andmarket abuse laws in his or her country of residence. These laws may affect Grantee's ability to acquire or dispose of CommonUnits or rights to Common Units (e.g., REUs) under the Plan, particularly during such times as the Grantee is considered to haveaccess to material nonpublic information concerning the Partnership (asC-3 defined by the Laws of the Grantee's country). Any restrictions under these Laws or regulations are separate from and inaddition to any policies and procedures set forth by the Partnership. The Grantee is responsible for ensuring compliance withany applicable restrictions and should consult his or her personal legal advisor on this matter.7. Foreign Asset / Account, Exchange Control ReportingDepending upon the country to which Laws the Grantee is subject, the Grantee may have certain exchange control, foreignasset and/or account reporting requirements that may affect the Grantee’s ability to acquire or hold Common Units under thePlan or cash received from participating in the Plan (including from any sale proceeds arising from the sale of Common Units) inthe Grantee’s Fidelity brokerage account or a bank or other brokerage account outside the Grantee’s country of residence. TheGrantee’s country may require that he or she report such accounts, assets or transactions to the applicable authorities in theGrantee’s country. The Grantee also may be required to repatriate sale proceeds or other funds received as a result of his or herparticipation in the Plan to his or her country through a designated bank or broker and/or within a certain time after receipt. TheGrantee is responsible for knowledge of and compliance with any such regulations and should speak with his or her ownpersonal tax, legal and financial advisors regarding same.C-4 APPENDIX D Confidentiality and Restrictive Covenant ObligationsA. Capitalized terms contained in this Appendix D and not defined herein shall have the same meaning as such termsare defined in the Agreement into which this Appendix D is incorporated by reference therein and to which this Appendix D isattached, or the Plan, as applicable. Further, for the purposes of this Appendix D, the “ Company ” shall refer to the KKR Group;B. In connection with the Grantee’s employment, engagement, association or other similar affiliation with an entity ofthe KKR Group, the Grantee is being issued one or more REUs pursuant to the Agreement to which this Appendix D is attached;C. The Grantee acknowledges and agrees that the Grantee will receive financial benefits from the KKR Group’sbusiness through their participation in the value of the REUs;D. The Grantee further acknowledges and agrees that (i) during the course of the Grantee’s employment, engagement,association or other similar affiliation with the KKR Group, the Grantee will receive and have access to confidential information ofthe KKR Group and the Portfolio Companies (collectively, the “ KKR Related Entities ”) and have influence over and theopportunity to develop relationships with Clients, Prospective Clients, Portfolio Companies and partners, members, employeesand associates of the Company; and (ii) such confidential information and relationships are extremely valuable assets in whichthe KKR Group has invested, and will continue to invest, substantial time, effort and expense in developing and protecting; andE. The Grantee acknowledges and agrees that (i) the REUs will materially benefit the Grantee; (ii) it is essential toprotect the business interests and goodwill of the Company and that the Company be protected by the restrictive covenants andconfidentiality undertaking set forth herein; (iii) it is a condition precedent to the Grantee receiving REUs that the Grantee agreeto be bound by the restrictive covenants and confidentiality undertaking contained herein; and (iv) the KKR Group would suffersignificant and irreparable harm from a violation by the Grantee of the confidentiality undertaking set forth herein as well as therestrictive covenants set forth herein for a period of time after the termination of the Grantee’s employment, engagement,association or other similar affiliation with the KKR Group.F. This Appendix D is made in part for the benefit of the KKR Group and the Designated Service Recipient and theparties intend, acknowledge, and agree that the KKR Group and the Designated Service Recipient are third party beneficiaries ofthis Appendix D and any one of them is authorized to waive compliance with any provision hereof by delivering a writtenstatement clearly expressing the intent to waive such compliance to the Grantee and a duly authorized representative of theKKR Group or Designated Service Recipient.NOW, THEREFORE, to provide the Company with reasonable protection of its interests and goodwill and inconsideration for (i) the REUs and any other consideration that the Grantee will receive in connection with and as a result of theGrantee’s employment, engagement, association or other similar affiliation with the KKR Group; (ii) the material financial andother benefits that the Grantee will derive from such REUs and other consideration (if any); and (iii)D-1 other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Grantee hereby agreesto the following restrictions:1.Outside Business Activities.The Grantee acknowledges that, during the course of the Grantee’s employment, engagement, association or other similaraffiliation with the KKR Group, the Grantee will be subject to the Written Policies. The Written Policies include restrictions thatlimit the ability of the Grantee to engage in outside business and other activities without the prior approval of the Company. If theGrantee has an employment, engagement or other similar contract with the KKR Group, the Grantee may be subject to similarrestrictions under that agreement. The Grantee hereby agrees that, during the Grantee’s employment, engagement, associationor other similar affiliation with the KKR Group, the Grantee will comply with all such restrictions that are from time to time in effectwhich are applicable to the Grantee.2.Confidentiality Undertaking.The Grantee acknowledges that, during the course of the Grantee’s employment, engagement, association or other similaraffiliation with the KKR Group, the Grantee will receive and have access to Confidential Information (as defined below) of theCompany and the Portfolio Companies. Recognizing that any disclosure of such information could have serious consequencesto one or more of the Company and the Portfolio Companies, the Grantee hereby agrees that, except as provided herein, theGrantee will not under any circumstances (either while employed, engaged, associated or otherwise affiliated with the KKRGroup, or at any time after the Termination Date) for any purpose other than in the ordinary course of the performance of theGrantee’s duties as an employee, consultant, associate or other affiliated person of the KKR Group, use or divulge,communicate, publish, make available, or otherwise disclose any Confidential Information to any person or entity, including butnot limited to any business, firm, governmental body, partnership, corporation, press service or otherwise, other than to (i) anyexecutive or employee of the Company in the ordinary course of the performance of Grantee’s duties as an employee,consultant, associate or other affiliated person of the KKR Group; (ii) any person or entity to the extent explicitly authorized by anexecutive of the Company in the ordinary course of the performance of Grantee’s duties as an employee, consultant, associateor other affiliated person of the KKR Group; (iii) any attorney, accountant, consultant or similar service provider retained by theCompany who is required to know such information and is obligated to keep such information confidential; or (iv) any person orentity to the extent the law or legal process requires disclosure by the Grantee, provided that, in the case of clause (iv), theGrantee must first give the Partnership or the Designated Service Recipient prompt written notice of any such requirement,disclose no more information than is so required in the opinion of competent legal counsel, and cooperate fully with all efforts bythe Company to obtain a protective order or similar confidentiality treatment for such information.Notwithstanding the foregoing, nothing in this Appendix E shall prohibit the Grantee from reporting possible violations offederal law or regulation to any governmental agency or entity, including but not limited to the U.S. Securities and ExchangeCommission, or making other disclosures to the extent protected under the whistleblower provisions of federal law or regulation(or comparable laws or regulations that similarly prohibit the impediment of such protected disclosures), and the Grantee shallnot be required to advise or seek permission from the Partnership or the Designated Service Recipient prior to making any suchreport orD-2 disclosure; provided, however, that (i) Grantee shall inform such governmental agency or entity that the information Grantee isproviding is confidential and (ii) neither the Partnership nor the Designated Service Recipient authorizes the waiver of (or thedisclosure of information covered by) the attorney-client privilege or work product protection or any other privilege or protectionbelonging to the Partnership, the Designated Service Recipient or their Affiliates, to the fullest extent permitted by law.As used in this Section 2, an “ executive ” of the KKR Group means an employee of the Company with the title of“Member,” “Managing Director,” “Director,” “Principal” or other employee of the Company acting in a managerial or supervisorycapacity. “ Confidential Information ” means (a) all confidential, proprietary or non-public information of, or concerning thebusiness, operations, activities, personnel, finances, plans, personal lives, habits, history, clients, investors, or otherwise of theKKR Related Entities or any person who at any time is or was a member, partner, officer, director, other executive, employee orstockholder of any of the foregoing, (b) all confidential, proprietary or non-public information of or concerning any member of afamily of any of the individuals referred to in clause (a), whether by birth, adoption or marriage (including but not limited to any oftheir current or former spouses or any living or deceased relatives), and (c) all confidential, proprietary or non-public informationof or concerning any of the clients or investors of the KKR Related Entities or any other person or entity with which or whom anyof the KKR Related Entities or their respective clients or investors does business or has a relationship. Confidential Informationincludes information about the KKR Related Entities relating to or concerning any of their (i) finances, investments, profits,pricing, costs, and accounting, (ii) intellectual property (including but not limited to patents, inventions, discoveries, plans,research and development, processes, formulae, reports, protocols, computer software, databases, documentation, tradesecrets, know-how and business methods), (iii) personnel, compensation, recruiting and training, and (iv) any pending orcompleted settlements, arbitrations, litigation, governmental investigations and similar proceedings. Notwithstanding theforegoing, Confidential Information does not include any portions of the foregoing that the Grantee can demonstrate by sufficientevidence satisfactory to the Company that has been (i) lawfully published in a form generally available to the public prior to anydisclosure by the Grantee in breach of this Appendix D or (ii) made legitimately available to the Grantee by a third party withoutbreach of any obligation of confidence owed to the Company or any Portfolio Company.Without limiting the generality of the foregoing, the Grantee agrees that it will be a breach of this Appendix D to writeabout, provide, disclose or use in any fashion at any time any Confidential Information that is or becomes part of the basis for, oris used in any way in connection with any part of any book, magazine or newspaper article, any interview or is otherwisepublished in any media of any kind utilizing any technology now known or created in the future.Upon termination of the Grantee's employment, engagement, association or other similar affiliation with the KKR Group forany reason, the Grantee hereby agrees to (i) cease and not thereafter commence any and all use of any ConfidentialInformation; (ii) upon the request of the Company promptly deliver to the Company or, at the option of the Company destroy,delete or expunge all originals and copies of any Confidential Information in any form or medium in the Grantee’s possession orcontrol (including any of the foregoing stored or located in the Grantee’s home, laptop or other computer that is not the propertyof the Company, its Affiliates or Portfolio Companies); (iii) notify and fully cooperate with the Company regarding the deliveryD-3 or destruction of any other Confidential Information of which the Grantee is aware; and (iv) upon the request of the Companysign and deliver a statement that the foregoing has been accomplished.The Grantee acknowledges that he or she is aware that applicable securities laws place certain restrictions on any personwho has received from an issuer material, non-public information concerning the issuer with respect to purchasing or sellingsecurities of such issuer or from communicating such information to any other person and further agrees to comply with suchsecurities laws. Without limiting anything in this Appendix D, the Grantee hereby expressly confirms his or her explicitunderstanding that the Grantee’s obligations hereunder are in addition to, and in no way limit, the Grantee’s obligations undercompliance procedures of the Company including those contained in the Written Policies.Notwithstanding anything in this Appendix D to the contrary, the Grantee may disclose to any and all persons, withoutlimitation of any kind, the tax treatment and tax structure of any member of the Company in which the Grantee holds an interestand all materials of any kind (including opinions or other tax analyses) that are provided to the Grantee relating to such taxtreatment and tax structure.3.Notice Period.The Grantee acknowledges and agrees that the Designated Service Recipient may terminate his or her employment,engagement, association or other similar affiliation with the Designated Service Recipient at any time for any reason or for noreason at all with or without reasons constituting Cause. The Designated Service Recipient or the Grantee, as applicable, shallprovide advance written notice (which may be by email) of the termination of the Grantee’s employment, engagement,association or other similar affiliation with the Designated Service Recipient at least 90 days prior to actual termination (such 90-day period, the “ Notice Period ”); provided, however, that no advance notice shall be required by the Designated ServiceRecipient and the provisions of this Section 3 shall not be applicable to the Designated Service Recipient if the Grantee’semployment, engagement, association or other similar affiliation is terminated by the Designated Service Recipient for reasonsconstituting Cause or due to any conduct by Grantee that, in the judgment of the Designated Service Recipient in its solediscretion, amounts to gross negligence or reckless or willful misconduct. Notice pursuant to this Section 3 shall be provided bythe Grantee to any of the Chief Executive Officers, General Counsel or Chief Human Resources Officer of the KKR Group.During the Notice Period, the Grantee shall perform his or her regular duties and any transitional responsibilities(including but not limited to helping to transition work, projects, and Client relationships internally to others) as determined anddirected by the Designated Service Recipient in its sole discretion, and Grantee shall not be employed, engaged, associated orotherwise similarly affiliated with any business other than the business of the KKR Group; provided, however, the DesignatedService Recipient reserves the right to require the Grantee not to be in the offices of the KKR Group, not to undertake all or anyof the Grantee’s duties or not to contact Clients or Prospective Clients (as defined in Section 5 below), other persons employed,engaged, associated or otherwise similarly affiliated with the KKR Group, or others (or any combination thereof) unlessotherwise instructed during all or any part of the Notice Period. During the Notice Period, and except as provided in the nextsentence, the Grantee shall continue to receive his or her salary, and the Grantee shall not be entitled to receive or beD-4 considered for payment of any other amount for his or her services during the Notice Period (including without limitation anybonus or equity award). In addition, the Designated Service Recipient in its sole discretion may elect to reduce the Notice Periodand pay the Grantee his or her salary, but no other amount, for the period from the conclusion of the reduced Notice Period tothe end of the original Notice Period, and the Grantee’s employment, engagement, association or other similar affiliation with theKKR Group, shall be terminated as of the day immediately following the conclusion of the reduced Notice Period.4.Non-Compete.The Grantee hereby agrees that, while employed, engaged, associated or otherwise similarly affiliated with the KKRGroup, and in addition during the Non-Compete Period (as defined below), the Grantee will not directly or indirectly set up, beemployed or engaged by, hold an office in or provide consulting, advisory or other similar services to or for the benefit of, aCompeting Business (i) where the activities or services of the Grantee in relation to the Competing Business are similar orsubstantially related to any activity that the Grantee engaged in or any service that the Grantee provided, in connection with theGrantee’s employment, engagement, association or other similar affiliation with the KKR Group or (ii) that competes with abusiness for which the Grantee had direct or indirect managerial or supervisory responsibility with the KKR Group, includingthrough the Grantee’s position on the Management Committee or similar committee or group, including without limitation thePublic Markets & Distribution Management Committee, for one or more businesses of the KKR Group, in each case, at any timeduring the 12 months preceding the Termination Date.For the purposes of this Appendix D, a “ Competing Business ” means a business that competes (i) in a CoveredCountry with any business conducted by the Company on the date on which the Grantee’s employment, engagement,association or other similar affiliation with the KKR Group is terminated (the “ Termination Date ”) or (ii) in any country with anybusiness that the Company was, on the Termination Date, formally considering conducting. A “ Covered Country ” means theUnited States, United Kingdom, the Republic of Ireland, France, Hong Kong, China, Japan, the Republic of Korea, Australia,India, United Arab Emirates, Saudi Arabia, Brazil, Canada, Singapore, Spain, Luxembourg or any other country where theCompany conducted business on the Termination Date; provided that if the Grantee is located in Japan, the definition ofCovered Country shall exclude the phrase “any other country where the Company conducted business on the Termination Date”to the extent unenforceable under applicable law. The “ Non-Compete Period ” for the Grantee shall commence on theTermination Date and shall expire upon the twelve month anniversary of the Termination Date. Notwithstanding the foregoing, ifthe Grantee’s employment, engagement, association or other similar affiliation with the KKR Group, is terminated involuntarilyand for reasons not constituting Cause, the Non-Compete Period will expire on the six month anniversary of the TerminationDate.Notwithstanding the foregoing, nothing in this Appendix D shall be deemed to prohibit the Grantee from (i) associating withany business whose activities consist principally of making passive investments for the account and benefit of the Grantee ormembers of the Grantee’s immediate family where such business does not, within the knowledge of the Grantee, compete with abusiness of the KKR Group for specific privately negotiated investment opportunities; (ii) making and holding passiveinvestments in publicly traded securities of a Competing Business where such passive investment does not exceed 5% of theamount of such securities that areD-5 outstanding at the time of investment; or (iii) making and holding passive investments in limited partner or similar interests in anyinvestment fund or vehicle with respect to which the Grantee does not exercise control, discretion or influence over investmentdecisions. 5.Non-Solicitation of Clients and Prospective Clients; Non-Interference.The Grantee hereby agrees that, while employed, engaged, associated or otherwise similarly affiliated with the KKRGroup, and in addition during the Post-Termination Restricted Period (as defined below), the Grantee will not, directly orindirectly, (i) solicit, or assist any other person in soliciting, the business of any Client or Prospective Client for, or on behalf of, aCompeting Business; (ii) provide, or assist any other person in providing, for any Client or Prospective Client any services thatare substantially similar to those that the Company provided or proposed to be provided to such Client or Prospective Client; or(iii) impede or otherwise interfere with or damage, or attempt to impede or otherwise interfere with or damage, any businessrelationship or agreement between the Company and any Client or Prospective Client. As used in this Section 5, “ solicit ”means to have any direct or indirect communication inviting, advising, encouraging or requesting any person to take or refrainfrom taking any action with respect to the giving by such person of business to a Competing Business, regardless of whoinitiated such communication.For purposes of this Appendix D, “ Client ” means any person (a) for whom the Company provided services, including anyinvestor in any Fund, any client of the KKR Group’s broker-dealer business, or any Portfolio Company and (b) with whom theGrantee, individuals reporting to the Grantee or any other individuals over whom the Grantee had direct or indirect managerial orsupervisory responsibility had any contact or dealings on behalf of, and involving Confidential Information of, the Companyduring the 12 months prior to the Termination Date; and “ Prospective Client ” means any person with whom (I) the Companyhas had negotiations or discussions concerning becoming a Client and (II) the Grantee, individuals reporting to the Grantee orany other individuals over whom the Grantee had direct or indirect managerial or supervisory responsibility had any contact ordealings on behalf of, and involving Confidential Information of, the Company during the 12 months prior to the TerminationDate.6.Non-Solicitation of Personnel; No Hire.The Grantee hereby agrees that, while employed, engaged, associated or otherwise similarly affiliated with the KKRGroup, and in addition during the Post-Termination Restricted Period, the Grantee will not, directly or indirectly, solicit, employ,engage or retain, or assist any other person in soliciting, employing, engaging or retaining, any Covered Person. As used in thisSection 6, “ solicit ” means to have any direct or indirect communication inviting, advising, encouraging or requesting anyCovered Person to terminate his or her employment, engagement, association or other affiliation with the KKR Group or KKRCapstone or recommending or suggesting that a third party take any of the foregoing actions, including by way of identifyingsuch Covered Person to the third party, in each case regardless of who initiated such communication.For purposes of this Appendix D, a “ Covered Person ” means a person who is or on the Termination Date was either (i)employed or engaged by the KKR Group as an employee or officer or otherwise associated or similarly affiliated with the KKRGroup in any position, including as a member or partner, having functions and duties substantially similar to those ofD-6 an employee or officer; (ii) a Senior Advisor, Industry Advisor or KKR Advisor to the KKR Group; (iii) employed or engaged byKKR Capstone as an employee or officer or otherwise associated or similarly affiliated with KKR Capstone in any position,including as a member or partner, having functions and duties substantially similar to those of an employee or officer; or (iv) aperson who provides services exclusively to the Company or any Portfolio Company and has functions and duties that aresubstantially similar to those of a person listed in sub-clauses (i), (ii) or (iii) above.7.Post-Termination Restricted Period.The “ Post-Termination Restricted Period ” for the Grantee shall commence on the Termination Date and shall expireupon the eighteen month anniversary of the Termination Date. Notwithstanding the foregoing, if the Grantee’s employment,engagement, association or other similar affiliation with the KKR Group is terminated involuntarily and for reasons notconstituting Cause, the Post-Termination Restricted Period will expire on the nine month anniversary of the Termination Date. Tothe extent that the Grantee continues to be employed or engaged by, or otherwise associated or similarly affiliated with, the KKRGroup, during any “garden leave” or “notice” period in which the Grantee is required to not perform any services for or enter thepremises of the Company, and to otherwise comply with all terms and conditions imposed on the Grantee during such “gardenleave” or “notice” period, the applicable Post-Termination Restricted Period shall be reduced by the amount of any such “gardenleave” or “notice” period in which the Grantee complies with such terms.8.Intellectual Property; Works Made for HireExcept as otherwise agreed in writing between the Grantee and the Partnership, the Designated Service Recipient orother member of the KKR Group, as applicable, the Grantee agrees that all work and deliverables that the Grantee prepares,creates, develops, authors, contributes to or improves, either alone or with third parties, during the course of the Grantee’semployment, engagement, association or other similar affiliation with the KKR Group, within the scope of the services providedto or with the use of any of the resources of the KKR Group, including but not limited to notes, drafts, scripts, documents,designs, inventions, data, presentations, research results, developments, reports, processes, programs, spreadsheets and othermaterials and all rights and intellectual property rights thereunder including but not limited to rights of authorship (collectively, “Work Product ”), are works-made-for-hire owned exclusively by the KKR Group. The Grantee hereby irrevocably assigns,transfers and conveys, to the maximum extent permitted by law, all right, title and interest that the Grantee may have in suchWork Product (and any written records thereof) to the KKR Group (or any of its designees), to the extent ownership of any suchrights does not vest originally with the KKR Group. The Grantee acknowledges and agrees that the Units issued pursuant to theAgreement are sufficient compensation for such assignment, transference and conveyance. To the extent the foregoingassignment is deemed to be invalid or unenforceable, Grantee grants the KKR Group, at no additional charge an exclusive,worldwide, irrevocable, royalty-free, perpetual, assignable license under all intellectual property in and to the Work Product.9.Non-Disparagement.The Grantee hereby agrees that the Grantee will not at any time during his or her employment, engagement, associationor other similar affiliation with the Designated Service Recipient or forD-7 five years thereafter make any disparaging, defamatory, or derogatory written or oral statements or other communications aboutor in reference to the Designated Service Recipient, the Partnership or any other member of the KKR Group or KKR Capstone(including their respective businesses or reputations), including but not limited to any of their Clients, Prospective Clients,Portfolio Companies, or Covered Persons; provided that this provision shall not prevent the Grantee from (i) making reports to ortestifying before any court, governmental agency, or regulatory body, including the U.S. Securities and Exchange Commission,or pursuant to any legal or regulatory process or proceeding or (ii) engaging in activity protected by applicable law, rule orregulations, including the U.S. National Labor Relations Act.10.Representations; Warranties; Other Agreements.The Grantee acknowledges and agrees that the Grantee will derive material financial and other benefits from theGrantee’s employment, engagement, association or other similar affiliation with the KKR Group, and that the restrictionscontained herein are reasonable in all circumstances and necessary to protect the legitimate business interests of the Company,to have and enjoy the full benefit of its business interests and goodwill. The Grantee further agrees and acknowledges that suchrestrictions will not unnecessarily or unreasonably restrict or otherwise limit the professional opportunities of the Grantee shouldhis or her employment, engagement, association or other similar affiliation with the KKR Group terminate, that the Grantee isfully aware of the Grantee’s obligations under this Appendix D and that the livelihood of the Grantee is not impaired by theGrantee’s entry into the covenants contained herein. The Partnership and the Designated Service Recipient shall have the right,exercisable in its sole discretion, to directly or indirectly make a payment to the Grantee or grant other consideration if, and to theextent, necessary to enforce the restrictions contained herein in accordance with any applicable law.11.Certain Relationships.The Grantee acknowledges and agrees that the Grantee’s compliance with this Appendix D is a material part of theGrantee’s arrangements with the Company. Notwithstanding anything to the contrary herein, this Appendix D does not constitutean employment, engagement or other similar agreement between the Grantee and the Company, or any other of the KKRRelated Entities (including but not limited to the Partnership), and shall not interfere with or otherwise affect any rights any suchperson or entity may have to terminate the Grantee’s employment, engagement, association or other similar affiliation at anytime upon such notice as may be required by law or the terms of any agreement or arrangement with the Grantee.12.Injunctive Relief; Third Party Beneficiaries.The Grantee acknowledges and agrees that the remedies of the Partnership and the Designated Service Recipient at lawfor any breach of this Appendix D would be inadequate and that for any breach of this Appendix D, the Designated ServiceRecipient may terminate your employment, engagement, association or other similar affiliation with the Company and shall, inaddition to any other remedies that may be available to it at law or in equity, or as provided for in this Appendix D, be entitled toan injunction, restraining order or other equitable relief, without the necessity of posting a bond, restraining the Grantee fromcommitting or continuing to commit any violation of this Appendix D. The Grantee further acknowledges and agrees that thePartnership and the Designated Service Recipient shall not be required to prove, or offer proof,D-8 that monetary damages for a breach of this Appendix D would be difficult to calculate and that any remedies at law would beinadequate for any breach of this Appendix D. The parties intend, acknowledge, and agree that each member of the KKR Groupis a third party beneficiary of this Agreement and is authorized to enforce any provision hereof by delivering a written statementexpressing the intent to enforce the provisions hereof to the Grantee or the Designated Service Recipient. The Grantee hasexecuted this Agreement for the benefit of each member of the KKR Group.13.Amendment; Waiver.This Appendix D may not be amended, restated, supplemented or otherwise modified other than by an agreement inwriting signed by the parties hereto; provided, however, that the Partnership, the KKR Group or the Designated ServiceRecipient may reduce the scope of, or waive compliance with any part of, any obligation of the Grantee arising under thisAppendix D, at any time without any action, consent or agreement of any other party. No failure to exercise and no delay inexercising, on the part of any party, of any right, remedy, power or privilege hereunder shall operate as a waiver thereof; norshall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercisethereof or the exercise of any other right, remedy, power or privilege. The waiver of any particular right, remedy, power orprivilege shall not affect or impair the rights, remedies, powers or privileges of any person with respect to any subsequent defaultof the same or of a different kind by any party hereunder. The rights, remedies, powers and privileges herein provided arecumulative and not exclusive of any rights, remedies, powers and privileges provided by law. No waiver of any provision heretoshall be effective unless it is in writing and signed by the person asserted to have granted such waiver.14.Assignment.This Appendix D may not be assigned by any party hereto without the prior written consent of the other party hereto,except that the consent of the Grantee shall be deemed to have been given to the Partnership and the Designated ServiceRecipient (and the Grantee acknowledges that the Partnership and the Designated Service Recipient shall therefore have theright without further consent) to assign its rights hereunder, in whole or in part, to (i) any member of the KKR Group thatbecomes a Designated Service Recipient or (ii) any person who is a successor of the Partnership or the Designated ServiceRecipient by merger, consolidation or purchase of all or substantially all of its assets, in which case such assignee shall besubstituted for the Partnership and the Designated Service Recipient hereunder with respect to the provisions so assigned andbe bound under this Appendix D and by the terms of the assignment in the same manner as the Partnership and the DesignatedService Recipient was bound hereunder. Any purported assignment of this Appendix D in violation of this section shall be nulland void.15.Governing Law.This Appendix D shall be governed by and construed in accordance with the laws of the State of New York.D-9 16.Resolution of Disputes.(a)Subject to paragraphs (b) and (c) below, any and all disputes which cannot be settled amicably, including any ancillaryclaims of any party, arising out of, relating to or in connection with the validity, negotiation, execution,interpretation, performance, non performance or termination of this Appendix D (including the validity,scope and enforceability of this arbitration provision) (each a “ Dispute ”) shall be finally settled byarbitration conducted by a single arbitrator in New York, New York in accordance with the then existingRules of Arbitration of the International Chamber of Commerce (the “ ICC ”). If the parties to the Disputefail to agree on the selection of an arbitrator within 30 days of the receipt of the request for arbitration, theICC shall make the appointment. The arbitrator shall be a lawyer and shall conduct the proceedings in theEnglish language. Performance under this Appendix D shall continue if reasonably possible during anyarbitration proceedings.(b)Prior to filing a Request for Arbitration or an Answer under the Rules of Arbitration of the ICC, as the case may be, thePartnership or the Designated Service Recipient may, in its sole discretion, require all Disputes or anyspecific Dispute to be heard by a court of law in accordance with paragraph (e) below and, for thepurposes of this paragraph (b), each party expressly consents to the application of paragraphs (e) and (f)below to any such suit, action or proceeding. If an arbitration proceeding has already been commenced inconnection with a Dispute at the time that the Partnership or the Designated Service Recipientcommences such proceedings in accordance with this paragraph (b), such Dispute shall be withdrawnfrom arbitration.(c)Subject to paragraph (b) above, either party may bring an action or special proceeding in any court of law (or, ifapplicable, equity) for the purpose of compelling a party to arbitrate, seeking temporary or preliminaryrelief in aid of an arbitration hereunder or enforcing an arbitration award and, for the purposes of thisparagraph (c), each party expressly consents to the application of paragraphs (e) and (f) below to anysuch suit, action or proceeding.(d)Except as required by law or as may be reasonably required in connection with judicial proceedings to compelarbitration, to obtain temporary or preliminary judicial relief in aid of arbitration or to confirm or challengean arbitration award, the arbitration proceedings, including any hearings, shall be confidential, and theparties shall not disclose any awards, any materials in the proceedings created for the purpose of thearbitration or any documents produced by another party in the proceedings not otherwise in the publicdomain. Judgment on any award rendered by an arbitration tribunal may be entered in any court havingjurisdiction thereover.(e)EACH PARTY HEREBY IRREVOCABLY SUBMITS AND AGREES TO THE EXCLUSIVE JURISDICTION OF THECOURTS, AND VENUE, LOCATED IN NEW YORK, NEW YORK FOR THE PURPOSE OF ANY SUIT,ACTION OR PROCEEDING BROUGHT IN ACCORDANCE WITH THE PROVISIONS OFPARAGRAPHS (B) OR (C) ABOVE. The parties acknowledge that the forum designated by thisparagraph (e) has a reasonable relation to this Appendix D, and to the parties' relationship with oneanother. The parties hereby waive, to the fullest extent permitted by applicable law, any objection whichthey now or hereafter mayD-10 have to personal jurisdiction or to the laying of venue of any suit, action or proceeding brought in any courtreferred to in the preceding sentence or pursuant to paragraphs (b) or (c) above and such parties agree not toplead or claim the same.(f)The parties agree that if a suit, action or proceeding is brought under paragraphs (b) or (c) proof shall not be requiredthat monetary damages for breach of the provisions of this Appendix D would be difficult to calculate andthat remedies at law would be inadequate, and they irrevocably appoint the Secretary or General Counselof the Partnership or the Designated Service Recipient or an officer of the Partnership or the DesignatedService Recipient (at the then-current principal business address of the Partnership or the DesignatedService Recipient) as such party’s agent for service of process in connection with any such action orproceeding and agrees that service of process upon such agent, who shall promptly advise such party ofany such service of process, shall be deemed in every respect effective service of process upon the partyin any such action or proceeding.17.Entire Agreement.This Appendix D contains the entire agreement and understanding among the parties hereto with respect to the subjectmatter of this Appendix D and supersedes all prior and contemporaneous agreements, understandings, inducements andconditions, express or implied, oral or written, of any nature whatsoever with the Partnership, the Company, or KKR HoldingsL.P. with respect to the subject matter of this Appendix D (including but not limited to any prior grant agreement for an equityaward under the Plan that contains one or more appendices with respect to the subject matter of this Appendix D) or anyConfidentiality and Restrictive Covenant Agreement previously executed with the Partnership, the Company or KKR HoldingsL.P. The express terms of this Appendix D control and supersede any course of performance and any usage of the tradeinconsistent with any of the terms of this Appendix D.18.Severability .Notwithstanding Section 13 or any other provision of this Appendix D to the contrary, any provision of this Appendix D thatis prohibited or unenforceable in any jurisdiction (including but not limited to the application, if applicable, of Rule 5.6 of the NewYork Rules of Professional Conduct (or successor rule)) shall, as to such jurisdiction, be ineffective to the extent of suchprohibition or unenforceability without invalidating the remaining provisions hereof and any such prohibition or unenforceability inany jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. In such event, the invalidprovision shall be partially enforced, reformed or substituted with a valid provision which most closely approximates the intentand the economic effect of the invalid provision to give effect to the provision to the maximum extent permitted in suchjurisdiction or in such case. Grantee specifically acknowledges that Grantee has been provided with valuable consideration inexchange for the covenants set forth herein and, accordingly, such partial enforcement or reformation is necessary to avoidfrustrating the Company’s purpose in awarding the Grantee such consideration.D-11 19.Interpretation .Notwithstanding anything contained in Article IV of the Agreement, the provisions of Sections 10 through 19 (inclusive) ofthis Appendix D shall govern with respect to, and shall be applicable only to the interpretation, administration and enforcementof, the provisions of this Appendix D, and shall not govern or otherwise apply to, or have any administrative or interpretive effecton, any other provisions of the remainder of the Agreement or any other of its Appendices.D-12 APPENDIX EKKR & CO. L.P. 2010 EQUITY INCENTIVE PLAN1. Purpose of the PlanThe KKR & Co. L.P. 2010 Equity Incentive Plan (the “ Plan ”) is designed to promote the long term financial interests andgrowth of KKR & Co. L.P., a Delaware limited partnership (the “ Partnership ”) and its Affiliates by (i) attracting and retainingdirectors, officers, employees, consultants or other service providers of the Partnership or any of its Affiliates, including but notlimited to directors of KKR Management LLC, the Partnership’s general partner (the “ General Partner ”) and (ii) aligning theinterests of such individuals with those of the Partnership and its Affiliates by providing them with equity-based awards based onthe common units of limited partner interest in the Partnership (the “ Common Units ”).2. DefinitionsThe following capitalized terms used in the Plan have the respective meanings set forth in this Section:(a) Act : The Securities Exchange Act of 1934, as amended, or any successor thereto.(b) Administrator : The Board, or the committee or subcommittee thereof to whom authority to administer the Planhas been delegated pursuant to Section 4 hereof.(c) Affiliate : With respect to any specified Person, any other Person that directly or indirectly through one or moreintermediaries Controls, is Controlled by or is under common control with such specified Person. As used herein, the term “Control ” (including the terms “ Controlled by ” and “ under common Control with ”) means the possession, directly or indirectly,of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership ofvoting securities, as trustee or executor, by contract or otherwise, including the ownership, directly or indirectly, of securitieshaving the power to elect a majority of the board of directors or similar body governing the affairs of such Person.(d) Award : Individually or collectively, any Option, Unit Appreciation Right, or Other Unit-Based Awards based on orrelating to the Common Units issuable under the Plan.(e) Board : The board of directors of the General Partner.(f) Change in Control : Except as otherwise set forth in any applicable Award agreement, (i) the occurrence of anyPerson, other than a Person approved by the General Partner, becoming the general partner of the Partnership, (ii) the director indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation) in one or more seriesof related transactions of all or substantially all of the combined assets of the Group Partnerships taken as a whole to anyPerson other than a Permitted Person, (iii) the consummation of any transaction or a series of related transactions (includingany merger or consolidation) that results in any Person (other than a Permitted Person) becoming theE-1 beneficial owner of a majority of the controlling interests in any one or more Group Partnerships that together hold all orsubstantially all of the combined assets of the Group Partnerships taken as a whole, or (iv) the occurrence of any other eventas determined by the Board to constitute a Change in Control. Solely for the purpose of this definition, the term “ person ” shallhave the meaning given to such term under Section 13(d)(3) of the Act or any successor provision thereto; and for purposes ofthe Plan, the term “ beneficial owner ” shall have the meaning given to such term under Rule 13d-3 promulgated under the Actor any successor provision thereto, and the combined assets of the Group Partnerships shall exclude the portion of any suchassets that are allocable to holders of any non-controlling interests in any consolidated subsidiaries.(g) Code : The Internal Revenue Code of 1986, as amended, or any successor thereto.(h) Effective Date : The date on which the Board adopts the Plan, or such later date as is designated by the Board,provided that in no event shall such date be prior to the date that limited partnership interests of the Partnership become listedand traded on the New York Stock Exchange or The NASDAQ Stock Market.(i) Employee Exchange Agreement : That certain Exchange Agreement, dated as of July 14, 2010, by and amongKKR & Co. L.P., KKR Management Holdings L.P., KKR Fund Holdings L.P., and KKR Holdings L.P.(j) Employment : The term “Employment” as used herein shall be deemed to refer to (i) a Participant’s employment ifthe Participant is an employee of the Partnership or any of its Affiliates, (ii) a Participant’s services as a consultant or partner,if the Participant is consultant to, or partner of, the Partnership or of any of its Affiliates, and (iii) a Participant’s services as annon-employee director, if the Participant is a non-employee member of the Board.(k) Fair Market Value : Of a Common Unit on any given date means (i) the closing sale price per Common Unit onthe New York Stock Exchange or The NASDAQ Stock Market (a “ U.S. Exchange ”) on that date (or, if no closing sale price isreported, the last reported sale price), (ii) if the Common Units are not listed for trading on a U.S. Exchange, the closing saleprice (or, if no closing sale price is reported, the last reported sale price) as reported on that date in composite transactions forthe principal national securities exchange registered pursuant to the Act on which the Common Units are listed, (iii) if theCommon Units are not so listed on a U.S. Exchange, the last quoted bid price for the Common Units on that date in the over-the-counter market as reported by Pink Sheets LLC or a similar organization, or (iv) if the Common Units are not so quoted byPink Sheets LLC or a similar organization, the average of the mid-point of the last bid and ask prices for the Common Units onthat date from a nationally recognized independent investment banking firm selected by the General Partner for this purpose.(l) Group Partnerships : KKR Management Holdings L.P., a Delaware limited partnership, and KKR Fund HoldingsL.P., a Cayman Island exempted limited partnership, along with any partnership designated in the future as a “GroupPartnership” by the Partnership.E-2 (m) Group Partnership Unit : A “Group Partnership Unit” as defined in the Pre-Listing Plan.(n) KKR Group : The Group Partnerships, the direct and indirect parents of the Group Partnerships (the “ Parents ”),any direct or indirect subsidiaries of the Parents or the Group Partnerships, the general partner or similar controlling entities ofany investment fund or vehicle that is managed, advised or sponsored by the KKR Group (the “ Funds ”) and any other entitythrough which any of the foregoing directly or indirectly conducts its business, but shall exclude any company over which aFund exercises a significant degree of control as an investor.(o) Option : An option to purchase Common Units granted pursuant to Section 6 of the Plan.(p) Option Price : The purchase price per Common Unit of an Option, as determined pursuant to Section 6(a) of thePlan.(q) Other Unit-Based Awards : Awards granted pursuant to Section 8 of the Plan.(r) Participant : A director, officer, employee, consultant or other service provider of the Partnership or of any of itsAffiliates, including but not limited to any director of the General Partner, who is selected by the Administrator to participate inthe Plan.(s) Permitted Person : The term “Permitted Person” means (i) an individual who (a) is an executive of the KKRGroup, (b) devotes substantially all of his or her business and professional time to the activities of the KKR Group and (c) didnot become an executive of the KKR Group or begin devoting substantially all of his or her business and professional time tothe activities of the KKR Group in contemplation of a Change in Control or (ii) any Person in which any one or more suchindividuals directly or indirectly holds a majority of the controlling interests.(t) Person : A ny individual, corporation, partnership, limited partnership, limited liability company, limited company,joint venture, trust, unincorporated or governmental organization or any agency or political subdivision thereof .(u) Pre-Listing Award : Any equity-based award (whether an option, unit appreciation right, restricted equity unit,phantom equity unit, or other equity-based award based in whole or in part on the fair market value of any equity unit orotherwise) granted pursuant to the Pre-Listing Plan.(v) Pre-Listing Plan : KKR Management Holdings L.P. 2009 Equity Incentive Plan.(w) Unit Appreciation Right : A unit appreciation right granted pursuant to Section 7 of the Plan.3. Common Units Subject to the PlanSubject to Section 9 hereof, the total number of Common Units which shall be available for issuance under the Plan shallbe, as of the Effective Date, 15% of the Common Units outstanding as of the Effective Date on a fully converted and dilutedbasis (the “ Initial PlanE-3 Amount ”), of which all or any portion may be issued as Common Units. Notwithstanding the foregoing, beginning with the firstfiscal year of the Partnership occurring after the Effective Date and continuing with each subsequent fiscal year of thePartnership occurring thereafter, the aggregate number of Common Units covered by the Plan will be increased, on the first dayof each fiscal year of the Partnership occurring during the term of the Plan, by a number of Common Units equal to the positivedifference, if any, of (x) 15% of the aggregate number of Common Units outstanding on the last day of the immediatelypreceding fiscal year of the Partnership minus (y) the Initial Plan Amount, as such amount may have been increased by thissentence in any prior fiscal year, unless the Administrator should decide to increase the number of Common Units covered bythe Plan by a lesser amount on any such date. The issuance of Common Units or the payment of cash upon the exercise of anAward or any Pre-Listing Award or in consideration of the settlement, cancellation or termination of an Award or any Pre-ListingAward shall reduce the total number of Common Units covered by and available for issuance under the Plan, as applicable (withany Awards or Pre-Listing Awards settled in cash reducing the total number of Common Units by the number of Common Unitsdetermined by dividing the cash amount to be paid thereunder by the Fair Market Value of one Common Unit on the date ofpayment), and the issuance of Group Partnership Units in consideration of the settlement, cancellation or termination of any Pre-Listing Award shall reduce the total number of Common Units covered by and available for issuance under the Plan by a numberof Common Units equal to the number of Group Partnership Units so issued multiplied by the Exchange Rate (as defined in theEmployee Exchange Agreement). Common Units which are subject to Awards which are cancelled, forfeited, terminated orotherwise expired by their terms without the payment of consideration, and Common Units which are used to pay the exerciseprice of any Award, may be granted again subject to Awards under the Plan. For the avoidance of doubt, Common Units whichare subject to Awards other than Options or Unit Appreciation Rights which are withheld to pay tax withholding obligations will bedeemed not to have been delivered and will be available for further Awards under the Plan.For purposes of this Section 3, the number of Common Units that, as of a particular date, will be considered to be“covered by” the Plan will be equal to the sum of (i) the number of Common Units available for issuance pursuant to the Plan butwhich are not subject to an outstanding Award or Pre-Listing Award as of such date, (ii) the number of Common Units subject tooutstanding Awards or Pre-Listing Awards as of such date and (iii) the number of Group Partnership Units subject to outstandingPre-Listing Awards as of such date multiplied by the Exchange Rate (as defined in the Employee Exchange Agreement) as ineffect on such date. For purposes of this Section 3, (A) an Option or Unit Appreciation Right that has been granted under thePlan or the Pre-Listing Plan will be considered to be an “outstanding” Award or Pre-Listing Award, as applicable, until is itexercised or cancelled, forfeited, terminated or otherwise expires by its terms, (B) a Common Unit that has been granted as anAward under the Plan that is subject to vesting conditions will be considered an “outstanding” Award until the vesting conditionshave been satisfied or the Award otherwise terminates or expires unvested by its terms, (C) a Group Partnership Unit that hasbeen granted as a Pre-Listing Award under the Pre-Listing Plan that is subject to vesting conditions will be considered an“outstanding” Pre-Listing Award until the vesting conditions have been satisfied or the Pre-Listing Award otherwise terminates orexpires unvested by its terms and (D) any Award or Pre-Listing Award other than an Option, Unit Appreciation Right, CommonUnit or Group Partnership Unit that is subject to vesting conditions will be considered to be an “outstanding” Award or Pre-ListingAward, as applicable, until it has been settled.E-4 4. Administration(a) Administration and Delegation . The Plan shall be administered by the Administrator. The Administrator maydelegate the authority to grant Awards under the Plan to any employee or group of employees of the Partnership or of anyAffiliate of the Partnership; provided that such delegation and grants are consistent with applicable law and guidelinesestablished by the Board from time to time. The Administrator may delegate the day-to-day administration of the Plan to anyemployee or group of employees of the Partnership or the General Partner or any of their respective Affiliates or a nationallyrecognized third-party stock plan administrator.(b) Substitution of Prior Awards . Awards may, in the discretion of the Administrator, be made under the Plan inassumption of, or in substitution for, outstanding awards previously granted by the Partnership, any Affiliate of the Partnershipor any entity acquired by the Partnership or with which the Partnership combines. The number of Common Units underlyingsuch substitute awards shall be counted against the aggregate number of Common Units available for Awards under the Plan.(c) Interpretation; Corrections; Final and Binding Decisions . The Administrator is authorized to interpret the Plan, toestablish, amend and rescind any rules and regulations relating to the Plan, and to make any other determinations that itdeems necessary or desirable for the administration of the Plan. The Administrator may correct any defect or supply anyomission or reconcile any inconsistency in the Plan or Award agreement in the manner and to the extent the Administratordeems necessary or desirable, without the consent of any Participant. Any decision of the Administrator in the interpretationand administration of the Plan, as described herein, shall lie within its sole and absolute discretion and shall be final,conclusive and binding on all parties concerned (including, but not limited to, Participants and their beneficiaries andsuccessors).(d) Establishment of Award Terms . The Administrator shall have the full power and authority to establish the termsand conditions of any Award consistent with the provisions of the Plan and to waive any such terms and conditions at any time(including, without limitation, accelerating or waiving any vesting conditions).(e) Payment of Taxes Due . The Administrator shall require payment of any amount it may determine to benecessary to withhold for federal, state, local or other taxes as a result of the exercise, grant or vesting of an Award. To theextent that such withholding arises in connection with the settlement of an Award with Common Units, the Administrator may,in its sole discretion, cause such payments to be funded by reducing the Common Units delivered upon settlement by anamount of Common Units having a Fair Market Value equal to the amount of payments that would then be due (and if anAward is settled in cash, the Administrator may withhold cash in respect to such taxes due). The Administrator shall establishthe manner in which any such tax obligation may be satisfied by the Participant.5. LimitationsE-5 No Award may be granted under the Plan after the tenth anniversary of the Effective Date, but Awards theretoforegranted may extend beyond that date.6. Terms and Conditions of OptionsOptions granted under the Plan shall be non‑qualified options for federal income tax purposes, and shall be subject to theforegoing and the following terms and conditions and to such other terms and conditions, not inconsistent therewith, as theAdministrator shall determine:(a) Option Price . The Option Price per Common Unit shall be determined by the Administrator, provided that, solelyfor the purposes of an Option granted under the Plan to a Participant who is a U.S. taxpayer, in no event will the Option Pricebe less than 100% of the Fair Market Value on the date an Option is granted.(b) Exercisability . Options granted under the Plan shall be exercisable at such time and upon such terms andconditions as may be determined by the Administrator, but in no event shall an Option be exercisable more than ten yearsafter the date it is granted.(c) Exercise of Options .(i) Except as otherwise provided in the Plan or in an Award agreement, an Option may be exercised for all, orfrom time to time any part, of the Common Units for which it is then exercisable. For purposes of this Section 6 of the Plan, theexercise date of an Option shall be the later of the date a notice of exercise is received by the Partnership and, if applicable, thedate payment is received by the Partnership pursuant to clauses (A), (B), (C) or (D) in the following sentence.(ii) The Option Price for the Common Units as to which an Option is exercised shall be paid to the Partnership,and in the manner designated by the Administrator, pursuant to one or more of the following methods: (A) in cash or itsequivalent (e.g., by personal check); (B) in Common Units having a Fair Market Value equal to the aggregate Option Price forthe Common Units being purchased and satisfying such other requirements as may be imposed by the Administrator; providedthat such Common Units have been held by the Participant for such period as may be established from time to time by theAdministrator in order to avoid adverse accounting treatment applying generally accepted accounting principles; (C) partly incash and partly in such Common Units; (D) if there is a public market for the Common Units at such time, through the delivery ofirrevocable instructions to a broker to sell Common Units obtained upon the exercise of the Option and to deliver promptly to thePartnership an amount out of the proceeds of such sale equal to the aggregate Option Price for the Common Units beingpurchased, or (E) to the extent permitted by the Administrator, through net settlement in Common Units.(iii) To the extent compliant with applicable laws, no Participant shall have any rights to distributions or otherrights of a holder with respect to Common Units subject to an Option until the Participant has given written notice of exercise ofthe Option, paid in full the Option Price for such Common Units and, if applicable, has satisfied any other conditions imposed bythe Administrator pursuant to the Plan.E-6 (d) Attestation . Wherever in this Plan or any agreement evidencing an Award a Participant is permitted to pay theOption Price of an Option or taxes relating to the exercise of an Option by delivering Common Units, the Participant may,subject to procedures satisfactory to the Administrator, satisfy such delivery requirement by presenting proof of beneficialownership of such Common Units, in which case the Partnership shall treat the Option as exercised without further paymentand/or shall withhold such number of Common Units from the Common Units acquired by the exercise of the Option, asappropriate.7. Terms and Conditions of Unit Appreciation Rights(a) Grants . The Administrator may grant (i) a Unit Appreciation Right independent of an Option or (ii) a UnitAppreciation Right in connection with an Option, or a portion thereof. A Unit Appreciation Right granted pursuant to clause (ii)of the preceding sentence (A) may be granted at the time the related Option is granted or at any time prior to the exercise orcancellation of the related Option, (B) shall cover the same number of Common Units covered by an Option (or such lessernumber of Common Units as the Administrator may determine) and (C) shall be subject to the same terms and conditions assuch Option except for such additional limitations as are contemplated by this Section 7 (or such additional limitations as maybe included in an Award agreement).(b) Exercise Price . The exercise price per Common Unit of a Unit Appreciation Right shall be an amount determinedby the Administrator; provided , however , that in the case of a Unit Appreciation Right granted in conjunction with an Option,or a portion thereof, the exercise price may not be less than the Option Price of the related Option; provided , further that,solely for the purposes of a Unit Appreciation Right granted under the Plan to a Participant who is a U.S. taxpayer, in the caseof a Unit Appreciation Right that was not granted in conjunction with an Option, the exercise price per Unit Appreciation Rightshall not be less than 100% of the Fair Market Value on the date the Unit Appreciation Right is granted.(c) Terms of Grant : Each Unit Appreciation Right granted independent of an Option shall entitle a Participant uponexercise to an amount equal to (i) the excess of (A) the Fair Market Value on the exercise date of one Common Unit over(B) the exercise price per Common Unit, times (ii) the number of Common Units covered by the Unit Appreciation Right. EachUnit Appreciation Right granted in conjunction with an Option, or a portion thereof, shall entitle a Participant to surrender to thePartnership the unexercised Option, or any portion thereof, and to receive from the Partnership in exchange therefore anamount equal to (i) the excess of (A) the Fair Market Value on the exercise date of one Common Unit over (B) the OptionPrice per Common Unit, times (ii) the number of Common Units covered by the Option, or portion thereof, which issurrendered. Payment shall be made in Common Units or in cash, or partly in Common Units and partly in cash (any suchCommon Units valued at such Fair Market Value), all as shall be determined by the Administrator.(d) Exercisability : Unit Appreciation Rights may be exercised from time to time upon actual receipt by thePartnership of written notice of exercise stating the number of Common Units with respect to which the Unit Appreciation Rightis being exercised. The date a notice of exercise is received by the Partnership shall be the exercise date. The Administrator,in its sole discretion, may determine that no fractional Common Units will be issued in payment for Unit Appreciation Rights,but instead cash will be paid for the fractional Common Units andE-7 the number of Common Units to be delivered will be rounded downward to the next whole Common Unit.(e) Limitations . The Administrator may impose, in its discretion, such conditions upon the exercisability of UnitAppreciation Rights as it may deem fit, but in no event shall a Unit Appreciation Right be exercisable more than ten years afterthe date it is granted.8. Other Unit-Based AwardsThe Administrator, in its sole discretion, may grant or sell Awards of Common Units, restricted Common Units, deferredrestricted Common Units, phantom restricted Common Units or other Common Unit-based awards based in whole or in part onthe Fair Market Value of the Common Units (“ Other Unit-Based Awards ”). Such Other Unit-Based Awards shall be in such form,and dependent on such conditions, as the Administrator shall determine, including, without limitation, the right to receive, or vestwith respect to, one or more Common Units (or the equivalent cash value of such Common Units) upon the completion of aspecified period of service, the occurrence of an event and/or the attainment of performance objectives. Other Unit-BasedAwards may be granted alone or in addition to any other Awards granted under the Plan. Subject to the provisions of the Plan,the Administrator shall determine to whom and when Other Unit-Based Awards will be made, the number of Common Units to beawarded under (or otherwise related to) such Other Unit-Based Awards; whether such Other Unit-Based Awards shall be settledin cash, Common Units, or other assets or a combination of cash, Common Units and other assets; and all other terms andconditions of such Awards (including, without limitation, the vesting provisions thereof and provisions ensuring that all CommonUnits so awarded and issued shall be fully paid and non-assessable).9. Adjustments Upon Certain EventsNotwithstanding any other provisions in the Plan to the contrary, the following provisions shall apply to all Awards grantedunder the Plan:(a) Equity Restructurings . In the event of any extraordinary Common Unit distribution or split, recapitalization, rightsoffering, split-up or spin-off or any other event that constitutes an “equity restructuring” (as defined under Financial AccountingStandards Board (FASB) Accounting Standards Codification 718) with respect to Common Units, the Administrator shall, inthe manner determined appropriate or desirable by the Administrator and without liability to any person, adjust any or all of (i)the number of Common Units or other securities of the Partnership (or number and kind of other securities or property) withrespect to which Awards may be granted under the Plan, and (ii) the terms of outstanding Awards, including, but not limited to(A) the number of Common Units or other securities of the Partnership (or number and kind of other securities or property)subject to outstanding Awards or to which outstanding Awards relate, (B) the Option Price or exercise price of any Option orUnit Appreciation Right and (C) any performance targets or other applicable terms.(b) Mergers, Reorganizations and Other Corporate Transactions . In the event of any reorganization, merger,consolidation, combination, repurchase or exchange of Common Units or other securities of the Partnership, issuance ofwarrants or other rights to purchase Common Units or other securities of the Partnership, or other similar corporatetransaction or event that affects the Common Units such that an adjustment is determined by theE-8 Administrator in its discretion to be appropriate or desirable, the Administrator in its sole discretion and without liability to anyperson shall make such substitution or adjustment, if any, as it deems to be equitable as to (i) the number of Common Units orother securities of the Partnership (or number and kind of other securities or property) with respect to which Awards may begranted under the Plan, and (ii) the terms of any outstanding Award, including (A) the number of Common Units or othersecurities of the Partnership (or number and kind of other securities or property) subject to outstanding Awards or to whichoutstanding Awards relate, (B) the Option Price or exercise price of any Option or Unit Appreciation Right and (C) anyperformance targets or other applicable terms.(c) Change in Control . In the event of a Change in Control after the Effective Date, (i) if determined by theAdministrator in the applicable Award agreement or otherwise, any outstanding Awards then held by Participants which areunexercisable or otherwise unvested or subject to lapse restrictions shall automatically be deemed exercisable or otherwisevested or no longer subject to lapse restrictions, as the case may be, as of immediately prior to such Change in Control and(ii) the Administrator may (subject to Sections 16 and 18), but shall not be obligated to: (A) accelerate, vest or cause therestrictions to lapse with respect to all or any portion of an Award; (B) cancel such Awards for fair value (as determined in thesole discretion of the Administrator) which, in the case of Options and Unit Appreciation Rights, may equal the excess, if any,of value of the consideration to be paid in the Change in Control transaction to holders of the same number of Common Unitssubject to such Options or Unit Appreciation Rights (or, if no consideration is paid in any such transaction, the Fair MarketValue of the Common Units subject to such Options or Unit Appreciation Rights) over the aggregate exercise price of suchOptions or Unit Appreciation Rights; (C) provide that any Options or Unit Appreciation Right having an exercise price perCommon Unit that is greater than the per Common Unit value of the consideration to be paid in the Change in Controltransaction to a holder of a Common Unit shall be cancelled without payment of any consideration therefor; (D) provide for theissuance of substitute Awards that will substantially preserve the otherwise applicable terms of any affected Awards previouslygranted hereunder as determined by the Administrator in its sole discretion; or (E) provide that for a period of at least 15 daysprior to the Change in Control, such Options shall be exercisable as to all shares subject thereto and that upon the occurrenceof the Change in Control, such Options shall terminate and be of no further force and effect.10. No Right to Employment or AwardsThe granting of an Award under the Plan shall impose no obligation on the Partnership or any Affiliate to continue theEmployment of a Participant and shall not lessen or affect the Partnership’s or Affiliate’s right to terminate the Employment ofsuch Participant. No Participant or other Person shall have any claim to be granted any Award (including as a result of recurringprior Award), and there is no obligation for uniformity of treatment of Participants, or holders or beneficiaries of Awards. NoAward shall constitute compensation for purposes of determining any benefits under any benefit plan. The terms and conditionsof Awards and the Administrator’s determinations and interpretations with respect thereto need not be the same with respect toeach Participant (whether or not such Participants are similarly situated).11. Successors and AssignsE-9 The Plan shall be binding on all successors and assigns of the Partnership and a Participant, including without limitation,the estate of such Participant and the executor, administrator or trustee of such estate, or any receiver or trustee in bankruptcyor representative of the Participant’s creditors.12. Nontransferability of AwardsUnless otherwise determined or approved by the Administrator, an Award shall not be transferable or assignable by theParticipant otherwise than by will or by the laws of descent and distribution. Any transfer or assignment in violation of the priorsentence shall be null and void. An Award exercisable after the death of a Participant may be exercised by the legatees,personal representatives or distributees of the Participant.13. Amendments or TerminationThe Board may amend, alter or discontinue the Plan or any outstanding Award, but no amendment, alteration ordiscontinuation shall be made, without the consent of a Participant, if such action would materially diminish any of the rights ofthe Participant under any Award theretofore granted to such Participant under the Plan; provided , however , that theAdministrator may without the Participant’s consent (a) amend the Plan or any outstanding Award in such manner as it deemsnecessary to permit the granting of Awards meeting the requirements of the Code or other applicable laws (including, withoutlimitation, to avoid adverse tax consequences to the Partnership or to Participants as provided in Section 14 and Section 18below), and (b) amend any outstanding Awards in a manner that is not adverse (other than in a de minimis manner) to aParticipant, except as otherwise may be permitted pursuant to Section 9 hereof or as is otherwise contemplated pursuant to theterms of the Award, without the Participant’s consent.14. International ParticipantsWith respect to Participants who reside or work outside the United States of America, the Administrator may, in its solediscretion, amend the terms of the Plan or Awards with respect to such Participants in order to conform such terms with therequirements of local law or to obtain more favorable tax or other treatment for a Participant, the Partnership or an Affiliate.15. Choice of LawThe Plan shall be governed by and construed in accordance with the law of the State of New York without giving effect toany otherwise governing principles of conflicts of law that would apply the laws of another jurisdiction.16. Other Laws; Restrictions on Transfer of Common UnitsThe Administrator may refuse to issue or transfer any Common Units or other consideration under an Award if, acting inits sole discretion, it determines that the issuance or transfer of such Common Units or such other consideration might violateany applicable law or regulation or entitle the Partnership to recover the same under Section 16(b) of the Act, as amended, andany payment tendered to the Partnership by a Participant, other holder or beneficiary in connection with the exercise of suchAward shall be promptly refunded to the relevant Participant, holder or beneficiary. Without limiting the generality of theforegoing, noE-10 Award granted hereunder shall be construed as an offer to sell securities of the Partnership, and no such offer shall beoutstanding, unless and until the Administrator in its sole discretion has determined that any such offer, if made, would be incompliance with all applicable requirements of the United States federal and any other applicable securities laws.17. Effectiveness of the PlanThe Plan shall be effective as of the Effective Date.18. Section 409ATo the extent applicable, this Plan and Awards issued hereunder shall be interpreted in accordance with Section 409A ofthe Code and Department of Treasury regulations and other interpretative guidance issued thereunder, including withoutlimitation any such regulations or other guidance that may be issued after the Effective Date. Notwithstanding other provisions ofthe Plan or any Award agreements issued thereunder, no Award shall be granted, deferred, accelerated, extended, paid out ormodified under this Plan in a manner that would result in the imposition of an additional tax under Section 409A of the Codeupon a Participant. In the event that it is reasonably determined by the Administrator that, as a result of Section 409A of theCode, payments in respect of any Award under the Plan may not be made at the time contemplated by the terms of the Plan orthe relevant Award agreement, as the case may be, without causing the Participant holding such Award to be subject to taxationunder Section 409A of the Code, consistent with the provisions of Section 13(a) above, the Partnership may take whateveractions the Administrator determines necessary or appropriate to comply with, or exempt the Plan and Award agreement fromthe requirements of Section 409A of the Code and related Department of Treasury guidance and other interpretive materials asmay be issued after the Effective Date including, without limitation, (a) adopting such amendments to the Plan and Awards andappropriate policies and procedures, including amendments and policies with retroactive effect, that the Administratordetermines necessary or appropriate to preserve the intended tax treatment of the benefits provided by the Plan and Awardshereunder and/or (b) taking such other actions as the Administrator determines necessary or appropriate to avoid the impositionof an additional tax under Section 409A of the Code, which action may include, but is not limited to, delaying payment to aParticipant who is a “specified employee” within the meaning of Section 409A of the Code until the first day following the six-month period beginning on the date of the Participant’s termination of Employment . The Partnership shall use commerciallyreasonable efforts to implement the provisions of this Section 18 in good faith; provided that neither the Partnership, theAdministrator nor any employee, director or representative of the Partnership or of any of its Affiliates shall have any liability toParticipants with respect to this Section 18 .E-11 FIDELITY STOCK PLAN SERVICES, LLCPARTICIPANT CONSENTKKR & CO. L.P.PARTICIPANT CONSENTPursuant to provisions of this grant agreement between me and KKR & Co. L.P. (the “Company”) and/or other parties thereto, and as a condition of receiving suchgrant agreement, I hereby authorize Fidelity Stock Plan Services, LLC and its affiliates (including, but not limited to Fidelity Brokerage Services LLC, NationalFinancial Services LLC, and Fidelity Personal Trust Company, FSB) (“Fidelity”) (i) to act upon the directions of Company or its designee direction to restrict myability to sell, transfer or to take other actions with respect to certain Company equity that I may hold, and (ii) to act the directions of the Company or its designee,pursuant to provisions of the Company’s plans and this grant agreement requiring my forfeiture of Company equity if I violate certain restrictive covenants, totransfer in kind Company equity held by Fidelity on my behalf to the Company or its designee.Participant Name: Participant NameParticipant Signature: Electronic SignatureDate: Acceptance Date Exhibit 10.19GRANT CERTIFICATECurrent Issue of Units – Participant NameThis Grant Certificate amends and restates in its entirety the terms of the grant originally issued on Grant Date (the “Grant Date”) andamended on November 2, 2016. This Grant Certificate confirms that (subject to the following paragraph) the Units are Fully Unvested Units and shallvest pursuant to the vesting schedule specified hereunder. The Units are subject to the terms of the First Amended and Restated LimitedPartnership Agreement of KKR Holdings L.P., dated October 1, 2009, as amended (the “Holdings LPA”), and (save for the matters specificallyaddressed in this Grant Certificate) to the applicable terms of any other written documents relating to your interests in KKR Holdings L.P. (which mayinclude a Consent, Admission and Award Agreement), each of which have been previously executed by you. Capitalized terms not otherwisedefined herein have the meanings set forth in Appendix A hereto and if not defined therein have the meanings set forth in the Holdings LPA. In theevent of a conflict between any term or provision contained in the Holdings LPA and this Grant Certificate (including, without limitation, with respectto transfer restrictions and vesting upon retirement, death or disability and change in control), the applicable terms and provisions of this GrantCertificate will govern and prevail.Notwithstanding anything to the contrary in this Grant Certificate, the Holdings LPA or any other document, this grant of Units is conditionedupon and subject to your agreement to be bound by the Confidentiality and Restrictive Covenant Obligations attached hereto as Appendix B, whichconstitute the Limited Partner’s Confidentiality and Restrictive Covenant Agreement as of the date hereof (and may be amended or replaced afterthe date hereof in any Confidentiality and Restrictive Covenant Agreement executed by the Limited Partner with the Partnership or the Company (asdefined in Appendix B)).Issue:Number of Units issued on the Grant Date: Number of Awards Granted Units:Service-Based VestingThe following table presents the percentage of Units issued and/or disclosed to the Limited Partner on the Grant Date that will contingently vest andbecome Contingently Vested Units as of each applicable Service Vesting Date, subject to the Limited Partner’s continued Employment through theService Vesting Dates set forth below.Service Vesting DatePercentage of Units VestingMay 1, 201720%May 1, 201820%May 1, 201920%May 1, 202020%May 1, 202120%Cumulative Vesting Through May 1, 2021100%Minimum Retained OwnershipA-1The Units are subject to Section 9.2(a) of the Holdings LPA, which requires the Limited Partner to retain the Minimum Retained Ownership Amount.Additional Vesting ProvisionsTransfer RestrictionsEach Unit issued to the Limited Partner is subject to the transfer restrictions set forth in Appendix C of the Holdings LPA and shall be subject to thefollowing additional vesting provision until the earlier of (i) the Transfer Restrictions End Date for such Unit and (ii) the date on which the non-solicitation covenants contained in the Limited Partner’s Confidentiality and Restrictive Covenant Agreement expire:The Limited Partner shall not (i) become a Terminated Limited Partner due to Cause or (ii) with respect only to those Units with respect towhich the Transfer Restrictions End Date has not occurred, breach the Limited Partner’s Confidentiality and Restrictive Covenant Agreement.Retirement, Death or Disability, Change in Control and Other TerminationIf, prior to the date the Units are vested as provided in “Service-Based Vesting” above or otherwise terminate or are forfeited pursuant to this GrantCertificate: (A) the Limited Partner’s Employment terminates due to the Limited Partner’s Retirement, if applicable, then all Retirement Units shall, inthe discretion of the General Partner, be fully vested and thereafter be a Contingently Vested Unit as a result thereof; (B) the Limited Partner dies orexperiences a Disability, then all Units shall be vested and thereafter be a Contingently Vested Unit as a result thereof, provided that if the LimitedPartner is not an employee of the KKR Group, then any vesting of Units described in this clause (B) shall be in the discretion of the General Partner;or (C) there occurs a Change in Control prior to any termination of the Limited Partner’s Employment, then all or any portion of any Units may, in thediscretion of the General Partner, be vested and thereafter be a Contingently Vested Unit as a result thereof. Notwithstanding the foregoing, if theGeneral Partner or KKR & Co. L.P. receives an opinion of counsel that there has been a legal judgment and/or legal development in the LimitedPartner’s jurisdiction that would likely result in the favorable treatment applicable to the Retirement Units pursuant to this Grant Certificate beingdeemed unlawful and/or discriminatory, then the General Partner will not apply the favorable treatment at the time the Limited Partner’s Employmentterminates due to the Limited Partner’s Retirement under clause (A) above, and the Units will be treated as set forth in “Service-Based Vesting”, orthe other provisions of this Grant Certificate, as applicable.If the Limited Partner’s Employment terminates for any reason other than due to the Limited Partner’s death, Disability or Retirement, each asprovided for in this Grant Certificate, then all Units (including any Units that are not Retirement Units) shall immediately terminate and be forfeitedwithout consideration.The Limited Partner’s right to vest in the Units, if any, will terminate effective as of the date that the Limited Partner is no longer actively providingservices (even if still considered employed or engaged under local Law) and will not be extended by any notice period mandated under local Law(e.g., active Employment would not include a period of “garden leave” or similar period pursuant to local Law) except as may be otherwise agreed inwriting by the General Partner with the Limited Partner; the General Partner shall have the exclusive discretion to determine when the LimitedPartner is no longer actively employed or engaged for purposes of the Units.A-2Each of the foregoing additional vesting provisions shall be considered an “Additional Vesting Provision” for the purposes of the Holdings LPA.Appendix B and D of the Holdings LPA shall not apply to the Units.A-3In Witness Whereof , the parties hereto have executed this Grant Certificate as of ____________.KKR HOLDINGS L.P.By: KKR HOLDINGS GP LIMITED, its general partnerBy:__________________________ “LIMITED PARTNER”Name: Participant NameA-4Appendix ADefinitions“ Cause ” means, with respect to the Limited Partner, the occurrence or existence of any of the following as determined fairly on an informed basisand in good faith by the General Partner: (i) any act of fraud, misappropriation, dishonesty, embezzlement or similar conduct by the Limited Partneragainst any member of the KKR Group (including KKR & Co. L.P.), KKR Holdings L.P., KKR Associates Holdings L.P., a Fund, or a PortfolioCompany, (ii) a Regulatory Violation that has a material adverse effect on (x) the business of any member of the KKR Group or (y) the ability of theLimited Partner to function as an employee, associate or in any similar capacity (including consultant) with respect to the KKR Group, taking intoaccount the services required of the Limited Partner and the nature of the business of the KKR Group, or (iii) a material breach by the LimitedPartner of a material provision of any Written Policies or the deliberate failure by the Limited Partner to perform the Limited Partner’s duties to theKKR Group, provided that in the case of this clause (iii), the Limited Partner has been given written notice of such breach or failure within 45 days ofthe KKR Group becoming aware of such breach or failure and, where such breach or failure is curable, the Limited Partner has failed to cure suchbreach or failure within (A) 15 days of receiving notice thereof or (B) such longer period of time, not to exceed 30 days, as may be reasonablynecessary to cure such breach or failure provided that the Limited Partner is then working diligently to cure such breach or failure. If such breach orfailure is not capable of being cured, the notice given to the Limited Partner may contain a date of termination that is earlier than 15 days after thedate of such notice.Designated Service Recipient means the member of the KKR Group, that employs or engages the Grantee or to which the Grantee otherwise isrendering services.“ Disability ” means, as to any Person, such Person’s inability to perform in all material respects such Person’s duties and responsibilities to theKKR Group, by reason of a physical or mental disability or infirmity which inability is reasonably expected to be permanent and has continued (i) fora period of six consecutive months or (ii) such shorter period as the General Partner may reasonably determine in good faith.“ Employment ” means the Limited Partner’s employment or engagement (including any similar association determined by the General Partner toconstitute employment or engagement for purposes of this Grant Certificate) with (x) the Designated Service Recipient or any other member of theKKR Group or (y) any consultant or service provider that provides services to any member of the KKR Group; provided that in the case of clause (y),service provided as a consultant or service provider must be approved by the General Partner in order to qualify as “Employment” hereunder.“ Grantee ” means the Limited Partner identified on the signature page of the Grant Certificate to which this Appendix A is attached.“ Group Partnerships ” means KKR Management Holdings L.P., a Delaware limited partnership, KKR Fund Holdings L.P., a Cayman Islandexempted limited partnership, and KKR International Holdings L.P., a Cayman Island exempted limited partnership, along with any partnershipdesignated in the future as a “Group Partnership” by KKR & Co. L.P.“ KKR Capstone ” means (i) KKR Capstone Americas LLC, KKR Capstone EMEA LLP, KKR Capstone EMEA (International) LLP, KKR CapstoneAsia Limited and any other “Capstone” branded entity thatA-1provides similar consulting services to the KKR Group and Portfolio Companies, and (ii) the direct and indirect parents and subsidiaries of theforegoing.“ KKR Group ” means the Group Partnerships, the direct and indirect parents of the Group Partnerships (the “ Parents ”), any direct or indirectsubsidiaries of the Parents or the Group Partnerships, the general partner or similar controlling entities of any investment fund or vehicle that ismanaged, advised or sponsored by the KKR Group (the “ Funds ”) and any other entity through which any of the foregoing directly or indirectlyconducts its business, but shall exclude Portfolio Companies.“ Law ” means any statute, law, ordinance, regulation, rule, code, executive order, injunction, judgment, decree or other order issued or promulgatedby any national, supranational, state, federal, provincial, local or municipal government or any administrative or regulatory body with authoritytherefrom with jurisdiction over the Partnership or any Partner, as the case may be.“ Portfolio Company ” means a company over which a Fund exercises a significant degree of control as an investor.“ Regulatory Violation ” means, with respect to the Limited Partner (i) a conviction of the Limited Partner based on a trial or by an accepted plea ofguilt or nolo contendere of any felony or misdemeanor crime involving moral turpitude, false statements, misleading omissions, forgery, wrongfultaking, embezzlement, extortion or bribery, (ii) a final determination by any court of competent jurisdiction or governmental regulatory body (or anadmission by the Limited Partner in any settlement agreement) that the Limited Partner has violated any U.S. federal or state or comparable non-U.S. securities laws, rules or regulations or (iii) a final determination by self-regulatory organization having authority with respect to U.S. federal orstate or comparable non-U.S. securities laws, rules or regulations (or an admission by the Limited Partner in any settlement agreement) that theLimited Partner has violated the written rules of such self-regulatory organization that are applicable to any member of the KKR Group.“ Retirement ” means the resignation by the Limited Partner of the Limited Partner’s Employment with the KKR Group (other than for Cause), on orafter the date that the Limited Partner’s age, plus the Limited Partner’s years of Employment with the KKR Group, equals at least 80; provided thatsuch date shall be no earlier than December 31, 2012.“ Retirement Units ” means, with respect to any Limited Partner whose Employment terminates due to Retirement, any Units with a Service VestingDate that would, if the Limited Partner’s Employment were not so terminated, occur within two years after the date of such termination due toRetirement.“ Service Vesting Date ” means, with respect to any Unit, the date set forth in the Grant Certificate as the “Service Vesting Date.”“ Written Policies ” means with respect to any Limited Partner having Employment with a member of the KKR Group, the written policies of the KKRGroup included in its employee manual, code of ethics and confidential information and information barrier policies and procedures and otherdocuments relating to the Limited Partner's Employment, association or other similar affiliation with the KKR Group.A-2Appendix BConfidentiality and Restrictive Covenant ObligationsA. Capitalized terms contained in this Appendix B and not defined herein shall have the same meaning as such terms are definedin the Grant Certificate, including Appendix A thereto (the “ Agreement ”) into which this Appendix B is incorporated by reference therein and towhich this Appendix B is attached, or the Holdings LPA, as applicable.B. In connection with the Grantee’s employment, engagement, association or other similar affiliation with KKR & Co. L.P. or otherentity of the KKR Group (“ KKR ” or the “ Company ” and such Grantee, a “ KKR Employee ”), the Grantee is being issued one or more Unitspursuant to the Agreement to which this Appendix B is attached;C. The Grantee acknowledges and agrees that the Grantee will receive financial benefits from KKR’s business through theirparticipation in the value of the Units. The Grantee further acknowledges and agrees that (i) during the course of the Grantee’s employment,engagement, association or other similar affiliation with KKR, the Grantee will receive and have access to confidential information of KKR and thePortfolio Companies (collectively, the “ KKR Related Entities ”) and will have influence over and the opportunity to develop relationships withClients, Prospective Clients, Portfolio Companies and partners, members, employees and associates of the Company; and (ii) such confidentialinformation and relationships are extremely valuable assets in which KKR has invested, and will continue to invest, substantial time, effort andexpense in developing and protecting; andD. The Grantee acknowledges and agrees that (i) the Units will materially benefit the Grantee; (ii) it is essential to protect thebusiness interests and goodwill of the Company and that the Company be protected by the restrictive covenants and confidentiality undertaking setforth herein; (iii) it is a condition precedent to the Grantee receiving Units that the Grantee agree to be bound by the restrictive covenants andconfidentiality undertaking contained herein; and (iv) KKR would suffer significant and irreparable harm from a violation by the Grantee of theconfidentiality undertaking set forth herein as well as the restrictive covenants set forth herein for a period of time after the termination of theGrantee’s employment, engagement, association or other similar affiliation KKR.E. This Appendix B is made in part for the benefit of the KKR Group and the Designated Service Recipient and the parties intend,acknowledge, and agree that the KKR Group and the Designated Service Recipient are third party beneficiaries of this Appendix B and any one ofthem is authorized to waive compliance with any provision hereof by delivering a written statement clearly expressing the intent to waive suchcompliance to the Grantee and a duly authorized representative of the KKR Group or Designated Service Recipient.NOW, THEREFORE, to provide the Company with reasonable protection of its and goodwill and in consideration for (i) the Units and anyother consideration that the Grantee will receive in connection with and as a result of the Grantee’s employment, engagement, association or othersimilar affiliation with KKR; (ii) the material financial and other benefits that the Grantee will derive from such Units and other consideration (if any);and (iii) other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Grantee hereby agrees to thefollowing restrictions:1.Outside Business Activities.The Grantee acknowledges that, during the course of the Grantee’s employment, engagement, association or other similar affiliation withKKR, the Grantee will be subject to the Written Policies. The Written Policies include restrictions that limit the ability of the Grantee to engage inoutside business and other activities without the prior approval of the Company. If the Grantee has an employment, engagement or other similarcontract with KKR, the Grantee may be subject to similar restrictions under that agreement. TheB-1Grantee hereby agrees that, during the Grantee’s employment, engagement, association or other similar affiliation with KKR, the Grantee willcomply with all such restrictions that are from time to time in effect which are applicable to the Grantee.2.Confidentiality Undertaking.The Grantee acknowledges that, during the course of the Grantee’s employment, engagement, association or other similar affiliation withKKR, the Grantee will receive and have access to Confidential Information (as defined below) of the Company and the Portfolio Companies.Recognizing that any disclosure of such information could have serious consequences to one or more of the Company and the PortfolioCompanies, the Grantee hereby agrees that, except as provided herein, the Grantee will not under any circumstances (either while employed,engaged, associated or otherwise affiliated with KKR, or at any time after the Termination Date) for any purpose other than in the ordinary course ofthe performance of the Grantee’s duties as an employee, consultant, associate or other affiliated person of KKR, use or divulge, communicate,publish, make available, or otherwise disclose any Confidential Information to any person or entity, including but not limited to any business, firm,governmental body, partnership, corporation, press service or otherwise, other than to (i) any executive or employee of the Company in theordinary course of the performance of Grantee’s duties as an employee, consultant, associate or other affiliated person of KKR; (ii) any person orentity to the extent explicitly authorized by an executive of the Company in the ordinary course of the performance of Grantee’s duties as anemployee, consultant, associate or other affiliated person of KKR; (iii) any attorney, accountant, consultant or similar service provider retained bythe Company who is required to know such information and is obligated to keep such information confidential; or (iv) any person or entity to theextent the law or legal process requires disclosure by the Grantee, provided that, in the case of clause (iv), the Grantee must first give thePartnership or the Designated Service Recipient prompt written notice of any such requirement, disclose no more information than is so required inthe opinion of competent legal counsel, and cooperate fully with all efforts by the Company to obtain a protective order or similar confidentialitytreatment for such information; provided, however, the Partnership shall not enforce and shall cause its subsidiaries not to enforce anyconfidentiality agreement that prohibits the Grantee from reporting possible violations of federal law or regulation to any governmental agency orentity, including but not limited to the U.S. Securities and Exchange Commission, or making other disclosures to the extent protected under thewhistleblower provisions of federal law or regulation (or comparable laws or regulations that similarly prohibit the impediment of such protecteddisclosures). Notwithstanding the foregoing, neither the Partnership nor the Designated Service Recipient authorizes the waiver of (or thedisclosure of information covered by) the attorney-client privilege or work product protection or any other privilege or protection belonging to thePartnership, the Designated Service Recipient or their subsidiaries, to the fullest extent permitted by law.As used in this Section 2, an “ executive ” of KKR means an officer, member, managing director, director, principal or employee of theCompany, acting in a supervisory capacity. “ Confidential Information ” means (a) all confidential, proprietary or non-public information of, orconcerning the business, operations, activities, personnel, finances, plans, personal lives, habits, history, clients, investors, or otherwise of anyperson who at any time is or was a member, partner, officer, director, other executive, employee or stockholder of any of the foregoing, (b) allconfidential, proprietary or non-public information of or concerning any member of a family of any of the individuals referred to in clause (a),whether by birth, adoption or marriage (including but not limited to any of their current or former spouses or any living or deceased relatives), and(c) all confidential, proprietary or non-public information of or concerning any of the clients or investors of the KKR Related Entities or any otherperson or entity with which or whom any of the KKR Related Entities or their respective clients or investors does business or has a relationship.Confidential Information includes information about the KKR Related Entities relating to or concerning any of their (i) finances, investments, profits,pricing, costs, and accounting, (ii) intellectual property (including but not limited to patents, inventions, discoveries, plans, research anddevelopment, processes, formulae, reports, protocols, computer software, databases, documentation, trade secrets, know-how and businessmethods), (iii) personnel, compensation, recruiting and training, and (iv) any pending or completed settlements, arbitrations, litigation, governmentalinvestigations and similar proceedings. NotwithstandingB-2the foregoing, Confidential Information does not include any portions of the foregoing that the Grantee can demonstrate by sufficient evidencesatisfactory to the Company that has been (i) lawfully published in a form generally available to the public prior to any disclosure by the Grantee inbreach of this Appendix B or (ii) made legitimately available to the Grantee by a third party without breach of any obligation of confidence owed tothe Company or any Portfolio Company.Without limiting the generality of the foregoing, the Grantee agrees that it will be a breach of this Appendix B to write about, provide,disclose or use in any fashion at any time any Confidential Information that is or becomes part of the basis for, or is used in any way in connectionwith any part of any book, magazine or newspaper article, any interview or is otherwise published in any media of any kind utilizing any technologynow known or created in the future.Upon termination of the Grantee's employment, engagement, association or other similar affiliation with KKR, for any reason, the Granteehereby agrees to (i) cease and not thereafter commence any and all use of any Confidential Information; (ii) upon the request of the Companypromptly deliver to the Company or, at the option of the Company destroy, delete or expunge all originals and copies of any ConfidentialInformation in any form or medium in the Grantee’s possession or control (including any of the foregoing stored or located in the Grantee’s home,laptop or other computer that is not the property of the Company, its affiliates or Portfolio Companies); (iii) notify and fully cooperate with theCompany regarding the delivery or destruction of any other Confidential Information of which the Grantee is aware; and (iv) upon the request of theCompany sign and deliver a statement that the foregoing has been accomplished.The Grantee acknowledges that he or she is aware that applicable securities laws place certain restrictions on any person who hasreceived from an issuer material, non-public information concerning the issuer with respect to purchasing or selling securities of such issuer or fromcommunicating such information to any other person and further agrees to comply with such securities laws. Without limiting anything in thisAppendix B, the Grantee hereby expressly confirms his or her explicit understanding that the Grantee’s obligations hereunder are in addition to,and in no way limit, the Grantee’s obligations under compliance procedures of the Company including those contained in the Written Policies.Notwithstanding anything in this Appendix B to the contrary, the Grantee may disclose to any and all persons, without limitation of any kind,the tax treatment and tax structure of any member of the Company in which the Grantee holds an interest and all materials of any kind (includingopinions or other tax analyses) that are provided to the Grantee relating to such tax treatment and tax structure.3.Notice Period .The Grantee acknowledges and agrees that the Designated Service Recipient may terminate his or her employment, engagement,association or other similar affiliation with the Designated Service Recipient at any time for any reason or for no reason at all with or without reasonsconstituting Cause, which as used in this Appendix B shall have the meaning set forth in Appendix A of the Agreement. The Designated ServiceRecipient or the Grantee, as applicable, shall provide advance written notice (which may be by email) of the termination of the Grantee’semployment, engagement, association or other similar affiliation with the Designated Service Recipient at least 90 days prior to actual termination(such 90-day period, the “ Notice Period ”); provided, however, that no advance notice shall be required by the Designated Service Recipient andthe provisions of this Section 3 shall not be applicable if the Grantee’s employment, engagement, association or other similar affiliation is terminatedby the Designated Service Recipient for reasons constituting Cause or due to any conduct by Grantee that, in the judgment of the DesignatedService Recipient in its sole discretion, amounts to gross negligence or reckless or willful misconduct. Notice pursuant to this paragraph shall beprovided by the Grantee to any of the Chief Executive Officers, General Counsel or Chief Human Resources Officer of the KKR Group.During the Notice Period, the Grantee shall perform his or her regular duties and any transitional responsibilities (including but not limited tohelping to transition work, projects, and Client relationships internally to others) as determined and directed by the Designated Service Recipient inits sole discretion,B-3and Grantee shall not be employed, engaged, associated or otherwise similarly affiliated with any business other than the business of KKR;provided, however, the Designated Service Recipient reserves the right to require the Grantee not to be in the offices of the KKR Group, not toundertake all or any of the Grantee’s duties or not to contact Clients or Prospective Clients (as defined in Section 5 below), other persons employed,engaged, associated or otherwise similarly affiliated with the KKR Group, or others (or any combination thereof) unless otherwise instructed duringall or any part of the Notice Period. During the Notice Period, and except as provided in the next sentence, the Grantee shall continue to receive hisor her salary, and the Grantee shall not be entitled to receive or be considered for payment of any other amount for his or her services during theNotice Period (including without limitation any bonus or equity award). In addition, the Designated Service Recipient in its sole discretion may electto reduce the Notice Period and pay the Grantee his or her salary, but no other amount, for the period from the conclusion of the reduced NoticePeriod to the end of the original Notice Period, and the Grantee’s employment, engagement, association or other similar affiliation with KKR, shall beterminated as of the day immediately following the conclusion of the reduced Notice Period.4.Non-Compete.The Grantee hereby agrees that, while employed, engaged, associated or otherwise similarly affiliated with KKR, and in addition during theNon-Compete Period (as defined below), the Grantee will not set up, be employed or engaged by, hold an office in or provide consulting, advisoryor other similar services to or for the benefit of, a Competing Business (i) where the activities or services of the Grantee in relation to the CompetingBusiness are similar or substantially related to any activity that the Grantee engaged in or any service that the Grantee provided, in connection withthe Grantee’s employment, engagement, association or other similar affiliation with KKR or (ii) for which the Grantee had direct or indirectmanagerial or supervisory responsibility with KKR, including through the Grantee’s position on the Management Committee or similar committee orgroup, including without limitation the Public Markets & Distribution Management Committee, for one or more businesses of the KKR Group, ineach case, at any time during the 12 months preceding the Termination Date.For the purposes of this Appendix B, a “ Competing Business ” means a business that competes (i) in a Covered Country with anybusiness conducted by the Company on the date on which the Grantee’s employment, engagement, association or other similar affiliation with KKRGroup, is terminated (the “ Termination Date ”) or (ii) in any country with any business that the Company was, on the Termination Date, formallyconsidering conducting. A “ Covered Country ” means the United States, United Kingdom, the Republic of Ireland, France, Hong Kong, China,Japan, the Republic of Korea, Australia, India, United Arab Emirates, Saudi Arabia, Brazil, Canada, Singapore, Spain, Luxembourg or any othercountry where the Company conducted business on the Termination Date; provided that if the Grantee is located in Japan, the definition ofCovered Country shall exclude the phrase “any other country where the Company conducted business on the Termination Date” to the extentunenforceable under applicable law. The “ Non-Compete Period ” for the Grantee shall commence on the Termination Date and shall expire uponthe twelve month anniversary of the Termination Date. Notwithstanding the foregoing, if the Grantee’s employment, engagement, association orother similar affiliation with the KKR Group, is terminated involuntarily and for reasons not constituting Cause, the Non-Compete Period will expireon the six month anniversary of the Termination Date.Notwithstanding the foregoing, nothing in this Appendix B shall be deemed to prohibit the Grantee from (i) associating with any businesswhose activities consist principally of making passive investments for the account and benefit of the Grantee or members of the Grantee’simmediate family where such business does not, within the knowledge of the Grantee, compete with a business of the KKR Group for specificprivately negotiated investment opportunities; (ii) making and holding passive investments in publicly traded securities of a Competing Businesswhere such passive investment does not exceed 5% of the amount of such securities that are outstanding at the time of investment; or (iii) makingand holding passive investments in limited partner or similar interests in any investment fund or vehicle with respect to which the Grantee does notexercise control, discretion or influence over investment decisions.B-45.Non-Solicitation of Clients and Prospective Clients; Non-Interference.The Grantee hereby agrees that, while employed, engaged, associated or otherwise similarly affiliated with KKR, and in addition during thePost-Termination Restricted Period (as defined below), the Grantee will not, directly or indirectly, (i) solicit, or assist any other person in soliciting,the business of any Client or Prospective Client for, or on behalf of, a Competing Business; (ii) provide, or assist any other person in providing, forany Client or Prospective Client any services that are substantially similar to those that the Company provided or proposed to be provided to suchClient or Prospective Client; or (iii) impede or otherwise interfere with or damage, or attempt to impede or otherwise interfere with or damage, anybusiness relationship or agreement between the Company and any Client or Prospective Client. As used in this Section 5, “ solicit ” means to haveany direct or indirect communication inviting, advising, encouraging or requesting any person to take or refrain from taking any action with respectto the giving by such person of business to a Competing Business, regardless of who initiated such communication.For purposes of this Appendix B, “ Client ” means any person (a) for whom the Company provided services, including any investor in aninvestment fund, account or vehicle that is managed, advised or sponsored by KKR (a “ KKR Fund ”) or any client of the KKR Group’s broker-dealer business or that was a Portfolio Company of a KKR Fund and (b) with whom the Grantee, individuals reporting to the Grantee or any otherindividuals over whom the Grantee had direct or indirect managerial or supervisory responsibility had any contact or dealings on behalf of, andinvolving Confidential Information of, the Company during the 12 months prior to the Termination Date; and “ Prospective Client ” means anyperson with whom (I) the Company has had negotiations or discussions concerning becoming a Client and (II) the Grantee, individuals reporting tothe Grantee or any other individuals over whom the Grantee had direct or indirect managerial or supervisory responsibility had any contact ordealings on behalf of, and involving Confidential Information of, the Company during the 12 months prior to the Termination Date.6.Non-Solicitation of Personnel; No Hire.The Grantee hereby agrees that, while employed, engaged, associated or otherwise similarly affiliated with KKR, and in addition during thePost-Termination Restricted Period, the Grantee will not, directly or indirectly, solicit, employ, engage or retain, or assist any other person insoliciting, employing, engaging or retaining, any Covered Person. As used in this Section 6, “ solicit ” means to have any direct or indirectcommunication inviting, advising, encouraging or requesting any Covered Person to terminate his or her employment, engagement, association orother affiliation with the KKR Group or KKR Capstone or recommending or suggesting that a third party take any of the foregoing actions, includingby way of identifying such Covered Person to the third party, in each case regardless of who initiated such communication.For purposes of this Appendix B, a “ Covered Person ” means a person who on the Termination Date was either (i) employed or engagedby the KKR Group as an employee or officer or otherwise associated or similarly affiliated with the KKR Group in any position, including as amember or partner, having functions and duties substantially similar to those of an employee or officer; (ii) a Senior Advisor, Industry Advisor orKKR Advisor to the KKR Group; (iii) employed or engaged by KKR Capstone as an employee or officer or otherwise associated or similarlyaffiliated with KKR Capstone in any position, including as a member or partner, having functions and duties substantially similar to those of anemployee or officer; or (iv) a person who provides services exclusively to the Company or any Portfolio Company and has functions and duties thatare substantially similar to those of a person listed in sub-clauses (i), (ii) or (iii) above.7.Post-Termination Restricted Period.The “ Post-Termination Restricted Period ” for the Grantee shall commence on the Termination Date and shall expire upon the eighteenmonth anniversary of the Termination Date. Notwithstanding the foregoing, if the Grantee’s employment, engagement, association or other similaraffiliation with KKR is terminatedB-5involuntarily and for reasons not constituting Cause, the Post-Termination Restricted Period will expire on the nine month anniversary of theTermination Date. To the extent that the Grantee continues to be employed or engaged by, or otherwise associated or similarly affiliated with KKR,during any “garden leave” or “notice” period in which the Grantee is required to not perform any services for or enter the premises of the Company,and to otherwise comply with all terms and conditions imposed on the Grantee during such “garden leave” or “notice” period, the applicable Post-Termination Restricted Period shall be reduced by the amount of any such “garden leave” or “notice” period in which the Grantee complies withsuch terms.8.Intellectual Property; Works Made for Hire.Except as otherwise agreed in writing between the Grantee and the Partnership, the Designated Service Recipient or other member of theKKR Group, as applicable, the Grantee agrees that all work and deliverables that the Grantee prepares, creates, develops, authors, contributes toor improves, either alone or with third parties, during the course of the Grantee’s employment, engagement, association or other similar affiliationwith KKR, within the scope of the services provided to or with the use of any of the resources of KKR, including but not limited to notes, drafts,scripts, documents, designs, inventions, data, presentations, research results, developments, reports, processes, programs, spreadsheets andother materials and all rights and intellectual property rights thereunder including but not limited to rights of authorship (collectively, “ Work Product”), are works-made- for-hire owned exclusively by KKR. The Grantee hereby irrevocably assigns, transfers and conveys, to the maximum extentpermitted by law, all right, title and interest that the Grantee may have in such Work Product (and any written records thereof) to KKR (or any of itsdesignees), to the extent ownership of any such rights does not vest originally with the KKR. The Grantee acknowledges and agrees that the Unitsissued pursuant to the Agreement are sufficient compensation for such assignment, transference and conveyance. To the extent the foregoingassignment is deemed to be invalid or unenforceable, Grantee grants KKR, at no additional charge an exclusive, worldwide, irrevocable, royalty-free, perpetual, assignable license under all intellectual property in and to the Work Product.9.Non-Disparagement.The Grantee hereby agrees that the Grantee will not at any time during his or her employment with the Designated Service Recipient or forfive years thereafter make any disparaging, defamatory, or derogatory written or oral statements or other communications about or in reference tothe Designated Service Recipient, KKR & Co. L.P., KKR Holdings L.P., KKR Associates Holdings L.P., or any other member of the KKR Group orKKR Capstone (including their respective businesses or reputations) or any of their Clients, Prospective Clients, Portfolio Companies, or CoveredPersons; provided that this provision shall not prevent the Grantee from (i) making truthful reports to or testifying truthfully before any court, agency,or regulatory body or pursuant to any legal or regulatory process or proceeding or (ii) engaging in activity protected by applicable law, rule orregulations, including the U.S. National Labor Relations Act.10.Representations; Warranties; Other Agreements.The Grantee acknowledges and agrees that the Grantee will derive material financial and other benefits from the Grantee’s employment,engagement, association or other similar affiliation with KKR, and that the restrictions contained herein are reasonable in all circumstances andnecessary to protect the legitimate business interests of the Company, to have and enjoy the full benefit of its business interests and goodwill. TheGrantee further agrees and acknowledges that such restrictions will not unnecessarily or unreasonably restrict or otherwise limit the professionalopportunities of the Grantee should his or her employment, engagement, association or other similar affiliation with KKR, terminate, that theGrantee is fully aware of the Grantee’s obligations under this Appendix B and that the livelihood of the Grantee is not impaired by the Grantee’sentry into the covenants contained herein. The Partnership and the Designated Service Recipient shall have the right, exercisable in its solediscretion, to directly or indirectly make a payment to the Grantee or grant other consideration if, and to the extent, necessary to enforce therestrictions contained herein in accordance with any applicable law.B-611.Certain Relationships.The Grantee acknowledges and agrees that the Grantee’s compliance with this Appendix B is a material part of the Grantee’s arrangementswith the Company, if applicable. Notwithstanding anything to the contrary herein, this Appendix B does not constitute an employment, engagementor other similar agreement between the Grantee and the Partnership, Company, or any other of the KKR Related Entities (including but not limitedto KKR & Co. L.P.), and shall not interfere with or otherwise affect any rights any such person or entity may have to terminate the Grantee’semployment, engagement, association or other similar affiliation at any time upon such notice as may be required by law or the terms of anyagreement or arrangement with the Grantee.12.Injunctive Relief; Third Party Beneficiaries.The Grantee acknowledges and agrees that the remedies of the Partnership and the Designated Service Recipient at law for any breach ofthis Appendix B would be inadequate and that for any breach of this Appendix B, the Designated Service Recipient may terminate youremployment, engagement, association or other similar affiliation with the Company and shall, in addition to any other remedies that may beavailable to it at law or in equity, or as provided for in this Appendix B, be entitled to an injunction, restraining order or other equitable relief, withoutthe necessity of posting a bond, restraining the Grantee from committing or continuing to commit any violation of this Appendix B. The Granteefurther acknowledges and agrees that the Partnership and the Designated Service Recipient shall not be required to prove, or offer proof, thatmonetary damages for a breach of this Appendix B would be difficult to calculate and that any remedies at law would be inadequate for any breachof this Appendix B. The parties intend, acknowledge, and agree that each member of the KKR Group is a third party beneficiary of this Agreementand is authorized to enforce any provision hereof by delivering a written statement expressing the intent to enforce the provisions hereof to theGrantee or the Designated Service Recipient. The Grantee has executed this Agreement for the benefit of each member of the KKR Group.13.Amendment; Waiver.This Appendix B may not be amended, restated, supplemented or otherwise modified other than by an agreement in writing signed by theparties hereto; provided, however, that the Partnership, the KKR Group or the Designated Service Recipient may reduce the scope of, or waivecompliance with any part of, any obligation of the Grantee arising under this Appendix B, at any time without any action, consent or agreement ofany other party. No failure to exercise and no delay in exercising, on the part of any party, of any right, remedy, power or privilege hereunder shalloperate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or furtherexercise thereof or the exercise of any other right, remedy, power or privilege. The waiver of any particular right, remedy, power or privilege shallnot affect or impair the rights, remedies, powers or privileges of any person with respect to any subsequent default of the same or of a different kindby any party hereunder. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies,powers and privileges provided by law. No waiver of any provision hereto shall be effective unless it is in writing and signed by the person assertedto have granted such waiver.14.Assignment.This Appendix B may not be assigned by any party hereto without the prior written consent of the other party hereto, except that the consentof the Grantee shall be deemed to have been given to the Partnership and the Designated Service Recipient (and the Grantee acknowledges thatthe Partnership and the Designated Service Recipient shall therefore have the right without further consent) to assign its rights hereunder, in wholeor in part, to (i) any member of KKR that becomes a Designated Service Recipient or (ii) any person who is a successor of the Partnership or theDesignated Service Recipient by merger,B-7consolidation or purchase of all or substantially all of its assets, in which case such assignee shall be substituted for the Partnership and theDesignated Service Recipient hereunder with respect to the provisions so assigned and be bound under this Appendix B and by the terms of theassignment in the same manner as the Partnership and the Designated Service Recipient was bound hereunder. Any purported assignment of thisAppendix B in violation of this section shall be null and void.15.Governing Law.This Appendix B shall be governed by and construed in accordance with the laws of the State of New York.16.Resolution of Disputes.(a)Subject to paragraphs (b) and (c) below, any and all disputes which cannot be settled amicably, including any ancillary claims ofany party, arising out of, relating to or in connection with the validity, negotiation, execution, interpretation, performance, nonperformance or termination of this Appendix B (including the validity, scope and enforceability of this arbitration provision) (each a “Dispute ”) shall be finally settled by arbitration conducted by a single arbitrator in New York, New York in accordance with the thenexisting Rules of Arbitration of the International Chamber of Commerce (the “ ICC ”). If the parties to the Dispute fail to agree onthe selection of an arbitrator within 30 days of the receipt of the request for arbitration, the ICC shall make the appointment. Thearbitrator shall be a lawyer and shall conduct the proceedings in the English language. Performance under this Appendix B shallcontinue if reasonably possible during any arbitration proceedings.(b)Prior to filing a Request for Arbitration or an Answer under the Rules of Arbitration of the ICC, as the case may be, the Partnershipor the Designated Service Recipient may, in its sole discretion, require all Disputes or any specific Dispute to be heard by a courtof law in accordance with paragraph (e) below and, for the purposes of this paragraph (b), each party expressly consents to theapplication of paragraphs (e) and (f) below to any such suit, action or proceeding. If an arbitration proceeding has already beencommenced in connection with a Dispute at the time that the Partnership or the Designated Service Recipient commences suchproceedings in accordance with this paragraph (b), such Dispute shall be withdrawn from arbitration.(c)Subject to paragraph (b) above, either party may bring an action or special proceeding in any court of law (or, if applicable, equity)for the purpose of compelling a party to arbitrate, seeking temporary or preliminary relief in aid of an arbitration hereunder orenforcing an arbitration award and, for the purposes of this paragraph (c), each party expressly consents to the application ofparagraphs (e) and (f) below to any such suit, action or proceeding.(d)Except as required by law or as may be reasonably required in connection with judicial proceedings to compel arbitration, to obtaintemporary or preliminary judicial relief in aid of arbitration or to confirm or challenge an arbitration award, the arbitrationproceedings, including any hearings, shall be confidential, and the parties shall not disclose any awards, any materials in theproceedings created for the purpose of the arbitration or any documents produced by another party in the proceedings nototherwise in the public domain. Judgment on any award rendered by an arbitration tribunal may be entered in any court havingjurisdiction thereover.(e)EACH PARTY HEREBY IRREVOCABLY SUBMITS AND AGREES TO THE EXCLUSIVE JURISDICTION OF THE COURTS, ANDVENUE, LOCATED IN NEW YORK, NEW YORK FOR THE PURPOSE OF ANY SUIT, ACTION OR PROCEEDING BROUGHT INACCORDANCE WITH THE PROVISIONS OF PARAGRAPHS (B) OR (C) ABOVE. The parties acknowledge that the forumdesignated by this paragraph (e) has a reasonableB-8relation to this Appendix B, and to the parties' relationship with one another. The parties hereby waive, to the fullest extentpermitted by applicable law, any objection which they now or hereafter may have to personal jurisdiction or to the laying of venueof any suit, action or proceeding brought in any court referred to in the preceding sentence or pursuant to paragraphs (b) or (c)above and such parties agree not to plead or claim the same.(f)The parties agree that if a suit, action or proceeding is brought under paragraphs(b) or (c) proof shall not be required that monetary damages for breach of the provisions of this Appendix B would be difficult tocalculate and that remedies at law would be inadequate, and they irrevocably appoint the Secretary or General Counsel of thePartnership or the Designated Service Recipient or an officer of the Partnership or the Designated Service Recipient (at the then-current principal business address of the Partnership or the Designated Service Recipient) as such party’s agent for service ofprocess in connection with any such action or proceeding and agrees that service of process upon such agent, who shall promptlyadvise such party of any such service of process, shall be deemed in every respect effective service of process upon the party inany such action or proceeding.17.Entire Agreement.This Appendix B contains the entire agreement and understanding among the parties hereto with respect to the subject matter of thisAppendix B and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral orwritten, of any nature whatsoever with the Partnership or the Company with respect to the subject matter of this Appendix B (including but notlimited to any prior grant agreement for an equity award under the KKR & Co. L.P. 2010 Equity Incentive Plan (or successor equity plan) thatcontains one or more appendices with respect to the subject matter of this Appendix B) or any Confidentiality and Restrictive Covenant Agreementpreviously executed with the Partnership, the KKR Group or KKR Capstone. The express terms of this Appendix B control and supersede anycourse of performance and any usage of the trade inconsistent with any of the terms of this Appendix B.18.Severability .Notwithstanding Section 13 or any other provision of this Appendix B to the contrary, any provision of this Appendix B that is prohibited orunenforceable in any jurisdiction (including but not limited to the application, if applicable, of Rule 5.6 of the New York Rules of ProfessionalConduct (or successor rule)) shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating theremaining provisions hereof and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable suchprovision in any other jurisdiction. In such event, the invalid provision shall be partially enforced, reformed or substituted with a valid provision whichmost closely approximates the intent and the economic effect of the invalid provision to give effect to the provision to the maximum extent permittedin such jurisdiction or in such case. Grantee specifically acknowledges that Grantee has been provided with valuable consideration in exchange forthe covenants set forth herein and, accordingly, such partial enforcement or reformation is necessary to avoid frustrating the Company’s purpose inawarding the Grantee such consideration.19.Interpretation .The provisions of Sections 10 through 19 (inclusive) of this Appendix B shall govern with respect to, and shall be applicable only to theinterpretation, administration and enforcement of, the provisions of this Appendix B, and shall not govern or otherwise apply to, or have anyadministrative or interpretive effect on, any other provisions of the remainder of the Agreement or any other of its Appendices.B-9Exhibit 21.1The following is a list of the consolidated subsidiaries of KKR & Co. L.P. as of December 31, 2016.Subsidiaries of the RegistrantName JurisdictionAllstar Co-Invest GP LLC DelawareASF Walter Co-Invest GP Limited Cayman IslandsAurora C-I Aggregator L.P. DelawareAurora Holding GP L.P. DelawareAurora Holding GP LLC DelawareAvoca Capital CLO X Designated Activity Company IrelandAvoca Capital Jersey Unlimited JerseyAvoca Capital Property Unlimited Company IrelandAvoca Capital Unlimited Company IrelandAvoca CLO XI Designated Activity Company IrelandAvoca CLO XII Designated Activity Company IrelandAvoca CLO XIII Designated Activity Company IrelandAvoca CLO XIV Designated Activity Company IrelandAvoca CLO XV Designated Activity Company IrelandAvoca CLO XVI Designated Activity Company IrelandAvoca CLO XVII Designated Activity Company IrelandAvoca Convertible Bond Partners LLP England & WalesAvoca Securities Investments Unlimited Company IrelandCH Co-Investors GP Limited Cayman IslandsCitrus Restaurant Investor LLC DelawareColt Real Asset Holdings GP LLC DelawareColt Real Asset Holdings L.P. DelawareCPS Associates L.P. Cayman IslandsCPS GP Limited Cayman IslandsDorms Asia Real Estate (GP) Pte. Ltd. SingaporeDorms Asia Real Estate LP SingaporeDorms Pte. Ltd. SingaporeFan Co-Invest GP Limited Cayman IslandsFan Co-Invest L.P. Cayman IslandsFan Investors GP Limited Cayman IslandsFan Investors L.P. Cayman IslandsFan Investors Limited Cayman IslandsFortune Creek Co-Invest GP Limited Cayman IslandsGDG Co-Invest GP LLC DelawareHelios Co-Invest GP Limited Cayman IslandsHupah Co-Invest Limited Cayman IslandsKAG Europe GP S.à r.l. LuxembourgKAG Italy S.C.S. LuxembourgKAM Advisors LLC DelawareKAM Credit Advisors LLC DelawareName JurisdictionKAM Fund Advisors LLC DelawareKAM Funds GP Limited Cayman IslandsKappa Holdings Ltd. Cayman IslandsKFH III Holdings Ltd. Cayman IslandsKFH Real Asset Holdings L.P. DelawareKFH Royalties GP LLC DelawareKFH Royalties II GP LLC DelawareKFH Royalties II LLC DelawareKFH Royalties L.P. DelawareKFH Royalties LLC DelawareKFN Birch Feeder LLC DelawareKFN Broadway Feeder LLC DelawareKFN BTS Feeder LLC DelawareKFN CC Portfolio Feeder LLC DelawareKFN Colonie Feeder LLC DelawareKFN HG Hotel Feeder LLC DelawareKFN HHV Feeder LLC DelawareKFN Midland Feeder LLC DelawareKFN PEI IX, LLC DelawareKFN PEI XI, LLC DelawareKFN Pelican 1 Feeder LLC DelawareKFN Rad Philly Feeder LLC DelawareKFN Sentinel REIT LLC DelawareKFN WTC Oahu Feeder LLC DelawareKFN YTC Feeder LLC DelawareKKR (Cayman) Limited Cayman IslandsKKR 2006 AIV GP LLC DelawareKKR 2006 AIV Limited Cayman IslandsKKR 2006 GP (Energy II) LLC DelawareKKR 2006 GP LLC DelawareKKR 2006 Limited Cayman IslandsKKR 8 NA Limited Cayman IslandsKKR Account Adviser (Mauritius), Ltd. MauritiusKKR AHI GP LLC DelawareKKR AHI Investors L.P. DelawareKKR Alternative Credit L.P. DelawareKKR Alternative Credit Limited Cayman IslandsKKR Alternative Credit LLC DelawareKKR Alternative Investment Management Unlimited Company IrelandKKR Americas XII EEA Limited Cayman IslandsKKR Americas XII EEA LLC DelawareKKR Americas XII Limited Cayman IslandsKKR AMG Co-Invest GP LLC DelawareKKR Apex Equity Master Fund LP Cayman IslandsKKR Apex Tactical Fund Ltd. Cayman IslandsName JurisdictionKKR Apex Tactical Master Fund L.P. Cayman IslandsKKR ARC India Private Limited IndiaKKR ASF Walter PE Limited Cayman IslandsKKR Asia II Japan AIV Limited Cayman IslandsKKR Asia II Limited Cayman IslandsKKR Asia III S.à r.l. LuxembourgKKR Asia Limited Hong KongKKR Asia Limited Cayman IslandsKKR Asia LLC DelawareKKR Asian Fund (Ireland) GP Limited IrelandKKR Asset Management (International) Partners LLP DelawareKKR Asset Management Ltd England & WalesKKR Asset Management Partners LLP England & WalesKKR Associates 2006 (Overseas) AIV L.P. Cayman IslandsKKR Associates 2006 (Overseas), Limited Partnership Cayman IslandsKKR Associates 2006 AIV L.P. DelawareKKR Associates 2006 L.P. DelawareKKR Associates 8 NA L.P. Cayman IslandsKKR Associates Americas XII L.P. Cayman IslandsKKR Associates ASF Walter PE L.P. Cayman IslandsKKR Associates Asia (Japan) L.P. Cayman IslandsKKR Associates Asia II Japan AIV L.P. Cayman IslandsKKR Associates Asia II L.P. Cayman IslandsKKR Associates Asia III SCSp LuxembourgKKR Associates Asia L.P. Cayman IslandsKKR Associates CDP PE L.P. Cayman IslandsKKR Associates China Growth L.P. Cayman IslandsKKR Associates CIS Global L.P. Cayman IslandsKKR Associates Credit Select L.P. Cayman IslandsKKR Associates CS I L.P. Cayman IslandsKKR Associates CS II L.P. Cayman IslandsKKR Associates CS III L.P. Cayman IslandsKKR Associates CS IX L.P. Cayman IslandsKKR Associates CS V L.P. DelawareKKR Associates CS VIII L.P. Cayman IslandsKKR Associates CS X L.P. Cayman IslandsKKR Associates Custom Equity Opportunities L.P. Cayman IslandsKKR Associates E2 L.P. Cayman IslandsKKR Associates EIGF AIV L.P. DelawareKKR Associates EIGF L.P. DelawareKKR Associates EIGF TE AIV L.P. DelawareKKR Associates EIGF TE L.P. DelawareKKR Associates Europe II, Limited Partnership AlbertaKKR Associates Europe III, Limited Partnership Cayman IslandsKKR Associates Europe IV L.P. Cayman IslandsName JurisdictionKKR Associates Europe, Limited Partnership AlbertaKKR Associates GFIP L.P. Cayman IslandsKKR Associates Global Credit Opportunities GP L.P. Cayman IslandsKKR Associates HCSG AIV L.P. DelawareKKR Associates HCSG L.P. DelawareKKR Associates Infrastructure (AIV) L.P. DelawareKKR Associates Infrastructure II L.P. Cayman IslandsKKR Associates Infrastructure L.P. Cayman IslandsKKR Associates IUH L.P. DelawareKKR Associates Lending Europe L.P. Cayman IslandsKKR Associates Lending II L.P. DelawareKKR Associates Lending III L.P. DelawareKKR Associates Lending L.P. DelawareKKR Associates LR Energy L.P. Cayman IslandsKKR Associates Mezzanine I L.P. DelawareKKR Associates Millennium (Overseas), Limited Partnership AlbertaKKR Associates Millennium L.P. DelawareKKR Associates NGT L.P. Cayman IslandsKKR Associates North America XI AIV L.P. DelawareKKR Associates North America XI L.P. Cayman IslandsKKR Associates NR I L.P. DelawareKKR Associates NR II L.P. DelawareKKR Associates NZSF L.P. Cayman IslandsKKR Associates PCOP II (Offshore) L.P. Cayman IslandsKKR Associates PCOP II L.P. DelawareKKR Associates PIP L.P. DelawareKKR Associates Principal Opportunities (Domestic) L.P. Cayman IslandsKKR Associates Principal Opportunities (Offshore) L.P. Cayman IslandsKKR Associates Principal Opportunities AIV (Domestic) L.P. Cayman IslandsKKR Associates Principal Opportunities AIV (Offshore) L.P. Cayman IslandsKKR Associates RECOI L.P. Cayman IslandsKKR Associates RECOP Ltd. Cayman IslandsKKR Associates REPA AIV-3 L.P. DelawareKKR Associates REPA AIV-4 L.P. DelawareKKR Associates REPA AIV-5 L.P. Cayman IslandsKKR Associates REPA II L.P. DelawareKKR Associates REPA L.P. DelawareKKR Associates REPE L.P. Cayman IslandsKKR Associates Revolving Credit Partners L.P. Cayman IslandsKKR Associates SA Co-Invest L.P. Cayman IslandsKKR Associates SA Master L.P. Cayman IslandsKKR Associates Shanda L.P. Cayman IslandsKKR Associates SMRS L.P. DelawareKKR Associates Special Situations (Domestic) II L.P. Cayman IslandsKKR Associates Special Situations (Domestic) L.P. Cayman IslandsName JurisdictionKKR Associates Special Situations (EEA) II Limited Cayman IslandsKKR Associates Special Situations (EEA) II LLP GuernseyKKR Associates Special Situations (Offshore) II L.P. Cayman IslandsKKR Associates Special Situations (Offshore) L.P. Cayman IslandsKKR Associates SPN L.P. Cayman IslandsKKR Associates TFO L.P. Cayman IslandsKKR Associates TV SPN L.P. Cayman IslandsKKR Athena Holdings GP LLC DelawareKKR Athena Holdings L.P. DelawareKKR Atlanta Co-Invest GP Limited Cayman IslandsKKR Australia Investment Management Pty Limited AustraliaKKR Australia Pty Limited AustraliaKKR Biosimilar GP LLC DelawareKKR Biosimilar L.P. DelawareKKR Blue Co-Invest GP Limited Cayman IslandsKKR Brazil Aggregator GP LLC DelawareKKR Brazil LLC DelawareKKR Brickman Co-Invest GP LLC DelawareKKR Canada LLC DelawareKKR Canada ULC Nova ScotiaKKR Capital Markets Asia Limited Hong KongKKR Capital Markets Holdings GP LLC DelawareKKR Capital Markets Holdings L.P. DelawareKKR Capital Markets India Private Limited IndiaKKR Capital Markets Japan Holdings LLC DelawareKKR Capital Markets Japan Limited JapanKKR Capital Markets Limited England & WalesKKR Capital Markets LLC DelawareKKR CC Co-Invest GP LLC DelawareKKR CDP PE Limited Cayman IslandsKKR China Growth Limited Cayman IslandsKKR Chrome Investors GP, LLC DelawareKKR CIS Global Limited Cayman IslandsKKR CLO 10 Ltd. Cayman IslandsKKR CLO 11 Ltd. Cayman IslandsKKR CLO 12 LLC DelawareKKR CLO 12 Ltd. Cayman IslandsKKR CLO 13 Ltd. Cayman IslandsKKR CLO 14 Ltd. Cayman IslandsKKR CLO 14 LLC DelawareKKR CLO 9 Ltd. Cayman IslandsKKR Co G.P S.à r.l. LuxembourgKKR Co L.P S.à.r.l. LuxembourgKKR Corporate Capital Services LLC DelawareKKR Corporate Credit Partners L.P. Cayman IslandsName JurisdictionKKR Corporate Lending (Cayman) Limited Cayman IslandsKKR Corporate Lending (UK) LLC DelawareKKR Corporate Lending LLC DelawareKKR CP Partners GP Limited Cayman IslandsKKR CP Partners L.P. Cayman IslandsKKR Credit Advisors (Hong Kong) Limited Hong KongKKR Credit Advisors (Ireland) Unlimited Company IrelandKKR Credit Advisors (UK) LLP England & WalesKKR Credit Advisors (US) LLC DelawareKKR Credit Alpha GP Limited Cayman IslandsKKR Credit Fund Advisors LLC DelawareKKR Credit Relative Value GP L.P. Cayman IslandsKKR Credit Select Limited Cayman IslandsKKR CRV GP Limited Cayman IslandsKKR CS Advisors I LLC DelawareKKR CS I Limited Cayman IslandsKKR CS II Limited Cayman IslandsKKR CS III Limited Cayman IslandsKKR CS IX Limited Cayman IslandsKKR CS V LLC DelawareKKR CS VIII Investor LLC DelawareKKR CS VIII Limited Cayman IslandsKKR CS X Limited Cayman IslandsKKR Custom Equity Opportunities Limited Cayman IslandsKKR Cyprus Holdings LLC DelawareKKR DBFH LLC DelawareKKR DBMH LLC DelawareKKR de Mexico, S.C. MexicoKKR Diversified Private Markets GP Holdings Limited Cayman IslandsKKR do Brasil Gestão de Investimentos e Participações Ltda. BrazilKKR E2 Limited Cayman IslandsKKR Eagle Co-Invest GP Limited Cayman IslandsKKR EIGF AIV LLC DelawareKKR EIGF Feeder GP Limited Cayman IslandsKKR EIGF LLC DelawareKKR Element Co-Invest GP LLC DelawareKKR Energy HF Stake II Limited Cayman IslandsKKR Energy HF Stake Limited Cayman IslandsKKR Energy Income and Growth Fund I AIV L.P. DelawareKKR Energy Income and Growth Fund I L.P. DelawareKKR Engage Investors GP LLC DelawareKKR Engage Investors L.P. DelawareKKR Europe II Limited Cayman IslandsKKR Europe III Limited Cayman IslandsKKR Europe IV EEA Limited Cayman IslandsName JurisdictionKKR Europe IV EEA LLC DelawareKKR Europe IV Investments GP Limited Cayman IslandsKKR Europe IV Limited Cayman IslandsKKR Europe Limited Cayman IslandsKKR European Fund IV Investments L.P. Cayman IslandsKKR European Infrastructure Limited Cayman IslandsKKR European Infrastructure LLC DelawareKKR Evergreen Co-Invest GP Limited Cayman IslandsKKR FH Investment Limited Cayman IslandsKKR FI Advisors Cayman Ltd. Cayman IslandsKKR FI Advisors LLC DelawareKKR Finance LLC DelawareKKR Financial Advisors II, LLC DelawareKKR Financial Advisors IV LLC DelawareKKR Financial Advisors LLC DelawareKKR Financial Capital Trust I DelawareKKR Financial Capital Trust II DelawareKKR Financial Capital Trust III DelawareKKR Financial Capital Trust IV DelawareKKR Financial Capital Trust V DelawareKKR Financial Capital Trust VI DelawareKKR Financial CLO 2005-1, Ltd. Cayman IslandsKKR Financial CLO 2005-2, Ltd. Cayman IslandsKKR Financial CLO 2006-1, Ltd. Cayman IslandsKKR Financial CLO 2007-1, Ltd. Cayman IslandsKKR Financial CLO 2007-A, Ltd. Cayman IslandsKKR Financial CLO 2009-1, Ltd. Cayman IslandsKKR Financial CLO 2011-1, Ltd. Cayman IslandsKKR Financial CLO 2012-1, Ltd. Cayman IslandsKKR Financial CLO 2013-1 Holdings, Ltd. Cayman IslandsKKR Financial CLO 2013-1, Ltd. Cayman IslandsKKR Financial CLO 2013-2 Holdings, Ltd. Cayman IslandsKKR Financial CLO 2013-2, Ltd. Cayman IslandsKKR Financial CLO Holdings II LLC DelawareKKR Financial CLO Holdings, LLC DelawareKKR Financial Holdings II, LLC DelawareKKR Financial Holdings II, Ltd. Cayman IslandsKKR Financial Holdings III, LLC DelawareKKR Financial Holdings III, Ltd. Cayman IslandsKKR Financial Holdings LLC DelawareKKR Financial Holdings, Inc. DelawareKKR Financial Holdings, Ltd. Cayman IslandsKKR Financial Management LLC DelawareKKR Fund Holdings GP Limited Cayman IslandsKKR Fund Holdings L.P. Cayman IslandsName JurisdictionKKR Genetic Disorder GP LLC DelawareKKR Genetic Disorder L.P. DelawareKKR GFIP Limited Cayman IslandsKKR Global Credit Opportunities Fund L.P. DelawareKKR Global Credit Opportunities Master Fund L.P. Cayman IslandsKKR GMO GP Limited Cayman IslandsKKR GMO Holdings L.P. Cayman IslandsKKR GMO Holdings Limited Cayman IslandsKKR GMO II Holdings L.P. Cayman IslandsKKR GMO II Holdings Limited Cayman IslandsKKR GMO II US Holdings LLC DelawareKKR Greek Aggregator GP Limited Cayman IslandsKKR Group Finance Co. II LLC DelawareKKR Group Finance Co. III LLC DelawareKKR Group Finance Co. IV LLC DelawareKKR Group Finance Co. LLC DelawareKKR Group Holdings L.P. Cayman IslandsKKR Group Limited Cayman IslandsKKR Gym Aggregator L.P. Cayman IslandsKKR Gym GP Limited Cayman IslandsKKR Harbourview Holdings Pty Ltd AustraliaKKR Harbourview Pty Ltd AustraliaKKR HCSG GP AIV LLC DelawareKKR HCSG GP LLC DelawareKKR Health Care I LLC DelawareKKR Health Care Strategic Growth Fund (Sail) L.P. DelawareKKR Health Care Strategic Growth Fund L.P. DelawareKKR Holdings Mauritius, Ltd. MauritiusKKR HY LLC DelawareKKR IFI GP L.P. Cayman IslandsKKR IFI Limited Cayman IslandsKKR ILP LLC DelawareKKR India Advisors Private Limited IndiaKKR India Debt Opportunities Fund II IndiaKKR India Finance Holdings LLC DelawareKKR India Financial Services Private Limited IndiaKKR India LLC DelawareKKR India Reconstruction Pte. Ltd. SingaporeKKR Indigo Co-Invest GP LLC DelawareKKR Infrastructure (AIV) GP LLC DelawareKKR Infrastructure II EEA Limited Cayman IslandsKKR Infrastructure II EEA LLC DelawareKKR Infrastructure II Limited Cayman IslandsKKR Infrastructure Limited Cayman IslandsKKR International Holdings L.P. Cayman IslandsName JurisdictionKKR Investment Advisory (Shanghai) LLC ChinaKKR Investment Advisory (Zhuhai Hengqin) Company Limited ChinaKKR Investment Consultancy (Beijing) Company Limited ChinaKKR Investment Holdings I (Mauritius), Ltd. MauritiusKKR Investment Management LLC DelawareKKR Investments LLC DelawareKKR Irish Holdings SPC Limited Cayman IslandsKKR Irish Parent S.à.r.l. LuxembourgKKR IUH LLC DelawareKKR Japan Limited JapanKKR Korea Limited Liability Corporation Korea, Republic ofKKR KPE LLC DelawareKKR Landmark Partners AIV L.P. DelawareKKR Landmark Partners GP AIV LLC DelawareKKR Landmark Partners GP Limited Cayman IslandsKKR Landmark Partners L.P. Cayman IslandsKKR Latin America LLC DelawareKKR Lending Europe GP Limited Cayman IslandsKKR Lending Europe GP LLP GuernseyKKR Lending Europe Limited Cayman IslandsKKR Lending GP LLC DelawareKKR Lending II GP LLC DelawareKKR Lending III GP LLC DelawareKKR Lending Partners Europe (USD) L.P. England & WalesKKR Lending Partners L.P. DelawareKKR LR Energy Limited Cayman IslandsKKR Luxembourg S.à r.l. LuxembourgKKR Mackellar Partners GP Limited Cayman IslandsKKR Management Co Holdings LLC DelawareKKR Management Holdings Corp. DelawareKKR Management Holdings L.P. DelawareKKR Matterhorn Co-Invest GP Limited Cayman IslandsKKR Mauritius PE Investments I, Ltd. MauritiusKKR MENA Holdings LLC DelawareKKR MENA Limited Dubai International Financial CentreKKR Mexico LLC DelawareKKR Mezzanine GP LLC DelawareKKR Mezzanine I Advisors LLC DelawareKKR Millennium GP LLC DelawareKKR Millennium Limited Cayman IslandsKKR Natural Resources Fund I-A L.P. DelawareKKR Nautilus Aggregator Limited Cayman IslandsKKR Next Gen Tech Growth Limited Cayman IslandsKKR Next Generation Technology Growth Fund L.P. Cayman IslandsKKR NGT EEA Limited Cayman IslandsName JurisdictionKKR NGT EEA LLC DelawareKKR NGT Growth Fund SBS L.P. Cayman IslandsKKR North America Fund XI Brazil GP LLC DelawareKKR North America XI (Platinum) Blocker Parent L.P. DelawareKKR North America XI AIV GP LLC DelawareKKR North America XI Limited Cayman IslandsKKR NR I LLC DelawareKKR NR II LLC DelawareKKR NR Investors I-A GP LLC DelawareKKR NR Investors I-A L.P. DelawareKKR NZSF Limited Cayman IslandsKKR Olive Co-Invest GP LLC DelawareKKR Oracle Co-Invest GP LLC DelawareKKR Pacer Holdings GP Limited Cayman IslandsKKR Pacer Holdings L.P. Cayman IslandsKKR Par Holdings Ltd. Cayman IslandsKKR PCOP II (EEA) Limited Cayman IslandsKKR PCOP II (EEA) LLC DelawareKKR PCOP II (Offshore) Limited Cayman IslandsKKR PCOP II GP LLC DelawareKKR PEI Associates, L.P. GuernseyKKR PEI GP Limited Cayman IslandsKKR PEI Investments, L.P. GuernseyKKR PEI Opportunities GP, Ltd. Cayman IslandsKKR PEI Opportunities, L.P. Cayman IslandsKKR PEI Securities Holdings, Ltd. Cayman IslandsKKR Phorm Investors GP LLC DelawareKKR Phorm Investors L.P. DelawareKKR PIP GP LLC DelawareKKR Platinum Co-Invest Blocker Parent GP LLC DelawareKKR Platinum Co-Invest GP LLC DelawareKKR Principal Opportunities (Domestic) Limited Cayman IslandsKKR Principal Opportunities (Offshore) Limited Cayman IslandsKKR Principal Opportunities AIV (Domestic) Limited Cayman IslandsKKR Principal Opportunities AIV (Offshore) L.P. Cayman IslandsKKR Principal Opportunities AIV (Offshore) Limited Cayman IslandsKKR Principal Opportunities Partnership (Offshore) L.P. Cayman IslandsKKR Prisma Associates GP L.P. Cayman IslandsKKR Prisma GP Limited Cayman IslandsKKR Prisma LP Limited Cayman IslandsKKR Prisma PABF GP LLC DelawareKKR Prisma-Noah GP Associates Limited Cayman IslandsKKR Real Estate Credit Opportunities India Feeder LP SingaporeKKR Real Estate Finance Holdings L.P. DelawareKKR Real Estate Finance Manager LLC DelawareName JurisdictionKKR Real Estate Finance Trust Inc. MarylandKKR Real Estate Fund AIV 1 L.P. DelawareKKR Real Estate Fund AIV 1 LLC DelawareKKR Real Estate Fund GP LLC DelawareKKR Real Estate Fund Holdings L.P. DelawareKKR Real Estate Management GP LLC DelawareKKR Real Estate Management Holdings L.P. DelawareKKR Real Estate Partners Americas L.P. DelawareKKR Real Estate Partners Europe (A) L.P. Cayman IslandsKKR Real Estate Partners Europe (EEA) AIV L.P. DelawareKKR Real Estate Partners Europe (EEA) L.P. England & WalesKKR RECOI (Cayman) Limited Cayman IslandsKKR RECOI (Singapore) Pte. Ltd. SingaporeKKR RECOP Aggregator GP LLC DelawareKKR REFT Holdings GP LLC DelawareKKR REFT Holdings L.P. DelawareKKR Renaissance Co-Invest GP LLC DelawareKKR REPA AIV-1 L.P. DelawareKKR REPA AIV-2 L.P. DelawareKKR REPA AIV-3 GP LLC DelawareKKR REPA AIV-3 L.P. DelawareKKR REPA AIV-4 GP Ltd. Cayman IslandsKKR REPA AIV-4 L.P. DelawareKKR REPA AIV-5 GP Ltd. Cayman IslandsKKR REPA AIV-5 L.P. Cayman IslandsKKR REPA GP LLC DelawareKKR REPA II GP LLC DelawareKKR REPE EEA Limited Cayman IslandsKKR REPE EEA LLC DelawareKKR REPE GP Limited Cayman IslandsKKR Revolving Credit Partners Limited Cayman IslandsKKR Rise Co-Invest GP Limited Cayman IslandsKKR Royalty Aggregator LLC DelawareKKR Royalty Splitter LLC DelawareKKR SA Co-Invest GP Limited Cayman IslandsKKR SA Master GP Limited Cayman IslandsKKR Saudi Limited Saudi ArabiaKKR Selena Co-Invest GP Limited Cayman IslandsKKR Sentinel Co-Invest GP LLC DelawareKKR Shanda Limited Cayman IslandsKKR Singapore Pte. Ltd. SingaporeKKR SMRS LLC DelawareKKR Spark Power Holdings I (Mauritius), Ltd. MauritiusKKR Special Situations (Domestic) Fund II L.P. Cayman IslandsKKR Special Situations (Domestic) Fund L.P. Cayman IslandsName JurisdictionKKR Special Situations (Domestic) II Limited Cayman IslandsKKR Special Situations (Domestic) Limited Cayman IslandsKKR Special Situations (EEA) Fund II L.P. England & WalesKKR Special Situations (Offshore) Fund L.P. Cayman IslandsKKR Special Situations (Offshore) II Limited Cayman IslandsKKR Special Situations (Offshore) Limited Cayman IslandsKKR Special Situations Fund II Limited Cayman IslandsKKR SPN GP Limited Cayman IslandsKKR Square GP Limited Cayman IslandsKKR Strategic Capital Holdings GP, Ltd. Cayman IslandsKKR Strategic Capital Institutional Fund, Ltd. Cayman IslandsKKR Strategic Capital Management, L.L.C. DelawareKKR Strategic Capital Partners, L.L.C. DelawareKKR Streaming Aggregator GP Limited Cayman IslandsKKR Subsidiary Corp. DelawareKKR Subsidiary Partnership L.P. DelawareKKR TC Investors GP Limited Cayman IslandsKKR TE Seeder LLC DelawareKKR TFO GP Limited Cayman IslandsKKR Topaz LLC DelawareKKR TRS Holdings, Ltd. Cayman IslandsKKR Turbine Investors LLC DelawareKKR TV SPN GP Limited Cayman IslandsKKR Upstream Associates LLC DelawareKKR Upstream LLC DelawareKKR Victoria GP Limited Cayman IslandsKKR Vision Investors GP LLC DelawareKKR Vision Investors L.P. DelawareKKR Wolverine I Corp. DelawareKKR Wolverine I LLC DelawareKKR Wolverine I Ltd. Cayman IslandsKKR Wolverine I Sponsor LLC DelawareKKR YC AIV-1 Associates L.P. DelawareKKR YC Associates GP L.P. Cayman IslandsKKR YC Associates GP Limited Cayman IslandsKKR YC Associates L.P. Cayman IslandsKKR-Keats Associates Pipeline (AIV) L.P. DelawareKKR-Keats Associates Pipeline L.P. DelawareKKR-Keats Pipeline (AIV) LLC DelawareKKR-Keats Pipeline LLC DelawareKohlberg Kravis Roberts & Co. (International) Partners LLP DelawareKohlberg Kravis Roberts & Co. L.P. DelawareKohlberg Kravis Roberts & Co. Ltd England & WalesKohlberg Kravis Roberts & Co. Partners LLP England & WalesKohlberg Kravis Roberts & Co. SAS FranceName JurisdictionKohlberg Kravis Roberts (España) Asesores SL SpainKREF Capital LLC DelawareKREF Holdings I LLC DelawareKREF Holdings II LLC DelawareKREF Holdings III LLC DelawareKREF Holdings IV LLC DelawareKREF Holdings V LLC DelawareKREF Lending I LLC DelawareKREF Lending II LLC DelawareKREF Lending III LLC DelawareKREF Lending III TRS LLC DelawareKREF Lending IV LLC DelawareKREF Lending V LLC DelawareKREF Management Unit Holdings LLC DelawareKREF Securities Holdings II, LLC DelawareKREF Securities Holdings, LLC DelawareKREFT 625NMA, LLC DelawareKREFT REOC LLC DelawareLion Restaurant Holdings Trust CaliforniaLombard Street CLO I Public Limited Company IrelandLRG Investor LLC DelawareMachine Investors GP Limited Cayman IslandsMagic Investors GP LLC DelawareMagic Investors L.P. DelawareMBF Co-Invest GP Limited Cayman IslandsMCS Capital Markets LLC DelawareMCS Corporate Lending LLC DelawareMerchant Capital Solutions LLC DelawareNew Omaha Co-Invest GP, LLC DelawareNIM Aggregator LLC DelawareOrange Assets LLC DelawarePacova Limited JerseyPrisma Capital Advisors LLC DelawarePrisma Capital Management International LLP England & WalesPrisma Capital Management International Ltd England & WalesPrisma Capital Management LLC DelawarePrisma Capital Partners EH LLC DelawarePrisma Capital Partners I, L.P. DelawarePrisma Capital Partners I, LLC DelawarePrisma Capital Partners LLC DelawarePrisma Capital Partners LP DelawarePrisma GP LLC DelawareREFH 909 Half Street Investors LLC DelawareREFH 909 Half Street Investors TRS LLC DelawareREFH Holdings LLC DelawareName JurisdictionREFH SR Mezz LLC DelawareRenee C-I Holding L.P. DelawareRenee Holding GP LLC DelawareRoyalty (GP) Pte. Ltd. SingaporeSamson Co-Invest GP LLC DelawareSilverview Investments Pte. Ltd. SingaporeSpiral Holding GP S.à r.l. LuxembourgSprint Co-Invest 2 GP Limited Cayman IslandsSugary Asset Holdings LLC DelawareValhalla Co-Invest GP Limited Cayman IslandsExhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in Registration Statement No. 333-210061 on Form S-3ASR, Registration Statement No. 333-171601 on Form S-8, Registration Statement No. 333-208019 on Form S-3, as amended by Amendment No. 1, Registration Statement No. 333-196059 on Form S-3, RegistrationStatement No. 333-196052 on Form S-3, Registration Statement No. 333-194249 on Form S-3 and Registration Statement No. 333-169433 on Form S-1, asamended by Post-Effective Amendment No. 2 on Form S-3 of our report dated February 24, 2017, relating to the consolidated financial statements and financialstatement schedule of KKR & Co. L.P. and subsidiaries (the “Company”) (which report expresses an unqualified opinion and includes an explanatory paragraphregarding the change in accounting policy for the consolidation of legal entities on January 1, 2016 due to the adoption of ASU No. 2015-02, Consolidation (Topic810): Amendments to the Consolidation Analysis) and the effectiveness of the Company's internal control over financial reporting appearing in this Annual Reporton Form 10-K of the Company for the year ended December 31, 2016./s/ Deloitte & Touche LLPNew York, New YorkFebruary 24, 2017Exhibit 31.1 CO-CHIEF EXECUTIVE OFFICER CERTIFICATION I, Henry R. Kravis, certify that:1.I have reviewed this Annual Report on Form 10-K for the period ended December 31, 2016 of KKR & Co. L.P.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likelyto adversely affect the registrant’s ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. Date:February 24, 2017 /s/ Henry R. Kravis Henry R. Kravis Co-Chief Executive OfficerExhibit 31.2 CO-CHIEF EXECUTIVE OFFICER CERTIFICATION I, George R. Roberts, certify that: 1.I have reviewed this Annual Report on Form 10-K for the period ended December 31, 2016 of KKR & Co. L.P.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and 5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. Date:February 24, 2017 /s/ George R. Roberts George R. Roberts Co-Chief Executive OfficerExhibit 31.3 CHIEF FINANCIAL OFFICER CERTIFICATION I, William J. Janetschek, certify that: 1.I have reviewed this Annual Report on Form 10-K for the period ended December 31, 2016 of KKR & Co. L.P.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for theregistrant and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, toprovide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness ofthe disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’s internal control over financial reporting; and5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely toadversely affect the registrant’s ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting. Date:February 24, 2017 /s/ William J. Janetschek William J. Janetschek Chief Financial OfficerExhibit 32.1 CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER Pursuant to 18 U.S.C. §1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Annual Report of KKR & Co. L.P. (the “Partnership”) on Form 10-K for the period ended December 31, 2016 as filed with theSecurities and Exchange Commission (the “Report”), I, Henry R. Kravis, Co-Chief Executive Officer of the general partner of the Partnership, certify, pursuant to18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of thePartnership. Date:February 24, 2017 /s/ Henry R. Kravis Henry R. Kravis Co-Chief Executive Officer * The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separatedisclosure document.Exhibit 32.2 CERTIFICATION OF CO-CHIEF EXECUTIVE OFFICER Pursuant to 18 U.S.C. §1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Annual Report of KKR & Co. L.P. (the “Partnership”) on Form 10-K for the period ended December 31, 2016 as filed with theSecurities and Exchange Commission (the “Report”), I, George R. Roberts, Co-Chief Executive Officer of the general partner of the Partnership, certify, pursuantto 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of thePartnership. Date:February 24, 2017 /s/ George R. Roberts George R. Roberts Co-Chief Executive Officer * The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separatedisclosure document.Exhibit 32.3 CERTIFICATION OF CHIEF FINANCIAL OFFICER Pursuant to 18 U.S.C. §1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Annual Report of KKR & Co. L.P. (the “Partnership”) on Form 10-K for the period ended December 31, 2016 as filed with theSecurities and Exchange Commission (the “Report”), I, William J. Janetschek, Chief Financial Officer of the general partner of the Partnership, certify, pursuant to18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of thePartnership. Date:February 24, 2017 /s/ William J. Janetschek William J. Janetschek Chief Financial Officer * The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separatedisclosure document.Exhibit 99.1SECTION 13(r) DISCLOSUREThe information below was provided by the relevant company in connection with its activities. We have not independently verified this information.A European company, in which our credit funds and other vehicles own a minority interest, had brokered an insurance policy for NPC International Limited. TheEuropean company has informed us that the gross revenue and net profits attributable to this policy was less than £400 per annum from 2013 to 2015, and less than£120 for the period January 1, 2016 through December 31, 2016. We have been advised that the European company canceled the policy on November 16, 2016.

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