KKR Annual Report 2017 | Quarterlytics

Plain-text annual report

KKR & CO. INC. FORM 10-K (Annual Report) Filed 02/23/18 for the Period Ending 12/31/17 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, 2017 oro 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 limited partner interestsNew York Stock Exchange6.75% Series A Preferred UnitsNew York Stock Exchange6.50% Series B Preferred UnitsNew 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 1934 during thepreceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90days. 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 to be submittedand posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit 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 best of registrant'sknowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10‑K or any amendment to this Form 10‑K. oIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growthcompany. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.Large accelerated filer ý Accelerated filer o Non-accelerated filer o Smaller reporting company o Emerging growth company o (Do not check if a smaller reporting company) If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revisedfinancial accounting standards provided pursuant to Section 13(a) of the Exchange Act. oIndicate 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, 2017, was approximately $8.6 billion . As of February 21, 2018 ,there were 486,800,395 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, 2017 INDEX Page No. PART I Item 1.Business5 Item 1A.Risk Factors32 Item 1B.Unresolved Staff Comments91 Item 2.Properties91 Item 3.Legal Proceedings92 Item 4.Mine Safety Disclosures92 PART II Item 5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities93 Item 6.Selected Financial Data96 Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations98 Item 7A.Quantitative and Qualitative Disclosures About Market Risk174 Item 8.Financial Statements and Supplementary Data178 Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure254 Item 9A.Controls and Procedures254 Item 9B.Other Information255 PART III Item 10.Directors, Executive Officers and Corporate Governance256 Item 11.Executive Compensation261 Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters277 Item 13.Certain Relationships and Related Transactions, and Director Independence281 Item 14.Principal Accounting Fees and Services287 PART IV Item 15.Exhibits, Financial Statement Schedules288 Item 16.Form 10-K Summary295 SIGNATURES 2962Table 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, as amended (the "Securities Act"), andSection 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), which reflect our current views with respect to, among other things, ouroperations and financial performance. 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, othercomparable words or other statements that do not relate strictly to historical or factual matters. Without limiting the foregoing, statements regarding the declarationand payment of distributions on common or preferred units of KKR, the timing, manner and volume of repurchases of common units pursuant to a repurchaseprogram, and the expected synergies from acquisitions, reorganizations, or strategic partnerships, may constitute forward-looking statements. Forward-lookingstatements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differmaterially from those indicated in these statements or cause the benefits and anticipated synergies from transactions to not be realized. We believe these factorsinclude those described under the section entitled "Risk Factors" in this report. These factors should be read in conjunction with the other cautionary statementsthat are included in this report and in our other filings with the U.S. Securities and Exchange Commission (the "SEC"). We do not undertake any obligation topublicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law. In this report, references to "KKR," "we," "us," "our" and "our partnership" refer to KKR & Co. L.P. and its consolidated subsidiaries, except where thecontext requires otherwise. Prior to KKR & Co. L.P. becoming listed on the New York Stock Exchange ("NYSE") on July 15, 2010, KKR Group Holdings L.P.("Group Holdings") consolidated the financial 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 anidentical number of partner interests and, when held together, one Class A partner interest in each of the KKR Group Partnerships together represents one "KKRGroup Partnership Unit." In connection with KKR's issuance of 6.75% Series A Preferred Units ("Series A Preferred Units") and 6.50% Series B Preferred Units("Series B Preferred Units"), the KKR Group Partnerships issued preferred units with economic terms designed to mirror those of the Series A Preferred Units andSeries 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 interests in the KKR Group Partnerships and are net ofamounts that have been allocated to our principals and other employees and non-employee operating consultants in respect of the carried interest from KKR'sbusiness as part of our "carry pool" and certain minority interests. References to "principals" are to our senior employees and non-employee operating consultantswho hold interests in KKR's business through KKR Holdings L.P. ("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, who are not employees of KKR. KKR Capstone refers to a groupof entities 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"Predecessor Owners"). 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 PrivateEquity Investors, L.P) ("KPE") and, in connection with such acquisition, completed a series of transactions pursuant to which the business of KKR was reorganizedinto a holding company structure. The reorganization involved a contribution of certain equity interests in KKR's business that were held by the PredecessorOwners to the KKR Group Partnerships in exchange for equity interests in the KKR Group Partnerships held through KKR Holdings. We refer to the acquisition ofthe assets 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 Note 14 "Segment Reporting" to our consolidated financialstatements and under "Management's Discussion and Analysis of Financial Condition and Results of Operations—Segment Operating and Performance Measures"and "—Segment Balance Sheet."This report uses the terms assets under management ("AUM"), fee paying assets under management ("FPAUM"), economic net income ("ENI"), fee relatedearnings ("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 and 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 collateralized loan obligations ("CLOs") and commercial real estate mortgage-backed securities ("CMBS") vehicles, unless the context requiresotherwise. They do not include investment funds, vehicles or accounts of any hedge fund manager with which we have formed a strategic partnership where wehave 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 (our "Equity Incentive Plan"). Our fully exchanged and diluted common units outstanding do not include (i) commonunits available for issuance pursuant to our Equity Incentive Plan for which equity awards have not yet been granted and (ii) common units that we have the optionto issue in connection with our acquisition of additional interests in Marshall Wace LLP (together with its affiliates, "Marshall Wace"). 4Table of ContentsPART IITEM 1. BUSINESSOverview We are a leading global investment firm that manages multiple alternative asset classes including private equity, energy, infrastructure, real estate and credit,with strategic manager partnerships that manage hedge funds. We aim to generate attractive investment returns for our fund investors by following a patient anddisciplined investment approach, employing world-class people, and driving growth and value creation with our portfolio companies. We invest our own capitalalongside the capital we manage for fund investors and provide financing solutions and investment opportunities 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 320 privateequity investments in portfolio companies with a total transaction value in excess of $560 billion as of December 31, 2017 . We have grown our firm by expandingour geographical presence and building businesses in areas such as leveraged credit, alternative credit, hedge funds, capital markets, infrastructure, energy, realestate, growth equity and core investments. Our balance sheet has provided a significant source of capital in the growth and expansion of our business, and hasallowed 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 leveragethe intellectual capital and synergies in our businesses, and to capitalize on a broader range of the opportunities we source. Additionally, we have increased ourfocus 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 and 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, 2017 , approximately 77% 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.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 patience5Table of Contentsand emphasizes the sharing of information, resources, expertise and best practices across offices and asset classes. When appropriate, we staff transactions acrossmultiple offices and businesses in order to take advantage of the industry-specific expertise of our investment professionals, and we hold regular meetings in whichinvestment professionals throughout our offices share their knowledge and experiences. We believe that the ability to draw on the local cultural fluency of ourinvestment professionals while maintaining a centralized and integrated global infrastructure distinguishes us from other investment firms and has been asubstantial 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, 2017, we and our employees andother personnel have approximately $16.9 billion invested in or committed to our own funds and portfolio companies, including $8.4 billion funded from ourbalance sheet, $5.7 billion of additional commitments from our balance sheet to investment funds, $1.8 billion funded from personal investments and $1.0 billionof additional commitments from personal investments.Our BusinessOur SegmentsWe operate our business in four segments: (1) Private Markets, (2) Public Markets, (3) Capital Markets and (4) Principal Activities. Information about oursegments below should be read together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidatedfinancial statements included elsewhere in this report.Private Markets Through our Private Markets segment, we manage and sponsor a group of private equity funds that invest capital for long-term appreciation, either throughcontrolling ownership of a company or strategic minority positions. In addition to our traditional private equity funds, we sponsor investment funds that invest ingrowth equity and core equity investments. We also manage and sponsor investment funds that invest capital in real assets, such as infrastructure, energy and realestate. Our Private Markets segment includes separately managed accounts that invest in multiple strategies, which may include our credit strategies as well as ourprivate equity and real assets strategies. These funds and accounts are managed by Kohlberg Kravis Roberts & Co. L.P., an SEC-registered investment adviser. Asof December 31, 2017 , the segment had $97.5 billion of AUM and FPAUM of $61.7 billion, consisting of $46.0 billion in private equity (including growth equity)and $15.7 billion in real assets (including infrastructure, energy and real estate), core investments and other related strategies.6Table of ContentsPrivate MarketsAssets Under Management (1) ($ in billions) (1)For the years 2006 through 2008, AUM are presented pro forma for the KPE Transaction, and therefore, exclude the net asset value of KPE and its former commitments to ourinvestment funds. In 2015, our definition of AUM was amended to include capital commitments for which we are eligible to receive fees or carried interest upon deployment ofcapital 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 been adjusted to includesuch changes. 7Table of ContentsThe table below presents information as of December 31, 2017 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, 2017 . Investment Period (1) Amount ($ in millions) Start DateEnd Date Commitment (2)UncalledCommitmentsPercentageCommitted byGeneralPartnerInvestedRealizedRemainingCost (3)RemainingFair ValuePrivate Markets Private Equity and Growth Equity Asian Fund III (4)4/20174/2023 $9,000.0$9,000.05.6%$—$—$—$—Americas Fund XII (4)1/20171/2023 13,500.013,295.36.0%204.7—204.7224.8Health Care Strategic Growth Fund (4)12/201612/2021 1,331.01,331.011.3%————Next Generation Technology Growth Fund (4)3/20163/2021 658.9414.422.5%244.5—244.5350.9European Fund IV (4)12/201412/2020 3,539.21,330.75.6%2,276.263.12,221.53,148.8Asian Fund II (4)4/20134/2017 5,825.0889.51.3%5,936.71,891.34,666.27,015.0North America Fund XI (4)9/20121/2017 8,718.4874.22.9%9,274.45,144.96,487.112,586.6China Growth Fund11/201011/2016 1,010.0—1.0%1,010.0588.1642.1798.6European Fund III3/20083/2014 6,167.6840.24.6%5,327.38,117.81,411.92,368.9Asian Fund7/20074/2013 3,983.3—2.5%3,945.97,868.1630.6782.02006 Fund9/20069/2012 17,642.2337.72.1%17,304.527,121.94,676.56,331.5European Fund II11/200510/2008 5,750.8—2.1%5,750.88,467.3—60.2Millennium Fund12/200212/2008 6,000.0—2.5%6,000.013,305.4444.9765.9Private Equity and Growth Equity 83,126.428,313.0 57,275.072,567.921,630.034,433.2 Co-Investment Vehicles and Other (4)VariousVarious 6,072.81,624.3Various4,599.32,829.63,215.14,596.9 Total Private Equity and Growth Equity 89,199.229,937.3 61,874.375,397.524,845.139,030.1 Real Assets Energy Income and Growth Fund (4)9/20139/2018 1,974.2584.212.9%1,422.4300.91,144.41,222.6Natural Resources FundVariousVarious 887.42.8Various884.6113.4794.9150.5Global Energy Opportunities (4)VariousVarious 979.2586.3Various434.160.9317.1333.4Global Infrastructure Investors (4)9/201110/2014 1,040.242.44.8%1,029.3858.3621.7830.0Global Infrastructure Investors II (4)10/201410/2020 3,044.3736.64.1%2,513.1211.42,301.22,694.1Real Estate Partners Americas (4)5/20135/2017 1,229.1357.716.3%999.2835.0543.0587.1Real Estate Partners Americas II (4)5/201712/2020 1,921.21,921.27.8%————Real Estate Partners Europe (4)9/20156/2020 720.1528.29.2%202.215.1190.4237.5Real Estate Credit Opportunity Partners (4)2/20172/2019 1,130.0734.54.4%395.55.4395.5400.2Co-Investment Vehicles and OtherVariousVarious 1,404.911.8Various1,393.1528.51,389.81,781.6 Real Assets $14,330.6$5,505.7 $9,273.5$2,928.9$7,698.0$8,237.0 Other Core Investment VehiclesVariousVarious 9,500.08,500.036.8%1,000.0—1,000.01,000.0Unallocated Commitments (5) 3,462.13,462.1Various———— Private Markets Total $116,491.9$47,405.1 $72,147.8$78,326.4$33,543.1$48,267.1 (1)The start 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 on which thegeneral 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 and (ii) the date on which the lastinvestment 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, 2017 , 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, if any.(5)"Unallocated Commitments" represent unallocated commitments from our strategic investor partnerships.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 internal rates of return ("IRRs") when deploying capital in thesetransactions. We have more than doubled the value of capital that we have invested in our Private Markets investment funds, turning $85.5 billion of capital into$175.7 billion of value from our inception in 1976 to December 31, 2017 . Over this same period, the value of capital that we have invested in our Private Marketsinvestment funds and that has been realized and partially realized has grown from $67.4 billion to $157.2 billion .Amount Invested and Total Value forPrivate Markets Investment FundsAs of December 31, 2017 From our inception in 1976 through December 31, 2017 , our investment funds with at least 24 months of investment activity generated a cumulative grossIRR of 25.6% , compared to the 11.9% and 9.1% gross IRR achieved by the S&P 500 Index and MSCI World Index, respectively, over the same period, despitethe cyclical and sometimes challenging environments in which we have operated. The S&P 500 Index and MSCI World Index are unmanaged indices and suchreturns assume reinvestment of distributions and do not reflect any fees or expenses. Our past performance, however, may not be representative of performance inany period other than the period discussed above and is not a guarantee of future results. For example, as of March 31, 2009, the date of the lowest aggregatevaluation 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 markeddown to 67% of original cost. For additional information regarding impact of market conditions on the value and performance of our investments, see "RiskFactors—Risks Related to Our Business—Difficult market and economic conditions can adversely affect our business in many ways, including by reducing thevalue 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 impactour net income and cash flow and adversely affect our financial prospects and condition" and "Risk Factors—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 ourbalance sheet investments, of our future results or the performance of our common units."The tables below present information as of December 31, 2017 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 been9Table of Contentsdisposed of or have otherwise generated disposition proceeds or current income including dividends that have been distributed by the relevant fund. This data doesnot reflect additional capital raised since December 31, 2017 or acquisitions or disposals of investments, changes in investment values or distributions occurringafter that date. Past performance is no guarantee of future results. Amount Fair Value of Investments Private Markets Investment FundsCommitmentInvested Realized (4)Unrealized Total Value GrossIRR (5)Net IRR (5) GrossMultiple 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 13,305.4765.9 14,071.3 22.0 %16.1 % 2.3European Fund II (2005) (2)5,750.85,750.8 8,467.360.2 8,527.5 6.1 %4.4 % 1.52006 Fund (2006)17,642.217,304.5 27,121.96,331.5 33,453.4 11.4 %8.8 % 1.9Asian Fund (2007)3,983.33,945.9 7,868.1782.0 8,650.1 19.0 %13.8 % 2.2European Fund III (2008) (2)6,167.65,327.3 8,117.82,368.9 10,486.7 16.8 %11.6 % 2.0E2 Investors (Annex Fund) (2009) (2)195.8195.8 195.71.6 197.3 0.2 %(0.5)% 1.0China Growth Fund (2010)1,010.01,010.0 588.1798.6 1,386.7 11.5 %6.0 % 1.4Natural Resources Fund (2010)887.4884.6 113.4150.5 263.9 (29.8)%(32.3)% 0.3Global Infrastructure Investors (2011) (2) 1,040.21,029.3 858.3830.0 1,688.3 14.9 %12.9 % 1.6North America Fund XI (2012)8,718.49,274.4 5,144.912,586.6 17,731.5 29.4 %23.5 % 1.9Asian Fund II (2013)5,825.05,936.7 1,891.37,015.0 8,906.3 24.5 %17.8 % 1.5Real Estate Partners Americas (2013)1,229.1999.2 835.0587.1 1,422.1 20.3 %15.0 % 1.4Energy Income and Growth Fund (2013)1,974.21,422.4 300.91,222.6 1,523.5 3.4 %0.9 % 1.1Global Infrastructure Investors II (2014) (2)3,044.32,513.1 211.42,694.1 2,905.5 17.5 %14.1 % 1.2European Fund IV (2015) (2)3,539.22,276.2 63.13,148.8 3,211.9 32.0 %24.0 % 1.4Real Estate Partners Europe (2015) (2) (3)720.1202.2 15.1237.5 252.6 —— —Next Generation Technology Growth Fund (2016) (3)658.9244.5 —350.9 350.9 —— —Health Care Strategic Growth Fund (2016) (3)1,331.0— —— — —— —Americas Fund XII (2017) (3)13,500.0204.7 —224.8 224.8 —— —Real Estate Credit Opportunity Partners(2017) (3)1,130.0395.5—5.4400.2 405.6 —— —Asian Fund III (2017) (3)9,000.0— —— — —— —Real Estate Partners Americas II (2017) (3)1,921.2———— — —— —Core Investment Vehicles (2017) (3)9,500.01,000.0 —1,000.0 1,000.0 —— —Subtotal - Included Funds107,854.169,002.5 83,860.841,556.8 125,417.6 15.8 %11.7 % 1.8 All Funds$124,328.6$85,477.0 $134,130.1$41,556.8 $175,686.9 25.6 %18.8 % 2.1 10Table of Contents Amount Fair Value of Investments Private Markets Investment FundsCommitmentInvested Realized (4)Unrealized Total Value GrossMultiple ofInvested Capital (5)($ 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 13,305.4765.9 14,071.3 2.5European Fund II (2005) (2)5,750.85,245.4 8,467.360.2 8,527.5 1.62006 Fund (2006)17,642.215,439.7 27,121.94,442.6 31,564.5 2.0Asian Fund (2007)3,983.33,418.8 7,868.1563.1 8,431.2 2.5European Fund III (2008) (2)6,167.63,939.4 8,117.8918.6 9,036.4 2.3E2 Investors (Annex Fund) (2009) (2)195.894.8 195.7— 195.7 2.1China Growth Fund (2010)1,010.0510.9 588.1285.0 873.1 1.7Natural Resources Fund (2010)887.4886.9 113.4150.5 263.9 0.3Global Infrastructure Investors (2011) (2)1,040.21,025.7 858.3832.8 1,691.1 1.6North America Fund XI (2012)8,718.45,760.0 5,144.98,810.2 13,955.1 2.4Asian Fund II (2013)5,825.02,738.7 1,891.33,710.1 5,601.4 2.0Real Estate Partners Americas (2013)1,229.1867.2 835.0471.8 1,306.8 1.5Energy Income and Growth Fund (2013)1,974.21,422.4 300.91,222.6 1,523.5 1.1Global Infrastructure Investors II (2014) (2)3,044.3895.2 211.4936.4 1,147.8 1.3European Fund IV (2015) (2)3,539.2— —— — —Real Estate Partners Europe (2015) (2) (3) (4)720.1— —— — —Next Generation Technology Growth Fund (2016) (3) (4)658.9— —— — —Health Care Strategic Growth Fund (2016) (3) (4)1,331.0— —— — —Americas Fund XII (2017) (3) (4)13,500.0— —— — —Real Estate Credit Opportunity Partners (2017) (3) (4)1,130.0— —— — —Asian Fund III (2017) (3) (4)9,000.0— —— — —Real Estate Partners Americas II (2017) (3) (4)1,921.2— —— — —Core Investment Vehicles (2017) (3) (4)9,500.0— —— — —Subtotal - Included Funds107,854.150,929.9 83,777.223,169.8 106,947.0 2.1 All Realized/Partially Realized Investments$124,328.6$67,404.4 $134,046.5$23,169.8 $157,216.3 2.3(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, 2017 in the case of unfunded commitments.(3)The gross IRR, net IRR and gross multiple of invested capital are calculated for our investment funds that made their first investment at least 24 months prior to December 31, 2017 . Noneof the Real Estate Partners Europe, Next Generation Technology Growth Fund, Health Care Strategic Growth Fund, Americas Fund XII, Real Estate Credit Opportunity Partners, AsianFund III, Real Estate Partners Americas II or our Core Investment Vehicles has invested for at least 24 months as of December 31, 2017 . We therefore have not calculated gross IRRs, netIRRs and gross multiples of invested capital with respect to those funds.(4)An investment is considered fully or partially realized when it has been disposed of or has otherwise generated disposition proceeds or current income that has been distributed by therelevant 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 shownfor those investment funds that have either made their first investment more recently than 24 months prior to December 31, 2017 or have otherwise not had any realizations.11Table of Contents(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 and organizational expenses. Gross IRRs are calculated before giving effect to the allocation of carriedinterest and the payment of any applicable management fees and organizational expenses. The gross 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 togetherthe total 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 realizedand unrealized carried interest or the payment of any applicable management fees or organizational expenses.KKR's Private Markets funds may utilize third-party financing facilities to provide liquidity to such funds. The above net and gross IRRs are calculated from the time capital contributionsare due from fund 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 capitalthat would otherwise be used to calculate IRRs, which tends to increase IRRs when fair value grows over time and decrease IRRs when fair value decreases over time. KKR's PrivateMarkets funds also generally provide in certain circumstances, which vary depending on the relevant fund documents, for a portion of capital returned to investors to be restored to unusedcommitments as recycled capital. For KKR's Private Markets funds that have a preferred return, we take into account recycled capital in the calculation of IRRs and multiples of investedcapital because the calculation of the preferred return includes the effect of recycled capital. For KKR's Private Markets funds that do not have a preferred return, we do not take recycledcapital into account in the calculation of IRRs and multiples of invested capital. The inclusion of recycled capital generally causes invested and realized amounts to be higher and IRRs andmultiples of invested capital to be lower than had recycled capital not been included. The inclusion of recycled capital would reduce the composite net IRR of all Included Funds by 0.1%and the composite net IRR of all Legacy Funds by 0.5%, and would reduce the composite multiple of invested capital of Included Funds by less than 0.1 and the composite multiple ofinvested 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 presentedin this report, should not be considered as indicative of the future results of our funds or our balance sheet investments, of our future results or the performance ofour common units."Private EquityWe are a world leader in private equity, having raised 23 funds (including growth equity) with approximately $102.9 billion of capital commitments throughDecember 31, 2017 . We invest in industry-leading franchises and attract world-class management teams. Our investment approach leverages our capital base,sourcing advantage, global network and industry knowledge. It also leverages a sizable team of operating consultants, who work exclusively with our investmentprofessionals and portfolio company management teams and otherwise at our direction, as well as senior advisors and other advisors, many of whom are formerchief executive officers and leaders of the business community.Our traditional private equity investment strategy typically seeks to engage primarily in management buyouts, build-ups, or other investments with a view toacquire a controlling or significant influence. Building upon our four decades of private equity investing experience, we have sourced a number of smaller growthequity investment opportunities, and we expanded our business by launching dedicated growth equity funds. Our first dedicated growth equity fund, launched in2016, pursues growth equity investment opportunities in the technology, media and telecommunications ("TMT") sector, primarily in the United States, Canada,Europe and Israel. In 2016, we also launched our second dedicated growth equity fund to pursue growth equity investment opportunities in the health care sector,primarily in the United States. As of December 31, 2017, we have received $2.0 billion of capital commitments to our TMT and health care growth equitystrategies.In 2017, we further expanded on our private equity business by making our first core equity investment. Through our core investments strategy, we targetinvestments that have a longer holding period and a lower risk profile, which may not be suitable for our traditional private equity funds. See "—Core InvestmentStrategy."PortfolioThe following chart presents information concerning the amount of capital invested by traditional private equity funds and growth equity funds by geographythrough December 31, 2017 . We believe that this data illustrates the benefits of our business approach and our ability to source and invest in deals in multiplegeographies.12Table of ContentsAs of December 31, 2017, our traditional private equity portfolio consisted of 119 companies with approximately $167 billion of annual revenues. Thesecompanies are headquartered in 21 countries and operate in 19 general industries, which take advantage of our broad and deep industry and operating expertise.Many of these companies are leading franchises with global operations, strong management teams and attractive growth prospects, which we believe will providebenefits through a broad range of business conditions.Investment 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 relationshipswith leading 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 that13Table of Contentsthey believe will benefit from our involvement. They possess a detailed understanding of the economic drivers, opportunities for value creation and strategies thatcan 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 assist themin this process. Investment committees monitor all due diligence practices, and the applicable investment committee must approve an investment before it may bemade.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 capital management,top-line growth, R&D spending, geographical expansion, cost optimization and investment for the long-term.Realizing InvestmentsWe have developed substantial expertise for realizing private equity investments. From our inception through December 31, 2017 , the firm has generatedapproximately $134.1 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, Americas Fund XII and Asian FundIII have a performance hurdle which requires that we return 7%, compounded annually, to limited partners in the fund prior to receiving our 20% share of netprofits realized by limited14Table of Contentspartners. Such performance hurdles are subject to a catch-up allocation to the general partner after the hurdle has been reached. Our earlier private equity funds donot include a performance hurdle. The timing of receipt of carried interest in respect of investments of our private equity funds is dictated by the terms of thepartnership 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 notnetted between or among funds except for the Annex Fund. In addition, the agreements governing our private equity funds generally include a "clawback"provision that, if triggered, may give rise to a contingent obligation that may require the general partner to return or contribute amounts to the fund for distributionto fund investors at the end of the life of the fund. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—CriticalAccounting Policies—Clawback Provision" and "Risk Factors—The 'clawback' provision in our governing agreements may give rise to a contingent obligation thatmay require us 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 are 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 a transaction or when apotential investment is not consummated. Our newer private equity fund agreements typically require us to share 100% of any monitoring, transaction and otherfees that are allocable to a fund (after reduction for expenses incurred allocable to a fund from unconsummated transactions) with fund investors.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 person" event could cause disruption in our business, reduce the amount of capital that we have available for future investments, and make it morechallenging to 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 the fund'sinvestments, 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.15Table of ContentsReal 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 primarily through the KKR Energy Income and Growth Fund. As of December 31, 2017 , we have received $2.9 billion of capital commitments to ourenergy funds and $1.0 billion of capital commitments to this strategy through separately managed accounts.InfrastructureOur infrastructure platform 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 platform 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, 2017 , 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 equity opportunities primarily in the United States and Western Europe, although we have made investments inother areas of the world as well, including Australia and South Korea. Our equity investments include direct investments in real property, debt, special situationstransactions and businesses with significant real estate holdings that can benefit from KKR's operational expertise. We seek to partner with real estate owners,lenders, operators, and developers to provide flexible capital to respond to transaction specific needs, including the outright purchase or financing of existing assetsor companies and the funding of future development or acquisition opportunities. Through this strategy, we have made real estate equity investments in residentialand commercial assets. We have also established investment platforms with strategic partners to invest in commercial real estate in Germany and the United States.As of December 31, 2017 , we have received $3.9 billion of capital commitments through our real estate equity investment funds.Our real estate credit platform provides capital solutions for complex real estate transactions with a focus on commercial mortgage-backed securities, wholeloans and subordinated debt. As of December 31, 2017, we managed approximately $2.2 billion of assets in our real estate credit strategy, which include KKR RealEstate Finance Trust Inc. ("KREF"), a NYSE-listed real estate investment trust ("REIT"), and $1.1 billion of capital commitments through our real estate creditfund.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, infrastructure and real estateinvestment teams typically partner with technical experts and operators to manage our real asset investments.16Table of ContentsReal 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.Core Investment StrategyOur core investment strategy targets investments with a longer holding period and a lower risk profile than our traditional private equity or, in certain cases,our real asset investments. The holding periods in core investments are generally longer than 15 years. In 2017, we established core investment vehicles with $6.0billion of capital commitments from fund investors and a $3.5 billion capital commitment from KKR's balance sheet, through which we aim to make coreinvestments in private equity and real asset opportunities globally.Public Markets We operate and report our combined credit and hedge funds businesses through the Public Markets segment. Our credit business invests capital in(i) leveraged credit strategies, including leveraged loans, high-yield bonds, opportunistic credit and revolving credit strategies, and (ii) alternative credit strategies,including special situations and private credit strategies such as direct lending and private opportunistic credit (or mezzanine) investment strategies. The funds,CLOs, separately managed accounts, investment companies registered under the Investment Company Act of 1940 (the "Investment Company Act"), includingbusiness development companies ("BDCs"), and alternative investments funds ("AIFs") in our leveraged credit and alternative credit strategies are managed byKKR Credit Advisors (US) LLC, which is an SEC-registered investment adviser, KKR Credit Advisors (Ireland) Unlimited Company, regulated by the CentralBank of Ireland, and KKR Credit Advisors (EMEA) LLP, regulated by the United Kingdom Financial Conduct Authority (the "FCA"). Our Public Marketssegment also includes our hedge funds business, which consists of strategic partnerships with third-party hedge fund managers in which KKR owns a minoritystake (which we refer to as "strategic manager partnerships"). Our strategic manager partnerships offer a variety of investment strategies, including hedge fund-of-funds, equity hedge funds, credit hedge funds and funds focused on investing in natural catastrophe and weather risks.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.On December 11, 2017, we entered into an agreement with FS Investment Corporation ("FS Investments") to form a strategic BDC partnership to provideinvestment advisory services to Corporate Capital Trust ("CCT") and Corporate Capital Trust II ("CCT II"), which are BDCs currently advised and sub-advised,respectively, by us, and four BDCs that are currently sponsored by FS Investments. This new strategic BDC partnership, if and when it closes, is expected to have$18 billion in combined AUM (based on current valuations). This transaction is subject to stockholder approvals and the satisfaction of certain other closingconditions, and there can be no assurance that it will be consummated as planned or at all or that the combined AUM will be as expected at closing. 17Table of ContentsThe following chart presents the growth in the AUM of our Public Markets segment from the commencement of its operations in August 2004 throughDecember 31, 2017 .Public MarketsAssets Under Management (1)(2) ($ in billions) (1)For years 2006 through 2008, AUM are presented pro forma for the KPE Transaction and, therefore, exclude the net asset value of KPE and its former commitments to ourinvestment funds. AUM of KKR Prisma and pro rata AUM of PAAMCO Prisma, each as defined below, and AUM of Avoca are included in the years on and after the completion ofthe respective acquisitions or transactions, as applicable.(2)In 2015 our definition of AUM was amended to include (i) KKR's pro rata portion of AUM managed by third-party 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.18Table of ContentsCreditPerformanceWe generally review our performance in our credit business by investment strategy.Our leveraged credit strategies principally invest through separately managed accounts, BDCs, CLOs and private equity-like investment funds. In certaincases, these strategies have meaningful track records and may be compared to widely-known indices. The following table presents information regarding largerleveraged credit strategies managed by KKR from inception to December 31, 2017. Our past performance, however, may not be representative of performance inany period other than the period discussed below and is not a guarantee of future results.Leveraged 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 8.17% 7.53% 65% S&P/ LSTA Loan Index, 35% BoAML HY Master II Index (2) 6.39%Opportunistic Credit (3) May 2008 13.01% 11.00% BoAML HY Master II Index (3) 6.70%Bank Loans Apr 2011 5.48% 4.86% S&P/LSTA Loan Index (4) 4.25%High-Yield Apr 2011 7.07% 6.48% BoAML HY Master II Index (5) 6.60%Bank Loans Conservative Apr 2011 4.78% 4.17% S&P/LSTA BB-B Loan Index (6) 4.25%European Leveraged Loans (7) Sep 2009 5.48% 4.96% CS Inst West European Leveraged Loan Index (8) 4.78%High-Yield Conservative Apr 2011 6.44% 5.86% BoAML HY BB-B Constrained (9) 6.49%European Credit Opportunities (7) Sept 2007 5.68% 4.77% S&P European Leveraged Loans (All Loans) (10) 4.35%Revolving Credit (11) May 2015 N/A N/A N/A N/A (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 West European Leveraged Loan Index"), and S&P 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 isan index 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 theBoAML HY Master II Index including all securities rated BB1 through B3, inclusive. The CS Inst West European Leveraged Loan Index contains only institutional loan facilities pricedabove 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 institutionalleveraged loan portfolios investing in European credits. While the returns of our leveraged credit strategies reflect the reinvestment of income and dividends, none of the indices presentedin the chart above reflect such reinvestment, which has the effect of increasing the reported relative performance of these strategies as compared to the indices. Furthermore, these indicesare not subject to management fees, 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 LoansConservative strategy 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 LeveragedLoans strategy is based on the CS Inst West European Leveraged Loan Index.(9)Performance is based on a composite of portfolios that primarily invest in high-yield securities rated B or higher. The benchmark used for purposes of comparison for the High-YieldConservative strategy is based on the BoAML HY BB-B Constrained Index.(10)Performance is based on a composite of portfolios that primarily invest in European institutional leveraged loans. The benchmark used for purposes of comparison for the European CreditOpportunities strategy is based on the S&P European Leveraged Loans (All Loans) Index.19Table of Contents(11)This strategy has not called any capital as of December 31, 2017. As a result, the gross and net return performance measures are not meaningful and are not included above.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, 2017 . 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.Alternative Credit Strategies: Fund Performance Amount Fair Value of Investments Public Markets Investment Funds Inception Date Commitment Invested (1) Realized (1) Unrealized Total Value GrossIRR (2) NetIRR (2) Multiple of InvestedCapital (3)($ in Millions) Special Situations Fund Dec 2012 $2,274.3 $2,231.6 $874.1 $1,872.7 $2,746.8 7.0% 5.0 % 1.2Special Situations Fund II Dec 2014 3,283.5 1,680.1 — 1,706.5 1,706.5 1.5% (1.4)% 1.0Mezzanine Partners Mar 2010 1,022.8 913.9 971.3 339.1 1,310.4 12.8% 8.1 % 1.4Private Credit OpportunitiesPartners II Dec 2015 2,245.1 133.8 — 168.0 168.0 29.9% 21.2 % 1.3Lending Partners Dec 2011 460.2 405.3 341.0 176.9 517.9 7.6% 6.1 % 1.3Lending Partners II Jun 2014 1,335.9 1,164.9 286.9 1,164.7 1,451.6 13.8% 11.5 % 1.2Lending Partners III Apr 2017 795.8 35.8 — 45.1 45.1 N/A N/A N/ALending Partners Europe Mar 2015 847.6 396.5 47.3 418.2 465.5 18.7% 11.9 % 1.2Other Alternative Credit Vehicles Various 6,509.9 3,845.2 2,214.4 2,962.3 5,176.7 N/A N/A N/AUnallocated Commitments (4) Various 1,180.0 — — — — N/A N/A N/AAll Funds $19,955.1 $10,807.1 $4,735.0 $8,853.5 $13,588.5 (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.(4)"Unallocated Commitments" represent unallocated commitments from our strategic investor partnerships.Such past performance may not be representative of performance in any period other than the period discussed above and is not a guarantee of future results.For additional information regarding impact of market conditions on the value and performance of our investments, see "Risk Factors—Risks Related to OurBusiness—Difficult market and economic conditions can adversely affect our business in many ways, including by reducing the value or performance of theinvestments 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 flowand adversely affect our financial prospects and condition" and "Risk Factors—Risks Related to the Assets We Manage—The historical returns attributable to ourfunds, including those presented in this report, should not be considered as indicative of the future results of our funds or our balance sheet investments, of ourfuture results or the performance of our common units."20Table of ContentsInvestment 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.Due 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, and industryand company trends. Investment professionals use the services of outside advisors and industry experts as appropriate to assist them in the due diligence processand, 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. Quarterlyanalyses include the preparation of quarterly operating results, reconciliations of actual results to projections and updates to financial models (baseline and stresscases). 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, opportunistic credit and revolving creditstrategies, and alternative credit strategies, such as special situations, direct lending and private opportunistic credit. We pursue these investments across a range ofvehicles, including investment 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 CLOs that hold leveraged loans, high-yield bonds or a combination of both. CLOs are typicallystructured as special purpose investment vehicles that acquire, monitor and, to varying degrees, manage a pool of credit assets. The CLOs generally serve as long-term financing for leveraged credit investments and as a way to minimize refinancing risk, minimize maturity risk and secure a fixed cost of funds over anunderlying market interest rate. We typically 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, including BDCs such as CCT and CCT II, are generally subject to contractual rights that require their board of directors toprovide prior notice (or, in the case of a BDC we manage as a sub-adviser, the investment adviser) in order to terminate our investment management services. 21Table of ContentsLeveraged 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 andliquidity profiles. Our revolving credit strategy invests in senior secured revolving credit facilities. We had AUM of $24.8 billion in this strategy as ofDecember 31, 2017 (inclusive of AUM of $2.3 billion in our opportunistic credit strategy and AUM of $1.5 billion in our revolving credit strategy).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 investmentstrategy. These investments include distressed investments (including post- restructuring equity), control-oriented opportunities,rescue financing (debt or equity investments made to address covenant, maturity or liquidity issues), debtor-in-possession or exitfinancing, and other event-driven investments in debt or equity. We had AUM of $7.4 billion in this strategy as of December 31,2017 .•Private Credit. Our private credit strategies seek to leverage the knowledge and relationships developed in the leveraged credit business. Thesestrategies include direct lending and private opportunistic credit strategies.◦Direct Lending. We seek to make investments in proprietarily sourced primarily senior debt financings for middle-market companiesthrough our direct lending strategy. We had AUM of $7.4 billion in this strategy as of December 31, 2017 .◦Private Opportunistic Credit. Through this strategy, we seek to make investments in directly sourced third-party mezzanine andmezzanine-like transactions and also seek asset-based credit and structured credit opportunities across financialand hard assets. These investments often consist of mezzanine debt, which generates a current yield, coupledwith marginal equity exposure with additional upside potential. We had AUM of $4.4 billion in this strategy asof December 31, 2017 .Hedge FundsOverviewOur hedge fund business consists of strategic manager partnerships with third-party hedge fund managers in which KKR owns a minority stake. This includesa 29.9% interest in Marshall Wace, a global alternative investment manager specializing in long/short equity products, a 24.9% interest in Nephila Capital Ltd.("Nephila"), an investment manager focused on investing in natural catastrophe and weather risk, a 24.9% interest in BlackGold Capital Management L.P.("BlackGold"), a credit-oriented investment manager focused on energy and hard asset investments, and a 39.9% interest in PAAMCO Prisma Holdings, LLC("PAAMCO Prisma"), an investment manager focused on liquid alternative investment solutions, including hedge fund-of-fund portfolios. We have also seededAcion Partners Limited ("Acion"), a Hong Kong-based investment manager that manages Asian event-driven investments. As of December 31, 2017 , our strategicmanager partnerships with third-party hedge fund managers accounted for $26.2 billion of AUM.Prior to June 1, 2017, our hedge fund business included Prisma Capital Partners LP, formerly known as KKR Prisma ("KKR Prisma"). KKR Prismaconstructed and managed customized hedge fund portfolios. On June 1, 2017, KKR completed the transaction to combine Pacific Alternative Asset ManagementCompany, LLC ("PAAMCO") and KKR Prisma to create PAAMCO Prisma. KKR owns 39.9% of, and receives certain other payments from, PAAMCO Prisma,which operates independently from KKR.22Table of ContentsPublic Markets AUM and Vehicle StructuresAs of December 31, 2017 , our Public Markets segment had $70.9 billion of AUM, comprised of $24.8 billion of assets managed in our leveraged creditstrategies (which include $2.3 billion of assets managed in our opportunistic credit strategy and $1.5 billion of assets managed in our revolving credit strategy),$7.4 billion of assets managed in our special situations strategy, $11.8 billion of assets managed in our private credit strategies, $26.2 billion of assets managedthrough our hedge fund business and $0.7 billion of assets managed in other strategies. Our private credit strategies include $7.4 billion of assets managed in ourdirect lending strategy and $4.4 billion of assets managed in our private opportunistic credit strategy.The table below presents information as of December 31, 2017, based on the investment funds, vehicles or accounts offered by our Public Markets segment. Our funds, vehicles and accounts have been sorted based upon their primary investment strategies. However, the AUM and FPAUM presented for each line in thetable includes certain investments from non-primary investment strategies, which are permitted by their investment mandates, for purposes of presenting the feesand other terms for such funds, vehicles and accounts.($ in millions) AUM FPAUM Typical ManagementFee Rate Incentive Fee /CarriedInterest PreferredReturn Durationof CapitalLeveraged Credit: Leveraged Credit SMAs/Funds $13,322 $11,643 0.33%-1.50% Various (1) Various (1) Subject to redemptionsCLOs 10,689 10,689 0.40%-0.50% Various (1) Various (1) 10-14 Years (2)Total Leveraged Credit 24,011 22,332 Alternative Credit: (3) Special Situations 8,060 4,646 0.90%-1.75% (4) 10.00-20.00% 7.00-12.00% 8-15 Years (2)Private Credit 8,504 4,105 0.50%-1.75% 10.00-20.00% 5.00-8.00% 8-15 Years (2)Total Alternative Credit 16,564 8,751 Hedge Funds (5) 26,182 20,489 0.50%-2.00% Various (1) Various (1) Subject to redemptionsBDCs (6) 4,187 4,187 1.00%-1.125% 10.00-15.00% 7.00% 7 yearsTotal $70,944 $55,759 (1)Certain funds and CLOs are subject to a performance fee in which the manager or general partner of the funds share up to 20% of the net profits earned by investors in excess ofperformance hurdles (generally tied to a benchmark or index) and subject to a provision requiring the funds and vehicles to regain prior losses before any performance fee is earned.(2)Duration of capital is measured from inception. Inception dates for CLOs were between 2005 and 2017 and for separately managed accounts and funds investing in alternative creditstrategies from 2009 through 2017.(3)Our alternative credit funds generally have investment periods of three to five years and our newer alternative credit funds generally earn fees on invested capital during the investmentperiod.(4)Lower fees on uninvested capital in certain vehicles.(5)Hedge Funds represent KKR's pro rata portion of AUM and FPAUM of our strategic manager partnerships, which consist of minority stakes in other hedge fund managers.(6)Consists of CCT and CCT II, which are BDCs advised and sub-advised, respectively, by KKR. These vehicles invest in both leveraged credit and private credit strategies. On November14, 2017, shares of CCT's common stock commenced trading on the NYSE and KKR Credit Advisors (US) LLC became CCT's sole investment adviser. On December 11, 2017, weentered into an agreement with FS Investments to form a strategic BDC partnership that will, subject to stockholder approvals and the satisfaction of certain other closing conditions,provide investment advisory services to CCT, CCT II and four BDCs that are currently sponsored by FS Investments.Fundraising and Composition of Fund InvestorsWe 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 certain third-party fund managers in our strategic manager partnerships. As of December 31, 2017 , we had over 70 executives andprofessionals dedicated to our Client & Partner Group.23Table of ContentsAs of December 31, 2017 , we had approximately 900 investors in funds across all our strategies, which reflect the addition of 90 investors during the year,excluding former KKR Prisma clients following the PAAMCO Prisma transaction that closed on June 1, 2017. On average, a fund investor is invested inapproximately two of our products as of December 31, 2017 . The following charts detail our investor base by type and geography as of December 31, 2017 .Fund Investor Base by Type (1) Fund Investor Base by Geography (1) _________________________(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.Capital Markets Our Capital Markets segment is comprised of our global capital markets business. Our capital markets business supports our firm, our portfolio companies andthird-party clients by developing and implementing both traditional and non-traditional capital solutions for investments or companies seeking financing. Theseservices include arranging debt and equity financing, placing and underwriting securities offerings and providing other types of capital markets services. Ourcapital markets business underwrites credit facilities and arranges loan syndications and participations. When we are sole arrangers of a credit facility, we mayadvance amounts to the borrower on behalf of other lenders, subject to repayment. When we underwrite an offering of securities on a firm commitment basis, wecommit to buy and sell an issue of securities and generate revenue by purchasing the securities at a discount or for a fee. When we act in an agency capacity or bestefforts basis, we generate revenue for arranging financing or placing securities with capital markets investors. We may also provide issuers with capital marketsadvice on security selection, access to markets, marketing considerations, securities pricing, and other aspects of capital markets transactions in exchange for a fee.Our capital markets business also plays an important role in syndicating private equity co-investment opportunities to both fund investors and other third parties,which may entitle the firm to receive management fees and/or a carried interest.Our flagship capital markets subsidiary is KKR Capital Markets LLC, an SEC-registered broker-dealer and a member of the Financial Industry RegulationAuthority ("FINRA"), which is registered or authorized to carry out certain broker-dealer activities in various countries in North America, Europe, Asia-Pacific andthe Middle East.24Table of ContentsPrincipal 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 manager 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 CLOs.We also make opportunistic investments through our Principal Activities segment, which include co-investments alongside our Private Markets and PublicMarkets funds as well as 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, 2017 .Holdings by Asset Class (1) (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 strategic managerpartnerships 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, certain core equity investments, and other opportunisticinvestments. However, equity investments in other asset classes, such as real estate, special situations and energy appear in these other asset classes. Other Credit consists of certain leveragedcredit and specialty finance strategies.25Table of ContentsCompetitionWe 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, BDCs, investment banks, commercial finance companies and operating companies actingas strategic buyers. We believe that competition for fund investors is based primarily on investment performance, investor liquidity and willingness to invest,investor perception of investment managers' drive, focus and alignment of interest, business reputation, duration of relationships, quality of services, pricing, fundterms including fees, and the relative attractiveness of the types of investments that have been or are to be made. We believe that competition for investmentopportunities is based primarily on the pricing, terms and structure of a proposed investment and certainty of execution. In addition to these traditional competitorswithin the global investment management industry, we also face competition from local and regional firms, financial institutions and sovereign wealth funds in thevarious countries in which we invest. In certain emerging markets, local firms may have more established relationships with the companies in which we areattempting to invest. These competitors often fall into one of the aforementioned categories but in some cases may represent new types of fund investors, includinghigh 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, while private equity funds have acquired minority equity or debt positions in publicly listed companies.This convergence could heighten competition for investments. Furthermore, as institutional fund investors increasingly consolidate their relationships for multipleinvestment products with a few investment firms, competition for capital from such institutional fund investors may become more acute. However, suchconsolidation may also lead institutional fund investors to prefer more established investment firms, which could help us compete against newer entrants orinvestment firms that are smaller in size or offer more limited types of investment strategies.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. In addition, some of these competitors may have higher risk tolerances, different riskassessments or lower return thresholds, which could allow them to consider a wider range of investments and to bid more aggressively than us for investments.Strategic buyers may also be able to achieve synergistic cost savings or revenue enhancements with respect to a targeted portfolio company, which may providethem with a competitive advantage in bidding for such investments.Our capital markets business competes primarily with investment banks and independent broker-dealers in North America, Europe, Asia-Pacific and theMiddle East. We principally focus our capital markets activities on the firm, our portfolio companies and fund investors, but we also seek to service other thirdparties. 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.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, 2017, we employed 1,184 people worldwide:Investment Professionals378Other Professionals548Support Staff258Total Employees (1)1,184 (1) Does not include operating consultants and other consultants who provide services to us or our funds.26Table of ContentsInvestment ProfessionalsOur 378 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 548 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 55 operating consultants at KKRCapstone, who are not KKR employees but work exclusively with our investment professionals and portfolio company management teams or our designees. Withprofessionals in North America, Europe and the Asia-Pacific, KKR Capstone provides additional expertise for assessing investment opportunities and assistingmanagers of portfolio companies in defining strategic priorities and implementing operational changes. During the initial phases of an investment, KKR Capstone'swork seeks to implement our thesis for value creation. These operating consultants may assist portfolio companies in addressing top-line growth, cost optimizationand efficient capital allocation and in developing operating and financial metrics. Over time, this work shifts to identifying challenges and taking advantage ofbusiness opportunities that arise during the life of an investment. KKR Capstone is consolidated in KKR's financial results for GAAP purposes, but is not asubsidiary 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 chairpersons of major corporations and others holding leading positions of publicagencies worldwide.27Table of ContentsOrganizational StructureThe following simplified diagram illustrates our organizational structure as of December 31, 2017 , unless otherwise noted. Certain entities depicted belowmay be held through intervening entities not shown in the diagram. If our Managing Partner elects to convert KKR into a corporation, the organizational structureillustrated below may significantly change.(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 a one-for-one basis, subject to customary conversion rate adjustments for splits, unit distributions andreclassifications and compliance with applicable vesting and transfer restrictions. As limited partner interests, these KKR Group Partnership Units are non-voting and do not entitleKKR Holdings to participate in the management of our business and affairs. As of December 31, 2017, KKR Holdings had approximately a 40.9% interest in our business indirectlythrough its limited partner interests in the KKR Group Partnerships.(3)Includes holders of 13,800,000 Series A Preferred Units issued on March 17, 2016, 6,200,000 Series B Preferred Units issued on June 20, 2016 and 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 Partnerships include KKR Management Holdings L.P., KKR Fund Holdings L.P. and KKR International Holdings L.P. Because the income of KKR ManagementHoldings L.P. is likely to be primarily non-qualifying income for purposes of the qualifying income exception to the publicly traded partnership rules, we formed KKR ManagementHoldings Corp., which is subject to taxation as a corporation for U.S. federal income tax purposes, to hold our interest in KKR Management Holdings L.P. Accordingly, our allocableshare of the taxable income of KKR Management Holdings L.P. will be subject to taxation at a corporate rate. KKR Management Holdings L.P., which is treated as a partnership forU.S. federal income tax purposes, was formed to hold interests in our fee generating businesses and other assets that may not generate qualifying income for purposes of thequalifying income exception to the publicly traded partnership rules. KKR Fund Holdings L.P., which is also treated as a partnership for U.S. federal income tax purposes, wasformed to hold interests in our businesses and assets that will generate qualifying income for purposes of the qualifying income exception 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 income under the U.S. federal income tax laws applicable topublicly traded partnerships. As of February 21, 2018, KKR International Holdings L.P. held no assets.(6)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 and KKR Capital Markets Holdings L.P., the holding company forKKR Capital Markets LLC. KKR Fund Holdings L.P. is the parent company of KKR Credit Advisors (Ireland) Unlimited Company and KKR Alternative Investment ManagementUnlimited Company.28Table of Contents(7)40% of the carried interest earned from our investment funds, and, beginning with the quarter ended September 30, 2016, 40% of the management fees that would have been subjectto a management fee refund for investment funds that have a preferred return, are allocated to a carry pool, from which carried interest is allocable to our employees and selected otherindividuals. Beginning with the quarter ended September 30, 2017, 43% of carried interest generated by then-current and future funds is allocated to the carry pool instead of 40% ofcarried interest. For impacted funds, the incremental 3% replaces the amount of certain management fee refunds that would have been calculated for those funds as performanceincome compensation. No carried interest has been allocated with respect to co-investments acquired from KPE in the KPE Transaction. Our carry pool is supplemented by allocatingfor compensation 40% of the incentive fees that do not constitute carried interest that are earned from investment funds. See "Management's Discussion and Analysis of FinancialCondition and Results of Operations—Key Financial Measures Under GAAP—Expenses—Compensation and Benefits."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-ownedsubsidiary KKR Credit Advisors (US) LLC, each of which is registered as an investment adviser with the SEC under the Investment Advisers Act of 1940 (the"Investment Advisers Act"). The investment advisers are subject to the anti-fraud provisions of the Investment Advisers Act and to fiduciary duties derived fromthese provisions, which apply to our relationships with our advisory clients globally, including funds that we manage. These provisions and duties imposerestrictions and obligations on us with respect to our dealings with our fund investors and our investments, including for example restrictions on agency cross andprincipal transactions. Our registered investment advisers are subject to periodic SEC examinations and other requirements under the Investment Advisers Act andrelated regulations primarily intended to benefit advisory clients. These additional requirements relate, among other things, to maintaining an effective andcomprehensive compliance program, record-keeping and reporting requirements and disclosure requirements. The Investment Advisers Act generally grants theSEC broad administrative powers, including the power to limit or restrict an investment adviser from conducting advisory activities in the event it fails to complywith federal securities laws. Additional sanctions that may be imposed for failure to comply with applicable requirements include the prohibition of individualsfrom associating with 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 investment company registered under the Investment Company Act. The closed-endmanagement investment company and KKR Credit Advisors (US) LLC are subject to the Investment Company Act and the rules thereunder, which among otherthings regulate the relationship between a registered investment company (or BDC) and its investment adviser and prohibit or restrict principal transactions andjoint 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 FINRA. MCS Capital Markets LLC, one of our subsidiaries, is registered as a broker-dealer with the SEC under the ExchangeAct and in 35 U.S. States. As registered broker-dealers, KKR Capital Markets LLC and MCS Capital Markets LLC are subject to periodic SEC and FINRAexaminations 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 of customers' funds and securities, capital structure, record-keeping and retention and the conduct andqualifications of directors, officers, employees and other associated persons. These requirements include the SEC's "uniform net capital rule," which specifies theminimum level of net capital that a broker-dealer must maintain, requires a significant part of the broker-dealer's assets to be kept in relatively liquid form,29Table of Contentsimposes certain requirements that may have the effect of prohibiting a broker-dealer from distributing or withdrawing its capital and subjects any distributions orwithdrawals of capital by a broker-dealer to notice requirements. These and other requirements also include rules that limit a broker-dealer's ratio of subordinateddebt to equity in its regulatory capital composition, constrain a broker-dealer's ability to expand its business under certain circumstances and impose additionalrequirements when the broker-dealer participates in securities offerings of affiliated entities. Violations of these requirements may result in censures, fines, theissuance of cease-and-desist orders, revocation of licenses or registrations, the suspension or expulsion from the securities industry of the broker-dealer or itsofficers or employees or other similar consequences by regulatory bodies.United KingdomWe have several subsidiaries which are authorized and regulated by the FCA under the Financial Services and Markets Act 2000 ("FSMA"). FSMA andrelated rules govern most aspects of investment business, including investment management, sales, research and trading practices, provision of investment advice,corporate finance, use and safekeeping of client funds and securities, regulatory capital, record-keeping, margin practices and procedures, approval standards forindividuals, anti-money laundering, periodic reporting and settlement procedures. The FCA is responsible for administering these requirements and our compliancewith the FSMA and related rules. Violations of these requirements may result in censures, fines, imposition of additional requirements, injunctions, restitutionorders, revocation or modification of permissions or registrations, the suspension or expulsion from certain "controlled functions" within the financial servicesindustry of officers or employees performing 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 Credit Advisors (EMEA) LLP has permission to engage in a number of regulatedactivities including managing, advising on and arranging deals in relation to certain types of specified investments.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) Unlimited Company and KKR Alternative Investment Management Unlimited Company are regulated by the Central Bank ofIreland. KKR Credit Advisors (Ireland) Unlimited Company is authorized to carry out a number of regulated activities including receiving and transmitting orders,portfolio management and providing investment advice. KKR Alternative Investment Management Unlimited Company is an authorized EU alternative investmentmanager permitted to conduct portfolio management, risk management and certain administrative 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)under the Financial Instruments and Exchange Act of Japan, and a money lender under the Money Lending Business Act of Japan.KKR MENA Limited, a Dubai International Financial Centre company, is licensed to arrange deals in investments, advise on financial products and arrangecustody, 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.30Table of ContentsKKR 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 qualified investors only, and is regulated by MonetaryAuthority 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 with the Securities Exchange Board of India ("SEBI") under the SEBI(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 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 holding company inMauritius 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 SEBI as a merchant banker that is authorized to execute capital market mandates, underwrite issues,offer investment advisory and other consultancy/advisory services in connection with securities. In addition, KKR Capital Markets India Private Limited is theinvestment manager and sponsor of five 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 Foreign Portfolio Investor with SEBI under the SEBI (Foreign Portfolio Investor) Regulations, 2014 pursuant to which theycan make investments in listed 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 a non-deposit taking non-banking financial company and is authorized to undertake lending and financing activities.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 theCommission 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 andpenalties. The possibility of increased regulatory focus or legislative or regulatory changes could materially and adversely affect our business."31Table of ContentsWebsite 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 report. We make availablefree 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 Reports onForm 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 practicable afterthose reports are electronically filed with, or furnished to, the SEC. To access these filings, go to the "KKR & Co. L.P." section of our "Investor Center" page onour 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 under the "KKR & Co. L.P." section of the "Investor Center" page at www.kkr.com .ITEM 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 financial statements and accompanying notes.Any of the following risks could materially and adversely affect our business, financial condition or results of operations. Our business, financial condition orresults of operations could also be materially and adversely affected by additional factors that apply to all companies generally, as well as other risks that are notcurrently 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 part ofyour original investment. While we attempt to mitigate known risks to the extent we believe to be practicable and reasonable, we can provide no assurance, and wemake no representation, that our mitigation efforts will be successful.Risks Related to Our BusinessDifficult market and economic conditions can adversely affect our business in many ways, including by reducing the value or performance of the investmentsthat 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 andadversely affect our financial prospects and condition.Our business and the businesses of the companies in which we invest are materially affected by financial markets and economic conditions or eventsthroughout the world, such as interest rates, availability of credit, inflation rates, economic uncertainty, changes in laws (including laws relating to taxation), tradebarriers, commodity prices, currency exchange rates and controls and national and international political circumstances (including wars, terrorist acts or securityoperations). For example, the unprecedented turmoil in the global financial markets during 2008 and 2009 provoked significant volatility of securities prices,contraction in the availability of credit and the failure of a number of companies, including leading financing institutions, and had a material adverse effect on ourbusinesses and the businesses of the companies in which we invest. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Business Environment" for a discussion of recent developments in market and business conditions that may affect our business.Such financial markets and economic conditions 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 be able to or may choose not to manage our exposure to these conditions and/orevents. If not otherwise offset, declines in the equity, commodity and debt in the markets would likely cause us to write down our investments and the investmentsof our funds. For example, during the global financial crisis in 2008 and 2009, valuations of our private equity funds declined across all geographies, withinvestments in private equity funds marked down to as low as 67% of original cost and multiples of invested capital reaching as low as 0.5x, 0.6x, 0.7x and 0.8xfor the European Fund II, European Fund III, 2006 Fund and Asian Fund, respectively, as of March 31, 2009. Our profitability may also be materially andadversely affected by our fixed costs and the possibility that we would be unable to scale back other costs within a time frame sufficient to match any decreases innet income relating to a downturn in market and economic conditions.Unfavorable market and economic conditions may reduce opportunities for our funds to make, exit and realize value from their investments. Challengingmarket and economic conditions, including those caused by changes in tax laws and other regulatory restrictions, may make it difficult for us to find suitableinvestments for our funds or secure financing for32Table of Contentsinvestments on attractive terms. Such conditions may also result in reduced opportunities for our funds to exit and realize value from their existing investments andlower-than-expected returns on existing investments. Although the equity markets are not the only means by which we exit investments, in challenging equitymarkets, our funds may experience greater difficulty in realizing value from investments. In addition, when financing is not available or becomes too costly, it isdifficult for potential buyers to raise sufficient capital to purchase our funds' investments. Consequently, we may earn lower-than-expected returns on investments,which could cause us to realize diminished or no carried interest.We generally raise capital for a successor fund following the substantial and successful deployment of capital from the existing fund. In the event of poorperformance by existing funds, our ability to raise new funds is impaired. During periods of unfavorable fundraising conditions, fund investors may negotiate forlower fees, different fee sharing arrangements for transaction or other fees, and other concessions. The outcome of such negotiations could result in our agreementto terms that are materially less favorable to us than for prior funds we have managed. Our current funds, including all our recent private equity funds, haveperformance hurdles, which require us to generate a specified return on investment prior to our right to receive carried interest. This requirement will likely be inall our future funds, and the hurdle rate could increase for our future funds. 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 materially and adversely affect our future revenues, net income, cash flow,financial condition or ability to retain our employees. See "—Our inability to raise additional or successor funds (or raise successor funds of a comparable size asour predecessor funds) could have a material adverse impact on our business" and "—Our investors in future funds may negotiate to pay us lower managementfees, reimburse us for fewer expenses or change the economic terms of our future funds, including with respect to transaction fees, management fees or monitoringfees, to be less favorable to us than those of our existing funds, which could materially and adversely affect our revenues or profitability."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 payother expenses as they become due, including amounts payable to us. Negative financial results in our funds' portfolio companies may result in lower investmentreturns for 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 Public Markets segment, impact both the frequency and size of fees generated by thissegment.Changes 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 to refinance existing debt and may increase the cost of such financing orrefinancing 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 that we may have contracted to purchase. Similarly, certain of the strategies pursued with our balance sheetassets rely on the use of leverage, including the issuance of CLOs, and other secured and unsecured borrowings. Our ability to generate returns on these assets andmake cash available for distribution to our unitholders would be reduced to the extent that changes in market conditions, including continued increase by the U.S.Federal Reserve of its benchmark interest rate, cause the cost of our financing to increase relative to the income that can be derived from the assets33Table of Contentsacquired and financed. Similarly, our portfolio companies regularly utilize the corporate debt markets in order to obtain financing for their operations. To theextent that credit markets render such financing difficult to obtain or more expensive, this may negatively impact the operating performance of those portfoliocompanies and, therefore, the investment returns on our funds. In addition, to the extent that conditions in the credit markets impair the ability of our portfoliocompanies to refinance or extend maturities on their outstanding debt, either on favorable terms or at all, the operating performance of those portfolio companiesmay be negatively impacted, which could impair the value of our investment in those portfolio companies and lead to a decrease in the investment income earnedby us. In some cases, the inability of our portfolio companies to refinance or extend maturities may result in the inability of those companies to repay debt atmaturity or pay interests when due, and may cause the companies to sell assets, undergo a recapitalization or seek bankruptcy protection, any of which would alsolikely impair the value of our investment and lead to a decrease in investment income earned by us.We have significant liquidity requirements, and adverse market and economic 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, funding our capital commitments made to existing and future funds, co-investments andany net capital requirements of our capital markets companies and otherwise supporting investment vehicles that we sponsor;•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 at maturity, on interest payment dates or upon redemption, as well as any contingentliabilities that may give rise to future cash payments;•fund cash operating expenses and contingencies, including 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, advance loan proceeds and fund syndication commitments within our capital markets business;•make future purchase price payments in connection with our proprietary acquisitions, such as our strategic manager partnership with Marshall Wace, tothe extent not paid by newly issued common units;•acquire other assets for our Principal Activities segment, including other businesses, investments and assets, some of which may be required to satisfyregulatory requirements for our capital markets business or risk retention requirements for CLOs (to the extent it continues to apply); and•repurchase our common units pursuant to the unit repurchase program 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 31,2017, we have approximately $5.7 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 also used our balance sheet to provide credit support to our general partner's obligations to our funds and to support certain transactions by ourfunds.In addition, as of December 31, 2017, we had $21.2 billion of indebtedness outstanding under our credit facilities and debt securities on a GAAP basis and$3.1 billion of indebtedness outstanding under our credit facilities and debt securities on a segment basis, and $1.9 billion of cash and short-term investments on aGAAP basis and $3.2 billion of cash and short-term investments on a segment basis. The segment-based measures exclude the assets and liabilities of ourinvestment funds, CLOs and CMBS and other consolidated entities that are not subsidiaries of KKR & Co. L.P., but include KKR Financial Holdings LLC's("KFN") debt obligations, which as of December 31, 2017, consisted of $764.8 million and KFN's 7.375% Series A LLC34Table of Contentspreferred shares of $373.8 million , which do not provide for recourse to KKR beyond the assets of KFN. All of KFN's outstanding 7.375% Series A LLCpreferred shares were redeemed on January 16, 2018. Our $1.0 billion corporate revolving credit facility will mature in 2019. Depending on market conditions, wemay not be able to refinance or renew all or part of these senior notes or our corporate revolving credit facility, or find alternate sources of financing (includingissuing equity), on commercially reasonable terms or at all. Furthermore, the incurrence of additional debt by us or our subsidiaries in the future could result indowngrades of our existing corporate credit ratings, which could limit the availability 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, and a 364-dayrevolving credit agreement that provides for revolving borrowing of up to $750 million, which can only be used to facilitate the settlement of debt transactionsyndicated by our capital markets business. To the extent we commit to buy and sell an issue of securities in firm commitment underwritings or otherwise, we maybe required to borrow under these revolving credit facilities to fund such obligations, which, depending on the size and timing of the obligations, may limit ourability to enter into other underwriting arrangements or similar activities, service existing debt obligations or otherwise grow our business. Further, these facilitiesare scheduled to mature in 2021 and 2018, respectively, and depending on the market conditions, we may not be able to refinance or renew them on commerciallyreasonable terms or at all. Regulatory net capital requirements may also limit the ability of our broker-dealer subsidiaries to participate in underwriting or othertransactions or to allocate our capital more efficiently across our businesses.Our other liquidity requirements include potential future purchase price payments in connection with strategic manager partnerships with third-party hedgefund managers like Marshall Wace, based on the respective performance of these businesses or the exercise of certain options. In the fourth quarter of 2017, due tothe exercise of one of the options agreed to between Marshall Wace and KKR, we acquired an additional 5.0% interest in Marshall Wace, for which we paid with acombination of cash and common units. In addition, in connection with the development of a new KKR office in New York City, we will be required to pay for theconstruction of the office, which is expected to be completed in 2020.In the event that our liquidity requirements were to exceed available liquid assets for the reasons specified above or for any other reasons, we could be forcedto sell assets or seek to raise debt or equity capital on unfavorable terms. For further discussion of our liquidity needs see "Management's Discussion and Analysisof Financial 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, revolving credit and core investments, generally include a "clawback" provision that, if triggered,may give rise 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 thefund. Under a clawback obligation, upon the liquidation of a fund, the general partner is required to return, typically on an after-tax basis, previously distributedcarry to the extent that, due to the diminished performance of later investments, the aggregate amount of carry distributions received by the general partner duringthe term of the fund exceed the amount to which the general partner was ultimately entitled, including the effects of any performance thresholds. We wouldcontinue to be subject to the clawback obligation even if carry has been distributed to current or former employees or other personnel through our carry pool, andwe would be required 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 bythe general partners of funds that were not contributed to us in the KPE Transaction, as of December 31, 2017 , $19.2 million of carried interest was subject to thisclawback obligation, assuming that all applicable carry-paying funds were liquidated at their December 31, 2017 fair values. Had the investments in such carry-paying funds been liquidated at zero value, the clawback obligation would have been $1,920.9 million .Carry distributions arising subsequent to the KPE Transaction may give rise to clawback obligations that may be allocated generally to us and our principalswho participate in the carry pool. In addition, guarantees of or similar arrangements relating to clawback obligations in favor of third-party investors in anindividual investment partnership by entities we own may limit distributions of carried interest more generally.Strategic investor partnerships have longer investment periods and invest in multiple strategies, which may increase the possibility of a "netting hole," whichwill result in less carried interest for us, as well as clawback liabilities.35Table of ContentsWe have entered into strategic partnerships with certain investors, generally through separately managed accounts, which have longer investment periods,often of 20 years or more, and provide for investments across different investment strategies (which we refer to as "strategic investor partnerships"). Compared toour traditional private equity fund structure, these partnerships may offer reduced fees for fund investors and may require netting across various funds in whichthey invest. Generally, if a fund's investments have fair values above cost overall, but one or more of its investments has a fair value that is below cost, the shortfallbetween cost and fair value for such investment (which we refer to as a "netting hole") must be "filled" by returning invested capital to such fund's limited partnersin an amount equal to such shortfall before any realized gains on individual investments can be distributed to the general partner as carried interest. The longerinvestment period and cross-fund netting feature of the strategic investor partnerships increases the possibility of netting holes compared to our traditional privateequity fund structure, which, if present, will reduce the carried interest we otherwise would earn. Similarly, the longer duration of these partnerships can increasethe risk of clawback, because over a longer investment period, a period of reduced performance following periods of performance adequate to realize carriedinterest is more likely to occur. See "—The 'clawback' provisions in our governing agreements may give rise to a contingent obligation that may require us toreturn or contribute amounts to our funds and fund investors."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 volatilitythe fair 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 "Management'sDiscussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Fair Value Measurements" for a discussion of theimpact of equity markets on the value of private equity investments. A decline in realized or unrealized gains, a failure to achieve a performance hurdle or anincrease in realized 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 variances in size and frequency of monitoring fees (including terminationpayments), transaction fees or fees received by our capital markets business. Our total management, monitoring and transaction fees (net of fee credits) for theyears ended December 31, 2017, 2016 and 2015 were $1,431.0 million, $987.6 million and $874.7 million, respectively, on a GAAP basis, and $1,502.0 million ,$1,074.9 million and $1,142.1 million, respectively, on a segment basis. We may create new funds or investment products or vary the terms of our funds orinvestment products (for example our funds now include performance hurdles), which may alter the composition or mix of our income from time to time. Inparticular, in our newer private equity and other funds, we have agreed to return to our fund investors all monitoring and transaction fees generated by the fund'sinvestments, which resulted in a decrease of our monitoring and transaction fee income. 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 market andeconomic 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 are 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 indebtednessoutstanding. The terms of its indebtedness impose limitations on KFN's current and future operations and may restrict its ability to make distributions to KKR. Forthe years ended December 31, 2017, 2016 and 2015, our net income attributable to KKR & Co. L.P. common unitholders on a GAAP basis was $984.9 million ,$287.1 million and $488.5 million, respectively, and our economic net income (loss) on a segment basis was $2,435.3 million , $794.4 million and $1,298.0million, respectively. Such fluctuations may lead to variability in the value of interests in our business and cause our results for a particular period not to beindicative of our performance in future periods. It may be difficult for us to achieve steady growth in net income and cash flow on a quarterly basis, which could inturn 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 fund 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 cost36Table of Contents(which we refer to as a netting hole), cost has been returned to fund investors in an amount sufficient to reduce remaining cost to the investments' fair value.Carried interest payments from investments depend on our funds' performance and opportunities for realizing gains, which may be limited. It takes a substantialperiod of time to identify attractive investment opportunities, to raise all the funds needed to make an investment and then to realize the cash value (or otherproceeds) of an investment through a sale, public offering or other exit. To the extent an investment is not profitable, no carried interest will be received from ourfunds with respect to that investment and, to the extent such investment remains unprofitable, we will only be entitled to a management fee on that investment.Furthermore, certain vehicles and separately managed accounts may not provide for the payment of any carried interest at all. Even if an investment proves to beprofitable, it may be several years before any profits can be realized in cash. We cannot predict when, or if, any realization of investments will occur. In addition, iffinance providers, such as commercial and investment banks, make it difficult for potential purchasers to secure financing to purchase companies in our investmentfunds' portfolio, it may decrease potential realization events and the potential to earn carried interest. A downturn in the equity markets would also make it moredifficult to exit investments by selling equity securities. If we were to have a realization event in a particular quarter, the event may have a significant impact onour cash flows during the quarter that may not be replicated in subsequent quarters. A decline in realized or unrealized gains, or an increase in realized orunrealized losses, would adversely affect our investment income, which could further increase the volatility of our quarterly results.The timing and receipt of carried interest also vary 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 ourcarry-paying funds that are in their fund raising or investment periods that precede the harvesting period. During times when a significant portion of our AUM isattributable to carry-paying funds that are not in their harvesting periods, we may receive substantially lower carried interest distributions.In addition, our hedge funds business consists of strategic manager partnerships with third-party hedge fund managers in which KKR owns a minority stake.These hedge fund managers offer a variety of investment strategies, including hedge fund-of-funds, equity hedge funds, credit hedge funds and funds makinginvestments based on natural catastrophe and weather risks. As a result, we are indirectly exposed to the volatility and fluctuations in financial results of ourstrategic manager partners. For example, certain funds managed by our strategic manager partners have "high-water mark" provisions whereby if the funds haveexperienced losses in prior periods, the fund managers will not be able to earn incentive fees with respect to a fund investor's account until the net asset value of thefund investor's account exceeds the highest period end value on which incentive fees were previously paid. The incentive fees our strategic manager partners earnare therefore dependent on the net asset value of these funds, which could add to volatility in our quarterly results and cash flow.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;•unfavorable market and economic conditions;•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.37Table of ContentsOur 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 continue to earn management fees after the expiration of theirinvestment periods, they are generally at a reduced rate). Even if we are successful in raising successor funds, to the extent we are unable to raise successor fundsof a comparable size to our predecessor funds or the extent that we are delayed in raising such successor funds, our revenues may decrease as the investment periodof our predecessor funds expire and associated fees decrease. For example, European Fund IV was smaller than its predecessor fund and North America Fund XIwas smaller than its predecessor fund. The performance of our funds also impacts our ability to raise capital, and deterioration in the performance of our fundswould result in challenges to future fundraising. The evolving preferences of our fund investors may necessitate that alternatives to the traditional investment fundstructure, such as separately managed accounts, smaller funds and co-investment vehicles, become a larger part of our business going forward. This could increaseour cost of raising capital at the scale we have historically achieved. Furthermore, in order to raise capital for new strategies and products without drawing capitalaway from our existing products, 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 private equity funds that have suffered from decreasing returns, liquidity pressure,increased volatility or difficulty maintaining target asset allocations may materially decrease or temporarily suspend making new investments in private equityfunds. Such concerns could be exhibited, in particular, by public pension funds, which have historically been among the largest investors in alternative assets.Many public pension funds are significantly underfunded and their funding problems have been, and may in the future be, exacerbated by economic downturn.Concerns with liquidity could cause such public pension funds to reevaluate the appropriateness of alternative investments, and other institutional investors mayreduce their overall portfolio allocations to alternative investments. This could result in a smaller overall pool of available capital in our industry. There is noassurance that the amount of commitments investors are making to alternative investment funds will continue at recent levels or that our ability to raise capitalfrom investors will not be hampered.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 or other non-private equity investment vehicles, which permit redemptions onrelatively short notice in order to meet liquidity needs or invest in other asset classes. We believe that our ability to avoid excessive redemption levels primarilydepends on our funds' continued satisfactory performance, although redemptions may also be driven by other factors important to our fund investors, includingtheir need for liquidity and compliance with investment mandates, even if our performance is superior. Investors' liquidity needs tend to be more pronouncedduring periods of market volatility. Any such redemptions would decrease our AUM and revenues.In addition, the Dodd Frank Wall Street Reform and Consumer Protection Act (the "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. As a result, banking entities, subject to certain limited exemptions, had to conform their existing covered fundinvestments and relationships to the Volcker Rule, and will be limited in their ability 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 equityfunds 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 could haveadverse implications for our ability to raise funds from investors who may have considered the availability of secondary market liquidity as a factor38Table of Contentsin determining 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 new strategies or successor funds will experience similar success as ourexisting or predecessor funds in the future.Our investors in future funds may negotiate to pay us lower management fees, reimburse us for fewer expenses or change the economic terms of our futurefunds, including with respect to transaction fees, management fees or monitoring fees, to be less favorable to us than those of our existing funds, which couldmaterially and 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. Such terms could restrict our ability to raise investment funds with investment objectives or strategies thatcompete with existing funds, reduce fee revenues we earn, reduce the percentage of profits on third-party capital in which we share, increase the performancehurdle required to be generated on investment prior to our right to receive carried interest, add expenses and obligations for us in managing the fund or increase ourpotential liabilities. Furthermore, as institutional investors increasingly consolidate their relationships with investment firms and competition becomes more acute,we may receive more requests to modify the terms in our new funds. Certain of our newer funds also include more favorable terms for fund investors that committo early closes for our funds. Additionally, in certain funds, we have agreed to charge management fees based on invested capital or net asset value as opposed tocharging management fees based on committed capital. In certain cases, we have provided "fee holidays" to certain investors in which we do not chargemanagement fees for a fixed period of time (such as the first six months). Agreement to terms that are materially less favorable to us could result in a materialdecrease in our profitability.Certain institutional investors have also publicly criticized certain fund fee and expense structures, including monitoring fees and transaction fees. We havereceived and expect to continue to receive requests from a variety of fund investors and groups representing such investors to decrease fees and to modify ourcarried interest and incentive fee structures, which could result in a reduction or delay in the timing of receipt of the fees and carried interest and incentive fees weearn. The SEC has focused on certain fund fees and expenses, including whether such fees and expenses were appropriately disclosed to fund limited partners, andsuch focus may lead to increased publicity that could cause fund investors to further resist our receipt of certain fees and expense reimbursements. In our recentflagship private equity funds, we have increased the percentage of transaction and monitoring fees that are credited against fund management fees to 100% of theamount of the transaction and monitoring fees attributable to that fund.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 separately managed accounts, specialized funds and co-investment vehicles. We also have enteredinto strategic investor partnerships with specific investors whereby we manage that investor's capital across a variety of our products on separately negotiatedterms. There can be no assurance that such alternatives will be as profitable to us as the traditional investment fund structure, and the impact such a trend couldhave on our results of operations, if widely implemented, is unclear. Moreover, certain institutional investors are demonstrating a preference to in-source their owninvestment professionals and to make direct investments in alternative assets without the assistance of investment advisers like us. Such institutional investors maybecome our competitors and could cease to be our clients.Any agreement to or changes in terms less favorable to us could materially and adversely affect our revenues and profitability.39Table of ContentsThe 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, BDCs, investment banks, commercialfinance companies and operating companies acting as strategic buyers of businesses. We believe that competition for fund investors is based primarily on:•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 or geographic regions, longer operating histories, more established relationships, greater expertise or betterreputation;•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 agreed to terms on their investment funds or products that are 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;40Table of Contents•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;•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 thatare corporate buyers may be able to achieve synergistic cost savings in respect of an investment, which may provide them with a competitive advantage in biddingfor an 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 ourcost structure, could materially and 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 more favorable and such products begin tooffer rates of return superior to those achieved by our funds, the attractiveness of our funds relative to investments in other investment products could decrease.This competitive pressure could materially and adversely affect our ability to make successful investments and limit our ability to raise future funds, either ofwhich would adversely impact 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. In addition, we may elect tochange our structure at any time.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 ("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 our Managing Partner broad authority to modify our limited partnership agreement from time to time asour Managing Partner determines to be necessary or appropriate, without the consent of the unitholders, to address changes in U.S. federal, state and local incometax regulations, legislation or interpretation. Without the consent of the unitholders, our Managing Partner may also elect to convert KKR into a corporation orcause KKR to be taxed as a corporation for U.S. federal tax purposes, if certain conditions have been satisfied. The Tax Cuts and Jobs Act, which was enacted inDecember 2017 and amends various aspects of U.S. federal income tax legislation (the "2017 Tax Act"), increases the likelihood of such a conversion. OnFebruary 8, 2018, we announced that our senior management and our Managing Partner's board of directors are evaluating whether to convert from a partnership toa corporation. Such a conversion could be a taxable event to our unitholders where gain or loss is recognized. In addition, a conversion would subject all of ourfuture net income to a level of corporate tax, which may reduce the amount of cash available for distribution or reinvestment and reduce our reported after-taxearnings. In addition, certain exemptions from certain corporate governance requirements of the NYSE would no longer be available to us if we convert to acorporation, and we may undertake significant internal reorganization of our organizational structure, both of which could result in an increase in costs. See "—Risks Related to Our Common Units—As a limited partnership, we qualify for some exemptions from the corporate governance and other requirements of theNYSE." Finally, following a conversion, certain future payments required under our tax receivable agreement could be materially higher than they would havebeen had we not converted. See "—Risks Related to Our Organizational Structure—We will be required to pay our principals for most of the benefits relating toany additional tax depreciation or amortization deductions we may claim as a result of the tax basis step-up we receive in connection with subsequent exchanges ofour common units and related transactions" and "Certain Relationships and Related Transactions, and Director Independence—Tax Receivable Agreement."41Table of ContentsThe U.S. Congress has considered legislation that would have in some cases after a ten-year period, precluded us from qualifying as a partnership or requiredus to hold carried interest through taxable subsidiary corporations. If any similar legislation were to be enacted and apply to us, the after-tax income and gainrelated to our business, as well as the market price of our units, could be reduced.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 not meet the qualifying income requirements under the publicly tradedpartnership rules. Therefore, if similar legislation is enacted, following such enactment (or such ten-year period), we would be precluded from qualifying as apartnership for U.S. federal income tax purposes. If we were taxed as a U.S. corporation, our effective tax rate would increase significantly. The federal statutoryrate for corporations is 21% effective January 1, 2018. In addition, we could be subject to increased state and local taxes. Furthermore, you could be subject to taxon our conversion into a corporation. See "—Our structure implicates complex provisions of U.S. federal income tax laws for which no clear precedent or authoritymay be available. These structures also are subject to potential legislative, judicial or administrative change and differing interpretations, possibly on a retroactivebasis. In addition, we may elect to change our structure at any time."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.The U.S. Congress, the Organization for Economic Co-operation and Development (the "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 has made changes tonumerous long-standing tax principles through its base erosion and profit shifting ("BEPS") project, which is focused on a number of issues, including theallocation of profits among affiliated entities in different tax jurisdictions. The OECD released the BEPS package in October 2015, which looks at various differentways in which domestic tax rules around the world, and the bilateral double tax treaties that govern the interplay between them, could be amended to addressperceived profit shifting among affiliated entities. Several of the proposed measures, including measures covering treaty abuse (including an anti-abuse "principalpurpose" test that would deny treaty benefits to the extent that obtaining such benefit was one of the principal purposes of any arrangement or transaction thatresulted directly or indirectly in such benefit), the deductibility of interest expense, local nexus requirements, transfer pricing and hybrid mismatch arrangementsare potentially relevant to some of our structures and could have an adverse tax impact on our funds, investors and/or our portfolio companies. Some membercountries have been moving forward on the BEPS agenda but, because timing of implementation and the specific measures adopted will vary among participatingstates, significant uncertainty remains regarding the impact of BEPS proposals. If implemented, these proposals could result in a loss of tax treaty benefits andincreased taxes on income from our investments.A number of European jurisdictions have enacted taxes on financial transactions, and the European Commission has proposed legislation to harmonize thesetaxes under the so-called "enhanced cooperation procedure," which provides for adoption of EU-level legislation applicable to some but not all EU Member States.Several of these proposals for reform, if enacted by the United States or by other countries in which we or our affiliates invest or do business, could materially andadversely affect our investment returns and could reduce the cash we have available for distributions to unitholders or for other uses by us. It is unclear what anyactual 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 of operations andfinancial condition.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.42Table of ContentsOur 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 of operations 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 certain geographically or product focused funds, one or more of the executives focusedon such funds) cease to actively manage a fund or be substantially involved 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 an investor-by-investor basis. In the case of certain of our fully paid-up funds, investors may bepermitted 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 to less favorable ongoing terms with respect to the affected fund. Although we periodicallyengage in discussions with the limited partners of our funds regarding a waiver of such provisions with respect to executives involved in geographically or productfocused funds whose departures have occurred or are anticipated, such waiver is not guaranteed, and our limited partners' refusal to provide a waiver may have amaterial adverse effect on our revenue, net income and cash flow.If we cannot retain and motivate our employees and other key personnel and recruit, retain and motivate new employees and other key personnel, ourbusiness, results of operations and financial condition could be materially and 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 talented and qualified candidates isextremely competitive. Our ability to recruit, retain and motivate our employees is dependent on our ability to offer highly attractive incentive opportunities. Underthe 2017 Tax Act, investments must be held for more than three years, rather than the prior requirement of more than one year, for carried interest to be treated forU.S. federal income tax purposes as capital gain. The longer holding period requirement may result in some of our carried interest being treated as ordinaryincome, which would materially increase the amount of taxes that our employees and other key personnel would be required to pay, thereby adversely affecting ourability to offer attractive incentive opportunities. See "—Risks Related to U.S. Taxation." Similarly, changes in the United Kingdom with respect to the taxation ofcarried interest, including the treatment of certain carried interest returns as income, which became effective from April 6, 2016, may impact our ability to recruit,retain and motivate employees and key personnel in the United Kingdom. In addition, there have been proposed laws and regulations that sought to regulate thecompensation of certain of our employees. See "—Extensive regulation of our business affects our activities and creates the potential for significant liabilities andpenalties. The possibility of increased regulatory focus or legislative or regulatory changes could materially and adversely affect our business." The loss of even asmall number of our investment professionals could jeopardize the performance of our funds and other investment products, which would have a material adverseeffect on our results of operations. Efforts to retain or attract employees, including our investment professionals, may result in significant additional expenses,which could materially and adversely affect 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 were historically borne by KKRHoldings from its cash reserves based upon distributions on a portion of KKR Group Partnership Units held by KKR Holdings. However, many units in KKRHoldings have been allocated to certain employees and non-employee operating consultants, and upon their vesting, distributions on vested units would belong tosuch unitholders and not be available to fund annual cash bonuses. In addition, under its distribution policy, KKR intends to make equal quarterly distributions toholders of its common units in a fixed amount per common unit per quarter. As a result, to the extent that distributions are made on KKR Group Partnership Units(which are used by KKR to pay such quarterly distributions), the pro rata distributions received by KKR Holdings for KKR Group Partnership Units underlyingany unvested KKR Holdings units could be insufficient to fully fund annual cash bonus compensation. In 2017, the amount of such annual cash bonuses borne byKKR Holdings was $5.5 million, and we funded the rest of the cash bonus payments from other sources, including cash from our operations and the carry pool.Although KKR Holdings may fund a larger portion of the cash bonus payments from its cash reserves, if any, in future periods, we likely will continue to utilizeour own funds for most, if not all, of the cash bonus payments. In that event, either our profit margins or our employee retention or both may be adverselyimpacted. There can be no assurance that the carry pool will have sufficient cash available to continue to make such cash payments in the future and fluctuationsfrom the distributions generated from the carry pool, if not offset by funds from other sources, including other performance-based income, could render our43Table of Contentscompensation less attractive. In any of these circumstances, a higher percentage of our revenue would be paid out in the form of cash compensation, which couldhave a material adverse impact on our profit margins. Currently 40% or 43%, as applicable, of the carried interest earned from our investment funds is allocated toour carry pool. Our Managing Partner is not permitted under its operating agreement to increase the percentage of carried interest allocable to the carry poolwithout the consent of a majority of our independent directors. Our carry pool is supplemented by allocating for compensation 40% of the incentive fees that do notconstitute carried interest that are earned from investment funds and certain management fee refunds, which percentage may be increased without requiring theconsent 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 will cause dilution. While we evaluate the grant ofequity awards from our Equity Incentive Plan to employees on an annual basis, the size of the grants, if any, is made at our discretion, and such grants generally donot require an approval by the independent directors of our Managing Partner's board of directors, except for grants to our executive officers. As we increase theuse of equity awards from our Equity Incentive Plan in the future, expense associated with equity-based compensation may increase materially. For example, inconnection with compensation in 2017, we allocated equity awards relating to 29.2 million common units under our Equity Incentive Plan and KKR Holdingsgranted 14.7 million KKR Holdings units to certain senior employees. These KKR Holdings awards were granted from outstanding but previously unallocatedunits of KKR Holdings, and consequently these grants did not increase the number of KKR Holdings units outstanding or outstanding KKR common units on afully-diluted basis. See "Executive Compensation—Compensation Discussion and Analysis—Compensation Elements—KKR Holdings Units" for the terms andconditions of such KKR Holdings units. The value of the KKR Holdings units and KKR common units may drop in value or be volatile, which may make ourequity less attractive to our employees.In July 2015, the SEC proposed rules, as mandated by the Dodd-Frank Act, requiring companies to develop and enforce recovery policies that in the event ofan accounting restatement, "claw back" from current and former executive officers incentive-based compensation they would not have received based on therestatement. In April and May 2016, the SEC also issued for public comment revised proposed rules designed to prohibit certain incentive-based compensationarrangements deemed to encourage inappropriate risk taking by covered financial institutions by providing "excessive" compensation, fees or benefits or that couldlead to material losses. To date, however, the SEC has not adopted the proposed rules. Depending on the outcome of the rule making process, the application ofthese rules to us could require us to substantially revise our compensation strategy, increase our compensation and other costs, and materially and adversely affectour ability to recruit and retain qualified employees. In addition, less carried interest from the carry pool may be allocated to certain of our employees, which mayresult 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 toattract, retain and motivate talented employees and other key personnel and we may need to increase the level of cash compensation 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, or may choose not to, enforce them or become subject to lawsuits orother claims, and certain of these agreements might be waived, modified or amended at any time without our consent. Even when enforceable, these agreementsexpire after a certain period of time, at which point each of our employees and other key personnel are 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 materially and adversely affect our business, results of operations and financial condition.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 be44Table of Contentsable to accommodate our growth, may not be suitable for new products and strategies and may be subject to security risks, and the cost of maintaining suchsystems and technology may increase from our current level. Such a failure to accommodate growth, or an increase in costs related to such information systemsand technology, could have a material adverse effect on our business. Furthermore, most of our administrative personnel and our information system andtechnology infrastructure are located in our New York City office, and any disruption in the operation of, or inability to access, our New York City office couldhave a significant impact on our business. We are also dependent on an increasingly concentrated group of third-party vendors that we do not control for hostingsolutions and technologies. A disaster or a disruption in technology or infrastructure that supports our businesses, including a disruption involving electroniccommunications or other services used by us, our vendors or third parties with whom we conduct business, or directly affecting our principal offices, could have amaterial adverse impact on our ability to continue to operate our business without interruption. Our business continuation or disaster recovery programs may not besufficient to mitigate the harm that may result from such a disaster or disruption. In addition, insurance and other safeguards might only partially reimburse us forour 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 to and attacks on our information technology infrastructure that are intended togain access to our proprietary information, destroy data or disable, degrade or sabotage our systems. Although we take protective measures and endeavor to modifythem as circumstances warrant, our computer systems, software and networks may be vulnerable to unauthorized access, theft, misuse, computer viruses or othermalicious code, and other events that could have a security impact. We and our employees have been and expect to continue to be the target of fraudulent calls,emails and other forms of activities. The costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other means. Inaddition, cyber-security has become a top priority for regulators around the world. Many jurisdictions in which we operate have laws and regulations relating todata privacy, cyber-security and protection of personal information, including the General Data Protection Regulation in the European Union that goes into effectin May 2018. Some jurisdictions have also enacted laws requiring companies to notify individuals of data security breaches involving certain types of personaldata. Breaches in security could potentially jeopardize our, our employees' or our fund investors' or counterparties' confidential and other information processedand stored in, and transmitted through, our computer systems and networks, or otherwise cause interruptions or malfunctions in our, our employees', our fundinvestors', our counterparties' or third parties' operations, which could result in significant losses, increased costs, disruption of our business, liability to our fundinvestors and other counterparties, regulatory intervention or reputational damage. Furthermore, if we fail to comply with the relevant laws and regulations, it couldresult in regulatory investigations and penalties, which could lead to negative publicity and may cause our fund investors and clients to lose confidence in theeffectiveness of our security measures. Finally, we rely on third party service providers for certain aspects of our business, including for certain informationsystems, technology, administration, tax and compliance matters. Any interruption or deterioration in the performance of these third parties could impair thequality of our and our funds' operations and could impact our reputation and materially 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, the nature of which could expose them to a greater risk of being subject to a terrorist attackor security breach than other assets or businesses. Such an event may have material adverse consequences on our investment or assets of the same type or mayrequire portfolio 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 separately managedaccounts and structured products), and expanding into new geographic markets and businesses. We have in the past opened offices in Asia, the Middle East andLatin America, and also developed a capital markets business in the United States, Europe, the Middle East and Asia-Pacific, which we intend to grow anddiversify. We have also launched a number of new investment initiatives in areas such as real estate, energy, infrastructure, growth equity and core investments.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 of45Table of Contentsour organic growth strategy will also depend on, among other things, our ability to correctly identify and create products that appeal to the limited partners of ourfunds and vehicles. While we have made significant expenditures to develop these new strategies and products, there is no assurance that they will achieve asatisfactory level of scale and profitability. To raise new funds and pursue new strategies, we have and expect to continue to use our balance sheet to warehouseseed investments, which may decrease the liquidity available for other parts of our business. If a new strategy or fund does not develop as anticipated and suchinvestments 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 in 2014. We havealso made minority investments in hedge fund managers, and we have entered into joint ventures with third parties to participate in new real estate investmentstrategies. On December 11, 2017, we entered into an agreement with FS Investments to form a strategic BDC partnership that will, subject to stockholderapprovals and the satisfaction of certain other closing conditions, provide investment advisory services to CCT, CCT II and four BDCs that are currently sponsoredby FS Investments. To the extent we make strategic investments or acquisitions, undertake other strategic initiatives or enter into a new line of business, we willface numerous 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;•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; and46Table of Contents•regulatory scrutiny or litigation exposure due to the activities of the strategic manager partners 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; the expected results will not be achieved; newstrategies are not appropriately planned for or integrated into the firm; the new strategies may conflict, detract from or compete against our existing businesses; theinvestment process, controls and procedures that we have developed around our existing platform will prove insufficient or inadequate; or our information systemsand technology, including related security systems, may prove to be inadequate. We have also entered into strategic investor partnerships and establishedseparately 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 and litigation costs. We may also incur significant charges in connection with such investments,which ultimately may result in significant losses and costs. Such losses could adversely impact our business, results of operations and financial condition, as wellas harm 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 materially and 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. We have used our balance sheet assets to underwrite loans, securities or other financial instruments,which we generally expect to syndicate to third parties. We also entered into an arrangement with a third party that reduces our risk associated with holding unsoldsecurities when underwriting certain debt transactions, which enables our capital markets business to underwrite a larger amount. To the extent that we are unableto syndicate our commitments to third parties or our risk reduction arrangement does not fully perform as anticipated, we may be required to sell such investmentsat a significant loss or hold them indefinitely. If we are required to retain investments on our balance sheet for an extended period of time, our results would bedirectly impacted by the performance of such investments and it would also impair our capital markets business' ability to complete additional transactions, eitherof which could materially and adversely affect our business, results of operations and financial condition.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 assets and generating returns on this capital will depend among other things on theavailability of suitable opportunities after giving priority in investment opportunities to our advised investment funds, the level of competition from othercompanies that may have greater financial resources and our ability to value potential development or acquisition opportunities accurately and negotiate acceptableterms for those opportunities. To the extent we are unsuccessful in deploying our balance sheet assets, our business and financial results may suffer. In addition, asour balance sheet assets have been a significant source of capital for new strategies, to the extent that such strategies are not successful or our balance sheet assetscease to provide adequate liquidity, we would be limited in our ability to seed new businesses or support our existing business as effectively as contemplated. See"—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."47Table of ContentsExtensive 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 materially and 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 governmentagencies and self-regulatory organizations, are empowered to impose fines, suspensions of personnel or other sanctions, including censure, the issuance of cease-and-desist orders or the suspension or expulsion of applicable licenses and memberships. Any of the foregoing may damage our relationships with existing fundinvestors, impair our ability to raise capital for successor funds, impair our ability to carry out certain investment strategies, or 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 and adversely affect our business, results of operations and financial condition.In recent years, 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, particularlyco-investment opportunities, and disclosures to fund investors. In recent years, the SEC's focus areas included, among others, the acceleration of monitoring fees,the allocation of broken-deal expenses, the disclosure, use and compensation of operating partners or consultants, outside business activities of firm principals andemployees, group purchasing arrangements, disclosure of affiliated service providers, general conflicts of interest disclosures, cyber-security, data privacy andprotection, foreign bribery and corruption, and policies covering insider trading, business continuity and transition planning. While it is unclear whether the SECwill continue its pursuit of these or other focus areas, the SEC's examination and enforcement program continues generally to focus on the alternative investmentmanagement industry in which we operate.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 results of operations, financial condition, 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 law, regulation, initiatives or regulatory guidance could negatively impact our funds and us in a number of ways, including: increasing our costs and the costfor our funds of investing, borrowing, hedging or operating; increasing the funds' or our regulatory operating costs; imposing additional burdens on the funds' orour staff; and potentially requiring the disclosure of sensitive information. In addition, we may be materially and adversely affected by changes in the interpretationor enforcement of existing laws and rules by these governmental authorities and self-regulatory organizations. New laws, regulations, initiatives or regulatoryguidance could make compliance more difficult or more expensive, affect the manner in which we conduct business and divert significant management andoperational resources and attention from our business. Moreover, an increase in regulatory investigations and new or enhanced reporting requirements of thetrading and other investment activities of alternative investment management funds and firms, including our funds and us, is possible. Such investigations andreporting requirements could impose additional expenses on us, require the attention of senior management, increase the complexity of managing our business, orresult in fines or other sanctions if we or any of our funds are deemed to have violated any law or regulations.Recent and Potential Regulatory Changes in the United States. In recent years, there have been a number of changes in the regulatory framework applicableto our business, including those required under the Dodd-Frank Act. These changes have, among other things: increased regulatory scrutiny of our industry;increased our recordkeeping, reporting and disclosure requirements; and placed restrictions on the growth or type of activities certain financial institutions maypursue. In addition, under the prior administration, regulatory agencies proposed several regulations that, if adopted as proposed, may increase our compliancecosts and affect our profitability in various ways. Although the current administration is not presently pursuing all of these proposed regulatory actions, it or futureadministrations could redirect their attention to these or other areas at any time. We discuss below several recent or potential regulatory changes that may furtherimpact our business. Financial Stability Oversight Council ("FSOC"). Established under the Dodd-Frank Act, the FSOC is an inter-agency body charged with, among other things,designating systemically important nonbank financial companies for heightened prudential supervision and making recommendations regarding the imposition ofenhanced regulatory standards regarding48Table of Contentscapital, leverage, conflicts and other requirements for financial firms deemed to pose a systemic threat to U.S. financial stability. The FSOC applies a three-stagereview process to determine whether to designate a nonbank financial company as systemically important, with the level of scrutiny increasing at each stage.During the first stage, the FSOC applies a broad set of uniform quantitative metrics to identify nonbank financial companies that warrant additional review. In thisfirst stage, 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 ("CDS") 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 meets both theasset 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 total consolidated assets asof December 31, 2017 (as currently measured by the FSOC) and we believe we do not currently meet any of the Stage 1 criteria outlined above, those criteria aswell as our business 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. Under the prior administration, FSOC focused on potential systemic risks arisingfrom asset management products and activities. It is unclear whether, under the current administration, the FSOC will continue to focus on this area. If the FSOCwere to determine that we were a systemically important nonbank financial company, we would become subject to supervision by the U.S. Federal Reserve and aheightened degree of regulation, including more stringent standards relating to capital, leverage, liquidity, risk management, resolution planning, credit exposurereporting and concentration limits, restrictions on acquisitions, and annual stress testing by the U.S. Federal Reserve. There can be no assurance that nonbankfinancial firms such as us will not become subject to the aforementioned restrictions or other requirements for financial firms deemed to be systemically importantto the financial stability of the U.S. economy.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 November 16, 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 products and activities.According to the notice and statement, the FSOC has not made any final determination regarding the existence or nature of any potential risks to financial stabilityposed by the asset management industry.Regulation of Swaps. As mandated by the Dodd-Frank Act, the Commodity Futures Trading Commission (the "CFTC") has proposed or adopted a seriesof rules to establish a comprehensive new regulatory framework for swaps. Under Title VII of the Dodd-Frank Act, the CFTC has assumed regulatory authorityover many types of swaps. As a result:•Operating pooled funds that trade swaps, or providing investment advice to clients that trade swaps is a basis for registration with the CFTC, absent anapplicable exemption. Although not mandated by the Dodd-Frank Act, the CFTC in 2012 issued a final rule that rescinded an exemption from CFTCregistration for commodity pool operators in connection with privately offered funds. Operating our funds in a manner consistent with one or moreexemptions from registration with the CFTC may limit the activities of certain of our funds, and monitoring and analysis of these exemptions requiresmanagement and operational resources and attention. Registration with the CFTC, if required, could impact our operations and add additional costsassociated 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 swaps and CDS, the CFTC may mandate central execution and clearing with respect to additional classes of swaps in the future.•CFTC regulations employ quantitative tests and thresholds to determine whether entities are "swap dealers" or "major swap participants" that mustregister 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. On the same day, the CFTC finalized rules that require commonly owned and commonly controlled accounts and entities toaggregate positions, absent an exemption, for position limit purposes. While these final aggregation rules currently apply only to agricultural products forCFTC purposes, the CFTC may expand them to cover oil and gas and other commodities, which could materially and adversely impact our private equityand energy funds. Moreover, the futures exchanges already apply similar aggregation rules to trading in oil, gas and other commodity futures. If theproposed position49Table of Contentslimits rules are adopted in substantially the form proposed and if the final aggregation rules are applied in a way such that we do not qualify for anexemption, we could be required to aggregate the positions of our various investment funds and the positions of our portfolio companies for which wecontrol trading, which in turn may require us and our portfolio companies to limit our trading activities, and impact the ability of our investment funds toinvest or remain invested in certain derivatives, or engage in otherwise profitable acquisitions in particular industries. The Dodd-Frank Act also requiresthe SEC to establish position limits on security-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. These requirements could increase the cost of trading in the derivative markets, which could inturn make it more expensive and difficult for us or our funds to enter into swaps and other derivatives in the normal course of our business and reduce theeffectiveness of the funds' and our investment strategies. In certain cases, using non-deliverable forward transactions to hedge non-deliverable currenciessuch as the Indian rupee, South Korean won, Malaysian ringgit and Indonesian rupiah may be cost prohibitive or impractical to execute, because of themargin requirements or capital reserve required to be held against potential derivative liabilities. These rules could also adversely impact liquidity inderivatives markets, which could expose our funds and us to greater risks and reduce hedging opportunities in connection with their trading activities.Variation margin requirements for uncleared swaps became effective in 2017, and initial margin requirements for uncleared swaps are expected to bephased in through 2020, depending on the aggregate notional amount of over-the-counter swaps traded by the funds and us.•In September 2016, the U.S. Federal Reserve issued for public comment a proposed rule that, if adopted as proposed, would impose significant capitaland other prudential requirements on the physical commodities activities of certain banking organizations. The implementation of these or other newregulations could increase the cost of trading in the commodities and derivative markets, which could in turn make it more expensive and difficult for usor our funds to enter into swaps and other derivatives in the normal course of our business. Moreover, these increased regulatory responsibilities andincreased costs could reduce trading levels in the commodities and derivative markets by a number of market participants, which could in turn adverselyimpact liquidity in the markets and expose our funds to greater risks in connection with their trading activities.Asset-Backed Securities Risk Retention Requirement. Rules adopted by the SEC and federal banking and housing agencies implementing the Dodd-FrankAct's five percent risk retention requirement for originators of asset-backed securities became fully effective on December 24, 2016. The risk retention rulesrequire a "securitizer" or "sponsor" (which, in the case of a CLO, is considered the collateral manager) to retain directly or through a majority-owned affiliate, atleast 5% of the credit risk of the securitized assets. These rules could materially and adversely affect the profitability of our CLO activities and may adverselyaffect the leveraged loan market generally, including the primary or secondary market for CLO securities, including the level of liquidity and trading of CLOsecurities, which in turn could materially and adversely affect our CLO management business. In addition, certain of our affiliates have been required to executeagreements agreeing to certain undertakings intended to ensure that the CLOs comply with the risk retention rules. In the event one of our affiliates breaches one ormore of such undertakings, we or such affiliates could be exposed to claims by the other parties, including for any losses incurred as a result of such breach. OnFebruary 9, 2018, The U.S. Court of Appeals for the District of Columbia ruled that CLO managers of open-market CLOs are not subject to the risk retentionrequirement; however, the decision is subject to further judicial review if federal agencies decide to seek rehearing in court. The implications on our CLO businessare unclear, given the near- and long-term uncertainty regarding the validity of the rule.Other Regulations under the Dodd-Frank Act. The Dodd-Frank Act amended the Exchange Act to compensate and protect whistleblowers whovoluntarily provide original information to the SEC and establishes a fund to be used to pay whistleblowers who will be entitled to receive a payment equal tobetween 10% and 30% of certain monetary sanctions imposed in a successful government action resulting from the information provided by the whistleblower. Inaddition, in October 2011, the SEC adopted a rule requiring certain advisers to private funds to periodically file reports on Form PF, as required under the Dodd-Frank Act. Large private fund advisers including advisers with at least $1.5 billion in assets under management attributable to hedge funds and advisers with atleast $2 billion in assets under management attributable to private equity funds are subject to more detailed and in certain cases more frequent reportingrequirements. The information is to be used by the FSOC in monitoring risks to the U.S. financial system. These regulations increase our compliance costs andcould result in adverse regulatory actions against us.Although it is possible that Congress or the current administration could modify and relax regulatory requirements and restrictions that were adopted inresponse to the financial crisis, the timing and scope of such modifications remain uncertain and may not materialize.50Table of ContentsEU-Wide Regulations. The EU Alternative Investment Fund Managers Directive (the "AIFMD") entered into effect on July 22, 2013. The AIFMD establishesa comprehensive regulatory and supervisory framework for alternative investment fund managers ("AIFMs") managing or marketing alternative investment funds("AIFs") in the European Union. The AIFMD imposes various substantive requirements on authorized AIFMs including rules on the structure of remuneration forcertain personnel that are similar to those applicable under CRD III and IV (each as defined below), a threshold for regulatory capital, an obligation to appoint adepositary, reporting obligations in respect of controlled EU portfolio companies and increased transparency towards investors and regulators and allowsauthorized AIFMs to market AIFs to professional investors throughout the European Union under an "EU passport." The EU passport is not currently available tonon-EU AIFMs or to EU AIFMs marketing non-EU AIFs, thereby restricting those persons to marketing under the national private placement regimes of EUMember States.Although a subsidiary of ours is registered as an AIFM with the Central Bank of Ireland, we may not be able to benefit from the EU marketing passport underthe AIFMD for all of our funds, and the EU marketing passport may not apply to marketing to investors in the United Kingdom when its withdrawal from theEuropean Union becomes effective. See "—Brexit" below. The AIFMD, Commission Delegated Regulation (EU) No 231/2013 and EU Member Stateimplementing measures could have a material adverse effect on our businesses by, among other things, (i) imposing disclosure obligations and restrictions ondistributions by EU portfolio companies of the funds we manage, (ii) potentially requiring changes in our compensation structures for key personnel, therebypotentially affecting our ability to recruit and retain these personnel, (iii) increasing the cost and complexity of raising capital for our funds, which may slow thepace of fundraising, and (iv) generally increasing our compliance costs. In addition, there are areas of the AIFMD that are subject to legal uncertainty, includingthe scope of the legal structures qualifying as AIFs whose management and marketing requires authorization, and failure to comply even in areas where there islegal uncertainty can result in enforcement action, including, but not limited to, fines.The AIFMD is currently subject to a legislative review by the European Commission. The outcome of that review is expected during the course of 2018 and itis not currently clear what changes to the AIFMD, if any, may be implemented and what impact any such changes would have on our business.In July 2014, revisions to the Markets in Financial Instruments Directive (known as "MiFID I"), consisting of the revised directive, "MiFID II," and a newrelated regulation, "MiFIR," came into force. MiFID II and MiFIR apply to our operations from January 2018. MiFID II and MiFIR further enhance the EUregulatory framework for the provision of investment services and trading in financial instruments by introducing a number of requirements in regards totransaction reporting, transparency, market infrastructure, securities and derivatives trading, and conduct of business rules, including new harmonized rules forauthorization of EU branches of third-country firms seeking to provide certain investment services in the European Union. The application of MiFID II and MiFIRwill result in new regulatory burdens on a number of our subsidiaries, which could result in increased costs, and any failure to comply with the new requirements,even in areas where there is legal uncertainty, could result in enforcement action, including, but not limited to, fines.In the European Union, credit institutions and certain investment firms are subject to the provisions of the Capital Requirements Directive IV ("CRD IV") andthe Capital Requirements Regulation. These pieces of legislation implement the capital and liquidity standards promulgated by the Basel Committee on BankingSupervision (commonly referred to as "Basel III"), and impose various governance and remuneration obligations. CRD IV has enhanced our financial reportingobligations and subjected us to new reporting requirements, which increases costs and the risk of non-compliance. Compliance with Basel III may result insignificant costs to banking organizations, which, in turn, could result in higher borrowing costs for us and our portfolio companies, and may reduce access tocertain types of credit.Two of our subsidiaries (established in the UK and Ireland) are subject to the remuneration-related requirements of CRD IV, as well as similar requirementsunder the AIFMD. Additionally, the European Banking Authority has published final guidelines on sound remuneration policies under CRD IV which set out therequirements for remuneration policies, group application and proportionality, along with criteria for the allocation of remuneration as fixed and variable anddetails on the disclosures required under the Capital Requirements Regulation. These measures required changes in our compensation structures for key personnel,thereby potentially affecting these subsidiaries' ability to recruit and retain these personnel.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 guidelines on leveraged lending, proposed in November 2016 and modeled on U.S. leveraged lending guidelines.51Table of ContentsCRD IV and the Capital Requirements Regulation are in the process of being amended, and while the amended measures are likely to impact our business insimilar ways to those described above, the extent of that impact cannot yet be determined.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 European Union, and may insome circumstances apply to transactions between two non-EU counterparties where these contracts have a direct, substantial and foreseeable effect within theEuropean Union. The European Commission adopted an equivalence decision for the United States in March 2016. However, ongoing regulatory uncertaintyregarding the interaction between U.S. and EU requirements for central clearing and related activities could result in duplicative regulatory obligations in the twojurisdictions and could increase our costs of compliance. The implementation of any new regulations could increase the cost of trading in the commodities andderivative markets, 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 ofour business. Moreover, these increased regulatory responsibilities and increased costs could reduce trading levels in the commodities and derivative markets by anumber of market participants, which could in turn adversely impact liquidity in the markets and expose our funds to greater risks in connection with their tradingactivities.A number of other EU financial regulatory initiatives have the potential to materially and adversely affect our business. Future acquisitions by KKR or ourfunds could lead to application of the European Union's Financial Conglomerates Directive, which introduced a prudential regime for financial conglomerates toaddress perceived risks associated with large cross-sector businesses, and could increase the costs of investing in insurance companies and banks in the EuropeanUnion. Other recent EU financial regulatory initiatives such as the Short Selling Regulation, which limits naked short selling of sovereign bonds and stocks, theBank Recovery and Resolution Directive, which established a recovery and resolution framework for EU credit institutions and investment firms, and a newregulation on reporting and transparency of securities financing transactions, which requires all such transactions to be reported to trade repositories, placesadditional reporting requirements on investment managers and introduces prior risk disclosures and written consent before assets are rehypothecated, may allimpact the complexity and cost of conducting our business in the European Union. The European Union has adopted, and may in the future adopt, additional riskretention and 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.In 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 materially and adversely affect our business.Brexit. On March 29, 2017, the government of the United Kingdom made a formal notification to the European Council under Article 50 of the Treaty of theEuropean Union, which triggered a two-year period during which the terms of the United Kingdom's exit from the European Union, commonly known as "Brexit,"will be negotiated. The final terms of the United Kingdom's exit from the European Union are, and will remain for the immediate future, unclear, and the resultinglegal and regulatory uncertainty may impact our business in a number of ways, not all of which are currently readily apparent. Such uncertainty may adverselyaffect the valuation of our investments that are located in United Kingdom, or those that conduct business in or derive revenues from, the United Kingdom.Following the Brexit, certain of our entities authorized and regulated by the Financial Conduct Authority may no longer be able to avail themselves of passportingrights to provide services in other EU Member States under various pieces of EU legislation, while our Central Bank of Ireland-authorized AIFM may no longerbenefit from the EU marketing passport to market products to investors in the United Kingdom. These changes may increase the cost of raising capital,underwriting and distributing securities and conducting business generally and interfere with our ability to market our products and provide our services. Changesin regulation may also impair our ability to recruit, retain and motivate new employees and retain key employees. The United Kingdom's exit could also lead toinstability in the European Union, including potential withdrawal by other Member States, which would greatly amplify the adverse events described in thisparagraph. Other Regulations of the Financial Markets. Certain requirements imposed by regulators are designed primarily to ensure the integrity of the financialmarkets and are not designed to protect holders of interests in our business or our funds. Consequently, these regulations often serve to limit our activities. Inaddition to many of the regulations and proposed regulations described above under "—Recent and Potential Regulatory Changes in the United States" and "—EU-Wide52Table of ContentsRegulations," U.S. federal bank regulatory agencies and the European Central Bank have issued leveraged lending guidance covering transactions characterized bya degree of financial leverage, although in the United States, pursuant to a determination by the U.S. Government Accountability Office in October 2017 thatguidance is subject to Congressional review pursuant to the Congressional Review Act before it becomes effective. If upheld in its current form, such guidancewould limit the amount or availability of debt financing available to borrowers and may increase the cost of financing we are able to obtain for our transactions andmay cause the returns on our investments to suffer. It is unclear whether or how the Congressional review will impact the guidance in the United States.In 2016, the U.S. Department of Labor (the "DOL") issued a final rule that, among other things, expanded the definition of an "investment advice fiduciary"under U.S. Employee Retirement Income Security Act of 1974 ("ERISA") to potentially include certain investment advisers and other intermediaries whorecommend investments to employee benefit plans and individual retirement accounts as fiduciaries to such plans and accounts. The rule, if implemented as firstissued by the DOL, could potentially limit our ability to distribute our products to certain investors. On February 3, 2017, President Trump issued a memorandumasking the DOL to examine the final rule, and subsequently, the DOL delayed the applicability date to July 1, 2019 while it determines whether to revise or repealthe rule. It is impossible to predict whether the rule will be implemented in current or revised form, or at all, and if adopted, the timing of the implementation.In addition, in 2016, the SEC proposed a rule that would require registered investment advisers to adopt and implement written business continuity plans andtransition plans based upon the particular risks associated with the individual adviser's operations and address several specified factors. Under the currentadministration, there is some uncertainty as to whether the proposed rule will be adopted as proposed or at all. While it remains to be seen what the final rule, ifadopted, will require, compliance with such a rule may impose additional costs on us.Certain of the funds we manage that engage in originating, lending and/or servicing loans, may consider investments that would subject us to state and federalregulation, borrower disclosure requirements, limits on fees and interest rates on some loans, state lender licensing requirements and other regulatory requirementsin the conduct of their business. If our funds make these investments, they may also be subject to consumer disclosures and substantive requirements on consumerloan terms and other federal regulatory requirements applicable to consumer lending that are administered by the Consumer Financial Protection Bureau. Thesestate 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 ultimately on usPortfolio Company Legal and Regulatory Environment. We are subject to certain laws, such as certain environmental laws, takeover laws, anti-bribery, anti-money laundering and anti-corruption laws, escheat or abandoned property laws, antitrust laws and data privacy and data protection laws that may imposerequirements on us and our portfolio companies as an affiliated group. As a result, we could become jointly and severally liable for all or part of fines imposed onour portfolio companies or be fined directly for violations committed by portfolio companies, and such fines imposed directly on us could be greater than thoseimposed on the portfolio company. Moreover, portfolio companies may seek to hold us responsible if any fine imposed on them is increased because of theirmembership in a larger group of affiliated companies. For example, on April 2, 2014, the European Commission announced that it had fined 11 producers ofunderground and submarine high voltage power cables a total of 302 million euro for participation in a ten-year market and customer sharing cartel. Fines werealso 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 to commit significant resources and capital towards information gathering and monitoring therebyincreasing our operating costs. For example, because we may indirectly hold voting securities in public utilities subject to regulation by the Federal EnergyRegulatory Commission ("FERC"), including entities that may hold FERC authorization to charge market-based rates for sales of wholesale power and energy, wemay be subject to certain FERC regulations, including regulations requiring us and our portfolio companies to collect, report and keep updated substantialinformation concerning our ownership of such voting interests and voting interests in other related energy companies, corporate officers, and our direct and indirectinvestment in such utilities and related companies. Such rules may subject our portfolio companies and us to costly and burdensome data collection and reportingrequirements.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 ("CERCLA"), also referred to as the "Superfund,"53Table of Contentsrequires cleanup of sites from which there has been a release or threatened release of hazardous substances, and authorizes the U.S. Environmental ProtectionAgency to take any necessary response action at Superfund sites, including ordering potentially responsible parties liable for the release to pay for such actions.Potentially responsible parties are broadly defined under CERCLA and could include us.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 SunCapital portfolio company. While neither fund held more than an 80% ownership interest of the portfolio company, the percentage required under existingregulations to find 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 andseverally liable 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 ourinvestment funds could be held liable under ERISA for certain pension obligations of portfolio companies. In addition, if the rationale of this decision wereexpanded to apply also for U.S. federal income tax purposes, then certain of our investors could be subject to increased U.S. income tax liability or filingobligations in certain contexts.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 ERISA in conducting our investment management activities. These exemptions are sometimes highly complex and may in certaincircumstances depend on compliance by third parties whom we do not control. If for any reason these exemptions were to become unavailable to us, we couldbecome subject to additional restrictive and costly registration requirements, regulatory action or third-party claims and our business could be materially andadversely affected. For example, in raising new funds, we typically rely on private placement exemptions from registration under the Securities Act, including Rule506 of Regulation D. However, Rule 506 becomes unavailable to issuers (including our funds) if the issuer or any of its "covered persons" (certain officers anddirectors and also certain third parties including, among others, promoters, placement agents and beneficial owners of 20% of outstanding voting securities of theissuer) has been the subject of a "disqualifying event," which includes a variety of criminal, regulatory and civil matters (so-called "bad actor" disqualification). Ifour funds or any of the covered persons associated with our funds is subject to a disqualifying event, one or more of our funds could lose the ability to raise capitalin a Rule 506 private offering for a significant period of time, which could significantly impair our ability to raise new funds, and, therefore, could materially andadversely affect our business, results of operations and financial condition. In addition, if certain of our employees or any potential significant investor has been thesubject of a disqualifying event, we could be required to reassign or terminate such an employee or we could be required to refuse the investment of such aninvestor, which could impair our relationships with investors, harm our reputation or make it more difficult to raise new funds. See "—Risks Related to OurOrganizational Structure—If we were deemed to be an 'investment company' subject to regulation under the Investment Company Act, applicable restrictions couldmake it impractical for us to continue our business as contemplated and could have a material 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 currently serves as their investment adviser (or in the case of CCT II, as its sub-adviser), aresubject to the Investment Company Act and the rules thereunder, which, among other things, regulate the relationship between a registered investment company (orBDC) and its investment adviser and prohibit or severely restrict principal transactions and joint transactions. As our business expands we may be required to makeadditional registrations under the Investment Company Act or similar laws, including in jurisdictions outside the United States. Compliance with these rules willincrease our compliance costs and create potential for additional liabilities and penalties the management of which would divert management's attention from ourbusiness and investments.54Table of ContentsRule 206(4)-5 under the Investment Advisers Act regulates "pay to play" practices by investment advisers involving campaign contributions and otherpayments to elected officials or candidates for political office who are able to exert influence on government clients. Among other restrictions, the rule prohibitsinvestment advisers from providing advisory services for compensation to a government client for two years, subject to very limited exceptions, after theinvestment adviser, its senior executives or its personnel involved in soliciting investments from government entities make contributions to certain candidates andofficials in position to influence the hiring of an investment adviser by such government client. Advisers are required to implement compliance policies designed,among other matters, to track contributions by certain of the adviser's employees and engagements of third parties that solicit government entities and to keepcertain records in order to enable the SEC to determine compliance with the rule. There has also been similar rule-making on a state-level regarding "pay to play"practices by investment advisers, including in California and New York. FINRA has released its own set of "pay to play" regulations that effectively prohibit thereceipt of compensation from state or local government agencies for solicitation and distribution activities within two years of a prohibited contribution by abroker-dealer or one of its covered associates. Any failure on our part to comply with these rules could cause us to lose compensation for our advisory services orexpose us to significant penalties and reputational damage.Federal, state and foreign anti-corruption and sanctions laws applicable to us and our portfolio companies create the potential for significant liabilities andpenalties and reputational harm .We are 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 ("FCPA"), as well as trade sanctions and export control laws administered by the Office of Foreign Assets Control("OFAC"), the U.S. Department of Commerce and the U.S. Department of State. The FCPA is intended to prohibit bribery of foreign governments and theirofficials and 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,including economic and trade sanctions based on U.S. foreign policy and national security goals against targeted foreign states, organizations and individuals.These laws and regulations relate to a number of aspects of our business, including servicing existing fund investors, finding new fund investors, and sourcing newinvestments, as well 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 ("ITRA") expanded the scope of U.S. sanctions against Iran require public reportingcompanies to disclose in their annual or quarterly reports certain dealings or transactions the company or its affiliates "knowingly" engaged in during the previousreporting period involving Iran or other individuals and entities targeted by certain OFAC sanctions. In some cases, ITRA requires companies to disclose thesetypes of dealings or transactions even if they are permissible under U.S. law or are conducted outside of the United States by a foreign affiliate. If any suchactivities are disclosed in a periodic report, we are required to separately file, concurrently with such report, a notice of such disclosure. The SEC is required topost this notice 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 toinitiate an investigation and, within 180 days of initiating such an investigation, to determine whether sanctions should be imposed. Disclosure of such activity,even if such activity is not subject to sanctions under applicable law, and any sanctions actually imposed on us or our affiliates as a result of these activities, couldharm 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 United States 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 coststo comply 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, reputational harm, incarceration of our employees,restrictions on our operations and other liabilities, which could materially and adversely affect our business, results of operations and financial condition. Inaddition, we may be subject to successor liability for FCPA violations or other acts of bribery, or violations of applicable sanctions or other export control lawscommitted 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 our funds, holders ofour or our portfolio companies' debt or equity, and a variety of other potential litigants. See the section entitled "Litigation" appearing in Note 18 "Commitmentsand55Table of ContentsContingencies" to our consolidated financial statements included elsewhere in this report. For example, we, our funds and certain of our employees are eachexposed to the risks of litigation relating to investment activities of our funds and actions taken by the officers and directors (some of whom may be KKRemployees) of portfolio companies, such as lawsuits by other shareholders of our public portfolio companies or holders of debt instruments of companies in whichour funds have significant investments. We are also exposed to risks of litigation, investigation or negative publicity in the event of any transactions that arealleged not to have been properly considered and approved under applicable law.Although investors in our funds do not have legal remedies against us, the general partners of our funds, our funds, our employees or our affiliates solely basedon their dissatisfaction with the investment performance of those funds, such investor may have remedies against us, the general partners of our funds, our funds,our employees or our affiliates to the extent any losses result from fraud, negligence, willful misconduct or other similar misconduct. While the general partnersand investment advisers to our investment funds, including their directors, officers, employees and affiliates, are generally indemnified to the fullest extentpermitted by law with respect to their conduct in connection with the management of the business and affairs of our investment funds, such indemnity generallydoes 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 materially andadversely affect our business, results of operations and financial condition 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.With a workforce composed of many highly-paid professionals, we face the risk of litigation relating to claims for compensation or other damages, whichmay, individually or in the aggregate, be significant in amount. The cost of settling any such claims could negatively impact our business, results of operations andfinancial condition.Certain types of investment vehicles may subject us to additional risk of litigation and regulatory scrutiny.We have formed and may continue to form investment vehicles seeking investment from retail investors, which may subject us to additional risk of litigationand regulatory scrutiny. See "—Extensive regulation of our businesses affects our activities and creates the potential for significant liabilities and penalties. Thepossibility of increased regulatory focus or legislative or regulatory changes could materially and adversely affect our business." We have and expect to continue todistribute products through new channels, including through unaffiliated firms, and we may not be able to effectively monitor or control the manner of theirdistribution, which could result in litigation against us, including with respect to, among other things, claims that products distributed through such channels aredistributed to customers for whom they are unsuitable or distributed in any other inappropriate manner. The distribution of products through new channels whetherdirectly or through market intermediaries, including in the retail channel, could expose us to additional regulatory risk in the form of allegations of improperconduct and/or actions by state and federal regulators against us with respect to, among other things, product suitability, conflicts of interest and the adequacy ofdisclosure to customers to whom our products are distributed through those channels.In addition, investment adviser subsidiaries of KKR externally manage a number of publicly traded permanent capital vehicles, including KREF (a REIT listedon the NYSE), CCT (a BDC listed on the NYSE) and KKR Income Opportunities Fund (a closed-end management investment company). We may enter into newinvestment management agreements with other publicly traded permanent capital vehicles in the future. Publicly traded permanent capital vehicles allow us toinvest in longer-term strategies and secure stable fee streams, while providing liquidity to such vehicle's equity investors. However, these vehicles are subject to theheightened regulatory requirements applicable to public companies, including compliance with the laws and regulations of the SEC, the Exchange Act, theSarbanes-Oxley Act of 2002 and the national securities exchanges on which their securities are listed, among others. These requirements will place increaseddemands on senior employees, require administrative, operational and accounting resources, and incur significant expenses. Failure to comply with theserequirements could result in a civil lawsuit, regulatory penalties, enforcement actions, or potentially lead to suspension of trading or de-listing from an exchange.Furthermore, if the shareholders of these vehicles were to be dissatisfied with the investment performance or disagree with investment strategies employed by us,they may seek to cause the board of directors of the relevant vehicle to terminate the investment management agreement with us or change the terms of suchagreement in a manner that is less favorable to us. As publicly traded entities, these permanent capital vehicles also face additional litigation risk,56Table of Contentsincluding class actions and other shareholder lawsuits, which would distract senior employees, including investment professionals.Misconduct of our employees, consultants or sub-contractors or by our portfolio companies could harm us by impairing our ability to attract and retain clientsand subjecting us to significant legal liability and reputational harm.There is a risk that our employees, consultants or sub-contractors could engage in misconduct that adversely affects our business. We are subject to a numberof obligations and standards arising from our business and our authority over the assets we manage. The violation of these obligations and standards by any of ouremployees, consultants or sub-contractors would adversely affect our clients and us. We may also be adversely affected if there is misconduct by seniormanagement of portfolio companies in which we invest, even though we may be unable to control or mitigate such misconduct. Such misconduct may alsonegatively affect the valuation of the investments in such portfolio companies. Our current and former employees, consultants or sub-contractors and those of ourportfolio companies may also become subject to allegations of sexual harassment, racial and gender discrimination or other similar misconduct, which, regardlessof the ultimate outcome, may result in adverse publicity that could significantly harm our and such portfolio company's brand and reputation. Furthermore, ourbusiness often requires that we deal with confidential matters of great significance to companies in which we may invest. If our employees, consultants 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 or investigation. It is not always possible to detect or deter such misconduct, and theprecautions we take may not be effective in all cases. If any of our employees, consultants or 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 materially and adversely affected.Underwriting, syndicating and securities placement activities expose us to risks.KKR Capital Markets LLC and our other broker-dealer subsidiaries may act as an underwriter, syndicator or placement agent in securities offerings and,through affiliated entities, loan syndications. We may incur losses and be subject to reputational harm to the extent that, for any reason, we are unable to sellsecurities or indebtedness we purchased or placed as an underwriter, syndicator or placement agent at the anticipated price levels or at all. As an underwriter,syndicator or placement agent, we also may be subject to potential liability for material misstatements or omissions in prospectuses and other offering documentsrelating to offerings we underwrite, syndicate or place. In certain situations, our broker-dealer subsidiaries may have liabilities arising from transactions in whichour investment fund may participate 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 third-party service providers, including prime brokers, custodians, administrators and other agents.Certain of our investment funds and our principal trading activities depend on the services of third-party service providers, including prime brokers,custodians, administrators and other agents, to carry out administrative or other services, including valuations, securities transactions, tax preparation andgovernment filings. We are subject to risks of errors and mistakes made by these third parties, which may be attributed to us and subject us or our fund investors toreputational damage, penalties or losses. We may be unsuccessful in seeking reimbursement or indemnification from these third-party service providers.Furthermore, 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 rankamong the prime broker's and custodian's unsecured creditors in relation to assets that the prime broker or custodian borrows, lends or otherwise uses. In addition,our and our 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 mayrank as unsecured creditors in relation to that cash. The inability to recover assets from the prime broker or custodian could have a material adverse impact on theperformance of our funds and our business, results of operations and financial condition. Counterparties have generally reacted to recent market volatility bytightening their underwriting standards and increasing their margin requirements for all categories of financing, which has the result of decreasing the overallamount of leverage available and increasing the costs of borrowing. Many of our funds have credit lines, and if a lender under one or more of these credit lineswere to become insolvent, 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 largemarket participant could lead to significant liquidity problems for other market participants, which may in turn expose us to significant losses. We may notaccurately anticipate the impact of market stress or counterparty financial condition, and as a result, we may not have taken sufficient action to reduce these riskseffectively, which, if left unmitigated, could have a material adverse effect on our business, results of operations and financial condition.57Table of ContentsRisks 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 investments of these funds are subject to many risks and uncertainties which, to theextent they are material, are discussed below. In addition, we have investments on our balance sheet, which we manage for our own behalf. These risks, as theyapply to our balance sheet investments, may have a greater impact on our results of operations and financial conditions as we directly bear the full risk of ourbalance sheet investments. As a result, the gains and losses on such assets are reflected in our net income and the risks set forth below relating to the assets that wemanage 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 or our balance sheet investments, of our future results or the performance of 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 our funds or our balance sheet investments. Inparticular, the future results may differ significantly from their historical results for the following reasons, among others:•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; those trends and rates of return may not be repeated in the future as the actual or expected length of holding periods related toinvestments is likely longer than such historical periods;•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—Difficultmarket and economic conditions can adversely affect our business in many ways, including by reducing the value or performance of the investments that wemanage 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 affectour financial prospects and condition."58Table 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, and in certain cases may utilize the services of independentvaluation firms. Credit investments are valued using values obtained from dealers or market makers, and where these values are not available, credit investmentsare valued by us based on ranges of valuations determined by an independent valuation firm.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 ("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.59Table of ContentsOur investments are impacted by various economic conditions that are difficult to quantify or predict, which may have a significant impact on the valuation ofour investments and, therefore, on the investment income we realize and our results of operations and financial condition.Our investments are impacted by various economic conditions that are difficult to quantify or predict, which may have a significant impact on the valuation ofour investments and, therefore, on the investment income we realize and our results of operations and financial condition. For example:•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 periodof time, which can further expose us to volatility risk. In addition, the receptivity of equity markets to initial public offerings, 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 our strategic manager partnerships with third-party hedge fund managers by influencing the level or pace ofsubscriptions or redemptions from the funds managed by our partners.•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. Forexample, 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 extentunhedged.•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 investments generally increase or decrease with the increase or decrease, respectively, of energy commodity prices and inparticular with long-term forecasts for such energy commodity prices. Given our investments in oil and gas companies and assets, the value of thisportfolio and the investment income we realize is sensitive to oil and gas prices. The volatility of commodity prices also makes it difficult to predictcommodity price movements. Apart from our energy investments, a number of our other investments may be dependent to varying degrees on the energysector through, for example, the provision of equipment and services used in energy exploration and production. These companies may benefit from anincrease 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 change60Table of Contentssignificantly. See "Management's Discussion and Analysis of Financial Condition 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 market andeconomic 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 financialprospects and condition."Dependence 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 and the European Central Bank haveissued leveraged lending guidance covering transactions characterized by a degree of financial leverage. Such guidance limits the amount or availability of debtfinancing and may increase the cost of financing we are able to obtain for our transactions and may cause the returns on our investments to suffer.In addition, the 2017 Tax Act has limited the tax deductibility of interest, which could have a material adverse effects on us. See "—Risks Related to U.S.Taxation—Comprehensive U.S. federal income tax reform tax legislation became effective in 2018, which could have a material effect on us."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 the globalfinancial crisis in 2008 and 2009 would make it more expensive to finance those investments. In addition, increases in interest rates could decrease the value offixed-rate debt investments that our balance sheet assets, finance vehicles or our funds make. Increases in interest rates could also make it more difficult to locateand consummate private equity and other investments because other potential buyers, including operating companies acting as strategic buyers, may be able to bidfor an asset at a higher price due to a lower overall cost of capital or their ability to benefit from a higher amount of cost savings following the acquisition of theasset. In addition, a portion of the indebtedness used to finance private equity investments often includes high-yield debt securities issued in the capital markets.Capital markets are volatile, and there may be times when we might not be able to access those markets at attractive rates, or at all, when completing aninvestment.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.61Table of ContentsA 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 by the lender in regards to a partial debt-write-off, be forced to putthe investment into liquidation. In addition, the 2017 Tax Act partially limits 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."When 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 (such as the global financial crisis in 2008 and 2009) are the CLO andleveraged finance markets. We have significant exposure to these markets through our CLO subsidiaries, which we principally acquired in the acquisitions of KFNand Avoca. As of December 31, 2017, we indirectly hold below investment grade corporate loans and securities with a $10.2 billion estimated fair market valuethrough our CLO subsidiaries. Each of these subsidiaries is a special purpose company that issued to us and other investors notes secured by a pool of collateralconsisting primarily of corporate leveraged loans. In most cases, our CLO holdings are deeply subordinated, representing the CLO subsidiary's substantialleverage, which increases both the opportunity for higher returns as well as the magnitude of losses when compared to holders or investors that rank more senior tous in right of payment. These loans and bonds also generally involve a higher degree of risk than investment grade rated debt, including the risks described in theparagraphs above. Our CLO subsidiaries have historically experienced an increase in downgrades, depreciations in market value and defaults in respect ofleveraged loans in their collateral during downturns in credit markets. The CLOs' portfolio profile tests set limits on the amount of discounted obligations a CLOcan 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 principal proceeds intosubstitute assets is restricted. In such circumstances, CLOs may fail certain over-collateralization tests, which would cause diversions of cash flows away from usas 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 senior notes of thosestructures is highly dependent upon the performance of the CLO collateral. If the collateral in those structures were to experience a significant decrease in cashflow 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 by holders of thesenior notes. There can be no assurance that market conditions giving rise to these types of consequences will not occur, re-occur, subsist or become more acute inthe future. Because our CLO structures involve complex collateral and other arrangements, the documentation for such structures is complex, is subject to differinginterpretations and involves legal risk. These CLOs have served as long-term, non-recourse financing for debt investments and as a way to minimize refinancingrisk, minimize maturity risk and secure a fixed cost of funds over an underlying market interest rate. An inability to continue to utilize CLOs or other similarfinancing vehicles successfully could limit our ability to fund future investments, grow our business or fully execute our business strategy and our results ofoperations may be materially and 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 CLOs could limit theirability to grow their business, reinvest principal cash, distribute cash to us or fully execute their business strategy, and our results of operations may be materiallyand adversely affected. If these subsidiaries are unable to maintain their operating results and access to capital resources, they could face substantial liquidityproblems and might be required to dispose of material assets or operations to meet debt service and other obligations. These CLO strategies and the value of theassets 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 loans do not alsoincrease, the CLO strategy is unlikely to achieve its projected returns. Also, if interest rates increase in the future, our CLO portfolio will likely experience areduction in value because it would hold assets receiving below market rates of interest.62Table of ContentsOur credit-oriented funds and CLOs may choose to use leverage as part of their respective investment programs and regularly borrow a substantial amount oftheir capital. The use of leverage poses a significant degree of risk and enhances the possibility of a significant loss in the value of the investment portfolio. A fundmay 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) withcounterparties that have embedded leverage. The interest expense and other costs incurred in connection with such borrowing may not be recovered byappreciation in the securities purchased or carried and will be lost—and the timing and magnitude of such losses may be accelerated or exacerbated—in the eventof a decline in the market value of such securities or debt obligations. Gains realized with borrowed funds may cause the fund's NAV to increase at a faster ratethan would be the case without borrowings. However, if investment results fail to cover the cost of borrowings, the fund's NAV could also decrease faster than ifthere had been no borrowings.Any of the foregoing circumstances could have a material adverse effect on our results of operations, financial condition 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, regulatory and legal issues in determining whether or not to proceed with an investment. Outside consultants,legal advisors, accountants and investment banks are involved in the due diligence process in varying degrees depending on the type of investment. Nevertheless,when conducting due diligence and making an assessment regarding an investment, we rely on resources available to us, including information provided by thetarget of the investment and, in some circumstances, third-party investigations. The due diligence process may at times be subjective with respect to newlyorganized companies 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's 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, as well as certain Private Markets investments, is limited to publicly availableinformation. Accordingly, we cannot be certain that the due diligence investigation that we will carry out with respect to any investment opportunity will reveal orhighlight all relevant facts (including fraud, bribery and other illegal activities and contingent liabilities) that may be necessary or helpful in evaluating suchinvestment opportunity, including the existence of contingent liabilities. We also cannot be certain that our due diligence investigations will result in investmentsbeing successful or that the actual financial performance of an investment will not fall short of the financial projections we used when evaluating that investment.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.63Table of ContentsMoreover, because the investment strategy of many of our funds, particularly our private equity funds, often entails 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 many 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 such times. We have made and expect to continue tomake significant capital investments in our current and future funds and other strategies. Contributing capital to these funds is risky, and we may lose some or allof 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 that 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 bribery, fraud or other deceptive practices are discovered, negativelyaffect the valuation of a fund's investments as well as contribute to overall market volatility that can negatively impact a fund's or our investmentprogram;•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's 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, which 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.64Table of ContentsOur investments in real assets such as real estate, infrastructure and energy may expose us to increased risks and liabilities and may expose our unitholders toadverse tax consequences.Investments in real assets, which may include real estate, infrastructure, oil and gas properties and other energy assets, may expose us to increased risks andliabilities that are inherent in the ownership of real assets. For example:•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, including without limitation: (i) labor disputes, shortages of material and skilled labor, or workstoppages; (ii) slower than projected construction progress and the unavailability or late delivery of necessary equipment; (iii) less than optimalcoordination with public utilities in the relocation of their facilities; (iv) adverse weather conditions and unexpected construction conditions; (v) accidentsor the breakdown or failure of construction equipment or processes; (vi) catastrophic events such as explosions, fires and terrorist activities, and othersimilar events and (vii) risks associated with holding direct or indirect interests in undeveloped land or underdeveloped real property. These risks couldresult in substantial unanticipated delays or expenses (which may exceed expected or forecasted budgets) and, under certain circumstances, could preventcompletion of construction activities once undertaken. Certain real asset investments may remain in construction phases for a prolonged period and,accordingly, may not be cash generative for a prolonged period. Recourse against the contractor may be subject to liability caps or may be subject todefault or insolvency on 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; and•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 best interestof the investment, or the breach by an operator of applicable agreements or laws, rules and regulations, could have an adverse effect on the investment'sresults of operations and financial condition. Real asset investments may involve the subcontracting of design and construction activities in respect ofprojects, and as a result our investments are subject to the risk that contractual provisions passing liabilities to a subcontractor could be ineffective, thesubcontractor fails to perform services that it has agreed to provide and in cases where a single subcontractor provides services to various investments, thesubcontractor becomes insolvent.Without limiting the foregoing risks, we note that investments that we have made and will continue to make in the oil and gas industries may present specificenvironmental, safety and other inherent risks. Such investments are subject to stringent and complex foreign, federal, state and local laws, ordinances andregulations specific to oil and gas industries, including, for example, those governing transportation, exploration and production of oil and natural gas. There arealso various conservation laws and regulations applicable to oil and natural gas production and related operations, in addition to regulations governing occupationalhealth and safety, the discharge of materials into the environment and other practices relating to environmental protection. Failure to comply with applicable laws,ordinances and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of remedial obligations and the issuance oforders enjoining some or all of our operations in affected areas. These laws, ordinances and regulations may also restrict the rate of oil and natural gas productionbelow the rate that would otherwise be possible and increase the cost of production, thereby reducing profitability. Our oil and gas investments are subject to otherrisks, such as:65Table of Contents•Volatility in the prices of oil and gas properties may make it difficult to ensure that our acquisition of interest in such properties is 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;•There may be unforeseen or increased regulatory and environmental risks stemming from 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, and materially and adversely affect our cash flows and results of operations; and•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 gas properties, which may reduce the value of our energy investments, have a negative impact on our abilityto 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 that 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 that 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 ofzoning and other regulatory or environmental approvals, the cost and timely completion of construction (including risks beyond the control of our fund,such as weather 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 followed by 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 and66Table of Contentsvoluntary bankruptcy of the borrower. It is expected that commercial real estate financing arrangements generally will require "bad boy" guarantees andin the event that such a guarantee is called, a fund's or our assets could be materially and adversely affected. Moreover, "bad boy" guarantees could applyto actions of the joint venture partners associated with the investments, and in certain cases the acts of such joint venture partner could result in liability toour 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 due diligence expenses or other damages. After the sale of a real estate asset, buyers may later sue ourfunds or us for losses associated with latent defects or other problems not uncovered in due diligence.•Our funds or we may be subject to certain risks associated with investments in particular assets. REITs may be affected by changes in the value of theirunderlying properties and by defaults by borrowers or tenants. REITs depend on their ability to generate cash flow to make distributions and may beimpacted by changes in tax laws or by a failure to qualify for tax-free pass through income. Investments in real estate debt investments may be unsecuredand subordinated to a substantial amount of indebtedness. Such debt investments may not be protected by financial covenants. Non-performing real estateloans may require a substantial amount of workout negotiations and/or restructuring, which may entail, among other things, a substantial reduction in theinterest rate and a substantial write-down of the principal of such loan. Investments in commercial mortgage loans are subject to risks of delinquency,foreclosure and loss of principal. In the event of any default under a mortgage loan held directly by our fund or us, our fund or we will bear a risk of lossof principal to the extent of any deficiency between the value of the collateral and the principal and accrued interest of the loan. Investments in assets orbusinesses that are distressed may have little or no near-term cash flow and involve a high degree of risk. Such investments subject to bankruptcy orinsolvency could be subordinated or disallowed.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, maymaterially and adversely affect the value of such investments and cause us serious reputational and legal harm. Revenues for such investments may rely oncontractual agreements for the provision of services with a limited number of counterparties, and are consequently subject to counterparty default risk. Theoperations and cash flow of infrastructure investments are also more sensitive to inflation and, in certain cases, commodity price risk. Furthermore, servicesprovided by infrastructure investments may be subject to rate regulations by government entities that determine or limit prices that may be charged. Similarly,users of applicable services, or government entities in response to such users, may react negatively to any adjustments in rates, which may reduce the profitabilityof 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. See "—Risks Related to U.S. Taxation—Non-U.S. persons face unique U.S. taxissues 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 United States and abroad where these real assets are located. 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 suchunits."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 effects67Table of Contentsand industry downturns, and their valuations may be more volatile depending on the achievement of milestones, such as receiving a governmental license orapproval. Growth equity companies also generally depend heavily on intellectual property rights, including patents, trademarks and proprietary products orprocesses. The ability to effectively enforce patent, trademark and other intellectual property laws in a cost-effective manner will affect the value of many of thesecompanies. The presence of patents or other intellectual property rights belonging to other parties may lead to the termination of the research and development of aportfolio company's particular product. In addition, if a portfolio company infringes on third-party patents or other intellectual property rights, it could be preventedfrom using certain third-party technologies or forced to acquire licenses in order to obtain access to such technologies at a high cost.Certain 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 risks are realized, it couldmaterially and adversely affect our results of operations, financial condition and cash flow.Certain of our funds and CLOs in our Public Markets segment and our firm through our Principal Activities segment invest in high-yield, below investmentgrade or unrated debt, including corporate loans and bonds, each of which generally involves a higher degree of risk than investment grade rated debt, and may beless liquid. Issuers of high yield, below investment grade or unrated debt may be highly leveraged, and their relatively high debt-to-equity ratios create increasedrisks that their operations might not generate sufficient cash flow to service their debt obligations. As a result, high yield or unrated debt is often less liquid thaninvestment 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 theabsence of appropriate hedging measures, changes in interest rates generally will also cause the value of debt investments to vary inversely to such changes. Theobligor of a debt security or instrument may not be able or willing to pay interest or to repay principal when due in accordance with the terms of the associatedagreement and collateral may not be available or sufficient to cover such liabilities. Commercial bank lenders and other creditors may be able to contest paymentsto the holders of other debt obligations of the same obligor in the event of default under their commercial bank loan agreements. Sub-participation interests insyndicated debt may be subject to certain risks as a result of having no direct contractual relationship with underlying borrowers. Debt securities and instrumentsmay be rated below investment grade by recognized rating agencies or unrated and face ongoing uncertainties and exposure to adverse business, financial oreconomic conditions and the issuer's failure 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. Companies that were not in financial distress at the time we or our funds made investments may in the future require work-outs, liquidations,reorganizations, bankruptcies or similar transactions, and as a result, become subject to the same risks described above. Because there is substantial uncertaintyconcerning the outcome of transactions involving financially troubled companies, there is a potential risk of loss of the entire investment in such company. Suchinvestments involve a substantial degree of risk, and a decline in value of the assets would have a material 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.68Table of ContentsWe 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 add 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 or protect against the risks that they present. Acquired contingent liabilities could thus result in unforeseen losses forus or our funds. In addition, in connection with the disposition of an investment in a portfolio company, we or a fund may be required to make representationsabout the business and financial affairs of such portfolio company typical of those made in connection with the sale of a business. We or a fund may also berequired to indemnify the purchasers of such investment to the extent that any such representations are inaccurate. These arrangements may result in the incurrenceof contingent liabilities by us or a fund, even after 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 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 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 "—We and our funds have made investments in companies that we do not control, exposing us to the risk of decisions made by others withwhich we may not agree." Any of these factors could increase the risk that our larger investments could be less successful. The consequences to our investmentfunds of an unsuccessful larger investment could be more severe given the size of the investment. Moreover, we have significant capital of our own committed insuch large investments. For certain large private equity transactions, we may seek to syndicate a portion of our capital commitment to third parties; however, if weare unable to syndicate all or part of such commitment, we may be required to fund the remaining commitment amount from our balance sheet. As a result, thepoor performance of any such large investment may have a material adverse impact on our financial results. See "—Risks Related to Our Business—If we areunable to syndicate the securities or indebtedness or realize returns on investments financed with our balance sheet assets, our liquidity, business, results ofoperations and financial condition could be materially and adversely affected" and "—Our funds and our firm through our Principal Activities segment may make alimited number of investments, or investments that are concentrated in certain issuers, geographic regions or asset types, which could negatively affect ourperformance or the performance of our funds to the extent those concentrated assets perform poorly."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 hold investments that include debt instruments and equity securities of companies that we do not control, and such investments maycomprise an increasing part of our business. Such instruments and securities may be acquired by our funds through trading activities or through purchases ofsecurities from the issuer or we may purchase such instruments and securities on a principal basis. In addition, our funds may acquire minority equity interests,particularly when making private69Table of Contentsequity investments in Asia, making growth equity investments or sponsoring investments as part of a large investor consortium or through many of our PublicMarkets funds. Our funds may also dispose of a portion of their majority equity investments in portfolio companies over time in a manner that results in the fundsretaining a minority investment. We and our funds, including our newer private equity funds, have made certain minority investments in publicly tradedcompanies.We have also increasingly made minority investments in companies including hedge fund managers on our balance sheet. For example, we have investmentsin Marshall Wace, Nephila, BlackGold and Acion. In addition, on June 1, 2017, KKR Prisma and PAAMCO were combined to create PAAMCO Prisma, a leadingliquid alternatives investment firm in which KKR owns a minority interest.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 amanner that does not serve our interests. These companies may be subject to complex regulatory requirements and instances of non-compliance by them maysubject us to reputational harm or in certain cases, liability. We are also reliant on the systems and processes of these companies for, among other, financialinformation and valuations of our investments in or with them, including hedge fund managers and their funds, but we do not control the decisions and judgmentsmade during such processes. Our investments in hedge fund managers may subject us to additional regulatory complexities or scrutiny if we are deemed to controlthe company for regulatory purposes, despite our minority interest. These asset managers may also be dependent on their founders and other key persons, and theloss of these key personnel could adversely impact our investment. If any of the foregoing were to occur, the value of the investments held by our funds or by uscould decrease and our results of operations, financial condition and cash flow could be materially and 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, 2017, approximately 51% of the capital invested in those funds was attributable to non-U.S. investments. Investing in companies that are basedor have significant operations in countries outside of the United States and, in particular, in emerging markets such as Brazil, China and India, Eastern Europe,South and Southeast Asia, Latin America and Africa, involves risks and considerations that are not typically associated with investments in companies establishedin 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;•the imposition of non-U.S. taxes and changes in tax law;•differences in the legal and regulatory environment, such as 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 and social instability, nationalization, expropriation of assets or political hostility to investments by foreign orprivate equity investors;•less liquid markets;70Table of Contents•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;•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.71Table of ContentsThese 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.See "—Risks Related to Our Business—Additional proposed changes in the U.S. and foreign taxation of businesses could adversely affect us."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 is subject to local tax, potentially reducing our profits associated withsuch income, although this risk may be mitigated by the availability of foreign tax credits. We or our funds may also inadvertently establish a taxable presence in ajurisdiction because of activities conducted there. Compliance with tax laws and structures in these jurisdictions and the costs of adapting to changes in tax policiesrequire 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. A depreciation of foreign currencies against the U.S. dollar, if not adequately hedged, would reduce the value of our investments in the relevant region,which could adversely impact our financial results. Factors that may affect currency values include trade balances, the ability of countries to pay their nationaldebt, levels of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capitalappreciation and political developments. We may employ hedging techniques to minimize these risks, but we can offer no assurance that such strategies will beeffective or even available at all. If we engage in hedging transactions, we may be exposed to additional risks associated with such transactions. See "—Riskmanagement activities may adversely affect the return on our investments." In addition, various countries and regulatory bodies may implement controls on foreignexchange and outbound remittances of currency, which could impact not only the timing and amount of capital contributions that are required to be made to ourfunds but also the value, in U.S. dollars, of our investments and investment proceeds. See "Risks Related to Our Business—Difficult market and economicconditions 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" and "—Risks Related to Our Business—Extensive regulation of our businesses affects our activities and creates the potential for significant liabilitiesand penalties. The possibility of increased regulatory focus or legislative or regulatory changes could materially and adversely affect our business." See also"Management's Discussion and Analysis of Financial Condition and Results of Operations—Business Environment" for a discussion of recent developments inmarket and business conditions that may 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 or our fund's investment. Also, in the event of insolvency, liquidation, dissolution,reorganization or bankruptcy of a company in which an investment is made, holders of securities ranking senior to our investment would typically be entitled toreceive payment in full before distributions could be made in respect of our investment. In addition, debt investments made by us or our funds in our portfoliocompanies may be equitably subordinated to the debt investments made by third parties in our portfolio companies. After repaying senior security holders, thecompany may not have any remaining assets to use for repaying amounts owed in respect of our investment. To the extent that any assets remain, holders of claimsthat rank equally with our investment would be entitled to share on an equal and ratable basis in distributions that are made out72Table of Contentsof those assets. Also, during periods of financial distress or following insolvency, the ability of us or our funds to influence a company's affairs and to take actionsto protect an investment 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,the types of investments that are made and other changing market conditions. We do not seek to hedge our exposure in all currencies or all investments, whichmeans that our exposure to certain market risks are not limited. Where applicable, we use hedging transactions and other derivative instruments to reduce theeffects of a decline in the value of a position, but they do not eliminate the possibility of fluctuations in the value of the position or prevent losses if the value of theposition declines. However, such activities can establish other positions designed to gain from those same developments, thereby offsetting the decline in the valueof the position. 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 exposureto a market 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 requiresthe sale 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 materially and adversely affect our business."Our funds and our firm through our Principal Activities segment may make a limited number of investments, or investments that are concentrated in certainissuers, geographic regions or asset types, which could negatively affect our performance or the performance of our funds to the extent those concentratedassets 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 or funds that focus on particular geographic region. During periods ofdifficult market conditions or slowdowns in these sectors or geographic regions, decreased revenues, difficulty in obtaining access to financing and increasedfunding costs may be exacerbated by this concentration of investments, which would result in lower investment returns. Because a significant portion of a fund'scapital may be invested in a single investment or portfolio company, a loss with respect to such investment or portfolio company could have a material adverseimpact on such fund's capital. Accordingly, a lack of diversification on the part of a fund could materially and adversely affect a fund's performance and therefore,our results of operations and financial condition.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 balance sheet investments in our private equity funds and direct co-investments, fluctuation in the fair values of theseportfolio companies may have a disproportionate impact on the investment income earned by us as compared to other portfolio companies. In these circumstances,as was the case with energy investments beginning in late 2014 through and into 2017, losses may have an even greater impact on our results of operations73Table of Contentsand financial condition, as we would directly bear the full extent of such losses. Our Principal Activities segment also has significant exposures to a small group ofcompanies, with our investment in First Data Corporation (NYSE: FDC) representing approximately 14.0% and our top five investments representingapproximately 29.2% of the segment's total investments as of December 31, 2017. As a result, our investment income and economic net income are subject togreater volatility depending on such companies' operating results and other idiosyncratic factors specific to such companies, and in the case of publicly tradedcompanies, our operating results would be impacted by volatility in the public markets generally and in the stock price of such companies. See "—Management'sDiscussion and Analysis of Financial Condition and Results of Operations—Segment Analysis—Segment Balance Sheet" for information on significantinvestments held in our Principal Activities segment.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 third-party 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 heldby our 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 onehand, 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, orexercise of rights with respect to investment transactions and the advice we provide to our funds. For example we may sell an investment at a differenttime or for different 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 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 that 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, other KKR-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;•Under the 2017 Tax Act, investments must be held for more than three years, rather than the prior requirement of more than one year, for carried interestto be treated for U.S. federal income tax purposes as capital gain, which may create a conflict of interest between the limited partner investors (whoseinvestments would receive such capital gain treatment after a holding period of only one year) and the general partner on the execution, closing or timingof sales of a fund's investments in connection with the receipt of carried interest;74Table of Contents•From time to time, one of our funds or other investment vehicles (including CLOs) may seek to effect a purchase or sale of an investment with one ormore of our other funds or other investment vehicles in a so-called "cross transaction," or we as a principal may seek to effect a purchase or sale of ourinvestment with one or more of our funds or other investment vehicles in a so-called "principal transaction";•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; and•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 also invest in a broad range of asset classes throughout the corporate capital structure. These investments include investments incorporate loans and debt securities, preferred equity securities and common equity securities. In certain cases, we may manage separate funds that invest indifferent parts of the same company's capital structure. For example, our credit funds may invest in different classes of the same company's debt and may makedebt 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 be aligned, which couldcreate actual or potential conflicts of interest or the appearance of such conflicts. For example, one of our private equity funds could have an interest in pursuing anacquisition, divestiture or other transaction that, in its judgment, could enhance the value of the private equity investment, even though the proposed transactionwould subject one of our credit fund's debt investments to additional or increased risks. Finally, our ability to effectively implement a public securities strategymay be limited to the extent that contractual obligations entered into in the ordinary course of our private equity business impose restrictions on our engaging intransactions 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 arm's-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 or investment to address potentialconflicts of interest. Such instances include principal transactions where we or our affiliates warehouse an investment in a portfolio company for the benefit of oneor more of our funds pending the contribution of committed capital by the investors in such funds, follow-on investments by a fund other than a fund that made aninitial investment in a company, or transactions in which we arrange for one of our funds to buy a security from, or sell a security to, another one of our funds.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 and 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 in certain of our leveraged credit investment vehicles may generally submit redemptions to redeem their investments on a quarterly ormonthly basis following the expiration of a specified period of time or in certain cases capital may be withdrawn earlier subject to a fee, in each case subject to theapplicable fund's specific redemption provisions. Factors that could result in investors leaving our funds include changes in interest rates that make otherinvestments more attractive, changes in investor perception regarding our focus or alignment of interest, unhappiness with a fund's performance or investmentstrategy, changes in our reputation, departures or changes in responsibilities of key investment professionals, and performance and liquidity needs of fundinvestors. In a declining market or period of economic disruption or uncertainty, the pace of redemptions and consequent reduction in our AUM could accelerate.The decrease in revenues that would result from significant redemptions from our funds or other similar investment vehicles could have a material adverse effecton our business, revenues, net income and cash flows.A portion of assets invested in our Public Markets funds 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 intend75Table of Contentsto continue to seek additional separately managed account or single entity mandates. The investment management agreements we enter into in connection withmanaging separately managed accounts or entities on behalf of certain clients may be terminated by such clients on as little as 30 days' prior written notice, or lessin certain prescribed circumstances. In addition, the boards of directors of certain funds we manage could terminate our advisory engagement of those companies,on as little as 30 days' prior written notice. Similarly, we provide sub-advisory services to other investment advisors and managers. Such investment advisors andmanagers could terminate our sub-advisory agreements on as little as 30 days' prior written notice. In the case of any such terminations, the management andincentive fees we earn in connection with managing such account or company would immediately cease, which could result in a material adverse impact on ourrevenues.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 CCT II, as its sub-adviser), are subject to the InvestmentCompany Act and the rules thereunder. One of these funds is a NYSE-listed closed-end fund. In addition, the management fees we are paid for managinginvestment companies will generally be subject to contractual rights the company's board of directors (or, in the case of the business development companies wemanage, the investment adviser) has to terminate our management of an account on as short as 60 days' prior notice. Termination of these agreements would reducethe fees we earn from the relevant funds, which could have a material adverse effect on our results of operations.Our stakes in our strategic manager partnerships subject us to numerous additional risks.Our stakes in our strategic manager partnerships subject us to numerous additional risks applicable to hedge funds and funds of funds, 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;•A fund of funds is subject to risks related to the limited rights it has to withdraw, redeem, transfer or otherwise liquidate its investments from theunderlying hedge funds or other funds in which it invests. It may be impossible or costly for hedge funds or such other funds to liquidate positions rapidlyin order to meet margin calls, withdrawal requests, redemption requests or otherwise, particularly if there are other market participants seeking to disposeof similar 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 movementlimits on the market or otherwise. In addition, terms of the governing documents of the relevant portfolio funds may limit withdrawal, redemption,transfer or liquidation of investments, including restrictions on the redemption of capital for an initial period, restrictions on the amount of redemptionsand the frequency with which redemptions can be made and investment minimums that must be maintained. Portfolio funds also typically reserve theright to reduce ("gate") or suspend redemptions, to set aside ("side pocket") capital that cannot be redeemed for so long as an event or circumstance hasnot occurred or ceased to exist, respectively, and to satisfy redemptions by making distributions in‑kind, under certain circumstances. Moreover, theserisks may be exacerbated for funds of funds. For example, if a fund of funds were to invest a significant portion of its assets in two or more hedge fundsthat each had illiquid positions in the same issuer, the illiquidity risk for such fund of funds would be compounded.•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;•Hedge funds may enter into CDS as investments or hedges. CDS involve greater risks than investing in the reference obligation directly. In addition togeneral market risks, CDS are subject to risks related to changes in interest rates, credit spreads, credit quality and expected recovery rates of theunderlying credit instrument;•Hedge funds are exposed to the risk that a counterparty will not settle a transaction in accordance with its terms and conditions because of a dispute overthe terms of the contract (whether or not bona fide) or because of a credit or liquidity problem, thus causing the fund to suffer a loss. Counterparty risk isaccentuated for contracts with longer maturities where events may intervene to prevent settlement, or where the fund has concentrated its transactionswith a single or small group of counterparties. Generally, hedge funds are not restricted from dealing with any particular counterparty or fromconcentrating any or all of their transactions with one counterparty. Moreover, the fund's internal consideration of the creditworthiness of theircounterparties may prove insufficient. The absence of a regulated market to facilitate settlement may increase the potential for losses;76Table of Contents•The efficacy of investment and trading strategies depends 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, including systemsfailures 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 overall positionwere 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 market positionselected by the management company or general partner of such funds, and might incur a loss in liquidating their position;•Hedge 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-kind distributionat dissolution, these funds may have to sell, distribute or otherwise dispose of investments at a disadvantageous time as a result of dissolution. This wouldresult in a lower than expected return on the investments and, perhaps, on the fund itself;•Hedge funds may rely on computer programs, internal infrastructure and services, quantitative models (both proprietary models and those supplied bythird parties) 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; and•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. Hedge funds and funds of these hedge funds may also be subject to extensive regulations, including those of CFTC.To the extent the financial condition of PAAMCO Prisma or other third-party hedge fund managers with which we have strategic manager partnerships isadversely affected by these risks, our revenues, AUM and FPAUM may also 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. KKR Holdings holds special non-economic voting units in our partnership that entitle it to cast, with respect to those limited matters, a number of votes equalto the number of KKR Group Partnership Units that it77Table of Contentsholds from time to time. As of February 21, 2018 , KKR Holdings owns 335,971,334 KKR Group Partnership Units, or 40.8% of the outstanding KKR GroupPartnership Units. Depending upon the number of units actually voted, we believe our senior employees should generally have sufficient voting power tosubstantially influence matters subject to a majority or more of all outstanding voting units. Matters that require a vote of a majority of all outstanding voting unitsinclude a merger or consolidation of our business, a sale of all or substantially all of our assets and amendments to our partnership agreement that may be materialto holders of our common units. In addition, our limited partnership agreement contains provisions that require a majority vote of all outstanding voting units tomake certain amendments to our partnership agreement that would materially and adversely affect all holders of our common units or a particular class of holdersof common units, and since approximately 40.8% of our voting units, as of February 21, 2018 , are controlled by KKR Holdings, we believe KKR Holdings shouldgenerally have the ability to substantially influence amendments that could materially and adversely affect the holders of our common units either as a whole or asa 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 (the "Delaware Limited PartnershipAct") or under any other law, rule or regulation or in equity. These standards reduce the obligations to which our Managing Partner would otherwise be held. See"—We are a Delaware limited partnership, and there are certain provisions in our limited partnership agreement regarding exculpation and indemnification of ourofficers and directors that differ from the Delaware General Corporation Law ('DGCL') in a manner that may be less protective of the interests of our commonunitholders."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,78Table of Contentstaking into account the totality of the relationships between us and our Managing Partner, then it will be presumed that in making this determination, our ManagingPartner acted in good faith. A holder of our common units seeking to challenge this resolution of the conflict of interest would bear the burden of overcoming suchpresumption. This is different from the situation with a typical Delaware corporation, where a conflict resolution by an interested party would be presumed to beunfair and the interested party would have the burden of demonstrating that the resolution was fair.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 of demonstrating unfairness to the plaintiff. If you purchase, receive or otherwise hold a common unit, you will be treated as having consented tothe provisions set forth in our limited partnership agreement, including provisions regarding conflicts of interest situations that, in the absence of such provisions,might be considered a breach of fiduciary or other duties under applicable state law. As a result, unitholders will, as a practical matter, not be able to successfullychallenge an 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 agreementincorporated by reference as an exhibit to this 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 acquisitions, joint ventures, reorganizations and other transactions, including incurrence of debt or issuance of securities inthe future;79Table of Contents•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;•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 financial statementsinclude financial information, including assets and revenues, of certain funds on a consolidated basis, and our future financial statements will continue toconsolidate certain of these funds, such assets and revenues are available to the fund and not to us except to a limited extent through management fees, carriedinterest 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 or for exchange, and issuable pursuant to our EquityIncentive Plan or as consideration in 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 21, 2018 , we have 486,800,395 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 our Equity IncentivePlan.As of February 21, 2018 , KKR Holdings owns 335,971,334 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 employees and other key personnel andrecruit, retain and motivate new employees and other key personnel, our business, results of operations and financial condition could be materially and adverselyaffected." The total number of common units that may be issued under our Equity Incentive Plan is equivalent to 15% of the number of fully exchanged and dilutedcommon units outstanding as of the beginning of the year. The amount may be increased each year to the extent that we issue additional equity. As of February 21,2018 , we may issue common units registered on our registration statement on Form S-8 for this purpose and may also issue 31.4 million common units under ourEquity Incentive Plan that were not registered on our registration statement on Form S-8. In addition previously issued awards that were canceled or are canceled inthe future, or in certain cases, withheld in respect of tax withholding obligations, are or will become available for further grant under the terms of our EquityIncentive 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. In80Table of Contentsaccordance with the Delaware Limited Partnership Act and the provisions of our limited partnership agreement, we may also issue additional partner interests thathave designations, preferences, rights, powers and duties that are different from, and may be senior to, those applicable to our common units. Similarly, the limitedpartnership agreements of the KKR Group Partnerships authorize the general partners of the KKR Group Partnerships to issue an unlimited number of additionalsecurities of the KKR Group Partnerships with such designations, preferences, rights, powers and duties that are different from, and may be senior to, thoseapplicable to the KKR Group Partnerships Units, and which may be exchangeable for KKR Group Partnership Units. For example, in March and June of 2016,KKR issued 13,800,000 Series A Preferred Units and 6,200,000 Series B Preferred Units, respectively, and in connection with such issuances, the KKR GroupPartnerships issued preferred units with economic terms designed to mirror KKR's respective preferred units. In the past, we have issued and sold our commonunits to generate cash proceeds to pay withholding taxes, social benefit payments or similar payments payable by us in respect of awards granted pursuant to ourEquity Incentive Plan or the amount of cash delivered in respect of awards granted pursuant to our Equity Incentive Plan that are settled in cash instead of commonunits. As of February 21, 2018 , we may issue up to 0.8 million common units as registered on our registration statement on Form S-3 (SEC file 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, we issued approximately 104.3 million common units, in connection with KKR's acquisition of Avoca, we issued securitiesexchangeable into 4.9 million common units and in connection with KKR's initial acquisition and subsequent increase in ownership of Marshall Wace, we issuedan aggregate of approximately 12.1 million common units. In addition, in connection with the Marshall Wace transaction or other investments or acquisitions, wemay make certain contingent payments in the form of common units. If our valuations of these transactions are not accurate or if the value of these acquisitions andinvestments is not realized, our distributions per 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's investmentsand dispositions, cash expenditures, including those relating to compensation, indebtedness, issuances of additional partner interests, tax liabilities andamounts of reserves, each of which can affect the amount of cash that is available for distribution to holders of KKR Group Partnership Units. Forexample, although annual cash bonuses for certain employees were historically borne by KKR Holdings from its cash reserves, the pro rata distributionsreceived by KKR Holdings for KKR Group Partnership Units underlying any unvested KKR Holdings units are expected to be insufficient to fully fundannual cash bonus compensation. Our Managing Partner has the sole discretion to decide the source of annual cash bonuses, and although KKR Holdingsmay fund a larger portion of the cash bonus payments from its cash reserves, if any, in future periods, we likely will utilize our own funds for most, if notall, of the cash bonus payments;•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 oflimiting its duties, including fiduciary duties, to us. For example, our affiliates that serve as the general partners of our funds or as broker-dealers havefiduciary and/or contractual obligations to our fund investors or other third parties. Such obligations may cause such affiliates to regularly take actionswith respect to the allocation of investments among our investment funds (including funds that have different fee structures), the purchase or sale ofinvestments in our investment funds, the structuring of investment transactions for those funds and the advice and services we provide that comply withthese fiduciary and contractual obligations but that might adversely affect our near-term results of operations or cash flow. Our Managing Partner willhave no obligation to intervene 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 and its subsidiaries, which are not subject tocorporate income taxation and we hold some of the KKR Group Partnership81Table of ContentsUnits through one or more wholly-owned subsidiaries that are taxable as a corporation, conflicts may arise between our principals and us relating to theselection and structuring of investments or transactions, declaring distributions and other matters; without limiting the foregoing, certain investmentsmade by us or through our funds may be determined to be held through KKR Management Holdings L.P., which would result in less taxation to ourprincipals who are limited partners in KKR Holdings as compared 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 limited partnership agreement to the fullest extent permitted by law, while also restricting the remedies available to holders ofcommon units for actions that, without these limitations, might constitute breaches of duty, including fiduciary duties. In addition, we have agreed toindemnify our Managing Partner, including its directors and officers, and our Managing Partner's affiliates to the fullest extent permitted by law, exceptwith respect to conduct involving bad faith, fraud or willful misconduct;•Our limited 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 limited partnership agreement. Neither our limited partnership agreement nor any of the other agreements,contracts and arrangements between us on the one hand, and our Managing Partner and its affiliates on the other, are or will be the result of arm's-lengthnegotiations. The conflicts committee will be responsible for, among other things, enforcing our rights and those of our unitholders under certainagreements against KKR Holdings and certain of its subsidiaries and designees, a general partner or limited partner of KKR Holdings, or a person whoholds 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 or redeem preferred securities and those decisions may adversely affectany credit ratings 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 its conflicts committee decides whether to retain separate counsel, accountants or others to perform services for 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 orexercise, as the case may be, at least 5% on a fully diluted, as converted, exchanged or82Table of Contentsexercised basis, of any class of our or their equity securities or (ii) have designations, preferences, rights, priorities or powers that are more favorable thanthose 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 our 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 our 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;•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. On such matters that may besubmitted to a vote of our common unitholders, the special voting units provide KKR Holdings with a number of votes that is equal to the aggregate number ofKKR Group Partnership Units it holds, and entitle it to participate in the vote on the same basis as our common unitholders. As a result, KKR Holdings' vote willlikely have a significant influence on the outcome of any matter that requires a vote of our common unitholders, including, for example, a vote to adopt a newequity plan. Furthermore, if our common unitholders are dissatisfied with the performance of our Managing Partner, they have no ability to remove our ManagingPartner, with or without cause. See "—Risks Related to Our Common Units—Our founders are able to determine or influence the outcome of any matter that maybe submitted for a vote of our limited partners."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.83Table of ContentsWe 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 atany time. 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 from the date of the applicable distribution. Furthermore, by paying cash distributions rather than investing that cash in our businesses,we risk slowing the pace of our growth, or not having a sufficient amount of cash to fund our operations, new investments or unanticipated capital expenditures,should the need arise. 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,the right 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 Series A Preferred Units and 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.84Table of ContentsWe are party to a tax receivable agreement with KKR Holdings requiring our intermediate holding company to pay to KKR Holdings or transferees of itsKKR Group Partnership Units 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax that the intermediate holding companiesactually realize 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 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 will be an obligation of ourintermediate holding companies and not of any 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, either by converting KKRinto a corporation or electing to be taxed as a corporation, we expect that each such entity will become subject to a tax receivable agreement with substantiallysimilar terms. The amounts payable to KKR Holdings or transferees of its KKR Group Partnership Units under such agreement may materially increase as a resultof KKR becoming taxable as a corporation, because, among other things, significantly less than half of KKR is currently subject to a corporate tax. While theactual increase in tax basis, as well as the amount and timing of any payments under this agreement, will vary depending upon a number of factors, including thetiming of exchanges, the price of our common units at the time of the exchange, the extent to which such exchanges are taxable and the amount and timing of ourtaxable income, we expect that as a result of the size of the increases in the tax basis of the tangible and intangible assets of the KKR Group Partnerships, thepayments that we may be required to make to our existing owners will be substantial. The payments under the tax receivable agreement are not conditioned uponour existing owners' continued ownership of us. We may need to incur debt to finance payments under the tax receivable agreement to the extent our cashresources are insufficient to meet our obligations under the tax receivable agreement as a result of timing discrepancies or otherwise. In particular, our intermediateholding companies' obligations under the tax receivable agreement would be effectively accelerated in the event of an early termination of the tax receivableagreement by our intermediate holding companies or in the event of certain mergers, asset sales and other forms of business combinations or other changes ofcontrol. In these situations, our obligations under the tax receivable 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 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 challengedby the 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 the tax receivable agreement, will depend upon a number of factors, 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 ourequity interests in our subsidiaries are investment securities, and we believe that the capital interests of the general partners of our funds in their respective fundsare neither securities nor investment securities. Accordingly, based on our determination, less than 40% of the85Table of Contentspartnership's total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis are comprised of assets that could be consideredinvestment securities. However, our subsidiaries have a significant number of investment securities, and we expect to make investments in other investmentsecurities from time to time. We monitor these holdings regularly to confirm our continued compliance with the 40% test described in the second bullet pointabove. The need to comply with this 40% test may cause us to restrict our business and subsidiaries with respect to the assets in which we can invest and/or thetypes of securities we may issue, sell investment securities, including on unfavorable terms, acquire assets or businesses that could change the nature of ourbusiness or potentially take other actions that may be viewed as adverse by the holders of our common units, in order to ensure conformity with exceptionsprovided by, and rules and regulations promulgated under, the Investment Company Act.The Investment Company Act and the rules and regulations thereunder contain detailed parameters for the organization and operation of investmentcompanies. Among other things, the Investment Company Act and the rules and regulations thereunder limit or prohibit transactions with affiliates, imposelimitations on the issuance of debt and equity securities, generally prohibit the issuance of options and impose certain governance requirements. We intend toconduct our operations so that we will not be deemed to be an investment company under the Investment Company Act. If anything were to happen which wouldcause us to be deemed to be an investment company under the Investment Company Act, requirements imposed by the Investment Company Act, includinglimitations on our capital structure, ability to transact business with affiliates and ability to compensate key employees, would make it impractical for us tocontinue our business as currently conducted, impair the agreements and arrangements between and among us, including the KKR Group Partnerships, and KKRHoldings, and materially and adversely affect our business, results of operations and financial condition. In addition, we may be required to limit the amount ofinvestments that we make as a principal, potentially divest of our investments or otherwise conduct our business in a manner that does not subject us to theregistration and other requirements of the Investment 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 securities, and could thereby materially and adversely affect our business,results of operations and financial condition.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. Although no further action hasbeen taken by the SEC, any guidance or action from the SEC or its staff, including changes that the SEC may ultimately propose and adopt to the way Rule 3a-7applies to entities or new or modified interpretive positions 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 future operating 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 or86Table of Contentsomissions to the fullest extent provided by law. However, under the DGCL, a corporation can only indemnify directors and officers for acts or omissions if thedirector or officer acted 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 ordirector had no reasonable cause to believe his conduct was unlawful. Accordingly, our limited partnership agreement may be less protective of the interests of ourcommon unitholders, when compared to the DGCL, insofar as it relates to the exculpation and indemnification of our officers and directors. See "—Our limitedpartnership agreement contains provisions that reduce or eliminate duties (including fiduciary duties) of our Managing Partner and limit remedies available tounitholders 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 may be substantially reduced and the valueof our common units could be adversely affected.We are currently treated as a partnership for U.S. federal income tax purposes, which requires that 90% or more of our gross income for every taxable yearconsist of qualifying income, as defined in Section 7704 of the Internal Revenue Code of 1986, as amended (the "Code"), and that our partnership not be registeredunder the Investment Company Act. Qualifying income generally includes dividends, interest, capital gains from the sale or other disposition of stocks andsecurities, gain from the sale or other disposition of real property, real property rents, income and gains from energy and oil and gas investments and certain otherforms of investment income. So long as we are a partnership for U.S. federal income tax purposes, we intend to structure our investments so as to satisfy theserequirements, including by generally holding investments that generate non-qualifying income through one or more subsidiaries that are treated as corporations forU.S. federal income tax purposes. Nonetheless, we may not meet these requirements, may not correctly identify investments that should be owned throughcorporate subsidiaries, or current law may change so as to cause, in any of these events, us to be treated as a corporation for U.S. federal income tax purposes orotherwise subject us to U.S. federal income tax. We have not requested, and do not plan to request, a ruling from the IRS regarding the amount of qualifyingincome earned by us during any particular period.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 corporate distributions, and no income, gains, losses, deductions or credits wouldotherwise flow through to you. Because a tax would be imposed upon us as a corporation, our distributions to you may be substantially reduced which could causea reduction in the value of our common units. The same changes will result if our Managing Partner elects to convert KKR into a corporation or cause KKR to betaxed as a corporation for U.S. federal tax purposes. See "Risks Related to Our Business—Our structure implicates complex provisions of U.S. federal income taxlaws for which no clear precedent or authority may be available. These structures also are subject to potential legislative, judicial or administrative change anddiffering interpretations, possibly on a retroactive basis. In addition, we may elect to change our structure at any time."Comprehensive U.S. federal income tax reform legislation became effective in 2018, which could have a material effect on us.The 2017 Tax Act has resulted in various changes to the Code. Changes to U.S. tax laws resulting from the 2017 Tax Act, including meaningful reduction tothe U.S. federal corporate income tax rate, partial limitation on the deductibility of business interest expense and a longer three-year holding period requirement forcarried interest to be treated as capital gain, could have a material effect on our business operations and our funds' investment activities. These and other changesfrom the 2017 Tax Act, including the changes to the carryback and carryforward of net operating losses, U.S. taxation on earnings from international businessoperations and certain modifications to the Section 162(m) of the Code, could also have a significant effect on the business of our portfolio companies. The 2017Tax Act also increases the likelihood that our Managing Partner may elect to convert KKR into, or cause KKR to be taxed as, a corporation. See "Risks Related toOur Business—Our structure implicates complex provisions of U.S. federal income tax laws for which no clear precedent or authority may be available. Thesestructures also are subject to potential legislative, judicial or administrative change and differing interpretations, possibly on a retroactive basis. In addition, wemay elect to change our structure at any time" and "Risks Related to Our Organizational Structure—We will be required to pay our principals for most of thebenefits relating to any additional tax depreciation or amortization deductions we may claim as a result of the tax basis step-up we receive in connection withsubsequent exchanges of our common units and related transactions." Following the 2017 Tax Act, the tax treatment of carried interest may continue to be an areaof focus for policymakers and government officials, which could result in a further regulatory action by federal or state governments. Additionally, foreign andstate and local governments may enact tax laws in response to the 2017 Tax Act that could result in further changes to foreign and state and local taxation andmaterially affect our financial position and results of operations. Currently, the exact impact of the 2017 Tax Act in many cases is unclear and difficult to quantifywith precision,87Table of Contentsbut any of these changes could have a material adverse effect on our business, results of operations and financial condition. See Note 11 "Income Taxes" to ourconsolidated financial statements included elsewhere in this report for further information on the impact of the 2017 Tax Act.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 or relevant change in our structure, we willbe treated, for U.S. federal income tax purposes, as a partnership and not as an association or a publicly traded partnership taxable as a corporation. Accordingly,each unitholder will be required to take into account its allocable share of our items of income, gain, loss and deduction. Distributions to a unitholder will generallybe taxable to the unitholder for U.S. federal income tax purposes only to the extent the amount distributed exceeds the unitholder's tax basis in the unit. Thattreatment contrasts with the treatment of a shareholder in a corporation. For example, a shareholder in a corporation who receives a distribution of earnings fromthe corporation will generally report the distribution as dividend income for U.S. federal income tax purposes. In contrast, a holder of our units who receives adistribution of earnings from us will not report the distribution as dividend income (and will treat the distribution as taxable only to the extent the amountdistributed exceeds the unitholder's tax basis in the units), but will instead report the holder's allocable share of items of our income for U.S. federal income taxpurposes. As a result, a unitholder may be subject to U.S. federal, state, local and possibly, in some cases, foreign income taxation on its allocable share of ouritems 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 isotherwise 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 suchunitholder receives cash distributions.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 ("CFCs"), passive foreign investmentcompanies ("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. Inthe event 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.Our 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 rateson all 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 also88Table of Contentselect to convert KKR into a corporation or be taxed as a corporation for U.S. federal income tax purposes if certain conditions have been met. See "Risks Relatedto Our Business—Our structure implicates complex provisions of U.S. federal income tax laws for which no clear precedent or authority may be available. Thesestructures also are subject to potential legislative, judicial or administrative change and differing interpretations, possibly on a retroactive basis. In addition, wemay elect to change our structure at any time."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 ("FATCA"), U.S. withholding agents and all entities in a broadly defined class offoreign financial institutions ("FFIs") are required to comply with a complicated and expansive reporting regime or be subject to a 30% U.S. withholding tax oncertain 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. entities that arenot FFIs are required to either certify they have no substantial U.S. beneficial ownership or to report certain information with respect to their substantial U.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 proceeds fromthe 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 the Common Reporting Standard. Compliance with such regimes could result in increased administrative andcompliance 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 affecting partners and partnerships, the taxable gain or loss allocated to a unitholder may not correspond tothat unitholder's share of the economic appreciation or depreciation in the particular asset. This is primarily an issue of the timing of the payment of tax, rather thana net increase in tax liability, because the gain or loss allocation 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("ECI") with respect to non-U.S. unitholders, including by reason of investments in certain U.S. real property holding corporations, REITs, real estate assets andenergy assets. To the extent our income is treated as ECI,89Table of Contentsnon-U.S. unitholders generally would be subject to withholding tax on their allocable share of such income, would be required to file a U.S. federal income taxreturn for such year reporting their allocable share of income effectively connected with such trade or business and any other income treated as ECI, and would besubject to U.S. federal income tax at regular U.S. tax rates on any such income (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% branch profits tax (potentially reduced under an applicable treaty) on their actual or deemeddistributions of such income. In addition, distributions to non-U.S. unitholders that are attributable to profits on the sale of a U.S. real property interest may also besubject to withholding tax at the highest applicable marginal income tax rate. Also, non-U.S. unitholders may be subject to 30% withholding on allocations of ourincome that are U.S. source fixed or determinable, annual or periodic income under the Code, unless an exemption from or a reduced rate of such withholdingapplies (under an applicable treaty of the Code) and certain tax status information is provided. Finally, if we are treated as being engaged in a U.S. trade orbusiness, the portion of any gain recognized by non-U.S. unitholders that is deemed to be effectively connected with such U.S. trade or business will be treated forU.S. federal income tax purposes as ECI, and hence such non-U.S. unitholders would be subject to U.S. federal income tax on the sale or exchange of commonunits. Under the 2017 Tax Act, for dispositions after December 31, 2017, unless an applicable nonforeign affidavit is furnished or other exception applies, if anyportion of any gain on a disposition of an interest in us would be treated as effectively connected with the conduct of a U.S. trade or business, the transferee of aninterest in us is required to withhold 10% of the amount realized on such disposition (and we would be required to withhold from future distributions to thetransferee if the transferee fails to properly withhold). On December 29, 2017, the U.S. Treasury Department and IRS announced a temporary suspension of suchwithholding tax provisions with respect to any disposition of an interest in a publicly traded partnership until regulations or other guidance have been issued. Suchwithholding tax provisions, when effective for publicly traded partnerships, could impose material tax and administrative burdens on us and our unitholders.Tax-exempt entities and tax-exempt or tax-deferred accounts face unique tax issues from owning our common units that may result in adverse taxconsequences to them.Generally, a tax-exempt partner of a partnership would be treated as earning unrelated business taxable income ("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 a 401(k) planparticipant) 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 be subject toU.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 to unrelatedbusiness 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 negativeimpact on 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.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 United States and abroad. Further, holders of our common units may be90Table of Contentssubject to penalties for failure to comply with those requirements. It is the responsibility of each unitholder to file all U.S. federal, state, local and foreign taxreturns that may be required of such unitholder. In addition our investments in real assets may expose unitholders to additional adverse tax consequences. See "—Risks Related to the Assets We Manage—Our investments in real assets such as real estate, infrastructure and energy may expose us to increased risks andliabilities 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 significantly changed the rules for U.S. federal income tax audits of partnerships. Such audits will continue to be conducted at apartnership 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 agiven adjustment, the amount of taxes for which its partners would be liable would be increased by any applicable penalties and a special interest charge. There canbe no assurance 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 notable to make such an elections, then (1) our then-current unitholders, in the aggregate, could indirectly bear income tax liabilities in excess of the aggregate amountof taxes 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.ITEM 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.91Table of ContentsITEM 3. LEGAL PROCEEDINGS. The section entitled "Litigation" appearing in Note 17 "Commitments and Contingencies" to our consolidated financial statements included elsewhere in thisreport is incorporated herein by reference.ITEM 4. MINE SAFETy DISCLOSURES. Not applicable.92Table of ContentsPART IIITEM 5. MARKET FOR REGISTRANT'S COMMON EqUITy, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EqUITySECURITIES.Our common units representing limited partner interests began trading on the NYSE on July 15, 2010 and are traded under the symbol "KKR." The following tablesets forth the high and low intra-day sales prices per unit of our common units, for the periods indicated, as reported by the NYSE. Sales price 2017 2016 High Low High LowFirst Quarter$18.43 $15.83 $15.97 $10.89Second Quarter$19.11 $16.86 $15.11 $11.90Third Quarter$20.33 $18.03 $15.43 $11.63Fourth Quarter$21.18 $19.19 $17.57 $13.58The number of holders of record of our common units as of February 21, 2018 was 35. 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 years 2016and 2017 :Payment Date Record Date Distribution per unitMarch 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 $0.16March 7, 2017 February 21, 2017 $0.16May 23, 2017 May 8, 2017 $0.17August 22, 2017 August 7, 2017 $0.17November 21, 2017 November 6, 2017 $0.17Under its distribution policy for common units, KKR intends to make equal quarterly distributions to holders of its common units. KKR's regular distributionper common unit of $0.17 was declared on February 8, 2018 for the quarter ended December 31, 2017.Because 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 distributions declared by the board of directors of our Managing Partner from thedistributions that we receive from our holding companies through which we invest.93Table of ContentsThe limited partnership agreements of the KKR Group Partnerships provide for cash distributions, which are referred to as "tax distributions," to the partnersof such partnerships if we determine that the taxable income of the relevant partnership will give rise to taxable income for its partners. However, holders shouldnot expect the KKR Group Partnerships will make any tax distributions, and there can be no assurance that, for any particular holder, our distributions will besufficient to pay such 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 or from time to time, and the terms of its limited partnership agreement. There can be no assurance that distributions will be made asintended 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 anyparticular distribution policy will be maintained. When KKR & Co. L.P. receives distributions from the KKR Group Partnerships (the holding companies of theKKR business), 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 the terms of our preferred units, and such other factors as the board of directors of our Managing Partner considers relevant including,among others: our available cash and current and anticipated cash needs, including funding of investment commitments and debt service and future debt repaymentobligations; general economic and business conditions; our strategic plans and prospects; our results of operations and financial condition; and our capitalrequirements. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity—Sources of Cash." In addition, underSection 17-607 of the Delaware Limited Partnership Act, we will not be permitted to make a distribution if, after giving effect to the distribution, our liabilitieswould exceed the fair value of our assets.Common Unit Repurchases in the Fourth quarter of 2017As announced on October 27, 2015 and amended on February 9, 2017, KKR is authorized to repurchase up to $750 million in the aggregate of its outstandingcommon units. Under this unit repurchase program, units may be repurchased from time to time in open market transactions, in privately negotiated transactions orotherwise. The timing, manner, price and amount of 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. KKR expects that the program, which has no expiration date, will be in effect until themaximum approved dollar amount has been used to repurchase common units. The program does not require KKR to repurchase any specific number of commonunits, and the program may be suspended, extended, modified or discontinued at any time. 94Table of ContentsThe table below sets forth the information with respect to repurchases made by or on behalf of KKR & Co. L.P. or any "affiliated purchaser" (as defined inRule 10b-18(a)(3) under the Exchange Act) of our common units during the fourth quarter of 2017. No common units were repurchased during the fourth quarterof 2017 or from January 1, 2018 to February 21, 2018. From inception of the repurchase program through February 21, 2018, we had repurchased a total ofapproximately 31.7 million common units under the program at an average price of approximately $14.47 per unit.Issuer Purchases of Common Units(amounts in thousands, except unit and per unit amounts) Total Number ofUnits Purchased Average Price Paid PerUnits Cumulative Numberof Units Purchased asPart of PubliclyAnnounced Plans orPrograms Approximate DollarValue of Units thatMay yet Be PurchasedUnder the Plans orProgramsMonth #1(October 1, 2017 toOctober 31, 2017)— $— 31,674,162 $291,225Month #2(November 1, 2017 toNovember 30, 2017)— $— 31,674,162 $291,225Month #3(December 1, 2017 toDecember 31, 2017)— $— 31,674,162 $291,225Total through December 31, 2017— Purchases subsequent to December 31, 2017: (January 1, 2018 toFebruary 21, 2018)— $— 31,674,162 $291,225Total through February 21, 2018— In addition to the repurchases of common units, (1) cash may be used to pay the amount of withholding taxes, social benefit payments or similar paymentspayable by KKR in respect of awards granted pursuant to our Equity Incentive Plan and (2) cash may be delivered in respect of certain awards granted pursuant toour Equity Incentive Plan and other exchangeable securities issued in connection with the acquisition of Avoca. During 2017, KKR paid $58.0 million in cash inlieu of issuing common units upon the vesting of equity awards representing 3.1 million common units to satisfy tax withholding and cash-settlement obligations.Since October 27, 2015, KKR has paid $137.0 million in cash in lieu of issuing common units upon the vesting of equity awards representing 8.2 million commonunits to satisfy tax withholding and cash-settlement obligations.Unregistered Sale of Equity SecuritiesDuring the fourth quarter of 2017, 5,562,665 KKR Group Partnership Units were exchanged by (i) KKR Holdings and (ii) holders of other exchangeablesecurities issued in connection with the acquisition of Avoca for an equal number of our common units. This resulted in an increase in our ownership of the KKRGroup Partnerships and a corresponding decrease in the ownership of the KKR Group Partnerships by KKR Holdings and the other exchangeable security holders.From January 1, 2018 to February 21, 2018, an additional 630,578 common units were issued to one or more holders of other exchangeable securities issued inconnection with the acquisition of Avoca. These private transactions were exempt from registration in reliance on Section 4(a)(2) of the Securities Act.On November 30, 2017, KKR acquired an additional 5.0% interest in Marshall Wace after the exercise of one of the options agreed to between Marshall Waceand KKR. As partial consideration, KKR issued 4,727,966 common units to affiliates of Marshall Wace in a private transaction exempt from registration inreliance on Section 4(a)(2) of the Securities Act. 95Table 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, 2017 , 2016, 2015, 2014 and 2013.We derived the selected historical consolidated financial data as of December 31, 2017 and 2016 and for the years ending December 31, 2017 , 2016 and 2015from the audited consolidated financial statements included elsewhere in this report. We derived the selected historical consolidated financial data as of December31, 2015, 2014 and 2013 and for the years ended December 31, 2014 and 2013 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 No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis ("ASU 2015-02"), whichresulted in the de-consolidation of most of KKR's investment funds that had been consolidated prior to such date. Effective with the adoption of ASU 2015-02,assets, liabilities, and noncontrolling interests from our investment funds that had previously been consolidated are no longer included in the statement of financialcondition. Additionally, when an investment fund is consolidated, management fees, fee credits and carried interest earned from consolidated funds are eliminatedin consolidation and as such are not recorded in Fees and Other. The economic impact of these management fees, fee credits and carried interests that areeliminated is reflected as an adjustment to noncontrolling interests and has no impact to Net Income Attributable to KKR & Co. L.P. KKR adopted this guidanceusing the modified retrospective method. As a result, no retrospective adjustment is required and prior periods presented under GAAP have not been impacted. For the years Ended December 31, 2017 2016 2015 2014 2013 (all dollars are in thousands, except unit and per unit data)Statements of Operations Data: Fees and Other$3,282,265 $1,908,093 $1,043,768 $1,110,008 $762,546Less: Total Expenses2,336,692 1,695,474 1,871,225 2,196,067 1,767,138Total Investment Income (Loss)1,838,795 762,606 6,169,125 6,544,748 8,896,746Income (Loss) Before Taxes2,784,368 975,225 5,341,668 5,458,689 7,892,154Income Taxes224,326 24,561 66,636 63,669 37,926Net Income (Loss)2,560,042 950,664 5,275,032 5,395,020 7,854,228Net Income (Loss) Attributable to RedeemableNoncontrolling Interests73,972 (8,476) (4,512) (3,341) 62,255Net Income (Loss) Attributable to NoncontrollingInterests andAppropriated Capital1,467,765 649,833 4,791,062 4,920,750 7,100,747Net Income (Loss) Attributable to KKR & Co. L.P.1,018,305 309,307 488,482 477,611 691,226Net Income Attributable to Series A PreferredUnitholders23,288 17,337 — — —Net Income Attributable to Series B Preferred Unitholders10,076 4,898 — — —Net Income (Loss) Attributable toKKR & Co. L.P. Common Unitholders$984,941 $287,072 $488,482 $477,611 $691,226 Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit Basic$2.10 $0.64 $1.09 $1.25 $2.51Diluted$1.95 $0.59 $1.01 $1.16 $2.30Weighted Average Common Units Outstanding Basic468,282,642 448,905,126 448,884,185 381,092,394 274,910,628Diluted506,288,971 483,431,048 482,699,194 412,049,275 300,254,09096Table of Contents As of December 31, 2017 2016 2015 2014 2013 (all dollars are in thousands)Statements of Financial Condition Data (period end): Total Assets$45,834,719 $39,002,897 $71,042,339 $65,872,745 $51,427,201Total Liabilities$25,171,919 $21,884,814 $21,574,754 $14,168,684 $4,842,383Redeemable Noncontrolling Interests$610,540 $632,348 $188,629 $300,098 $627,807Noncontrolling Interests$12,866,324 $10,545,902 $43,731,774 $46,004,377 $43,235,001Appropriated Capital$— $— $— $16,895 $—Total KKR & Co. L.P. Partners' Capital (1)$7,185,936 $5,939,833 $5,547,182 $5,382,691 $2,722,010 (1)Total KKR & Co. L.P. partners' capital (including Series A and B preferred partners' capital) reflects only the portion of equity attributable to KKR & Co. L.P. (59.1% interest in theKKR Group Partnerships as of December 31, 2017) and differs from book value reported on a segment basis primarily as a result of the exclusion of the equity impact of KKRManagement Holdings Corp. and allocations of equity to KKR Holdings. KKR Holdings' 40.9% interest in the KKR Group Partnerships as of December 31, 2017 is reflected asnoncontrolling interests and is not included in total KKR & Co. L.P. partners' capital. 97Table 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 & Co. L.P. and the related notesincluded elsewhere in this report. The historical consolidated financial data discussed below reflects the historical results and financial position of KKR. Inaddition, this discussion and analysis contains forward-looking statements and involves numerous risks and uncertainties, including those described under"Cautionary Note Regarding Forward-looking Statements" and "Risk Factors." Actual results may differ materially from those contained in any forward-lookingstatements. Overview of Business For a discussion about our businesses, business segments and our firm, see "Item 1. Business."Business Environment Economic and Market ConditionsEconomic Conditions . As a global investment firm, we are affected by financial and economic conditions globally. Global and regional economic conditionshave 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, our ability to raise capital from investors and our ability to make new investments. Financial and economic conditions in the United States,the European Union, Japan, China and other major economies are significant contributors to the global economy.As of December 31, 2017, the United States appears to be experiencing growth and signs of rising inflation, and the U.S. Federal Reserve is expected tocontinue to raise its benchmark interest rate and reduce its balance sheet. In the United States, real GDP growth was 2.3% for the full year ended December 31,2017, compared to 1.5% in the prior year; the U.S. unemployment rate was 4.1% as of December 31, 2017, down from 4.7% as of December 31, 2016; U.S. coreconsumer price index inflation was 1.8% on a year-over-year basis as of December 31, 2017, down from 2.2% on a year-over-year basis as of December 31, 2016;and the effective federal funds rate set by the U.S. Federal Reserve was 1.3% as of December 31, 2017, up from 0.7% as of December 31, 2016. As of December 31, 2017, the European Union appears to be experiencing growth with the expectation of rising inflation, and the European Central Bank isexpected to taper its quantitative easing program in the near future. In the Euro Area, real GDP growth is estimated to be 2.4% for the year ended December 31,2017 compared to 1.8% in the prior year; the Euro Area unemployment rate was 8.7% as of December 31, 2017, down from 9.7% as of December 31, 2016; EuroArea core inflation was 0.9% on a year-over-year basis as of December 31, 2017, flat compared to the prior year as of December 31, 2016; and the short-termbenchmark interest rate set by the European Central Bank was 0.0% as of December 31, 2017, flat from 0.0% as of December 31, 2016. In addition, in March2017, the United Kingdom triggered Article 50 to formally begin the process to exit from the European Union, which could, among other outcomes, significantlydisrupt trade and the free movement of goods, services and people between the United Kingdom and the European Union.As of December 31, 2017, the Bank of Japan is expected to continue its quantitative easing program, and the Chinese economy appears to be slowing slightlyagainst the backdrop of certain economic reforms. In Japan, the short-term benchmark interest rate set by the Bank of Japan was -0.1% as of December 31, 2017 ascompared to -0.1% as of December 31, 2016; and in China, reported real GDP was 6.9% in the year ended December 31, 2017, above the 6.7% reported for theyear ended December 31, 2016.These and other key issues could have repercussions across regional and global financial markets, which could adversely affect the valuations of ourinvestments. Other key issues include (i) political uncertainty caused by, among other things, populist political parties and economic nationalist sentiments, (ii)regulatory changes regarding, for example, taxation, international trade, cross-border investments, immigration, and austerity programs, and (iii) increasedvolatility as the U.S. Federal Reserve potentially raises interest rates more frequently and/or in larger increments than in previous years and (iv) technologicaladvancements and innovations that may disrupt marketplaces and businesses. For a further discussion of how market conditions may affect our businesses, see"Risk Factors—Risks Related to Our Business—Difficult market and economic conditions can adversely affect our business in many ways, including by reducingthe 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 negativelyimpact our net income and cash flow and adversely affect our financial condition." 98Table of ContentsEquity and Credit Markets . Global equity and credit 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, which also impacts our ability to generate incentive fees and carried interest. Periods of volatility and dislocation in the capital markets presentsubstantial risks, but also can present us with opportunities to invest at reduced valuations that position us for future growth and investment returns. Low interestrates related to monetary stimulus and economic stagnation may negatively impact expected returns on all types of investments. Higher interest rates in conjunctionwith slower growth or weaker currencies in some emerging market economies have caused, and may further 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 centralbank quantitative easing campaigns and comparatively low interest rates relative to the United States, could potentially experience further currency volatility andweakness relative to the U.S. dollar.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 31,2017, global equity markets were positive, with the S&P 500 Index up 21.8% and the MSCI World Index up 23.1% on a total return basis including dividends.Equity market volatility as evidenced by the Chicago Board Options Exchange Market Volatility Index (the "VIX"), a measure of volatility, ended at 11.0 as ofDecember 31, 2017, decreasing from 14.0 as of December 31, 2016. For a discussion of our valuation methods, see "Risk Factors—Risks Related to the Assets WeManage—Our investments are impacted by various economic conditions that are difficult to quantify or predict, which may have a significant impact on thevaluation of our investments and, therefore, on the investment income we realize and our results of operations and financial condition" and "—Critical AccountingPolicies—Fair Value Measurements—Level III Valuation Methodologies."Many of our investments are also in non-investment grade credit instruments, and our funds and our portfolio companies also rely on credit financing and theability to refinance existing debt. Consequently, any decrease in the value of credit instruments that we have invested in or any increase in the cost of creditfinancing reduces our returns and decreases our net income. In particular due in part to holdings of credit instruments such as CLOs on our balance sheet, theperformance of the credit markets has had an amplified impact on our financial results, as we directly bear the full extent of losses from credit instruments on ourbalance sheet. Credit markets can also impact valuations because a discounted cash flow analysis is generally used as one of the methodologies used to ascertainthe fair value of our investments that do not have readily observable market prices. In addition, with respect to our credit instruments, tightening credit spreads aregenerally expected to lead to an increase, and widening credit spreads are generally expected to lead to a decrease, in the value of these credit investments, if notoffset by hedging or other factors. In addition, the significant widening of credit spreads is also typically expected to negatively impact equity markets, which inturn would negatively impact our portfolio and us as noted above. During the year ended December 31, 2017, U.S. investment grade corporate bond spreads (BofAMerrill Lynch US Corporate Index) tightened by 31 basis points and U.S. high-yield corporate bond spreads (BofAML HY Master II Index) tightened by 59 basispoints. The non-investment grade credit indices rose during the year ended December 31, 2017, with the S&P/LSTA Leveraged Loan Index up 4.1% and theBofAML HY Master II Index up 7.5%. In addition, during the year ended December 31, 2017, 10-year government bond yields declined 4 basis points in theUnited States and declined 5 basis points in the United Kingdom, rose 22 basis points in Germany, were flat in Japan and rose 85 basis points in China. For afurther discussion of how market conditions may affect our businesses, see "Risk Factors—Risks Related to Our Business—Difficult market and economicconditions 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"and "Risk Factors—Risks Related to the Assets We Manage—Our investments are impacted by various economic conditions that are difficult to quantify orpredict, which may have a significant impact on the valuation of our investments and, therefore, on the investment income we realize and our results of operationsand financial condition."For further discussion of the impact of global credit markets on our financial condition and results of operations, see "Risk Factors—Risks Related to theAssets We Manage—Changes in the debt financing markets may negatively impact the ability of our investment funds, their portfolio companies and strategiespursued with our balance sheet assets to obtain attractive financing for their investments or to refinance existing debt and may increase the cost of such financing orrefinancing if it is obtained, which could lead to lower-yielding investments and potentially decrease our net income," "Risk Factors—Risks Related to the AssetsWe Manage—Our investments are impacted by various economic conditions that are difficult to quantify or predict, which may have a significant impact on thevaluation of our investments and, therefore, on the investment income we realize and our results of operations and financial condition" and "Risk Factors—RisksRelated to the Assets We Manage—Our funds and our firm through our Principal Activities segment may make a limited number of investments, or investmentsthat are concentrated in certain issuers, geographic regions or asset types, which could negatively affect our performance or the99Table of Contentsperformance of our funds to the extent those concentrated assets perform poorly." For a further discussion of our valuation methods, see "—Critical AccountingPolicies—Fair Value Measurements—Level III Valuation Methodologies."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 can also affect our businesses and investments that deal in cross-border trade. The appreciation or depreciation of the U.S.dollar is expected to contribute to a decrease or increase, respectively, in the U.S. dollar value of our non-U.S. investments to the extent unhedged. In addition, anappreciating U.S. dollar would be expected to make the exports of U.S. based companies less competitive, which may lead to a decline in their export revenues, ifany, while a depreciating U.S. dollar would be expected to have the opposite effect. Moreover, when selecting investments for our investment funds that aredenominated in U.S. dollars, an appreciating U.S. dollar may create opportunities to invest at more attractive U.S. dollar prices in certain countries outside of theUnited States, while a depreciating U.S. dollar would be expected to have the opposite effect. For our investments denominated in currencies other than the U.S.dollar, the depreciation in such currencies will generally contribute to the decrease in the valuation of such investments, to the extent unhedged, and adverselyaffect the U.S. dollar equivalent revenues of portfolio companies with substantial revenues denominated in such currencies, while the appreciation in suchcurrencies would be expected to have the opposite effect. For the year ended December 31, 2017, the euro rose 14.1%, the British pound rose 9.5%, the Japaneseyen rose 3.7%, and the Chinese renminbi rose 6.3%, respectively, relative to the U.S. dollar. For additional 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 other Private Markets and Public Marketsstrategies and products, including private equity, direct lending, special situations and CLOs, also have meaningful investments in the energy sector. The value ofthese investments is heavily influenced by the price of natural gas and oil. During the year ended December 31, 2017, the long-term price of WTI crude oildecreased approximately 5%, while the long-term price of natural gas was relatively stable. The long-term price of WTI crude oil decreased from approximately$56 per barrel to $53 per barrel, and the long-term price of natural gas decreased from approximately $2.87 per mcf to $2.82 per mcf as of December 31, 2016 andDecember 31, 2017, respectively. When commodity prices decline or if a decline is not offset by other factors, we would expect the value of our energy real assetinvestments to be adversely impacted. In addition, because we hold certain energy assets on our balance sheet, which had a fair value of $0.6 billion as ofDecember 31, 2017 , these price movements would have an amplified impact on our financial results, as we would directly bear the full extent of such gains orlosses. For additional information regarding our energy real assets, see "—Critical Accounting Policies—Fair Value Measurements—Level III ValuationMethodologies—Real Asset Investments" and "Risk Factors—Risks Related to the Assets We Manage—Our funds and our firm through our Principal Activitiessegment may make a limited number of investments, or investments that are concentrated in certain issuers, geographic regions or asset types, which couldnegatively affect our performance or the performance of our funds to the extent those concentrated assets perform poorly."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 capital appreciation orincome. Since 2010, we have expanded into strategies such as energy, infrastructure, real estate, growth equity, core, credit and, through strategic managerpartnerships, hedge funds. In several of these strategies, our first time funds have begun raising successor funds, and we expect the cost of raising such successorfunds to be lower. We have also reached out to new clients, including retail and high net worth clients. However, fundraising continues to be competitive. Whileour Americas Fund XII, Asian Fund III and our Real Estate Partners Americas II fund exceeded the size of their respective predecessor funds, there is no assurancethat fundraises for our other flagship private equity funds or for our newer strategies and their successor funds will experience similar success. If we are unable tosuccessfully raise comparably sized or larger funds, our AUM, FPAUM and associated fees attributable to new capital raised in future periods may be lower thanin prior years. New capital raised in AUM for the fiscal years ended December 31, 2015, 2016 and 2017 was $19.8 billion, $28.8 billion and $38.7 billion. See"Risk Factors—Risks Related to Our Business—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."100Table of ContentsOur ability to successfully deploy capital. Our ability to maintain and grow our revenue base is dependent upon our ability to successfully deploy the capitalavailable to us and participate in capital markets transactions. Greater competition, high valuations, increased overall cost of credit and other general marketconditions may impact our ability to identify and execute attractive investments. Additionally, because we seek to make investments that have an ability to achieveour targeted returns while taking on a reasonable level of risk, we may experience periods of reduced investment activity. We have a long-term investment horizonand the capital deployed in any one quarter may vary significantly from the capital deployed in any other quarter or the quarterly average of capital deployed in anygiven year. Reduced levels of transaction activity also tends to result in reduced potential future investment gains, lower transaction fees and lower fees for ourcapital markets business, which may earn fees in the syndication of equity or debt. Capital invested for the fiscal years ended December 31, 2015, 2016 and 2017were $11.5 billion, $11.0 billion and $18.4 billion, and syndicated capital for the fiscal years ended December 31, 2015, 2016 and 2017 were $0.9 billion,$1.2 billion and $4.7 billion.Our ability to realize investments. Challenging market and economic conditions may adversely affect our ability to exit and realize value from ourinvestments and result in lower-than-expected returns. Although the equity markets are not the only means by which we exit investments, the strength and liquidityof the U.S. and relevant global equity markets generally, and the initial public offering market specifically, affect the valuation of, and our ability to successfullyexit, our equity positions in our private equity portfolio companies in a timely manner. We may also realize investments through strategic sales. When financing isnot available or becomes too costly, it may be more difficult to find a buyer that can successfully raise sufficient capital to purchase our investments. For the fiscalyears ended December 31, 2015, 2016 and 2017, through exit activity in our investments, we realized carried interest of $1.0 billion, $1.3 billion and $1.2 billion.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 CMBS. We refer to CLOs and CMBS as collateralizedfinancing entities ("CFEs").When an entity is consolidated, we reflect the accounts of the consolidated entity, including its assets, liabilities, fees, expenses, investment income, cashflows and 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 IncomeAttributable to KKR or KKR's partners' capital that KKR reports, the consolidation does significantly impact the financial statement presentation under GAAP.This is due to the fact that the accounts of the consolidated entities are reflected on a gross basis while the allocable share of those amounts that are attributable tothird parties are reflected as single line items. The single line items in which the accounts attributable to third parties are recorded are presented as noncontrollinginterests on the consolidated statements of financial condition and net income attributable to noncontrolling interests on the consolidated statements of operations. 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. Monitoringfees also include certain expense reimbursements from certain portfolio companies and unconsolidated funds. For a further discussion of our fee policies, see "Item 8. Financial Statements and Supplementary Data—Summary of Significant Accounting Policies."101Table of Contents 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, in the past cash bonusesthat are paid to certain employees have been borne by KKR Holdings. These bonuses have historically been funded with distributions that KKR Holdings receiveson KKR Group Partnership Units held by KKR Holdings but are not then passed on to holders of unvested units of KKR Holdings. Because employees are notentitled to receive distributions on units that are unvested, any amounts allocated to employees in excess of an employee's vested equity interests are reflected asemployee compensation and benefits expense. These compensation charges are currently recorded based on the amount of cash expected to be paid by KKRHoldings. Because KKR makes only fixed quarterly distributions, the distributions made on KKR Group Partnership Units underlying any unvested KKR Holdingsunits are generally insufficient to fund annual cash bonus compensation 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 while subject to a 5 year vesting period, will become fully vested by 2021, thus decreasing theamount of distributions received by KKR Holdings that are available for annual cash bonus compensation. We, therefore, expect to pay all or substantially all ofthe cash bonus payments from KKR's cash from operations, the carry pool and other performance-based income compensation as described below, although fromtime to time, KKR Holdings may contribute to the cash bonus payments in the future. The amount of such annual cash bonus paid by KKR Holdings was $5.5million for the year ending December 31, 2017. Any other amounts paid were funded from other sources, including cash from our operations and the carry pool.See "Risks Related to Our Business—If we cannot retain and motivate our principals and other key personnel and recruit, retain and motivate new principals andother key personnel, our business, results and financial condition could be adversely affected" regarding the adequacy of such distributions to fund futurediscretionary cash bonuses.KKR uses three different methods, which are designed to yield comparable results, to allocate carried interest and other performance income compensation.With respect to KKR's investment funds that provide for carried interest without a preferred return, KKR allocates 40% of the carried interest received from suchfunds to its carry pool for employees and non-employee operating consultants. In addition, for investment funds that provide for incentive fees rather than carriedinterest, our carry pool is supplemented by allocating 40% of the incentive fees that do not constitute carried interest that are earned from such funds toperformance income compensation. Beginning with the quarter ended September 30, 2016, for investment funds that provide for carried interest with a preferredreturn and have accrued carried interest as of June 30, 2016, KKR also includes 40% of the management fees that would have been subject to a management feerefund as performance income compensation. Because of the different ways management fees are refunded in preferred return and non-preferred return funds thatprovide for carried interest, this calculation of 40% of the portion of the management fees subject to refund for funds that have a preferred return is designed toallocate to compensation an amount comparable to the amount that would have been allocated to the carry pool had the fund not had a preferred return. Beginningwith the quarter ended September 30, 2017, for then-current and future carry generating funds with no or minimal accrued carried interest as of June 30, 2017,KKR allocates 43% of the carried interest to the carry pool instead of 40% of carried interest. For impacted funds, the incremental 3% replaces the allocation ofmanagement fee refunds that would have been calculated for those funds and is designed, based on a historical financial analysis of certain investment funds, toallocate an amount for preferred return funds that is comparable to the management fee refunds that would have been allocated as performance incomecompensation for those funds. The percentage of carried interest, management fee refunds, and incentive fees allocable to the carry pool or as performance incomecompensation is subject to change from time to time. For a discussion of how management fees are refunded for preferred return funds and non-preferred funds see"—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. 102Table of ContentsGeneral, 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.Investment Income (Loss) Net Gains (Losses) from Investment Activities 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.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. Interest Expense Interest expense is incurred from debt issued by KKR, including debt issued by KFN, credit facilities entered into by KKR, debt securities issued byconsolidated CFEs and financing arrangements at our consolidated funds entered into primarily with the objective of managing cash flow. KFN's debt obligationsare non-recourse to KKR beyond the assets of KFN. Debt securities issued by consolidated CFEs are supported solely by the investments held at the CFE and arenot collateralized by assets of any other KKR entity. Our obligations under financing arrangements at our consolidated funds are generally limited to our pro rataequity interest in such funds. However, in some circumstances, we may provide limited guarantees of the obligations of our general partners in an amount equal toits pro rata equity interest in such funds. Our management companies bear no obligations with respect to financing arrangements at our consolidated funds. We alsomay provide other kinds of guarantees. See "—Liquidity."103Table of ContentsIncome TaxesThe 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, certain subsidiaries of KKR, including KKR Management Holdings Corp., are subject to U.S. federal, state and local corporate incometaxes at the entity level and the related tax provision attributable to KKR's share of this income is reflected in the financial statements. We also generate certaininterest 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. The 2017 Tax Act, which was enacted on December 22, 2017, permanently reduces the U.S. federal corporate income tax rate from a maximum of 35% to a21% rate, effective January 1, 2018. KKR has recognized the provisional tax impacts related to deemed repatriated earnings and the revaluation of deferred taxassets, deferred tax liabilities and the related impact on the tax receivable agreement and included these amounts in its consolidated financial statements for theyear ended December 31, 2017. The ultimate impact may differ from these provisional amounts, possibly materially, due to, among other things, additionalanalysis, changes in interpretations and assumptions KKR has made, additional regulatory guidance that may be issued, and actions KKR may take following theenactment of the 2017 Tax Act. The accounting is expected to be complete when the 2017 U.S. corporate income tax return is filed in 2018. See Item 8. FinancialStatements and Supplementary Data—Note 11 "Income Taxes" to the consolidated financial statements for further information on the financial statement impact ofthe 2017 Tax Act.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 primarily represents the ownership interests that certain third parties hold in entities that areconsolidated in the financial statements as well as the ownership interests in our KKR Group Partnerships that are held by KKR Holdings. The allocable share ofincome and expense attributable to these interests is accounted for as net income (loss) attributable to noncontrolling interests. Given the consolidation of certain ofour investment funds and the significant ownership interests in our KKR Group Partnerships held by KKR Holdings, we expect a portion of net income (loss) willcontinue to be attributed to noncontrolling interests in our business.For a further discussion of our noncontrolling interests policies, see "Item 8. Financial Statements and Supplementary Data—Summary of SignificantAccounting Policies."104Table of ContentsSegment 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 Item. 8 Financial Statements and SupplementaryData—Note 14 "Segment Reporting" and later in this report under "—Segment Balance Sheet."Adjusted 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 (the "Equity Incentive Plan"), but excluding preferred units), KKR Holdings and other holders of securitiesexchangeable into common units of KKR & Co. L.P. and represent the fully diluted common unit count using the if-converted method. We believe this measure isuseful to unitholders as it provides an indication of the total common equity ownership of KKR as if all outstanding KKR Holdings units, equity awards issuedunder the Equity Incentive Plan and other exchangeable securities had been exchanged for common units of KKR & Co. L.P. The Series A and Series B PreferredUnits are not exchangeable for common 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 usefulto unitholders as it provides insight into the calculation of amounts available for distribution on a per unit basis. Adjusted units eligible for distribution is used inthe calculation 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 KKR Private Equity Investors, L.P. on October 1, 2009. After-tax distributable earnings does not represent and is not used to calculate actualdistributions under KKR's distribution policy.The following tables present our calculations of distributable segment revenues, which is our total segment revenues excluding the impact of mark-to-marketgains (losses), distributable segment expenses, which is our total segment expenses excluding the impact of mark-to-market gains (losses), and after-taxdistributable earnings on common units for the years ended December 31, 2017 , 2016 and 2015. Additionally, the individual components of our calculations ofafter-tax distributable earnings are reconciled to the most directly comparable GAAP measure in the tables below.105Table of ContentsThe following table presents our calculation of distributable segment revenues for the years ended December 31, 2017 , 2016 and 2015. year Ended ($ in thousands) December 31, 2017 December 31, 2016 December 31, 2015 Distributable Segment Revenues Fees and Other, Net Management Fees $905,188 $797,862 $732,033 Monitoring Fees 81,021 64,354 264,643 Transaction Fees 777,247 344,274 364,994 Fee Credits (261,429) (131,628) (219,620) Total Fees and Other, Net 1,502,027 1,074,862 1,142,050 Realized Performance Income (Loss) Incentive Fees 73,395 33,346 19,647 Carried Interest 1,198,981 1,256,208 1,027,154 Total Realized Performance Income (Loss) 1,272,376 1,289,554 1,046,801 Realized Investment Income (Loss) Net Realized Gains (Losses) 194,020 371,563 337,023 Interest Income and Dividends 285,696 322,857 411,536 Interest Expense (181,612) (188,761) (203,085) Total Realized Investment Income (Loss) 298,104 505,659(1)545,474(2)Total Distributable Segment Revenues $3,072,507 $2,870,075 $2,734,325 (1) 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 our Economic Net Income during the yearended December 31, 2016.(2) Amount includes a $100.0 million realized loss on a segment basis relating to the write-off of Energy Future Holdings which had previously been marked at zero on an unrealized basis. Accordingly, this write-off had noimpact on our Economic Net Income during the year ended December 31, 2015.The following table presents our calculation of distributable segment expenses for the years ended December 31, 2017 , 2016 and 2015. year Ended($ in thousands) December 31, 2017 December 31, 2016 December 31, 2015Distributable Segment Expenses Compensation and Benefits Cash Compensation and Benefits $544,987 $395,016 $409,992Performance Income Compensation 533,450 538,321 418,718Total Compensation and Benefits 1,078,437 933,337 828,710Occupancy and Related Charges 56,410 62,400 62,657Other Operating Expenses 243,772 234,348 233,618Total Distributable Segment Expenses $1,378,619 $1,230,085 $1,124,985 106Table of ContentsThe following table presents our calculation of after-tax distributable earnings for the years ended December 31, 2017 , 2016 and 2015. year Ended($ in thousands except per unit data) December 31, 2017 December 31, 2016 December 31, 2015After-tax Distributable Earnings Distributable Segment Revenues $3,072,507 $2,870,075 $2,734,325Distributable Segment Expenses 1,378,619 1,230,085 1,124,985Income (Loss) Attributable to Noncontrolling Interests 6,551 2,336 16,007Income Taxes Paid 94,065 87,723 140,677Preferred Distributions 33,364 22,235 —After-tax Distributable Earnings $1,559,908 $1,527,696 $1,452,656 Per Adjusted Unit Eligible for Distribution $1.91 $1.89 $1.78For a discussion of the components that drove the changes in our after-tax distributable earnings, see discussion of (i) management, monitoring and transactionfees, (ii) realized performance income, (iii) realized gains and net interest and dividends within investment income and (iv) expenses excluding unrealizedperformance income compensation, within "—Segment Analysis."The following are reconciliations of the individual components of the calculation of after-tax distributable earnings to the most directly comparable GAAPmeasure. year Ended($ in thousands) December 31, 2017 December 31, 2016 December 31, 2015 Fees and Other $3,282,265 $1,908,093 $1,043,768Plus: Management fees relating to consolidated funds and placementfees 204,943 178,619 531,027Less: Fee credits relating to consolidated funds 4,028 2,921 202,269Plus: Net realized and unrealized carried interest - consolidated funds 58,562 32,651 1,190,699Plus: Total investment income (loss) 693,462 (78,764) 153,512Less: Revenue earned by oil & gas producing entities 63,460 65,754 112,328Less: Reimbursable expenses 123,144 81,549 66,144Less: Other (19,507) 25,095 32,357Total Segment Revenues $4,068,107 $1,865,280 $2,505,908Less: Unrealized Carried Interest 600,242 (420,372) 163,545Less: Net Unrealized Gains (Losses) 395,358 (584,423) (391,962)Total Distributable Segment Revenues $3,072,507 $2,870,075 $2,734,325 107Table of Contents year Ended($ in thousands) December 31, 2017 December 31, 2016 December 31, 2015 Total Expenses $2,336,692 $1,695,474 $1,871,225Less: Equity based compensation 334,821 264,890 261,579Less: Reimbursable expenses and placement fees 181,839 148,483 103,307Less: Operating expenses relating to consolidated funds, CFEs and otherentities 82,888 104,339 65,012Less: Expenses incurred by oil & gas producing entities 46,411 70,312 153,611Less: Intangible amortization 17,821 6,647 49,766Less: Other 46,692 32,228 46,038Total Segment Expenses $1,626,220 $1,068,575 $1,191,912Less: Unrealized Performance Income Compensation 247,601 (161,510) 66,927Total Distributable Segment Expenses $1,378,619 $1,230,085 $1,124,985 Assets Under Management ("AUM")Assets under management represent the assets managed or advised by KKR from which KKR is entitled to receive fees or a carried interest (either currently orupon deployment of capital), general partner capital and assets managed or advised by strategic manager partnerships in which KKR holds a minority ownershipinterest. We believe this measure is useful to unitholders as it provides additional insight into the capital raising activities of KKR and its strategic managerpartnerships and the overall activity in their investment funds and other managed capital. KKR calculates the amount of AUM as of any date as the sum of: (i) thefair value of the investments of KKR's investment funds; (ii) uncalled capital commitments from these funds, including uncalled capital commitments from whichKKR 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 ofoutstanding CLOs (excluding CLOs wholly-owned by KKR); (v) KKR's pro rata portion of the AUM of strategic manager partnerships in which KKR holds aminority ownership interest; and (vi) the fair value of other assets managed by KKR. The pro rata portion of the AUM of strategic manager partnerships iscalculated based on KKR's percentage ownership interest in such entities multiplied by such entity's respective AUM. KKR's definition of AUM is not based onany definition of AUM that may be set forth in the agreements governing the investment funds, vehicles or accounts that it manages or calculated pursuant to anyregulatory 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.Capital 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 leveraged credit strategies, (ii) capital invested by KKR's Principal Activitiessegment that is not a co-investment alongside KKR's investment funds, and (iii) capital invested by the Principal Activities segment that is not invested inconnection with a syndication transaction by KKR's Capital Markets segment. Capital syndicated by our Capital Markets segment to third parties other than KKR'sinvestment funds or Principal Activities segment is not included in capital invested. See also "—Syndicated Capital."108Table of ContentsEconomic 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 the AUM from which KKR receives management fees. We believe this measure is useful to unitholders as it providesadditional insight into the capital base upon which KKR earns management fees. FPAUM is the sum of all of the individual fee bases that are used to calculateKKR's and its strategic manager partnership management fees and differs from AUM in the following respects: (i) assets and commitments from which KKR doesnot receive a management fee are excluded (e.g., assets and commitments with respect to which it receives only carried interest or is otherwise not currentlyreceiving a management fee) and (ii) certain assets, primarily in its private equity funds, are reflected based on capital commitments and invested capital asopposed to fair value because fees are not impacted 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, (ii) debt capital that is arranged as part of the acquisition financing oftransactions originated by KKR investment funds and (iii) debt capital that is either underwritten or arranged on a best efforts basis. Syndicated capital is used as ameasure of investment activity for KKR during a given period, and we believe that this measure is useful to unitholders as it provides additional insight into levelsof syndication activity in KKR's Capital Markets segment and across its investment platfor m .Uncalled 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. 109Table of ContentsA 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. For a discussion of the components that drove the changes in our FRE, see discussion of (i) management, monitoring and transactionfees and (ii) expenses of our Private Markets, Public Markets and Capital Markets segments excluding unrealized performance income compensation in "—Segment Analysis." year Ended($ in thousands) December 31, 2017 December 31, 2016 December 31, 2015Net Income (Loss) Attributable to KKR & Co. L.P. CommonUnitholders $984,941 $287,072 $488,482Plus: Preferred Distributions 33,364 22,235 —Plus: Net income (loss) attributable to noncontrolling interests held byKKR Holdings L.P. 791,021 212,878 433,693Plus: Non-cash equity-based charges 346,035 264,890 261,579Plus: Amortization of intangibles, placement fees and other, net 122,870 (17,267) 47,599Less: Gain from remeasurement of tax receivable agreement liability (1) (67,221) — —Plus: Income tax (benefit) (2) 224,326 24,561 66,636Economic Net Income (Loss) 2,435,336 794,369 1,297,989Plus: Income attributable to segment noncontrolling interests 6,551 2,336 16,007Less: Total investment income (loss) 693,462 (78,764) 153,512Less: Net performance income (loss) 1,091,567 492,371 724,701Plus: Expenses of Principal Activities Segment 209,748 154,321 174,713Fee Related Earnings 866,606 537,419 610,496Plus: Net interest and dividends 104,084 134,096 208,451Less: Expenses of Principal Activities Segment 209,748 154,321 174,713Plus: Realized performance income (loss), net 738,926 751,233 628,083Plus: Net realized gains (losses) 194,020 371,563 337,023Less: Income taxes paid 94,065 87,723 140,677Less: Preferred distributions 33,364 22,235 —Less: Income attributable to segment noncontrolling interests 6,551 2,336 16,007After-tax Distributable Earnings $1,559,908 $1,527,696 $1,452,656 (1) Represents the impacts of the remeasurement of the amounts payable under the tax receivable agreement which arises from changes in the associated deferred tax balance, including theimpacts related to the 2017 Tax Act.(2) Includes the impacts of the remeasurement of deferred tax assets and liabilities which arises from changes in the estimated future tax rates related to the 2017 Tax Act. For the year endedDecember 31, 2017, the provision for income tax includes approximately $97.9 million of income tax expense related to the 2017 Tax Act. Management believes that excluding the remeasurement of the tax receivable agreement from ENI is meaningful as it increases comparability between periods. Remeasurement of the taxreceivable agreement is an estimate and may change due to changes in interpretations and assumptions based on additional guidance that may be issued pertaining to the 2017 Tax Act.110Table of ContentsConsolidated Results of Operations The following is a discussion of our consolidated results of operations for the years ended December 31, 2017 and 2016 . You should read this discussion inconjunction with the consolidated financial statements and related notes included elsewhere in this report. For a more detailed discussion of the factors thataffected the results of operations of our four business segments in these periods, see "—Segment Analysis."Year ended December 31, 2017 compared to year ended December 31, 2016 year Ended December 31, 2017 December 31, 2016 Change ($ in thousands)Revenues Fees and Other$3,282,265 $1,908,093 $1,374,172 Expenses Compensation and Benefits1,695,490 1,063,813 631,677Occupancy and Related Charges58,722 64,622 (5,900)General, Administrative and Other582,480 567,039 15,441Total Expenses2,336,692 1,695,474 641,218 Investment Income (Loss) Net Gains (Losses) from Investment Activities1,203,159 342,897 860,262Dividend Income202,115 187,853 14,262Interest Income1,242,419 1,021,809 220,610Interest Expense(808,898) (789,953) (18,945)Total Investment Income (Loss)1,838,795 762,606 1,076,189 Income (Loss) Before Taxes2,784,368 975,225 1,809,143 Income Taxes224,326 24,561 199,765 Net Income (Loss)2,560,042 950,664 1,609,378 Net Income (Loss) Attributable to Redeemable Noncontrolling Interests73,972 (8,476) 82,448Net Income (Loss) Attributable to Noncontrolling Interests1,467,765 649,833 817,932 Net Income (Loss) Attributable to KKR & Co. L.P.1,018,305 309,307 708,998 Less: Net Income Attributable to Series A Preferred Unitholders23,288 17,337 5,951Less: Net Income Attributable to Series B Preferred Unitholders10,076 4,898 5,178 Net Income (Loss) Attributable to KKR & Co. L.P. Common Unitholders$984,941 $287,072 $697,869111Table of ContentsFees and OtherFor the years ended December 31, 2017 and 2016 , fees and other consisted of the following: year Ended December 31, 2017 December 31, 2016 ChangeManagement Fees $700,245 $619,243 $81,002Transaction Fees 783,952 350,091 433,861Monitoring Fees 204,165 146,967 57,198Fee Credits (257,401) (128,707) (128,694)Carried Interest 1,740,661 803,185 937,476Incentive Fees 4,601 8,709 (4,108)Oil and Gas Revenue 63,460 65,754 (2,294)Consulting Fees 42,582 42,851 (269)Total Fees and Other $3,282,265 $1,908,093 $1,374,172Management fees, transaction fees, monitoring fees and fee credits all increased for the year ended December 31, 2017 compared to the year endedDecember 31, 2016 . For a more detailed discussion of the factors that affected our management fees, transaction fees, monitoring fees and fee credits during theperiod, see "—Segment Analysis."The increase in carried interest earned during the year ended December 31, 2017 was due primarily to increases in carried interest gains primarily reflecting ahigher level of appreciation in the value of our private equity portfolio as compared to the prior period and to a lesser extent gains in our private credit portfolioduring the current year. For a more detailed discussion of the factors that affected our Private Markets and Public Markets carried interest during the period, see"—Segment Analysis—Private Markets—Segment Revenues—Performance Income" and "—Segment Analysis—Public Markets—Segment Revenues—Performance Income."Compensation and Benefits ExpensesThe increase was primarily due to (i) a higher level of carry pool allocations reflecting higher appreciation in the value ofour private equity and credit portfolios, (ii) an increase in cash compensation and benefits and (iii) an increase in equity-basedcompensation resulting from new equity grants of KKR Holdings units during the year ended December 31, 2017 compared to the year ended December 31, 2016 .General, Administrative and Other ExpensesThe increase was primarily due to (i) a reduction in the fair value of the contingent consideration liability during the year ended December 31, 2016 related tothe acquisition of Prisma from $46.6 million to zero since it was determined that it was no longer probable that the sellers of Prisma would be entitled to any futureadditional payment under the arrangement while no such reversal of expense was incurred during the current period and (ii) an increase in professional fees andother expenses incurred as compared to the prior period. These increases were partially offset by (i) a lower level of financing costs incurred relating to debt at newconsolidated CLOs for which the fair value option has been elected, (ii) a decrease in depreciation, depletion and amortization of our consolidated oil and gas-producing entities primarily caused by a lower cost basis due to previously recorded impairments, resulting in a lower unit of production depletion rate comparedto the prior period and (iii) the write-off of intangible assets during the year ended December 31, 2016 in connection with the termination of management contractsfor certain credit funds that were wound down while no such charge was incurred during the current period.112Table of ContentsNet Gains (Losses) from Investment ActivitiesThe following is a summary of net gains (losses) from investment activities: year Ended December 31, 2017 December 31, 2016 ($ in thousands) Private Equity Investments$562,288 $109,288 Credit & Other Investments(372,543) (821,542) Investments of Consolidated CFEs(96,777) 185,712 Real Assets Investments200,006 229,398 Debt Obligations101,486 14,665 Other Net Gains (Losses) from Investment Activities808,699 625,376 Net Gains (Losses) from Investment Activities$1,203,159 $342,897 The net gains from investment activities for the year ended December 31, 2017 were comprised of net unrealized gains of $1,164.8 million and net realizedgains of $38.3 million .Unrealized Gains from Investment ActivitiesFor the year ended December 31, 2017 , net unrealized gains were driven primarily by (i) mark-to-market gains on alternative credit assets in our consolidatedspecial situations funds and KFN, (ii) mark-to-market gains in certain consolidated entities, the most significant of which were unrealized gains in our growthequity investments, (iii) mark-to-market gains in our private equity portfolio held by KKR's balance sheet, the most significant of which were unrealized gains inour investment in First Data Corporation, (iv) mark-to-market gains in our infrastructure portfolio held by KKR's balance sheet and (v) the reversal of unrealizedlosses on the sale of our investment in Fortune Creek Partnership (energy sector) and the restructurings of our investment in Aurora Eaglebine (energy sector)which are held by KKR's balance sheet in our energy portfolio. For the year ended December 31, 2017, unrealized gains from investment activities includes a gainof $67.2 million relating to a remeasurement of the tax receivable agreement liability which arises from changes in the associated deferred tax balances related tothe 2017 Tax Act.Unrealized Losses from Investment ActivitiesPartially offsetting the unrealized gains above were unrealized losses, the most significant of which were unrealized losses relating to (i) the reversal ofunrealized gains on the final sale of our investments in US Foods Holding Corp. (NYSE: USFD), HCA Holdings, Inc. (NYSE: HCA) and Galenica AG (VTX:GALN) and (ii) mark-to-market losses in certain consolidated entities, the most significant of which were unrealized losses in our growth equity investments.Realized Gains from Investment ActivitiesFor the year ended December 31, 2017, realized gains were comprised primarily of realized gains related to (i) the sale of private equity investments held byKKR's balance sheet, including the final sale of our investment in US Foods Holding Corp., HCA Holdings, Inc. and Galenica AG and the partial sale of ourinvestment in First Data Corporation.Realized Losses from Investment ActivitiesPartially offsetting these realized gains were realized losses relating to (i) alternative credit assets in our consolidated special situations funds and KFN, (ii) thesale of investments held by our consolidated CLOs and (iii) the sale of our investments in Fortune Creek Partnership and Aurora Eaglebine which are held byKKR's balance sheet in our energy portfolio.For a discussion of other factors that affected KKR's investment income, see "—Segment Analysis."113Table of ContentsNet Gains (Losses) from Investment Activities for the year ended December 31, 2016The 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 of privateequity investments held by KKR's balance sheet, including the partial sales of Walgreens Boots Alliance, Inc. (NASDAQ: WBA), Zimmer Biomet Holdings, Inc.(NYSE: ZBH) and HCA Holdings, Inc.; (ii) realized losses in connection with our investment in Samson Resources (energy sector); (iii) realized losses on assetsheld at consolidated CLOs; and (iv) realized gains on debt held at consolidated CLOs. For the year ended December 31, 2016, net unrealized losses were drivenprimarily by (i) mark-to-market losses in our private equity portfolio held by KKR's balance sheet including unrealized losses in First Data Corporation; (ii) mark-to-market losses on assets in our consolidated special situations funds; (iii) mark-to-market losses on debt held through consolidated CMBS; and (iv) the reversalof unrealized gains on the partial sales of Walgreens Boots Alliance, Inc., Zimmer Biomet Holdings, Inc. and HCA Holdings, Inc., as well as the reversal ofunrealized gains on debt realizations at our consolidated CLOs. Offsetting these unrealized losses were unrealized gains, the most significant of which wereunrealized gains relating to (i) the reversal of unrealized losses in connection with our investment in Samson Resources, (ii) reversals of unrealized losses on assetrealizations in our consolidated CLOs and (iii) mark-to-market gains on investments held through consolidated CMBS structures. For a discussion of other factorsthat affected KKR's investment income, see "—Segment Analysis."Dividend Income During the year ended December 31, 2017 , the most significant dividends received included $88.5 million from our consolidated special situations funds and$43.5 million from our consolidated real estate funds. During the year ended December 31, 2016 , the most significant dividends received included $51.5 millionfrom our consolidated special situations funds and dividends from US Foods Holding Corp. of $23.4 million, Sedgwick Claims Management Services (financialservices sector) of $12.7 million and PRA Health Sciences, Inc. (NASDAQ: PRAH) of $4.1 million. Significant dividends from portfolio companies are generallynot recurring quarterly dividends, and while they may occur in the future, their size and frequency are variable. For a discussion of other factors that affectedKKR's dividend income, see "—Segment Analysis."Interest Income The increase in interest income during the year ended December 31, 2017 was primarily due to a higher level of interest earned related to (i) an increase in theamount of investments in our consolidated special situations funds and other leveraged credit funds, (ii) the impact of the consolidation of three additional CLOssubsequent to the year ended December 31, 2016 , (iii) an increase in the amount of investments held by KREF, our REIT, compared to the prior period and (iv) anincrease in the amount of investments held at our India debt financing company. These increases were partially offset by a decrease in interest income at KFNprimarily due to a smaller portfolio generating recurring income as well as a decrease associated with the paydown of CLO 2007-01 in the second quarter of 2016.For a discussion of other factors that affected KKR's interest income, see "—Segment Analysis."Interest Expense The increase in interest expense during the year ended December 31, 2017 was primarily due to the impact of (i) the consolidation of three additional CLOssubsequent to the year ended December 31, 2016 , (ii) increased borrowings at our India debt financing company, (iii) increased CMBS issuances by KREF and(iv) increased borrowings from asset backed financing vehicles managed by KKR. These increases were partially offset by a decrease in interest expenseassociated with certain notes issued by consolidated CLOs being called for redemption during the year ended December 31, 2016 , which resulted in an increasedlevel of interest expense during 2016. Specifically, as a result of a paydown made in August 2016, KKR recorded increased interest expense of $59.9 million andan incremental $8.7 million of accelerated accretion of debt discounts during the year ended December 31, 2016 . The paydown of CLO 2007-01 during the yearended December 31, 2016 also contributed to the increased interest expense in the prior period. For a discussion of other factors that affected KKR's interestexpense, see "—Segment Analysis." Income (Loss) Before Taxes The increase in income (loss) before taxes was due primarily to higher carried interest gains in our private equityportfolio and higher net gains from investment activities, partially offset by an increase in expenses, in each case asdescribed above.114Table of ContentsIncome TaxesThe increase in income taxes is due primarily to accounting for the impacts of the 2017 Tax Act which was enacted on December 22, 2017. The 2017 Tax Act,among other provisions, reduced the U.S. federal corporate tax rate from 35% to 21%. Certain income tax effects of the 2017 Tax Act, including $97.9 million oftax expense recorded principally due to the remeasurement of our net deferred tax assets, are reflected in our financial results for the year ended December 31,2017. This net write-down reduces our deferred tax assets and liabilities to a level that reflects the future tax benefit or liability that will be realized at the new U.S.federal corporate tax rate of 21%. See Item. 8 Financial Statements and Supplementary Data—Note 2 "Summary of Significant Accounting Policies" to theconsolidated financial statements for further information on the financial statement impact of the 2017 Tax Act.Taxes also increased as a result of a higher level of fees earned by our management companies and capital markets companies during the year ended December 31,2017 as compared to the prior period and to a lesser extent a higher level of carried interest gains accrued by certain general partner entities subject to corporateincome tax.Net Income (Loss) Attributable to Noncontrolling Interests Net income attributable to noncontrolling interests for the year ended December 31, 2017 relates primarily to netincome attributable to KKR Holdings representing its ownership interests in the KKR Group Partnerships as well as third-party limited partner interests in thoseinvestment funds that we consolidate. The increase from the prior period is dueprimarily to (i) higher amounts attributed to KKR Holdings in connection with higher income recognized for the year ended December 31, 2017 as compared to theprior period, partially offset by a reduction in KKR Holdings' ownership percentage in the KKR Group Partnerships and (ii) a higher level of income recorded bycertain consolidated fund entities that is attributable to third-party limited partners. Net Income (Loss) Attributable to KKR & Co. L.P. The increase for the year ended December 31, 2017 was primarily due to increased fee income and to a lesser extent,higher carried interest gains and higher net investment gains from investment activities in the current period as compared to the prior period.115Table of ContentsYear 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)116Table 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 $6.2 million charge incurred during the year ended December 31, 2016 and(b) a decrease in depreciation, depletion and amortization of our consolidated oil and gas-producing entities caused by a lower cost basis due to previouslyrecorded impairments and lower production volumes compared to the117Table of Contentsprior period. These decreases were partially offset by (i) an increase in placement fees incurred in connection with capital raising activity, the most significant ofwhich relates to Americas Fund XII and (ii) financing costs incurred relating to debt at new consolidated CLOs for which the fair value option has been elected.Net Gains (Losses) from Investment ActivitiesOn January 1, 2016, KKR adopted ASU 2015-02, which resulted in the de-consolidation of most of KKR's investment funds that had been consolidated priorto such date. Effective with the adoption of ASU 2015-02, the Net Gains (Losses) from Investment Activities attributed to third-party limited partners in ourinvestment funds that had previously been consolidated are not included in the statement of operations.The following is a summary of net gains (losses) from investment activities: year Ended December 31, 2016 2015 ($ 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 of privateequity investments held by KKR's balance sheet, including the partial sales of Walgreens Boots Alliance, Inc., Zimmer Biomet Holdings, Inc. and HCA Holdings,Inc.; (ii) realized losses in connection with our investment in Samson Resources (energy sector); (iii) realized losses 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 losses were driven primarily by (i) mark-to-market lossesin our private equity portfolio held by KKR's balance sheet including unrealized losses in First Data Corporation; (ii) mark-to-market losses on assets in ourconsolidated special situations funds; (iii) mark-to-market losses on debt held through consolidated CMBS; and (iv) the reversal of unrealized gains on the partialsales of Walgreens Boots Alliance, Inc., Zimmer Biomet Holdings, Inc. and HCA Holdings, Inc., as well as the reversal of unrealized gains on debt realizations atour consolidated CLOs. Offsetting these unrealized losses were unrealized gains, the most significant of which were unrealized gains relating to (i) the reversal ofunrealized losses in connection with our investment in Samson Resources, (ii) reversals of unrealized losses on asset realizations in our consolidated CLOs and (iii)mark-to-market gains on investments held through consolidated CMBS structures. For a discussion of 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. of $4.1 million. During the year ended December 31, 2015 we received dividends of $123.7 million from WMF (consumer products sector), $114.9million from CITIC Envirotech Ltd. (SP: CEL), $86.2 million from MMI Holdings Limited118Table of Contents(technology sector), $80.5 million from Academy Ltd. (retail sector), $65.9 million from Aricent Group (technology sector) and an aggregate of $379.3 million ofdividends from other investments. Significant dividends from portfolio companies are generally not recurring quarterly dividends, and while they may occur in thefuture, 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 KREF. For a discussion of other factors that affected KKR's interest income, see "—Segment Analysis." 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 KREFand (iii) interest expense associated with certain notes issued by consolidated CLOs of KFN being called for redemption. Third-party CLO subordinated noteholders receive the residual interest after all other payments have been made and as a result of a paydown made in August 2016, KKR recorded interest expense of$59.9 million. In addition, an incremental $8.8 million of accelerated accretion of debt discounts was recorded in connection with the notes of this CLO beingcalled for redemption. These increases were partially offset by a decrease in interest expense associated with financing facilities at investment funds no longerbeing 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's 8.375% Notes due 2041 inNovember 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 was 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 related 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 was dueprimarily to noncontrolling interests attributed to third party limited partners in our investment funds that had previously been consolidated, but which were 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.119Table of ContentsConsolidated Statements of Financial ConditionThe following table provides the Consolidated Statements of Financial Condition on a GAAP Basis as of December 31, 2017 and December 31, 2016 .(Amounts in thousands, except common unit and per common unit amounts) As of As of December 31, 2017 December 31, 2016 Assets Cash and Cash Equivalents $1,876,687 $2,508,902Investments 39,013,934 31,409,765Other 4,944,098 5,084,230Total Assets 45,834,719 39,002,897 Liabilities and Equity Debt Obligations 21,193,859 18,544,075Other Liabilities 3,978,060 3,340,739Total Liabilities 25,171,919 21,884,814 Redeemable Noncontrolling Interests 610,540 632,348 Equity Series A Preferred Units 332,988 332,988Series B Preferred Units 149,566 149,566KKR & Co. L.P. Capital - Common Unitholders 6,703,382 5,457,279Noncontrolling Interests 12,866,324 10,545,902Total Equity 20,052,260 16,485,735Total Liabilities and Equity $45,834,719 $39,002,897 KKR & Co. L.P. Capital Per Outstanding Common Unit - Basic $13.79 $12.06 120Table of ContentsConsolidated Statements 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 (Used) by Operating Activities Our net cash provided (used) by operating activities was $(3.6) billion , $(1.6) billion and $0.4 billion during the years ended December 31, 2017 , 2016 and2015, respectively. These amounts primarily included: (i) proceeds from sales of investments net of purchases of investments of $(4.8) billion , $(1.2) billion and$(0.7) billion during the years ended December 31, 2017 , 2016 and 2015, respectively; (ii) net realized gains (losses) on investments of $38.3 million , $347.1million and $3,001.9 million during the years ended December 31, 2017 , 2016 and 2015, respectively; (iii) change in unrealized gains (losses) on investments of$1,164.8 million , $(4.2) million and $1,670.7 million during the years ended December 31, 2017 , 2016 and 2015, respectively; and (iv) carried interest allocatedas a result of changes in fund fair value of $1,740.7 million , $803.2 million and zero during the years ended December 31, 2017 , 2016 and 2015, respectively.Investment funds are, for GAAP purposes, investment companies and reflect their investments and other financial instruments at fair value. Net Cash Provided (Used) by Investing Activities Our net cash provided (used) by investing activities was $57.7 million , $(62.5) million and $(425.2) million during the years ended December 31, 2017 , 2016and 2015, respectively. Our investing activities included: (i) a change in restricted cash and cash equivalents (that primarily funds collateral requirements) of$155.9 million , $1.4 million and $(164.6) million during the years ended December 31, 2017 , 2016 and 2015, respectively; (ii) the purchase of fixed assets of$(97.1) million , $(62.7) million and $(169.4) million during the years ended December 31, 2017 , 2016 and 2015, respectively; and (iii) development of oil andnatural gas properties of $(1.1) million , $(2.1) million and $(96.0) million for the years ended December 31, 2017 , 2016 and 2015, respectively. Net Cash Provided (Used) by Financing Activities Our net cash provided (used) by financing activities was $2.9 billion , $3.1 billion and $0.2 billion during the years ended December 31, 2017 , 2016 and 2015,respectively. Our financing activities primarily included: (i) distributions to, net of contributions by, our noncontrolling and redeemable noncontrolling interests of$1.2 billion , $0.9 billion and $(7.0) billion during the years ended December 31, 2017 , 2016 and 2015, respectively; (ii) proceeds received net of repayment ofdebt obligations of $2.1 billion , $2.4 billion and $8.1 billion during the years ended December 31, 2017 , 2016 and 2015, respectively; (iii) distributions to ourpartners of $(312.0) million , $(285.4) million and $(706.6) million during the years ended December 31, 2017 , 2016 and 2015, respectively; (iv) unit repurchasesof $(296.8) million and $(161.9) million during the years ended December 31, 2016 and 2015; (v) issuance of preferred units of $482.6 million during the yearended December 31, 2016; and (vi) preferred unit distributions of $(33.4) million and $(22.2) million during the years ended December 31, 2017 and 2016.121Table of ContentsSegment Analysis The following is a discussion of the results of our four reportable business segments for the years ended December 31, 2017 , 2016 and 2015. 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. Expense AllocationsCertain expenses are allocated among our operating segments. Specifically, as described below, (i) a portion of expenses, except for broken deal expenses,originating in our Private Markets, Public Markets and Capital Markets segments are reflected in the Principal Activities segment and (ii) corporate expenses areallocated across all segments.Expenses Allocated to Principal ActivitiesKKR allocates certain expenses to its Principal Activities segment. The Principal Activities segments incurs its own direct costs, and an allocation from theother segments is also made to reflect the estimated amount of costs that are necessary to operate our Principal Activities segment, which are incremental to thosecosts incurred directly by the Principal Activities segment. These allocable expenses consist of a portion of our cash compensation and benefits, occupancy andrelated charges and other operating expenses that are initially recognized within our Private Markets, Public Markets and Capital Markets segments. Consistentwith prior years, the total amount of expenses (other than its direct costs) that is allocated to Principal Activities is based on the proportion of revenue earned byPrincipal Activities, relative to other operating segments' revenue, over the preceding four calendar years. However, this allocation percentage will not be less thanthe allocation percentage calculated using the cumulative amount of such revenues since 2009 (the year we completed the KPE transaction). For 2017, KKRdetermined that this allocation percentage is 25.7%. This allocation percentage is expected to be updated annually or more frequently if there are material changesto our business. Below is a summary of the allocation to Principal Activities, relative to other operating segments, for the 2017, 2016 and 2015 periods.•2017 Allocation: 25.7%, based on cumulative revenues earned since 2009•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 The expense allocation expected to be used in 2018 to allocate expense to the Principal Activities segment, based on cumulative revenues earned since 2009 is24.3%, subject to adjustments if there are material changes to our 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. The 2016 and 2015 allocations to Principal Activities were based on revenues earned by Principal Activities, relative to other operating segments' revenue,over the preceding four calendar years. Had the allocations for 2016 and 2015 been based on cumulative revenues earned by Principal Activities since 2009,consistent with our allocation methodology adopted in 2017, the expense allocations to Principal Activities would have been 28.7% and 32.1%, respectively, andwould have had the following impact on Economic Net Income across each of our reporting segments: year EndedDecember 31, 2016 year EndedDecember 31, 2015 Private Markets $19,123 $20,266Public Markets 13,462 15,753Capital Markets 2,914 4,860Principal Activities (35,499) (40,879)Total Economic Net Income $— $—122Table of ContentsAllocations of Corporate ExpensesCorporate expenses are allocated to each of the Private Markets, Public Markets, Capital Markets and Principal Activities segments based on the proportion ofrevenues earned by each segment over the preceding four calendar years. However, to the extent that expenses allocated to Principal Activities, as described above,is based on the cumulative amount of such revenues since 2009, corporate expenses will also be allocated based on the proportion of revenues earned by eachsegment since 2009.Below is a summary of the allocations percentages used for corporate expenses to each of our operating segments for the 2017 and 2016 periods. Expense AllocationSegment 2017 2016 2015 Private Markets 59.6% 61.6% 58.7%Public Markets 9.0% 10.1% 9.8%Capital Markets 5.7% 5.7% 6.1%Principal Activities 25.7% 22.6% 25.4%Total Reportable Segments 100.0% 100.0% 100.0% Allocation basis Cumulative revenue since 2009 Revenue earned in 2015, 2014,2013 & 2012 Revenue earned in 2014, 2013,2012 & 2011 123Table of ContentsPrivate Markets Segment The following tables set forth information regarding the results of operations and certain key operating metrics for our Private Markets segment for the yearsended December 31, 2017 and 2016 .Year ended December 31, 2017 compared to year ended December 31, 2016 year Ended December 31, 2017 December 31, 2016 Change ($ in thousands)Segment Revenues Management, Monitoring and Transaction Fees, Net Management Fees$575,451 $466,422 $109,029Monitoring Fees81,021 64,354 16,667Transaction Fees288,879 132,602 156,277Fee Credits(220,710) (103,579) (117,131)Total Management, Monitoring and Transaction Fees, Net724,641 559,799 164,842 Performance Income Realized Incentive Fees— — —Realized Carried Interest1,198,981 1,252,370 (53,389)Unrealized Carried Interest520,807 (416,060) 936,867Total Performance Income1,719,788 836,310 883,478 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 Revenues2,444,429 1,396,109 1,048,320 Segment Expenses Compensation and Benefits Cash Compensation and Benefits261,123 194,240 66,883Realized Performance Income Compensation504,092 523,448 (19,356)Unrealized Performance Income Compensation213,785 (159,786) 373,571Total Compensation and Benefits979,000 557,902 421,098Occupancy and related charges32,458 35,785 (3,327)Other operating expenses137,055 135,425 1,630Total Segment Expenses1,148,513 729,112 419,401 Income (Loss) attributable to noncontrolling interests— — — Economic Net Income (Loss)$1,295,916 $666,997 $628,919 Assets Under Management$97,527,100 $73,815,500 $23,711,600Fee Paying Assets Under Management$61,678,600 $52,204,800 $9,473,800Capital Invested$13,342,400 $6,344,000 $6,998,400Uncalled Commitments$47,405,100 $31,478,700 $15,926,400124Table of ContentsSegment Revenues Management, Monitoring and Transaction Fees, Net The net increase was primarily due to an increase in transaction fees, partially offset by a corresponding increase in fee credits, and an increase in managementfees.The increase in transaction fees was primarily attributable to an increase in both the number and size of transaction fee-generating investments. During theyear ended December 31, 2017 , there were 46 transaction fee-generating investments that paid an average fee of $6.3 million compared to 35 transaction fee-generating investments paying an average fee of $3.8 million during the year ended December 31, 2016 . Approximately 44% of these transaction fees were paidby companies located in North America, 32% were paid from companies located in the Asia-Pacific region and 24% were paid from companies in Europe.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 amountof the fees, the complexity of the transaction and KKR's role in the transaction. The increase in fee credits is due primarily to a higher level of transaction fees.The increase in management fees was primarily due to (i) Americas Fund XII entering its investment period in the first quarter of 2017, in which it earnsmanagement fees on a larger pool of capital than its predecessor fund North America Fund XI, which entered its post-investment period, (ii) Asian Fund IIIentering its investment period in the second quarter of 2017, in which it earns management fees on a larger pool of capital than its predecessor fund Asian Fund II,which entered its post-investment period and (iii) new capital raised in our Health Care Strategic Growth Fund. This net increase was partially offset by decreasesdue to (i) North America Fund XI and Asian Fund II entering their post-investment periods during 2017, in which they earn fees at a lower rate and based oninvested capital rather than committed capital, and (ii) lower invested capital as a result of realizations primarily in our 2006 Fund, China Growth Fund and AsianFund.Recurring monitoring fees increased $12.4 million, which was primarily the result of an increase in the number of portfolio companies paying monitoring fees.For the year ended December 31, 2017 , we had 66 portfolio companies that were paying an average monitoring fee of $0.9 million compared with 53 portfoliocompanies that were paying an average monitoring fee of $0.9 million for the year ended December 31, 2016 . For the year ended December 31, 2017 , we alsoreceived termination payments of $19.6 million in connection with the initial public offerings of Gardner Denver Holdings, Inc. (NYSE: GDI) and National VisionHoldings, Inc. (NASDAQ: EYE) compared to $15.3 million of termination payments received in the year ended December 31, 2016 , in connection with the initialpublic offering of US Foods Holding Corp. These termination payments may occur in the future; however, they are infrequent in nature and are generallycorrelated with the initial public offering and other realization activity in our private equity portfolio, and are expected to continue to be smaller in size and numbercompared to prior periods. Performance Income The net increase is attributable to a higher level of net carried interest gains in the year ended December 31, 2017 compared to the year ended December 31,2016 , primarily reflecting a higher level of appreciation in the value of our private equity portfolio in the current period compared to the prior period.Realized carried interest for the year ended December 31, 2017 , consisted primarily of realized gains from the sale of Capsugel (manufacturing sector) andthe partial sales of US Foods Holding Corp. and PRA Health Sciences, Inc.Realized carried interest for the year ended December 31, 2016 consisted primarily of realized gains from the sale or partial sale of Walgreens Boots Alliance,Inc., Alliance Tire Group B.V. (manufacturing sector) and HCA Holdings, Inc. 125Table of ContentsThe following table presents performance income by investment vehicle for the year ended December 31, 2017 and 2016 : year Ended December 31, 2017 2016 ($ in thousands) Realized CarriedInterestUnrealizedCarried InterestTotalCarried Interest Realized CarriedInterestUnrealizedCarried InterestTotalCarriedInterestNorth America Fund XI$235,927$559,783$795,710 $124,797$124,202$248,999Co-Investment Vehicles and Other40,156175,795215,951 10,38133,64944,030Asian Fund II65,53498,274163,808 —146,382146,3822006 Fund557,888(416,159)141,729 493,195(315,187)178,008European Fund III182,386(53,262)129,124 175,717(17,602)158,115European Fund IV—127,643127,643 —6,2916,291Asian Fund18,51125,15443,665 182,805(104,797)78,008Global Infrastructure Investors II—34,33734,337 —(272)(272)Millennium Fund28,2664,99433,260 60,257(87,628)(27,371)Global Infrastructure Investors14,77213,79728,569 16,84594817,793Real Estate Partners Americas15,160(2,135)13,025 10,020(2,452)7,568Next Generation Technology Growth—8,4548,454 —599599China Growth Fund20,130(19,812)318 2,8587,66810,526European Fund——— 2,850(4,395)(1,545)E2 Investors—(306)(306) —1,4531,453European Fund II20,251(26,752)(6,501) 172,645(191,071)(18,426)Management Fee Refunds—(8,998)(8,998) —(13,848)(13,848)Total (1)$1,198,981$520,807$1,719,788 $1,252,370$(416,060)$836,310(1) The above table excludes any funds for which there was no carried interest during either of the periods presented. Unrealized carried interest reflects the difference between total carried interest and realized carried interest. The recognition of realized carried interest resultsin the reversal of accumulated unrealized carried interest, generally resulting in minimal impact on total performance income. Additionally, because unrealizedcarried interest can be reversed upon a realization event, in periods where there is significant realized carried interest, unrealized carried interest can be negativeeven in periods of portfolio appreciation.For the year ended December 31, 2017 , the value of our private equity investment portfolio increased 23.3%. This was comprised of a 34.6% increase in the shareprices of various publicly held or publicly indexed investments and a 16.7% increase in value of our privately held investments. Additionally, our infrastructureinvestment portfolio, which is comprised predominately of private investments, increased 21.7%.The most significant increases in share prices of various publicly held or publicly indexed investments were gains in Gardner Denver Holdings, Inc., NationalVision Holdings, Inc. and Qingdao Haier Co., Ltd. (CH: 600690) These increases were partially offset by decreased share prices of various publicly heldinvestments, the most significant of which were losses in Fujian Sunner Development Co. Ltd. (SZ: 002299), Laureate Education, Inc. (NASDAQ: LAUR) andEngility Holdings, Inc. (NYSE: EGL).Our privately held investments contributed the remainder of the change in value, the most significant of which were gains relating to Internet Brands, Inc.(technology sector), Weld North (education sector) and Aricent Group (technology sector). The unrealized gains on our privately held investments were partiallyoffset by unrealized losses relating primarily to Academy Ltd. (retail sector), Toys R Us, Inc. (retail sector) and Santanol Pty Ltd (forestry sector). The increasedvaluations of individual companies in our privately held investments, in the aggregate, generally related to (i) in the case of Weld North and Aricent Group,valuations that reflect agreements to sell all or a portion of these investments, (ii) an increase in the value of market comparables and (iii) individual companyperformance. The decreased valuations of individual companies in our privately held investments, in the aggregate, generally related to (i) individual companyperformance or, in certain cases, an unfavorable business outlook and (ii) a decrease in the value of market comparables.126Table of ContentsSubsequent to December 31, 2017, realization activity such as dividends and agreements to sell, including partial sales and secondary sales, are expected, withrespect to certain private equity portfolio companies, the most significant of which are Weld North, Aricent Group and Välinge Innovation AB (manufacturingsector). We expect that these transactions will be consummated subsequent to December 31, 2017, and represent distributable earnings of approximately $175million. These transactions are generally subject to the satisfaction of closing conditions prior to their completion, and there can be no assurance if or when any ofthese transactions will be completed. 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., PRA Health Sciences Inc. and HCAHoldings, Inc. These increases were partially offset by decreased share prices of various publicly held investments, the most significant of which were losses inFirst Data Corporation, Walgreens Boots Alliance, Inc. and Qingdao Haier Co., Ltd. Our privately held investments contributed the remainder of the change invalue, the most significant of which were gains relating to Panasonic Healthcare Co. Ltd (healthcare sector), Capsugel (manufacturing) and Sedgwick ClaimsManagement Services. The unrealized gains on our privately held investments were partially offset by unrealized losses relating primarily to Aricent Group(technology sector), OEG Management Partners Limited (energy sector) and Academy Ltd. (retail sector). The increased valuations of individual companies in ourprivately held investments, in the aggregate, generally related to (i) in the case of Panasonic Healthcare Co. Ltd, Capsugel and Sedgwick Claims ManagementServices, valuations that reflect agreements to sell all or a portion of these investments, (ii) an increase in the value of market comparables and (iii) individualcompany performance. The decreased valuations of individual companies in our privately held investments, in the aggregate, generally related to (i) individualcompany performance or, in certain cases, an unfavorable business outlook and (ii) a decrease in the value of market comparables. Segment Expenses Compensation and Benefits The net increase for the year ended December 31, 2017 was due primarily to higher performance income compensation resulting from a higher level of gainsin our private equity portfolio in the current period compared to the prior period as described above as well as increased cash compensation and benefits. Theseincreases were partially offset by a greater amount of compensation and benefits expense allocated to Principal Activities as a result of an increase in theproportion of revenue earned by Principal Activities relative to other operating segments.Occupancy and Other Operating ExpensesThe net decrease for the year ended December 31, 2017 is primarily due to (i) a decrease in expenses that are creditable to our investment funds, whichincludes broken-deal expenses, and (ii) a decrease relating to a greater amount of other operating expenses allocated to Principal Activities as a result of an increasein the proportion of revenue earned by Principal Activities relative to other operating segments. These decreases were partially offset by an increase in professionalfees.Economic Net Income (Loss) The increase was primarily due to a higher level of performance income in the current period compared to the prior period and higher fees partially offset byan increase in compensation and benefits as described above.Assets Under ManagementThe following table reflects the changes in our Private Markets AUM from December 31, 2016 to December 31, 2017 : ($ in thousands)December 31, 2016$73,815,500New Capital Raised25,455,400Distributions and Other(12,503,200)Change in Value10,759,400December 31, 2017$97,527,100127Table of ContentsAUM for the Private Markets segment was $97.5 billion at December 31, 2017 , an increase of $23.7 billion, compared to $73.8 billion at December 31, 2016.The increase was primarily attributable to (i) new capital raised primarily in our Asian Fund III, our core investment vehicles, two new strategic investorpartnerships, our Real Estate Partners Americas II fund and our Real Estate Credit Opportunity Partners fund and (ii) to a lesser extent, an increase in the value ofour Private Markets portfolio.These increases were partially offset by (i) distributions to Private Markets fund investors primarily as a result of realizations most notably in our 2006 Fund,European Fund III and North America Fund XI, and (ii) a decrease of $0.8 billion reflecting expired commitments that are no longer eligible to be called forinvestments. Our flagship private equity funds such as our Asian Fund III which represents $9.0 billion of AUM at December 31, 2017 , are raised onlyepisodically toward the end of the investment period of their predecessor funds or when their predecessor funds' capital becomes largely invested or allocated forinvestment. The increase in the value of our Private Markets portfolio was driven primarily by net gains of $4.3 billion in our North America Fund XI, $1.0 billion in eachof our European Fund IV and European Fund III, $0.9 billion in our 2006 Fund and $0.8 billion in our Asian Fund II. The drivers of the overall change in value forPrivate Markets were consistent with those noted in the Performance Income commentary above. See "—Private Markets—Segment Revenues—PerformanceIncome."Certain investments included in our AUM are denominated in currencies other than the U.S. dollar. Those investments expose our AUM to the risk that thevalue of the investments will be affected by changes in exchange rates between the currency in which the investments are denominated and the currency in whichthe investments are made. Our policy is generally to minimize these risks in certain cases by employing hedging techniques, including using foreign currencyoptions and foreign exchange forward contracts to reduce exposure to changes in exchange rates when a meaningful amount of capital has been invested incurrencies other than the currencies in which the investments are denominated. We do not, however, hedge our currency exposure in all currencies or for allinvestments. See "—Quantitative and Qualitative Disclosures about Market Risk—Exchange Rate Risk" and "Risk Factors—Risks Related to the Assets WeManage—We make investments in companies that are based outside of the United States, which may expose us to additional risks not typically associated withinvesting in companies that are based in the United States." Fee-Paying Assets Under Management The following table reflects the changes in our Private Markets FPAUM from December 31, 2016 to December 31, 2017 : ($ in thousands)December 31, 2016$52,204,800New Capital Raised16,868,600Distributions and Other(6,140,400)Net Changes in Fee Base of Certain Funds(2,418,800)Change in Value1,164,400December 31, 2017$61,678,600FPAUM in our Private Markets segment was $61.7 billion at December 31, 2017 , an increase of $9.5 billion, compared to $52.2 billion at December 31,2016.The increase was primarily attributable to new capital raised in our Asian Fund III and our Real Estate Partners Americas II fund and capital invested in ourAsian Fund II and North America Fund XI. These increases were partially offset by (i) distributions and other activity primarily relating to realizations in our 2006Fund and European Fund III and (ii) net changes in the fee base of our Asian Fund II as a result of it entering into its post-investment period, during which it earnsfees at a lower rate based on invested capital rather than committed capital.Uncalled capital commitments from investment funds from which KKR is currently not earning management fees amounted to approximately $13.7 billion atDecember 31, 2017, which includes capital commitments reserved for follow-on investments for funds that have completed their investment periods. This capitalwill generally begin to earn management fees upon deployment of the capital or upon the commencement of the fund's investment period. The average annualmanagement fee rate associated with this capital is approximately 0.9%. We will not begin earning fees on this capital until it is deployed or the related investmentperiod commences, neither of which is guaranteed. If and when such management fees are earned,128Table of Contentswhich will occur over an extended period of time, a portion of existing FPAUM may cease paying fees or pay lower fees, thus offsetting a portion of any newmanagement fees earned.Capital Invested The increase was driven primarily by a $4.5 billion increase in capital invested in our private equity platform, which includes an increase in core equityinvestments of $1.0 billion consisting of an investment in USI, Inc. (financial services sector), and a $2.5 billion increase in capital invested in our real assets andother platforms. Generally, the portfolio companies acquired through our private equity funds have higher transaction values and result in higher capital investedrelative to transactions in our real assets funds. The number of large private equity investments made in any quarter is volatile and consequently, a significantamount of capital invested in one quarter or a few quarters may not be indicative of a similar level of capital deployment in future quarters. During the year endedDecember 31, 2017 , 41% of capital deployed in private equity, which does not include core investments, was in transactions in North America, 37% was in theAsia-Pacific region and 22% was in Europe. As of February 21, 2018, our Private Markets business had announced transactions that were subject to closingconditions which aggregated approximately $5.0 billion. These transactions are generally subject to the satisfaction of closing conditions prior to their completion,and there can be no assurance if or when any of these transactions will be completed.Uncalled Commitments As of December 31, 2017 , our Private Markets segment had $47.4 billion of remaining uncalled capital commitments that could be called for investments innew transactions. The increase from December 31, 2016 is due primarily to new capital raised in our Asian Fund III, our core investment vehicles, two newstrategic investor partnerships and Real Estate Partners Americas II, partially offset by capital called from fund investors to fund investments during the period. 129Table of ContentsThe following tables set forth information regarding the results of operations and certain key operating metrics for our Private Markets segment for the yearsended December 31, 2016 and 2015.Year ended December 31, 2016 compared to year ended December 31, 2015 year Ended December 31, 2016 December 31, 2015 Change ($ 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 $8,712,400130Table 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 initial public offerings, exits or partial exits of the following investments: (i) Alliance BootsGmbH, which was acquired by Walgreens Co. and renamed Walgreens Boots Alliance, Inc. subsequent to the acquisition, (ii) Big Heart Pet Brands (consumerproducts sector), (iii) Biomet, Inc., which was acquired by Zimmer Holdings Inc. and renamed Zimmer Biomet Holdings, Inc. subsequent to its acquisition, (iv) theinitial public offering of Go Daddy Inc. (NYSE: GDDY) and (v) the initial public offering of First Data Corporation compared to $15.3 million of such terminationpayments during the year ended December 31, 2016 in connection with the initial public offering of US Foods Holding Corp. The level of termination paymentsthat were realized in 2015 and in certain other historical periods are not expected to recur in future periods, because current monitoring agreements generallyprovide for smaller termination payments than have been provided for in such historical periods. Termination payments may recur in future periods but areinfrequent in nature and are generally correlated with initial public offerings and other realization activity in our private equity portfolio. In addition, recurringmonitoring fees decreased $16.8 million as a 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 that were paying an average monitoring fee of $0.9 million compared with 52 portfolio companies that were paying anaverage monitoring fee of $1.3 million for the year ended December 31, 2015. The decrease in transaction fees was primarily attributable to a decrease in both thenumber and size of transaction fee generating investments. During the year ended December 31, 2016, there were 35 investments that paid an average fee of $3.8million compared to 37 transaction fee-generating investments paying an average fee of $3.9 million during the year ended December 31, 2015. Transaction feesvary 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, thecomplexity of the transaction and KKR's role in the transaction. The decrease in fee credits is due primarily to a lower level of monitoring fees. The increase inmanagement fees was primarily due to an increase in capital raised in Global Infrastructure Investors II and Real Estate Partners Europe as well as more capitalearning a fee in European Fund IV during 2016 as such fund was continuing its capital raising efforts in 2015. These increases were partially offset by a decreasein management fees attributable to lower invested 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 investment period and North America Fund XI entered its post-investment period, the net effect of which is expected to be anincrease in management fees by approximately $90 million in 2017 if not offset by other factors. On a segment basis, placement fees incurred in connection withcapital raising activity are amortized as a reduction of revenues. See also discussion under "—Assets Under Management" and "—Fee-Paying Assets UnderManagement." Performance Income The net decrease is attributable to a lower level of carried interest primarily reflecting a lower level of net appreciation in value of our private equity portfoliocompared to the prior period.Realized carried interest for the year ended December 31, 2016 consisted primarily of realized gains from the sale or partial sale of Walgreens Boots Alliance,Inc., Alliance Tire Group B.V. (manufacturing sector) and HCA Holdings, Inc.Realized carried interest for the year ended December 31, 2015 consisted primarily of realized gains from the sales or partial sales of Walgreens BootsAlliance, Inc., Capital Safety Group (industrial sector) and Zimmer Biomet Holdings, Inc.131Table of ContentsThe following table presents net unrealized carried interest by investment vehicle for the year ended December 31, 2016 and 2015: year Ended December 31, 2016 2015 ($ 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., PRA Health Sciences Inc. and HCAHoldings, Inc. These increases were partially offset by decreased share prices of various publicly held investments, the most significant of which were losses inFirst Data Corporation, Walgreens Boots Alliance, Inc. and Qingdao Haier Co., Ltd. Our privately held investments contributed the remainder of the change invalue, the most significant of which were gains relating to Panasonic Healthcare Co. Ltd, Capsugel (manufacturing sector) and Sedgwick Claims ManagementServices. The unrealized gains on our privately held investments were partially offset by unrealized losses relating primarily to Aricent Group (technology sector),OEG Management Partners Limited (energy sector) and Academy Ltd. (retail sector). The increased valuations of individual companies in our privately heldinvestments, 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 of market comparables and (iii) individual companyperformance. The decreased valuations of individual companies in our privately held investments, in the aggregate, generally related to (i) individual companyperformance or, in certain cases, an unfavorable business outlook and (ii) a decrease in the value of market comparables.The 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. 132Table of ContentsFor 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. and GoDaddy,Inc. These increases were partially offset by decreased share prices of various publicly held investments, the most significant of which were RigNet (NASDAQ:RNET), HCA Holdings, Inc. and CITIC Envirotech Ltd. Subsequent to December 31, 2015, world equity markets declined sharply with both the S&P 500 and theMSCI World Index down on a total return basis, including dividends, as of February 22, 2016. Our privately held investments contributed the remainder of thechange in value, the most significant of which were gains relating to Panasonic Healthcare Co. Ltd (healthcare sector), Capital Safety Group (industrial sector) andAlliant Insurance Services (financial services sector). The unrealized gains on our privately held investments were partially offset by unrealized losses relatingprimarily to BIS Industries Ltd. (industrial sector), Acteon Group Ltd. (energy sector) and Aceco TI S.A. (technology sector). The increased valuations ofindividual companies in our privately held investments, in the aggregate, generally related 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 companyperformance. The decreased valuations of individual companies in our privately held investments, in the aggregate, generally related to (i) individual companyperformance or, in certain cases, an unfavorable business outlook and (ii) a decrease in the 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 andPerformance Measures—After-Tax Distributable Earnings" for a discussion of how the Energy Future Holdings write-off impacted Principal Activities and ourdistributable earnings. 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.133Table 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, KREF, our Next Generation Technology Growth Fund and, to alesser extent, an increase in the value of our Private Markets portfolio. These increases were offset by distributions to Private Markets fund investors primarily as aresult 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., PRA Health Sciences Inc. and HCA Holdings, Inc. Theseincreases were partially offset by decreased share prices of various publicly held investments, the most significant of which were losses in First Data Corporation,Walgreens Boots Alliance, Inc. and Qingdao Haier Co., Ltd. Our privately held investments contributed the remainder of the change in value, the most significantof which were gains relating to Panasonic Healthcare Co. Ltd, Capsugel (manufacturing sector) and Sedgwick Claims Management Services. The unrealized gainson our privately held investments were partially offset by unrealized losses relating primarily to Aricent Group (technology sector), OEG Management PartnersLimited (energy sector) and Academy Ltd. (retail sector). The increased valuations 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 tosell all or a portion of these investments, (ii) an increase in the value of market comparables and (iii) individual company performance. The decreased valuations ofindividual companies in our privately held investments, in the aggregate, generally related to (i) individual company performance or, in certain cases, anunfavorable business outlook and (ii) a decrease in the value of market comparables.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 generally to minimize these risks in certain cases by employing hedging techniques, including using foreign currencyoptions and foreign exchange forward contracts to reduce exposure to changes in exchange rates when a meaningful amount of capital has been invested incurrencies other than the currencies in which the investments are denominated. We do not, however, hedge our currency exposure in all currencies or for allinvestments. See "—Quantitative and Qualitative Disclosures about Market Risk—Exchange Rate Risk" and "Risk Factors—Risks Related to the Assets WeManage—We make investments in companies that are based outside of the United States, which may expose us to additional risks not typically associated withinvesting in companies that 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$52,204,800134Table 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, KREF, and Next Generation TechnologyGrowth Fund. These increases were partially offset by distributions and other activity and net changes in the fee base of certain funds. Distributions and otheractivity primarily related to (i) realizations in our 2006 Fund, Asian Fund and European Fund III and (ii) the termination of a management fee agreement withrespect to one client. The decreases related to net changes in fee base primarily relates to our North America Fund XI entering its post-investment period duringwhich it earns fees at a lower rate based on invested capital rather than committed capital. Additionally, upon entering its post-investment period, North AmericaFund XI has established a reserve on its fund investors' capital commitments on which no fee is paid unless such capital is invested. Uncalled capital commitmentsfrom investment funds from which KKR is currently not earning management fees amounted to approximately $6.7 billion at December 31, 2016, which includescapital commitments reserved for follow-on investments for funds that have completed their investment periods. This capital will generally begin to earnmanagement fees upon deployment of the capital or upon the commencement of the fund's investment period. The average annual management fee rate associatedwith this capital is approximately 0.9%. We will not begin earning fees on this capital until it is deployed or the related investment period commences, neither ofwhich is guaranteed. If and when such management fees are earned, which will occur over an extended period of time, a portion of existing FPAUM may ceasepaying fees or pay lower fees, thus offsetting a portion of any new management fees earned.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.Uncalled Commitments As of December 31, 2016, our Private Markets segment had $31.5 billion of remaining uncalled capital commitments that could be called for investments innew transactions. The increase is due primarily to new capital raised in Americas Fund XII, partially offset by capital called from fund investors to fundinvestments during the period. 135Table of ContentsPublic Markets Segment The following tables set forth information regarding the results of operations and certain key operating metrics for our Public Markets segment for the yearsended December 31, 2017 and 2016 .Year ended December 31, 2017 compared to year ended December 31, 2016 year Ended December 31, 2017 December 31, 2016 Change ($ in thousands)Segment Revenues Management, Monitoring and Transaction Fees, Net Management Fees $329,737 $331,440 $(1,703)Monitoring Fees — — —Transaction Fees 48,370 30,155 18,215Fee Credits (40,719) (28,049) (12,670)Total Management, Monitoring and Transaction Fees, Net 337,388 333,546 3,842 Performance Income Realized Incentive Fees 73,395 33,346 40,049Realized Carried Interest — 3,838 (3,838)Unrealized Carried Interest 79,435 (4,312) 83,747Total Performance Income 152,830 32,872 119,958 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 490,218 366,418 123,800 Segment Expenses Compensation and Benefits Cash Compensation and Benefits 63,637 77,017 (13,380)Realized Performance Income Compensation 29,358 14,873 14,485Unrealized Performance Income Compensation 33,816 (1,724) 35,540Total Compensation and Benefits 126,811 90,166 36,645Occupancy and related charges 6,478 9,517 (3,039)Other operating expenses 31,317 38,439 (7,122)Total Segment Expenses 164,606 138,122 26,484 Income (Loss) attributable to noncontrolling interests — — — Economic Net Income (Loss) $325,612 $228,296 $97,316 Assets Under Management $70,943,500 $55,740,200 $15,203,300Fee Paying Assets Under Management $55,758,900 $49,268,600 $6,490,300Capital Invested $5,017,100 $4,642,200 $374,900Uncalled Commitments $9,148,000 $6,312,600 $2,835,400 136Table of ContentsSegment Revenues Management, Monitoring and Transaction Fees, Net The net increase for the year ended December 31, 2017 was primarily due to an increase in transaction fees, partially offset by a corresponding increase in feecredits and a decrease in management fees. The increase in transaction fees was driven primarily by an $18.5 million breakup fee received in the year endedDecember 31, 2017 in connection with a terminated transaction, compared to having received no such breakup fees in the year ended December 31, 2016 . The netamount of this fee attributable to us after credits to our fund investors was $4.6 million. The decrease in management fees related primarily to a reduction inmanagement fees from KKR Prisma as a result of the PAAMCO Prisma transaction that closed in the second quarter of 2017. KKR reports its investment inPAAMCO Prisma using the equity method of accounting, and on a segment basis, KKR reflects its allocation of the net income of PAAMCO Prisma asmanagement fees and realized incentive fees. Accordingly, the management fees and other revenues and expenses of KKR Prisma that had been reported on agross basis prior to the closing of the transaction on June 1, 2017 are reflected on a net basis as part of our allocation of the net income of PAAMCO Prisma afterJune 1, 2017 resulting in a decrease in our reported gross management fees when compared to the prior period. This decrease was partially offset by capitalinvested in our Special Situations Fund II, Lending Partners II Fund, and Lending Partners Europe Fund as well as an increase in management fees in certainseparately managed accounts and with our strategic manager partnerships.Performance Income The net increase for the year ended December 31, 2017 was primarily attributable to higher incentive fees earned in our strategic manager partnerships, whichwere partially offset by lower incentive fees received from BDCs advised or sub-advised by KKR. Performance income also increased as a result of net carriedinterest gains in the year ended December 31, 2017 , compared to net carried interest losses in the year ended December 31, 2016 . The carried interest gains in thecurrent period were primarily the result of increases in the value of our private credit portfolio, with the most significant carried interest gains arising in our privateopportunistic credit and direct lending strategies. In the prior period, our direct lending strategies experienced a lower level of carried interest gains and net carriedinterest losses were experienced in our private opportunistic credit strategy.Segment Expenses Compensation and Benefits The increase for the year ended December 31, 2017 was primarily due to higher net performance income compensation in connection with higher incentivefees and net carried interest gains for the year ended December 31, 2017 , as compared to lower incentive fees and net carried interest losses for the year endedDecember 31, 2016 , as described above. These increases were partially offset by decreased cash compensation and benefits due primarily to (i) a greater amountof compensation and benefits expense allocated to Principal Activities as a result of an increase in the proportion of revenue earned by Principal Activities relativeto other operating segments and (ii) the PAAMCO Prisma transaction which closed on June 1, 2017. KKR reports its investment in PAAMCO Prisma using theequity method of accounting. Accordingly, the compensation expenses of KKR Prisma that had been reported on a gross basis prior to the closing of thetransaction on June 1, 2017 are reflected as part of our allocation of the net income of PAAMCO Prisma after June 1, 2017 resulting in a decrease in our reportedcash compensation and benefits expense when compared to the prior period. Occupancy and Other Operating Expenses The decrease for the year ended December 31, 2017 was primarily driven by lower operating expenses as a result of having transferred certain leased officespace and other operating expenses as part of the PAAMCO Prisma transaction. See "—Business Segments—Public Markets." Economic Net Income (Loss) The increase for the year ended December 31, 2017 is primarily attributable to the increase in performance income, partially offset by an increase incompensation and benefits expense as described above. 137Table of ContentsAssets Under Management The following table reflects the changes in our Public Markets AUM from December 31, 2016 to December 31, 2017 : ($ in thousands)December 31, 2016$55,740,200New Capital Raised13,221,600Acquisitions1,794,800Impact of Other Transactions3,811,400Distributions(3,831,800)Redemptions(3,653,100)Change in Value3,860,400December 31, 2017$70,943,500AUM in our Public Markets segment totaled $70.9 billion at December 31, 2017 , an increase of $15.2 billion compared to AUM of $55.7 billion at December31, 2016. The increase for the period was primarily due to new capital raised across multiple strategies most notably $3.5 billion in certain leveraged creditstrategies, $2.9 billion with our strategic manager partnerships, $2.4 billion in our CLOs, $1.5 billion in our private opportunistic credit strategy, $1.4 billion in twonew strategic investor partnerships and $0.8 billion in our Lending Partners III Fund. The "Impact of Other Transactions" represents the closing of the PAAMCOPrisma transaction. This resulted in a net increase of approximately $3.8 billion reflecting the excess of our pro rata portion of the AUM of PAAMCO Prisma overthe historical AUM of KKR Prisma. For the year ended December 31, 2017 , new capital raised offset redemptions with our strategic manager partnerships. The"Acquisitions" activity represents the increase in our pro rata portion of the AUM of Marshall Wace in connection with the acquisition of an additional 5% interestin this strategic manager partnership. The increases due to change in value were driven primarily by our strategic manager partnerships, our domestic private creditstrategies and our European CLOs and certain European leveraged credit strategies. Partially offsetting these increases were redemptions and distributions fromcertain investment vehicles across multiple strategies, primarily with our strategic manager partnerships, our private credit strategies and our CLOs.Fee-Paying Assets Under Management The following table reflects the changes in our Public Markets FPAUM from December 31, 2016 to December 31, 2017 : ($ in thousands)December 31, 2016$49,268,600New Capital Raised12,048,200Acquisitions1,794,800Impact of Other Transactions(1,600,000)Distributions(5,012,000)Redemptions(3,653,100)Change in Value2,912,400December 31, 2017$55,758,900 FPAUM in our Public Markets segment was $55.8 billion at December 31, 2017 , an increase of $6.5 billion compared to FPAUM of $49.3 billion atDecember 31, 2016. The increase was primarily due to new capital raised across multiple strategies, most notably $2.9 billion with our strategic managerpartnerships, $2.7 billion in certain leveraged credit strategies, $2.4 billion in our CLOs, $1.1 billion in our Special Situations Fund II and $1.2 billion in our directlending strategies. New capital raised includes capital that was raised in previous periods but began earning fees upon deployment of capital. For the year endedDecember 31, 2017, new capital raised offset redemptions with our strategic manager partnerships. Change in value was driven primarily by $1.1 billion throughour strategic manager partnerships, $0.7 billion in certain leveraged credit strategies and $0.6 billion in our European CLOs. Partially offsetting these increaseswere redemptions and distributions from certain investment vehicles across multiple strategies driven by $2.9 billion from our strategic manager partnerships, $3.2billion from our private credit strategies and $1.3 billion from our CLOs. The "Impact of Other Transactions" represents the closing of the PAAMCO Prismatransaction. This resulted in a net decrease of approximately $1.6 billion reflecting the excess of our historical FPAUM of KKR Prisma, over our pro rata portionof the FPAUM of PAAMCO Prisma. FPAUM excludes assets under advisement of PAAMCO Prisma. The "Acquisitions" activity represents the increase in ourpro rata portion of the AUM of Marshall Wace in connection with the acquisition of an additional 5% interest in this strategic manager partnership.Uncalled capital commitments from investment funds from which KKR is currently not earning management fees amounted to approximately $6.5 billion. This capital will generally begin to earn management fees upon deployment of the138Table of Contentscapital or upon the commencement of the fund's investment period. The average annual management fee rate associated with this capital is approximately 1.0%. We will not begin earning fees on this capital until it is deployed or the related investment period commences, neither of which is guaranteed. If and when suchmanagement fees are earned, which will occur over an extended period of time, a portion of existing FPAUM may cease paying fees or pay lower fees, thusoffsetting a portion of any new management fees earned. Capital Invested Capital invested increased for the year ended December 31, 2017 , compared to the year ended December 31, 2016 . The increase is primarily due to a higherlevel of net capital deployed in our direct lending and special situations strategies.Uncalled Commitments As of December 31, 2017 , our Public Markets segment had $9.1 billion of uncalled capital commitments that could be called for investments in newtransactions. The increase from December 31, 2016 is due to new capital raised primarily in our private opportunistic credit strategy, two new strategic investorpartnerships and Lending Partners III Fund, partially offset by capital called from fund investors to fund investments during the period.139Table of ContentsThe following tables set forth information regarding the results of operations and certain key operating metrics for our Public Markets segment for the yearsended December 31, 2016 and 2015.Year ended December 31, 2016 compared to year ended December 31, 2015 year Ended December 31, 2016 December 31, 2015 Change ($ 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)140Table of ContentsSegment Revenues The net increase for the year ended December 31, 2016 was primarily due to an increase in management fees of $65.0 million which included $40.2 million ofincreased management fees earned relating to our strategic manager partnership in 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 CCT (a BDC advised by KKR). This increase was partially offset by a decrease in management fees in our hedge funds solutionsbusiness 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 ata lower rate and on invested rather than committed capital.Performance Income The net increase for the year ended December 31, 2016 was primarily attributable to higher incentive fees and a lower level of net carried interest lossescompared to the prior period. Incentive fees increased due primarily to higher incentive fees relating to our strategic manager partnership with Marshall Wace,which was completed in the fourth quarter of 2015, and higher incentive fees at CCT reflecting favorable investment performance. These incentive fee increaseswere partially offset by a lower level of incentive fees in our hedge funds solutions business driven by less favorable financial performance in 2016. Incentive feesare typically determined for the twelve-month periods ending in either the second or fourth quarters of the calendar year; however, such fees may be determinedquarterly or at other points during the year for certain strategies. Whether incentive fees from KKR vehicles or strategic manager partnerships are payable in anygiven period, and the amount of such incentive fee payments, if any, depends on the investment performance of the vehicle and as a result is expected to varysignificantly from period to period. The lower level of net carried interest losses was primarily the result of (i) carried interest losses in the prior year in our SpecialSituations Fund compared to no carried interest in the current year and (ii) increased carried interest in our Lending Partners II Fund, partially offset by (iii) carriedinterest losses in our Mezzanine Fund and Lending Partners Fund in 2016.Segment Expenses Compensation and Benefits The increase for the year ended December 31, 2016 was primarily due to higher net performance income compensation in connection with a higher level ofrealized incentive fees for the year ended December 31, 2016 as compared the year ended December 31, 2015 as described above. To a lesser extent there was anincrease in cash compensation and benefits primarily due to a higher level of management fees which generally results in higher compensation expense. Occupancy and Other Operating Expenses The decrease for the year ended December 31, 2016 was primarily driven by a reduction reflecting the cost to exit office space during 2015. Economic Net Income (Loss) The increase for the year ended December 31, 2016 is primarily attributable to the increase in management fees and performance income partially offset by anincrease in compensation and benefits expense 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$55,740,200141Table 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 manager partnerships with hedge fund managers, $2.1 billion in certain leveraged credit strategies and $1.7 billion in our hedge fundsolutions business. Partially offsetting these increases were redemptions and distributions of $11.0 billion from certain investment vehicles across multiplestrategies including our CLOs, our hedge fund solutions business, certain separately managed accounts and our strategic manager partnerships. For the year endedDecember 31, 2016, within our hedge funds business, new capital raised has outpaced redemptions within our strategic manager partnership platform, whileredemptions have outpaced new capital raised in our hedge fund solutions platform. Fee-Paying Assets Under Management The following table reflects the changes in our Public Markets FPAUM from December 31, 2015 to December 31, 2016: ($ 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 manager partnerships with hedge fund managers, $2.0 billion in certain leveraged credit strategies and $1.7 billion in our hedge fundsolutions business. New capital raised includes capital that was raised in previous periods but began earning fees upon deployment of capital. Partially offsettingthese increases were redemptions and distributions of $11.1 billion from certain investment vehicles across multiple strategies including our CLOs, hedge fundsolutions business, certain separately managed accounts and our strategic manager partnerships. For the year ended December 31, 2016, within our hedge fundbusiness, new capital raised has outpaced redemptions with our strategic manager partnerships with hedge fund managers, while redemptions have outpaced newcapital raised in our hedge fund solutions platform. Uncalled capital commitments from investment funds from which KKR was then not earning management feesamounted to approximately $4.2 billion. This capital will generally begin to earn management fees upon deployment of the capital or upon the commencement ofthe fund's investment period. The average annual management fee rate associated with this capital is approximately 1.2%. We will not begin earnings fees on thiscapital until it is deployed or the related investment period commences, neither of which is guaranteed. If and when such management fees are earned, which willoccur over an extended period of time, a portion of existing FPAUM may cease paying fees or pay lower fees, thus offsetting a portion of any new managementfees 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 private credit opportunities strategy.Uncalled Commitments As of December 31, 2016, our Public Markets segment had $6.3 billion of uncalled capital commitments that could be called for investments in newtransactions. The decrease from December 31, 2015 is due to capital called from limited partners to fund investments during the period, partially offset by newcapital raised primarily in Special Situations Fund II, Private Credit Opportunities Partners II Fund and a co-invest vehicle investing across multiple strategies.142Table of ContentsCapital Markets The following tables set forth information regarding the results of operations and certain key operating metrics for our Capital Markets segment for the yearsended December 31, 2017 and 2016 .Year ended December 31, 2017 compared to year ended December 31, 2016 year Ended December 31, 2017 December 31, 2016 Change ($ in thousands)Segment Revenues Management, Monitoring and Transaction Fees, Net Management Fees $— $— $—Monitoring Fees — — —Transaction Fees 439,998 181,517 258,481Fee Credits — — —Total Management, Monitoring and Transaction Fees, Net 439,998 181,517 258,481 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 439,998 181,517 258,481 Segment Expenses Compensation and Benefits Cash Compensation and Benefits 80,093 29,552 50,541Realized Performance Income Compensation — — —Unrealized Performance Income Compensation — — —Total Compensation and Benefits 80,093 29,552 50,541Occupancy and related charges 2,747 2,474 273Other operating expenses 20,513 14,994 5,519Total Segment Expenses 103,353 47,020 56,333 Income (Loss) attributable to noncontrolling interests 6,551 2,336 4,215 Economic Net Income (Loss) $330,094 $132,161 $197,933 Syndicated Capital $4,685,600 $1,213,500 $3,472,100 143Table of ContentsSegment Revenues Management, Monitoring and Transaction Fees, Net Transaction fees increased due primarily to an increase in both the size and number of capital markets transactions for the year ended December 31, 2017,compared to the year ended December 31, 2016. Overall, we completed 193 capital markets transactions for the year ended December 31, 2017, of which 26represented equity offerings and 167 represented debt offerings, as compared to 117 transactions for the year ended December 31, 2016, of which 11 representedequity offerings and 106 represented debt offerings. We earned fees in connection with underwriting, syndication and other capital markets services. While each ofthe capital markets transactions that we undertake in this segment is separately negotiated, our fee rates are generally higher with respect to underwriting orsyndicating equity offerings than with respect to debt offerings, and the amount of fees that we collect for like transactions generally correlates with overalltransaction sizes. Our capital markets fees are generated in connection with our Private Markets and Public Markets businesses as well as from third-partycompanies. For the year ended December 31, 2017, approximately 23% of our transaction fees were earned from unaffiliated third parties as compared toapproximately 28% for the year ended December 31, 2016. Our transaction fees are comprised of fees earned from North America, Europe and Asia-Pacific,including India. For the year ended December 31, 2017, approximately 49% of our transaction fees were generated outside of North America as compared toapproximately 34% for the year ended December 31, 2016. Our capital markets business is dependent on the overall capital markets environment, which isinfluenced by equity prices, credit spreads and volatility. Our capital markets business does not generate management or monitoring fees.Segment Expenses Compensation and Benefits and Occupancy and Other Operating Expenses Segment expenses increased for the year ended December 31, 2017 compared to the prior period primarily due to higher compensation and benefits expensethat are reserved for payment in connection with a higher level of transaction fees. The increase in other operating expenses as compared to the prior period isprimarily attributable to increased professional fees in connection with increased business development activity. Economic Net Income (Loss) The increase for the year ended December 31, 2017 is primarily attributable to the increase in transaction fees, partially offset by the increase in compensationand benefits expense as described above.Syndicated Capital The increase is primarily due to an increase in the size and number of syndication transactions in the year ended December 31, 2017 as compared to the yearended December 31, 2016 . Overall, we completed 15 syndication transactions for the year ended December 31, 2017 as compared to eight syndications for theyear ended December 31, 2016 .144Table 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, 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 145Table 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 inthis segment is separately negotiated, our fee rates are generally higher with respect to underwriting or syndicating equity offerings than with respect to debtofferings, and the amount of fees that we collect for like transactions generally correlates with overall transaction sizes. Our capital markets fees are generated inconnection with our Private Markets and Public Markets businesses as well as third-party companies. For the year ended December 31, 2016 approximately 28%of our transaction fees were earned from third parties as compared to approximately 24% for the year ended December 31, 2015. Our transaction fees arecomprised of fees earned from North America, Europe, and Asia-Pacific, including India. For the year ended December 31, 2016 approximately 34% of ourtransaction fees were generated internationally as compared to approximately 44% for the year ended December 31, 2015. Our capital markets business isdependent on the overall capital markets environment, which is influenced by equity prices, credit spreads and volatility. Our capital markets business does notgenerate management or monitoring fees. Segment Expenses Compensation and Benefits The decrease for the year ended December 31, 2016 compared to the prior period is primarily related to the reduction in transaction fees noted above. Occupancy and Other Operating Expenses The overall increase for the year ended December 31, 2016 was primarily due to a lower amount of expenses allocated from the Capital Markets segment tothe Principal Activities segment as a result of a decrease in the proportion of revenue earned by Principal Activities relative to other operating segments ascompared to the prior period. This increase was offset by a reduction in the amount of rent expense allocated to the Capital Markets segment.Economic Net Income (Loss) The increase for the year ended December 31, 2016 is primarily attributable to lower income attributable to noncontrolling interests and the reduction incompensation and benefits expense, which was 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, 2015.146Table 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, 2017 and 2016 .Year ended December 31, 2017 compared to year ended December 31, 2016 year Ended December 31, 2017 December 31, 2016 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) 194,020 371,563 (177,543)Net Unrealized Gains (Losses) 395,358 (584,423) 979,781Total Realized and Unrealized 589,378 (212,860) 802,238Interest Income and Dividends 285,696 322,857 (37,161)Interest Expense (181,612) (188,761) 7,149Net Interest and Dividends 104,084 134,096 (30,012)Total Investment Income (Loss) 693,462 (78,764) 772,226 Total Segment Revenues 693,462 (78,764) 772,226 Segment Expenses Compensation and Benefits Cash Compensation and Benefits 140,134 94,207 45,927Realized Performance Income Compensation — — —Unrealized Performance Income Compensation — — —Total Compensation and Benefits 140,134 94,207 45,927Occupancy and related charges 14,727 14,624 103Other operating expenses 54,887 45,490 9,397Total Segment Expenses 209,748 154,321 55,427 Income (Loss) attributable to noncontrolling interests — — — Economic Net Income (Loss) $483,714 $(233,085) $716,799 147Table of ContentsSegment RevenuesInvestment IncomeThe net increase is primarily due to net realized and unrealized gains during the year ended December 31, 2017 , compared to net realized gains and netunrealized losses in the prior period.For the year ended December 31, 2017 , net realized gains were comprised primarily of gains from the sale of Private Markets investments including the salesor partial sales of HCA Holdings, Inc., Walgreens Boots Alliance, Inc. and Visma AS (technology sector), partially offset by losses on the sale of Fortune CreekPartnership and the restructurings of Algeco Scotsman (industrial sector) and Aurora Eaglebine. Net unrealized gains were primarily attributed to mark-to-marketgains on various Private Markets investments including First Data Corporation, an oil field services investment in our special situations strategy and The HutGroup (retail sector). These increases were partially offset primarily by unrealized losses due to the reversal of unrealized gains on the sales of private equityinvestments mentioned above.As of December 31, 2017 , $372.0 million of investments in CLOs and our $325.0 million investment in KREF were carried at cost. As of December 31, 2017, the cumulative net unrealized gain or loss relating to changes in fair value for these investments was a $20.8 million loss for CLOs and a $0.2 million gain forKREF.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.For the year ended December 31, 2017 , net interest and dividends were comprised of (i) $163.4 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 Capital Markets business and our cashbalances, (ii) $122.3 million of dividend income from distributions received primarily through our private equity investments and real estate investments includingour investment in KREF and (iii) $181.6 million of interest expense primarily relating to the senior notes outstanding for KKR and KFN.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 distributions received primarily through our private equity investments, real estate investments including our investmentin KREF and Public Markets investments and (iii) $188.8 million of interest expense primarily relating to the senior notes outstanding for KKR and KFN.The net decrease in net interest and dividends is due primarily to the impact of a lower amount of capital invested in CLOs as well as a lower level ofdividends in the 2017 period, partially offset by lower interest expense due to the redemption of KFN's 8.375% senior notes due 2041 and other debt after the thirdquarter of 2016, a portion of which was replaced with the issuance of KFN's 5.200% senior notes due 2033, which bears a lower rate of interest.Segment ExpensesCompensation and BenefitsThe increase for the year ended December 31, 2017 was primarily due to a greater amount of compensation and benefits expenses allocated from the otheroperating segments to Principal Activities, as well as a greater amount of corporate compensation allocated to Principal Activities, in each case as a result of anincrease in the proportion of revenue earned by Principal Activities relative to other operating segments as well as an increase in the absolute amount ofcompensation recorded. See "—Segment Analysis" for a discussion of expense allocations among segments.148Table of ContentsOccupancy and Other Operating ExpensesThe increase for the year ended December 31, 2017 was primarily due to a greater amount of other operating expenses allocated from the other operatingsegments to Principal Activities, as well as a greater amount of corporate other operating expenses allocated to Principal Activities, in each case as a result of anincrease in the proportion of revenue earned by Principal Activities relative to other operating segments.Economic Net Income (Loss)The increase in economic net income for the year ended December 31, 2017 was primarily driven by the net investment income in the current period asdescribed above.149Table of ContentsThe 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) 150Table 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., Walgreens Boots Alliance, Inc., mark to market losses on variousalternative credit investments and unrealized losses on energy investments, and reversals of unrealized gains on the sales of private equity investments. Theseunrealized losses were partially offset by unrealized gains representing the reversal of unrealized losses primarily in connection with our investment in SamsonResources 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 KREF were carried at cost. As of December 31, 2016,the cumulative net unrealized gain or loss relating to changes in fair value for these investments was a $9.1 million gain for CLOs and a $13.0 million gain for thereal 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. 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 distributions received primarily through our private equity investments, real estate investments including our investmentin KREF and Public Markets investments and (iii) $188.8 million of interest expense primarily relating to the senior notes outstanding for KKR and KFN.151Table of ContentsFor 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 for the year ended December 31, 2016 was primarily due to a lower amount of compensation and benefits expenses allocated from the otheroperating segments to Principal Activities, as well as a lower amount of corporate compensation allocated to Principal Activities, in each case as a result of adecrease in the proportion of revenue earned by Principal Activities relative to other operating segments. This decrease was partially offset by an increase in theabsolute amount of expenses eligible to be allocated from the other operating segments to Principal Activities. See "—Segment Analysis" for a discussion ofexpense 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 $142 million.152Table of ContentsSegment Balance Sheet Our segment balance sheet is the balance sheet of KKR & Co. L.P. and its subsidiaries on a segment basis which includes, but is not limited to, our investmentmanagement companies, broker-dealer companies, general partners of our investment funds and KFN. Our segment balance sheet excludes the assets and liabilitiesof our investment funds and CFEs and other consolidated entities that are not subsidiaries of KKR & Co. L.P. Investments Investments is a term used solely for purposes of financial presentation of a portion of KKR's balance sheet and includes majority ownership of subsidiariesthat operate KKR's asset management and other businesses, including the general partner interests of KKR's investment funds.Cash and Short-Term Investments Cash and short-term investments represent cash and liquid short-term investments in high-grade, short-duration cash management strategies used by KKR togenerate additional yield on our excess liquidity and is used by management in evaluating KKR's liquidity position. We believe this measure is useful tounitholders as it provides additional insight into KKR's available liquidity. Cash and short-term investments differ from cash and cash equivalents on a GAAPbasis as a result of the inclusion of liquid short-term investments in cash and short-term investments. The impact that these liquid short-term investments have oncash and cash equivalents on a GAAP basis is reflected in the consolidated statements of cash flows within cash flows from operating activities. Accordingly, theexclusion of these investments from cash and cash equivalents on a GAAP basis has no impact on cash provided (used) by operating activities, investing activitiesor financing activities. The following tables present information with respect to our segment balance sheet as of December 31, 2017 and December 31, 2016 : As of As of December 31, 2017 December 31, 2016 ($ in thousands, except per unit amounts)Cash and Short-term Investments $3,214,794 $3,387,673Investments 8,488,606 6,958,873Unrealized Carry (1) 1,620,401 1,213,692Other Assets 2,276,286 1,611,678Corporate Real Estate 161,225 161,225Total Assets $15,761,312 $13,333,141 Debt Obligations - KKR (ex-KFN) $2,000,000 $2,000,000Debt Obligations - KFN 764,767 398,560Preferred Shares - KFN 373,750 373,750Other Liabilities 426,699 244,676Total Liabilities 3,565,216 3,016,986 Noncontrolling Interests 22,187 19,564Preferred Units 500,000 500,000 Book Value $11,673,909 $9,796,591 Book Value Per Outstanding Adjusted Unit $14.20 $12.15 (1) Unrealized Carry Private Markets $1,480,142 $1,141,610Public Markets 140,259 72,082Total $1,620,401 $1,213,692 153Table of ContentsThe following table presents the holdings of our segment balance sheet by asset class as of December 31, 2017 . To the extent investments on our segmentbalance sheet, for example in energy, direct lending, CLOs and specialty finance, are realized at values below their cost in future periods, after-tax distributableearnings would be adversely affected by the amount of such loss, if any, during the period in which the realization event occurs. As of December 31, 2017 Investments Cost CarryingValue Carrying Value as aPercentage ofTotal Investments Private Equity Co-Investments, Core Investments and OtherEquity $2,288,691 $2,649,445 31.2%Private Equity Funds 1,067,988 1,408,092 16.6%Private Equity and Other Equity Total 3,356,679 4,057,537 47.8% Energy 1,008,260 621,925 7.3%Real Estate (1) 753,155 799,622 9.4%Infrastructure 324,032 409,588 4.8%Real Assets Total 2,085,447 1,831,135 21.5% Special Situations 774,758 775,569 9.1%Direct Lending 105,385 100,771 1.2%Mezzanine 23,701 25,777 0.3%Alternative Credit Total 903,844 902,117 10.6%CLOs (1) 1,032,707 659,207 7.8%Other Leveraged Credit 119,412 132,855 1.6%Specialty Finance 279,095 197,219 2.3%Credit Total 2,335,058 1,891,398 22.3% Other 641,598 708,536 8.4% Total Investments $8,418,782 $8,488,606 100.0% As of December 31, 2017Significant Investments: (2) Cost CarryingValue Carrying Value as aPercentage of Total InvestmentsFirst Data Corporation (NYSE: FDC) $956,454 $1,187,496 14.0%USI, Inc. (financial services sector) 500,000 500,000 5.9%KKR Real Estate Finance Trust Inc. (NYSE: KREF) 325,000 325,000 3.8%PortAventura Entertainment S.A. (hotels/leisure sector) 233,132 259,596 3.1%WMIH Corp. (NASDAQ: WMIH) 221,250 203,805 2.4%Total Significant Investments 2,235,836 2,475,897 29.2% Other Investments 6,182,946 6,012,709 70.8%Total Investments $8,418,782 $8,488,606 100.0% (1) Includes our ownership of $325.0 million in KREF and $372.0 million of CLOs which are not held for investment purposes and 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 carrying values as of December 31, 2017. The carrying value figures include the co-investment and the limited partner and/orgeneral partner interests held by KKR in the underlying investment, if applicable.154Table of ContentsThe following tables provide reconciliations of KKR's GAAP Consolidated Statements of Financial Condition to Total Reportable Segments Balance Sheet asof December 31, 2017 and December 31, 2016.As of December 31, 2017(Amounts in thousands)CONSOLIDATED STATEMENTS OFFINANCIAL CONDITION (GAAP BASIS) 1 2 3 4 5 TOTAL REPORTABLE SEGMENTSBALANCE SHEET Assets Cash and Cash Equivalents$1,876,687 — — 1,338,107 — — $3,214,794Cash and Short-termInvestmentsInvestments39,013,934 (27,684,368) (1,220,559) (1,620,401) — — 8,488,606Investments — — 1,620,401 — — 1,620,401Unrealized CarryOther Assets4,944,098 (974,710) — (1,499,332) — (193,770) 2,276,286Other Assets — — 161,225 — — 161,225Corporate Real EstateTotal Assets$45,834,719 (28,659,078) (1,220,559) — — (193,770) $15,761,312 Liabilities and Equity Debt Obligations21,193,859 (18,429,092) — (764,767) — — 2,000,000Debt Obligations - KKR (ex-KFN) — — 764,767 — — 764,767Debt Obligations - KFN — — 373,750 — — 373,750Preferred Shares - KFNOther Liabilities3,978,060 (2,207,518) (1,220,559) — — (123,284) 426,699Other LiabilitiesTotal Liabilities25,171,919 (20,636,610) (1,220,559) 373,750 — (123,284) 3,565,216 Redeemable NoncontrollingInterests610,540 (610,540) — — — — — Equity Series A Preferred Units332,988 — — (332,988) — — — Series B Preferred Units149,566 — — (149,566) — — — KKR & Co. L.P. Capital -Common Unitholders6,703,382 214,188 — (17,446) 4,844,271 (70,486) 11,673,909Book ValueNoncontrolling Interests12,866,324 (7,626,116) — (373,750) (4,844,271) — 22,187Noncontrolling Interests — — 500,000 — — 500,000Preferred UnitsTotal Liabilities andEquity$45,834,719 (28,659,078) (1,220,559) — — (193,770) $15,761,312 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. 155Table of ContentsAs 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 ENTITIES 2CARRY POOL RECLASSIFICATION 3OTHER RECLASSIFICATIONS 4NONCONTROLLING INTERESTS HELD BY KKR HOLDINGS L.P. AND OTHER 5EQUITY IMPACT OF KKR MANAGEMENT HOLDINGS CORP. 156Table of ContentsThe following tables provide reconciliations of KKR's GAAP Common Units Outstanding to Adjusted Units, Adjusted Units Eligible for Distribution andOutstanding Adjusted Units: As ofAs of December 31, 2017December 31, 2016GAAP Common Units Outstanding - Basic486,174,736452,380,335Adjustments: Unvested Common Units (1)46,475,17637,519,436Other Exchangeable Securities (2)2,299,4214,600,320GAAP Common Units Outstanding - Diluted534,949,333494,500,091Adjustments: KKR Holdings Units (3)335,971,334353,757,398Adjusted Units870,920,667848,257,489Adjustments: Unvested Common Units(46,475,176)(37,519,436)Adjusted Units Eligible for Distribution824,445,491810,738,053Adjustments: Vested Other Exchangeable Securities (2)(2,299,421)(4,600,320)Outstanding Adjusted Units822,146,070806,137,733 (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 Plan dilutes KKRcommon unitholders and KKR Holdings pro rata in accordance with their respective percentage interests in the KKR business. Excludes the award of 2,500,000 restricted equity unitsgranted to each of our Co-Presidents/Co-Chief Operating Officers during 2017 that have not met their market-price based vesting condition as of December 31, 2017. See "Item 8.Financial Statements and Supplementary Data—Equity Based Compensation."(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 connection with theacquisition 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 of other investments, assetsand businesses; (v) underwriting and funding commitments in our capital markets business; (vi) distributing cash flow to our unitholders, certain holders of certainexchangeable securities and holders of our Series A and Series B Preferred Units; and (vii) paying borrowings, interest payments and repayments under creditagreements, our senior notes and other borrowing 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. Many of our investment funds provide carried interest. With respect to our private equity funds, carried interest is distributed to the general partner of a privateequity fund with a clawback provision only after all of the following are met: (i) a realization 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 toinvestments157Table of Contentswith a fair value below cost, cost has been returned to fund investors in an amount sufficient to reduce remaining cost to the investments' fair value. As ofDecember 31, 2017 , 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 interestaccrues on the consolidated statement of operations, but will not be distributed in cash to us as the general partner of an investment fund upon a realization 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 and fair value forsuch investments is referred to as a "netting hole." When netting holes are present, realized gains on individual investments that would otherwise allow the generalpartner to receive carried interest distributions are instead used to return invested capital to our funds' limited partners in an amount equal to the netting hole. Oncenetting 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 thefair value of those investments where fair value is below cost, then realized carried interest will be distributed to the general partner upon a realization event. Afund 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 next material realizationevent, which includes funds with no netting holes as well as funds with a netting hole that is sufficiently small in size such that the next material realization eventwould be expected to result in the payment of carried interest. Strategic investor partnerships with fund investors may require netting across the various funds inwhich they invest, which may reduce the carried interest we otherwise would have earned if such fund investors were to have invested in our funds without theexistence of the strategic investor partnership. See "Risk Factors—Risks Related to Our Business—Strategic investor partnerships have longer investment periodsand invest in multiple strategies, which may increase the possibility of a 'netting hole,' which will result in less carried interest for us, as well as clawbackliabilities." As of December 31, 2017 , netting holes in excess of $50 million existed at two of our private equity funds, which were our European Fund IV andMillennium Fund which had netting holes of approximately $148 million and $82 million, respectively. In accordance with the criteria set forth above, other fundscurrently have and may in the future develop netting holes, and netting holes for those and other funds may otherwise increase or decrease in the future.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 Item 8.Financial Statements and Supplementary Data—Note 10 "Debt Obligations" to the consolidated financial statements included elsewhere in this report. Theinformation presented below supplements and updates, and should be read in conjunction with, such information.KFN Issued 5.500% Senior Notes Due 2032On March 30, 2017, KFN issued $375.0 million aggregate principal amount of 5.500% Senior Notes due 2032 (the "KFN 2032 Senior Notes"). On November17, 2017, KFN issued an additional $125.0 million aggregate principal amount of the same KFN 2032 Senior Notes initially issued on March 30, 2017.KFN RedemptionOn April 24, 2017 KFN redeemed all of its outstanding 7.500% Senior Notes due 2042 for approximately $115 million in cash in accordance with the optionalredemption provisions provided in the indenture governing such notes.KCM Short-Term Credit AgreementOn June 29, 2017, KKR Capital Markets entered into a 364-day revolving credit agreement with a major financial institution for use in KKR's capital marketsbusiness. This financial institution also provides the existing KCM Credit Agreement.KFN Issued 5.200% Notes Due 2033On February 12, 2018, KFN issued $120.0 million aggregate principal amount of 5.200% Senior Notes due 2033 (the "KFN 2033 Senior Notes"). The KFN2033 Senior Notes are unsecured and unsubordinated obligations of KFN and will mature on February 12, 2033, unless earlier redeemed or repurchased. The KFN2033 Senior Notes bear interest at a rate of158Table of Contents5.200% per annum, accruing from February 12, 2018. Interest is payable semi-annually in arrears on February 12 and August 12 of each year.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. For adiscussion of KKR's equity, including our preferred units, see Item 8. Financial Statements and Supplementary Data—Note 15 "Equity" to the consolidatedfinancial statements included elsewhere in this report.Common UnitsOn May 16, 2014, KKR & Co. L.P. filed a registration statement with the SEC for the sale by us from time to time of up to 5,000,000 common units ofKKR & Co. L.P. to generate cash proceeds (a) up to (1) the amount of withholding taxes, social benefit payments or similar payments payable by us in respect ofawards 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 thatare settled in cash instead of common units; and (b) to the extent the net proceeds from the sale of common units exceeds the amounts due under clause (a), forgeneral corporate purposes. This registration statement expired on June 4, 2017 with 4,173,039 common units issued and sold.Liquidity Needs We expect that our primary liquidity needs will consist of cash required to:•continue to grow our business, including seeding new strategies, funding our capital commitments made to existing and future funds, co-investmentsand any net capital requirements of our capital markets companies and otherwise supporting investment vehicles which we sponsor; •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 and contingencies, 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, advance loan proceeds and fund syndication commitments within our capital markets business;•make future purchase price payments in connection with our proprietary investments, such as our strategic manager partnership with Marshall Wace,to the extent not paid by newly issued common units;•acquire other assets for our Principal Activities segment, including other businesses, investments and assets, some of which may be required tosatisfy regulatory requirements for our capital markets business or risk retention requirements for CLOs (to the extent it continues to apply); and•repurchase KKR's common units pursuant to the unit repurchase program or other securities issued by KKR.159Table of ContentsKKR & 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. On February 9, 2017, KKR announced the authorization for KKR to repurchase an incremental $250 million under this unit repurchaseprogram. Under this unit repurchase program, units may be repurchased from time to time in open market transactions, in privately negotiated transactions orotherwise. The timing, manner, price and amount of 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. KKR expects that the program, which has no expiration date, will be in effect until themaximum approved dollar amount has been used to repurchase common units. The program does not require KKR to repurchase any specific number of commonunits, and the program may be suspended, extended, modified or discontinued at any time. Since inception of the unit repurchase program through February 21,2018, KKR has repurchased and canceled approximately 31.7 million outstanding common units for approximately $459 million. There is $291 million remainingas of February 21, 2018 under the current repurchase program. No units were repurchased during 2017.In addition to the purchases of common units above, (1) cash may be used to pay the amount of withholding taxes, social benefit payments or similarpayments payable by KKR in respect of awards granted pursuant to the Equity Incentive Plan and (2) cash may be delivered in respect of certain awards grantedpursuant to the Equity Incentive Plan and Other Exchangeable Securities. During 2017, KKR paid $58.0 million of cash in lieu of issuing equity for vested equityawards representing 3.1 million common units to satisfy tax withholding and cash-settlement obligations. Since October 27, 2015, KKR paid $137.0 million incash in lieu of issuing common units in connection with their vesting bringing cumulative cancellations of equity awards representing 8.2 million common units tosatisfy tax withholding and cash-settlement obligations. See "Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases ofEquity Securities."160Table of ContentsCapital CommitmentsThe agreements governing our active investment funds generally require the general partners of the funds to make minimum capital commitments to suchfunds, which usually range from 2% to 8% of a fund's total capital commitments at final closing; however, the size of our general partner commitment to certainfunds pursuing newer strategies may exceed this range. The following table presents our uncalled commitments to our active investment funds as of December 31,2017 : UncalledCommitmentsPrivate Markets($ in thousands)Core Investment Vehicles$3,000,000Americas Fund XII791,300Asian Fund III500,000Health Care Strategic Growth150,000Real Estate Partners Americas II150,000Next Generation Technology Growth93,300Energy Income and Growth75,300European Fund IV70,000Real Estate Partners Europe52,100Real Estate Credit Opportunity Partners30,400Global Infrastructure Investors II29,600Other Private Markets Vehicles403,500Total Private Markets Commitments5,345,500 Public Markets Special Situations Fund II143,700Private Credit Opportunities Partners II 40,000Lending Partners III24,700Lending Partners Europe23,200Other Public Markets Vehicles119,900Total Public Markets Commitments351,500 Total Uncalled Commitments$5,697,000 Other CommitmentsIn addition to the uncalled commitments to our investment funds as shown above, KKR has entered into contractual commitments with respect to (i) thepurchase of investments and other assets in our Principal Activities segment, and (ii) underwriting transactions, debt financing, and syndications in our CapitalMarkets segment. As of December 31, 2017 , these commitments amounted to $750.7 million and $731.8 million , respectively. Whether these amounts areactually funded, in whole or in part, depends on the contractual terms of such commitments, including the satisfaction or waiver of any conditions to closing orfunding. The unfunded commitments shown for our Capital Markets segment are shown without reflecting arrangements that may reduce the actual amount ofcontractual commitments shown. Our capital markets business has an arrangement with a third party, which reduces our risk when underwriting certain debttransactions. In the case of purchases of investments or assets in our Principal Activities segment, the amount to be funded includes amounts that are intended to besyndicated to third parties, and the actual amounts to be funded may be less than shown. Prisma Capital Partners As of December 31, 2017 , no amounts were due under the contingent consideration arrangement in connection with the acquisition of the equity interests ofKKR Prisma on October 1, 2012. The final measurement date for such contingent consideration was June 30, 2017. On June 1, 2017, KKR completed thetransaction to combine PAAMCO with KKR Prisma. See "Item 1. Business—Our Segments—Public Markets."161Table of ContentsInvestment in Marshall WaceOn November 2, 2015, KKR entered into a strategic manager partnership with Marshall Wace and acquired a 24.9% interest in Marshall Wace through acombination of cash and common units. Subject to the exercise of a put option by Marshall Wace or a call option by KKR, at subsequent closings to occur in thesecond, third and fourth years following the initial closing described above, and subject to satisfaction or waiver of certain closing conditions, including regulatoryapprovals, KKR may at each such closing subscribe (or be required to subscribe) for an incremental 5% equity interest, for ultimate aggregate ownership of up to39.9% of Marshall Wace. The exercise of such options would require the use of cash and/or KKR common units. KKR's investment in Marshall Wace is accountedfor using the equity method of accounting.On November 30, 2017, KKR acquired an additional 5.0% interest in Marshall Wace after the exercise of one of the options agreed to between Marshall Waceand KKR. This acquisition was funded through a combination of cash and 4,727,966 common units.Corporate Capital TrustDuring 2017, CCT shareholders approved, among other things, a proposal for KKR Credit Advisors (US) LLC to become CCT's sole investment advisersubject to the listing of CCT's common stock on a national securities exchange, which occurred during the fourth quarter of 2017. Following the listing of CCT onthe NYSE, KKR Credit Advisors may purchase up to $50 million of CCT's common stock in the aggregate in open-market transactions.Strategic BDC Partnership with FS Investments CorporationOn December 11, 2017, KKR announced a definitive agreement to form a new strategic BDC partnership with FS Investment Corporation. This transactionwould be completed through a combination of cash and other assets and is anticipated to close during 2018, subject to stockholder approvals and the satisfaction ofcertain other closing conditions.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 Code that will remain in effect for each taxable year in which an exchange of KKR Group Partnership Units for common units 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 time of anexchange of KKR Group Partnership Units. Certain of these exchanges are expected to result in an increase in our intermediate holding companies' share of the taxbasis 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 nototherwise have been available. This increase in tax basis may increase depreciation and amortization deductions for tax purposes and therefore reduce the amountof 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 increaseloss) 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 savings162Table of Contentsreceived by KKR's intermediate holdings companies and the cash payments made to the selling holders of KKR Group Partnership Units.For the year ended December 31, 2017, no cash payments were made under the tax receivable agreement. For the years ended December 31, 2016 and 2015,cash payments that have been made under the tax receivable agreement were $5.0 million and $5.7 million, respectively. As of December 31, 2017 , $4.2 millionof cumulative income tax savings have been realized. See "—Liquidity—Other Liquidity Needs—Contractual Obligations, Commitments and Contingencies" for adiscussion of amounts payable and cumulative cash payments made under this agreement.DistributionsA distribution of $0.17 per common unit has been declared, which will be paid on March 6, 2018 to holders of record of common units as of the close ofbusiness on February 20, 2018 . Under KKR's current distribution policy for its common units, KKR intends to make equal quarterly distributions to holders ofcommon units in an amount of $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, 2018 to holders of record of Series APreferred Units as of the close of business on March 1, 2018. A distribution of $0.406250 per Series B Preferred Unit has been declared and set aside for paymenton March 15, 2018 to holders of record of Series B Preferred Units as of the close of business on March 1, 2018.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 & Co. L.P. and the terms of its limited partnership agreement. There can be no assurance that future 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 for common units will be maintained. Furthermore, the declaration and payment of distributions by the KKR Group Partnerships and our othersubsidiaries may also be subject to legal, contractual and regulatory restrictions, including restrictions contained in our debt agreements and the terms of thepreferred units of the KKR Group Partnerships.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, syndications and fronting commitments in our capital markets business in connection with theunderwriting of loans, securities or other financial instruments, which has increased in significance in 2017 and may continue to be significant in future periods.We generally expect that these commitments will be syndicated to third parties or otherwise fulfilled or terminated, although we may in some instances elect toretain a portion of the commitments for our own investment.163Table of ContentsContractual Obligations, Commitments and Contingencies 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, 2017 excluding consolidated funds and CFEs with areconciliation of such amounts to the anticipated future cash payments of KKR including consolidated 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) $5,697.0 $— $— $— $5,697.0Debt payment obligations (2) — 500.0 — 2,264.8 2,764.8Interest obligations on debt (3) 157.2 296.4 232.8 2,059.9 2,746.3Underwriting commitments (4) 584.3 — — — 584.3Lending commitments (5) 147.5 — — — 147.5Purchase commitments (6) 730.9 19.8 — — 750.7Lease obligations 51.2 94.8 23.0 14.4 183.4Corporate real estate (7) — 292.5 — — 292.5Total Contractual Obligations of KKR 7,368.1 1,203.5 255.8 4,339.1 13,166.5Plus: Uncalled commitments of consolidated funds (8) 9,743.0 — — — 9,743.0Plus: Debt payment obligations of consolidated funds and CFEs (9) 962.9 1,881.7 476.3 15,056.5 18,377.4Plus: Interest obligations of consolidated funds andCFEs (10) 587.3 1,175.4 1,070.7 2,366.0 5,199.4Total Consolidated Contractual Obligations $18,661.3 $4,260.6 $1,802.8 $21,761.6 $46,486.3(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 on demand, the above commitments have been presented as falling due within oneyear. However, given the size of such commitments and the pace at which our investment funds make investments, we expect that the capital commitmentspresented above will be called over a period of several years. See "—Liquidity—Liquidity Needs."(2)Amounts include (i) $500 million aggregate principal amount of 6.375% Senior Notes due 2020 issued by KKR Group Finance Co. LLC, $500 millionaggregate principal amount of 5.500% Senior Notes due 2043 issued by KKR Group Finance Co. II LLC and $1,000 million aggregate principal amount of5.125% Senior Notes due 2044 issued by KKR Group Finance Co. III LLC, gross of unamortized discount, (ii) $0.5 billion aggregate principal amount ofKFN 2032 Senior Notes, gross of unamortized discount and (iii) $0.3 billion aggregate principal amount of KFN junior subordinated notes, gross ofunamortized discount. 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 calculatedassuming the debt outstanding at December 31, 2017 is not repaid until its maturity. Future interest rates are assumed to be those in effect as ofDecember 31, 2017 , including both variable and fixed rates, as applicable, provided for by the relevant debt agreements. The amounts presented aboveinclude accrued interest on 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 commitments of KKR and KFN to fund the purchase of various investments.164Table of Contents(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.(8)Represents uncalled commitments of our consolidated funds excluding KKR's portion of uncalled commitments as the general partner of the respectivefunds.(9)Amounts include (i) financing arrangements entered into by our consolidated funds with the objective of providing liquidity to the funds of $3.0 billion ,(ii) debt securities issued by our consolidated CLOs of $10.6 billion and (iii) debt securities issued by our consolidated CMBS entities of $5.0 billion . Debtsecurities issued by consolidated CLOs and CMBS entities are supported solely by the investments held at the CLO and CMBS vehicles and are notcollateralized by assets of any other KKR entity. Obligations under financing arrangements entered into by our consolidated funds are generally limited toour pro rata equity interest in such funds. Our management companies bear no obligations to repay any financing arrangements at our consolidated funds.(10)The interest obligations on debt of our consolidated funds and CFEs represent estimated interest to be paid over the maturity of the related debt obligation,which has been calculated assuming the debt outstanding at December 31, 2017 is not repaid until its maturity. Future interest rates are assumed to be thosein effect as of December 31, 2017 , including both variable and fixed rates, as applicable, provided for by the relevant debt agreements. The amountspresented above include accrued interest on outstanding indebtedness. 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, 2017 , a payable of $84.0 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. For the year ended December 31, 2017,unrealized gains from investment activities includes a gain of $67.2 million relating to a remeasurement of the tax receivable agreement liability which arises fromchanges in the associated deferred tax balances related to the 2017 Tax Act. As of December 31, 2017 , approximately $24.0 million of cumulative cash paymentshave been made under the tax receivable agreement. See "—Liquidity Needs—Tax Receivable Agreement." 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. KKR has also provided certain guarantees for fraud, willful misconduct,bankruptcy and other customary wrongful acts in connection with certain investment vehicles. KKR has also guaranteed certain of our employees' (other than ournamed executive officers) and consultants' personal loans obtained in connection with certain fund investments. We have also indemnified employees and non-employees against potential liabilities, in connection with their service as described under “Item 13. Certain Relationships and Related Transactions, and DirectorIndependence-Indemnification of Directors, Officers and Others.” In addition, we have also provided credit support to certain of our subsidiaries' obligations inconnection with certain investment vehicles or partnerships that we manage. For example, KKR has guaranteed the obligations of a general partner to postcollateral on behalf of its investment vehicle in connection with such vehicle's derivative transactions, and we have also agreed to be liable for certain investmentlosses and/or for providing liquidity in the events specified in the governing documents of certain investment vehicles. Our maximum exposure under thesearrangements 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, 2017 , $19.2 million of carried interest was subject to this clawback obligation, assuming that allapplicable carry paying funds were liquidated at their December 31, 2017 fair values. Had the investments in such funds been liquidated at zero value, theclawback obligation would have been $1,920.9 million . Carried interest is recognized in the statement of operations based on the contractual conditions set forth inthe agreements governing the fund as165Table of Contentsif 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 pursuantto carried interest are earned by the general partner of those funds to the extent that cumulative investment returns are positive and where applicable, preferredreturn thresholds have been met. If these investment amounts earned decrease or turn negative in subsequent periods, recognized carried interest will be reversedand to the extent that the aggregate amount of carry distributions received by the general partner during the term of the fund exceed the amount to which thegeneral partner was ultimately entitled, a clawback obligation would be recorded. For funds that are consolidated, this clawback obligation, if any, is reflected as anincrease in noncontrolling interests in the consolidated statements of financial condition. For funds that are not consolidated, this clawback obligation, if any, isreflected as a reduction of our 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 tous 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 made to date, however, it is no longer possible for the principals to be required to pay any such clawback obligation. Carry distributions arisingsubsequent to the KPE Transaction may give rise to clawback obligations that may be allocated generally to us and to persons who participate in the carry pool. Inaddition, guarantees of or similar arrangements relating to clawback obligations in favor of third party investors in an individual investment partnership by entitieswe own may limit distributions of carried interest more generally.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. Financial Statements and Supplementary Data—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.166Table of ContentsFinancial 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 financial instrumentsincluded in this category are publicly-listed equities and securities sold short.We classified 6.1% of total investments measured and reported at fair value as Level I at December 31, 2017 . 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 40.0% of total investments measured and reported at fair value as Level II at December 31, 2017 . 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 53.9% of total investments measured and reported at fair value as Level III at December 31, 2017 . The valuation of our Level III investments atDecember 31, 2017 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. 167Table of ContentsLevel 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.Investments and Debt Obligations of Consolidated CLO Vehicles: Investments of consolidated CLO vehicles are valued using the same valuationmethodology as described above for credit investments. Under ASU 2014-13, KKR measures CLO debt obligations on the basis of the fair value of the financialassets 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: 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" and "Risk Factors—Risks Related to the Assets We Manage—Ourinvestments are impacted by various economic conditions that are difficult to quantify or predict, but may have a significant adverse impact on the value of ourinvestments" in this report, a change in interest rates could have a significant impact on valuations. In addition, when a definitive agreement has been executed tosell an investment, KKR generally considers a significant determinant of fair value to be the consideration to be received by KKR pursuant to the executeddefinitive 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 79% of the fair value is derived frominvestments that are valued based exactly 50% on market168Table of Contentscomparables and 50% on a discounted cash flow analysis. Less than 5% of the fair value of this Level III private equity investment portfolio is derived frominvestments that are valued either based 100% on market comparables or 100% on a discounted cash flow analysis. As of December 31, 2017 , the overall weightsascribed to the market comparables methodology, the discounted cash flow methodology and a methodology based on pending sales for this portfolio of Level IIIprivate equity investments were 43%, 47% and 10%, 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 Asset 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 otherinputs. On a segment basis, our energy real asset investments in oil and gas-producing properties as of December 31, 2017 had a fair value of approximately $622million . 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 $62.2 million and a decline in net income attributable toKKR & Co. L.P. of $36.8 million, after deducting amounts that are attributable to noncontrolling interests held by KKR Holdings L.P. As of December 31, 2017 ,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 $53 million lower, resulting in a lower amountof net income attributable to KKR & Co. L.P. of approximately 59.1% of the overall decrease in investment income, after deducting amounts that are attributableto noncontrolling interests held by KKR Holdings L.P.169Table of ContentsThese 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 from investment funds which hold investments in oil and gas-producing properties are based on either committedcapital 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 Item 8. Financial Statementsand Supplementary Data - Note 5 "Fair Value Measurements" of the financial statements included elsewhere in this report. We utilize several unobservable pricinginputs and assumptions in determining the fair value of our Level III investments. These unobservable pricing inputs and assumptions may differ by investmentand in the application of our valuation methodologies. Our reported fair value estimates could vary materially if we had chosen to incorporate differentunobservable pricing inputs and other assumptions or, for applicable investments, if we only used either the discounted cash flow methodology or the marketcomparables methodology instead of assigning a weighting to both methodologies. For valuations determined for periods other than at year end, various inputs maybe estimated prior to the end of the relevant period. 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 quarterly by KKR with respect to most investments classified as Level III. The valuation firm either provides avalue or provides a valuation range from which KKR's investment professionals select a point in the range to determine the preliminary valuation or performscertain procedures in order to assess the reasonableness and provide positive assurance of KKR's valuations. After reflecting any input from the independentvaluation firm, the valuation170Table of Contentsproposals are submitted for review and approval by KKR's valuation committees. As of December 31, 2017 , less than 5% of the total value of our Level III creditinvestments were not valued with the engagement of an independent valuation firm.KKR has a global valuation committee that is responsible for coordinating and implementing the firm's valuation process to ensure consistency in theapplication of valuation principles across portfolio investments and between periods. The global valuation committee is assisted by the asset class-specificvaluation committees that exist for private equity (including growth equity), real estate, energy and infrastructure and credit. The asset class-specific valuationcommittees are responsible for the review and approval of all preliminary Level III valuations in their respective asset classes on a quarterly basis. The members ofthese valuation committees are comprised of investment professionals, including the heads of each respective strategy, and professionals from business operationsfunctions such as legal, compliance and finance, who are not primarily responsible for the management of the investments. For periods prior to the completion ofthe PAAMCO Prisma transaction, when Level III valuations were required to be performed on hedge fund investments, a valuation committee for hedge fundsreviewed these valuations.All Level III valuations are also subject to approval by the global valuation committee, which is comprised of senior employees including investmentprofessionals and professionals from business operations functions, and includes one of KKR's Co-Presidents and Co-Chief Operating Officers and its ChiefFinancial Officer, General Counsel and Chief Compliance Officer. When valuations are approved by the global valuation committee after reflecting any input fromit, 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 the board ofdirectors of the general partner of KKR & Co. L.P. and are then reported to the board of directors. As of December 31, 2017 , 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, 2017 , there were no investments which represented greater than 5% of total investments on a GAAP basis. On a segment basis, as ofDecember 31, 2017 , investments which represented greater than 5% of total reportable segments investments consisted of First Data Corporation and USI, Inc.(financial services sector) valued at $1,187.5 million and $500.0 million , respectively. Our investment income can be impacted by volatility in the public marketsrelated to our holdings of publicly traded securities, including our sizable holdings of First Data Corporation. For the year ended December 31, 2017 , the increasein the stock price of First Data Corporation increased economic net income on a segment basis by approximately $238 million. See "—Business Environment" fora discussion on the impact of global equity markets on our financial condition and "—Segment Balance Sheet" for additional information regarding our largestholdings on a segment basis. 171Table of ContentsRecognition of Investment IncomeInvestment 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. Certain of our investment funds are consolidated. When a fund is consolidated, the portion of our funds' investment income that is allocable to our carriedinterests and capital investments is not shown in the consolidated financial statements. For funds that are consolidated, all investment income (loss), including theportion of a funds' investment income (loss) that is allocable to KKR's carried interest, is included in investment income (loss) on the consolidated statements ofoperations. The carried interest that KKR retains in net income (loss) attributable to KKR & Co. L.P. is reflected as an adjustment to net income (loss) attributableto noncontrolling interests. However, because certain of our funds remain consolidated and because we hold a minority economic interest in these funds'investments, our share of the investment income is less than the total amount of investment income presented in the consolidated financial statements for theseconsolidated 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. 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 portion of the amount that represents 20% of the earned management fees, suchmanagement 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 beenachieved172Table of Contentsbased 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 by them todate. 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 of carriedinterest like netting holes, carried interest is distributed to the general partner. Until the preferred return is achieved, no carried interest is recorded. Thereafter, thegeneral 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 netgains used to pay the preferred return, until the general partner has received the full percentage amount of carried interest that the general partner is entitled tounder the terms of the fund. In general, investment funds that entitle the management company to receive an incentive fee have a preferred return and arecalculated 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. Financial Statementsand Supplemental Data—Summary of Significant Accounting Policies."173Table 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. Asof December 31, 2017 , KKR & Co. L.P. and KKR Holdings held interests in our business of 59.1% and 40.9% , respectively. The actual impact of a hypotheticaladverse 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, a Co-President/Co-Chief Operating Officer and the Chief Financial Officer, must approve the investment or transactionbefore it may be made. The committee may delegate authority to other employees subject to maximum commitment sizes or other limitations determined by thecommittee. In addition, 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 Exchange Act. When our capital is committed to capital marketstransactions, after diligence is conducted, such transactions are subject to the review and approval of a capital markets underwriting committee. These transactionsare also subject to risk tolerance limits. The risk tolerance limits establish the level of investment we may make in a single company or type of transaction, forexample, and are designed to avoid undue concentration and risk exposure. Regulatory capital requirements also place limits on the size of securities underwritingsthe capital markets business can conduct based on quantitative measure of assets, liabilities and certain off-balance-sheet items. Aggregate balance sheet risk andcapital 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 an investment management and distribution committee comprised of senior employees across our business lines, and includes our Co-Presidents/Co-Chief Operating Officers. The investment management and distribution committee focuses on coordinating investment and distribution activities across the firm.KKR has a risk and operations committee comprised of senior employees from across our business operations, and includes our Co-Presidents/Co-Chief OperatingOfficers, Chief Financial Officer, General Counsel and Chief Compliance Officer. The risk and operations committee focuses on KKR's operations and enterpriserisk management.KKR's global conflicts and compliance committee is responsible for analyzing and addressing new or potential conflicts of interest that may arise in KKR'sbusiness, including conflicts relating to specific transactions as well as potential conflicts involving the overall activities of KKR and its various businesses. Thiscommittee also reviews and monitors certain174Table of Contentscompliance matters. Our Chief Financial Officer, General Counsel and Chief Compliance Officer are included as members of this committee.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, 2017 , 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 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, 2017 , 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 2018 from reductions in the following items, if not offset by otherfactors: year Ended December 31, 2017 Management fees Carried Interest, Net ofCarry Pool Allocation Net Gains/(Losses) FromInvestment ActivitiesExcluding CarriedInterest ($ in thousands) 10% Decline in Fair Value of Investments (1)$12,301(2) $295,509(3) $501,931(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 NAV of the fund and, in some cases, weadditionally 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's investments. The proportion of our management fees that are based on NAVdepends on the number and type of funds in175Table of Contentsexistence. For the year ended December 31, 2017 , the fund management fees that were recognized based on the NAV of the applicable funds was approximately23%.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 belowas a result of (i) the inclusion of amounts attributable to KKR Holdings in individual line items within the consolidated statement of operations, (ii) the eliminationof management fees and carried interest and (iii) the gross-up of net gains (losses) from investment activities, in each case as a result of the consolidation of certaininvestment 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, 2017 (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 2018 from reductions in the following items, net of the impact of foreign exchange hedgingstrategies, if not offset by other factors: year Ended December 31, 2017 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) $44,286(2) $49,812(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. 176Table 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, includingCLOs, earn income based on variable interest rates. However, the contractual interest rate structure for a large portion of our credit investments bearing variablerates 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 creditinvestments held by us and our consolidated funds, including CLOs, are earning interest at the contractual floor and therefore, for these investments, a decrease invariable interest rates would not impact the amount of interest income earned. With respect to consolidated funds and CLOs, the impact on net income attributableto 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 beexpected to be material since (i) many variable rate credit investments are subject to floors as described above and (ii) a substantial portion of this decrease wouldbe attributable to noncontrolling interests. With respect to credit investments held by KKR outside of the consolidated funds and CLOs, all of the interest incomeearned inures to KKR & Co. L.P.; however a large portion of these investments are subject to floors as described above. Accordingly, the impact on net incomeattributable 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 incomewould not be expected to be 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, 2017 , KKR had debt obligations outstanding with an aggregate principal amount of approximately $ 264.8million that accrues interest at a variable rate. The impact on net income attributable to KKR & Co. L.P. resulting from an increase of a hypothetical 100 basispoints in variable interest rates 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.177Table of ContentsITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARy DATAINDEX TO CONSOLIDATED FINANCIAL STATEMENTSReport of Independent Registered Public Accounting Firm179Consolidated Statements of Financial Condition as of December 31, 2017 and 2016181Consolidated Statements of Operations for the Years Ended December 31, 2017, 2016 and 2015183Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2017, 2016 and 2015184Consolidated Statements of Changes in Equity for the Years Ended December 31, 2017, 2016 and 2015185Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2016 and 2015187Notes to Consolidated Financial Statements189178Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Unitholders and Board of Directors of KKR & Co. L.P.:Opinions on the Financial Statements and Internal Control over Financial ReportingWe have audited the accompanying consolidated statements of financial condition of KKR & Co. L.P. and subsidiaries (the "Company") as of December 31, 2017and 2016, 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, 2017, and the related notes and the financial statement schedule listed in the Index at Item 15 (collectively referred to as the "financialstatements"). We also have audited the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in InternalControl - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with accountingprinciples generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal controlover financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.Basis for OpinionsThe Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessmentof the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting.Our responsibility is to express an opinion on these financial statements and an opinion on the Company's internal control over financial reporting based on ouraudits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to beindependent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities andExchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control overfinancial reporting was maintained in all material respects.Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to erroror fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosuresin the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluatingthe overall presentation of the financial statements. 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.Definition and Limitations of Internal Control over Financial ReportingA company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financialreporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect thetransactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.179Table of ContentsBecause of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance withthe policies or procedures may deteriorate./s/ Deloitte & Touche LLPNew York, New YorkFebruary 23, 2018We have served as the Company's auditor since 2006.180Table of ContentsKKR & CO. L.P.CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Amounts in Thousands, Except Unit Data) December 31, 2017 December 31, 2016Assets Cash and Cash Equivalents$1,876,687 $2,508,902Cash and Cash Equivalents Held at Consolidated Entities1,802,372 1,624,758Restricted Cash and Cash Equivalents56,302 212,155Investments39,013,934 31,409,765Due from Affiliates554,349 250,452Other Assets2,531,075 2,996,865Total Assets$45,834,719 $39,002,897 Liabilities and Equity Debt Obligations$21,193,859 $18,544,075Due to Affiliates323,810 359,479Accounts Payable, Accrued Expenses and Other Liabilities3,654,250 2,981,260Total Liabilities25,171,919 21,884,814 Commitments and Contingencies Redeemable Noncontrolling Interests610,540 632,348 Equity Series A Preferred Units (13,800,000 units issued and outstanding as of December 31, 2017 and 2016)332,988 332,988Series B Preferred Units (6,200,000 units issued and outstanding as of December 31, 2017 and 2016)149,566 149,566KKR & Co. L.P. Capital - Common Unitholders (486,174,736 and 452,380,335 common units issued and outstanding as of December 31, 2017 and 2016, respectively)6,703,382 5,457,279Total KKR & Co. L.P. Partners' Capital7,185,936 5,939,833Noncontrolling Interests12,866,324 10,545,902Total Equity20,052,260 16,485,735Total Liabilities and Equity$45,834,719 $39,002,897 See notes to consolidated financial statements.181Table 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, 2017 and December 31, 2016 . 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 and anyincome 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, 2017 Consolidated CFEs Consolidated KKRFunds and OtherEntities TotalAssets Cash and Cash Equivalents Held at Consolidated Entities$1,467,829 $231,423 $1,699,252Restricted Cash and Cash Equivalents— 21,255 21,255Investments15,573,203 9,408,967 24,982,170Due from Affiliates— 23,562 23,562Other Assets176,572 168,003 344,575Total Assets$17,217,604 $9,853,210 $27,070,814 Liabilities Debt Obligations$15,586,216 $770,350 $16,356,566Accounts Payable, Accrued Expenses and Other Liabilities923,494 243,660 1,167,154Total Liabilities$16,509,710 $1,014,010 $17,523,720 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 $15,471,087Accounts Payable, Accrued Expenses and Other Liabilities722,714 316,121 1,038,835Total Liabilities$14,581,002 $1,928,920 $16,509,922See notes to consolidated financial statements.182Table of ContentsKKR & CO. L.P.CONSOLIDATED STATEMENTS OF OPERATIONS(Amounts in Thousands, Except Unit Data) For the years Ended December 31, 2017 2016 2015Revenues Fees and Other$3,282,265 $1,908,093 $1,043,768 Expenses Compensation and Benefits1,695,490 1,063,813 1,180,591Occupancy and Related Charges58,722 64,622 65,683General, Administrative and Other582,480 567,039 624,951Total Expenses2,336,692 1,695,474 1,871,225 Investment Income (Loss) Net Gains (Losses) from Investment Activities1,203,159 342,897 4,672,627Dividend Income202,115 187,853 850,527Interest Income1,242,419 1,021,809 1,219,197Interest Expense(808,898) (789,953) (573,226)Total Investment Income (Loss)1,838,795 762,606 6,169,125 Income (Loss) Before Taxes2,784,368 975,225 5,341,668 Income Taxes224,326 24,561 66,636 Net Income (Loss)2,560,042 950,664 5,275,032Net Income (Loss) Attributable to Redeemable Noncontrolling Interests73,972 (8,476) (4,512)Net Income (Loss) Attributable to Noncontrolling Interests1,467,765 649,833 4,791,062Net Income (Loss) Attributable to KKR & Co. L.P.1,018,305 309,307 488,482 Net Income Attributable to Series A Preferred Unitholders23,288 17,337 —Net Income Attributable to Series B Preferred Unitholders10,076 4,898 — Net Income (Loss) Attributable to KKR & Co. L.P. Common Unitholders$984,941 $287,072 $488,482 Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit Basic$2.10 $0.64 $1.09Diluted$1.95 $0.59 $1.01Weighted Average Common Units Outstanding Basic468,282,642 448,905,126 448,884,185Diluted506,288,971 483,431,048 482,699,194See notes to consolidated financial statements.183Table of ContentsKKR & CO. L.P.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)(Amounts in Thousands) For the years Ended December 31, 2017 2016 2015Net Income (Loss) $2,560,042 $950,664 $5,275,032 Other Comprehensive Income (Loss), Net of Tax: Foreign Currency Translation Adjustments 54,654 (34,583) (27,176) Comprehensive Income (Loss) 2,614,696 916,081 5,247,856 Less: Comprehensive Income (Loss) Attributable to Redeemable Noncontrolling Interests 73,972 (8,476) (4,512)Less: Comprehensive Income (Loss) Attributable to Noncontrolling Interests 1,498,861 634,813 4,771,152 Comprehensive Income (Loss) Attributable to KKR & Co. L.P. $1,041,863 $289,744 $481,216 See notes to consolidated financial statements.184Table 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, 2015433,330,540$5,403,095$(20,404)$5,382,691$—$— $46,004,377 16,895 $51,403,963 $300,098 Net 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 and Other 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 Unit Repurchases(9,919,892)(161,929) (161,929) (161,929) Common Units Issued in Connection with thePurchase of an Investment7,364,545126,302 126,302 126,302 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 and Other (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 Preferred UnitOffering —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 $632,348See notes to consolidated financial statements.185Table of ContentsKKR & CO. L.P. CONSOLIDATED STATEMENTS OF CHANGES IN EqUITy (Continued) (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, 2017452,380,335$5,506,375$(49,096)$5,457,279$332,988$149,566 $10,545,902 $— $16,485,735 $632,348 Net Income (Loss) 984,941 984,94123,28810,076 1,467,765 2,486,070 73,972Other Comprehensive Income (Loss)- ForeignCurrency Translation (Net of Tax) 23,55823,558 31,096 54,654 Changes in Consolidation — (1,682) (1,682) (315,057)Transfer of interests under common control andOther (See Note 15 "Equity") 16,1397,35923,498 (23,498) — Exchange of KKR Holdings L.P. Units andOther Securities to KKR & Co. L.P. CommonUnits20,086,963291,040(1,979)289,061 (289,061) — Tax Effects Resulting from Exchange of KKRHoldings L.P. Units and Other (3,469)677(2,792) (2,792) Net Delivery of Common Units - EquityIncentive Plan8,979,472(58,679) (58,679) (58,679) Equity Based Compensation 204,308 204,308 141,727 346,035 Common Units Issued in Connection with thePurchase of an Investment4,727,96694,181 94,181 94,181 Capital Contributions — 3,119,917 3,119,917 220,167Capital Distributions (311,973) (311,973)(23,288)(10,076) (2,125,842) (2,471,179) (890)Balance at December 31, 2017486,174,736$6,722,863$(19,481)$6,703,382$332,988$149,566 $12,866,324 $— $20,052,260 $610,540See notes to consolidated financial statements.186Table of ContentsKKR & CO. L.P.CONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in Thousands) For the years Ended December 31, 2017 2016 2015Operating Activities Net Income (Loss)$2,560,042 $950,664 $5,275,032Adjustments to Reconcile Net Income (Loss) to Net Cash Provided (Used) by OperatingActivities: Equity Based Compensation334,820 264,890 261,579Net Realized (Gains) Losses on Investments(38,316) (347,097) (3,001,884)Change in Unrealized (Gains) Losses on Investments(1,164,843) 4,200 (1,670,743)Carried Interest Allocated as a result of Changes in Fund Fair Value(1,740,661) (803,185) —Other Non-Cash Amounts(51,286) (34,620) (78,522)Cash Flows Due to Changes in Operating Assets and Liabilities: Change in Cash and Cash Equivalents Held at Consolidated Entities(95,875) (435,417) (160,092)Change in Due from / to Affiliates(285,562) (79,372) 15,264Change in Other Assets86,545 (555,666) 605,305Change in Accounts Payable, Accrued Expenses and Other Liabilities1,581,967 648,737 (187,661)Investments Purchased(39,616,120) (20,824,349) (27,936,898)Proceeds from Investments34,799,260 19,649,033 27,264,024Net Cash Provided (Used) by Operating Activities(3,630,029) (1,562,182) 385,404 Investing Activities Change in Restricted Cash and Cash Equivalents155,853 1,409 (164,637)Purchase of Fixed Assets(97,070) (62,663) (169,419)Development of Oil and Natural Gas Properties(1,052) (2,122) (95,959)Proceeds from Sale of Oil and Natural Gas Properties— 858 4,863Net Cash Provided (Used) by Investing Activities57,731 (62,518) (425,152) Financing Activities Distributions to Partners(311,973) (285,408) (706,611)Distributions to Redeemable Noncontrolling Interests(890) (26,836) (300,226)Contributions from Redeemable Noncontrolling Interests220,167 479,031 193,269Distributions to Noncontrolling Interests(2,125,842) (2,086,577) (13,187,653)Contributions from Noncontrolling Interests3,116,722 2,496,352 6,274,296Issuance of Preferred Units (net of issuance costs)— 482,554 —Preferred Unit Distributions(33,364) (22,235) —Net Delivery of Common Units - Equity Incentive Plan(58,679) (50,515) 15,245Unit Repurchases— (296,844) (161,929)Proceeds from Debt Obligations11,657,948 7,895,320 14,014,510Repayment of Debt Obligations(9,514,558) (5,482,133) (5,926,162)Financing Costs Paid(9,448) (16,847) (45,331)Net Cash Provided (Used) by Financing Activities2,940,083 3,085,862 169,408 Net Increase/(Decrease) in Cash and Cash Equivalents(632,215) 1,461,162 129,660Cash and Cash Equivalents, Beginning of Period2,508,902 1,047,740 918,080Cash and Cash Equivalents, End of Period$1,876,687 $2,508,902 $1,047,740 See notes to consolidated financial statements.187Table of ContentsKKR & CO. L.P.CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)(Amounts in Thousands) For the years Ended December 31, 2017 2016 2015Supplemental Disclosures of Cash Flow Information Payments for Interest$773,882 $773,032 $485,739Payments for Income Taxes$55,216 $33,526 $40,468Supplemental Disclosures of Non-Cash Investing and Financing Activities Non-Cash Contributions of Equity Based Compensation$346,035 $264,890 $261,579Non-Cash Contributions from Noncontrolling Interests$3,195 $29,283 $—Non-Cash Distributions to Noncontrolling Interests$— $(7,639) $—Cumulative effect adjustment from adoption of accounting guidance$— $— $(17,202)Debt Obligations - Net Gains (Losses), Translation and Other$(512,745) $228,405 $226,577Tax Effects Resulting from Exchange of KKR Holdings L.P. Units and delivery of KKR & Co.L.P. Common Units$(2,792) $(1,399) $18,598Impairments of Oil and Natural Gas Properties$— $6,191 $53,926Gains on Sales of Oil and Natural Gas Properties$— $12,286 $— Changes in Consolidation and Other Cash and Cash Equivalents Held at Consolidated Entities$1,831 $(270,458) $—Restricted Cash and Cash Equivalents$— $(54,064) $—Investments$(75,827) $(35,686,489) $—Due From Affiliates$15,379 $147,427 $—Other Assets$(298,097) $(532,226) $—Debt Obligations$46,809 $(2,355,305) $—Due to Affiliates$5,021 $329,083 $—Accounts Payable, Accrued Expenses and Other Liabilities$(114,309) $(129,348) $—Noncontrolling Interests$(1,682) $(34,240,240) $—Redeemable Noncontrolling Interests$(315,057) $— $— See notes to consolidated financial statements.188Table 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 multiple alternativeasset classes including private equity, energy, infrastructure, real estate and credit, with strategic manager partnerships that manage hedge funds. KKR aims togenerate attractive investment returns for its fund investors by following a patient and disciplined investment approach, employing world-class people, and drivinggrowth and value creation with KKR's portfolio companies. KKR invests its own capital alongside the capital it manages for fund investors and provides financingsolutions and investment opportunities through its capital 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 KKR Holdings L.P.("KKR Holdings"), which is not a subsidiary of KKR. As of December 31, 2017 , KKR & Co. L.P. held approximately 59.1% of the KKR Group Partnership Unitsand principals through KKR Holdings held approximately 40.9% of the KKR Group Partnership Units. The percentage ownership in the KKR Group Partnershipswill continue to change as KKR Holdings and/or principals exchange units in the KKR Group Partnerships for KKR & Co. L.P. common units or when KKR &Co. L.P. otherwise issues or repurchases KKR & Co. L.P. common units. The KKR Group Partnerships also have outstanding equity interests that provide for thecarry pool and preferred units with economic terms that mirror the preferred units issued by KKR & Co. L.P.PAAMCO PrismaOn June 1, 2017, KKR completed its previously announced transaction to combine Pacific Alternative Asset Management Company, LLC ("PAAMCO") andPrisma Capital Partners LP ("Prisma"), formerly known as KKR Prisma or KKR's hedge fund solutions platform, to create PAAMCO Prisma Holdings, LLC("PAAMCO Prisma"). PAAMCO Prisma is a leading liquid alternatives investment firm, which operates independently from KKR.In connection with this transaction, KKR contributed $114.1 million of net assets, including intangible assets and an allocation of goodwill, in exchange for a39.9% equity interest in PAAMCO Prisma and the right to receive certain payments from PAAMCO Prisma, the collective fair value of which was $131.6 million .KKR reports its investment in PAAMCO Prisma using the equity method of accounting. See Note 16 "Goodwill and Intangible Assets."189Notes to Consolidated Financial Statements (Continued)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, 2017 2016 2015Net income (loss) attributable to KKR & Co. L.P.$1,018,305 $309,307 $488,482Transfers from noncontrolling interests: Exchange of KKR Group Partnership units held by KKR Holdings L.P. (1)247,946 90,910 212,043Change from net income (loss) attributable to KKR & Co. L.P. and transfersfrom noncontrolling interests held by KKR Holdings$1,266,251 $400,217 $700,525(1)Increase in KKR's partners' capital for exchange of 17,786,064 , 7,589,190 and 15,850,161 for the years ended December 31, 2017, 2016, and 2015, respectively, KKR GroupPartnerships units held by KKR Holdings L.P., inclusive of deferred taxes.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 investment funds, general partners of consolidatedinvestment funds and their respective consolidated investment funds and certain other entities including CFEs. References in the accompanying financialstatements to "principals" are to KKR'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."An entity in which KKR holds a variable interest is a VIE if any one of the following conditions exist: (a) the total equity investment at risk is not sufficient topermit the legal entity to finance its activities without additional subordinated financial support, (b) the holders of the equity investment at risk (as a group) lackeither the direct or indirect ability through voting rights or similar rights to make decisions about a legal entity's activities that have a significant effect on thesuccess of the legal190Notes to Consolidated Financial Statements (Continued)entity or the obligation to absorb the expected losses or right to receive the expected residual returns, or (c) the voting rights of some investors are disproportionateto their obligation to absorb the expected losses of the legal entity, their rights to receive the expected residual returns of the legal entity, or both and substantiallyall of the legal entity's activities either involve or are conducted on behalf of an investor with disproportionately few voting rights. Limited partnerships and othersimilar entities where unaffiliated limited partners have not been granted (i) substantive participatory rights or (ii) substantive rights to either dissolve thepartnership or remove the general partner ("kick-out rights") are VIEs under condition (b) above. KKR's investment funds that are not CFEs (i) are generallylimited partnerships, (ii) generally provide KKR with operational discretion and control, and (iii) generally have fund investors with no substantive rights to impactongoing governance and operating activities of the fund, including the ability to remove the general partner, and as such the limited partners do not hold kick-outrights. Accordingly, most of KKR's investment funds are categorized as VIEs.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. Fees earned by KKR that are customary and commensurate with the level of effort required to provide those services, and where KKR does not holdother 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 consideredvariable interests. KKR factors in all economic interests including interests held through related parties, to determine if it holds a variable interest. KKR determineswhether 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 subordinate tranche, KKR is in a first loss position and has the right to receive benefits, including the actual residual returns of the CMBS, ifany. In these cases, KKR is deemed to be the primary beneficiary and consolidates the CMBS.191Notes to Consolidated Financial Statements (Continued)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. 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 equity fundsprior 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 Capital ("Avoca"); and(vii)holders of the 7.375% Series A LLC Preferred Shares of KKR Financial Holdings LLC ("KFN") whose rights are limited to the assets of KFN. SeeNote 20 "Subsequent Events."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. 192Notes to Consolidated Financial Statements (Continued)The following table presents the calculation of noncontrolling interests held by KKR Holdings: For the years Ended December 31, 2017 2016 2015Balance at the beginning of the period $4,293,337 $4,347,153 $4,661,679Net income (loss) attributable to noncontrolling interests held by KKRHoldings (1) 791,021 212,878 433,693Other comprehensive income (loss), net of tax (2) 21,904 (10,514) (14,030)Impact of the exchange of KKR Holdings units toKKR & Co. L.P. common units (3) (238,941) (89,182) (203,127)Equity based compensation 141,727 66,572 59,114Capital contributions 3,028 241,748 25,573Capital distributions (235,610) (475,318) (615,749)Transfer of interests under common control and Other(See Note 15 "Equity") 17,009 — —Balance at the end of the period $4,793,475 $4,293,337 $4,347,153 (1)Refer to the table below for calculation of net income (loss) attributable to noncontrolling interests held by KKR Holdings.(2)Calculated on a pro rata basis based on the weighted average KKR Group Partnership Units held by KKR Holdings during the reporting period. (3)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 holds 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 to theexchange agreement and (iii) the contribution of certain expenses borne entirely by KKR associated with the KKR & Co. L.P. 2010 Equity Incentive Plan ("EquityIncentive Plan"), equity allocations shown in the consolidated statement of changes in equity differ from their respective pro rata ownership interests in KKR's netassets.The following table presents net income (loss) attributable to noncontrolling interests held by KKR Holdings: For the years Ended December 31, 2017 2016 2015Net income (loss) $2,560,042 $950,664 $5,275,032Less: Net income (loss) attributable to Redeemable Noncontrolling Interests 73,972 (8,476) (4,512)Less: Net income (loss) attributable to Noncontrolling Interests in consolidatedentities 676,744 436,955 4,357,369Less: Net income (loss) attributable to Series A andSeries B Preferred Unitholders 33,364 22,235 —Plus: Income tax / (benefit) attributable toKKR Management Holdings Corp. 150,812 (18,937) 21,241Less: Gain from remeasurement of tax receivable agreement liabilityattributable to KKR Management Holdings Corp. (1) 67,221 — —Net income (loss) attributable to KKR & Co. L.P. Common Unitholdersand KKR Holdings $1,859,553 $481,013 $943,416 Net income (loss) attributable to Noncontrolling Interests held by KKRHoldings $791,021 $212,878 $433,693 (1) Represents the impacts of the remeasurement of the tax receivable agreement which arises from changes in the associated deferred tax balance, including the impacts related to the Tax Cuts & Jobs Act enacted on December 22,2017 (the "2017 Tax Act").193Notes to Consolidated Financial Statements (Continued)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 entity's functional currency are valued based on the spot rate of the respective currency at the end of thereporting period with changes related to exchange rate movements reflected as a component of Net Gains (Losses) from Investment Activities in the consolidatedstatements of operations. 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 FundsThe 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.194Notes to Consolidated Financial Statements (Continued)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. Accounting for these investments at fair valueis consistent with how KKR accounts for its investments held through consolidated investment funds. Changes in the fair value of such instruments are recognizedin Net Gains (Losses) from Investment Activities in the consolidated statements of operations. Interest income on interest bearing credit securities on which the fairvalue option has been elected is based on stated coupon rates adjusted for the accretion of purchase discounts and the amortization of purchase premiums. Thisinterest income is recorded within Interest Income in the consolidated statements of operations.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. For equity method investments, KKR records itsproportionate share of the investee's earnings or losses based on the most recently available financial information of the investee, which in certain cases may lagthe date of KKR's financial statements by no more than three calendar months. As of December 31, 2017 , equity method investees for which KKR reportsfinancial results on a quarter lag include Marshall Wace LLP ("Marshall Wace"). KKR evaluates its equity method investments for which KKR has not elected thefair value option for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable.The carrying value of equity method investments in private equity funds, real assets funds and credit funds, which are not consolidated, approximate fairvalue, because the underlying investments of the unconsolidated investment funds are reported at fair value.195Notes to Consolidated Financial Statements (Continued)The carrying value of equity method investments in certain operating companies, with respect to which KKR is determined to exert significant influence underGAAP and for which KKR has not elected the fair value option, is determined based on the amounts invested by KKR, adjusted for the equity in earnings or lossesof the investee allocated based on KKR's respective ownership percentage, less distributions.Financial Instruments held by Consolidated CFEs KKR measures both the financial assets and financial liabilities of the consolidated CFEs in its financial statements using the more observable of the fair valueof the financial assets and the fair value of the financial liabilities which results in KKR's consolidated net income (loss) reflecting KKR's own economic interestsin the consolidated CFEs including (i) changes in the fair value of the beneficial interests retained by KKR and (ii) beneficial interests that represent compensationfor services rendered.For the consolidated CLO entities, KKR has determined that the fair value of the financial assets of the consolidated CLOs is 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 in consolidation as: (1) the sum of the fair value of the financial assets and the carrying value of any nonfinancial assets thatare incidental to the operations of the CLOs less (2) the sum of the fair value of any beneficial interests retained by KKR (other than those that representcompensation for services) and KKR's carrying value of any beneficial interests that represent compensation for services. The resulting amount is allocated to theindividual financial liabilities (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.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, 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.Investments and financial instruments measured and reported at fair value are classified and disclosed based on the observability of inputs used in thedetermination of fair values, 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 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 of196Notes to Consolidated Financial Statements (Continued)consolidated CLO entities, convertible debt securities indexed to publicly-listed securities, less liquid and restricted 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.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.197Notes to Consolidated Financial Statements (Continued)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 Investments and financial instruments 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 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 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 Asset 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.198Notes to Consolidated Financial Statements (Continued)Key inputs used in this methodology can include the weighted average cost of capital and assumed inputs used to calculate terminal values, such as exit EBITDAmultiples. Energy investments are generally valued using a discounted cash flow analysis. Key inputs used in this methodology that require estimates include theweighted average cost of capital. In addition, the valuations of energy investments generally incorporate both commodity prices as quoted on indices and long-termcommodity price forecasts, which may be substantially different from commodity prices on certain indices for equivalent future dates. Certain energy investmentsdo not include an illiquidity discount. Long-term commodity price forecasts are utilized to capture the value of the investments across a range of commodity priceswithin the energy investment portfolio associated with future development and to reflect a range of price expectations. Real estate investments are generally valuedusing a combination of direct income capitalization and discounted cash flow analysis. Key inputs used in such methodologies that require estimates include anunlevered discount rate and current capitalization rate. The valuations of real assets investments 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. 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 investments classified as Level III. The valuation firm either provides a valueor provides a valuation range from which KKR's investment professionals select a point in the range to determine the preliminary valuation or performs certainprocedures in order to assess the reasonableness and provide positive assurance of KKR's valuations. After reflecting any input from the independent valuationfirm, the valuation proposals are submitted for review and approval by KKR's valuation committees.KKR has a global valuation committee that is responsible for coordinating and implementing the firm's valuation process to ensure consistency in theapplication of valuation principles across portfolio investments and between periods. The global199Notes to Consolidated Financial Statements (Continued)valuation committee is assisted by the asset class-specific valuation committees that exist for private equity (including growth equity), real estate, energy andinfrastructure, and credit. The asset class-specific valuation committees are responsible for the review and approval of all preliminary Level III valuations in theirrespective asset classes on a quarterly basis. The members of these valuation committees are comprised of investment professionals, including the heads of eachrespective strategy, and professionals from business operations functions such as legal, compliance and finance, who are not primarily responsible for themanagement of the investments. For periods prior to the completion of the PAAMCO Prisma transaction, when Level III valuations were required to be performedon hedge fund investments, a valuation committee for hedge funds reviewed these valuations.All Level III valuations are also subject to approval by the global valuation committee, which is comprised of senior employees including investmentprofessionals and professionals from business operations functions, and includes one of KKR's Co-Presidents and Co-Chief Operating Officers and its ChiefFinancial Officer, General Counsel and Chief Compliance Officer. When valuations are approved by the global valuation committee after reflecting any input fromit, 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 the board ofdirectors of the general partner of KKR & Co. L.P. and are then reported to the board of directors.Fees and OtherFees 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.For the years ended December 31, 2017 , 2016 and 2015, respectively, fees and other consisted of the following: For the years Ended December 31, 2017 2016 2015Management Fees $700,245 $619,243 $201,006Transaction Fees 783,952 350,091 354,895Monitoring Fees 204,165 146,967 336,159Fee Credits (257,401) (128,707) (17,351)Carried Interest 1,740,661 803,185 —Incentive Fees 4,601 8,709 16,415Oil and Gas Revenue 63,460 65,754 112,328Consulting Fees 42,582 42,851 40,316Total Fees and Other $3,282,265 $1,908,093 $1,043,768 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 whichservices are 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's200Notes to Consolidated Financial Statements (Continued)consolidated funds and vehicles is increased by the amount of fees that are eliminated. Accordingly, the elimination of these fees does not have an effect on the netincome (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 growth equity, real assets, credit, and the core investment strategy provide for management fees determinedquarterly based on an annual rate generally ranging from 0.5% to 2.0% . Such rate may be based on the investment fund's average net asset value, capitalcommitments, or invested capital.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, KKR receives reimbursement for certain expenses incurred on behalf of these entities. Costsincurred in monitoring these entities are classified as general, administrative and other expenses201Notes to Consolidated Financial Statements (Continued)and reimbursements of such costs are classified as monitoring fees. In addition, certain monitoring fee provisions may provide for a termination payment followingan initial public offering or change of control. 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 the funds' limited partners. At the end of each reporting period, KKR calculates the carried interest that would be due to KKR foreach 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 amountshave been realized. As the fair value of underlying investments varies between reporting periods, it is necessary to make adjustments to amounts recorded ascarried interest to reflect either (a) positive performance resulting in an increase in the carried interest allocated to the general partner or (b) negative performancethat would cause the amount due to KKR to be less than the amount previously recognized as revenue, resulting in a negative adjustment to carried interestallocated to the general partner. In each case, it is necessary to calculate the carried interest on cumulative results compared to the carried interest recorded to dateand make the required positive or negative adjustments. KKR ceases to record negative carried interest allocations once previously recognized carried interestallocations for a fund have been fully reversed. KKR is not obligated to pay guaranteed returns or hurdles, and therefore, cannot have negative carried interest overthe life of a fund. Accrued but unpaid carried interest as of the reporting date is reflected in Investments in the consolidated statements of financial condition.Incentive FeesIncentive fees earned on investment funds that do not generate carried interest are recognized based on fund performance, subject to the achievement ofminimum return levels, and/or high water marks, in accordance with the respective terms set out in each fund's governing agreements. Incentive fee rates generallyrange from 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 the performance‑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 portfolio company forwhich services are provided and are not shared with KKR.202Notes to Consolidated Financial Statements (Continued)Compensation and BenefitsCompensation and Benefits expense includes (i) cash compensation consisting of salaries, bonuses, and benefits, (ii) equity based compensation consisting ofcharges associated with the vesting of equity-based awards (see Note 12 "Equity Based Compensation") and (iii) 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, certain cash bonuses that are paid to certain of KKR's principals can be 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 currently recordedbased on the amount of cash expected to be paid by KKR Holdings.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% or 43% , asapplicable, of the carry it earns from these funds and vehicles to its carry pool. In addition, for investment funds that provide for incentive fees rather than carriedinterest, the carry pool is supplemented by allocating 40% of the incentive fees that do not constitute carried interest that are earned from such funds. Theseamounts are accounted for as compensatory profit‑sharing arrangements in Accounts Payable, Accrued Expenses and Other Liabilities within the accompanyingconsolidated statements of financial condition in conjunction with the related carried interest income or incentive fees and recorded as compensation expense.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, 2017, 2016 and 2015, KKR incurred expenses of $8.2 million , $8.0 million and $7.9 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, derivatives and debt obligations of consolidated CFEs which are recordedin 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.203Notes to Consolidated Financial Statements (Continued)(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.Deferred Income TaxesIncome 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 the consolidatedstatements of operations in the period when the change is enacted.Deferred tax assets, which are recorded in Other Assets within the statement of financial condition, are reduced by a valuation allowance when, based on theweight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. When evaluating the realizability ofthe deferred tax assets, all evidence, both positive and negative, is considered. Items considered when evaluating the need for a valuation allowance include theability to carry back losses, future reversals of existing temporary differences, tax planning strategies, and expectations of future earnings.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 condition.2017 Tax ActThe 2017 Tax Act makes various changes to the U.S. tax code that include, but are not limited to, (1) reducing the U.S. federal corporate tax rate to 21%effective January 1, 2018 and (2) requiring a one-time transition tax on certain un-repatriated earnings of foreign subsidiaries that is payable over eight years.On December 22, 2017, the SEC issued Staff Accounting Bulletin ("SAB 118"), which provides guidance on accounting for tax effects of the 2017 Tax Act.SAB 118 provides a measurement period that should not extend beyond one year from the 2017 Tax Act enactment date for companies to complete the accountingunder Accounting Standards Codification 740, Income Taxes ("ASC 740"). In accordance with SAB 118, a company must reflect the income tax effects of thoseaspects of the 2017 Tax Act for which the accounting under ASC 740 is complete. To the extent that a company's accounting for certain income tax effects of the2017 Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate to be included in the financial statements. If acompany cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provision ofthe tax laws that were in effect immediately before the enactment of the 2017 Tax Act.KKR has recognized the provisional tax impacts related to the revaluation of deferred tax assets and liabilities and the deemed repatriated earnings for the yearended December 31, 2017. The ultimate impact may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis,changes in interpretations and assumptions KKR has made, additional regulatory guidance that may be issued, and actions KKR may take following the enactmentof the 2017 Tax Act. The accounting is expected to be complete when the 2017 U.S. corporate income tax return is filed in 2018. See Note 11 "Income Taxes" forfurther information on the financial statement impact of the 2017 Tax Act.204Notes to Consolidated Financial Statements (Continued)Uncertain Tax PositionsKKR 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. The reservefor uncertain tax positions is recorded in Accounts Payable, Accrued and Other Liabilities in the accompanying statements of financial condition. KKR recognizesaccrued 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.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.205Notes to Consolidated Financial Statements (Continued)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.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.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 expenses resulting from transactionsoutside of the functional currency of a consolidated entity are recorded as incurred in general, administrative and other expense in the consolidated statements ofoperations.Recently Issued Accounting Pronouncements Revenue from Contracts with Customers In May 2014, the Financial Accounting Standards Board ("the "FASB") issued ASU No. 2014-09, Revenue from Contracts with Customers Topic 606 ("ASU2014-09") which has subsequently been amended by ASU 2015-14, ASU 2016-08, ASU 2016-10, ASU 2016-12, and ASU 2017-13. These ASUs outline a singlecomprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognitionguidance, including industry-specific guidance. Revenue recorded under ASU 2014-09 will depict the transfer of promised goods or services to customers in anamount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In July 2015, the FASB deferred theeffective date of ASU 2014-09 to annual reporting periods beginning after December 15, 2017. Early adoption will be permitted as of annual reporting periodsbeginning after December 15, 2016, including interim reporting periods within those annual periods. A full retrospective or modified retrospective approach isrequired.206Notes to Consolidated Financial Statements (Continued)Carried interest is a capital allocation to the general partner based on investment performance, and where applicable, subject to a preferred return to a funds'limited partners. KKR has concluded that capital allocation-based carried interest represents income from equity method investments that is not in the scope ofASU 2014-09. Accordingly, in connection with the adoption of ASU 2014-09, KKR will account for such carried interest as a financial instrument under the equitymethod of accounting within the scope of ASC 323, Investments - Equity Method and Joint Ventures ("ASC 323"). In accordance with ASC 323, KKR will recordequity method income (losses) based on the change in KKR's proportionate claim on the net assets of the investment fund, including performance-based capitalallocations, assuming the investment fund was liquidated as of each reporting date pursuant to each investment fund's governing agreements. As carried interestand the related general partner investments are considered to be a single unit of account under KKR's accounting policy, the equity method income associated withthe general partner interests will be combined with the associated carried interest and reported in a single line within the statement of operations. KKR expects toapply this change in accounting on a full retrospective basis. The pattern and amount of recognition under the policy is not expected to differ materially fromKKR's existing recognition. As it pertains to incentive fees, KKR expects the recognition of incentive fees, which are a form of variable consideration, to bedeferred until such fees are no longer subject to significant reversal, which is consistent with KKR's existing recognition treatment. Additionally, KKR is currentlyin the process of implementing the new revenue guidance and is continuing to evaluate the effect this guidance will have on other revenue streams. KKR will adoptthe new revenue recognition guidance effective January 1, 2018.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. KKR will adopt this guidance as of January 1, 2018.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. Entities are required toapply the guidance prospectively to increases in the level of ownership interest or degree of influence occurring after the ASU's effective date. Additional transitiondisclosures are not required upon adoption. This guidance has been adopted as of January 1, 2017.207Notes to Consolidated Financial Statements (Continued)Equity-Based 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. KKRadopted ASU 2016-09 on January 1, 2017 and will apply prospective application. In connection with this adoption, the most significant impacts to KKR relate tothe following: (i) with respect to the tax impact of equity-based compensation charges, KKR has accounted for the difference between the deduction for taxpurposes and the compensation cost recognized for financial reporting purposes as an income tax expense or benefit in the statement of operations, (ii) KKR hasclassified this difference with other income tax cash flows as an operating activity in the statement of cash flows and (iii) KKR has made an election to continue toestimate the number of equity compensation awards that are expected to vest, net of forfeitures, over the life of an equity award and not account for forfeitures asthey occur.In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting ("ASU 2017-09"),which amends the scope of modification accounting for share-based payment arrangements. ASU 2017-09 provides guidance on the types of changes to the termsor conditions of share-based payment awards to which an entity would be required to apply modification accounting. Specifically, an entity would not applymodification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. ASU2017-09 is effective for fiscal years and interim periods beginning after December 15, 2017. Early adoption is permitted. KKR is currently evaluating the impact ofthis guidance on the financial statements. KKR will adopt this guidance as of January 1, 2018.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,which amends the guidance on the classification of certain cash receipts and payments in the statement of cash flows. The amended guidance adds or clarifiesguidance on eight cash flow matters: (i) debt prepayment or debt extinguishment costs, (ii) settlement of zero-coupon debt instruments or other debt instrumentswith coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (iii) contingent consideration payments made after abusiness combination, (iv) proceeds from the settlement of insurance claims, (v) proceeds from the settlement of corporate-owned life insurance policies, (vi)distributions received from equity method investees, (vii) beneficial interests in securitization transactions and (viii) separately identifiable cash flows andapplication 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 financialstatements.In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which amends the guidance to add or clarifyguidance on the classification and presentation of restricted cash in the statement of cash flows. The amended guidance requires the following: (i) restrictedcash and restricted cash equivalents should be included in the cash and cash-equivalents balances in the statement of cash flows; (ii) changes in restricted cash andrestricted cash equivalents that result from transfers between cash, cash equivalents, and restricted cash and restricted cash equivalents should not be presented ascash flow activities in the statement of cash flows; (iii) a reconciliation between the statement of financial position and the statement of cash flows must bedisclosed when the statement of financial position includes more than one line item for cash, cash equivalents, restricted cash, and restricted cash equivalents; and(iv) the nature of the restrictions must be disclosed for material restricted cash and restricted cash equivalents amounts. The guidance in this ASU is effective forfiscal years beginning after December 15, 2017, including interim periods therein. Early adoption is permitted. The guidance must be applied retrospectively to allperiods presented. KKR is currently evaluating the impact of this guidance on the financial statements. KKR will adopt this guidance as of January 1, 2018.208Notes to Consolidated Financial Statements (Continued)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. KKR will adopt this guidance as of January 1, 2018.Clarifying the Definition of a BusinessIn January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business ("ASU 2017-01"). Thisguidance amends the definition of a business and provides a threshold which must be considered to determine whether a transaction is an asset acquisition or abusiness combination. ASU 2017-01 is effective for fiscal years and interim periods beginning after December 15, 2017. Early adoption is permitted fortransactions (i.e. acquisitions or dispositions) that occurred before the issuance date or effective date of the standard if the transactions were not reported infinancial statements that have been issued or made available for issuance. This guidance has been adopted as of the fourth quarter of 2017.GoodwillIn January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. Thisguidance simplifies the accounting for goodwill impairments by eliminating the second step from the goodwill impairment test. The ASU requires goodwillimpairments 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 the impliedamount of goodwill relative to the goodwill balance of the reporting unit. The ASU also (i) clarifies the requirements for excluding and allocating foreign currencytranslation adjustments to reporting units related to an entity's testing of reporting units for goodwill impairment; and (ii) clarifies that an entity should considerincome tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. Theguidance is effective for fiscal periods beginning after December 15, 2019. Early adoption is allowed for entities as of January 1, 2017, for annual and any interimimpairment tests occurring after January 1, 2017. KKR is currently evaluating the impact of this guidance on the financial statements.Other IncomeIn February 2017, the FASB issued ASU No. 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20):Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets. The ASU conforms the derecognition guidance onnonfinancial assets with the model for transactions in the new revenue standard (ASC 606, as amended). The effective date of the new guidance is aligned with therequirements in the new revenue standard, which is effective for annual and interim reporting periods beginning after December 15, 2017. The ASU allows anentity to use a full or modified retrospective adoption approach. KKR is currently evaluating the impact of this guidance on the financial statements.Premium Amortization on Purchased Callable Debt SecuritiesIn March 2017, the FASB issued ASU No. 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization onPurchased Callable Debt Securities ("ASU 2017-08"). This guidance amends the amortization period for certain purchased callable debt securities held at apremium. The guidance requires the premium to be amortized to the earliest call date. The guidance does not require an accounting change for securities held at adiscount; the discount continues to be amortized to maturity. ASU 2017-08 is effective for fiscal years and interim periods beginning after December 15, 2018.Early adoption is permitted and the guidance when adopted should be applied on a modified retrospective basis through a cumulative-effect adjustment directly toretained earnings as of the beginning of the period of adoption. KKR is currently evaluating the impact of this guidance on the financial statements. 209Notes to Consolidated Financial Statements (Continued)Reclassification of Certain Tax Effects from Accumulated Other Comprehensive IncomeIn February 2018, the FASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain TaxEffects from Accumulated Other Comprehensive Income ("ASU 2018-02). Under ASC 740-10-45-15, the effects of changes in tax rates and laws on deferred taxbalances are recorded as a component of tax expense related to continuing operations for the period in which the law was enacted, even if the assets and liabilitiesrelated to items of accumulated other comprehensive income ("OCI"). ASU 2018-02 allows entities to reclassify from accumulated OCI to retained earningsstranded tax effects related to the change in federal tax rate for all items accounted for in OCI. Entities can also elect to reclassify other stranded tax effects thatrelate to the 2017 Tax Act but do not directly relate to the change in the federal tax rate. Tax effects that are stranded in OCI for other reasons may not bereclassified. In the period of adoption, entities that elect to reclassify the income tax effects of the 2017 Tax Act from accumulated OCI to retained earnings mustdisclose that they made such an election. Entities must also disclose a description of other income tax effects related to the 2017 Tax Act that are reclassified fromaccumulated OCI to retained earnings, if any. The guidance is effective for fiscal periods beginning after December 15, 2018, and interim periods within thosefiscal years. Early adoption is permitted for periods for which financial statement have not yet been issued or made available upon issuance, including in the periodthe 2017 Tax Act was enacted. An entity that adopts ASU 2018-02 in an annual or interim periods after the period of enactment is able to choose whether to applythe amendments retrospectively to each period in which the effect of the 2017 Tax Act is recognized or to apply the amendments in the period of adoption. KKR iscurrently evaluating the impact of this guidance on the financial statements.210Notes 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 tables summarize total Net Gains (Losses) from Investment Activities for the years ended December 31, 2017 , 2016 and 2015, respectively: For the year Ended December 31, 2017 Net Realized Gains (Losses) Net Unrealized Gains (Losses) TotalPrivate Equity (1)$223,568 $338,720 $562,288Credit, Equity Method and Other (1)(1,232,645) 860,102 (372,543)Investments of Consolidated CFEs (1)(97,129) 352 (96,777)Real Assets (1)(18,722) 218,728 200,006Foreign Exchange Forward Contracts and Options (2)(31,772) (342,849) (374,621)Securities Sold Short (2)1,116,325 97,811 1,214,136Other Derivatives (2)(7,129) (23,687) (30,816)Debt Obligations and Other (3)85,820 15,666 101,486Net Gains (Losses) From Investment Activities$38,316 $1,164,843 $1,203,159 For the year Ended December 31, 2016 Net Realized Gains (Losses) Net Unrealized Gains (Losses) TotalPrivate Equity (1)$306,180 $(196,892) $109,288Credit, Equity Method and Other (1)(825,822) 4,280 (821,542)Investments of Consolidated CFEs (1)(258,430) 444,142 185,712Real Assets (1)87,512 141,886 229,398Foreign Exchange Forward Contracts and Options (2)108,404 (7,986) 100,418Securities Sold Short (2)594,743 (90,607) 504,136Other Derivatives (2)(49,712) 70,534 20,822Debt Obligations and Other (3)384,222 (369,557) 14,665Net Gains (Losses) From Investment Activities$347,097 $(4,200) $342,897 For the year Ended December 31, 2015 Net Realized Gains (Losses) Net Unrealized Gains (Losses) TotalPrivate Equity (1)$4,452,593 $1,140,377 $5,592,970Credit, Equity Method and Other (1)138,915 (800,027) (661,112)Investments of Consolidated CFEs (1)(54,367) (220,577) (274,944)Real Assets (1)(2,035,727) 1,591,541 (444,186)Foreign Exchange Forward Contracts and Options (2)415,370 87,482 502,852Securities Sold Short (2)(6,860) 3,909 (2,951)Other Derivatives (2)17,694 2,449 20,143Debt Obligations and Other (3)74,266 (134,411) (60,145)Net Gains (Losses) From Investment Activities$3,001,884 $1,670,743 $4,672,627 (1)See Note 4 "Investments."(2)See Note 8 "Other Assets and Accounts Payable, Accrued Expenses and Other Liabilities."(3)See Note 10 "Debt Obligations."211Notes to Consolidated Financial Statements (Continued)4. INVESTMENTS Investments consist of the following: December 31, 2017 December 31, 2016Private Equity$3,301,261 $2,915,667Credit7,621,320 4,847,936Investments of Consolidated CFEs15,573,203 13,950,897Real Assets2,302,061 1,807,128Equity Method4,552,515 2,728,995Carried Interest2,904,287 2,384,177Other2,759,287 2,774,965Total Investments$39,013,934 $31,409,765 As of December 31, 2017 and 2016, there were no investments which represented greater than 5% of total investments. The majority of the securitiesunderlying private equity investments represent equity securities.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, 2016 $2,384,177Carried Interest Allocated as a result of Changes in Fund Fair Value 1,740,661Cash Proceeds Received (1,220,551)Balance at December 31, 2017 $2,904,287Equity Method Equity method investments include (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 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 represents 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 U.S. Securities andExchange Commission (the "SEC"). As of and for the years ended December 31, 2017, 2016 and 2015, no individual equity method investment held by KKR metthe significance criteria. As such, KKR is not required to present separate financial statements for any of its equity method investments.212Notes to Consolidated Financial Statements (Continued)Investment in Marshall WaceOn November 2, 2015, KKR entered into a long-term strategic relationship with Marshall Wace LLP and its affiliates ("Marshall Wace") and acquired a24.9% interest in Marshall Wace through a combination of cash and common units. Subject to the exercise of a put option by Marshall Wace or a call option byKKR, at subsequent closings to occur in the second, third and fourth years following the initial closing described above, and subject to satisfaction or waiver ofcertain closing conditions, including regulatory approvals, KKR may at each such closing subscribe (or be required to subscribe) for an incremental 5% equityinterest, for ultimate aggregate ownership of up to 39.9% of Marshall Wace. The exercise of such options would require the use of cash and/or issuance of KKRcommon units. KKR's investment in Marshall Wace is accounted for using the equity method of accounting.On November 30, 2017, KKR acquired an additional 5.0% interest in Marshall Wace after the exercise of one of the options agreed to between Marshall Waceand KKR. This acquisition was funded through a combination of cash and newly issued common units.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, 2017 and 2016: December 31, 2017 December 31, 2016Total Assets $66,989,419 $46,607,136Total Liabilities $10,510,223 $4,368,696Total Equity $56,479,196 $42,238,440The 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, 2017, 2016 and 2015: For the years Ended December 31, 2017 2016 2015Investment Related Revenues $1,167,038 $1,195,404 $240,877Other Revenues 3,002,987 1,201,693 623,714Investment Related Expenses 482,336 464,616 53,081Other Expenses 2,392,965 801,342 675,293Net Realized and Unrealized Gain/(Loss) from Investments 9,217,912 3,625,293 (307,301)Net Income (Loss) $10,512,636 $4,756,432 $(171,084)213Notes to Consolidated Financial Statements (Continued)5 . 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, 2017 Level I Level II Level III TotalPrivate Equity$1,043,390 $85,581 $2,172,290 $3,301,261Credit— 2,482,383 5,138,937 7,621,320Investments of Consolidated CFEs— 10,220,113 5,353,090 15,573,203Real Assets50,794 — 2,251,267 2,302,061Equity Method60,282 247,748 1,076,709 1,384,739Other864,872 134,404 1,760,011 2,759,287Total2,019,338 13,170,229 17,752,304 32,941,871 Foreign Exchange Contracts and Options— 96,584 — 96,584Other Derivatives— 33,125 51,949(1)85,074Total Assets$2,019,338 $13,299,938 $17,804,253 $33,123,529(1)Includes derivative assets that were valued using a third-party valuation firm. The approach used to estimate the fair value of these derivative assets was generally the discounted cash flowmethod, which includes consideration of the current portfolio, projected portfolio construction, projected portfolio realizations, portfolio volatility (based on the volatility, correlation, andsize of each underlying asset class), and the discounting of future cash flows to the reporting date. 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 $27,410,231214Notes to Consolidated Financial Statements (Continued)Liabilities, at fair value: December 31, 2017 Level I Level II Level III TotalSecurities Sold Short$692,007 $— $— $692,007Foreign Exchange Contracts and Options— 260,948 — 260,948Unfunded Revolver Commitments— — 17,629(1)17,629Other Derivatives— 27,581 41,800(2)69,381Debt Obligations of Consolidated CFEs— 10,347,980 5,238,236 15,586,216Total Liabilities$692,007 $10,636,509 $5,297,665 $16,626,181 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— 44,015 56,000(2)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 (1)These unfunded revolver commitments are classified as Level III within the fair value hierarchy and valued using the same valuation methodologies as KKR's Level III creditinvestments.(2)Includes options issued in connection with the acquisition of the 24.9% equity interest in Marshall Wace in November 2015 and its affiliates to increase KKR's ownershipinterest to 39.9% 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. See Note 4 "Investments."215Notes to Consolidated Financial Statements (Continued)The following tables summarize changes in investments and debt obligations reported at fair value for which Level III inputs have been used to determine fairvalue for the years ended December 31, 2017 and 2016, respectively: For the year Ended December 31, 2017 Level III Investments Level III Debt Obligations PrivateEquity Credit Investments ofConsolidatedCFEs Real Assets EquityMethod Other Total Debt Obligations ofConsolidatedCFEsBalance, Beg. of Period$1,559,559 $3,290,361 $5,406,220 $1,807,128 $570,522 $1,767,573 $14,401,363 $5,294,741Transfers In/Out Due toChanges in Consolidation— (41,422) — 45,639 — — 4,217 —Transfers In— — — — — 3,511 3,511 —Transfers Out(14,532) (16,671) — — — (1,496) (32,699) —Asset Purchases / DebtIssuances427,914 2,545,756 — 744,273 728,338 327,144 4,773,425 —Sales / Paydowns(175,676) (1,224,468) (45,562) (528,617) (291,326) (262,953) (2,528,602) —Settlements— 134,561 — — — — 134,561 (45,562)Net Realized Gains (Losses)6,846 (97,409) — (18,722) 21,865 (40,098) (127,518) —Net Unrealized Gains (Losses)368,179 518,049 (7,568) 201,566 47,310 (33,670) 1,093,866 (10,943)Change in Other ComprehensiveIncome— 30,180 — — — — 30,180 —Balance, End of Period$2,172,290 $5,138,937 $5,353,090 $2,251,267 $1,076,709 $1,760,011 $17,752,304 $5,238,236 Changes in Net UnrealizedGains (Losses) Included in NetGains (Losses) fromInvestment Activities related toLevel III Assets and Liabilitiesstill held as of the ReportingDate$370,136 $424,099 $(7,568) $147,940 $61,855 $(22,904) $973,558 $(10,943) For the year Ended December 31, 2016 Level III Investments Level III Debt Obligations PrivateEquity Credit Investments ofConsolidatedCFEs Real Assets EquityMethod Other Total 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 / DebtIssuances591,459 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 UnrealizedGains (Losses) Included in NetGains (Losses) fromInvestment Activities related toLevel III Assets and Liabilitiesstill held as of the ReportingDate$127,082 $(138,335) $67,876 $180,543 $(31,130) $(217,771) $(11,735) $64,496216Notes to Consolidated Financial Statements (Continued)Total realized and unrealized gains and losses recorded for Level III assets and liabilities 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, 2017 and 2016: For the years Ended December 31, 2017 2016Assets, at fair value: Transfers from Level I to Level II (1)$53,416 $73,600Transfers from Level II to Level I (4)$33,634 $—Transfers from Level II to Level III (2)$3,511 $4,571,873Transfers from Level III to Level II (3)$16,671 $318,752Transfers from Level III to Level I (4)$16,028 $104,000 Liabilities, at fair value: Transfers from Level II to Level III (5)$— $4,272,081(1)Transfers out of Level I into Level II are principally attributable to certain investments that are no longer valued using a publicly traded market price.(2)Transfers out of Level II into Level III are principally attributable to certain investments that experienced an insignificant level of market activity during the period and thuswere valued in the absence of observable inputs.(3)Transfers out of Level III into Level II are principally attributable to certain investments that experienced a higher level of market activity during the period and thus werevalued using observable inputs.(4)Transfers out of Level III and Level II into Level I are attributable to portfolio companies that are valued using their publicly traded market price.(5)Transfers out of Level II into Level III are principally attributable to debt obligations of CMBS vehicles due to an insignificant level of market activity during the period andthus were valued in the absence of observable inputs.217Notes to Consolidated Financial Statements (Continued)The following table presents additional information about valuation methodologies and significant unobservable inputs used for investments and debtobligations that are measured at fair value and categorized within Level III as of December 31, 2017 : Fair ValueDecember 31,2017 ValuationMethodologies Unobservable Input(s) (1) WeightedAverage (2) Range Impact to Valuationfrom anIncrease inInput (3) Private Equity$2,172,290 Private Equity$576,410 Inputs to market comparables,discounted cash flow and transactionprice Illiquidity Discount 9.6% 5.0% - 15.0% Decrease Weight Ascribed to Market Comparables 48.4% 0.0% - 50.0% (4) Weight Ascribed to Discounted Cash Flow 51.6% 50.0% - 100.0% (5) Market comparables Enterprise Value/LTM EBITDA Multiple 14.4x 7.4x - 26.2x Increase Enterprise Value/Forward EBITDA Multiple 12.4x 5.7x - 19.0x Increase Discounted cash flow Weighted Average Cost of Capital 10.1% 7.7% - 14.6% Decrease Enterprise Value/LTM EBITDA Exit Multiple 10.5x 4.8x - 15.1x Increase Growth Equity$1,595,880 Inputs to market comparables,discounted cash flow and milestones Illiquidity Discount 13.3% 10.0% - 15.0% Decrease Weight Ascribed to Market Comparables 24.5% 0.0% - 100.0% (4) Weight Ascribed to Discounted Cash Flow 9.0% 0.0% - 75.0% (5) Weight Ascribed to Milestones 66.5% 0.0% - 100.0% (6) Scenario Weighting Base 51.9% 30.0% - 80.0% Increase Downside 21.4% 5.0% - 40.0% Decrease Upside 26.7% 10.0% - 45.0% Increase Credit$5,138,937 Yield Analysis Yield 10.3% 3.2% - 36.6% Decrease Net Leverage 4.7x 0.5x - 27.5x Decrease EBITDA Multiple 11.8x 0.1x - 22.4x Increase Investments ofConsolidated CFEs$5,353,090(9) Debt Obligations ofConsolidated CFEs$5,238,236 Discounted cash flow Yield 5.6% 2.2% - 29.3% Decrease Real Assets$2,251,267(10) Energy$1,152,627 Discounted cash flow Weighted Average Cost of Capital 10.4% 9.4% - 17.5% Decrease Average Price Per BOE (8) $40.34 $26.50 - $42.05 Increase Real Estate$887,403 Inputs to direct income capitalization anddiscounted cash flow Weight Ascribed to Direct Income Capitalization 37.2% 0.0% - 100.0% (7) Weight Ascribed to Discounted Cash Flow 62.8% 0.0% - 100.0% (5) Direct income capitalization Current Capitalization Rate 5.8% 1.9% - 8.7% Decrease Discounted cash flow Unlevered Discount Rate 9.0% 4.5% - 20.0% Decrease Other$1,760,011(11)Inputs to market comparables,discounted cash flow and transactionprice Illiquidity Discount 10.6% 5.0% - 15.0% Decrease Weight Ascribed to Market Comparables 22.8% 0.0% - 100.0% (4) Weight Ascribed to Discounted Cash Flow 45.3% 0.0% - 100.0% (5) Weight Ascribed to Transaction Price 31.9% 0.0% - 100.0% (6) Market comparables Enterprise Value/LTM EBITDA Multiple 10.9x 0.1x - 15.1x Increase Enterprise Value/Forward EBITDA Multiple 9.1x 4.0x - 13.5x Increase Discounted cash flow Weighted Average Cost of Capital 11.8% 8.5% - 21.2% Decrease Enterprise Value/LTM EBITDA Exit Multiple 6.7x 2.0x - 11.3x Increase 218Notes to Consolidated Financial Statements (Continued)(1)In determining certain of these inputs, management evaluates a variety of factors including economic conditions, industry and market developments, market valuations ofcomparable companies and company specific developments including exit strategies and realization opportunities. Management has determined that market participants wouldtake these inputs into account when valuing the investments and debt obligations. LTM means last twelve months and EBITDA means earnings before interest taxesdepreciation 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 insignificantly higher or lower fair value measurements.(4)The directional change from an increase in the weight ascribed to the market comparables approach would increase the fair value of the Level III investments if the marketcomparables approach results in a higher valuation than the discounted cash flow approach and transaction price. The opposite would be true if the market comparables approachresults 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 discountedcash flow approach results in a higher valuation than the market comparables approach, transaction price and direct income capitalization approach. The opposite would be trueif the discounted 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 transactionprice results 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 lowervaluation than the market 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 approachresults in a 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 producevarying quantities of oil, condensate, natural gas liquids, and natural gas. Commodity price may be measured using a common volumetric equivalent where one barrel of oilequivalent, or BOE, 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 toshow the aggregate of all price inputs for the various investments over a common volumetric equivalent although the valuations for specific investments may use price inputsspecific to the asset for purposes of our valuations. The discounted cash flows include forecasted production of liquids (oil, condensate, and natural gas liquids) and natural gaswith a forecasted revenue ratio of approximately 85% liquids and 15% natural gas.(9)KKR measures CMBS investments on the basis of the fair value of the financial liabilities of the CMBS vehicle. See Note 2 "Summary of Significant Accounting Policies."(10)Includes one Infrastructure investment for $211.2 million that was valued using a discounted cash flow analysis. The significant inputs used included the weighted average costof capital 7.6% and the enterprise value/LTM EBITDA Exit Multiple 12.0 x.(11)Consists primarily of investments in common stock, preferred stock, warrants and options of companies that are not private equity, real assets, credit or investments ofconsolidated CFEs.The table above excludes equity method investments, which KKR has elected the fair value option in the amount of $1,076.7 million , comprised primarily of(i) interests in partnerships that hold investments in private equity investments, (ii) interests in real estate joint ventures and (iii) direct interests in certain operatingcompanies. These equity method investments were valued using Level III value methodologies which are generally the same as those shown for private equity andreal estate 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.219Notes 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, 2017 December 31, 2016Assets Private Equity$3,744 $96,721Credit4,381,519 1,392,525Investments of Consolidated CFEs15,573,203 13,950,897Real Assets343,820 247,376Equity Method1,384,739 791,418Other344,996 240,343 Total$22,032,021 $16,719,280 Liabilities Debt Obligations of Consolidated CFEs$15,586,216 $13,858,288 Total$15,586,216 $13,858,288The following table presents the net realized and net change in unrealized gains (losses) on financial instruments on which the fair value option was elected forthe years ended December 31, 2017 , 2016 and 2015, respectively: For the years Ended December 31, 2017 2016 2015 Net RealizedGains (Losses) Net UnrealizedGains (Losses) Net Realized Gains (Losses) Net UnrealizedGains (Losses) Net Realized Gains (Losses) Net UnrealizedGains (Losses)Assets Private Equity$(1,386) $38,791 $(245,014) $238,600 $111,962 $86,419Credit(464,512) 78,282 (144,854) 48,922 (22,847) (68,053)Investments of Consolidated CFEs(97,129) 352 (258,430) 444,142 (54,367) (220,577)Real Assets13,112 44,136 8,835 4,159 (200,394) 213,171Equity Method18,883 (2,635) 3,830 (127,741) 7,703 (80,587)Other(32,217) 24,923 (10,361) (19,386) 9,984 (20,691) Total$(563,249) $183,849 $(645,994) $588,696 $(147,959) $(90,318) Liabilities Debt Obligations of Consolidated CFEs83,146 11,768 325,548 (357,321) — (11,257) Total$83,146 $11,768 $325,548 $(357,321) $— $(11,257)220Notes to Consolidated Financial Statements (Continued)7. NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. L.P. PER COMMON UNIT For the years ended December 31, 2017 , 2016 and 2015, basic and diluted Net Income (Loss) attributable to KKR & Co. L.P. per common unit werecalculated as follows: For the years Ended December 31, 2017 2016 2015Net Income (Loss) Attributable to KKR & Co. L.P. Common Unitholders$984,941 $287,072 $488,482Basic Net Income (Loss) Per Common Unit Weighted Average Common Units Outstanding - Basic468,282,642 448,905,126 448,884,185Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit - Basic$2.10 $0.64 $1.09Diluted Net Income (Loss) Per Common Unit Weighted Average Common Units Outstanding - Basic468,282,642 448,905,126 448,884,185Weighted Average Unvested Common Units and Other Exchangeable Securities38,006,329 34,525,922 33,815,009Weighted Average Common Units Outstanding - Diluted506,288,971 483,431,048 482,699,194Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit - Diluted$1.95 $0.59 $1.01 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, 2017 , 2016 and 2015, 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. For the years Ended December 31, 2017 2016 2015Weighted Average KKR Holdings Units Outstanding344,422,095 357,873,788 368,399,872Additionally, for the year ended December 31, 2017, 5.0 million KKR common units subject to a market-price based vesting condition ("Market ConditionAwards") were excluded from the calculation of Net Income (Loss) Attributable to KKR & Co. L.P. Per Common Unit - Diluted since the vesting conditions havenot been satisfied. See Note 12 "Equity Based Compensation."221Notes to Consolidated Financial Statements (Continued)8. OTHER ASSETS AND ACCOUNTS PAyABLE, ACCRUED EXPENSES AND OTHER LIABILITIES Other Assets consist of the following: December 31, 2017 December 31, 2016Unsettled Investment Sales (1)$134,781 $144,600Receivables138,109 49,279Due from Broker (2)682,403 1,084,602Oil & Gas Assets, net (3)252,371 276,694Deferred Tax Assets, net131,944 286,948Interest Receivable189,785 158,511Fixed Assets, net (4)364,203 283,262Foreign Exchange Contracts and Options (5)96,584 240,627Intangible Assets, net (6)129,178 135,024Goodwill (6)83,500 89,000Derivative Assets85,074 81,593Deferred Transaction Related Expenses54,328 17,688Prepaid Taxes83,371 46,996Prepaid Expenses25,677 17,761Deferred Financing Costs7,534 10,507Other72,233 73,773Total$2,531,075 $2,996,865 (1)Represents amounts due from third parties for investments sold for which cash settlement has not occurred.(2)Represents amounts held at clearing brokers resulting from securities transactions.(3)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 $24.7 million and $38.9 million for the years ended December 31, 2017 and2016, 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 year ended December 31,2017, there was no impairment charge. For the years ended December 31, 2016 and 2015, KKR recorded impairment charges totaling approximately $6.2 million and $54.0million , respectively, to write down certain of its oil and natural gas properties. The impairment charge is recorded in General, Administrative and Other in the consolidatedstatements of operations. (4)Net of accumulated depreciation and amortization of $156,859 and $141,911 as of December 31, 2017 and December 31, 2016 , respectively. Depreciation and amortizationexpense of $15,329 , $16,045 and $15,418 for the years ended December 31, 2017 , 2016 and 2015, respectively, is included in General, Administrative and Other in theaccompanying consolidated statements of operations.(5)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.(6)See Note 16 "Goodwill and Intangible Assets." 222Notes to Consolidated Financial Statements (Continued)Accounts Payable, Accrued Expenses and Other Liabilities consist of the following: December 31, 2017 December 31, 2016Amounts Payable to Carry Pool (1)$1,220,559 $987,994Unsettled Investment Purchases (2)885,945 722,076Securities Sold Short (3) 692,007 647,234Derivative Liabilities69,381 100,015Accrued Compensation and Benefits35,953 20,764Interest Payable168,673 114,894Foreign Exchange Contracts and Options (4)260,948 75,218Accounts Payable and Accrued Expenses152,916 114,854Deferred Rent17,441 17,503Taxes Payable35,933 12,514Uncertain Tax Positions Reserve58,369 51,964Redemptions Payable— 4,021Due to Broker (5)— 83,206Other Liabilities56,125 29,003Total$3,654,250 $2,981,260 (1)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.(2)Represents amounts owed to third parties for investment purchases for which cash settlement has not occurred.(3)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.(4)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.(5)Represents amounts owed for securities transactions initiated at clearing brokers.223Notes to Consolidated Financial Statements (Continued)9. VARIABLE INTEREST ENTITIES 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 $4.4 billion at December 31, 2017 .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, 2017 , KKR's commitments to these unconsolidated investment funds was $1.9 billion . KKR has not provided any financial support otherthan its obligated amount as of December 31, 2017 . 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, 2017 , combined assets undermanagement in the pools of unconsolidated CLO vehicles were $0.7 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 $27.5 million as of December 31, 2017 . 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, 2017 and 2016, 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, 2017 December 31, 2016Investments$4,417,003 $3,632,162Due from (to) Affiliates, net176,131 (60,604)Maximum Exposure to Loss$4,593,134 $3,571,558224Notes to Consolidated Financial Statements (Continued)10. DEBT OBLIGATIONS KKR borrows and enters into credit agreements and issues debt for its general operating and investment purposes. Additionally, certain of KKR's consolidatedinvestment funds borrow to meet financing needs of their operating and investing activities. KKR consolidates and reports KFN's debt obligations which are non-recourse to KKR beyond the assets 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, 2017 December 31, 2016 FinancingAvailable BorrowingOutstanding Fair Value FinancingAvailable BorrowingOutstanding Fair Value Revolving Credit Facilities: Corporate Credit Agreement$1,000,000 $— $— $1,000,000 $— $— KCM Credit Agreement487,656 — — 500,000 — — KCM Short-Term Credit Agreement750,000 — — — — — Notes Issued: KKR Issued 6.375% Notes Due 2020 (1)— 498,390 549,000(10) — 497,804 562,960(10) KKR Issued 5.500% Notes Due 2043 (2)— 491,496 580,000(10) — 491,158 502,800(10) KKR Issued 5.125% Notes Due 2044 (3)— 990,375 1,107,100(10) — 990,009 955,240(10) KFN Issued 5.500% Notes Due 2032 (4)— 493,129 505,235 — — — KFN Issued 7.500% Notes Due 2042 (5)— — — — 123,008 116,699(11) KFN Issued Junior Subordinated Notes (6)— 236,038 201,828 — 250,154 210,084 Other Consolidated Debt Obligations: Fund Financing Facilities and Other (7)2,056,096 2,898,215 2,898,215(12) 2,039,532 2,333,654 2,333,654(12) CLO Senior Secured Notes (8)— 10,055,686 10,055,686 — 8,279,812 8,279,812 CLO Subordinated Notes (8)— 292,294 292,294 — 283,735 283,735 CMBS Debt Obligations (9)— 5,238,236 5,238,236 — 5,294,741 5,294,741 $4,293,752 $21,193,859 $21,427,594 $3,539,532 $18,544,075 $18,539,725 (1)$500 million aggregate principal amount of 6.375% senior notes of KKR due 2020. Borrowing outstanding is presented net of i) unamortized note discount and ii) unamortizeddebt issuance costs of $1.0 million and $1.4 million as of December 31, 2017 and 2016, respectively.(2)$500 million aggregate principal amount of 5.500% senior notes of KKR due 2043. Borrowing outstanding is presented net of i) unamortized note discount and ii) unamortizeddebt issuance costs of $3.7 million and $3.9 million as of December 31, 2017 and 2016, respectively.(3)$1.0 billion aggregate principal amount of 5.125% senior notes of KKR due 2044. Borrowing outstanding is presented net of i) unamortized note discount (net of premium) andii) unamortized debt issuance costs of $8.3 million and $8.6 million as of December 31, 2017 and 2016, respectively.(4)KKR consolidates KFN and thus reports KFN's outstanding $500.0 million aggregate principal amount of 5.500% senior notes due 2032. Borrowing outstanding is presented netof i) unamortized note discount and ii) unamortized debt issuance costs of $4.7 million as of December 31, 2017 . These debt obligations are classified as Level III within thefair value hierarchy and valued using the same valuation methodologies as KKR's Level III credit investments.(5)KKR consolidates KFN and thus reports KFN's outstanding $115.0 million aggregate principal amount of 7.500% senior notes due 2042. These senior notes were redeemed inApril 2017. Borrowing outstanding is presented net of unamortized note premium as of December 31, 2016. (6)KKR consolidates KFN and thus reports KFN's outstanding $264.8 million aggregate principal amount of junior subordinated notes. The weighted average interest rate is 3.8%and the weighted average years to maturity is 19.0 years as of December 31, 2017 . 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.225Notes to Consolidated Financial Statements (Continued)(7)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 4.2% and 2.4% as of December 31, 2017 and 2016,respectively. In addition, the weighted average years to maturity is 3.6 years and 2.4 years as of December 31, 2017 and 2016, respectively.(8)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."(9)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."(10)The notes are classified as Level II within the fair value hierarchy and fair value is determined by third party broker quotes.(11)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.(12)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‑basedpricing grid ranging from 69 basis points to 120 basis points (for LIBOR borrowings). Borrowings under the credit facility are guaranteed by KKR & Co. L.P. andany other entity (other than the borrowers) that guarantees the 2020 Senior Notes, 2043 Senior Notes or the 2044 Senior Notes (each as defined below).For the years ended December 31, 2017 and 2016, no amounts were 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. 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 drawdown requested. If the loan is a Eurocurrency loan, it will be based on LIBORplus 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 willbe 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, 2017 , $847.0 million was borrowed and repaid under the credit facility. As of December 31, 2017, no amounts were drawnunder the KCM Credit Agreement, but a letter of credit was outstanding in the amount of $12.3 million which reduces the overall capacity of the KCM CreditAgreement. For the year ended December 31, 2016, $848.0 million was borrowed and repaid under the credit facility.226Notes to Consolidated Financial Statements (Continued)KCM Short-Term Credit AgreementOn June 29, 2017, KKR Capital Markets entered into a 364 -day revolving credit agreement (the "KCM Short-Term Credit Agreement") with the samefinancial institution that provides the KCM Credit Agreement. The KCM Short-Term Credit Agreement provides for revolving borrowings of up to $750 million ,expires on June 28, 2018, and ranks pari passu with the KCM Credit Agreement.If a borrowing is made under the KCM Short-Term Credit Agreement, the interest rate will vary depending on the type of drawdown requested. If theborrowing is a Eurocurrency loan, it will be based on a LIBOR rate plus an applicable margin ranging between 1.25% and 2.50% , depending on the duration of theloan. If the borrowing is an ABR loan, it will be based on a base rate plus an applicable margin ranging between 0.25% and 1.50% , depending on the duration ofthe loan.Borrowings under the KCM Short-Term Credit Agreement may only be used to facilitate the settlement of debt transactions syndicated by KKR's capitalmarkets business. Obligations under the KCM Short-Term Credit Agreement are limited solely to entities involved in KKR's capital markets business, andliabilities under the KCM Short-Term Credit Agreement are non-recourse to other parts of KKR.For the year ended December 31, 2017 , $635 million was borrowed and repaid under the KCM Short-Term Credit Agreement.Notes Issuances and RedemptionsKKR 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 due 2020 (the "2020 Senior Notes"), which were issued at a price of 99.584% . The 2020 Senior Notes are unsecured and unsubordinatedobligations of KKR 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, transfer or lease assets. The indenture, as supplemented, also provides for events of default and further provides thatthe 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 immediatelydue and payable upon the occurrence and during the continuance of any event of default after expiration of any applicable grace period. In the case of specifiedevents of bankruptcy, insolvency, receivership or reorganization, the principal amount of the 2020 Senior Notes and any accrued and unpaid interest on the 2020Senior Notes automatically becomes due 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 anytime, and from time to time, prior to their stated maturity, at the make‑whole redemption price set forth in the 2020 Senior Notes. If a change of control repurchaseevent occurs, the 2020 Senior Notes are subject to repurchase by the issuer at a repurchase price in cash equal to 101% of the aggregate principal amount of the2020 Senior Notes repurchased plus any accrued 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 due 2043 (the "2043 Senior Notes"), which were issued at a price of 98.856% . The 2043 Senior Notes are unsecured and unsubordinatedobligations of KKR Group Finance Co. II LLC and will mature on February 1, 2043, unless earlier redeemed or repurchased. The 2043 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 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.227Notes to Consolidated Financial Statements (Continued)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 any applicable grace period. In the case of specified events ofbankruptcy, insolvency, receivership or reorganization, the principal amount of the 2044 Senior Notes and any accrued and unpaid interest on the 2044 SeniorNotes automatically becomes due and payable. All or a portion of the 2044 Senior Notes may be redeemed at 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 2044 Senior Notes. If a change of control repurchase eventoccurs, the 2044 Senior Notes are subject to repurchase by the issuer at a repurchase price in cash equal to 101% of the aggregate principal amount of the 2044Senior Notes repurchased plus any accrued and unpaid interest on the 2044 Senior Notes repurchased to, but not including, the date of repurchase.KFN Issued 5.500% Notes Due 2032On March 30, 2017, KFN issued $375.0 million aggregate principal amount of 5.500% Senior Notes due 2032 (the "KFN 2032 Senior Notes"), resulting in netproceeds to KFN of $368.6 million . The KFN 2032 Senior Notes are unsecured and unsubordinated obligations of KFN and will mature on March 30, 2032,unless earlier redeemed or repurchased. The KFN 2032 Senior Notes bear interest at a rate of 5.500% per annum, accruing from March 30, 2017. Interest ispayable semi-annually in arrears on March 30 and September 30 of each year.The indenture, as supplemented by a first supplemental indenture, relating to the KFN 2032 Senior Notes includes covenants, including (i) limitations onKFN's ability to, subject to exceptions, incur indebtedness secured by liens on voting stock or profit participating equity interests of certain of its subsidiaries ormerge, consolidate or sell, transfer or lease assets, (ii) requirements that KFN maintain a minimum Consolidated Net Worth (as defined in the indenture) and (iii)requirements that KFN maintain a minimum Cash and Liquid Investments (as defined in the indenture). The indenture, as supplemented, also provides for eventsof default and further provides that the trustee or the holders of not less than 25% in aggregate principal228Notes to Consolidated Financial Statements (Continued)amount of the outstanding KFN 2032 Senior Notes may declare the KFN 2032 Senior Notes immediately due and payable upon the occurrence and during thecontinuance of any event of default after expiration of any applicable grace period. In the case of specified events of bankruptcy, insolvency, receivership orreorganization, the principal amount of the KFN 2032 Senior Notes and any accrued and unpaid interest on the KFN 2032 Senior Notes automatically becomes dueand payable.Beginning on March 30, 2022, KFN may redeem the KFN 2032 Senior Notes in whole, but not in part, at KFN's option, at a redemption price equal to 100%of the outstanding principal amount plus accrued and unpaid interest to, but excluding, the date of redemption. At any time prior to March 30, 2022, KFN mayredeem the KFN 2032 Senior Notes in whole, but not in part, at KFN's option at any time, at a "make-whole" redemption price set forth in the KFN 2032 SeniorNotes. If a change of control occurs, the KFN 2032 Senior Notes are subject to repurchase by the issuer at a repurchase price in cash equal to 101% of theaggregate principal amount of the KFN 2032 Senior Notes repurchased plus any accrued and unpaid interest on the KFN 2032 Senior Notes repurchased to, but notincluding, the date of repurchase.On November 17, 2017, KFN issued an additional $125.0 million aggregate principal amount of the KFN 2032 Senior Notes, resulting in the total outstandingaggregate principal amount of $500.0 million . The additional KFN 2032 Senior Notes, which were issued under the indenture related to the existing KFN 2032Senior Notes as supplemented by a second supplemental indenture, constitute a further issuance of and are part of the same series as the KFN 2032 Senior Notesfirst issued on March 30, 2017.KFN Issued 7.500% Notes Due 2042On April 24, 2017, KFN redeemed all of its outstanding 7.500% Senior Notes due 2042 (the "KFN 2042 Senior Notes") for cash, in accordance with theoptional redemption provisions provided in the indenture governing the KFN 2042 Senior Notes. The redemption price was equal to 100% of the $115.0 millionprincipal amount of the KFN 2042 Senior Notes plus unpaid interest accrued thereon to, but excluding, the redemption date, in accordance with the terms of theKFN 2042 Senior Notes.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, 2017, the aggregate outstanding principal amount of the junior subordinated notes was approximately $264.8 million .Other Consolidated Debt ObligationsFund Financing FacilitiesCertain of KKR's investment funds have entered into financing arrangements with financial institutions, generally to provide liquidity to such investment funds.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, 2017 and 2016, $6.9 billion was borrowed and $4.6 billion was repaid and $3.4 billion was borrowed and $3.4 billion wasrepaid, respectively.229Notes to Consolidated Financial Statements (Continued)Debt Obligations of Consolidated CFEs As of December 31, 2017 , debt obligations of consolidated CFEs consisted of the following: BorrowingOutstanding WeightedAverageInterest Rate Weighted AverageRemainingMaturity in yearsSenior Secured Notes of Consolidated CLOs$10,055,686 2.7% 11.8Subordinated Notes of Consolidated CLOs292,294 (1) 12.2Debt Obligations of Consolidated CMBS Vehicles5,238,236 4.3% 26.7 $15,586,216 (1)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, 2017 , the fair value of the consolidated CFE assets was $17.2 billion . This collateral consisted of Cash andCash Equivalents Held at Consolidated Entities, Investments, and Other Assets.As part of KKR's borrowing arrangements, KKR is subject to certain financial and operating covenants. KKR was in compliance with all of its debt covenantsin all material respects as of December 31, 2017 .Scheduled principal payments for debt obligations at December 31, 2017 are as follows: Revolving CreditFacilities Notes Issued Other ConsolidatedDebt Obligations Total2018$— $— $962,910 $962,9102019 ‑ 2020— 500,000 2,174,242 2,674,2422021 ‑ 2022— — 476,262 476,2622023 and thereafter— 2,264,800 15,056,468 17,321,268 $— $2,764,800 $18,669,882 $21,434,682230Notes to Consolidated Financial Statements (Continued)11. INCOME TAXES The provision (benefit) for income taxes consists of the following: For the years Ended December 31, 2017 2016 2015Current Federal Income Tax$(34,611) $(3,440) $27,978State and Local Income Tax5,229 (443) 6,320Foreign Income Tax79,371(1) 38,052 42,036Subtotal49,989 34,169 76,334Deferred Federal Income Tax178,449 (15,032) (19,133)State and Local Income Tax(424) 1,348 8,264Foreign Income Tax(3,688)(1) 4,076 1,171Subtotal174,337 (9,608) (9,698)Total Income Taxes$224,326 $24,561 $66,636 (1)The foreign income tax provision was calculated on $171.6 million of pre-tax income generated in foreign jurisdictions.The 2017 Tax Act was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a U.S. federalcorporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S. international taxation from amodified worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as ofDecember 31, 2017. The Company has calculated its best estimate of the impact of the 2017 Tax Act in its year end income tax provision in accordance with itsunderstanding of the 2017 Tax Act and guidance available as of the date of this filing. As a result, KKR has recorded $97.9 million as an additional income taxexpense in the fourth quarter of 2017, the period in which the legislation was enacted. The provisional amount that is related to the remeasurement of certaindeferred tax assets and liabilities based on the rates at which they are expected to reverse in the future was $96.4 million . The provisional amount that is related tothe one-time transition tax on the mandatory deemed repatriation of foreign earnings is $3.1 million based on cumulative foreign earnings of $20.1 million . Thisamount is offset by the reversal of a deferred tax liability for unremitted foreign earnings and profits valued at $1.6 million .On December 22, 2017, Staff Accounting Bulletin No. 118 ("SAB 118") was issued to address the application of U.S. GAAP in situations when a registrantdoes not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certainincome tax effects of the 2017 Tax Act. In accordance with SAB 118, the Company has determined that the $96.4 million of the deferred tax expense recorded inconnection with the remeasurement of certain deferred tax assets and liabilities and the $1.5 million of expense, net of the reversal of the deferred tax liabilityrelated to unremitted foreign earnings, recorded in connection with the transition tax on the mandatory deemed repatriation of foreign earnings was a provisionalamount and a reasonable estimate at December 31, 2017. Additional work is necessary to do a more detailed analysis of historical foreign earnings as well aspotential correlative adjustments. Any subsequent adjustment to these amounts will be recorded to tax expense in the quarter of 2018 when the analysis iscomplete.231Notes to Consolidated Financial Statements (Continued)The following table reconciles the U.S. Federal Statutory Tax Rate to the Effective Income Tax Rate: For the years Ended December 31, 2017 2016 2015Statutory U.S. Federal Income Tax Rate35.00 % 35.00 % 35.00 %Income not attributable to KKR Management Holdings Corp. (1)(38.64)% (42.68)% (36.04)%Foreign Income Taxes2.62 % 4.32 % 0.81 %State and Local Income Taxes0.05 % 0.05 % 0.21 %Compensation Charges Borne by KKR Holdings6.29 % 8.20 % 1.92 %Change in Valuation Allowance0.00 % (1.03)% 0.29 %Impact of 2017 Tax Act3.52 % 0.00 % 0.00 %Other(0.78)% (1.34)% (0.94)%Effective Income Tax Rate8.06 % 2.52 % 1.25 % (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 directly or indirectly owned by KKR Management Holdings L.P.The effective tax rate for 2017 was 8.06% , compared to 2.52% in 2016, an increase of 5.54% , which was impacted by several factors. The 2017 Tax Act wasenacted on December 22, 2017, and as a result of the remeasurement of our deferred tax asset and the estimate of the one-time transition tax on unremittedearnings, our effective tax rate increased by 3.52% . Additionally, due to increased fee revenue at KKR Management Holdings Corp., a greater percentage ofKKR's overall income was subject to U.S. federal and state tax than in prior years, increasing our effective tax rate by approximately 4.04% compared to 2016.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: December 31, 2017 (3) December 31, 2016Deferred Tax Assets Fund Management Fees$51,662 $59,963Equity Based Compensation19,749 30,094KKR Holdings Unit Exchanges (1)93,229 156,624Depreciation and Amortization13,421 24,919Federal Foreign Tax Credit15,028 15,028Interest Limitation Carryforward (2)— 13,494Net Operating Loss Carryforwards4,346 33,867Other5,875 12,599Total Deferred Tax Assets before Valuation Allowance203,310 346,588Valuation Allowance(11,872) (9,768)Total Deferred Tax Assets191,438 336,820Deferred Tax Liabilities Investment Basis Differences / Net Unrealized Gains59,494 49,872Total Deferred Tax Liabilities59,494 49,872Total Deferred Taxes, Net$131,944 $286,948 (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 included232Notes to Consolidated Financial Statements (Continued)within Due to Affiliates in the consolidated statements of financial condition. The net impact of these adjustments was recorded as an adjustment to equity at the time of theexchanges.(2) Represents interest expense limitations under IRC Section 163(j) (as existing prior to the 2017 Tax Act), which has an indefinite carryforward.(3) A provisional adjustment in the amount of $97.9 million was recorded to adjust our U.S. federal deferred income tax assets and liabilities as of December 31, 2017 in order to reflect theimpact of the 2017 Tax Act. A majority of this charge was due to the reduction in the U.S. statutory corporate tax rate from 35% to 21% .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, 2017, KKR has a U.S. federal income tax net operating loss ("NOL") carryforward of $106.8 million and a cumulative state and localNOL carryforward of $14.3 million that will begin to expire in 2036. KKR intends to carry back its U.S. federal NOL to past years during 2018, and is reflectingthe estimated refund amount related to the carryback within other assets as a prepaid tax. In addition, KKR has U.S. federal foreign tax credit ("FTC")carryforwards of $15.0 million as of December 31, 2017. The FTC carryforwards are related to taxes paid in foreign jurisdictions, which if not utilized, will beginto expire in 2024. KKR has determined that a portion of the FTC carryforwards will not ultimately be realized due to U.S. federal limitations on FTC utilization.Therefore, KKR has established a valuation allowance of $11.9 million as of December 31, 2017 against the deferred tax asset. For all other deferred tax assets,including net operating loss carryforwards, KKR has determined that it is more likely than not that they will be realized and that a valuation allowance is notneeded as of December 31, 2017.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 toexamination by U.S. federal and certain state, local and foreign tax regulators. As of December 31, 2017, the U.S. federal, state and local tax returns of KKR andits predecessor entities for the years 2011 through 2016 are open under general statute of limitations provisions and therefore subject to examination.At December 31, 2017, 2016 and 2015, KKR's unrecognized tax benefits, excluding related interest and penalties, were: For the years Ended December 31, 2017 2016 2015Unrecognized Tax Benefits, beginning of period$43,996 $22,792 $7,180Gross increases in tax positions in prior periods— — —Gross decreases in tax positions in prior periods— (1,351) (116)Gross increases in tax positions in current period4,406 22,810 15,959Lapse of statute of limitations(232) (255) (231)Unrecognized Tax Benefits, end of period$48,170 $43,996 $22,792If 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 $0.1 million and interest of $2.2million during 2017 and in total, as of December 31, 2017, recognized a liability for penalties of $2.3 million and interest of $7.9 million . During 2016, penaltiesof $0.6 million and interest of $1.2 million were accrued and in total, as of December 31, 2016, recognized a liability for penalties of $2.3 million and interest of$5.7 million .233Notes 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, 2017 , 2016 and 2015, respectively. For the years Ended December 31, 2017 2016 2015Equity Incentive Plan Units$204,308 $186,227 $186,346KKR Holdings Principal Awards143,204 44,837 6,726Other Exchangeable Securities— 12,091 16,119KKR Holdings Restricted Equity Units— — 132Total (1)$347,512 $243,155 $209,323 (1)Includes $11,214 of equity based charges for the year ended December 31, 2017 related to employees of equity method investees. Such amounts are included in Net Gains(Losses) from Investment Activities in the consolidated statements of operations.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. Beginning with the financial results reported for the first quarter of 2017, KKR has madeequal quarterly distributions to common unitholders of $ 0.17 per common unit per quarter or $ 0.68 per year. Therefore, for units granted on or after January 1,2017, the discount for lack of participation rights in the expected distributions on unvested units was based on the $ 0.68 annual distribution. KKR has made equalquarterly distributions to holders of its common units of $0 .16 per common unit per quarter or $ 0.64 per year in respect of financial results reported for the firstquarter of 2016 through the fourth quarter of 2016. Accordingly, for units granted subsequent to December 31, 2015 but before January 1, 2017, the discount forthe lack of participation rights in the expected distributions on unvested units was based on the $0.64 annual distribution. The discount range for awards grantedprior to December 31, 2015 was based on management's estimates of future distributions that the unvested equity awards would not be entitled to receive betweenthe grant date and the vesting date which ranged from 8% to 56% . Expense is recognized on a straight line basis over the life of the award and assumes a forfeiture rate of up to 7% annually based upon expected turnover byclass of recipient.234Notes to Consolidated Financial Statements (Continued)Market Condition AwardsOn November 2, 2017, KKR's Co-Presidents and Co-Chief Operating Officers were each granted 2.5 million KKR common units subject to a market-pricebased vesting condition ("Market Condition Awards"). These units were granted under the Equity Incentive Plan. All of such units will vest upon the market priceof KKR common units reaching and maintaining a closing market price of $40 per unit for 10 consecutive trading days on or prior to December 31, 2022, subjectto the employee's continued service to the time of such vesting. If the $40 price target is not achieved by the close of business on December 31, 2022, the unvestedMarket Condition Awards will be automatically canceled and forfeited. These Market Condition Awards are subject to additional transfer restrictions andminimum retained ownership requirements after vesting. Due to the existence of the market condition, the vesting period for the Market Condition Awards is notexplicit, and as such, compensation expense will be recognized over the period derived from the valuation technique used to estimate the grant-date fair value ofthe award (the "Derived Vesting Period").The fair value of the Market Condition Awards at the date of grant was $4.02 per unit based on a Monte-Carlo simulation valuation model due to the existenceof the market condition described above. Below is a summary of the significant assumptions used to estimate the grant date fair value of the Market ConditionAwards.Closing KKR unit price as of valuation date $19.90Risk Free Rate 2.02%Volatility 25.00%Dividend Yield 3.42%Expected Cost of Equity 11.02%In addition, the grant date fair value assumes that holders of the Market Condition Awards will not participate in distributions until such awards have met theirvesting requirements.Compensation expense is recognized over the Derived Vesting Period, which was estimated to be 3 years from the date of grant, on a straight-line basis.As of December 31, 2017, there was approximately $19.0 million of estimated unrecognized compensation expense related to unvested Market ConditionAwards and such awards did not meet their market-price based vesting condition.As of December 31, 2017 , there was approximately $538.1 million of total estimated unrecognized expense related to unvested awards, including MarketCondition Awards. That cost is expected to be recognized as follows:year Unrecognized Expense (in millions)2018 227.52019 163.92020 103.02021 33.62022 9.22023 0.9Total $538.1235Notes to Consolidated Financial Statements (Continued)A summary of the status of unvested awards granted under the Equity Incentive Plan, excluding Market Condition Awards as described above, from January 1,2017 through December 31, 2017 is presented below: Units WeightedAverage GrantDate Fair ValueBalance, January 1, 201737,498,333 $13.85Granted24,209,434 16.45Vested(12,077,165) 14.79Forfeitures and Other(3,207,869) 13.52Balance, December 31, 201746,422,733 $14.98 The weighted average remaining vesting period over which unvested awards are expected to vest is 1.6 years . A summary of the remaining vesting tranches of awards granted under the Equity Incentive Plan is presented below:Vesting Date UnitsApril 1, 2018 10,477,750October 1, 2018 5,810,795April 1, 2019 9,523,248October 1, 2019 4,385,817April 1, 2020 6,588,617October 1, 2020 3,297,528April 1, 2021 3,309,863October 1, 2021 1,830,239April 1, 2022 116,532October 1, 2022 991,172October 1, 2023 91,172 46,422,733KKR 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 -forone basis. As of December 31, 2017 and 2016, KKR Holdings owned approximately 40.9% or 335,971,334 units and 43.9% or 353,757,398 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 generally subject to transfer restrictions which last for (i) one year with respect to one-half of theinterests 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 toKKR, the recipients are also subject to minimum retained ownership rules requiring them to continuously hold 25% of their vested interests. Upon separation fromKKR, award recipients are subject to the terms of a confidentiality and restrictive covenants agreement that would require the forfeiture of certain vested andunvested units should the terms of the agreement be violated. Holders of KKR Holdings units are not entitled to participate in distributions made on KKR GroupPartnership Units underlying their KKR Holdings units until such units are vested.Because KKR Holdings is a partnership, all of the 335,971,334 KKR Holdings units have been legally allocated, but the allocation of 199,929 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 generally based on the closing price of KKR & Co. L.P. common units on the date of grant. KKRdetermined this 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 KKR Holdings unit is an instrument with terms and conditions similar to those of a KKR & Co. L.P. common unit. Specifically, units in both KKRHoldings and KKR & Co. L.P. represent ownership interests in KKR Group Partnership Units and, subject to any vesting, minimum retained ownership236Notes to Consolidated Financial Statements (Continued)requirements and transfer restrictions, each KKR Holdings unit is exchangeable into a KKR Group Partnership Unit and then into a KKR & Co. L.P. common uniton a one -for-one basis.In February 2016, approximately 28.9 million KKR Holdings units were granted that were originally subject to market condition and service-based vestingthat were subsequently modified in November 2016 to eliminate the market condition vesting and instead require only service-based vesting in equal annualinstallments over a five year period. At the date of modification, total future compensation expense amounted to $320.9 million , net of estimated forfeitures, to berecognized over the remaining vesting period of the modified awards.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. KKR Holdings Awards give rise to equity-based compensation in the consolidated statements of operations based on the grant-date fair value of the awarddiscounted for the lack of participation rights in the expected distributions on unvested units. Beginning with the financial results reported for the first quarter of2017, KKR intends to make quarterly distributions to common unitholders of $ 0.17 per common unit per quarter or $ 0.68 per year. Therefore, for awards grantedon or after January 1, 2017, the discount for lack of participation rights in the expected distributions on unvested units is based on the $ 0.68 annual distribution.KKR has made equal quarterly distributions to holders of its common units of $0.16 per common unit per quarter or $0.64 per year in respect of financial resultsreported for the first quarter of 2016 through the fourth quarter of 2016. Accordingly, for awards granted subsequent to December 31, 2015 but before January 1,2017, the discount for the lack of participation rights in the expected distributions on unvested units was based on the $0.64 annual distribution.Expense is recognized on a straight line basis over the life of the award and assumes a forfeiture rate of up to 7% annually based on expected turnover by classof recipient.As of December 31, 2017 , there was approximately $358.4 million of estimated unrecognized expense related to unvested KKR Holdings awards. That cost isexpected to be recognized as follows:year Unrecognized Expense (in millions)2018 $101.52019 96.22020 88.12021 47.42022 25.2Total $358.4A summary of the status of unvested awards granted under the KKR Holdings Plan from January 1, 2017 through December 31, 2017 is presented below: Units WeightedAverage GrantDate Fair ValueBalance, January 1, 201728,245,886 $12.10Granted14,700,000 17.64Vested(6,062,425) 13.87Forfeitures and Other(6,034,878) 11.94Balance, December 31, 201730,848,583 $14.42The weighted average remaining vesting period over which unvested awards are expected to vest is 2.4 years.237Notes to Consolidated Financial Statements (Continued)A summary of the remaining vesting tranches of awards granted under the KKR Holdings Plan is presented below:Vesting Date UnitsApril 1, 2018 574,590May 1, 2018 3,805,000October 1, 2018 1,970,000April 1, 2019 229,514May 1, 2019 3,805,000October 1, 2019 2,455,000April 1, 2020 124,479May 1, 2020 3,805,000October 1, 2020 2,940,000May 1, 2021 3,805,000October 1, 2021 3,425,000October 1, 2022 3,910,000 30,848,583Other Exchangeable Securities As of October 1, 2016, all equity securities of a subsidiary of a KKR Group Partnership and of KKR & Co. L.P. both of which are exchangeable into commonunits of KKR & Co. L.P. on a one -for-one basis issued in connection with the acquisition of Avoca ("Other Exchangeable Securities") have either vested or wereforfeited, and there is no unrecognized expense associated with Other Exchangeable Securities as of December 31, 2017 .238Notes to Consolidated Financial Statements (Continued)13. RELATED PARTy TRANSACTIONS Due from Affiliates consists of: December 31, 2017 December 31, 2016Amounts due from portfolio companies$129,594 $66,940Amounts due from unconsolidated investment funds415,907 170,219Amounts due from related entities8,848 13,293Due from Affiliates$554,349 $250,452Due to Affiliates consists of: December 31, 2017 December 31, 2016Amounts due to KKR Holdings in connection with the tax receivable agreement$84,034 $128,091Amounts due to unconsolidated investment funds239,776 231,388Due to Affiliates$323,810 $359,479Tax 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 of 1986, as amended, that will remain in effect for each taxable year in which an exchange of KKR GroupPartnership Units for common units occurs, which may result in an increase in KKR's intermediate holding companies' share of the tax basis of the assets of theKKR Group Partnerships at the time of an exchange of KKR Group Partnership Units. Certain of these exchanges are expected to result in an increase in KKR'sintermediate holding companies' share of the tax basis of the tangible and intangible assets of the KKR Group Partnerships, primarily attributable to a portion ofthe goodwill inherent in KKR's business that would not otherwise have been available. This increase in tax basis may increase depreciation and amortizationdeductions for tax purposes and therefore reduce the amount of income tax KKR's intermediate holding companies would otherwise be required to pay in thefuture. 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 thosecapital 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.239Notes to Consolidated Financial Statements (Continued)As a result of the 2017 Tax Act, which lowered the federal corporate tax rate from 35% to 21%, expected future cash savings generated as a result of KKRHoldings exchanges are expected to decrease. Accordingly, KKR has decreased the liability associated with the tax receivable agreement to reflect lower futurepayments to individuals who exchanged KKR Holdings units for KKR common units. The amount of this reduction was $67.2 million and is included in Net Gains(Losses) from Investment Activities in the consolidated statements of operations.For the year ended December 31, 2017, no cash payments have been made under the tax receivable agreement. For the years ended December 31, 2016 and2015, cash payments that have been made under the tax receivable agreement were $5.0 million and $5.7 million , respectively. KKR expects its intermediateholding companies to benefit from the remaining 15% of cash savings, if any, in income tax that they realize. As of December 31, 2017, $4.2 million of cumulativeincome tax savings have been realized.Discretionary InvestmentsCertain of KKR's current and former employees and other qualifying personnel are permitted to invest, and have invested, their own capital in KKR's funds, inside-by-side investments with these funds and the firm, as well as in funds managed by its strategic manager partnerships. Side-by-side investments are made onthe same terms and conditions as those acquired by the applicable fund or the firm, except that the side-by-side investments do not subject the investor tomanagement fees or a carried interest. The cash contributed by these individuals aggregated $505.1 million , $328.3 million and $434.9 million for the years endedDecember 31, 2017, 2016 and 2015, 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 $3.9 million , $5.1 million and$4.4 million for the use of these aircraft for the years ended December 31, 2017, 2016 and 2015, 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 $7.6million , $7.4 million and $7.3 million for the years ended December 31, 2017, 2016 and 2015, respectively.240Notes 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 private equity funds and co-investment vehicles, which invest capital for long-termappreciation, either through controlling ownership of a company or strategic minority positions. KKR also manages and sponsors 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, including leveraged loans, high-yield bonds, opportunistic credit and revolving credit strategies, and alternative credit strategiesincluding special situations and private credit opportunities, such as direct lending and private opportunistic credit investment strategies. KKR's hedge fundsbusiness consists of strategic manager partnerships with third-party hedge fund managers in which KKR owns a minority stake. Capital Markets KKR's capital markets business supports the firm, portfolio companies, and third-party clients by developing and implementing both traditional and non-traditional capital solutions for investments or companies seeking financing. These services include arranging debt and equity financing, placing and underwritingsecurities offerings and providing other types of capital markets services.Principal ActivitiesThrough KKR's Principal Activities segment, KKR manages the firm's assets and deploy capital to support and grow its businesses.KKR's Principal Activities segment uses its balance sheet assets to support KKR's investment management and capital markets businesses, including to makecapital commitments as general partner to its funds, to seed new businesses or investments for new funds or to bridge capital selectively for its funds' investments.The Principal Activities segment also provides the required capital to fund the various commitments of KKR's Capital Markets business or to meet regulatorycapital requirements. 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. 241Notes 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, 2017 PrivateMarkets PublicMarkets CapitalMarkets PrincipalActivities Total Reportable SegmentsSegment Revenues Management, Monitoring and Transaction Fees, Net Management Fees$575,451 $329,737 $— $— $905,188Monitoring Fees81,021 — — — 81,021Transaction Fees288,879 48,370 439,998 — 777,247Fee Credits(220,710) (40,719) — — (261,429)Total Management, Monitoring and Transaction Fees,Net724,641 337,388 439,998 — 1,502,027 Performance Income (Loss) Realized Incentive Fees— 73,395 — — 73,395Realized Carried Interest1,198,981 — — — 1,198,981Unrealized Carried Interest520,807 79,435 — — 600,242Total Performance Income (Loss)1,719,788 152,830 — — 1,872,618 Investment Income (Loss) Net Realized Gains (Losses)— — — 194,020 194,020Net Unrealized Gains (Losses)— — — 395,358 395,358Total Realized and Unrealized— — — 589,378 589,378Interest Income and Dividends— — — 285,696 285,696Interest Expense— — — (181,612) (181,612)Net Interest and Dividends— — — 104,084 104,084Total Investment Income (Loss)— — — 693,462 693,462 Total Segment Revenues2,444,429 490,218 439,998 693,462 4,068,107 Segment Expenses Compensation and Benefits Cash Compensation and Benefits261,123 63,637 80,093 140,134 544,987Realized Performance Income Compensation504,092 29,358 — — 533,450Unrealized Performance Income Compensation213,785 33,816 — — 247,601Total Compensation and Benefits979,000 126,811 80,093 140,134 1,326,038Occupancy and Related Charges32,458 6,478 2,747 14,727 56,410Other Operating Expenses137,055 31,317 20,513 54,887 243,772Total Segment Expenses1,148,513 164,606 103,353 209,748 1,626,220 Income (Loss) attributable to noncontrolling interests— — 6,551 — 6,551 Economic Net Income (Loss)$1,295,916 $325,612 $330,094 $483,714 $2,435,336 Total Assets$2,313,801 $1,534,027 $484,792 $11,428,692 $15,761,312242Notes to Consolidated Financial Statements (Continued) As of and for the year Ended December 31, 2016 PrivateMarkets PublicMarkets 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 $13,333,141243Notes 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 $13,429,298244Notes to Consolidated Financial Statements (Continued)The following tables reconcile the most directly comparable financial measures calculated and presented in accordance with GAAP to KKR's total reportablesegments: Fees and Other For the years Ended December 31, 2017 2016 2015Fees and Other$3,282,265 $1,908,093 $1,043,768Plus: Management fees relating to consolidated funds and placement fees204,943 178,619 531,027Less: Fee credits relating to consolidated funds4,028 2,921 202,269Plus: Net realized and unrealized carried interest - consolidated funds58,562 32,651 1,190,699Plus: Total investment income (loss)693,462 (78,764) 153,512Less: Revenue earned by oil & gas producing entities63,460 65,754 112,328Less: Reimbursable expenses123,144 81,549 66,144Less: Other(19,507) 25,095 32,357Total Segment Revenues$4,068,107 $1,865,280 $2,505,908 Expenses For the years Ended December 31, 2017 2016 2015Total Expenses$2,336,692 $1,695,474 $1,871,225Less: Equity based compensation334,821 264,890 261,579Less: Reimbursable expenses and placement fees181,839 148,483 103,307Less: Operating expenses relating to consolidated funds, CFEs and other entities82,888 104,339 65,012Less: Expenses incurred by oil & gas producing entities46,411 70,312 153,611Less: Intangible amortization17,821 6,647 49,766Less: Other46,692 32,228 46,038Total Segment Expenses$1,626,220 $1,068,575 $1,191,912 Net Income (Loss) Attributable to KKR & Co. L.P. Common Unitholders For the years Ended December 31, 2017 2016 2015Net Income (Loss) Attributable to KKR & Co. L.P. Common Unitholders$984,941 $287,072 $488,482Plus: Preferred Distributions33,364 22,235 —Plus: Net income (loss) attributable to noncontrolling interests held by KKR Holdings L.P.791,021 212,878 433,693Plus: Non-cash equity-based charges346,035 264,890 261,579Plus: Amortization of intangibles, placement fees and other, net (1)122,870 (17,267) 47,599Less: Gain from remeasurement of tax receivable agreement liability (2)(67,221) — —Plus: Income tax (benefit)224,326 24,561 66,636Economic Net Income (Loss)$2,435,336 $794,369 $1,297,989 (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.(2) Represents the impacts of the remeasurement of the tax receivable agreement which arises from changes in the associated deferred tax balance, including the impacts related to the 2017 TaxAct.245Notes to Consolidated Financial Statements (Continued)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.Assets December 31, 2017 December 31, 2016Total Assets$45,834,719 $39,002,897Less: Impact of consolidation of funds and other entities (1)28,659,078 24,367,570Less: Carry pool reclassification from liabilities1,220,559 987,994Less: Impact of KKR Management Holdings Corp.193,770 314,192Total Segment Assets$15,761,312 $13,333,141 (1) Includes accounting basis difference for oil & natural gas properties of $25,042 and $15,242 as of December 31, 2017 and 2016, respectively.15. EqUITyTransfer of Interests Under Common Control and OtherOn March 30, 2017, KKR reorganized KKR's Indian capital markets and credit asset management businesses, to create KKR India Financial Investments Pte.Ltd. ("KIFL"). This reorganization transaction was accounted for as a transfer of interests under common control, and the difference between KKR's carrying valuebefore and after the transaction was treated as a reallocation of equity interests. No gain or loss was recognized in the consolidated financial statements.On November 24, 2017, KIFL issued equity to an unaffiliated third-party. This transaction was accounted for as a subsidiary's direct issuance of its equity tothird-parties, and the difference between KKR's carrying value before and after the transaction was treated as a reallocation of equity interests. No gain or loss wasrecognized in the consolidated financial statements.Both transactions above resulted in an increase to KKR's equity and to noncontrolling interests held by KKR Holdings.Unit Repurchase ProgramKKR has a total of $750.0 million authorized to repurchase its common units, of which $459.0 million has been spent to repurchase 31.7 million commonunits as of February 21, 2018. Under this common unit repurchase program, common units may be repurchased from time to time in open market transactions, inprivately negotiated transactions or otherwise. The timing, manner, price and amount of any unit repurchases will be determined by KKR in its discretion and willdepend on a variety of factors, including legal requirements, price and economic and market conditions. KKR expects that the program, which has no expirationdate, will be in effect until the maximum approved dollar amount has been used to repurchase common units. The program does not require KKR to repurchase anyspecific number of common units, and the program may be suspended, extended, modified or discontinued at any time. See consolidated statements of changes inequity for the amount of common units repurchased during the years ended December 31, 2016 and 2015. There were no common units repurchased pursuant tothis program during the year ended December 31, 2017 .Distribution PolicyUnder KKR's distribution policy for its common units, KKR intends to make equal quarterly distributions to holders of its common units in an amount of$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 the general partner ofKKR 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 receivesufficient distributions to satisfy payment of their tax liabilities as limited partners of KKR or that any particular distribution policy will be maintained.246Notes to Consolidated Financial Statements (Continued)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 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.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.247Notes to Consolidated Financial Statements (Continued)16. GOODWILL AND INTANGIBLE ASSETS Goodwill As of December 31, 2016 , the carrying value of goodwill was $89.0 million , which was allocated to Public Markets and Principal Activities in the amountsof $59.0 million and $30.0 million , respectively. As part of the PAAMCO Prisma transaction that occurred on June 1, 2017, goodwill of $5.5 million was includedin determining the gain on the contribution of Prisma Capital Partners LP and its affiliates to PAAMCO Prisma Holdings LLC. In accordance with ASC 350, theamount of goodwill included in the gain calculation was based on the relative fair values of Prisma Capital Partners LP and its affiliates, which was integrated inPublic Markets, and the remaining portion of Public Markets. Subsequent to this transaction the remaining carrying value of goodwill in Public Markets andPrincipal Activities is $53.5 million and $30.0 million , respectively, as of December 31, 2017 .Goodwill is recorded in Other Assets in the consolidated statements of financial condition. All of the goodwill is currently expected to be deductible for taxpurposes. See Note 8 "Other Assets and Accounts Payable, Accrued Expenses and Other Liabilities." Intangible Assets Intangible Assets, Net consists of the following: December 31, 2017 December 31, 2016Finite-Lived Intangible Assets$190,526 $251,768Accumulated Amortization(61,348) (116,744)Intangible Assets, Net$129,178 $135,024 Changes in Intangible Assets, Net consists of the following: For the years Ended December 31, 2017 2016Balance, Beginning of Period$135,024 $176,987Amortization Expense(17,811) (26,387)Foreign Exchange2,173 (160)Additions (1)115,425 —Write-Offs (2)— (15,416)Other (3)(105,633) —Balance, End of Period$129,178 $135,024 (1) Represents acquired investment management contractual rights. (2) Represents the write-off of certain investment management contractual rights. (3) Represents the removal of intangible assets in connection with the PAAMCO Prisma transaction. Amortization expense including foreign exchange relating to intangible assets held at December 31, 2017 is expected to be as follows:2018 $16,4012019 13,3282020 13,1602021 12,5902022 12,4752023 and thereafter 61,224 $129,178The intangible assets as of December 31, 2017 are expected to amortize over a weighted‑average period of 9.6 years.248Notes to Consolidated Financial Statements (Continued)17. 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 as of December 31, 2017 . KKR is in compliance with its debt covenants in all material respects as of December 31, 2017 .Funding Commitments As of December 31, 2017 , KKR had unfunded commitments consisting of $5,697.0 million to its active private equity and other investment vehicles. Inaddition to the uncalled commitments to KKR's investment funds, KKR has entered into contractual commitments with respect to (i) the purchase of investmentsand other assets in its Principal Activities segment, and (ii) underwriting transactions, debt financing, and syndications in KKR's Capital Markets segment. As ofDecember 31, 2017 , these commitments amounted to $750.7 million and $731.8 million , respectively. Whether these amounts are actually funded, in whole or inpart, depends on the contractual terms of such commitments, including the satisfaction or waiver of any conditions to closing or funding. The unfundedcommitments shown for KKR's Capital Markets segment are shown without reflecting arrangements that may reduce the actual amount of contractualcommitments shown; KKR's capital market business has an arrangement with a third party, which reduces its risk when underwriting certain debt transactions. Inthe case of purchases of investments or assets in its Principal Activities segment, the amount to be funded includes amounts that are intended to be syndicated tothird parties, and the actual amounts to be funded may be less than shown.Strategic Business Development Company ("BDC") Partnership with FS Investments CorporationOn December 11, 2017, KKR announced a definitive agreement to form a new strategic BDC partnership with FS Investment Corporation. This transactionwould be completed through a combination of cash and other assets and is anticipated to close during 2018, subject to stockholder approvals and the satisfaction ofcertain other closing conditions.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.As of December 31, 2017 , the approximate aggregate minimum future lease payments, net of sublease income, required on the operating leases are asfollows:2018$51,203201949,233202045,544202113,6182022 and thereafter23,817Total minimum payments required$183,415Contingent 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 partnersof funds 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, 2017 , $19.2 million of carried interest was subject to this clawback obligation,assuming that all applicable carry-paying funds were liquidated at their December 31, 2017 fair values.249Notes to Consolidated Financial Statements (Continued)Had the investments in such funds been liquidated at zero value, the clawback obligation would have been $1,920.9 million . Carried interest is recognized in thestatement of operations based on the contractual conditions set forth in the agreements governing the fund as if the fund were terminated and liquidated at thereporting date and the fund's investments were realized at the then estimated fair values. Amounts earned pursuant to carried interest are earned by the generalpartner of those funds to the extent that cumulative investment returns are positive and where applicable, preferred return thresholds have been met. If theseinvestment amounts earned decrease or turn negative in subsequent periods, recognized carried interest will be reversed and to the extent that the aggregate amountof carry distributions received by the general partner during the term of the fund exceed the amount to which the general partner was ultimately entitled, aclawback obligation would be recorded. For funds that are consolidated, this clawback obligation, if any, is reflected as an increase in noncontrolling interests inthe consolidated statements of financial condition. For funds that are not consolidated, this clawback obligation, if any, is reflected as a reduction of KKR'sinvestment 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 made to date, however, it is no longer possible for the principals to be required to pay any such clawback obligation. Carry distributions arisingsubsequent to the KPE Transaction may give rise to clawback obligations that may be allocated generally to KKR and persons who participate in the carry pool. Inaddition, guarantees of or similar arrangements relating to clawback obligations in favor of third party investors in an individual investment partnership by entitiesKKR owns may limit distributions of carried interest 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 other investment vehicles. KKR has also provided creditsupport regarding repayment obligations to third-party lenders to certain of its employees, excluding its executive officers, in connection with their personalinvestments in KKR investment funds and to a strategic partner regarding the ownership of its business. KKR also may become liable for certain fees payable tosellers of businesses or assets if a transaction does not close, subject to certain conditions, if any, specified in the acquisition agreements for such businesses orassets. KKR's maximum exposure under these arrangements is currently unknown and KKR's liabilities for these matters would require a claim to be made againstKKR 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. In December 2017, KKR & Co. L.P. and its Co-Chief Executive Officers were named as defendants in a lawsuit pending in Kentucky state court alleging,among other things, the violation of fiduciary and other duties in connection with certain separately managed accounts that Prisma Capital Partners LP, a formersubsidiary of KKR, manages for the Kentucky Retirement Systems. Also named as defendants in the lawsuit are certain current and former trustees and officers ofthe Kentucky Retirement Systems, Prisma Capital Partners LP, and various other service providers to the Kentucky Retirement Systems and their related persons.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 SEC, Department of Justice, state attorney generals, Financial Industry RegulatoryAuthority, or FINRA, and the U.K. Financial Conduct Authority. Such examinations, inquiries and investigations may result in the commencement of civil,criminal or administrative proceedings against KKR or its personnel.250Notes to Consolidated Financial Statements (Continued) 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. 18. 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 Dublin 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 Tokyo 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 and the Securities and Exchange Board of India. All of these entities have continuously operated in excess of theirrespective 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, 2017 , approximately $185.8 million of cash at KKR's registered broker-dealer entities may be restricted as to the payment of cash dividends andadvances to KKR. 251Notes to Consolidated Financial Statements (Continued)19. qUARTERLy FINANCIAL DATA (UNAUDITED) For the Three Months Ended, March 31, 2017 June 30, 2017 September 30, 2017 December 31, 2017Statement of Operations Data: Fees and Other$715,952 $931,788 $692,877 $941,648Less: Total Expenses540,014 629,728 530,247 636,703Total Investment Income (Loss)662,498 585,002 234,728 356,567Income (Loss) Before Taxes838,436 887,062 397,358 661,512Income Tax / (Benefit)40,542 18,538 18,420 146,826Net Income (Loss)797,894 868,524 378,938 514,686Less: Net Income (Loss) Attributable to RedeemableNoncontrolling Interests20,933 22,387 20,876 9,776Less: Net Income (Loss) Attributable to NoncontrollingInterests509,277 432,150 196,158 330,180Net Income (Loss) Attributable to KKR & Co. L.P.267,684 413,987 161,904 174,730Less: Net Income Attributable to Series A PreferredUnitholders5,822 5,822 5,822 5,822Less: Net Income Attributable to Series B PreferredUnitholders2,519 2,519 2,519 2,519Net Income (Loss) Attributable to KKR & Co. L.P. CommonUnitholders$259,343 $405,646 $153,563 $166,389Net Income (Loss) Attributable to KKR & Co. L.P.Per Common Unit Basic$0.57 $0.87 $0.33 $0.35Diluted$0.52 $0.81 $0.30 $0.32Weighted Average Common Units Outstanding Basic453,695,846 466,170,025 471,758,886 481,165,742Diluted496,684,340 501,177,423 506,873,177 520,156,583 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 Basic450,262,143 448,221,538 445,989,300 451,154,845Diluted450,262,143 481,809,612 479,975,675 484,312,804252Notes to Consolidated Financial Statements (Continued)20. SUBSEqUENT EVENTS Common Unit Distribution A distribution of $0.17 per KKR & Co. L.P. common unit was announced on February 8, 2018 , and will be paid on March 6, 2018 to common unitholders ofrecord as of the close of business on February 20, 2018 . KKR Holdings will receive its pro rata share of the distribution from the KKR Group Partnerships.Preferred Unit DistributionsA distribution of $0.421875 per Series A Preferred Unit has been declared as announced on February 8, 2018 and set aside for payment on March 15, 2018 toholders of record of Series A Preferred Units as of the close of business on March 1, 2018 .A distribution of $0.406250 per Series B Preferred Unit has been declared as announced on February 8, 2018 and set aside for payment on March 15, 2018 toholders of record of Series B Preferred Units as of the close of business on March 1, 2018 .KFN Preferred Share RedemptionOn January 16, 2018, KFN completed the redemption of all of its outstanding 7.375% Series A LLC Preferred Shares. Following the delisting of the Series A LLCPreferred Shares from the NYSE, KFN is no longer subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, and ceased filingreports with the SEC.KFN Issued 5.200% Notes Due 2033On February 12, 2018, KFN issued $120.0 million aggregate principal amount of 5.200% Senior Notes due 2033 (the "KFN 2033 Senior Notes"). The KFN 2033Senior Notes are unsecured and unsubordinated obligations of KFN and will mature on February 12, 2033, unless earlier redeemed or repurchased. The KFN 2033Senior Notes bear interest at a rate of 5.200% per annum, accruing from February 12, 2018. Interest is payable semi-annually in arrears on February 12 and August12 of each year.253Table of ContentsITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENone.ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and ProceduresWe maintain disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensurethat the information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reportedwithin the time periods specified in the SEC's rules and forms and such information is accumulated and communicated to management, including the Co-ChiefExecutive Officers and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Any controls and procedures, no matterhow well designed and operated, can provide only reasonable assurances of achieving the desired control objectives. As of the period ended December 31, 2017 , we carried out an evaluation, under the supervision and with the participation of our management, including theCo-Chief Executive Officers and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Basedupon that evaluation, our Co-Chief Executive Officers and Chief Financial Officer have concluded that, as of the period ended December 31, 2017 , our disclosurecontrols and procedures were effective to accomplish their objectives at the reasonable assurance level.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, 2017. 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, 2017, our internal control over financial reporting iseffective.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 2017 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.Attestation Report of the Independent Registered Public Accounting FirmDeloitte & Touche LLP, our independent registered public accounting firm that audited our consolidated financial statements included in this Annual Report,has issued its attestation report on our internal control over financial reporting, which is included in Item 8. Financial Statements and Supplementary Data.254Table of ContentsITEM 9B. OTHER INFORMATION.None.255Table 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. Kravis74 Co-Chief Executive Officer, Co-Chairman and DirectorGeorge R. Roberts74 Co-Chief Executive Officer, Co-Chairman and DirectorJoseph Y. Bae46 Co-President, Co-Chief Operating Officer and DirectorScott C. Nuttall45 Co-President, Co-Chief Operating Officer and DirectorDavid C. Drummond54 DirectorJoseph A. Grundfest66 DirectorJohn B. Hess63 DirectorPatricia F. Russo65 DirectorThomas M. Schoewe65 DirectorRobert W. Scully68 DirectorWilliam J. Janetschek55 Chief Financial OfficerDavid J. Sorkin58 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 Committees. Mr. Kravis currently serves on the boards of First Data Corporation and ICONIQCapital, LLC. He also serves as a director, chairman emeritus or trustee of several cultural, professional, and educational institutions, including the BusinessCouncil, Claremont McKenna College, Columbia Business School, Mount Sinai Hospital, the Partnership for New York City, the Partnership Fund for New YorkCity, Rockefeller University, Sponsors for Educational Opportunity and Tsinghua University School of Economics and Management. Mr. Kravis founded theKravis Leadership Institute at Claremont McKenna College, where he established the Kravis Prize in Leadership, which honors 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 in 1969. Mr. Kravis has more than four decadesof experience financing, analyzing, and investing in public and private companies, as well as serving on the boards of a number of KKR portfolio companies. Asour co-founder and Co-Chief Executive Officer, Mr. Kravis has an intimate knowledge of KKR's business, which allows him to provide insight into various aspectsof 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 Committees. Mr. Roberts serves as a director or trustee of several cultural and educationalinstitutions, including Claremont McKenna College. He is also founder and chairman of the board of directors of REDF, a San Francisco nonprofit 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 morethan four decades of experience financing, analyzing, and investing in public and private companies, as well as serving on the boards of a number of KKR portfoliocompanies. As our co-founder and Co-Chief Executive Officer, Mr. Roberts has an intimate knowledge of KKR's business, which allows him to provide insightinto various aspects of our business and is of significant value to the board of directors. Mr. Roberts is a first cousin of Mr. Kravis.256Table of ContentsJoseph y. Bae joined KKR in 1996 and is Co-President and Co-Chief Operating Officer of our Managing Partner. Mr. Bae has been a member of the board ofdirectors of our Managing Partner since July 16, 2017. Prior to July 2017, when he was promoted to his current position, he was the managing partner of KKR Asiaand the global head of KKR's infrastructure and energy real asset businesses. He is the chairman of KKR's Asia and Americas Private Equity InvestmentCommittees and serves on KKR's European Private Equity, Growth Equity, Energy, Infrastructure, Real Estate and Special Situations Investment Committees. Heis also a member of KKR's Inclusion and Diversity Council. Prior to KKR, Mr. Bae worked for Goldman Sachs & Co. in its principal investment area, where hewas involved in a broad range of merchant banking transactions. He has a B.A., magna cum laude, from Harvard College. Mr. Bae serves on the boards of anumber of non-profit educational and cultural institutions including, as a trustee for Phillips Andover Academy, the Global Advisory Council at HarvardUniversity, a board member of the Lincoln Center, The Asia Society and the Asia Art Archives. Mr. Bae's intimate knowledge of KKR's business and operationsand his experience in a variety of senior leadership roles within KKR provide significant value to the board of directors.Scott C. Nuttall joined KKR in 1996 and is Co-President and Co-Chief Operating Officer of our Managing Partner. Mr. Nuttall has been a member of theboard of directors of our Managing Partner since July 16, 2017. Prior to July 2017, when he was promoted to his current position, he was the head of KKR's globalcapital and asset management group, where he was responsible for overseeing KKR's Public Markets and distribution businesses, which include credit, capitalmarkets, hedge funds and its Client and Partner Group. Mr. Nuttall also serves on KKR's balance sheet committee and the firm's Inclusion and Diversity Council.He is currently a member of the board of directors of First Data Corporation. Prior to joining KKR, he was with the Blackstone Group where he was involved innumerous merchant banking and merger and acquisition transactions. He received a B.S., summa cum laude, from the University of Pennsylvania. He has servedon the board of various non-profit institutions with a particular focus on education, most recently as co-chairman of Teach for America - New York. Mr. Nuttall'sintimate knowledge of KKR's business and operations and his experience in a variety of senior leadership roles within KKR provide significant value to the boardof directors.David 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 to December 2005.Prior to joining Google Inc., from July 1999 to February 2002, Mr. Drummond served as chief financial officer of SmartForce, an educational softwareapplications company. Prior to that, Mr. Drummond was a partner at the law firm of Wilson Sonsini Goodrich & Rosati. Mr. Drummond holds a Juris Doctordegree from Stanford Law School and a Bachelor of Arts degree in history from Santa Clara University. Mr. Drummond provides significant value to the oversightand development of our business through his management and leadership roles at a publicly-traded global technology business and his insight into legaldevelopments affecting global enterprises.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; co-director of Directors' College, a venue for the continuing 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. Prior to joining the Stanford Law School faculty, Mr. Grundfest was aCommissioner 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'sknowledge and expertise in capital markets, corporate governance, and securities 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 member of 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 Center for Strategic and InternationalStudies, Mount Sinai Hospital, the Lincoln Center for the Performing Arts and the Dean's Advisors at Harvard Business School, and chairs The Harvard BusinessSchool 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 theoversight and development of our business through his management and leadership roles at a global energy business, and his involvement with major businessesand public policy organizations also provides valuable perspectives for our business. 257Table of ContentsPatricia 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 of Lucent Technologies, Inc. from 2003 to 2006, andas president and chief executive officer from 2002 to 2006. Before rejoining Lucent in 2002, Ms. Russo was president and chief operating officer of EastmanKodak Company from March 2001 to December 2001. Since November 2016, Ms. Russo has served on the board of Arconic Inc., which separated from AlcoaInc., where Ms. Russo served as a director from 2008 to November 2016. She also has served as the chairman of Hewlett Packard Enterprise Company since 2015and as a director of, Merck & Co., Inc. since 2009 and General Motors Company since 2009. Prior to its merger with Merck in 2009, Ms. Russo served as adirector of Schering-Plough since 1995, and she served as a director of Hewlett Packard Company from 2011 to November 2015. She graduated from GeorgetownUniversity with a bachelor's degree in political science and history, and obtained an Advanced Management Degree from Harvard Business School's AdvancedManagement Program. Ms. Russo's management and leadership experience as chief executive officer of complex global companies as well as her experience withcorporate strategy, mergers and acquisitions, and sales and marketing brings important expertise to the oversight and development of our business. Ms. Russo alsobrings 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 heheld from 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 degree in finance. Mr. Schoewe'sexperience in financial reporting, accounting and controls, and business planning and analysis, together with his significant international experience as an executiveof large multinational companies, brings important expertise to the oversight and development of our business. Mr. Schoewe also has experience with large-scale,transformational information technology implementations at Wal-Mart and Black and Decker.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 in 1996, he served as a managing director at Lehman Brothers and at Salomon Brothers. Mr.Scully has served 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 ACELimited from May 2014 to January 2016, and UBS Group AG since May 2016. Previously, he was a director of Bank of America Corporation from August 2009to May 2013 and a public governor of the Financial Industry Regulatory Authority, Inc. from October 2014 to May 2016. He has also served as a director ofGMAC Financial Services and MSCI Inc. He holds an A.B. from Princeton University and an M.B.A. from Harvard Business School. Mr. Scully serves on theBoard of Dean's Advisors of Harvard Business School. Mr. Scully's 35-year career in the financial services industry brings important expertise to the oversight ofour business. In addition, his leadership experience with a global financial services company brings an industry perspective to our business development within andoutside the United States as well as issues such as talent development, senior client relationship management, strategic initiatives, risk management and audit andfinancial reporting.William J. Janetschek joined KKR in 1997 and is Chief Financial Officer of our Managing Partner. Mr. Janetschek also serves on KKR's balance sheetcommittee, and has been the president and chief executive officer of KKR Financial Holdings LLC since June 2014 and its director since May 2014. Prior tojoining 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 andSt. 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. Mr. Sorkin serves on the board of directors of New Alternatives for Children. He received a B.A., summa cum laude, from Williams College and a J.D.,cum laude, from Harvard Law School.258Table of ContentsIndependence and Composition of the Board of DirectorsOur Managing Partner's board of directors consists of ten 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 and relationships between KKR and the companies and organizations on whose boards or other similargoverning bodies where our independent directors also serve or where our independent directors serve as executive officers, including investments made by suchcompanies in the portfolio companies in which KKR or its funds are invested. It was determined that none of these transactions or relationships adversely impactedthe independence of our independent directors.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.Audit 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 website at www.kkr.com .Conflicts CommitteeThe conflicts committee consists of Messrs. Drummond, Hess, Schoewe and Scully and Ms. Russo. The conflicts committee is responsible for reviewingspecific 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 taxreceivable agreement, the limited partnership agreement of any KKR Group Partnership or our limited partnership agreement (collectively, the "coveredagreements") against KKR Holdings and certain of its subsidiaries and designees, a general partner or limited partner of KKR Holdings, or a person who holds apartnership or equity interest in the foregoing entities. The conflicts committee is also authorized to take any action pursuant to any authority or rights granted tosuch committee under any covered agreement or with respect to any amendment, supplement, modification or waiver to any such agreement that would purport tomodify such authority or rights. In addition, the conflicts committee shall approve any amendment to any of the covered agreements that in the reasonablejudgment of our Managing Partner's board of directors is or will result in a conflict of interest. The conflicts committee will determine if the resolution of anyconflict of interest submitted to it is fair and reasonable to our partnership. Any matters approved by the conflicts committee will be conclusively deemed to be fairand 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 and approveany related person transactions, other than those that are approved pursuant to our related person policy, as described under "Certain Relationships and RelatedTransactions, and Director Independence—Statement of Policy Regarding Transactions with Related Persons," and may establish guidelines or rules to coverspecific 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. 259Table of ContentsNominating 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 underour Managing Partner's limited liability company agreement or the Delaware Limited Liability Company Act.Code of Business Conduct and EthicsWe have a Code of Business Conduct and Ethics that applies to our principal executive officers, principal financial officer and principal accounting officer andis available on our website at www.kkr.com under the "Investor Center" section. In accordance with, and to the extent required by the rules and regulations of theSEC, we intend to disclose any amendment to or waiver of the Code of Business Conduct and Ethics on behalf of an executive officer or director either on ourwebsite 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 website at www.kkr.com under 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: Investor Relations, KKR & Co. L.P., 9 West 57th Street, Suite 4200, New York,New York 10019. Section 16(a) Beneficial Ownership Reporting ComplianceSection 16(a) of the Exchange Act requires the executive officers and directors of our Managing Partner, and persons who beneficially own more than tenpercent of a registered class of our partnership's equity securities, to file initial reports of ownership and reports of changes in ownership with the SEC and furnishus 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 written representations from suchpersons 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 fiscalyear ended December 31, 2017 , such persons complied with all such filing requirements, except KKR Holdings filed a late Form 4 on November 13, 2017 for atransaction that occurred on November 8, 2017.260Table of ContentsITEM 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 is dependent on the services of our employees, including our named executive officers. Among other things, we depend on theirability, where applicable, to find, select and execute investments, manage and improve portfolio company operations, find and develop relationships with fundinvestors and other sources of capital, find, select and execute capital markets opportunities, and provide other services, and we cannot compete effectively withouttheir continued employment with us. Therefore, it is important that our key employees are compensated in a manner that motivates them to excel consistently andencourages 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% or 43%, as applicable, of the carried interest that we generate through our business, we believe that our employees' interests are alsoaligned with those of our investors in the funds, vehicles and accounts that we manage, which in turn benefits our unitholders. Our carry pool is supplemented byallocating for compensation 40% of the incentive fees that do not constitute carried interest that are earned from investment funds and certain management feerefunds.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 culture ofmeritocracy 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 least annually, an evaluation process based on input from a wide range of persons regarding each employee's contribution to the firm, including hisor her commitment to 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 toa single manager's judgment.We refer to our two Co-Chief Executive Officers (Henry Kravis and George Roberts), our two Co-Presidents/Co-Chief Operating Officers (Joseph Bae andScott Nuttall), our Chief Financial Officer (William Janetschek), our General Counsel (David Sorkin) and our former Chief Administrative Officer (Todd Fisher)as our "named executive officers." Messrs. Bae and Nuttall were appointed as our Co-Presidents and Co-Chief Operating Officers on July 16, 2017, and Mr. Fisherleft the firm on December 29, 2017 to pursue a career outside the investment industry. We believe that the elements of compensation discussed below for ournamed executive officers serve these primary objectives. We, as a limited 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 makechanges to the compensation structure relating to one or more named 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 Partnership261Table of ContentsUnits, such distributions may be allocated or otherwise applied in such amounts and in such manner as our Co-Chief Executive Officers, acting through the generalpartner of KKR Holdings, may determine. See "—Compensation Elements—Year-End Bonus Compensation" for a description of these grants. As of February 21,2018, approximately 0.2 million KKR Holdings units remain unallocated. In 2017 , 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 2017 , 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 CompensationOur Co-Chief Executive Officers did not receive any year-end bonus compensation in 2017 . They have decided at this time not to receive any bonus from usor from KKR Holdings in excess of distributions payable with respect to their KKR Holdings units. Instead, they have decided that year-end bonus payments fromKKR Holdings for 2017 should be made to our other employees in order to motivate and retain them for the benefit of the firm. See also "—KKR Holdings Unitsand Restricted Equity Units" and "—Other Compensation" below for KKR Holdings units granted to our Co-Chief Executive Officers in November 2017 andcertain incidental benefits provided by the firm.In 2017 , our Co-Presidents/Co-Chief Operating Officers, Chief Financial Officer, General Counsel and former Chief Administrative Officer wereawarded additional year-end compensation as bonus payments that were determined by our Co-Chief Executive Officers. Our Co-Chief Executive Officers madetheir subjective determinations by assessing our overall performance and the contributions that our Co-Presidents/Co-Chief Operating Officers, Chief FinancialOfficer, General Counsel and former Chief Administrative Officer made to our development and success, as a firm, during the year. Certain factors that wereconsidered when determining the size of the bonus payments for our Co-Presidents/Co-Chief Operating Officers, Chief Financial Officer, General Counsel andformer Chief Administrative Officer include (i) their respective contributions and accomplishments in 2017 in terms of driving commercial results for the firm,leading and managing people, and living the firm's values; (ii) their respective performance and contributions relative to other senior employees at the firm, (iii)their respective performance and contributions in 2017 as compared to the prior year and (iv) the overall financial performance of the firm in 2017 as compared tothe prior year based on certain financial measures considered by management, including but not limited to distributable earnings. More specifically, in assessingMr. Bae and Mr. Nuttall's contributions, our Co-Chief Executive Officers considered their services as newly appointed Co-Presidents/Co-Chief Operating Officersand their day-to-day management of the firm's operations, as well as their joint leadership roles in executing and implementing KKR's strategy in its global privateequity, real assets, credit, capital markets and capital raising businesses together with its corporate development and balance sheet initiatives. In assessing Mr.Janetschek's contributions, they considered his service as the Chief Financial Officer and his leadership and oversight of our finance, tax and accounting functionsand related operations and his role with respect to strategic initiatives undertaken by the firm. In assessing Mr. Sorkin's contributions, they considered hisleadership and oversight of our global legal and compliance functions and his role with respect to the strategic initiatives undertaken by the firm. Finally, inassessing Mr. Fisher's contributions, they considered his service as the firm's Chief Administrative Officer, his role in overseeing the growth and operations of thefirm, his leadership in the performance of our real estate business and the strategic direction of the firm generally. The firm experienced stronger performance in2017 compared to the prior year, supported by a notable increase in revenues year-over-year, greater AUM raised and greater capital deployed. Based on the firm'spositive 2017 results and the individual contributions described above, the aggregate size of the bonus granted to the named executive officers with respect to 2017was higher relative to the total bonus granted with respect to 2016. In making these determinations, our Co-Chief Executive Officers consulted with certain of oursenior employees and, with respect to the determinations for our Chief Financial Officer and General Counsel, considered the recommendations by our Co-Presidents/Co-Chief Operating Officers. We believe that the discretion permitted to our Co-Chief Executive Officers permits them to award bonus compensation inan amount they determine to be necessary to motivate and retain these named executive officers. Because the restricted equity units associated with the deferredequity bonus were made after December 31, 2017, they do not appear in the tables below, but will appear in the tables for the year ended December 31, 2018.262Table of ContentsOnce the bonus amount is determined, the bonus amount is divided into cash compensation and, for our named executive officers (other than our Co-ChiefExecutive Officers and our former Chief Administrative Officer, who did not receive any deferred equity bonus compensation), 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 2017 year-end bonus compensation. Seealso "—KKR Holdings Units and Restricted Equity Units" below for KKR Holdings units and restricted equity units granted to certain named executive officers inNovember 2017 .The cash bonus amounts paid to our Co-Presidents/Co-Chief Operating Officers, our Chief Financial Officer, our General Counsel and our former ChiefAdministrative Officer for 2017 are reflected in the Bonus column of the 2017 Summary Compensation Table below.The portion of the year-end bonus payment granted to our named executive officers as 2017 deferred equity bonus compensation (other than our Co-ChiefExecutive Officers and our former Chief Administrative Officer, who received none) consists of grants of equity awards issued under our Equity Incentive Plan.These equity awards are restricted equity units that may be settled for our common units on a one-for-one basis. See below under "—Narrative Disclosure toSummary Compensation Table and Grants of Plan-Based Awards—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 vesting provisions (and anyapplicable transfer restrictions) discussed below lapse.The number of restricted equity units granted to our named executive officers as deferred equity bonus compensation (other than our Co-Chief ExecutiveOfficers and our former Chief Administrative Officer, who received none) is determined by our Managing Partner's board of directors. As part of 2017 year-endbonus compensation, our Managing Partner's board of directors approved the following grants: 286,042 restricted equity units to each of our Co-Presidents/Co-Chief Operating Officers, 61,259 restricted equity units to our Chief Financial Officer and 61,259 restricted equity units to our General Counsel, in each case asdeferred equity bonus compensation. The number of restricted equity units was determined by dividing the dollar amount of deferred equity bonus compensationrecommended by the Co-Chief Executive Officers to our Managing Partner's board of directors by the average closing price of our common units over the tentrading days ending December 1, 2017. The restricted equity units that were granted as deferred equity bonus compensation in respect of 2017 year-end bonuscompensation are subject to a three-year service-based vesting condition (with the first vesting event occurring on April 1, 2019). The restricted equity units for thedeferred equity bonus are not subject to additional transfer restrictions after vesting or any minimum retained ownership requirement. Because these grants weremade after December 31, 2017 and the associated restricted equity units are generally issued in the first quarter of the following year, they do not appear in thetables below, but will appear in the tables for the year ended December 31, 2018.Our named executive officers along with other employees at the firm may be eligible for additional equity compensation awards based on their performanceand contributions during the year as described above. Grants of additional equity compensation made in February 2015 for 2014 year-end compensation arereflected in the Summary Compensation Table. While no additional equity compensation was granted to our named executive officers in connection with any of2017, 2016 or 2015 year-end bonus compensation, these additional equity compensation awards may become a component of our annual year-end bonusdetermination for our named executive officers in the future. See "—KKR Holdings Units and Restricted Equity Units" below for KKR Holdings units andrestricted equity units granted to certain named executive officers in 2017.KKR Holdings Units and Restricted Equity UnitsCertain of our named executive officers also received allocations or grants of KKR Holdings units and restricted equity units that are not part of the annualcompensation program, as determined by the general partner of KKR Holdings and our Managing Partner's board of directors, as applicable. KKR Holdings unitsare, subject to certain restrictions, exchangeable for our common units, on a one-for-one basis. The restricted equity units are also settled for our common units, ona one-for-one basis, and subject to tax withholding, once the applicable vesting provisions are satisfied. The size of the allocations and grants were determined inlight of the remaining KKR Holdings units available to be granted to them and other senior employees of the firm and taking into consideration the roles andresponsibilities of each named executive officer, including their view of each officer's potential impact on future firm performance, growth and strategic initiatives.263Table of ContentsOn November 2, 2017, the conflicts committee of our Managing Partners' board of directors consented to the allocation by KKR Holdings of 2,500,000 KKRHoldings units to each of Messrs. Kravis and Roberts. Also on November 2, 2017, in connection with the appointment of Messrs. Bae and Nuttall as our Co-Presidents/Co-Chief Operating Officers, our Managing Partner's board of directors consented to the allocation by KKR Holdings of 4,850,000 KKR Holdings unitsto each of Messrs. Bae and Nuttall and authorized grants of 4,000,000 restricted equity units to each of Messrs. Bae and Nuttall.The KKR Holdings units (but not the restricted equity units) allocated to our Co-Chief Executive Officers and Co-Presidents/Co-Chief Operating Officerswere already outstanding but previously unallocated units, and consequently these allocations did not increase the number of KKR Holdings units outstanding orour outstanding common units on a fully-diluted basis. If and when vested, these KKR Holdings units would not dilute our ownership interests in the KKR GroupPartnerships. The objectives of the allocations and grants were (1) to provide incremental long-term economic incentives to our Co-Presidents/Co-Chief OperatingOfficers in connection with their appointment as such in July 2017 and (2) to grant our co-founders practically all of the remaining unallocated KKR Holdingsunits that were previously reserved for future allocations to provide additional incentives for them to spend time externally on investor, corporate and otherrelationships and internally on investments, strategy, culture and mentoring, including providing guidance and oversight for our Co-Presidents/Co-Chief OperatingOfficers. It was also recognized that our co-founders did not receive any equity grants or allocations since the KPE Transaction, at which time they could haveassigned a larger equity interest in KKR Holdings for themselves. We believe these allocations and grants will further align these named executive officers'interests with those of our unitholders. For the terms of these allocations and grants, see below under "—Narrative Disclosure to Summary Compensation Tableand Grants of Plan-Based Awards—Terms of KKR Holdings Units" and "—Narrative Disclosure to Summary Compensation Table and Grants of Plan-BasedAwards—Terms of Restricted Equity Units."Carried InterestWe allocate 40% or 43%, as applicable, of the carried interest that we earn to a carry pool, from which our employees and selected other individuals areeligible to receive a carried interest allocation. The percentage of carried interest allocable to the carry pool may be amended with the approval of a majority of ourindependent directors. Our carry pool is supplemented by allocating for compensation 40% of the incentive fees that do not constitute carried interest that areearned from investment funds. Carry pool allocations for the named executive officers are made by first determining a total dollar value for the named executiveofficer'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 thecarry pool. To make this total dollar value determination for the other named executive officers, our Co-Chief Executive Officers take into consideration theexecutive officer's involvement with investments and impact on the portfolio, the size of the executive officer's bonus as well as the recommendations by our Co-Presidents/Co-Chief Operating Officers and other factors similar to those considered when determining the size of the bonus, as described under "—Year-EndBonus Compensation." However, the total dollar value available to be allocated to the named executive officers and other employees is limited by the total amountof investments made by our investment funds during the fiscal year, and executive officers and other employees may not be allocated any dollar value of carry inany given year. For our older funds, carry pool allocations were determined based on a percentage applied on an investment-by-investment basis. After a totaldollar value, if any, for each named executive officer is determined, such dollar value was then divided by the total allocable dollar value of investments made byour funds for the year, which yielded a certain percentage for the named executive officer. This percentage was then applied consistently to each investment madeduring the year. Because the size of each investment was different, the nominal amount of the carry pool allocation differed by investment, although the percentageapplied to each investment was consistent. For our more recent funds, carry pool allocations are determined based on 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 totalallocable dollar value of investments made by that fund for the year to yield a percentage for that particular fund. If carry is paid prior to the end of a fund'sinvestment period, this percentage is applied at that time. At the end of the investment period, an adjustment would be made to account for any difference inpercentages applied at the times carry was paid during the investment period (taking vesting into account) and the percentage determined for a particular fundbased on the total dollar values allocated to the named executive officer for such fund divided by the total allocable dollars invested during the entire investmentperiod 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 an investment 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.264Table of ContentsCarried 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 portionof certain 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 2017 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 carry pool allocationsupon 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 our Equity Incentive Plan that have satisfied the applicable 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 or otherwise, asignificant majority of the equity awards granted to our employees are subject to a multi-year vesting conditions, one- and two-year post-vesting transfer restrictionperiods and/or a minimum retained ownership requirement. Because our equity awards have multi-year vesting provisions, the actual amount of compensationrealized by the recipient will be tied to the long- term performance of our common units. Pursuant to our internal policies, our employees are not permitted to buyor sell derivative securities, including for hedging purposes, or to engage in short-selling to hedge their economic risk of ownership. In addition, we only makecash payments of carried interest to our employees when profitable investments have been realized and after sufficient cash has been distributed to the investors inour funds. Moreover, the general partner of a fund is required to return carried interest distributions to the fund due to, for example, underperformance by therelevant fund subsequent to the payment of such carried interest. Accordingly, the employees would be subject to a "clawback," i.e., be required to return carriedinterest payments previously made, all of which further discourages excessive risk-taking by our personnel.265Table of ContentsSummary 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, 2015, 2016 and 2017.In 2015, 2016 and 2017, 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, whichrelate to payments to our named executive officers that are not compensatory and are described in "Certain Relationships and Related Transactions, and DirectorIndependence." Because the grants of restricted equity units to our named executive officers as part of 2017 year-end bonus compensation were made afterDecember 31, 2017, they do not appear in the tables below, and will appear in the tables for the year ended December 31, 2018.Carried interest distributions to our named executive officers in respect of the carry pool for the years ended December 31, 2015, 2016 and 2017 are reflectedin the All Other Compensation column in the 2017 Summary Compensation Table below.2017 Summary Compensation TableName and Principal Position year Salary($) Bonus($) Stock Awards ($) (2) All OtherCompensation ($) (3) Total($)Henry R. Kravis 2017 300,000 — 44,650,000 68,484,271(4) 113,434,271Co-Chief Executive Officer 2016 300,000 — — 63,541,599 63,841,599 2015 300,000 — — 51,994,055 52,294,055 George R. Roberts 2017 300,000 — 44,650,000 68,761,704(5) 113,711,704Co-Chief Executive Officer 2016 300,000 — — 63,637,400 63,937,400 2015 300,000 — — 52,064,278 52,364,278 Joseph Y. Bae 2017 300,000 7,385,000 121,302,000 14,919,102(6)(7) 143,906,102Co-President and Co-Chief OperatingOfficer Scott C. Nuttall 2017 300,000 7,385,000 121,302,000 15,364,186(6)(7)(9) 144,351,186Co-President and Co-Chief OperatingOfficer William J. Janetschek 2017 300,000 2,747,500(1) 967,419 6,655,362(6) 10,670,281Chief Financial Officer 2016 300,000 2,455,000 7,813,846 5,196,063 15,764,909 2015 300,000 2,325,000 3,676,867 2,705,105 9,006,972 David J. Sorkin 2017 300,000 2,747,500(1) 967,419 3,389,709(6) 7,404,628General Counsel 2016 300,000 2,455,000 7,841,425 1,695,934 12,292,359 2015 300,000 2,390,000 3,676,867 1,396,629 7,763,496 Todd A. Fisher 2017 300,000 3,500,000 — 9,014,143(6)(8) 12,814,143Chief Administrative Officer 2016 300,000 3,585,000 12,880,497 15,660,918 32,426,415 2015 300,000 3,485,000 3,600,328 10,622,133 18,007,461 (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 2015, 2016 and 2017 were made by KKR Holdings and accordingly were not economically borne by us. 266Table of Contents(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 thefiscal years ended December 31, 2015, 2016 and 2017, restricted equity units presented in such reporting periods relate to the equity portion of the prior year's year-end bonuscompensation and for the fiscal year ended December 31, 2015, also includes additional equity compensation granted for the fiscal year ended December 31, 2014, and in each casereflect the grant date fair value of restricted equity units. For the fiscal years ended December 31, 2016 and 2017, amounts relating to KKR Holdings units represent the original grantdate fair value of KKR Holdings units, and for the fiscal year ended December 31, 2016, the incremental fair value of such KKR Holdings units, as of the modification in November2016. Fair value of the restricted equity units and KKR Holdings units granted to our named executive officers and the incremental fair value relating to the modification of the KKRHoldings units are calculated in accordance with Accounting Standards Codification Topic 718, Compensation-Stock Compensation ("ASC Topic 718"). See Note 12 "Equity BasedCompensation" to our consolidated financial statements included elsewhere in this report for additional information about the valuation assumptions with respect to all grants reflectedin this column. These amounts reflect the aggregate grant date fair values (or incremental fair values) calculated under ASC Topic 718, and may not correspond to the actual value thatwill be recognized by our named executive officers. See "—Grants of Plan-Based Awards in 2017" for additional information regarding the restricted equity units and KKR Holdingsunits, including the modification 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 by our namedexecutive officers is a more representative disclosure of their compensation than presenting accrued carried interest, because carried interest is paid only if and when there are profitablerealization events relating to the underlying investments. Carried interest also includes amounts retained and allocated for distribution to the respective named executive officer, but notyet distributed to the named executive officer, which could be used to fund potential future clawback obligations if any were to arise. (4)Consists of $ 67,846,230 in cash payments of carried interest from the carry pool during 2017; $40,000 in fees for Mr. Kravis's service as a KKR-designated director on the board ofdirectors of First Data Corporation, a KKR portfolio company, during 2017; $212,041 rela ted to Mr. Kravis's use of a car and driver during 20 17; $361,000 related to certainpersonnel who administer personal matters for Mr. Kravis during 2017; and $25,000 rela ted to tax preparation fees. SEC rules require that transportation and personnel expenses notdirectly and integrally related to our business be disclosed as compensation to Mr. Kravis. Because we do not separately track personnel expenses based on whether they are incurredfor business or for personal reasons, 100% of the preceding costs have been reported for Mr. Kravis. (5)Consists of $67,846,230 in cash payments of ca rried interest from the car ry pool during 2017; $340,318 re lated to Mr. Roberts's use of a car and driver during 201 6; $550,156 related to certain personnel who administer personal matters for Mr. Roberts during 2017; and $25,000 rela ted to tax preparation fees. SEC rules require that transportation andpersonnel expenses not directly and integrally related to our business be disclosed as compensation to Mr. Roberts. Because we do not separately track personnel expenses based onwhether 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 2017 and $25,000 related to tax preparation fees. (7)Messrs. Bae and Nuttall became our named executive officers in 2017, and therefore, only their compensation information for the fiscal year ended December 31, 2017 is provided inthe table. (8)Following his departure from KKR, Mr. Fisher is permitted to continue to make investments in our funds on a no-fee and no-carry basis. See "Certain Relationships and RelatedTransactions, and Director Independence—Side-By-Side and Other Investments." (9)Includes $40,000 in fees for Mr. Nuttall's service as a KKR-designated director on the board of directors of First Data Corporation, a KKR portfolio company, during 2017.267Table of ContentsGrants of Plan-Based Awards in 2017The following table provides supplemental information relating to grants of equity awards in the year ended December 31, 2017 provided in our 2017Summary Compensation Table.Name Grant Date All Other StockAwards: Number ofShares of Stock orUnits (#) Grant Date FairValue of Stock andOption Awards ($)(4) Henry R. Kravis 11/02/17 2,500,000(1)$44,650,000 George R. Roberts 11/02/17 2,500,000(1)$44,650,000 Joseph Y. Bae 11/02/17 4,850,000(1)$84,972,000 11/02/17 4,000,000(2)$36,330,000 Scott C. Nuttall 11/02/17 4,850,000(1)$84,972,000 11/02/17 4,000,000(2)$36,330,000 William J. Janetschek 02/21/17 67,463(3)$967,419 David J. Sorkin 02/21/17 67,463(3)$967,419 Todd A. Fisher 02/21/17 117,173(3)$—(5) (1)The amounts represent KKR Holdings units allocated in the fiscal year ended December 31, 2017. Each allocation of KKR Holdings units is subject to a service-basedvesting condition, which is described under the caption "Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards—Terms of KKRHoldings Units" below. (2)The amounts represent restricted equity units granted under our Equity Incentive Plan in the fiscal year ended December 31, 2017 relating to the appointment of Messrs.Bae and Nuttall as our Co-Presidents and Co-Chief Operating Officers in 2017. Each grant of restricted equity units is subject to a service-based vesting condition or amarket price-based vesting condition, which is described under the caption "Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards—Terms of Restricted Equity Units" below. (3)The amounts represent restricted equity units granted under our Equity Incentive Plan in the fiscal year ended December 31, 2017 relating to the equity portion of theprior year's year-end bonus compensation. Each grant of restricted equity units is subject to a service-based vesting condition, which is described under the caption"Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards—Terms of Restricted Equity Units" below. (4)The amounts represent the grant date fair value of the KKR Holdings units or restricted equity units, as applicable, as calculated in accordance with ASC Topic 718. SeeNote 12 "Equity Based Compensation" to our consolidated financial statements included elsewhere in this report for additional information about the valuationassumptions with respect to all grants reflected in this table. These amounts reflect the aggregate grant date fair values calculated under ASC Topic 718 and may notcorrespond to the actual value that will be recognized by our named executive officers. (5)All of Mr. Fisher's unvested restricted equity units were forfeited upon his departure from KKR. Narrative Disclosure to Summary Compensation Table and Grants of Plan‑‑ Based AwardsTerms of KKR Holdings UnitsIn general, KKR Holdings units vest over a three- to five-year period from their grant date, subject to continued service through each vesting date. Followingthis service-based vesting, certain KKR Holdings units may also be subject to transfer restrictions and/or minimum retained ownership requirements. UnvestedKKR Holdings units are not entitled to receive any distributions that are declared and received on the underlying KKR Group Partnership Units. See "—KKRHoldings."The KKR Holdings units granted to our Co‑Chief Executive Officers in November 2017 are subject to five year service-based vesting requirements and willvest in equal annual installments beginning on October 1, 2018 and ending October 1, 2022, in each case, subject to continued service through each vesting date(including full continued vesting upon death or disability and an additional two years of vesting following retirement), and will be subject to minimum retainedownership requirements but no transfer restriction requirements. The KKR Holdings units granted to our Co-Presidents/Co-Chief Operating Officers in November2017 are subject to five year service-based vesting requirements and will vest on October 1 of each year as follows: 10% in 2018, 15% in 2019, 20% in 2020, 25%in 2021 and 30% in 2022, in each case, subject to continued service through each vesting date (including continued vesting upon death and disability), and will besubject to minimum retained ownership and transfer restriction requirements. As of February 21, 2018, 304,922,822 outstanding KKR Holdings units have vested,constituting 91% of the KKR Holdings units outstanding.268Table of ContentsKKR 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 and interests in such units will remain contingently vested during that time. 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 other one-half of the units vesting on such vestingdate. Transfer restricted units become fully vested and transferable and may be exchanged into common units at the end of the transfer restriction period if theholder is not terminated for cause and has complied with the terms of his or her confidentiality and restrictive covenant agreement during the transfer restrictionsperiod. See "Terms of Confidentiality and Restrictive Covenant Agreements" below.Because KKR Holdings is a partnership, all of the 335,971,334 KKR Holdings units have been legally allocated, but the allocation of 199,929 of these unitshas not been communicated to each respective principal as of December 31, 2017. 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 requirements applicable to KKR Holdings units may not be enforceable in all cases andcan be waived, 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 a 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. Certain restricted equityunit grant agreements may also contain additional vesting requirements.The restricted equity units granted to our Co-Presidents/Co-Chief Operating Officers in November 2017 are partly subject to service-based vesting conditionand partly subject to a market price-based vesting condition. Of the 4,000,000 restricted equity units granted to each of our Co-Presidents/Co-Chief OperatingOfficers, 1,500,000 units are subject to five year service-269Table of Contentsbased vesting requirements and will vest on October 1 of each year as follows: 10% in 2018, 15% in 2019, 20% in 2020, 25% in 2021 and 30% in 2022, in eachcase, subject to continued service through each vesting date (including continued vesting upon death and disability). The remaining 2,500,000 restricted equityunits are subject to a market price-based vesting condition, where all of such units will vest upon the market price of our common units reaching and maintaining aclosing market price of $40.00 per common unit for a period of ten consecutive trading days on or prior to December 31, 2022, subject to the officer's continuedservice to the time of such vesting (including continued service vesting upon death and disability). These restricted equity units will be automatically forfeitedupon the earlier of the officer's termination of service (except for death or disability) and the failure of the price condition to have been met by December 31, 2022.Following vesting, the common units received upon settlement of the restricted equity units will remain subject to minimum retained ownership and transferrestriction requirements.The restricted equity units granted to Messrs. Janetschek, Sorkin and Fisher in the fiscal year ended December 31, 2017 are subject to three year service-basedvesting requirements.Common units delivered upon settlement of restricted equity units that are subject to transfer restrictions, unless waived, may not be sold, exchanged orotherwise transferred for a specified period of time following the vesting date. The transfer restriction period typically lasts for (1) one year with respect to one-halfof the units vesting on such vesting date and (2) two years with respect to the other one-half of the units vesting on such vesting date. Transfer-restricted commonunits become saleable at the end of the transfer restriction period if the holder has not been terminated for cause and has not breached in any significant orintentional manner, as determined by the Administrator (as defined in "KKR & Co. L.P. Equity Incentive Plan—Administration"), the terms of his or herconfidentiality and restrictive covenants contained in the grant agreement during the transfer restriction period. See "Terms of Confidentiality and RestrictiveCovenant Agreements" below.While 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 two years from termination for both the prohibitions on competition with us and theprohibitions on the solicitations of our clients and employees. In cases where the Co-Chief Executive Officer is terminated involuntarily and for reasons notconstituting cause, such periods are reduced to one year from termination. The restricted periods for our other named executive officers expire (1) in the case of theprohibitions on competition with us, 12 months from termination and (2) in the case of the prohibitions on the solicitation of our clients and employees, 18 monthsfrom termination. In cases where the named executive officer is terminated involuntarily and for reasons not constituting cause, such periods are reduced to 6months and 9 months, respectively. In addition, under certain conditions the restricted periods applicable to the solicitation of our clients and employees are subjectto reduction for any "garden leave" or "notice period" that an employee serves prior to termination of employment. These agreements also require that we, and ournamed 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.270Table of ContentsOutstanding Equity Awards at 2017 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, 2017 . Stock AwardsName Number of Sharesor Units of Stockthat Have NotVested (#) Market Value of Sharesor Units of Stockthat Have NotVested ($) (1)Henry R. Kravis2,500,000 (2) $52,650,000George R. Roberts2,500,000 (2) $52,650,000Joseph Y. Bae10,341,659 (3) $217,795,339Scott C. Nuttall10,546,390 (4) $222,106,973William J. Janetschek619,545 (5) $13,047,618David J. Sorkin620,926 (6) $13,076,702Todd A. Fisher— — (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, 2017 , of $21.06 per commonunit.(2)Includes 2,500,000 KKR Holdings units granted to each of Messrs. Kravis and Roberts on November 2, 2017, which will vest in five equal annual installments,beginning on October 1, 2018.(3)Includes (i) 145,370 KKR Holdings units granted on January 28, 2015, which will vest on April 1, 2018; (ii) 52,595 KKR Holdings units granted on January 25,2016, which will vest on April 1, 2018; (iii) 67,032 KKR Holdings units granted on December 31, 2016, which will vest on April 1, 2018; (iv) 52,596 KKRHoldings units granted on January 25, 2016, which will vest on April 1, 2019; (v) 67,033 KKR Holdings units granted on December 31, 2016, which will vest onApril 1, 2019; (vi) 67,033 KKR Holdings units granted on December 30, 2016, which will vest on April 1, 2020; (vii) 1,040,000 KKR Holdings units granted onFebruary 25, 2016, which will vest in equal installments on May 1, 2018, May 1, 2019, May 1, 2020 and May 1, 2021; (viii) 4,850,000 KKR Holdings unitsgranted on November 2, 2017, which will vest on October 1 of each year as follows: 10% in 2018, 15% in 2019, 20% in 2020, 25% in 2021 and 30% in 2022; and(ix) 4,000,000 restricted equity units granted on November 2, 2017, of which (a) 1,500,000 units will vest on October 1 of each year as follows: 10% in 2018, 15%in 2019, 20% in 2020, 25% in 2021 and 30% in 2022 and (b) 2,500,000 units will vest upon the market price of our common units reaching and maintaining amarket price of $40.00 per common unit for a period of ten consecutive trading days on or prior to December 31, 2022.(4)Includes (i) 159,958 KKR Holdings units granted on January 28, 2015, which will vest on April 1, 2018; (ii) 48,648 KKR Holdings units granted on January 25,2016, which will vest on April 1, 2018; (iii) 53,045 KKR Holdings units granted on December 31, 2016, which will vest on April 1, 2018; (iv) 48,649 KKRHoldings units granted on January 25, 2016, which will vest on April 1, 2019; (v) 53,045 KKR Holdings units granted on December 31, 2016, which will vest onApril 1, 2019; (vi) 53,045 KKR Holdings units granted on December 30, 2016, which will vest on April 1, 2020; (vii) 1,280,000 KKR Holdings units granted onFebruary 25, 2016, which will vest in equal installments on May 1, 2018, May 1, 2019, May 1, 2020 and May 1, 2021; (viii) 4,850,000 KKR Holdings unitsgranted on November 2, 2017, which will vest on October 1 of each year as follows: 10% in 2018, 15% in 2019, 20% in 2020, 25% in 2021 and 30% in 2022; and(ix) 4,000,000 restricted equity units granted on November 2, 2017, of which (a) 1,500,000 units will vest on October 1 of each year as follows: 10% in 2018, 15%in 2019, 20% in 2020, 25% in 2021 and 30% in 2022 and (b) 2,500,000 units will vest upon the market price of our common units reaching and maintaining amarket price of $40.00 per common unit for a period of ten consecutive trading days on or prior to December 31, 2022.(5)Includes (i) 73,597 restricted equity units granted on February 23, 2015, which will vest on April 1, 2018; (ii) 38,485 restricted equity units granted on February23, 2016, which will vest in equal installments on April 1, 2018 and April 1, 2019; and (iii) 440,000 KKR Holdings units granted on February 25, 2016, which willvest in equal installments on May 1, 2018, May 1, 2019, May 1, 2020 and May 1, 2021; and (iv) 67,463 restricted equity units granted on February 21, 2017, whichwill vest in equal installments on April 1, 2018, April 1, 2019 and April 1, 2020.(6)Includes (i) 73,597 restricted equity units granted on February 23, 2015, which will vest on April 1, 2018; (ii) 39,866 restricted equity units granted onFebruary 23, 2016, which will vest in equal installments on April 1, 2018 and April 1, 2019; and (iii) 440,000 KKR Holdings units granted on February 25, 2016,which will vest in equal installments on May 1, 2018, May 1, 2019, May 1, 2020 and May 1, 2021; and (iv) 67,463 restricted equity units granted on February 21,2017, which will vest in equal installments on April 1, 2018, April 1, 2019 and April 1, 2020.271Table of ContentsOption Exercises and Stock Vested in 2017The following table sets forth information concerning the vesting of KKR Holdings units and restricted equity units held by each of our named executiveofficers during the year ended December 31, 2017 . Stock AwardsName Number ofShares Acquired onVesting (#) (1)Value Realized onVesting ($) (2)Henry R. Kravis——George R. Roberts——Joseph Y. Bae496,626$9,227,692Scott C. Nuttall567,267$10,555,677William J. Janetschek215,750$4,006,823David J. Sorkin215,960$4,010,651Todd A. Fisher316,333$5,887,351 (1)The amounts reflected in this column represent KKR Holdings units and common units delivered upon vesting, a portion of which are subject to one‑ and two-yeartransfer restrictions upon vesting. See "—Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards—Terms of KKR HoldingsUnits" and "—Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards—Terms of Restricted Equity Units" for additional terms,including with respect 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 2017We provided no pension benefits during the fiscal year ended December 31, 2017 .Nonqualified Deferred Compensation for 2017We provided no defined contribution plan for the deferral of compensation on a basis that is not tax‑qualified during the fiscal year ended December 31, 2017.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, transfer-restricted 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 ("qualified retirement") will continue to vest in hisor her unvested KKR Holdings units and restricted equity units for an additional two years following retirement, subject to compliance, if applicable, with therequirement that the holder not violate the terms and conditions of his or her confidentiality and restrictive covenants during the period in which such KKRHoldings unit or restricted equity unit, if applicable, remains transfer restricted over one-and two-year periods. None of our named executive officers had aqualified retirement in the fiscal year ended December 31, 2017 .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, which become permitted to be exchanged after the scheduled vesting dates or will be settled on the scheduled vestingdates, respectively. In addition, upon a change in control of KKR, a holder of KKR Holdings units and restricted equity units becomes immediately vested in allunvested KKR Holdings units and restricted equity units, respectively, which become permitted to be exchanged after the scheduled vesting dates or will be settledon the scheduled vesting dates, respectively. The values of unvested KKR Holdings units and restricted equity units272Table of Contentsheld by the named executive officers as of December 31, 2017 are set forth above in "Outstanding Equity Awards at 2017 Fiscal Year-End."Upon termination of employment, vesting generally ceases for carried interest allocations. In addition, carried interest allocations become immediately vestedupon death or permanent disability.Pay Ratio DisclosureFor the fiscal year ended December 31, 2017:•the median of the annual total compensation of all employees of our company (other than Messrs. Kravis and Roberts, who are our Co-Chief ExecutiveOfficers) was $265,000;•the annual total compensation of Messrs. Kravis and Roberts were $113,434,271 and $113,711,704, respectively; and•the ratio of the annual total compensation of our Co-Chief Executive Officers to the median of the annual total compensation of all other employees was429 to 1 (which includes the special allocation of KKR Holdings units to each of our Co-Chief Executive Officers in 2017, as described in “—Compensation Elements—Year-end Bonus Compensation").To identify the median employee for the purpose of providing the information above, we examined the compensation of all our employees (other than our Co-Chief Executive Officers) as of December 31, 2017 using, based on our payroll records, a consistently applied compensation measure consisting of suchemployees' annual salary, annual cash bonus, actual overtime, carried interest payouts and equity granted. Employees on unpaid leave of absence, employees whogave notice of departure and were not part of the regular year-end compensation process, and certain employees who joined us in connection with an acquisitionconsummated in 2017 were excluded from the calculation. Compensation of employees who were employed for less than the full year of 2017 were annualized, ifthey were part of the regular year-end compensation process. We reviewed all compensation in U.S. dollars, using the relevant exchange rate for any compensationpaid in other currencies. After identifying the median employee, we calculated annual total compensation for such employee using the same methodology we usefor our principal executive officers as set forth in "—Summary Compensation Table—2017 Summary Compensation Table." As noted in “—CompensationElements—Year-end Bonus Compensation," Messrs. Kravis and Roberts did not receive any year-end bonus compensation in 2017, and the distributions payablewith respect to their vested KKR Holdings units are not considered compensation and accordingly are not included in the pay ratio calculation above.273Table of ContentsDirector 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 $25,000 if such independent director serves as the chairman of the audit committee. Cash retainers are pro-rated if, during the fiscal year, a directorjoins or resigns from the board of directors of our Managing Partner, a director joins or resigns from a committee or the amount of a retainer is increased ordecreased. In addition, on October 27, 2017, 7,372 restricted equity units were granted to each independent director pursuant to our Equity Incentive Plan.Name FeesEarned orPaid in Cash($)StockAwards($) (1)Total($)David C. Drummond75,000150,000225,000Joseph A. Grundfest125,000150,000275,000John 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, 2017 ascalculated in accordance with ASC Topic 718. See Note 12 "Equity Based Compensation" to our consolidated financial statements included elsewhere in thisreport for additional information about the valuation assumptions with respect to all grants reflected in this column. These amounts reflect the aggregate grant datefair values calculated under ASC Topic 718 and may not correspond to the actual value that will be recognized by the independent directors.The following table details grants of restricted equity units to each independent director of our Managing Partner in the fiscal year ended December 31, 2017 .The table includes the grant date and grant date fair value of 2017 restricted equity units and the aggregate number of unvested restricted equity units as ofDecember 31, 2017 owned by each independent director who served as a director during the year ended December 31, 2017 :Name GrantDate (1)StockAwards(#)Grant DateFair Value($) (2)Total Number ofUnvested RestrictedEquity Awards onDecember 31, 2017(#)David C. Drummond10/27/20177,372150,0007,372Joseph A. Grundfest10/27/20177,372150,0007,372John B. Hess10/27/20177,372150,0007,372Patricia F. Russo10/27/20177,372150,0007,372Thomas M. Schoewe10/27/20177,372150,0007,372Robert W. Scully10/27/20177,372150,0007,372 (1)The restricted equity awards were granted on October 27, 2017 and vest on October 1, 2018, 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, 2017 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.274Table of ContentsKKR & Co. L.P. Equity Incentive PlanOur Managing Partner has adopted the KKR & Co. L.P. 2010 Equity Incentive Plan, which is referred to as our Equity Incentive Plan.AdministrationThe board of directors of our Managing Partner administers our 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 our Equity Incentive Plan, the board of directors of ourManaging Partner, or the committee or subcommittee thereof to whom authority to administer our Equity Incentive Plan has been delegated, as the case may be, isreferred to as the "Administrator." The Administrator determines who will receive awards under our 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 our Equity Incentive Plan. The Administrator hasfull authority to interpret and administer our 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 our Equity Incentive PlanThe total number of our common units that may be issued under our 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 our 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.Options and Unit Appreciation RightsThe Administrator may award non‑qualified unit options and unit appreciation rights under our Equity Incentive Plan. Options and unit appreciation rightsgranted under our 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 ten 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 Code. To theextent permitted by the Administrator, the exercise price of an option may be paid in cash or its equivalent, in common units having a fair market value equal to theaggregate exercise price and satisfying such other requirements as may be imposed by the Administrator, partly in cash and partly in common units or through netsettlement in common units. As determined by the Administrator, unit appreciation rights may be settled in common units, 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.275Table of ContentsCompensation 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. RobertsJoseph Y. BaeScott C. NuttallDavid C. DrummondJoseph A. GrundfestJohn B. HessPatricia F. RussoThomas M. SchoeweRobert W. Scully276Table 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 486,800,395 commonunits issued and outstanding and 335,971,334 KKR Group Partnership Units that are exchangeable for our common units as of February 21, 2018 . 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 21, 2018 . 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 (1)(2) Percentageof CombinedBeneficialName (3) Number PercentNumber Percent Ownership (4)KKR Holdings (5)2,677 *335,971,334 100.0% 40.8%ValueAct Capital MFB Holdings, L.P. (6)49,700,000 10.2%— — 6.0FMR LLC (7)33,735,482 6.9— — 4.1Henry R. Kravis (5)(8)(9)6,965,126 1.4335,971,334 100.0 41.7George R. Roberts (5)(8)(9)5,878,998 1.2335,971,334 100.0 41.6Joseph Y. Bae (10)385,978 *8,170,735 2.4 1.0Scott C. Nuttall (10)564,265 *11,046,555 3.3 1.4David C. Drummond24,967 *— — *Joseph A. Grundfest59,583 *— — *John B. Hess133,183 *— — *Patricia F. Russo52,583 *— — *Thomas M. Schoewe60,183 *— — *Robert W. Scully114,583 *— — *William J. Janetschek (10)115,326 *3,110,000 * *David J. Sorkin (10)225,886 *3,133,593 * *Todd A. Fisher (10)211,302 *9,468,035 2.8 1.2Directors and executive officers as a group(12 persons)9,910,818 2.0%335,971,334 100.0% 42.0% *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 in 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.277Table of Contents(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.(3)The address of each director and executive officer is c/o KKR Management LLC, 9 West 57th Street, Suite 4200, New York, New York 10019.(4)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.(5)KKR Holdings owns, beneficially or of record, an aggregate of 2,677 common units and 335,971,334 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,special voting units and common units held by KKR Holdings. Mr. Kravis disclaims beneficial ownership of the securities that may be deemed to bebeneficially owned by him, except with respect to 82,814,740 KKR Group Partnership Units in which he and certain related entities he controls have apecuniary interest. Mr. Roberts disclaims beneficial ownership of the securities that may be deemed to be beneficially owned by him, except with respectto 87,277,805 KKR Group Partnership Units in which he and certain related entities he controls have a pecuniary interest. The address of KKR Holdingsis c/o KKR Management LLC, 9 West 57th Street, Suite 4200, New York, New York 10019.(6)Based on a Form 4 filed with the SEC on February 13, 2018 and a Schedule 13D/A filed with the SEC on November 29, 2017, common units reported asbeneficially owned by ValueAct Capital MFB Holdings, L.P. are also reported as indirectly beneficially owned by (i) ValueAct Capital Master Fund, L.P.as sole limited partner of ValueAct Capital MFB Holdings, L.P., (ii) VA Partners I, LLC as general partner of ValueAct Capital MFB Holdings, L.P. andValueAct Capital Master Fund, L.P., (iii) ValueAct Capital Management, L.P. as the manager of ValueAct Capital Master Fund, L.P., (iv) ValueActCapital Management, LLC as general partner of ValueAct Capital Management, L.P., (v) ValueAct Holdings, L.P. as the sole owner of the limitedpartnership interests of ValueAct Capital Management, L.P. and the membership interests of ValueAct Capital Management, LLC and as the majorityowner of the membership interests of VA Partners I, LLC and (vi) ValueAct Holdings GP, LLC as general partner of ValueAct Holdings, L.P. ValueActCapital MFB Holdings, L.P. is reported as having shared power to vote or to direct the vote, and shared power to dispose or direct the disposition of, suchshares of common units, with VA Partners I, LLC, ValueAct Capital Master Fund, L.P., ValueAct Capital Management, L.P., ValueAct CapitalManagement, LLC, ValueAct Holdings, L.P. and ValueAct Holdings GP, LLC. The address of these beneficial owners is One Letterman Drive, BuildingD, Fourth Floor, San Francisco, California 94129.(7)Based on a Schedule 13G/A filed with the SEC on February 13, 2018, FMR LLC and Abigail P. Johnson may be deemed to beneficially own and have thesole power to dispose or to direct the disposition of 33,735,482 common units. The address of these beneficial owners is 245 Summer Street, Boston,Massachusetts 02210. Certain affiliates of Fidelity provide services to us in connection with the investment management, record keeping andadministration of our Equity Incentive Plan and our retirement savings plans for which they received customary fees and expenses not in excess of $1.2million, although certain of these fees are paid by participants in the respective plans. Affiliates of Fidelity have invested or committed to investapproximately $95.0 million as of December 31, 2017, 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, 2017, in connection with such transactions affiliates of Fidelity received selling concessions of less than$650,000 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.(8)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 KKR278Table of ContentsMIF Carry Holdings L.P. is KKR MIF Carry Limited. Each of KKR MIF Carry Holdings L.P. (as the sole general partner of KKR MIF FundHoldings L.P.); KKR MIF Carry Limited (as the sole general partner of KKR MIF Carry Holdings L.P.); KKR Index Fund Investments L.P. (as the soleshareholder of KKR MIF Carry Limited); KKR IFI GP L.P. (as the sole general partner of KKR Index Fund Investments L.P.); KKR IFI Limited (as thesole general partner of KKR IFI GP L.P.); KKR Fund Holdings L.P. (as the sole shareholder of KKR IFI Limited); KKR Fund Holdings GP Limited (as ageneral partner of KKR Fund Holdings L.P.); KKR Group Holdings L.P. (as a general partner of KKR Fund Holdings L.P. and the sole shareholder ofKKR Fund Holdings GP Limited); KKR Group Limited (as the sole general partner of KKR Group Holdings L.P.); KKR & Co. L.P. (as the soleshareholder of KKR Group Limited); and KKR Management LLC (as the sole general partner of KKR & Co. L.P.) may be deemed to be the beneficialowner of the securities. Messrs. Kravis and Roberts are the designated members of KKR Management LLC and may be deemed to share dispositivepower with respect to the common units held by KKR MIF Fund Holdings L.P. Each of Messrs. Kravis and Roberts disclaims beneficial ownership of thesecurities.(9)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 sole general partner of KKR Group Holdings L.P.);KKR & Co. L.P. (as the sole shareholder of KKR Group Limited); and KKR Management LLC (as the sole general partner of KKR & Co. L.P.) may bedeemed to be the beneficial owner of the securities. Messrs. Kravis and Roberts are the designated members of KKR Management LLC and may bedeemed to share dispositive power with respect to the common units held by KKR MIF Fund Holdings L.P. Each of Messrs. Kravis and Roberts disclaimsbeneficial ownership of the securities.(10)The common units above for Messrs. Janetschek and Sorkin include 115,326 and 116,017 restricted equity units, respectively, that will vest within 60days of February 21, 2018.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—RisksRelated to Our Common Units—Our limited partnership agreement contains provisions that reduce or eliminate duties (including fiduciary duties) of ourManaging Partner and limit remedies available to unitholders for actions that might otherwise constitute a breach of duty. It will be difficult for unitholders tosuccessfully challenge a resolution of a conflict of interest by our Managing Partner or by its conflicts committee." In addition, see "Risk Factors—Risks Related toOur Organizational Structure—We are a Delaware limited partnership, and there are certain 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."279Table of ContentsSecurities 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, 2017 . 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 Holders51,475,176—27,313,068Equity Compensation Plans Not Approved by Security Holders———Total51,475,176—27,313,068 (1)Reflects the aggregate number of restricted equity units granted under our Equity Incentive Plan and outstanding as of December 31, 2017 .(2)The aggregate number of common units covered by our 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 and exchanged)on the last day of the immediately preceding fiscal year minus (b) the aggregate number of common units available for issuance under our EquityIncentive Plan as of such date (unless the Administrator should decide to increase the number of common units covered by the plan by a lesser amount).We have filed a registration statement and intend to file additional registration statements on Form S-8 under the Securities Act to register common unitscovered by our Equity Incentive Plan (including pursuant to automatic annual increases). Any such Form S-8 registration statement will automaticallybecome effective upon filing. Accordingly, upon issuance pursuant to our Equity Incentive Plan, these common units will be available for sale in the openmarket.280Table 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 exchange agreement, our registration rights agreement, our tax receivable agreement and thelimited partnership agreements of the KKR Group Partnerships, all of which have been incorporated by reference as exhibits to this report.Exchange AgreementWe have entered into an exchange agreement with KKR Holdings, the entity through which certain of our employees, including Messrs. Kravis, Roberts, Bae,Nuttall, 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, 2017 ,17,786,064 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. Underthe registration rights agreement, holders of registration rights will have the right to request us to register the common units received upon the exchange of theirKKR Holdings units and the sale of such common units and also have the right to require us to make available shelf registration statements permitting sales ofcommon units into the market from time to time over an extended period. In addition, holders of registration rights will have the ability to exercise certainpiggyback registration rights in connection with registered offerings requested by other holders of registration rights or initiated by us. On October 1, 2010, theregistration statement we filed pursuant to this agreement was declared effective, and a post-effective amendment was declared effective on September 21, 2011.As of December 31, 2017 , 335,971,334 common units remain unissued under that registration statement.281Table of ContentsTax 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 Code, which will remain in effect foreach taxable year in which an exchange of KKR Group Partnership Units for common units occurs. Certain of these exchanges are expected to result in an increasein certain of our intermediate holding companies' share of the tax basis of the tangible and intangible assets of the KKR Group Partnerships, primarily attributableto a portion of the goodwill inherent in our business, that would not otherwise have been available. This increase in tax basis may increase depreciation andamortization deductions for tax purposes and therefore reduce the amount of income tax our intermediate holding companies would otherwise be required to pay inthe 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 tothose 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 any 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;• 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 anysuch payment—if our intermediate holding companies do not have taxable income aside from any tax benefit from the exchanges, they will not berequired to make 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 realize282Table of Contentsthe full tax benefit of the increased amortization of our assets, future payments under the tax receivable agreement will be substantial. The payments under the taxreceivable 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 sof our intermediate holding companies. For the year ended December 31, 2017 , no payments were made to our principals, including our executive officers, orKKR Holdings. The independent directors of our board of directors are not eligible to receive payments under the tax receivable agreement.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, assetsales, 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 challengedby the 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 limited partnership agreements of the KKR Group Partnerships, our partnership, as the controlling general partner of KKR Fund Holdings L.P.,KKR Management 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.On 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 limited partnership agreements of the KKR Group Partnerships provide for tax distributions to the holders of KKR Group Partnership Units if the generalpartners of the KKR Group Partnerships determine that distributions from the KKR Group Partnerships would otherwise be insufficient to cover the tax liabilitiesof a holder 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).283Table of ContentsThe limited partnership agreements of the KKR Group Partnerships authorize the general partners of the KKR Group Partnerships to issue an unlimitednumber of additional securities of the KKR Group Partnerships with such designations, preferences, rights, powers and duties that are different from, and may besenior 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 $3.9 million for the use of these aircraft during the year ended December 31, 2017 , of which substantially all was paid to entities collectively controlledby Messrs. Kravis and Roberts.Side-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, certain of our current and former employees and certain other qualifying personnel are permitted to invest, and have invested, their own capital inour funds, in side-by-side investments with our funds and the firm, as well as in funds managed by our strategic manager partnerships. Side-by-side investmentsare investments generally made on the same terms and conditions as those available to the applicable fund or the firm and, they, together with their investments inour funds or the funds managed by our strategic manager partnerships, are not generally subject to management fees or a carried interest. The cash invested by ourcurrent and former employees and certain other qualifying personnel and their investment vehicles aggregated to $505.1 million for the year ended December 31,2017 , of which $43.3 million, $39.0 million, $22.4 million, $7.3 million, $2.8 million, $0.8 million and $5.3 million was invested by Messrs. Kravis, Roberts, Bae,Nuttall, Janetschek, Sorkin and Fisher and their investment vehicles, respectively. These investments are not included in the accompanying consolidated financialstatements. In addition, our funds invested $9.2 million in 2017 from the commitments of certain investment vehicles associated with Mr. Hess. Such investmentsassociated with Mr. Hess were made on the same terms and conditions as for other fund investors including management fees and/or a carried interest applicable tothe relevant fund. Indemnification of Directors, Officers and OthersUnder our limited partnership agreement, in most circumstances we will indemnify the following persons, to the fullest extent permitted by law, from andagainst all losses, claims, damages, liabilities, joint or several, expenses (including legal fees and expenses), judgments, fines, penalties, interest, settlements orother amounts: (a) our Managing Partner; (b) any former Managing Partner; (c) any person who is or was an affiliate of our Managing Partner or any formerManaging Partner; (d) any person who is or was a member, partner, Tax Matters Partner (as defined in the Code), officer, director, employee, agent, fiduciary ortrustee of our partnership or our subsidiaries, any KKR Group Partnership, our Managing Partner or any former Managing Partner or any affiliate of us or oursubsidiaries, our Managing Partner or any former Managing Partner; (e) any person who is or was serving at the request of our Managing Partner or any formerManaging Partner or any affiliate of our Managing Partner or any former Managing Partner as an officer, director, employee, member, partner, Tax MattersPartner, agent, fiduciary or trustee of another person (provided that a person shall not be an indemnitee by reason of providing, on a fee-for-services basis orsimilar arms-length compensatory basis, agency, advisory, consulting, trustee, fiduciary or custodial services); or (f) any person designated by our ManagingPartner as an indemnitee. We have agreed to provide this284Table of Contentsindemnification unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining that these persons acted in bad faith orengaged in fraud or willful misconduct. We have also agreed to provide this indemnification for criminal proceedings. Any indemnification under these provisionswill only be out of our assets. Unless it otherwise agrees, our Managing Partner will not be liable for, or have any obligation to contribute or loan any monies orproperty to us to enable us to effectuate, indemnification. The indemnification of the persons described above shall be secondary to any indemnification suchperson is entitled from another person or the relevant KKR fund to the extent applicable. We may purchase insurance against liabilities asserted against andexpenses incurred by persons in connection with our activities, regardless of whether we would have the power to indemnify the person against liabilities under ourlimited partnership agreement. We currently maintain liability insurance for directors and officers of our Managing Partner.Each member of the board of directors, each as an indemnitee, has entered into an indemnification agreement with our 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 our 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 or otherwise, by reason of being or having been or having agreed to serve as a member ofthe board of directors, or while serving as a member of the board of directors, being or having been serving or having agreed to serve at the request of ourManaging Partner as a director, officer, employee or agent (which, for purposes hereof, shall include a trustee, partner or manager or similar capacity) of anothercorporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise, whether arising from acts or omissions to actoccurring on, before or after the date of such indemnification agreement. Each indemnification agreement provides that the indemnitee shall not be indemnifiedand held harmless if there has been a final and non-appealable judgment entered by an arbitral tribunal or court of competent jurisdiction determining that, inrespect of the matter for which the indemnitee is seeking indemnification pursuant to the indemnification agreement, the indemnitee acted in bad faith or engagedin 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, special situations and core investments, generally include a "clawback" provision that, if triggered, may give rise to a contingent obligationrequiring 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, uponthe liquidation 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 thediminished performance of later investments, 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, including the effects of any performance thresholds. Excluding carried interest received by the generalpartners of funds that were not contributed to KKR in the KPE Transaction, as of December 31, 2017 , $19.2 million carried interest was subject to this clawbackobligation, assuming that all applicable carry-paying funds were liquidated at their December 31, 2017 fair values. Had the investments in such funds beenliquidated at zero value, the clawback obligation would have been $1,920.9 million . Carried interest is recognized in the statement of operations based on thecontractual conditions set forth in the agreements governing the fund as if the fund were terminated and liquidated at the reporting date and the fund's investmentswere 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 thatcumulative investment returns are positive and where applicable, preferred return thresholds have been met. If these investment amounts earned decrease or turnnegative in subsequent periods, recognized carried interest will be reversed and to the extent that the aggregate amount of carry distributions received by thegeneral partner during the term of the fund exceed the amount to which the general partner was ultimately entitled, a clawback obligation would be recorded. Forfunds that are consolidated, this clawback obligation, if any, is reflected as an increase in noncontrolling interests in the consolidated statements of financialcondition. For funds that are not consolidated, this clawback obligation, if any, is reflected as a reduction of KKR's investment balance as this is where carriedinterest 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 made to date, however, it is no longer possible for the principals to be required to pay any such clawback obligation. Carry distributions arisingsubsequent to the KPE Transaction may give rise to clawback obligations that may be allocated generally to KKR and principals who participate in the carry pool.In addition, guarantees of or similar285Table of Contentsarrangements relating to clawback obligations in favor of third-party investors in an individual investment partnership by entities KKR owns may limitdistributions of carried interest more generally.FacilitiesCertain 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 $7.6 million for the year ended December 31, 2017 .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 2017 —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."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 (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 promptly disclose to ourGeneral Counsel or other designated person any "related person transaction" (defined as any transaction, arrangement or relationship, or series of similartransactions, arrangements or relationships, including, without limitation, any loan, guarantee of indebtedness, transfer or lease of real estate, or use of companyproperty) 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 andin which any related person had or will have a direct or indirect material interest) and all material facts with respect thereto. Those individuals will thencommunicate 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 termsgenerally not less favorable as obtained from other third parties, including investments in our funds as limited partners and participation in capital marketstransactions like underwritings and syndications; the renewal of pre-existing strategic relationships with an owner of more than 5% of our outstanding commonunits; the use of aircraft owned by our senior employees for business purposes; certain investments by eligible employees in our funds, in side-by-side investmentswith our funds and the firm, as well as in funds managed by our strategic manager partnership; and certain pro rata cash contributions to the KKR GroupPartnerships for cash management purposes. It is our policy that directors interested in a related person transaction will recuse themselves from any vote on arelated person transaction in which they have an interest.Director IndependencePlease see "Directors, Executive Officers and Corporate Governance—Independence and Composition of the Board of Directors" for information on directorindependence.286Table 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, 2017 and 2016 . For the year Ended December 31, 2017 KKR Completed Transactions (in thousands) Audit Fees$21,197(a) $— Audit-Related Fees$11,432(b) $13,603(d) Tax Fees$33,946(c) $8,034(d) All Other Fees$24(e) $— For the year Ended December 31, 2016 KKR Completed Transactions (in thousands) Audit Fees$22,068(a) $— Audit-Related Fees$6,854(b) $6,769(d) Tax Fees$30,804(c) $5,478(d) All Other Fees$— $— (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 Fees and Tax Fees included merger, acquisition, and investment due diligence services for strategic acquisitions or investments inportfolio companies that have been completed. In addition, the Deloitte Entities provided audit, audit-related, tax and other services to the portfoliocompanies, which are approved directly by the portfolio company's management and are not included in the amounts presented here. (e)All Other Fees in 2017 included real estate advisory services.Our audit committee charter, which is available on our website at www.kkr.com under "Investor Center - KKR & Co. L.P. - Corporate Governance -AuditCharter", requires the audit committee to approve in advance all audit and non-audit related services to be provided by our independent registered publicaccounting firm in accordance with the audit and non-audit related services pre-approval policy. All services reported in the Audit, Audit-Related, Tax, and AllOther categories above were approved by the audit committee.287Table 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, 2017, 2016 and 2015 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 KKR & Co. L.P. (incorporated by reference to Exhibit 3.1 to the KKR & Co. L.P. Registration Statementon Form S-1 (File No. 333-165414) filed on March 12, 2010). 3.2 Third Amended and Restated Limited Partnership Agreement of KKR & Co. L.P. (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 KKR Management LLC (incorporated by reference to Exhibit 3.3 of the Registration Statement on Form S-1 (FileNo. 333-165414) filed on March 12, 2010). 3.4 Second Amended and Restated Limited Liability Company Agreement of KKR Management LLC (incorporated by reference to Exhibit 3.1 tothe 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).288Table 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 onMarch 17, 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, asTrustee (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 Indenture, dated as of March 30, 2017, between KKR Financial Holdings LLC and The Bank of New York Mellon Trust Company, N.A., astrustee (incorporated by reference to Exhibit 4.1 to the KKR Financial Holdings LLC Current Report on Form 8-K filed on March 30, 2017). 289Table of Contents4.19 First Supplemental Indenture, dated as of March 30, 2017, between KKR Financial Holdings LLC and The Bank of New York Mellon TrustCompany, N.A., as trustee (incorporated by reference to Exhibit 4.2 to the KKR Financial Holdings LLC Current Report on Form 8-K filed onMarch 30, 2017). 4.20 Form of 5.50% Senior Note due 2043 of KKR Financial Holdings LLC (incorporated by reference to Exhibit 4.2 to the KKR FinancialHoldings LLC Current Report on Form 8-K filed on March 30, 2017). 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 4.1 of the Registration Statement on Form S-3 (No. 333-208019)filed on November 13, 2015). 4.22 Registration Rights Agreement Amendment, dated as of November 30, 2017, between KKR & Co. L.P. and the Covered PersonsRepresentative (as defined therein). 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 on Form S-1 (File No. 333-165414) filed on March 12, 2010). 10.1.1 Amendment No. 1 to the Second Amended and Restated Limited Partnership Agreement of KKR Management Holdings L.P., dated March17, 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 on Form S-1 (File No. 333-165414) filed on March 12, 2010). 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(incorporated by 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).290Table of Contents 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 on Form S-1 (File No. 333-165414) filed on June 3, 2010). 10.6 Tax Receivable Agreement, dated as of July 14, 2010, among KKR Holdings L.P., KKR Management Holdings Corp., KKR & Co. L.P., KKRManagement Holdings, L.P., and other persons who executed a joinder thereto (incorporated by reference to Exhibit 10.3 to theKKR & Co. L.P. Current Report on Form 8-K filed on July 20, 2010). 10.7 Amended and Restated Exchange Agreement, dated as of November 2, 2010, among KKR Management Holdings L.P., KKR Fund HoldingsL.P., KKR Holdings L.P., KKR & Co. L.P., KKR Group Holdings L.P., KKR Subsidiary Partnership L.P. and KKR Group Limited(incorporated by reference to Exhibit 10.1 to the KKR & Co. L.P. Current Report on Form 8-K filed 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., KKRFund Holdings L.P., KKR Holdings L.P., KKR & Co. L.P., KKR Group Holdings L.P., KKR Subsidiary Partnership L.P., KKR GroupLimited, and KKR International Holdings L.P. (incorporated by reference to Exhibit 10.2 to the KKR & Co. L.P. Quarterly Report onForm 10-Q filed on August 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). 10.11 364-Day Revolving Credit Agreement, dated as of June 29, 2017, among KKR Capital Markets Holdings L.P., certain subsidiaries of KKRCapital Markets Holdings L.P., each of the Lenders (as defined therein), and Mizuho Bank, Ltd., as administrative agent (incorporated byreference to Exhibit 10.1 to the KKR & Co. L.P. Quarterly Report on For m10-Q filed August 4, 2017). 10.12 First Amendment, dated as of June 29, 2017, to Second Amended and Restated 5-Year Revolving Credit Agreement, dated as of March 30,2016, among KKR Capital Markets Holdings L.P., certain subsidiaries of KKR Capital Markets Holdings L.P., the Majority Lenders (asdefined therein), and Mizuho Bank, Ltd., as administrative agent (incorporated by reference to Exhibit 10.2 to the KKR & Co. L.P. QuarterlyReport on For m10-Q filed August 4, 2017). 10.13*Form of Confidentiality and Restrictive Covenant Agreement (Founders) (incorporated by reference to Exhibit 10.10 of the RegistrationStatement on Form S-1 (File No. 333-165414) filed on March 12, 2010). 10.14*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). 10.15*Independent Director Compensation Program. 10.16*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). 10.17*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). 291Table of Contents10.18*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). 10.19*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). 10.20*Form of Public Company Holdings Unit Award Agreement of KKR & Co. L.P. (Executive Officers) (incorporated by reference to Exhibit10.18 of the KKR & Co. L.P. Annual Report on Form 10-K filed on February 24, 2017). 10.21*Form of Grant Certificate (Executive Officers) (incorporated by reference to Exhibit 10.19 of the KKR & Co. L.P. Annual Report on Form10-K filed on February 24, 2017). 10.22 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). 10.23*Form of Grant Certificate. 10.24*Form of Public Company Holdings Unit Award Agreement of KKR & Co. L.P. (Executive Officers) (Market Price Vesting). 10.25*Form of Public Company Holdings Unit Award Agreement of KKR & Co. L.P. (Executive Officers) (Service Vesting). 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. 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,as adopted 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-OxleyAct of 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-OxleyAct of 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. 292Table of Contents101 Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Statements of Financial Condition as of December 31, 2017and December 31, 2016, (ii) the Consolidated Statements of Operations for the years ended December 31, 2017, 2016 and 2015, (iii) theConsolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2017, 2016 and 2015, (iv) the ConsolidatedStatements of Changes in Equity for the years ended December 31, 2017, 2016 and 2015 (v) the Consolidated Statements of Cash Flows forthe years ended December 31, 2017, 2016 and 2015, 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.293Table 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, 2015$4,153 $15,628(1) $— $19,781December 31, 2016$19,781 $— $10,013(2) $9,768December 31, 2017$9,768 $2,104 $— $11,872 (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.294Table of ContentsITEM 16. FORM 10-K SUMMARyNone.295Table 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 23, 2018 KKR & CO. L.P. By: KKR Management LLC, its General Partner /s/ WILLIAM J. JANETSCHEK Name:William J. Janetschek Title:Chief Financial OfficerPursuant 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 23, 2018 Management LLC /s/ GEORGE R. ROBERTS Co-Chairman and Co-Chief Executive Officer George R. Roberts (principal executive officer) of KKR February 23, 2018 Management LLC /s/ JOSEPH Y. BAE Director, Co-President and Co-Chief Operating February 23, 2018Joseph Y. Bae Officer of KKR Management LLC /s/ SCOTT C. NUTTALL Director, Co-President and Co-Chief Operating February 23, 2018Scott C. Nuttall Officer of KKR Management LLC /s/ DAVID C. DRUMMOND Director of KKR Management LLC February 23, 2018David C. Drummond /s/ JOSEPH A. GRUNDFEST Director of KKR Management LLC February 23, 2018Joseph A. Grundfest /s/ JOHN. B. HESS Director of KKR Management LLC February 23, 2018John. B. Hess /s/ PATRICK F. RUSSO Director of KKR Management LLC February 23, 2018Patricia F. Russo /s/ THOMAS M. SCHOEWE Director of KKR Management LLC February 23, 2018Thomas M. Schoewe 296Table of ContentsSignature Title Date/s/ ROBERT W. SCULLY Director of KKR Management LLC February 23, 2018Robert W. Scully /s/ WILLIAM J. JANETSCHEK Chief Financial Officer (principal financial and accountingofficer) of KKR Management LLC February 23, 2018William J. Janetschek 297Exhibit 4.22Registration Rights Agreement AmendmentReference is made to the Registration Rights Agreement between KKR & Co. L.P. and the persons listed on the signature page thereto, dated November2, 2015 (the “ Registration Rights Agreement ”).In connection with the exercise by MW Group (GP) Ltd (the “ General Partner ”) on October 5, 2017 of the First Put Option (as defined in andcontemplated by that certain put and call option agreement, dated September 9, 2015, among Kappa Holdings Limited (the “ Buyer ”), KKR Fund Holdings L.P.,the General Partner and the persons listed on Schedule 1 thereto (the “ Put/Call Option Agreement ”)), the parties hereto agree that section 2.1 of the RegistrationRights Agreement shall not apply with respect to the Put/Call Registrable Securities (as defined in the Registration Rights Agreement) to be issued in connectionwith the General Partner’s exercise of the First Put Option.This amendment is limited to the matters expressly set forth herein, and except as expressly set forth herein, the provisions of the Registration RightsAgreement remain in full force and effect. The provisions of sections 3.2 through 3.9 and 3.12 through 3.13 (inclusive) of the Registration Rights Agreement areincorporated herein mutatis mutandis .[ Signature Page Follows ] IN WITNESS WHEREOF, the Parties hereto have caused this amendment to be executed as of _____ 30 November _____ 2017.KKR & CO. L.P.By: KKR Management LLC, its general partnerBy:/s/ William Janetschek Name:Williaam Janetschek Title: Chief Financial OfficerIAN WACE (solely in his role as Covered Persons Representative under the Registration Rights Agreement) /s/ Ian Wace [Registration Rights Amendment Signature Page] Exhibit 10.15INDEPENDENT DIRECTOR COMPENSATION PROGRAM As of February 2018 1.Annual Retainer: $75,000. 2.Committee Fees: audit committee member—$25,000, audit committee chair— $50,000 (inclusive of the audit committee member fee), nominating andcorporate governance committee member—$15,000.3.Equity Awards. To be determined from time to time by the board of directors or a committee thereof. Exhibit 10.23 GRANT CERTIFICATECurrent Issue of Units – Participant NameThis Grant Certificate confirms that you have been granted the units of KKR Holdings L.P. identified below (the “ Units ”), which (subject to thefollowing paragraph) are Fully Unvested Units and shall vest pursuant to the vesting schedule specified hereunder. The Units are subject to the terms of the FirstAmended and Restated Limited Partnership Agreement of KKR Holdings L.P., dated October 1, 2009, as amended (the “ Holdings LPA ”), and (save for thematters specifically addressed in this Grant Certificate) to the applicable terms of any other written documents relating to your interests in KKR Holdings L.P.(which may include a Consent, Admission and Award Agreement), each of which have been previously executed by you. Capitalized terms not otherwise definedherein have the meanings set forth in Appendix A hereto and if not defined therein have the meanings set forth in the Holdings LPA. In the event of a conflictbetween any term or provision contained in the Holdings LPA and this Grant Certificate (including, without limitation, with respect to transfer restrictions andvesting upon retirement, death or disability and change in control), the applicable terms and provisions of this Grant Certificate 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 conditioned upon andsubject to your agreement to be bound by the Confidentiality and Restrictive Covenant Obligations attached hereto as Appendix B, which constitute the LimitedPartner’s Confidentiality and Restrictive Covenant Agreement as of the date hereof (and may be amended or replaced after the date hereof in any Confidentialityand Restrictive Covenant Agreement executed by the Limited Partner with the Partnership or the Company (as defined in Appendix B)).Grant Date:Grant Date (the “ Grant Date ”) Issue:Number of Units issued on the Grant Date: Number of Awards GrantedUnits: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 the Service VestingDates set forth below.Service Vesting DatePercentage of Units Vesting [●][●]% [●][●]% [●][●]% [●][●]% [●][●]% Cumulative Vesting Through [●]100% Minimum Retained OwnershipThe 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 ☐ / ☐ is not subject to the transfer restrictions set forth in Appendix C and D, as applicable, of the HoldingsLPA and shall be subject to the following additional vesting provision until the earlier of (i) the Transfer Restrictions End Date for such Unit and (ii) the date onwhich 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 to which theTransfer 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, in thediscretion of the General Partner, be fully vested and thereafter be a Contingently Vested Unit as a result thereof; (B) the Limited Partner dies or experiences aDisability, then all Units shall be vested and thereafter be a Contingently Vested Unit as a result thereof, provided that if the Limited Partner is not an employee ofthe 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 Controlprior to any termination of the Limited Partner’s Employment, then all or any portion of any Units may, in the discretion of the General Partner, be vested andthereafter be a Contingently Vested Unit as a result thereof. Notwithstanding the foregoing, if the General Partner or KKR & Co. L.P. receives an opinion ofcounsel that there has been a legal judgment and/or legal development in the Limited Partner’s jurisdiction that would likely result in the favorable treatmentapplicable to the Retirement Units pursuant to this Grant Certificate being deemed unlawful and/or discriminatory, then the General Partner will not apply thefavorable treatment at the time the Limited Partner’s Employment terminates due to the Limited Partner’s Retirement under clause (A) above, and the Units will betreated as set forth in “Service-Based Vesting”, or the 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 as providedfor in this Grant Certificate, then all Units (including any Units that are not Retirement Units) shall immediately terminate and be forfeited without 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., activeEmployment would not include a period of “garden leave” or similar period pursuant to local Law) except as may be otherwise agreed in writing by the GeneralPartner with the Limited Partner; the General Partner shall have the exclusive discretion to determine when the Limited Partner is no longer actively employed orengaged for purposes of the Units. Each of the foregoing additional vesting provisions shall be considered an “Additional Vesting Provision” for the purposes of the Holdings LPA.Appendix B of the Holdings LPA shall not apply to the Units. 2In Witness Whereof , the parties hereto have executed this Grant Certificate as of the date specified under the signature of the Limited Partner. KKR HOLDINGS L.P. By:KKR HOLDINGS GP LIMITED, its general partner By: “LIMITED PARTNER”Electronic SignatureName: Participant NameDated: Grant Date 3Appendix ADefinitions“ Cause ” means, with respect to the Limited Partner, the occurrence or existence of any of the following as determined fairly on an informed basis and in goodfaith by the General Partner: (i) any act of fraud, misappropriation, dishonesty, embezzlement or similar conduct by the Limited Partner against any member of theKKR Group (including KKR & Co. L.P.), KKR Holdings L.P., KKR Associates Holdings L.P., a Fund, or a Portfolio Company, (ii) a Regulatory Violation thathas a material adverse effect on (x) the business of any member of the KKR Group or (y) the ability of the Limited Partner to function as an employee, associate orin any similar capacity (including consultant) with respect to the KKR Group, taking into account the services required of the Limited Partner and the nature of thebusiness of the KKR Group, or (iii) a material breach by the Limited Partner of a material provision of any Written Policies or the deliberate failure by the LimitedPartner to perform the Limited Partner’s duties to the KKR Group, provided that in the case of this clause (iii), the Limited Partner has been given written noticeof such breach or failure within 45 days of the KKR Group becoming aware of such breach or failure and, where such breach or failure is curable, the LimitedPartner has failed to cure such breach or failure within (A) 15 days of receiving notice thereof or (B) such longer period of time, not to exceed 30 days, as may bereasonably necessary 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 the date of suchnotice.“ Designated Service Recipient ” means the member of the KKR Group, that employs or engages the Grantee or to which the Grantee otherwise is renderingservices.“ Disability ” means, as to any Person, such Person’s inability to perform in all material respects such Person’s duties and responsibilities to the KKR Group, byreason of a physical or mental disability or infirmity which inability is reasonably expected to be permanent and has continued (i) for a period of six consecutivemonths 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 to constituteemployment or engagement for purposes of this Grant Certificate) with (x) the Designated Service Recipient or any other member of the KKR Group or (y) anyconsultant 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 orservice 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 Island exempted limitedpartnership, and KKR International Holdings L.P., a Cayman Island exempted limited partnership, along with any partnership designated in the future as a “GroupPartnership” by KKR & Co. L.P.“ KKR Capstone ” means (i) KKR Capstone Americas LLC, KKR Capstone EMEA LLP, KKR Capstone EMEA (International) LLP, KKR Capstone AsiaLimited and any other “Capstone” branded entity that provides similar consulting services to the KKR Group and Portfolio Companies, and (ii) the direct andindirect parents and subsidiaries of the foregoing. A-1“ KKR Group ” means the Group Partnerships, the direct and indirect parents of the Group Partnerships (the “ Parents ”), any direct or indirect subsidiaries of theParents or the Group Partnerships, the general partner or similar controlling entities of any investment fund or vehicle that is managed, advised or sponsored by theKKR Group (the “ Funds ”) and any other entity through which any of the foregoing directly or indirectly conducts its business, but shall exclude PortfolioCompanies.“ Law ” means any statute, law, ordinance, regulation, rule, code, executive order, injunction, judgment, decree or other order issued or promulgated by anynational, supranational, state, federal, provincial, local or municipal government or any administrative or regulatory body with authority therefrom with jurisdictionover 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 of guilt or nolocontendere of any felony or misdemeanor crime involving moral turpitude, false statements, misleading omissions, forgery, wrongful taking, embezzlement,extortion or bribery, (ii) a final determination by any court of competent jurisdiction or governmental regulatory body (or an admission by the Limited Partner inany 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 finaldetermination by self-regulatory organization having authority with respect to U.S. federal or state or comparable non-U.S. securities laws, rules or regulations (oran admission by the Limited Partner in any settlement agreement) that the Limited Partner has violated the written rules of such self-regulatory organization thatare 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 or after the datethat the Limited Partner’s age, plus the Limited Partner’s years of Employment with the KKR Group, equals at least 80; provided that such date shall be no earlierthan December 31, 2012.“ Retirement Units ” means, with respect to any Limited Partner whose Employment terminates due to Retirement, any Units with a Service Vesting Date thatwould, if the Limited Partner’s Employment were not so terminated, occur within two years after the date of such termination due to Retirement.“ 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 KKR Groupincluded in its employee manual, code of ethics and confidential information and information barrier policies and procedures and other documents relating to theLimited Partner's Employment, association or other similar affiliation with the KKR Group. A-2Appendix B Confidentiality and Restrictive Covenant Obligations A. Capitalized terms contained in this Appendix B and not defined herein shall have the same meaning as such terms are defined in the GrantCertificate, including Appendix A thereto (the “ Agreement ”) into which this Appendix B is incorporated by reference therein and to which this Appendix B isattached, 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 other entity of theKKR Group (“ KKR ” or the “ Company ” and such Grantee, a “ KKR Employee ”), the Grantee is being issued one or more Units pursuant to the Agreement towhich this Appendix B is attached; C. The Grantee acknowledges and agrees that the Grantee will receive financial benefits from KKR’s business through their participation in thevalue of the Units. The Grantee further acknowledges and agrees that (i) during the course of the Grantee’s employment, engagement, association or other similaraffiliation with KKR, the Grantee will receive and have access to confidential information of KKR and the Portfolio Companies (collectively, the “ KKR RelatedEntities ”) and will have influence over and the opportunity to develop relationships with Clients, Prospective Clients, Portfolio Companies and partners, members,employees and associates of the Company; and (ii) such confidential information and relationships are extremely valuable assets in which KKR has invested, andwill continue to invest, substantial time, effort and expense in developing and protecting; D. The Grantee acknowledges and agrees that (i) the Units will materially benefit the Grantee; (ii) it is essential to protect the business interests andgoodwill of the Company and that the Company be protected by the restrictive covenants and confidentiality undertaking set forth herein; (iii) it is a conditionprecedent to the Grantee receiving Units that the Grantee agree to be bound by the restrictive covenants and confidentiality undertaking contained herein; and (iv)KKR would suffer significant and irreparable harm from a violation by the Grantee of the confidentiality undertaking set forth herein as well as the restrictivecovenants set forth herein for a period of time after the termination of the Grantee’s employment, engagement, association or other similar affiliation KKR; and 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 of them is authorized to waivecompliance with any provision hereof by delivering a written statement clearly expressing the intent to waive such compliance to the Grantee and a duly authorizedrepresentative 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 any otherconsideration that the Grantee will receive in connection with and as a result of the Grantee’s employment, engagement, association or other similar affiliation withKKR; (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 valuableconsideration, the receipt and adequacy of which are hereby acknowledged, the Grantee hereby agrees to the following restrictions: 1.Outside Business Activities. The Grantee acknowledges that, during the course of the Grantee’s employment, engagement, association or other similar affiliation with KKR, theGrantee will be subject to the Written Policies. The Written Policies include restrictions that limit the ability of the Grantee to engage in outside business and otheractivities without the prior approval of the Company. If the Grantee has an employment, engagement or other similar contract with KKR, the Grantee may besubject to similar restrictions under that agreement. The Grantee hereby agrees that, during the Grantee’s employment, engagement, association or other similaraffiliation with KKR, the Grantee will comply with all such restrictions that are from time to time in effect which are applicable to the Grantee. B-12.Confidentiality Undertaking. The Grantee acknowledges that, during the course of the Grantee’s employment, engagement, association or other similar affiliation with KKR, theGrantee will receive and have access to Confidential Information (as defined below) of the Company and the Portfolio Companies. Recognizing that any disclosureof such information could have serious consequences to one or more of the Company and the Portfolio Companies, the Grantee hereby agrees that, except asprovided herein, the Grantee will not under any circumstances (either while employed, engaged, associated or otherwise affiliated with KKR, or at any time afterthe Termination Date) for any purpose other than in the ordinary course of the performance of the Grantee’s duties as an employee, consultant, associate or otheraffiliated 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 employeeof the Company in the ordinary course of the performance of Grantee’s duties as an employee, consultant, associate or other affiliated person of KKR; (ii) anyperson or entity to the extent explicitly authorized by an executive of the Company in the ordinary course of the performance of Grantee’s duties as an employee,consultant, associate or other affiliated person of KKR; (iii) any attorney, accountant, consultant or similar service provider retained by the Company who isrequired to know such information and is obligated to keep such information confidential; or (iv) any person or entity to the extent the law or legal process requiresdisclosure by the Grantee, provided that , in the case of clause (iv), the Grantee must first give the Partnership or the Designated Service Recipient prompt writtennotice 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; provided, however , the Partnership shall not enforce and shallcause its subsidiaries not to enforce any confidentiality agreement that prohibits the Grantee from reporting possible violations of federal law or regulation to anygovernmental agency or entity, including but not limited to the U.S. Securities and Exchange Commission, or making other disclosures to the extent protectedunder the whistleblower 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 the disclosure of informationcovered by) the attorney-client privilege or work product protection or any other privilege or protection belonging to the Partnership, the Designated ServiceRecipient 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 the Company, actingin a supervisory capacity. “ Confidential Information ” means (a) all confidential, proprietary or non-public information of, or concerning the business, operations,activities, personnel, finances, plans, personal lives, habits, history, clients, investors, or otherwise of any person who at any time is or was a member, partner,officer, director, other executive, employee or stockholder of any of the foregoing, (b) all confidential, proprietary or non-public information of or concerning anymember 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 orformer 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 ofthe KKR Related Entities or any other person or entity with which or whom any of the KKR Related Entities or their respective clients or investors does businessor 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 and development,processes, formulae, reports, protocols, computer software, databases, documentation, trade secrets, know-how and business methods), (iii) personnel,compensation, recruiting and training, and (iv) any pending or completed settlements, arbitrations, litigation, governmental investigations and similar proceedings.Notwithstanding the 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 in breach of thisAppendix B or (ii) made legitimately available to the Grantee by a third party without breach of any obligation of confidence owed to the Company or anyPortfolio Company. B-2Without 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 inany fashion at any time any Confidential Information that is or becomes part of the basis for, or is used in any way in connection with any part of any book,magazine or newspaper article, any interview or is otherwise published 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 KKR, for any reason, the Grantee hereby agreesto (i) cease and not thereafter commence any and all use of any Confidential Information; (ii) upon the request of the Company promptly deliver to the Companyor, 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’spossession 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, itsaffiliates or Portfolio Companies); (iii) notify and fully cooperate with the Company regarding the delivery or destruction of any other Confidential Information ofwhich the Grantee is aware; and (iv) upon the request of the Company 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 has received from an issuermaterial, non-public information concerning the issuer with respect to purchasing or selling securities of such issuer or from communicating such information toany other person and further agrees to comply with such securities laws. Without limiting anything in this Appendix B, the Grantee hereby expressly confirms hisor her explicit understanding that the Grantee’s obligations hereunder are in addition to, and in no way limit, the Grantee’s obligations under complianceprocedures 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 taxtreatment and tax structure of any member of the Company in which the Grantee holds an interest and all materials of any kind (including opinions or other taxanalyses) 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 othersimilar affiliation with the Designated Service Recipient at any time for any reason or for no reason at all with or without reasons constituting Cause, which as usedin this Appendix B shall have the meaning set forth in Appendix A of the Agreement. The Designated Service Recipient or the Grantee, as applicable, shall provideadvance written notice (which may be by email) of the termination of the Grantee’s employment, engagement, association or other similar affiliation with theDesignated Service Recipient at least [●] days prior to actual termination (such [●]-day period, the “ Notice Period ”); provided, however , that no advance noticeshall be required by the Designated Service Recipient and the provisions of this Section 3 shall not be applicable if the Grantee’s employment, engagement,association or other similar affiliation is terminated by the Designated Service Recipient for reasons constituting Cause or due to any conduct by Grantee that, inthe judgment of the Designated Service Recipient in its sole discretion, amounts to gross negligence or reckless or willful misconduct. Notice pursuant to thisparagraph shall be provided by the Grantee to any of the Chief Executive Officers, Presidents, Chief Operating Officers, General Counsel or Chief HumanResources Officer of the KKR Group. B-3During the Notice Period, the Grantee shall perform his or her regular duties and any transitional responsibilities (including but not limited to helping totransition work, projects, and Client relationships internally to others) as determined and directed by the Designated Service Recipient in its sole discretion, andGrantee shall not be employed, engaged, associated or otherwise similarly affiliated with any business other than the business of KKR; provided, however , theDesignated Service Recipient reserves the right to require the Grantee not to be in the offices of the KKR Group, not to undertake all or any of the Grantee’s dutiesor not to contact Clients or Prospective Clients (as defined in Section 5 below), other persons employed, engaged, associated or otherwise similarly affiliated withthe KKR Group, or others (or any combination thereof) unless otherwise instructed during all or any part of the Notice Period. During the Notice Period, andexcept as provided in the next sentence, the Grantee shall continue to receive his or her salary, and the Grantee shall not be entitled to receive or be considered forpayment of any other amount for his or her services during the Notice Period (including without limitation any bonus or equity award). In addition, the DesignatedService Recipient in its sole discretion may elect to reduce the Notice Period and pay the Grantee his or her salary, but no other amount, for the period from theconclusion of the reduced Notice Period to the end of the original Notice Period, and the Grantee’s employment, engagement, association or other similaraffiliation with KKR, 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 KKR, and in addition during the Non-Compete Period (as defined below), the Grantee will not set up, be employed or engaged by, hold an office in or provide consulting, advisory or other similarservices to or for the benefit of, a Competing 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 the Grantee’s employment,engagement, association or other similar affiliation with KKR or (ii) for which the Grantee had direct or indirect managerial or supervisory responsibility withKKR, including through the Grantee’s position on the Management Committee or similar committee or group, including without limitation the Public Markets &Distribution Management Committee, for one or more businesses of the KKR Group, in each case, at any time during the 12 months preceding the TerminationDate. For the purposes of this Appendix B, a “ Competing Business ” means a business that competes (i) in a Covered Country with any business conducted bythe Company on the date on which the Grantee’s employment, engagement, association or other similar affiliation with KKR Group, is terminated (the “Termination Date ”) or (ii) in any country with any business that the Company was, on the Termination Date, formally considering conducting. A “ CoveredCountry ” means the United States, United Kingdom, the Republic of Ireland, France, Hong Kong, China, Japan, the Republic of Korea, Australia, India, UnitedArab Emirates, Saudi Arabia, Brazil, Canada, Singapore, Spain, Luxembourg or any other country where the Company conducted business on the TerminationDate; provided that if the Grantee is located in Japan, the definition of Covered Country shall exclude the phrase “any other country where the Company conductedbusiness 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 [●] 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 not constituting Cause, the Non-CompetePeriod will expire on the [●] 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 business whose activitiesconsist principally of making passive investments for the account and benefit of the Grantee or members of the Grantee’s immediate family where such businessdoes not, within the knowledge of the Grantee, compete with a business of the KKR Group for specific privately negotiated investment opportunities; (ii) makingand holding passive investments in publicly traded securities of a Competing Business where such passive investment does not exceed 5% of the amount of suchsecurities that are outstanding at the time of investment; or (iii) making and holding passive investments in limited partner or similar interests in any investmentfund or vehicle with respect to which the Grantee does not exercise 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 the Post-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 anyClient or Prospective Client for, or on behalf of, a Competing Business; (ii) provide, or assist any other person in providing, for any Client or Prospective Clientany services that are substantially similar to those that the Company provided or proposed to be provided to such Client or Prospective Client; or (iii) impede orotherwise interfere with or damage, or attempt to impede or otherwise interfere with or damage, any business relationship or agreement between the Company andany Client or Prospective Client. As used in this Section 5, “ solicit ” means to have any direct or indirect communication inviting, advising, encouraging orrequesting any person to take or refrain from 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 B, “ Client ” means any person (a) for whom the Company provided services, including any investor in an investmentfund, 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 aPortfolio Company of a KKR Fund and (b) with whom the Grantee, individuals reporting to the Grantee or any other individuals over whom the Grantee had director indirect managerial or supervisory responsibility had any contact or dealings on behalf of, and involving Confidential Information of, the Company during the12 months prior to the Termination Date; and “ Prospective Client ” means any person with whom (I) the Company has had negotiations or discussions concerningbecoming a Client and (II) the Grantee, 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 Company during the 12 months prior to theTermination 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 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 this Section 6, “ solicit ” means to have any direct or indirect communication inviting, advising,encouraging or requesting any Covered 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 identifying such Covered Person to the thirdparty, 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 engaged by the KKRGroup as an employee or officer or otherwise associated or similarly affiliated with the KKR Group in any position, including as a member or partner, havingfunctions and duties substantially similar to those of an employee or officer; (ii) a Senior Advisor, Industry Advisor or KKR Advisor to the KKR Group; (iii)employed or engaged by KKR Capstone as an employee or officer or otherwise associated or similarly affiliated with KKR Capstone in any position, including as amember or partner, having functions and duties substantially similar to those of an employee or officer; or (iv) a person who provides services exclusively to theCompany or any Portfolio Company and has functions and duties that are substantially similar to those of a person listed in sub-clauses (i), (ii) or (iii) above. B-57.Post-Termination Restricted Period. The “ Post-Termination Restricted Period ” for the Grantee shall commence on the Termination Date and shall expire upon the [●] month anniversary ofthe Termination Date. Notwithstanding the foregoing, if the Grantee’s employment, engagement, association or other similar affiliation with KKR is terminatedinvoluntarily and for reasons not constituting Cause, the Post-Termination Restricted Period will expire on the [●] 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 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 andconditions imposed on the Grantee during such “garden leave” or “notice” period, the applicable Post-Termination Restricted Period shall be reduced by theamount of any such “garden leave” or “notice” period in which the Grantee complies with such 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 the KKR Group, asapplicable, the Grantee agrees that all work and deliverables that the Grantee prepares, creates, develops, authors, contributes to or improves, either alone or withthird parties, during the course of the Grantee’s employment, engagement, association or other similar affiliation with KKR, within the scope of the servicesprovided 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 and other materials and all rights and intellectual property rights thereunder includingbut not limited to rights of authorship (collectively, “ Work Product ”), are works-made-for-hire owned exclusively by KKR. The Grantee hereby irrevocablyassigns, transfers and conveys, to the maximum extent permitted by law, all right, title and interest that the Grantee may have in such Work Product (and anywritten records thereof) to KKR (or any of its designees), to the extent ownership of any such rights does not vest originally with the KKR. The Granteeacknowledges and agrees that the Units issued pursuant to the Agreement are sufficient compensation for such assignment, transference and conveyance. To theextent the foregoing assignment 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 for [●] yearsthereafter make any disparaging, defamatory, or derogatory written or oral statements or other communications about or in reference to the Designated ServiceRecipient, KKR & Co. L.P., KKR Holdings L.P., KKR Associates Holdings L.P., or any other member of the KKR Group or KKR Capstone (including theirrespective businesses or reputations) or any of their Clients, Prospective Clients, Portfolio Companies, or Covered Persons; provided that this provision shall notprevent the Grantee from (i) making truthful reports to or testifying truthfully before any court, agency, or regulatory body or pursuant to any legal or regulatoryprocess or proceeding or (ii) engaging in activity protected by applicable law, rule or regulations, 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 and necessary to protect thelegitimate business interests of the Company, to have and enjoy the full benefit of its business interests and goodwill. The Grantee further agrees and acknowledgesthat such restrictions will not unnecessarily or unreasonably restrict or otherwise limit the professional opportunities of the Grantee should his or her employment,engagement, association or other similar affiliation with KKR, terminate, that the Grantee is fully aware of the Grantee’s obligations under this Appendix B andthat the livelihood of the Grantee is not impaired by the Grantee’s entry into the covenants contained herein. The Partnership and the Designated Service Recipientshall 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 the extent,necessary to enforce the restrictions 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 arrangements with theCompany, if applicable. Notwithstanding anything to the contrary herein, this Appendix B does not constitute an employment, engagement or other similaragreement between the Grantee and the Partnership, Company, or any other of the KKR Related Entities (including but not limited to KKR & Co. L.P.), and shallnot interfere with or otherwise affect any rights any such person or entity may have to terminate the Grantee’s employment, engagement, association or othersimilar affiliation at any time 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 law for any breach of this Appendix Bwould be inadequate and that for any breach of this Appendix B, the Designated Service Recipient may terminate your employment, engagement, association orother similar affiliation with the Company and shall, in addition to any other remedies that may be available to it at law or in equity, or as provided for in thisAppendix B, be entitled to an 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 B. The Grantee further acknowledges and agrees that the Partnership and the DesignatedService Recipient shall not be required to prove, or offer proof, that monetary damages for a breach of this Appendix B would be difficult to calculate and that anyremedies at law would be inadequate for any breach of this Appendix B. The parties intend, acknowledge, and agree that each member of the KKR Group is a thirdparty beneficiary of this Agreement and is authorized to enforce any provision hereof by delivering a written statement expressing the intent to enforce theprovisions hereof to the Grantee 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 the parties hereto;provided, however , that the Partnership, the KKR Group or the Designated Service Recipient may reduce the scope of, or waive compliance with any part of, anyobligation of the Grantee arising under this Appendix B, at any time without any action, consent or agreement of any other party. No failure to exercise and nodelay in exercising, on the part of any party, of any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partialexercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power orprivilege. The waiver of any particular right, remedy, power or privilege shall not affect or impair the rights, remedies, powers or privileges of any person withrespect to any subsequent default of 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 hereto shall be effective unless it is inwriting and signed by the person asserted to 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 consent of theGrantee shall be deemed to have been given to the Partnership and the Designated Service Recipient (and the Grantee acknowledges that the Partnership and theDesignated Service Recipient shall therefore have the right without further consent) to assign its rights hereunder, in whole or in part, to (i) any member of KKRthat becomes a Designated Service Recipient or (ii) any person who is a successor of the Partnership or the Designated Service Recipient by merger, consolidationor purchase of all or substantially all of its assets, in which case such assignee shall be substituted for the Partnership and the Designated Service Recipienthereunder with respect to the provisions so assigned and be bound under this Appendix B and by the terms of the assignment in the same manner as the Partnershipand the Designated Service Recipient was bound hereunder. Any purported assignment of this Appendix B in violation of this section shall be null and void. B-715.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 of any party,arising out of, relating to or in connection with the validity, negotiation, execution, interpretation, performance, non performance or terminationof this Appendix B (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 existing Rules of Arbitration of the InternationalChamber of Commerce (the “ICC”). If the parties to the Dispute fail to agree on the selection of an arbitrator within 30 days of the receipt of therequest for arbitration, the ICC shall make the appointment. The arbitrator shall be a lawyer and shall conduct the proceedings in the Englishlanguage. Performance under this Appendix B shall continue 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 Partnership or theDesignated Service Recipient may, in its sole discretion, require all Disputes or any specific Dispute to be heard by a court of law in accordancewith paragraph (e) below and, for the purposes 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 in connection with a Dispute at the timethat the Partnership or the Designated Service Recipient commences such proceedings in accordance with this paragraph (b), such Dispute shallbe 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 thepurpose of compelling a party to arbitrate, seeking temporary or preliminary relief in aid of an arbitration hereunder or enforcing an arbitrationaward and, for the purposes of this paragraph (c), each party expressly consents to the application of paragraphs (e) and (f) below to any suchsuit, action or proceeding. (d)Except as required by law or as may be reasonably required in connection with judicial proceedings to compel arbitration, to obtain temporary orpreliminary judicial relief in aid of arbitration or to confirm or challenge an arbitration award, the arbitration proceedings, including anyhearings, shall be confidential, and the parties 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 public domain. Judgment on any award renderedby an arbitration tribunal may be entered in any court having jurisdiction 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 forum designated bythis paragraph (e) has a reasonable relation to this Appendix B, and to the parties' relationship with one another. The parties hereby waive, to thefullest extent permitted 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 suchparties agree not to plead or claim the same. B-8(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 damagesfor breach of the provisions of this Appendix B would be difficult to calculate and that remedies at law would be inadequate, and theyirrevocably appoint the Secretary or General Counsel of the Partnership or the Designated Service Recipient or an officer of the Partnership orthe Designated Service Recipient (at the then-current principal business address of the Partnership or the Designated Service Recipient) as suchparty’s agent for service of process in connection with any such action or proceeding and agrees that service of process upon such agent, whoshall promptly advise 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 this Appendix B andsupersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoeverwith the Partnership or the Company with respect to the subject matter of this Appendix B (including but not limited to any prior grant agreement for an equityaward under the KKR & Co. L.P. 2010 Equity Incentive Plan (or successor equity plan) that contains one or more appendices with respect to the subject matter ofthis Appendix B) or any Confidentiality and Restrictive Covenant Agreement previously executed with the Partnership, the KKR Group or KKR Capstone. Theexpress terms of this Appendix B control and supersede any course of performance and any usage of the trade inconsistent with any of the terms of this AppendixB. 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 Professional Conduct (orsuccessor rule)) shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisionshereof and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. In suchevent, the invalid provision shall be partially enforced, reformed or substituted with a valid provision which most closely approximates the intent and the economiceffect of the invalid provision to give effect to the provision to the maximum extent permitted in such jurisdiction or in such case. Grantee specificallyacknowledges that Grantee has been provided with valuable consideration in exchange for the covenants set forth herein and, accordingly, such partial enforcementor reformation is necessary to avoid frustrating the Company’s purpose in awarding 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 the interpretation,administration and enforcement of, the provisions of this Appendix B, 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. B-9Exhibit 10.24 PUBLIC COMPANY HOLDINGS UNIT AWARD AGREEMENTOFKKR & CO. L.P. (Executive Officers)CONFIDENTIAL Table of Contents Page ARTICLE I GRANT OF PUBLIC COMPANY HOLDINGS UNITS2 Section 1.1.Grant of Public Company Holdings Units; Conditions of Grant2Section 1.2.REUs and Agreement Subject to Plan; Administrator2 ARTICLE II VESTING and SETTLEMENT OF REUS3 Section 2.1.Vesting of REUs3Section 2.2.Settlement of REUs3Section 2.3.No Distribution Payments4 ARTICLE III RESTRICTIONS ON TRANSFERS AND OTHER LIMITATIONS4 Section 3.1.Transfer Restrictions on REUs4Section 3.2.Confidentiality and Restrictive Covenants4Section 3.3.Post-Settlement Transfer Restrictions on Common Units4Section 3.4.Transfers to Other Holders6Section 3.5.Minimum Retained Ownership Requirement7 ARTICLE IV MISCELLANEOUS8 Section 4.1.Governing Law8Section 4.2.Arbitration8Section 4.3.Remedies; Recoupment; Right to Set-Off9Section 4.4.Amendments and Waivers9Section 4.5.Withholding10Section 4.6.Notices11Section 4.7.Entire Agreement; Termination of Agreement; Survival11Section 4.8.Severability11Section 4.9.Binding Effect12Section 4.10.Appendices12Section 4.11.Further Assurances12Section 4.12.Interpretation; Defined Terms; Section 409A; Employment with Designated Service Recipient; Headings12Section 4.13.Counterparts13 APPENDIX A DEFINITIONSA-1 APPENDIX B REU GRANT CERTIFICATEB-1 APPENDIX C ADDITIONAL TERMS AND CONDITIONSC-1 APPENDIX D CONFIDENTIALITY AND RESTRICTIVE COVENANT OBLIGATIONSD-1 APPENDIX E KKR & CO. L.P. 2010 EQUITY INCENTIVE PLANE-1 iPUBLIC COMPANy HOLDINGS UNIT AWARD AGREEMENTOFKKR & CO L.P. This PUBLIC COMPANy HOLDINGS UNIT AWARD AGREEMENT (this “ Agreement ”) of KKR & CO L.P. (the “ Partnership ”) is made by andbetween the Partnership and the undersigned (the “ Grantee ”). Capitalized terms used herein and not otherwise defined herein or in the KKR & Co. L.P. 2010Equity Incentive Plan, as amended from time to time (the “ Plan ”), shall be as defined in Appendix A attached hereto and the Plan is hereby attached as AppendixE and incorporated by reference herein. RECITALS WHEREAS , the general partner of the Partnership has determined it is in the best interests of the Partnership to provide the Grantee with this Agreement pursuantto 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 bound hereby, the parties hereto agree tothe following: ARTICLE IGRANT OF PUBLIC COMPANy HOLDINGS UNITS Section 1.1. Grant of Public Company Holdings Units; Conditions of Grant The Partnership hereby grants to the Grantee, effective as of the Grant Date specified on the REU Grant Certificate attached hereto as Appendix B (the “ GrantDate ”), the number of “public company holdings units”, which are restricted equity units as set forth in the REU Grant Certificate attached hereto, subject to theterms and conditions of this Agreement. Each restricted equity unit that is granted pursuant to this Agreement represents the right to receive delivery of oneCommon Unit, subject to any adjustment pursuant to Section 9 of the Plan (each such restricted equity unit, an “ REU ”). Notwithstanding the foregoing, the grantof REUs hereunder is conditioned upon the Grantee’s agreement to the covenants and obligations contained in the Confidentiality and Restrictive CovenantObligations attached hereto as Appendix D incorporated herein by reference.Section 1.2. REUs and Agreement Subject to Plan; Administrator This Agreement and the grant of REUs provided for herein shall be subject to the provisions of the Plan, except that if there are any express differences orinconsistencies between the provisions of the Plan and this Agreement, the provisions of this Agreement shall govern. For the avoidance of doubt, the Partnershipmay delegate to any employee of the KKR Group its duties and powers hereunder, and any reference to the “Administrator” contained herein shall be deemed toinclude any such delegate. 2ARTICLE IIVESTING AND SETTLEMENT OF REUS Section 2.1. Vesting of REUs The vesting of the REUs is set forth in the REU Grant Certificate attached hereto as Appendix B. Section 2.2. Settlement of REUs (a)To the extent that an REU granted hereunder becomes vested pursuant to the REU Grant Certificate, as a result of satisfaction of the applicableService Condition and Price Condition on a Vesting Date, then with respect to such percentage of REUs which have vested on such Vesting Date,such REU shall be Settled as soon as administratively practicable on or following the applicable Vesting Date for such REU; provided that theAdministrator may determine that such Settlement may instead occur on or as soon as administratively practicable after the first day of the nextpermissible trading window of Common Units that opens for employees of the KKR Group to sell Common Units (provided that in any event suchSettlement shall not be later than the time permitted under Section 409A, if applicable). For the avoidance of doubt, the Settlement of any REUsthat become vested pursuant to Section 2(b)(iii) or (iv) of the attached REU Grant Certificate shall not be accelerated, such that, with respect to anysuch REUs, only that percentage of such REUs that would otherwise have become vested on each applicable Vesting Date as set forth on the REUGrant Certificate pursuant to the REU Grant Certificate shall be Settled at each such Vesting Date in accordance with the foregoing sentence. Thedate on which any REU is to be Settled hereunder is referred to as a “ Delivery Date. ” The Settlement of each REU shall be effected inaccordance 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 the Partnership delivering to the Granteeeither (i) the number of Common Units equal to the number of REUs that are to be Settled on such Delivery Date pursuant to Section 2.2(a) aboveor (ii) an amount of cash, denominated in U.S. dollars, equal to the Fair Market Value of the foregoing number of Common Units (a “ CashPayment ”). The Administrator may elect in its sole discretion whether to Settle the REUs in Common Units or by a Cash Payment, and in the caseof the Cash Payment, whether to have the Cash Payment delivered by the member of the KKR Group that employs or engages the Grantee or towhich 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 applicable Delivery Date and solely to theextent permitted under Section 409A, if applicable, the Partnership may impose such other conditions and procedures in relation to the Settlementof REUs as it may reasonably determine. In addition to the foregoing and notwithstanding anything else in this Agreement, the Administrator mayrequire that any or all of the Common Units that may be delivered to the Grantee under this Section 2.2 that the Grantee intends to sell, from timeto time, may only be sold through a coordinated sales program as defined by the Administrator. 3(d)Any of the foregoing payments or deliveries shall in all instances be subject to Sections 4.3 and 4.5 below, as applicable. Section 2.3. No Distribution Payments The REUs granted to the Grantee hereunder do not include the right to receive any distribution payments.ARTICLE IIIRESTRICTIONS ON TRANSFERS AND OTHER LIMITATIONS Section 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 any Family Related Holder) without theprior written consent of the Administrator, which consent may be given or withheld, or made subject to such conditions (including the receipt ofsuch legal or tax opinions and other documents 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 withSection 3.4. (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 Covenants The Grantee acknowledges and agrees that Grantee is bound by and will comply with the Confidentiality and Restrictive Covenant Obligations contained inAppendix D, which obligations are incorporated by reference herein, and any other agreements that the Grantee has entered into with the Designated ServiceRecipient, the Partnership, KKR Holdings L.P., KKR Associates Holdings L.P., or any other member of the KKR Group, with respect to the Grantee’s obligationto keep confidential the nonpublic, confidential or proprietary information of the KKR Group and its Affiliates and any restrictive covenants concerning theGrantee’s obligations not to compete with the KKR Group or solicit its clients or employees after termination of Employment), as such agreements may beamended from time to time. If the Grantee is a limited partner of KKR Holdings L.P. or KKR Associates Holdings L.P., the Grantee further acknowledges andagrees that references to a Confidentiality and Restrictive Covenant Agreement in the limited partnership agreements of KKR Holdings L.P. and KKR AssociatesHoldings L.P. shall be deemed 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 Units The provisions of this Section 3.3 shall or shall not be applicable to the REUs granted to the Grantee hereunder as indicated on the REU Grant Certificate. 4(a)The Grantee may not Transfer all or any portion of the Grantee’s Transfer Restricted Common Unit (as defined below) (including to any FamilyRelated Holder) without the prior written consent of the Administrator, which consent may be given or withheld, or made subject to suchconditions (including the receipt of such legal or tax opinions and other documents that the Partnership may require) as are determined by theAdministrator, in its sole discretion. 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 TransferRestricted Common Units by the Grantee to Other Holders permitted by the Administrator pursuant to Section 3.3(a) shall be made in accordancewith Section 3.4. (b)A “ Transfer Restricted Common Unit ” refers to all Common Units delivered upon Settlement of a vested REU until (i) the first anniversary ofthe Vesting Date related thereto, in the case of 50% of such Common Units and (ii) the second anniversary of such Vesting Date, in the case of theother 50% of such Common Units. (c)If the Grantee breaches in any significant or intentional manner, as determined by the Administrator in its sole discretion, any of the Grantee’scovenants as stated in the Confidentiality and Restrictive Covenant Obligations contained in Appendix D, the Administrator, in its sole discretion,may direct that the Grantee forfeit all or a portion of the Transfer Restricted Common Units held by the Grantee in an amount determined by theAdministrator in its sole discretion. The Grantee hereby consents and agrees to immediately surrender and deliver such Transfer RestrictedCommon 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 the Administrator in writing, all TransferRestricted Common Units held by the Grantee shall automatically be forfeited by the Grantee without payment of any consideration. The Granteehereby consents and agrees to immediately surrender and deliver such Transfer Restricted Common Units to the Partnership, without the paymentof any consideration, 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 require no additional procedures on thepart of the Partnership or its Affiliates. The Grantee hereby acknowledges that the Administrator may take any and all actions to reflect theforfeiture of Transfer Restricted Common Units hereunder, including but not limited to the delivery of a written notice to the institutioncontemplated in Section 3.3(a) that holds the Transfer Restricted Common Units, and agrees to take any further action to memorialize suchforfeiture as the Administrator may require. 5(f)The Administrator may, from time to time, waive the provisions of this Section 3.3, subject to the imposition of any conditions or furtherrequirements, as determined by the Administrator in its sole discretion. Without limiting the foregoing, (i) the Administrator may imposeequivalent transfer or forfeiture restrictions on the Grantee’s other equity, if any, held in KKR Holdings, L.P., the Partnership or any of theirrespective Affiliates (or any of their respective 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 for purposes of the governing documentsof Grantee’s other equity, if any, held in KKR Holdings, L.P., the Partnership or any of their respective Affiliates (or any of their respective equityincentive plans) to the extent the Administrator 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 Cash Payment in Settlement of a vestedREU 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 null and 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 permitted unless the Administrator provides itsprior written consent pursuant Section 3.1 or Section 3.3. Prior to a Transfer of any REUs or Transfer Restricted Common Units to any OtherHolder, the Other Holder must consent in writing to 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 by this Agreement in the samemanner and to the same extent as the Grantee is bound hereby (or would be bound hereby had the Grantee continued to hold such REU or TransferRestricted Common Unit). Any Transfer to an Other Holder must be undertaken in compliance with Section 3.1(a). For the avoidance of doubt, anyvesting requirement that applies to an REU or transfer or forfeiture restrictions that are applicable to Transfer Restricted Common Units (includingthose Transfer Restricted Common Units delivered upon Settlement of a Transferred REU) held by an Other Holder shall be satisfied or deemed tobe satisfied under this Article III only to the extent that such vesting requirement or transfer or forfeiture restrictions, as applicable, wouldotherwise have been satisfied if the REU or Transfer Restricted Common Unit had not been Transferred by the Grantee, and any REU and TransferRestricted Common Unit, as applicable, that is held by an Other Holder shall cease to be held by such Other Holder under this Article III if theREU or Transfer Restricted Common Unit, as applicable, would have then ceased to be held by the Grantee if the REU or Transfer RestrictedCommon Unit had not been Transferred by the Grantee to such Other Holder. (c)In the event of a property settlement or separation agreement between the Grantee and his or her spouse, the Grantee agrees that he or she shall usereasonable efforts to retain all of his or her REUs and Transfer Restricted Common Units and shall reimburse his or her spouse for any interest heor she may have under this Agreement out of funds, assets or proceeds separate and distinct from his or her interest under this Agreement. 6Section 3.5. Minimum Retained Ownership Requirement The provisions of this Section 3.5 shall or shall not be applicable to the REUs granted to the Grantee hereunder as indicated on the REU Grant Certificate.(a)For so long as the Grantee retains his or her Employment, the Grantee (collectively with all Family Related Holders who become Other Holders, ifapplicable) must continuously hold an aggregate number of Common Unit Equivalents that is at least equal to fifteen percent (15%) of thecumulative amount of (x) all REUs granted to the Grantee under this Agreement and (y) all other REUs designated as “public company holdingsunits” that have been or are hereafter granted to the Grantee under the Plan, in each case that have become vested pursuant to the REU GrantCertificate (or similar provision in any other “public company holdings units” grant agreement), prior to any net Settlement permitted by Section4.5. (b)“ Common Unit Equivalents ” means any combination of: (i) REUs that are or become vested pursuant to the REU Grant Certificate andCommon Units delivered upon Settlement of any such REUs (even if they are Transfer Restricted Common Units) and (ii) REUs designated as“public company holdings units” granted to the Grantee under the Plan that are or become vested pursuant to a provision similar to the REU GrantCertificate and Common Units delivered upon Settlement of any such REUs (even if a provision similar to the transfer restrictions on TransferRestricted 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 any conditions or furtherrequirements, as determined by the Administrator in its sole discretion. Without limiting the foregoing, (i) the Administrator may imposeequivalent 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 are waived, and (ii) the Granteehereby consents in advance to the imposition of such equivalent transfer restrictions for purposes of the governing documents of Grantee’s otherequity, if any, held in KKR Holdings, L.P., the Partnership or any of their respective Affiliates (or any of their respective equity incentive plans) tothe extent the Administrator 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 thecontrary contained in this Agreement (including, without limitation, Section 4.7) this Section 3.5 shall survive any termination of this Agreement. 7ARTICLE IVMISCELLANEOUSSection 4.1. Governing Law This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, United States of America, without giving effect to anyotherwise governing principles of conflicts of law that would apply the Laws of another jurisdiction. 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 withthe validity, negotiation, execution, interpretation, performance or non-performance of this Agreement (including the validity, scope andenforceability of this arbitration provision) shall be finally settled by arbitration conducted by a single arbitrator in New York, New York inaccordance with the then-existing Rules of Arbitration of the International Chamber of Commerce. If the parties to the dispute fail to agree on theselection of an arbitrator within 30 days of the receipt of the request for arbitration, the International Chamber of Commerce shall make theappointment. The arbitrator shall be a lawyer and shall conduct the proceedings in the English language. Performance under this Agreement shallcontinue if reasonably possible during 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 of arbitration, or to confirm orchallenge an arbitration award, the arbitration proceedings, including any hearings, shall be confidential, and the parties shall not disclose anyawards, any materials in the proceedings created for the purpose of the arbitration, or any documents produced by another party in the proceedingsnot otherwise in the public domain. Judgment on any award rendered by an arbitration tribunal may be entered in any court having jurisdictionthereover. (b)Notwithstanding the provisions of Section 4.2(a), the Partnership may bring an action or special proceeding in any court of competent jurisdictionfor the purpose of compelling the Grantee to arbitrate, seeking temporary or preliminary relief in aid of an arbitration hereunder, or enforcing anarbitration award and, for the purposes of this clause (b), the Grantee (i) expressly consents to the application of Section 4.2(c) below to any suchaction or proceeding, (ii) agrees that proof shall not be required that monetary damages for breach of the provisions of this Agreement would bedifficult to calculate and that remedies at law would be inadequate, and (iii) irrevocably appoints the Secretary or General Counsel of thePartnership (or any officer of the Partnership) at the address identified for the Partnership as set forth in Section 4.6 below as such Grantee’s agentfor service of process in connection with any such action or proceeding and agrees that service of process upon such agent, who shall promptlyadvise such Grantee of any such service of process, shall be deemed in every respect effective service of process upon the Grantee in any suchaction or proceeding. 8(c)EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE U.S. FEDERAL AND STATE COURTS LOCATEDIN NEW YORK, NEW YORK FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN ACCORDANCE WITH THEPROVISIONS OF THIS SECTION 4.2, OR ANY JUDICIAL PROCEEDING ANCILLARY TO AN ARBITRATION OR CONTEMPLATEDARBITRATION ARISING OUT 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 of arbitration, or to confirm orchallenge an arbitration award. The parties acknowledge that the forums designated by this clause (c) have a reasonable relation to this Agreementand to the parties’ relationship with one another. The parties hereby waive, to the fullest extent permitted by applicable Law, any objection whichthey now or hereafter may have to personal 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 by any party shall not preclude orwaive its right to use any or all other remedies. Said rights and remedies are given in addition to any other rights the parties may have by Law orunder 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 Act and any rules promulgatedthereunder and any other similar Laws including but not limited to the European Directives 2011/61/EU, 2013/36/EU and 2014/91/EU, theAdministrator may specify in any other document or a policy to be incorporated into this Agreement by reference, that the Grantee’s rights,payments, and benefits with respect 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 which may be owed to the Partnership orits Affiliates by the Grantee under this Agreement, any other relationship or otherwise. The Grantee hereby expressly authorizes the Partnershipand its Affiliates to take any and all actions on the Grantee’s behalf (including, without limitation, payment, credit and satisfaction of amountsowed) in connection 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 Certificate attached as Appendix B hereto, theAdditional Terms and Conditions attached as Appendix C hereto, the Confidentiality and Restrictive Covenant Obligations attached as Appendix Dhereto, and any other provisions as may 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 as may be requiredfor purposes of compliance or enforceability with applicable local Law; provided, however, that the REU Grant Certificate shall be deemedamended from time to time to reflect any adjustments provided for under the Plan. 9(b)No failure or delay by any party in exercising any right, power or privilege hereunder (other than a failure or delay beyond a period of timespecified herein) shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof orthe exercise of any other right, power or privilege. Section 4.5. Withholding Regardless of any action the Partnership or the Designated Service Recipient takes with respect to any or all income tax, social insurance, payroll tax, payment onaccount or other tax-related items related to the Grantee’s participation in the Plan and legally applicable to the Grantee (“ Tax-Related Items ”), the Granteeacknowledges that the ultimate liability for all Tax-Related Items is and remains the Grantee’s responsibility and may exceed the amount actually withheld by thePartnership or the Designated Service 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, thegrant, vesting or Settlement of the REUs, the delivery of Common Units or a Cash Payment upon Settlement of the REUs, the lapse of any restrictions imposed onthe Grantee’s Transfer Restricted Common Units, the subsequent sale of Common Units acquired under the Plan and the receipt of any distributions; and (2) do notcommit to and are under no obligation to structure the terms of the REUs or any aspect of the REUs to reduce or eliminate the Grantee’s liability for Tax-RelatedItems or achieve any particular tax result. Further, if the Grantee has become subject to tax in more than one jurisdiction, the Grantee acknowledges that thePartnership and/or the Designated Service Recipient (or the Affiliate formerly employing, engaging or retaining the Grantee, as applicable) may be required towithhold or account for Tax-Related Items in more than one jurisdiction. Prior to any relevant taxable or tax withholding event, as applicable, the Grantee will pay or make adequate arrangements satisfactory to the Partnership and/or theDesignated Service Recipient to satisfy all Tax-Related Items. In this regard, the Grantee authorizes the Partnership and/or the Designated Service Recipient, ortheir respective agents, at their discretion, to satisfy 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 the Partnership and/or the DesignatedService Recipient; or (b)withholding from proceeds of the sale of Common Units delivered upon Settlement of the REUs either through a voluntary sale or through amandatory sale arranged by the Partnership (on the Grantee’s behalf pursuant to this authorization); 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 considering applicable minimum statutory withholdingamounts or other applicable withholding rates. If the obligation for Tax-Related Items is satisfied by withholding in Common Units, for tax purposes, the Granteeis deemed to have been issued the full number of Common Units subject to the Settled Common Units, notwithstanding that a number of the Common Units areheld back solely for the purpose of paying the Tax-Related Items due as a result of any aspect of the Grantee’s participation in the Plan. 10Finally, the Grantee shall pay to the Partnership or the Designated Service Recipient any amount of Tax-Related Items that the Partnership or the DesignatedService Recipient may be required to withhold or account for as a result of the Grantee’s participation in the Plan that cannot be satisfied by the means previouslydescribed. The Partnership may refuse to issue or deliver the Common Units, the Cash Payment or the proceeds of the sale of Common Units, if the Grantee failsto comply with the Grantee’s obligations in connection with the Tax-Related Items. Section 4.6. Notices All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly givenupon receipt) by delivery in person, by courier service, by fax or by registered or certified mail (postage prepaid, return receipt requested) to the respective partiesat the following addresses (or at such other address for a party 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 4200New 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 the Designated 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 hereof and supersedes all prioragreements and understandings, whether oral or written, pertaining thereto. The Grantee acknowledges that the grant of REUs provided for underthis Agreement is in full satisfaction of any and all grants of equity or equity-based awards that representatives of the Partnership or its Affiliates,on or prior to the date hereof, 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 or Transfer Restricted Common Units thathave been granted or delivered, as applicable, hereunder. Notwithstanding anything to the contrary herein, this Article IV shall survive anytermination of this Agreement. Section 4.8. Severability If any term or other provision of this Agreement is held to be invalid, illegal or incapable of being enforced by any rule of Law, or public policy, all otherconditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions is notaffected in any manner materially adverse to any party. Upon a determination that any term or other provision is invalid, illegal or incapable of being enforced, theparties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptablemanner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible. 11Section 4.9. Binding Effect This 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. Appendices Appendices A, B, C and D constitute part of this Agreement. Notwithstanding the provisions of this Article IV, the provisions of Sections 10 through 19(inclusive) of Appendix D shall govern solely with respect to, and shall be applicable only to the interpretation, administration and enforcement of, the provisionsof Appendix D, but not to any other provisions of this Agreement or any other of its Appendices, including but not limited to Sections 3.2 and 3.3(c) of thisAgreement. For the further avoidance of doubt, and without limiting the foregoing sentence, Sections 3.2 and 3.3(c) of this Agreement shall only be governed by,and shall only be subject to administration and enforcement under, the provisions of this Article IV, and shall not be governed by or subject to interpretation,administration or enforcement under any of Sections 10 through 19 (inclusive) of Appendix D. Section 4.11. Further Assurances The Grantee shall perform all other acts and execute and deliver all other documents as may be necessary or appropriate to carry out the purposes and intent of thisAgreement. 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 beapplicable. Unless otherwise specified, all references herein to “Articles,” “Sections” and clauses shall refer to corresponding provisions of thisAgreement. The word “including” is not meant to be exclusive, but rather shall mean “including without limitation” wherever used in thisAgreement. Reference to “hereto”, “herein” and similar words is to this entire Agreement (including any Appendices) and not a particularsentence or section of this Agreement. All references to “date” and “time” shall mean the applicable date (other than a Saturday or Sunday or anyday on which the Federal Reserve Bank of New York is closed or any day on which banks in the city of New York, New York are required toclose, in which case such date refers to the next occurring date that is not described in this parenthetical) or time in New York, New York. 12(b)This Section 4.12(b) applies to Grantees who are U.S. tax residents (such as, a U.S. citizen, greencard holder or a U.S. tax resident under thesubstantial presence test) to the extent applicable. All references to any “separation from service” or termination of the Employment of, or theservices to be provided by, the Grantee, shall be deemed to refer to a “separation from service” within the meaning of Section 409A, if applicable. Notwithstanding anything herein to the contrary, (i) if at the time of the Grantee’s termination of Employment the Grantee is a “specifiedemployee” as defined in Section 409A of the Code and the deferral of the commencement of any payments or delivery of Common Units otherwisepayable or provided hereunder as a result of such termination of employment is necessary in order to prevent any accelerated or additional taxunder Section 409A, then the Partnership will defer the commencement of the payment of any such payments or delivery hereunder (without anyreduction in such payments or delivery of Common Units ultimately paid or provided to the Grantee) until the date that is six months following theGrantee’s termination of Employment (or the earliest date as is permitted under Section 409A) and (ii) if any other payments or other deliveriesdue to the Grantee hereunder could cause the application of an accelerated or additional tax under Section 409A, such payments or other deliveriesshall be deferred if deferral will make such payment or other delivery compliant under Section 409A, or otherwise such payment or other deliveryshall be restructured, to the extent possible, in a manner, determined by the Administrator, that does not cause such an accelerated or additionaltax. The Partnership shall use commercially reasonable efforts to implement the provisions of this Section 4.12(b) in good faith; provided thatnone of the Partnership, the General Partner, the Administrator nor any of the Partnership’s, KKR Group’s employees, directors or representativesshall 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 the Employment of the Grantee bythe Designated Service Recipient or any other member of the KKR Group. The grant of REUs under this Agreement in no way implies anyEmployment relationship with the General Partner, the Partnership or with any other member of the KKR Group, other than the Designated ServiceRecipient with which a formal Employment relationship is currently in effect with the Grantee, or any other member of the KKR Group with whicha formal Employment relationship is currently in effect with the Grantee. If the Grantee changes Employment from the Designated ServiceRecipient as of the Grant Date to 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 no way intended to describe,interpret, define or limit the scope, extent or intent of this Agreement or any provision hereof. Section 4.13. Counterparts This Agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, and by the different parties hereto in separatecounterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the sameagreement. Copies of executed counterparts transmitted by telecopy or other electronic transmission service shall be considered original executed counterparts forpurposes of this Agreement.[Rest of page intentionally left blank] 13IN WITNESS WHEREOF , the Partnership has executed this Agreement as of the date specified under the signature of the Grantee. KKR & CO. L.P. By: KKR MANAGEMENT LLC, its general partner By: 14IN WITNESS WHEREOF , the undersigned Grantee has caused this counterpart signature page to this Agreement to be duly executed as of the date specifiedunder the signature of the Grantee. “GRANTEE” Electronic SignatureName: Participant NameDated: Grant Date 15APPENDIX A DEFINITIONSIn addition the defined terms set forth in the Plan, the following terms shall have the following meanings for purposes of the Agreement: “ Cause ” means, with respect to the Grantee, the occurrence or existence of any of the following as determined fairly on an informed basis and in good faith bythe Administrator: (i) any act of fraud, misappropriation, dishonesty, embezzlement or similar conduct by the Grantee against any member of the KKR Group(including the Partnership), KKR Holdings L.P., KKR Associates Holdings L.P., a Fund, or a Portfolio Company, (ii) a Regulatory Violation that has a materialadverse effect on (x) the business of any member of the KKR Group or (y) the ability of the Grantee to function as an employee, associate or in any similarcapacity (including consultant) with respect to the KKR Group, taking into account the services required of the Grantee and the nature of the business of the KKRGroup, or (iii) a material breach by the Grantee of a material provision of any Written Policies or the deliberate failure by the Grantee to perform the Grantee’sduties 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 theKKR Group becoming aware of such breach or failure and, where such breach or failure is curable, the Grantee has failed to cure such breach 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 reasonably necessary to cure such breach or failure providedthat the Grantee is then working diligently to cure such breach or failure. If such breach or failure is not capable of being cured, the notice given to the Grantee maycontain a date of termination that is earlier than 15 days after the date of such notice. “ Closing Price ” for any trading day shall mean the closing price per Common Unit reported on the NYSE (or, if not listed on the NYSE, the principal securitiesexchange on which the Common Units are listed). If Common Units are not listed on any securities exchange, the Closing Price shall be the Fair Value thereof asreasonably determined by the Administrator. “ Disability ” means, as to any Person, such Person’s inability to perform in all material respects such Person’s duties and responsibilities to the KKR Group byreason of a physical or mental disability or infirmity which inability is reasonably expected to be permanent and has continued (i) for a period of six consecutivemonths or (ii) such shorter period as the Administrator may reasonably determine in good faith. “ Employment ” means the Grantee’s employment or engagement (including any similar association determined by the Administrator to constitute employment orengagement for purposes of this Agreement) with (x) the Designated Service Recipient or any other member of the KKR Group or (y) any consultant or serviceprovider 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 mustbe approved by the Administrator 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 andsiblings-in-law, descendants of siblings, and grandchildren, (ii) any trust or other personal or estate planning vehicle established by such Grantee, (iii) anycharitable organization established by such Grantee and (iv) any successor-in-interest to such Grantee, including but not limited to a conservator, executor or otherpersonal representative. A-1“ Group Partnerships ” means KKR Management Holdings L.P., a Delaware limited partnership, KKR Fund Holdings L.P., a Cayman Island exempted limitedpartnership, and KKR International Holdings L.P., a Cayman Island exempted limited partnership, along with any partnership designated in the future as a “GroupPartnership” by the Partnership. “ KKR Capstone ” means (i) KKR Capstone Americas LLC, KKR Capstone EMEA LLP, KKR Capstone EMEA (International) LLP, KKR Capstone AsiaLimited and any other “Capstone” branded entity that provides similar consulting services to the KKR Group and Portfolio Companies and (ii) the direct andindirect parents and subsidiaries of the foregoing. “ KKR Group ” means the Group Partnerships, the direct and indirect parents of the Group Partnerships (the “ Parents ”), any direct or indirect subsidiaries of theParents or the Group Partnerships, the general partner or similar controlling entities of any investment fund, account or vehicle that is managed, advised orsponsored by the KKR Group (the “ Funds ”) and any other entity through which any of the foregoing directly or indirectly conducts its business, but shall excludePortfolio Companies. “ Law ” means any statute, law, ordinance, regulation, rule, code, executive order, injunction, judgment, decree or other order issued or promulgated by anynational, supranational, state, federal, provincial, local or municipal government or any administrative or regulatory body with authority therefrom with jurisdictionover the Partnership or any Participant, as the case may 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 accepted plea of guilt or nolo contendere ofany felony or misdemeanor crime involving moral turpitude, false statements, misleading omissions, forgery, wrongful taking, embezzlement, extortion or bribery,(ii) a final determination by any court of competent jurisdiction or governmental regulatory body (or an admission by the Grantee in any settlement agreement) thatthe Grantee 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-regulatoryorganization having authority with respect to U.S. federal or state or comparable non-U.S. securities laws, rules or regulations (or an admission by the Grantee inany settlement agreement) that the Grantee 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 Grantee of the Grantee’s Employment with the KKR Group (other than for Cause), on or after the date that theGrantee’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. “ REU Grant Certificate ” means the REU Grant Certificate delivered to the Grantee and attached to this Agreement as Appendix B, as the same may bemodified 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 to time, and the applicable regulations,including temporary regulations, promulgated under such Section, as such regulations may be amended from time to time (including corresponding provisions ofsucceeding regulations). A-2“ Service Vesting Date ” means, with respect to any REU, the date set forth in the REU Grant Certificate as the “Service Vesting Date.” “ Settle ”, “ Settled ” or “ Settlement ” means the discharge of the Partnership’s obligations in respect of an REU through the delivery 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 other disposition thereof or any intereststherein or rights attached thereto, whether voluntarily or by operation of Law, or (ii) creation or placement of any mortgage, claim, lien, encumbrance, conditionalsales or other title retention agreement, right of first refusal, preemptive right, pledge, option, charge, security interest or other similar interest, easement, judgmentor imperfection of title of any nature whatsoever. “ Written Policies ” means the written policies of the KKR Group included in its employee manual, code of ethics and confidential information and informationbarrier policies and procedures and other documents relating to the Grantee's Employment, association or other similar affiliation with the KKR Group. A-3APPENDIX B REU GRANT CERTIFICATE – Market Condition Equity GrantGrantee Name: Participant Name Grant Date: Grant Date Number of REUs: Number of Awards Granted1. Grant of Public Company Holdings Units This REU Grant Certificate confirms that the Partnership hereby grants to the Grantee listed above, effective as of the grant date above (the “ Grant Date ”), thenumber of REUs, subject to the terms and conditions of this REU Grant Certificate and the other provisions of the Agreement. In the event of a conflict betweenany term or provision contained in the Agreement and this REU Grant Certificate, the applicable terms and provisions of this REU Grant Certificate will governand prevail.2. Vesting of REUs (a)The following vesting provisions shall apply to the REUs: (i)Service Condition for Vesting Provided that the applicable Price Condition (as defined below) has been achieved, a percentage of the REUs shall vest subject to the Grantee’s continuedEmployment through and at the close of business on the applicable Service Vesting Date or Service Vesting Dates (the “ Service Condition ”).The following tablesets forth the maximum number of REUs that are eligible to vest on each Service Vesting Date, subject to the Grantee’s continued Employment through each suchdate and the satisfaction of the applicable Price Condition:Percentage of Granted REUs thatMay Become Vested on ApplicableService Vesting DateApplicable Service Vesting Date[●]%[●][●]%[●][●]%[●][●]%[●][●]%[●]To the extent the percentage of REUs that have achieved the Price Condition exceed the maximum percentage of REUs that may vest on a given Service VestingDate, such excess (up to the next applicable maximum percentage) shall vest on the next Service Vesting Date, if applicable, subject to the Grantee’s continuedEmployment through the close of business on such date. B-1To the extent the Service Condition with respect to any REUs is satisfied prior to the achievement of the Price Condition applicable to such REUs, then therelevant percentage of REUs will vest only on the date such Price Condition is achieved.(ii)Price Condition for Vesting The “ Price Condition ” shall be achieved with respect to the percentage of the REUs when the Closing Price per Common Unit meets or exceeds the applicable “Price Target ” for a period of [●] consecutive trading days (the “ Trading Period ”), in each case, as specified in the chart below:TranchePercentage of Granted Unitsthat Satisfy the PriceConditionPrice Target [●]%$[●] [●]%$[●] [●]%$[●] [●]%$[●] [●]%$[●]The Price Condition is not achieved if the Closing Price is below the Price Target at any point during such Trading Period.In the event of any extraordinary unit distribution, unit split, unit combination, recapitalization, rights offering, split-up, spin-off or similar event that constitutes an“equity restructuring” (as defined under Financial Accounting Standards Board (FASB) Accounting Standards Codification 718) with respect to the CommonUnits, then the Administrator shall, in the manner determined appropriate or desirable by the Administrator and without liability to any person, adjust any or all of(x) the Price Target, (y) the number of REUs, and (z) any other term applicable to the REUs.(iii)Overall Vesting Principles Notwithstanding any provision to the contrary, (i) both the Service Condition and the Price Condition must be satisfied for any REU to vest (any date bothconditions are satisfied, a “ Vesting Date ”), (ii) no REU shall be vested prior to [●], and (iii) any REU that fails to vest by the close of business on [●] (the “ EndDate ”) shall be canceled and forfeited without any consideration. (b)Vesting and Forfeiture in Connection with Certain Events. (i)No Vesting Upon Retirement Notwithstanding anything to the contrary, the REUs shall not be affected when Grantee’s Employment is terminated due to Retirement. (ii)No Vesting Upon Change of Control B-2Notwithstanding anything to the contrary, the REUs shall not be affected by the occurrence of any Change of Control. (iii)Continued Service Condition Vesting Upon Death or Disability Notwithstanding anything to the contrary, in the event of the Grantee’s death or Disability, the REUs shall remain outstanding until the End Date and, to the extentthe applicable Price Conditions are satisfied with respect thereto, shall be eligible to vest on the applicable Service Vesting Dates (as though the Grantee’sEmployment had not terminated). Any REUs that are not vested as of the End Date shall be canceled and forfeited without consideration. Notwithstandinganything to the contrary, the determination of the Grantee’s Disability shall be determined by the Administrator in its sole discretion. (iv)Forfeiture for Any Other Termination If the Grantee’s Employment terminates for any reason other than for death, Disability or Involuntarily Termination without Cause as provided in the Agreement,then all REUs that are not vested at the time of termination of Employment shall be canceled and forfeited without consideration. (v)Two-Year Clawback for Termination for Cause or Breach of Confidentiality and Restrictive Covenant Agreement If either (i) for any reason the Grantee’s Employment is terminated for Cause or (ii) the Grantee breaches the confidentiality, non-competition and non-solicitationprovisions set forth in the Confidentiality and Restrictive Covenant Agreement attached as Appendix D to the Agreement (each event in clauses (i) or (ii), a “Triggering Event ”), then a number of units (whether REUs or any other units owned by such Grantee) equal to the number of REUs that vested during the two(2) year period immediately prior to the date of the Triggering Event shall be canceled and forfeited without consideration (or, if sold, the Grantee may be requiredto return or repay to the Partnership the net proceeds of such sale), unless otherwise determined in writing by the Administrator in its sole discretion. Any REUsthat vested prior to the two (2) year period immediately prior to the Triggering Event shall not be subject to the provisions of this paragraph, and nothing in thisparagraph shall be deemed to limit any other rights or remedies that may be available to the Administrator, the Partnership or their Affiliates with respect to theoccurrence of a Triggering Event. (c) All REUs that become vested under this REU Grant Certificate are eligible to be Settled pursuant to Section 2.2. of the Agreement. 3. Post-Settlement Terms Settlement of the REUs is subject to all terms and conditions contained in the Agreement to which this REU Grant Certificate is attached. Notwithstanding theforegoing: The post-settlement transfer restrictions contained in Section 3.3 of the Agreement ☐ shall / ☐ shall not be applicable to the REUs (and any resultingCommon Units) granted under this REU Grant Certificate. The minimum retained ownership requirements contained in Section 3.5 of the Agreement ☐ shall / ☐ shall not be applicable to the REUs (and anyresulting Common Units) granted under this REU Grant Certificate. B-3APPENDIX C ADDITIONAL TERMS AND CONDITIONSThe terms and conditions in this Appendix C supplement the provisions of the Agreement, unless otherwise indicated herein. Capitalized terms contained in thisAppendix C and not defined herein shall have the same meaning as such terms are defined in the Agreement into which this Appendix C is incorporated byreference therein and to which this Appendix C is attached, or the Plan, as applicable.1. Data PrivacyThe Grantee hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Grantee’s personal data asdescribed in this Agreement and any other Award materials (“Data”) by and among, as applicable, the Designated Service Recipient, the Partnership and itsAffiliates for the exclusive purpose of implementing, administering and managing the Grantee’s participation in the Plan. The Grantee understands that the Partnership and the Designated Service Recipient may hold certain personal information about the Grantee, including, butnot limited to, the Grantee’s name, home address and telephone number, email address, date of birth, social insurance number, passport or otheridentification number (e.g. resident registration number), salary, nationality, job title, any Common Units or directorships held in the Partnership, details of allREUs or any other entitlement to Common Units awarded, canceled, exercised, vested, unvested or outstanding in the Grantee’s favor, for the exclusivepurpose of implementing, administering and managing the Plan. The Grantee understands that Data will be transferred to any third parties assisting the Partnership with the implementation, administration and managementof the Plan. The Grantee understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipients’ country (e.g.,the United States) may have different data privacy laws and protections than the Grantee’s country. The Grantee understands that he or she may request a listwith the names and addresses of any potential recipients of the Data by contacting his or her local human resources representative. The Grantee authorizesthe Partnership, its subsidiaries, the Designed Service Recipient and any 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 purposeof implementing, administering and managing his or her participation in the Plan. The Grantee understands that Data will be held only as long as isnecessary to implement, administer and manage the Grantee’s participation in the Plan. The Grantee understands that he or she may, at any time, view Data,request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consentsherein, in any case without cost, by contacting in writing his or her local human resources representative. Further, the Grantee understands that he or she isproviding the consents herein on a purely voluntary basis. If the Grantee does not consent, or if the Grantee later seeks to revoke his or her consent, theGrantee’s employment status or service and career with the Designated Service Recipient will not be affected; the only consequence of refusing or withdrawingthe Grantee’s consent is that the Partnership would not be able to grant him or her REUs or other awards or administer or maintain such awards. Therefore,the Grantee understands that refusing or withdrawing his or her consent may affect the Grantee’s ability to participate in the Plan. For more information onthe consequences of the Grantee’s refusal to consent or withdrawal of consent, the Grantee understands that he or she may contact his or her local humanresources representative. C-12. Nature of Grant In 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 thePartnership at any time; (b)the grant of the REUs is voluntary and occasional and does not create any contractual or other right to receive future grants, or benefits in lieu ofREUs, 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 Service Recipient and shall not interferewith the ability of the Designated Service Recipient to terminate the Grantee’s Employment 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 extraordinary items, which are outside the scope ofthe 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 normal or expected compensation forpurposes of calculating any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long-service awards,pension or retirement or welfare benefits or similar payments; (h)the grant of REUs and the Grantee’s participation in the Plan will not be interpreted to form an Employment or service contract or relationship withthe Partnership, the Designated Service Recipient or any Affiliate; (i)the future value of the underlying Common Units is unknown, indeterminable and cannot be predicted with certainty; (j)no claim or entitlement to compensation or damages shall arise from forfeiture of the REUs resulting from termination of the Grantee’sEmployment (for any reason whatsoever and whether or not in breach of local labor laws and whether or not later found to be invalid), and inconsideration of the grant of REUs, the Grantee agrees not to institute any claim against the Partnership, the Designated Service Recipient or anyAffiliate; (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 as consideration for, or in connection with, the service the Grantee may provide as a director of the Designated Service Recipient,the Partnership or any Affiliate; C-2(l)subject to Section 9 of the Plan, the REUs and the benefits under the Plan, if any, will not automatically transfer to another company in the case ofa 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 of normal or expected compensationor 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 to replace any pension rights orcompensation; and (iii)neither the Designated Service Recipient, the Partnership nor any Affiliate shall be liable for any foreign exchange rate fluctuation betweenthe Grantee’s local currency and the United States Dollar that may affect the value of the REUs or of any amounts due to the Granteepursuant to the vesting of the REUs or the subsequent sale of any Common Units acquired upon vesting. 3. No Advice Regarding Award The Partnership is not providing any tax, legal or financial advice, nor is the Partnership making any recommendations regarding the Grantee’s participation in thePlan, or the Grantee’s acquisition or sale of the underlying Common Units. The Grantee should consult with his or her own personal tax, legal and financialadvisors regarding his or her participation in the Plan before taking any action related to the Plan. 4. Language If the Grantee has received the Agreement or any other document related to the Plan translated into a language other than English and if the meaning of thetranslated version is different than the English version, the English version will control. 5. Electronic Delivery and Acceptance The Partnership may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. The Granteehereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established andmaintained by the Partnership or a third party designated by the Partnership. 6. Restrictions on Trading in Securities In addition to any policies and procedures which govern Grantee's ability to trade in Common Units as well as other securities of the Partnership set forth in thePartnership's trading window policy, Grantee may be subject to additional securities trading and market abuse laws in his or her country of residence. These lawsmay affect Grantee's ability to acquire or dispose of Common Units or rights to Common Units (e.g., REUs) under the Plan, particularly during such times as theGrantee is considered to have access to material nonpublic information concerning the Partnership (as defined by the Laws of the Grantee's country). Anyrestrictions under these Laws or regulations are separate from and in addition to any policies and procedures set forth by the Partnership. The Grantee isresponsible for ensuring compliance with any applicable restrictions and should consult his or her personal legal advisor on this matter. C-37. Foreign Asset / Account, Exchange Control Reporting Depending upon the country to which Laws the Grantee is subject, the Grantee may have certain exchange control, foreign asset and/or account reportingrequirements that may affect the Grantee’s ability to acquire or hold Common Units under the Plan or cash received from participating in the Plan (including fromany sale proceeds arising from the sale of Common Units) in the Grantee’s Fidelity brokerage account or a bank or other brokerage account outside the Grantee’scountry of residence. The Grantee’s country may require that he or she report such accounts, assets or transactions to the applicable authorities in the Grantee’scountry. The Grantee also may be required to repatriate sale proceeds or other funds received as a result of his or her participation in the Plan to his or her countrythrough a designated bank or broker and/or within a certain time after receipt. The Grantee is responsible for knowledge of and compliance with any suchregulations and should speak with his or her own personal tax, legal and financial advisors regarding same. C-4APPENDIX DConfidentiality and Restrictive Covenant Obligations A. Capitalized terms contained in this Appendix D and not defined herein shall have the same meaning as such terms are defined in the Agreementinto which this Appendix D is incorporated by reference therein and to which this Appendix D is attached, or the Plan, as applicable. Further, for the purposes ofthis 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 of the KKR Group, the Granteeis 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’s business through their participationin 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 similaraffiliation with the KKR Group, the Grantee will receive and have access to confidential information of the KKR Group and the Portfolio Companies (collectively,the “ KKR Related Entities ”) and have influence over and the opportunity to develop relationships with Clients, Prospective Clients, Portfolio Companies andpartners, members, employees and associates of the Company; and (ii) such confidential information and relationships are extremely valuable assets in which theKKR Group has invested, and will continue to invest, substantial time, effort and expense in developing and protecting; E. The Grantee acknowledges and agrees that (i) the REUs will materially benefit the Grantee; (ii) it is essential to protect the business interests andgoodwill of the Company and that the Company be protected by the restrictive covenants and confidentiality undertaking set forth herein; (iii) it is a conditionprecedent to the Grantee receiving REUs that the Grantee agree to be bound by the restrictive covenants and confidentiality undertaking contained herein; and (iv)the KKR Group would suffer significant 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 affiliationwith the KKR Group; and F. This Appendix D 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 D and any one of them is authorized to waivecompliance with any provision hereof by delivering a written statement clearly expressing the intent to waive such compliance to the Grantee and a duly authorizedrepresentative of the KKR Group or Designated Service Recipient. NOW, THEREFORE, to provide the Company with reasonable protection of its interests and goodwill and in consideration for (i) the REUs and any otherconsideration that the Grantee will receive in connection with and as a result of the Grantee’s employment, engagement, association or other similar affiliation withthe KKR Group; (ii) the material financial and other benefits that the Grantee will derive from such REUs and other consideration (if any); and (iii) other good andvaluable consideration, the receipt and adequacy of which are hereby acknowledged, the Grantee hereby agrees to the following restrictions: D-11.Outside Business Activities. The Grantee acknowledges that, during the course of the Grantee’s employment, engagement, association or other similar affiliation with the KKR Group,the Grantee will be subject to the Written Policies. The Written Policies include restrictions that limit the ability of the Grantee to engage in outside business andother activities without the prior approval of the Company. If the Grantee has an employment, engagement or other similar contract with the KKR Group, theGrantee may be subject to similar restrictions under that agreement. The Grantee hereby agrees that, during the Grantee’s employment, engagement, association orother similar affiliation with the KKR Group, the Grantee will comply with all such restrictions that are from time to time in effect which are applicable to theGrantee. 2.Confidentiality Undertaking. The Grantee acknowledges that, 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 (as defined below) of the Company and the Portfolio Companies. Recognizing that anydisclosure of such information could have serious consequences to one or more of the Company and the Portfolio Companies, 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 the KKR Group,or at any time after the Termination Date) for any purpose other than in the ordinary course of the performance of the Grantee’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 toany person or entity, including but not 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 affiliatedperson of the KKR Group; (ii) any person or entity to the extent explicitly authorized by an executive of the Company in the ordinary course of the performance ofGrantee’s duties as an employee, consultant, associate or other affiliated person of the KKR Group; (iii) any attorney, accountant, consultant or similar serviceprovider retained by the Company who is required to know such information and is obligated to keep such information confidential; or (iv) any person or entity tothe extent the law or legal process requires disclosure by the Grantee, provided that, in the case of clause (iv), the Grantee must first give the Partnership or theDesignated Service Recipient prompt written notice of any such requirement, disclose no more information than is so required in the opinion of competent legalcounsel, and cooperate fully with all efforts by the 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 of federal law or regulation to anygovernmental agency or entity, including but not limited to the U.S. Securities and Exchange Commission, or making other disclosures to the extent protectedunder the whistleblower provisions of federal law or regulation (or comparable laws or regulations that similarly prohibit the impediment of such protecteddisclosures), and the Grantee shall not be required to advise or seek permission from the Partnership or the Designated Service Recipient prior to making any suchreport or disclosure; provided, however, that (i) Grantee shall inform such governmental agency or entity that the information Grantee is providing is confidentialand (ii) neither the Partnership nor the Designated Service Recipient authorizes the waiver of (or the disclosure of information covered by) the attorney-clientprivilege or work product protection or any other privilege or protection belonging to the Partnership, the Designated Service Recipient or their Affiliates, to thefullest extent permitted by law. D-2As 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 supervisory capacity. “ Confidential Information ” means (a) all confidential,proprietary or non-public information of, or concerning the business, operations, activities, personnel, finances, plans, personal lives, habits, history, clients,investors, or otherwise of the KKR 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 a family of any of the individualsreferred 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 deceasedrelatives), 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. ConfidentialInformation includes information about the KKR Related Entities relating to or concerning any of their (i) finances, investments, profits, pricing, costs, andaccounting, (ii) intellectual property (including but not limited to patents, inventions, discoveries, plans, research and development, processes, formulae, reports,protocols, computer software, databases, documentation, trade secrets, know-how and business methods), (iii) personnel, compensation, recruiting and training,and (iv) any pending or completed settlements, arbitrations, litigation, governmental investigations and similar proceedings. Notwithstanding the foregoing,Confidential Information does not include any portions of the foregoing that the Grantee can demonstrate by sufficient evidence satisfactory to the Company thathas been (i) lawfully published in a form generally available to the public prior to any disclosure by the Grantee in breach of this Appendix D or (ii) madelegitimately available to the Grantee by a third party without breach 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 write about, provide, disclose or use in anyfashion at any time any Confidential Information that is or becomes part of the basis for, or is used in any way in connection with any part of any book, magazineor newspaper article, any interview or is otherwise published 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 for any reason, the Grantee herebyagrees to (i) cease and not thereafter commence any and all use of any Confidential Information; (ii) upon the request of the Company promptly deliver to theCompany 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 theGrantee’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 theCompany, its Affiliates or Portfolio Companies); (iii) notify and fully cooperate with the Company regarding the delivery or destruction of any other ConfidentialInformation of which the Grantee is aware; and (iv) upon the request of the Company sign and deliver a statement that the foregoing has been accomplished. D-3The Grantee acknowledges that he or she is aware that applicable securities laws place certain restrictions on any person who has received from an issuermaterial, non-public information concerning the issuer with respect to purchasing or selling securities of such issuer or from communicating such information toany other person and further agrees to comply with such securities laws. Without limiting anything in this Appendix D, the Grantee hereby expressly confirms hisor her explicit understanding that the Grantee’s obligations hereunder are in addition to, and in no way limit, the Grantee’s obligations under complianceprocedures 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, without limitation of any kind, the taxtreatment and tax structure of any member of the Company in which the Grantee holds an interest and all materials of any kind (including opinions or other taxanalyses) 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 similaraffiliation with the Designated Service Recipient at any time for any reason or for no reason at all with or without reasons constituting Cause. The DesignatedService Recipient or the Grantee, as applicable, shall provide 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 [●] days prior to actual termination (such [●]-day period, the “Notice Period ”); provided, however, that no advance notice shall be required by the Designated Service Recipient and the provisions of this Section 3 shall not beapplicable to the Designated Service Recipient if the Grantee’s employment, engagement, association or other similar affiliation is terminated by the DesignatedService Recipient for reasons constituting Cause or due to any conduct by Grantee that, in the judgment of the Designated Service Recipient in its sole discretion,amounts to gross negligence or reckless or willful misconduct. Notice pursuant to this Section 3 shall be provided by the Grantee to any of the Chief ExecutiveOfficers, Presidents, Chief Operating 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 totransition work, projects, and Client relationships internally to others) as determined and directed by the Designated Service Recipient in its sole discretion, andGrantee shall not be employed, engaged, associated or otherwise similarly affiliated with any business other than the business of the KKR Group; provided,however, the Designated Service Recipient reserves the right to require the Grantee not to be in the offices of the KKR Group, not to undertake all or any of theGrantee’s duties or not to contact Clients or Prospective Clients (as defined in Section 5 below), other persons employed, engaged, associated or otherwisesimilarly affiliated with the KKR Group, or others (or any combination thereof) unless otherwise instructed during all or any part of the Notice Period. During theNotice Period, and except as provided in the next sentence, the Grantee shall continue to receive his or her salary, and the Grantee shall not be entitled to receive orbe considered for payment of any other amount for his or her services during the Notice Period (including without limitation any bonus or equity award). Inaddition, the Designated Service Recipient in its sole discretion may elect to 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 Notice Period to the end of the original Notice Period, and the Grantee’s employment, engagement, association orother similar affiliation with the KKR Group, shall be terminated as of the day immediately following the conclusion of the reduced Notice Period. D-44.Non-Compete. The Grantee hereby agrees that, while employed, engaged, associated or otherwise similarly affiliated with the KKR Group, and in addition during the Non-Compete Period (as defined below), the Grantee will not directly or indirectly 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 Competing Business aresimilar or substantially related to any activity that the Grantee engaged in or any service that the Grantee provided, in connection with the Grantee’s employment,engagement, association or other similar affiliation with the KKR Group or (ii) that competes with a business for which the Grantee had direct or indirectmanagerial or supervisory responsibility with the KKR Group, 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, in each case, at anytime during 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 Covered Country with any business conducted bythe 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 any business that the Company was, on the Termination Date, formally considering conducting. A “ CoveredCountry ” means the United States, United Kingdom, the Republic of Ireland, France, Hong Kong, China, Japan, the Republic of Korea, Australia, India, UnitedArab Emirates, Saudi Arabia, Brazil, Canada, Singapore, Spain, Luxembourg or any other country where the Company conducted business on the TerminationDate; provided that if the Grantee is located in Japan, the definition of Covered Country shall exclude the phrase “any other country where the Company conductedbusiness 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 [●] 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 not constituting Cause, the Non-CompetePeriod will expire on the [●] month anniversary of the Termination Date. Notwithstanding the foregoing, nothing in this Appendix D shall be deemed to prohibit the Grantee from (i) associating with any business whose activitiesconsist principally of making passive investments for the account and benefit of the Grantee or members of the Grantee’s immediate family where such businessdoes not, within the knowledge of the Grantee, compete with a business of the KKR Group for specific privately negotiated investment opportunities; (ii) makingand holding passive investments in publicly traded securities of a Competing Business where such passive investment does not exceed 5% of the amount of suchsecurities that are outstanding at the time of investment; or (iii) making and holding passive investments in limited partner or similar interests in any investmentfund or vehicle with respect to which the Grantee does not exercise control, discretion or influence over investment decisions. D-55.Non-Solicitation of Clients and Prospective Clients; Non-Interference. The Grantee hereby agrees that, while employed, engaged, associated or otherwise similarly affiliated with the KKR Group, and in addition during the Post-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 anyClient or Prospective Client for, or on behalf of, a Competing Business; (ii) provide, or assist any other person in providing, for any Client or Prospective Clientany services that are substantially similar to those that the Company provided or proposed to be provided to such Client or Prospective Client; or (iii) impede orotherwise interfere with or damage, or attempt to impede or otherwise interfere with or damage, any business relationship or agreement between the Company andany Client or Prospective Client. As used in this Section 5, “ solicit ” means to have any direct or indirect communication inviting, advising, encouraging orrequesting any person to take or refrain from 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 any investor in any Fund, any clientof the KKR Group’s broker-dealer business, or any Portfolio Company 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, and involvingConfidential Information of, the Company during the 12 months prior to the Termination Date; and “ Prospective Client ” means any person with whom (I) theCompany has had negotiations or discussions concerning becoming a Client and (II) the Grantee, individuals reporting to the Grantee or any other individuals overwhom the Grantee had direct or indirect managerial or supervisory responsibility had any contact or dealings on behalf of, and involving Confidential Informationof, 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 the KKR Group, 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 this Section 6, “ solicit ” means to have any direct or indirect communication inviting, advising,encouraging or requesting any Covered 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 identifying such Covered Person to the thirdparty, 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 KKRGroup as an employee or officer or otherwise associated or similarly affiliated with the KKR Group in any position, including as a member or partner, havingfunctions and duties substantially similar to those of an employee or officer; (ii) a Senior Advisor, Industry Advisor or KKR Advisor to the KKR Group; (iii)employed or engaged by KKR Capstone as an employee or officer or otherwise associated or similarly affiliated with KKR Capstone in any position, including as amember or partner, having functions and duties substantially similar to those of an employee or officer; or (iv) a person who provides services exclusively to theCompany or any Portfolio Company and has functions and duties that are substantially similar to those of a person listed in sub-clauses (i), (ii) or (iii) above. D-67.Post-Termination Restricted Period. The “ Post-Termination Restricted Period ” for the Grantee shall commence on the Termination Date and shall expire upon the [●] month anniversary ofthe Termination Date. Notwithstanding the foregoing, if the Grantee’s employment, engagement, association or other similar affiliation with the KKR Group isterminated involuntarily and for reasons not constituting Cause, the Post-Termination Restricted Period will expire on the [●] 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, the KKR Group,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 tootherwise comply with all terms and conditions imposed on the Grantee during such “garden leave” or “notice” period, the applicable Post-Termination RestrictedPeriod shall be reduced by the amount of any such “garden leave” or “notice” period in which the Grantee complies with such 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 the KKR Group, asapplicable, the Grantee agrees that all work and deliverables that the Grantee prepares, creates, develops, authors, contributes to or improves, either alone or withthird parties, during the course of the Grantee’s employment, engagement, association or other similar affiliation with the KKR Group, within the scope of theservices provided to 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 other materials and all rights and intellectual property rightsthereunder including but not limited to rights of authorship (collectively, “ Work Product ”), are works-made-for-hire owned exclusively by the KKR Group. TheGrantee 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 such rights does not vest originally withthe KKR Group. The Grantee acknowledges and agrees that the Units issued pursuant to the Agreement are sufficient compensation for such assignment,transference and conveyance. To the extent the foregoing assignment is deemed to be invalid or unenforceable, Grantee grants the KKR Group, at no additionalcharge 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, association or other similar affiliation with theDesignated Service Recipient or for [●] years thereafter make any disparaging, defamatory, or derogatory written or oral statements or other communicationsabout or in reference to the Designated Service Recipient, the Partnership or any other member of the KKR Group or KKR Capstone (including their respectivebusinesses or reputations), including but not limited to any of their Clients, Prospective Clients, Portfolio Companies, or Covered Persons; provided that thisprovision shall not prevent the Grantee from (i) making reports to or testifying 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. D-710.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 the KKR Group, and that the restrictions contained herein are reasonable in all circumstances and necessary to protectthe legitimate business interests of the Company, to have and enjoy the full benefit of its business interests and goodwill. The Grantee further agrees andacknowledges that such restrictions will not unnecessarily or unreasonably restrict or otherwise limit the professional opportunities of the Grantee should his or heremployment, engagement, association or other similar affiliation with the KKR Group terminate, that the Grantee is fully aware of the Grantee’s obligations underthis Appendix D and that the livelihood of the Grantee is not impaired by the Grantee’s entry into the covenants contained herein. The Partnership and theDesignated Service Recipient shall have the right, exercisable in its sole discretion, to directly or indirectly make a payment to the Grantee or grant otherconsideration if, and to the extent, 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 the Grantee’s arrangements with theCompany. Notwithstanding anything to the contrary herein, this Appendix D does not constitute an employment, engagement or other similar agreement betweenthe Grantee and the Company, or any other of the KKR Related Entities (including but not limited to the Partnership), and shall not interfere with or otherwiseaffect any rights any such person or entity may have to terminate the Grantee’s employment, engagement, association or other similar affiliation at any time uponsuch 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 law for any breach of this Appendix Dwould be inadequate and that for any breach of this Appendix D, the Designated Service Recipient may terminate your employment, engagement, association orother similar affiliation with the Company and shall, in addition to any other remedies that may be available to it at law or in equity, or as provided for in thisAppendix D, be entitled to an 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 the Partnership and the DesignatedService Recipient shall not be required to prove, or offer proof, that monetary damages for a breach of this Appendix D would be difficult to calculate and that anyremedies at law would be inadequate for any breach of this Appendix D. The parties intend, acknowledge, and agree that each member of the KKR Group is a thirdparty beneficiary of this Agreement and is authorized to enforce any provision hereof by delivering a written statement expressing the intent to enforce theprovisions hereof to the Grantee or the Designated Service Recipient. The Grantee has executed this Agreement for the benefit of each member of the KKR Group. D-813.Amendment; Waiver. This Appendix D may not be amended, restated, supplemented or otherwise modified other than by an agreement in writing signed by the parties hereto;provided, however, that the Partnership, the KKR Group or the Designated Service Recipient may reduce the scope of, or waive compliance with any part of, anyobligation of the Grantee arising under this Appendix D, at any time without any action, consent or agreement of any other party. No failure to exercise and nodelay in exercising, on the part of any party, of any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partialexercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power orprivilege. The waiver of any particular right, remedy, power or privilege shall not affect or impair the rights, remedies, powers or privileges of any person withrespect to any subsequent default of 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 hereto shall be effective unless it is inwriting 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 Granteeshall be deemed to have been given to the Partnership and the Designated Service Recipient (and the Grantee acknowledges that the Partnership and the DesignatedService Recipient shall therefore have the right 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 Service Recipient by merger, consolidation orpurchase of all or substantially all of its assets, in which case such assignee shall be substituted for the Partnership and the Designated Service Recipient hereunderwith respect to the provisions so assigned and be bound under this Appendix D and by the terms of the assignment in the same manner as the Partnership and theDesignated Service Recipient was bound hereunder. Any purported assignment of this Appendix D in violation of this section shall be null and void. 15.Governing Law. This Appendix D 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 of any party, arisingout of, relating to or in connection with the validity, negotiation, execution, interpretation, performance, non-performance or termination of thisAppendix D (including the validity, scope and enforceability of this arbitration provision) (each a “ Dispute ”) shall be finally settled by arbitrationconducted by a single arbitrator in New York, New York in accordance with the then existing Rules of Arbitration of the International Chamber ofCommerce (the “ ICC ”). If the parties to the Dispute fail to agree on the selection of an arbitrator within 30 days of the receipt of the request forarbitration, the ICC shall make the appointment. The arbitrator shall be a lawyer and shall conduct the proceedings in the English language.Performance under this Appendix D shall continue if reasonably possible during any arbitration proceedings. D-9(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 Partnership or theDesignated Service Recipient may, in its sole discretion, require all Disputes or any specific Dispute to be heard by a court of law in accordancewith paragraph (e) below and, for the purposes 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 in connection with a Dispute at the timethat the Partnership or the Designated Service Recipient commences such proceedings in accordance with this paragraph (b), such Dispute shall bewithdrawn 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 purposeof compelling a party to arbitrate, seeking temporary or preliminary relief in aid of an arbitration hereunder or enforcing an arbitration award and,for the purposes of this paragraph (c), each party expressly consents to the application of paragraphs (e) and (f) below to any such suit, action orproceeding. (d)Except as required by law or as may be reasonably required in connection with judicial proceedings to compel arbitration, to obtain temporary orpreliminary judicial relief in aid of arbitration 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 for the purpose of the arbitration or anydocuments produced by another party in the proceedings not otherwise in the public domain. Judgment on any award rendered by an arbitrationtribunal may be entered in any court having jurisdiction 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 forum designated by thisparagraph (e) has a reasonable relation to this Appendix D, and to the parties' relationship with one another. The parties hereby waive, to the fullestextent permitted by applicable law, any objection which they now or hereafter may have to personal jurisdiction or to the laying of venue of anysuit, action or proceeding brought in any court referred to in the preceding sentence or pursuant to paragraphs (b) or (c) above and such partiesagree 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 forbreach of the provisions of this Appendix D would be difficult to calculate and that remedies at law would be inadequate, and they irrevocablyappoint the Secretary or General Counsel of 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 Designated Service Recipient) as such party’s agent forservice of process in connection with any such action or proceeding and agrees that service of process upon such agent, who shall promptly advisesuch party of any such service of process, shall be deemed in every respect effective service of process upon the party in any such action orproceeding. D-1017.Entire Agreement. This Appendix D contains the entire agreement and understanding among the parties hereto with respect to the subject matter of this Appendix D andsupersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoeverwith the Partnership, the Company, or KKR Holdings L.P. with respect to the subject matter of this Appendix D (including but not limited to any prior grantagreement for an equity award under the Plan that contains one or more appendices with respect to the subject matter of this Appendix D) or any Confidentialityand Restrictive Covenant Agreement previously executed with the Partnership, the Company or KKR Holdings L.P. The express terms of this Appendix D controland supersede any course of performance and any usage of the trade inconsistent 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 that is prohibited or unenforceablein any jurisdiction (including but not limited to the application, if applicable, of Rule 5.6 of the New York Rules of Professional Conduct (or successor rule)) shall,as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof and any suchprohibition or unenforceability in any 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 intent and the economic effect of theinvalid provision to give effect to the provision to the maximum extent permitted in such jurisdiction or in such case. Grantee specifically acknowledges thatGrantee has been provided with valuable consideration in exchange for the covenants set forth herein and, accordingly, such partial enforcement or reformation isnecessary to avoid frustrating the Company’s purpose in awarding the Grantee such consideration. 19.Interpretation . Notwithstanding anything contained in Article IV of the Agreement, the provisions of Sections 10 through 19 (inclusive) of this Appendix D shall governwith respect to, and shall be applicable only to the interpretation, administration and enforcement of, the provisions of this Appendix D, and shall not govern orotherwise apply to, or have any administrative or interpretive effect on, any other provisions of the remainder of the Agreement or any other of its Appendices. D-11APPENDIX E KKR & CO. L.P.2010 EqUITy INCENTIVE PLAN1. Purpose of the Plan The KKR & Co. L.P. 2010 Equity Incentive Plan (the “ Plan ”) is designed to promote the long term financial interests and growth of KKR & Co. L.P., aDelaware limited partnership (the “ Partnership ”) and its Affiliates by (i) attracting and retaining directors, officers, employees, consultants or other serviceproviders of the Partnership or any of its Affiliates, including but not limited to directors of KKR Management LLC, the Partnership’s general partner (the “General Partner ”) and (ii) aligning the interests of such individuals with those of the Partnership and its Affiliates by providing them with equity-based awardsbased on the common units of limited partner interest in the Partnership (the “ Common Units ”). 2. Definitions The 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 Plan has been delegated pursuant toSection 4 hereof. (c) Affiliate : With respect to any specified Person, any other Person that directly or indirectly through one or more intermediaries Controls, isControlled by or is under common control with such specified Person. As used herein, the term “ Control ” (including the terms “ Controlled by ” and “ undercommon 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 of voting 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 or relating to the CommonUnits 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 any Person, other than a Personapproved by the General Partner, becoming the general partner of the Partnership, (ii) the direct or indirect sale, transfer, conveyance or other disposition (otherthan by way of merger or consolidation) in one or more series of related transactions of all or substantially all of the combined assets of the Group Partnershipstaken as a whole to any Person other than a Permitted Person, (iii) the consummation of any transaction or a series of related transactions (including any merger orconsolidation) that results in any Person (other than a Permitted Person) becoming the beneficial owner of a majority of the controlling interests in any one or moreGroup Partnerships that together hold all or substantially all of the combined assets of the Group Partnerships taken as a whole, or (iv) the occurrence of any otherevent as determined by the Board to constitute a Change in Control. Solely for the purpose of this definition, the term “ person ” shall have the meaning given tosuch term under Section 13(d)(3) of the Act or any successor provision thereto; and for purposes of the Plan, the term “ beneficial owner ” shall have the meaninggiven to such term under Rule 13d-3 promulgated under the Act or any successor provision thereto, and the combined assets of the Group Partnerships shallexclude the portion of any such assets that are allocable to holders of any non-controlling interests in any consolidated subsidiaries. E-1(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 shallsuch date be prior to the date that limited partnership interests of the Partnership become listed and traded on the New York Stock Exchange or The NASDAQStock Market. (i) Employee Exchange Agreement : That certain Exchange Agreement, dated as of July 14, 2010, by and among KKR & Co. L.P., KKRManagement 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 if the Participant is anemployee 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, thePartnership or of any of its Affiliates, and (iii) a Participant’s services as an non-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 on the New York Stock Exchangeor The NASDAQ Stock Market (a “ U.S. Exchange ”) on that date (or, if no closing sale price is reported, the last reported sale price), (ii) if the Common Units arenot listed for trading on a U.S. Exchange, the closing sale price (or, if no closing sale price is reported, the last reported sale price) as reported on that date incomposite transactions for the principal national securities exchange registered pursuant to the Act on which the Common Units are listed, (iii) if the CommonUnits 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 SheetsLLC or a similar organization, or (iv) if the Common Units are not so quoted by Pink Sheets LLC or a similar organization, the average of the mid-point of the lastbid and ask prices for the Common Units on that date from a nationally recognized independent investment banking firm selected by the General Partner for thispurpose. (l) Group Partnerships : KKR Management Holdings L.P., a Delaware limited partnership, and KKR Fund Holdings L.P., a Cayman Islandexempted limited partnership, along with any partnership designated in the future as a “Group Partnership” by the Partnership. (m) Group Partnership Unit : A “Group Partnership Unit” as defined in the Pre-Listing Plan. E-2(n) KKR Group : 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 is managed, advisedor sponsored by the KKR Group (the “ Funds ”) and any other entity through which any of the foregoing directly or indirectly conducts its business, but shallexclude any company over which a Fund 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 the Plan. (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 its Affiliates, including but notlimited to any director of the General Partner, who is selected by the Administrator to participate in the Plan. (s) Permitted Person : The term “Permitted Person” means (i) an individual who (a) is an executive of the KKR Group, (b) devotes substantially allof his or her business and professional time to the activities of the KKR Group and (c) did not become an executive of the KKR Group or begin devotingsubstantially all of his or her business and professional time to the activities of the KKR Group in contemplation of a Change in Control or (ii) any Person in whichany one or more such individuals 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 otherequity-based award based in whole or in part on the fair market value of any equity unit or otherwise) 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. E-33. Common Units Subject to the Plan Subject to Section 9 hereof, the total number of Common Units which shall be available for issuance under the Plan shall be, as of the Effective Date, 15%of the Common Units outstanding as of the Effective Date on a fully converted and diluted basis (the “ Initial Plan Amount ”), of which all or any portion may beissued as Common Units. Notwithstanding the foregoing, beginning with the first fiscal year of the Partnership occurring after the Effective Date and continuingwith each subsequent fiscal year of the Partnership occurring thereafter, the aggregate number of Common Units covered by the Plan will be increased, on the firstday of each fiscal year of the Partnership occurring during the term of the Plan, by a number of Common Units equal to the positive difference, if any, of (x) 15%of the aggregate number of Common Units outstanding on the last day of the immediately preceding fiscal year of the Partnership minus (y) the Initial PlanAmount, as such amount may have been increased by this sentence in any prior fiscal year, unless the Administrator should decide to increase the number ofCommon Units covered by the Plan by a lesser amount on any such date. The issuance of Common Units or the payment of cash upon the exercise of an Award orany Pre-Listing Award or in consideration of the settlement, cancellation or termination of an Award or any Pre-Listing Award shall reduce the total number ofCommon Units covered by and available for issuance under the Plan, as applicable (with any Awards or Pre-Listing Awards settled in cash reducing the totalnumber of Common Units by the number of Common Units determined by dividing the cash amount to be paid thereunder by the Fair Market Value of oneCommon Unit on the date of payment), 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 number of Common Units equal to thenumber of Group Partnership Units so issued multiplied by the Exchange Rate (as defined in the Employee Exchange Agreement). Common Units which aresubject to Awards which are cancelled, forfeited, terminated or otherwise expired by their terms without the payment of consideration, and Common Units whichare used to pay the exercise price of any Award, may be granted again subject to Awards under the Plan. For the avoidance of doubt, Common Units which aresubject to Awards other than Options or Unit Appreciation Rights which are withheld to pay tax withholding obligations will be deemed not to have been deliveredand 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 thesum of (i) the number of Common Units available for issuance pursuant to the Plan but which are not subject to an outstanding Award or Pre-Listing Award as ofsuch date, (ii) the number of Common Units subject to outstanding Awards or Pre-Listing Awards as of such date and (iii) the number of Group Partnership Unitssubject to outstanding Pre-Listing Awards as of such date multiplied by the Exchange Rate (as defined in the Employee Exchange Agreement) as in effect on suchdate. For purposes of this Section 3, (A) an Option or Unit Appreciation Right that has been granted under the Plan or the Pre-Listing Plan will be considered to bean “outstanding” Award or Pre-Listing Award, as applicable, until is it exercised or cancelled, forfeited, terminated or otherwise expires by its terms, (B) aCommon Unit that has been granted as an Award under the Plan that is subject to vesting conditions will be considered an “outstanding” Award until the vestingconditions have been satisfied or the Award otherwise terminates or expires unvested by its terms, (C) a Group Partnership Unit that has been 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 conditionshave been satisfied or the Pre-Listing Award otherwise terminates or expires unvested by its terms and (D) any Award or Pre-Listing Award other than an Option,Unit Appreciation Right, Common Unit or Group Partnership Unit that is subject to vesting conditions will be considered to be an “outstanding” Award or Pre-Listing Award, as applicable, until it has been settled. E-44. Administration (a) Administration and Delegation . The Plan shall be administered by the Administrator. The Administrator may delegate the authority to grantAwards under the Plan to any employee or group of employees of the Partnership or of any Affiliate of the Partnership; provided that such delegation and grantsare consistent with applicable law and guidelines established by the Board from time to time. The Administrator may delegate the day-to-day administration of thePlan to any employee or group of employees of the Partnership or the General Partner or any of their respective Affiliates or a nationally recognized third-partystock plan administrator. (b) Substitution of Prior Awards . Awards may, in the discretion of the Administrator, be made under the Plan in assumption of, or in substitutionfor, outstanding awards previously granted by the Partnership, any Affiliate of the Partnership or any entity acquired by the Partnership or with which thePartnership combines. The number of Common Units underlying such substitute awards shall be counted against the aggregate number of Common Unitsavailable for Awards under the Plan. (c) Interpretation; Corrections; Final and Binding Decisions . The Administrator is authorized to interpret the Plan, to establish, amend and rescindany rules and regulations relating to the Plan, and to make any other determinations that it deems necessary or desirable for the administration of the Plan. TheAdministrator may correct any defect or supply any omission or reconcile any inconsistency in the Plan or Award agreement in the manner and to the extent theAdministrator deems necessary or desirable, without the consent of any Participant. Any decision of the Administrator in the interpretation and administration ofthe 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 notlimited to, Participants and their beneficiaries and successors). (d) Establishment of Award Terms . The Administrator shall have the full power and authority to establish the terms and conditions of any Awardconsistent with the provisions of the Plan and to waive any such terms and conditions at any time (including, without limitation, accelerating or waiving anyvesting conditions). (e) Payment of Taxes Due . The Administrator shall require payment of any amount it may determine to be necessary to withhold for federal, state,local or other taxes as a result of the exercise, grant or vesting of an Award. To the extent that such withholding arises in connection with the settlement of anAward with Common Units, the Administrator may, in its sole discretion, cause such payments to be funded by reducing the Common Units delivered uponsettlement by an amount of Common Units having a Fair Market Value equal to the amount of payments that would then be due (and if an Award is settled in cash,the Administrator may withhold cash in respect to such taxes due). The Administrator shall establish the manner in which any such tax obligation may be satisfiedby the Participant. 5. Limitations No Award may be granted under the Plan after the tenth anniversary of the Effective Date, but Awards theretofore granted may extend beyond that date. 6. Terms and Conditions of Options Options granted under the Plan shall be non‑qualified options for federal income tax purposes, and shall be subject to the foregoing and the following termsand conditions and to such other terms and conditions, not inconsistent therewith, as the Administrator shall determine: E-5(a) Option Price . The Option Price per Common Unit shall be determined by the Administrator, provided that, solely for the purposes of an Optiongranted under the Plan to a Participant who is a U.S. taxpayer, in no event will the Option Price be less than 100% of the Fair Market Value on the date an Optionis granted. (b) Exercisability . Options granted under the Plan shall be exercisable at such time and upon such terms and conditions as may be determined bythe Administrator, but in no event shall an Option be exercisable more than ten years after 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, or from time to time any part, of theCommon Units for which it is then exercisable. For purposes of this Section 6 of the Plan, the exercise date of an Option shall be the later of the date a notice ofexercise is received by the Partnership and, if applicable, the date payment is received by the Partnership pursuant to clauses (A), (B), (C) or (D) in the followingsentence. (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 theAdministrator, pursuant to one or more of the following methods: (A) in cash or its equivalent (e.g., by personal check); (B) in Common Units having a FairMarket Value equal to the aggregate Option Price for the Common Units being purchased and satisfying such other requirements as may be imposed by theAdministrator; provided that such Common Units have been held by the Participant for such period as may be established from time to time by the Administratorin order to avoid adverse accounting treatment applying generally accepted accounting principles; (C) partly in cash and partly in such Common Units; (D) if thereis a public market for the Common Units at such time, through the delivery of irrevocable instructions to a broker to sell Common Units obtained upon the exerciseof the Option and to deliver promptly to the Partnership an amount out of the proceeds of such sale equal to the aggregate Option Price for the Common Unitsbeing purchased, 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 other rights of a holder with respect toCommon Units subject to an Option until the Participant has given written notice of exercise of the Option, paid in full the Option Price for such Common Unitsand, if applicable, has satisfied any other conditions imposed by the Administrator pursuant to the Plan. (d) Attestation . Wherever in this Plan or any agreement evidencing an Award a Participant is permitted to pay the Option Price of an Option ortaxes relating to the exercise of an Option by delivering Common Units, the Participant may, subject to procedures satisfactory to the Administrator, satisfy suchdelivery requirement by presenting proof of beneficial ownership of such Common Units, in which case the Partnership shall treat the Option as exercised withoutfurther payment and/or shall withhold such number of Common Units from the Common Units acquired by the exercise of the Option, as appropriate. E-67. 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 Unit Appreciation Right in connectionwith 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 relatedOption is granted or at any time prior to the exercise or cancellation of the related Option, (B) shall cover the same number of Common Units covered by an Option(or such lesser number of Common Units as the Administrator may determine) and (C) shall be subject to the same terms and conditions as such Option except forsuch additional limitations as are contemplated by this Section 7 (or such additional limitations as may be included in an Award agreement). (b) Exercise Price . The exercise price per Common Unit of a Unit Appreciation Right shall be an amount determined by 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 lessthan 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 whois a U.S. taxpayer, in the case of a Unit Appreciation Right that was not granted in conjunction with an Option, the exercise price per Unit Appreciation Right shallnot 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 upon exercise 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 ofCommon Units covered by the Unit Appreciation Right. Each Unit Appreciation Right granted in conjunction with an Option, or a portion thereof, shall entitle aParticipant to surrender to the Partnership the unexercised Option, or any portion thereof, and to receive from the Partnership in exchange therefore an amountequal to (i) the excess of (A) the Fair Market Value on the exercise date of one Common Unit over (B) the Option Price per Common Unit, times (ii) the number ofCommon Units covered by the Option, or portion thereof, which is surrendered. Payment shall be made in Common Units or in cash, or partly in Common Unitsand partly in cash (any such Common 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 the Partnership of written notice of exercisestating the number of Common Units with respect to which the Unit Appreciation Right is being exercised. The date a notice of exercise is received by thePartnership shall be the exercise date. The Administrator, in its sole discretion, may determine that no fractional Common Units will be issued in payment for UnitAppreciation Rights, but instead cash will be paid for the fractional Common Units and the number of Common Units to be delivered will be rounded downward tothe next whole Common Unit. (e) Limitations . The Administrator may impose, in its discretion, such conditions upon the exercisability of Unit Appreciation Rights as it maydeem fit, but in no event shall a Unit Appreciation Right be exercisable more than ten years after the date it is granted. E-78. Other Unit-Based Awards The Administrator, in its sole discretion, may grant or sell Awards of Common Units, restricted Common Units, deferred restricted Common Units,phantom restricted Common Units or other Common Unit-based awards based in whole or in part on the 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 vest with respect to, one or more Common Units (or the equivalent cash value of such Common Units) upon thecompletion of a specified period of service, the occurrence of an event and/or the attainment of performance objectives. Other Unit-Based Awards may be grantedalone 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 OtherUnit-Based Awards will be made, the number of Common Units to be awarded under (or otherwise related to) such Other Unit-Based Awards; whether such OtherUnit-Based Awards shall be settled in 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 Common Units so awarded and issuedshall be fully paid and non-assessable). 9. Adjustments Upon Certain Events Notwithstanding any other provisions in the Plan to the contrary, the following provisions shall apply to all Awards granted under the Plan: (a) Equity Restructurings . In the event of any extraordinary Common Unit distribution or split, recapitalization, rights offering, split-up or spin-offor any other event that constitutes an “equity restructuring” (as defined under Financial Accounting Standards Board (FASB) Accounting Standards Codification718) with respect to Common Units, the Administrator shall, in the manner determined appropriate or desirable by the Administrator and without liability to anyperson, 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) with respectto 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 othersecurities of the Partnership (or number and kind of other securities or property) subject to outstanding Awards or to which outstanding Awards relate, (B) theOption Price or exercise price of any Option or Unit 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, repurchaseor exchange of Common Units or other securities of the Partnership, issuance of warrants or other rights to purchase Common Units or other securities of thePartnership, or other similar corporate transaction or event that affects the Common Units such that an adjustment is determined by the Administrator in itsdiscretion to be appropriate or desirable, the Administrator in its sole discretion and without liability to any person shall make such substitution or adjustment, ifany, as it deems to be equitable as to (i) the number of Common Units or other securities of the Partnership (or number and kind of other securities or property)with respect to which Awards may be granted 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 which outstanding Awards relate, (B) theOption Price or exercise price of any Option or Unit Appreciation Right and (C) any performance targets or other applicable terms. E-8(c) Change in Control . In the event of a Change in Control after the Effective Date, (i) if determined by the Administrator in the applicable Awardagreement or otherwise, any outstanding Awards then held by Participants which are unexercisable or otherwise unvested or subject to lapse restrictions shallautomatically be deemed exercisable or otherwise vested or no longer subject to lapse restrictions, as the case may be, as of immediately prior to such Change inControl and (ii) the Administrator may (subject to Sections 16 and 18), but shall not be obligated to: (A) accelerate, vest or cause the restrictions to lapse withrespect to all or any portion of an Award; (B) cancel such Awards for fair value (as determined in the sole discretion of the Administrator) which, in the case ofOptions 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 thesame number of Common Units subject to such Options or Unit Appreciation Rights (or, if no consideration is paid in any such transaction, the Fair Market Valueof the Common Units subject to such Options or Unit Appreciation Rights) over the aggregate exercise price of such Options or Unit Appreciation Rights; (C)provide that any Options or Unit Appreciation Right having an exercise price per Common Unit that is greater than the per Common Unit value of theconsideration to be paid in the Change in Control transaction to a holder of a Common Unit shall be cancelled without payment of any consideration therefor; (D)provide for the issuance of substitute Awards that will substantially preserve the otherwise applicable terms of any affected Awards previously granted hereunderas determined by the Administrator in its sole discretion; or (E) provide that for a period of at least 15 days prior to the Change in Control, such Options shall beexercisable as to all shares subject thereto and that upon the occurrence of the Change in Control, such Options shall terminate and be of no further force andeffect. 10. No Right to Employment or Awards The granting of an Award under the Plan shall impose no obligation on the Partnership or any Affiliate to continue the Employment of a Participant andshall not lessen or affect the Partnership’s or Affiliate’s right to terminate the Employment of such Participant. No Participant or other Person shall have any claimto be granted any Award (including as a result of recurring prior Award), and there is no obligation for uniformity of treatment of Participants, or holders orbeneficiaries of Awards. No Award shall constitute compensation for purposes of determining any benefits under any benefit plan. The terms and conditions ofAwards and the Administrator’s determinations and interpretations with respect thereto need not be the same with respect to each Participant (whether or not suchParticipants are similarly situated). 11. Successors and Assigns The Plan shall be binding on all successors and assigns of the Partnership and a Participant, including without limitation, the estate of such Participant andthe executor, administrator or trustee of such estate, or any receiver or trustee in bankruptcy or representative of the Participant’s creditors. 12. Nontransferability of Awards Unless otherwise determined or approved by the Administrator, an Award shall not be transferable or assignable by the Participant otherwise than by will orby the laws of descent and distribution. Any transfer or assignment in violation of the prior sentence shall be null and void. An Award exercisable after the deathof a Participant may be exercised by the legatees, personal representatives or distributees of the Participant. 13. Amendments or Termination The Board may amend, alter or discontinue the Plan or any outstanding Award, but no amendment, alteration or discontinuation shall be made, without theconsent of a Participant, if such action would materially diminish any of the rights of the Participant under any Award theretofore granted to such Participant underthe Plan; provided , however , that the Administrator may without the Participant’s consent (a) amend the Plan or any outstanding Award in such manner as itdeems necessary to permit the granting of Awards meeting the requirements of the Code or other applicable laws (including, without limitation, to avoid adversetax consequences to the Partnership or to Participants as provided in Section 14 and Section 18 below), and (b) amend any outstanding Awards in a manner that isnot adverse (other than in a de minimis manner) to a Participant, except as otherwise may be permitted pursuant to Section 9 hereof or as is otherwise contemplatedpursuant to the terms of the Award, without the Participant’s consent. E-914. International Participants With respect to Participants who reside or work outside the United States of America, the Administrator may, in its sole discretion, amend the terms of thePlan or Awards with respect to such Participants in order to conform such terms with the requirements of local law or to obtain more favorable tax or othertreatment for a Participant, the Partnership or an Affiliate. 15. Choice of Law The Plan shall be governed by and construed in accordance with the law of the State of New York without giving effect to any otherwise governingprinciples of conflicts of law that would apply the laws of another jurisdiction. 16. Other Laws; Restrictions on Transfer of Common Units The Administrator may refuse to issue or transfer any Common Units or other consideration under an Award if, acting in its sole discretion, it determinesthat the issuance or transfer of such Common Units or such other consideration might violate any applicable law or regulation or entitle the Partnership to recoverthe same under Section 16(b) of the Act, as amended, and any payment tendered to the Partnership by a Participant, other holder or beneficiary in connection withthe exercise of such Award shall be promptly refunded to the relevant Participant, holder or beneficiary. Without limiting the generality of the foregoing, no Awardgranted hereunder shall be construed as an offer to sell securities of the Partnership, and no such offer shall be outstanding, unless and until the Administrator in itssole discretion has determined that any such offer, if made, would be in compliance with all applicable requirements of the United States federal and any otherapplicable securities laws.17. Effectiveness of the Plan The Plan shall be effective as of the Effective Date. E-1018. Section 409A To the extent applicable, this Plan and Awards issued hereunder shall be interpreted in accordance with Section 409A of the Code and Department ofTreasury regulations and other interpretative guidance issued thereunder, including without limitation any such regulations or other guidance that may be issuedafter the Effective Date. Notwithstanding other provisions of the Plan or any Award agreements issued thereunder, no Award shall be granted, deferred,accelerated, extended, paid out or modified 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 the Code, payments in respect of anyAward under the Plan may not be made at the time contemplated by the terms of the Plan or the relevant Award agreement, as the case may be, without causing theParticipant holding such Award to be subject to taxation under Section 409A of the Code, consistent with the provisions of Section 13(a) above, the Partnershipmay take whatever actions the Administrator determines necessary or appropriate to comply with, or exempt the Plan and Award agreement from the requirementsof Section 409A of the Code and related Department of Treasury guidance and other interpretive materials as may be issued after the Effective Date including,without limitation, (a) adopting such amendments to the Plan and Awards and appropriate policies and procedures, including amendments and policies withretroactive effect, that the Administrator determines necessary or appropriate to preserve the intended tax treatment of the benefits provided by the Plan andAwards hereunder and/or (b) taking such other actions as the Administrator determines necessary or appropriate to avoid the imposition of an additional tax underSection 409A of the Code, which action may include, but is not limited to, delaying payment to a Participant who is a “specified employee” within the meaning ofSection 409A of the Code until the first day following the six-month period beginning on the date of the Participant’s termination of Employment . ThePartnership shall use commercially reasonable 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 to Participants with respect to thisSection 18 . E-11FIDELITy 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 Name Participant Signature:Electronic Signature Date:Acceptance Date Exhibit 10.25 PUBLIC COMPANY HOLDINGS UNIT AWARD AGREEMENTOFKKR & CO. L.P.(Executive Officers) CONFIDENTIAL Table of Contents Page ARTICLE I GRANT OF PUBLIC COMPANY HOLDINGS UNITS2 Section 1.1. Grant of Public Company Holdings Units; Conditions of Grant2 Section 1.2. REUs and Agreement Subject to Plan; Administrator2 ARTICLE II VESTING and SETTLEMENT OF REUS3 Section 2.1. Vesting of REUs3 Section 2.2. Settlement of REUs4 Section 2.3. No Distribution Payments5 ARTICLE III RESTRICTIONS ON TRANSFERS AND OTHER LIMITATIONS5 Section 3.1. Transfer Restrictions on REUs5 Section 3.2. Confidentiality and Restrictive Covenants5 Section 3.3. Post-Settlement Transfer Restrictions on Common Units5 Section 3.4. Transfers to Other Holders7 Section 3.5. Minimum Retained Ownership Requirement7 ARTICLE IV MISCELLANEOUS8 Section 4.1. Governing Law8 Section 4.2. Arbitration9 Section 4.3. Remedies; Recoupment; Right to Set-Off10 Section 4.4. Amendments and Waivers10 Section 4.5. Withholding11 Section 4.6. Notices12 Section 4.7. Entire Agreement; Termination of Agreement; Survival12 Section 4.8. Severability12 Section 4.9. Binding Effect13 Section 4.10. Appendices13 Section 4.11. Further Assurances13 Section 4.12. Interpretation; Defined Terms; Section 409A; Employment with Designated Service Recipient; Headings13 Section 4.13. Counterparts14 APPENDIX 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-1 iPUBLIC COMPANy HOLDINGS UNIT AWARD AGREEMENTOFKKR & CO L.P.This PUBLIC COMPANy HOLDINGS UNIT AWARD AGREEMENT (this “ Agreement ”) of KKR & CO L.P. (the “ Partnership ”) is made by andbetween the Partnership and the undersigned (the “ Grantee ”). Capitalized terms used herein and not otherwise defined herein or in the KKR & Co. L.P. 2010Equity Incentive Plan, as amended from time to time (the “ Plan ”), shall be as defined in Appendix A attached hereto and the Plan is hereby attached as AppendixE and incorporated by reference herein.RECITALSWHEREAS , the general partner of the Partnership has determined it is in the best interests of the Partnership to provide the Grantee with this Agreement pursuantto 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 bound hereby, the parties hereto agree tothe following:ARTICLE IGRANT 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 attached hereto as Appendix B (the “ GrantDate ”), the number of “public company holdings units”, which are restricted equity units set forth in the REU Grant Certificate attached hereto, subject to theterms and conditions of this Agreement. Each restricted equity unit that is granted pursuant to this Agreement represents the right to receive delivery of oneCommon Unit, subject to any adjustment pursuant to Section 9 of the Plan (each such restricted equity unit, an “ REU ”). Notwithstanding the foregoing, the grantof REUs hereunder is conditioned upon the Grantee’s agreement to the covenants and obligations contained in the Confidentiality and Restrictive CovenantObligations 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 are any express differences orinconsistencies between the provisions of the Plan and this Agreement, the provisions of this Agreement shall govern. For the avoidance of doubt, the Partnershipmay delegate to any employee of the KKR Group its duties and powers hereunder, and any reference to the “Administrator” contained herein shall be deemed toinclude any such delegate. 2ARTICLE IIVESTING 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, as applicable, as specifiedin the REU Grant Certificate attached hereto, the REUs shall become vested on such 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 are forfeited pursuant toSection 2.1(b) and (c) below: (A) the Grantee’s Employment terminates due to the Grantee’s Retirement, if applicable, then allRetirement REUs shall, in the discretion of the Administrator, be fully vested as a result thereof; (B) the Grantee dies or experiences aDisability, then all unvested REUs shall be vested as a result thereof, provided that if the Grantee is not an employee of the KKRGroup, then any vesting of unvested REUs described in this clause (B) shall be in the discretion of the Administrator; or (C) thereoccurs a Change in Control prior to any termination of the Grantee’s Employment, then all or any portion of any unvested REUs may,in the discretion of the Administrator, be vested as a result thereof. Notwithstanding the foregoing, if the Partnership receives anopinion of counsel that there has 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 deemed unlawful and/ordiscriminatory, then the Partnership will not apply the favorable treatment at the time the Grantee’s Employment terminates due to theGrantee’s Retirement under clause (A) above, and the REUs will be treated as set forth in Section 2.1(a)(i), 2.1(b), 2.1(c) or the otherprovisions 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 this Agreement.(b)If the Grantee’s Employment terminates for any reason other than due to the Grantee’s death, Disability or Retirement, each as provided for inSection 2.1(a) above, all then unvested REUs (including any REUs that are not Retirement REUs) shall immediately terminate and be forfeitedwithout consideration, and no Common Units shall 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 the Grantee is no longer activelyproviding services (even if still considered employed or engaged under local Law) and will not be extended by any notice period mandated underlocal Law (e.g., active Employment would not include a period of “garden leave” or similar period pursuant to local Law) except as may beotherwise agreed in writing by the Partnership or the Designated Service Recipient with the Grantee; the Administrator shall have the exclusivediscretion to determine when the Grantee is no longer actively employed or engaged for purposes of the REUs. 3Section 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) the related Service Vesting Date hasalso occurred, then with respect to such percentage of REUs set forth next to the applicable Service Vesting Date on the REU Grant Certificate,such REU shall be Settled as soon as administratively practicable on or following the applicable Service Vesting Date for such REU; providedthat the Administrator may determine that such Settlement may instead occur on or as soon as administratively practicable after the first day ofthe next permissible trading window of Common Units that opens for employees of the KKR Group to sell Common Units (provided that in anyevent such Settlement shall not be later than the time permitted under Section 409A, if applicable). For the avoidance of doubt, the Settlement ofany REUs that become vested pursuant 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 as set forth on the REU GrantCertificate pursuant to Section 2.1(a)(i) shall be Settled at each such Service Vesting Date in accordance with the foregoing sentence. The dateon which any REU is to be Settled hereunder is referred to as a “ Delivery Date. ” The Settlement of each REU shall be effected in accordancewith, 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 the Partnership delivering to the Granteeeither (i) the number of Common Units equal to the number of REUs that are to be Settled on such Delivery Date pursuant to Section 2.2(a)above or (ii) an amount of cash, denominated in U.S. dollars, equal to the Fair Market Value of the foregoing number of Common Units (a “Cash Payment ”). The Administrator may elect in its sole discretion whether to Settle the REUs in Common Units or by a Cash Payment, and inthe case of the Cash Payment, whether to have the Cash Payment delivered by the member of the KKR Group that employs or engages theGrantee 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 applicable Delivery Date and solely to theextent permitted under Section 409A, if applicable, the Partnership may impose such other conditions and procedures in relation to theSettlement of REUs as it may reasonably determine. In addition to the foregoing and notwithstanding anything else in this Agreement, theAdministrator may require that any 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 the Administrator.(d)Any of the foregoing payments or deliveries shall in all instances be subject to Sections 4.3 and 4.5 below, as applicable. 4Section 2.3. No Distribution PaymentsThe REUs granted to the Grantee hereunder do not include the right to receive any distribution payments. ARTICLE IIIRESTRICTIONS 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 any Family Related Holder) withoutthe prior written consent of the Administrator, which consent may be given or withheld, or made subject to such conditions (including the receiptof such legal or tax opinions and other documents 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 accordancewith Section 3.4.(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 Restrictive Covenant Obligations contained inAppendix D, which obligations are incorporated by reference herein, and any other agreements that the Grantee has entered into with the Designated ServiceRecipient, the Partnership, KKR Holdings L.P., KKR Associates Holdings L.P., or any other member of the KKR Group, with respect to the Grantee’s obligationto keep confidential the nonpublic, confidential or proprietary information of the KKR Group and its Affiliates and any restrictive covenants concerning theGrantee’s obligations not to compete with the KKR Group or solicit its clients or employees after termination of Employment), as such agreements may beamended from time to time. If the Grantee is a limited partner of KKR Holdings L.P. or KKR Associates Holdings L.P., the Grantee further acknowledges andagrees that references to a Confidentiality and Restrictive Covenant Agreement in the limited partnership agreements of KKR Holdings L.P. and KKR AssociatesHoldings L.P. shall be deemed 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 on the REU Grant Certificate. (a)The Grantee may not Transfer all or any portion of the Grantee’s Transfer Restricted Common Unit (as defined below) (including to any FamilyRelated Holder) without the prior written consent of the Administrator, which consent may be given or withheld, or made subject to suchconditions (including the receipt of such legal or tax opinions and other documents that the Partnership may require) as are determined by theAdministrator, in its sole discretion. 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 TransferRestricted Common Units by the Grantee to Other Holders permitted by the Administrator pursuant to Section 3.3(a) shall be made inaccordance with Section 3.4. 5(b)A “ Transfer Restricted Common Unit ” refers to all Common Units delivered upon Settlement of a vested REU until (i) the first anniversaryof the Service Vesting Date related thereto, in the case of 50% of such Common Units and (ii) the second anniversary of such Service VestingDate, 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 its sole discretion, any of the Grantee’scovenants as stated in the Confidentiality and Restrictive Covenant Obligations contained in Appendix D, the Administrator, in its solediscretion, may direct that the Grantee forfeit all or a portion of the Transfer Restricted Common Units held by the Grantee in an amountdetermined by the Administrator in its sole discretion. The Grantee hereby consents and agrees to immediately surrender and deliver suchTransfer Restricted Common Units to the Partnership, without the payment of any consideration, receipt of any further notice or fulfillment ofany other condition.(d)If for any reason the Grantee’s Employment is terminated for Cause, unless otherwise determined by the Administrator in writing, all TransferRestricted Common Units held by the Grantee shall automatically be forfeited by the Grantee without payment of any consideration. TheGrantee hereby consents and agrees to immediately surrender and deliver such Transfer Restricted Common Units to the Partnership, without thepayment of any consideration, 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 require no additional procedures onthe part of the Partnership or its Affiliates. The Grantee hereby acknowledges that the Administrator may take any and all actions to reflect theforfeiture of Transfer Restricted Common Units hereunder, including but not limited to the delivery of a written notice to the institutioncontemplated in Section 3.3(a) that holds the Transfer Restricted Common Units, and agrees to take any further action to memorialize suchforfeiture 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 any conditions or furtherrequirements, as determined by the Administrator in its sole discretion. Without limiting the foregoing, (i) the Administrator may imposeequivalent transfer or forfeiture restrictions on the Grantee’s other equity, if any, held in KKR Holdings, L.P., the Partnership or any of theirrespective Affiliates (or any of their respective 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 for purposes of the governingdocuments of Grantee’s other equity, 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 the Administrator waives the application of this Section 3.3 to the Transfer Restricted CommonUnits. 6(g)For the avoidance of doubt, the provisions of this Section 3.3 also apply in the event the Grantee receives a Cash Payment in Settlement of avested 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 null and 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 permitted unless the Administrator provides itsprior written consent pursuant Section 3.1 or Section 3.3. Prior to a Transfer of any REUs or Transfer Restricted Common Units to any OtherHolder, the Other Holder must consent in writing to be bound by this Agreement as an Other Holder and deliver such consent to theAdministrator.(b)If an REU or Transfer Restricted Common Unit is held by an Other Holder, such Other Holder shall be bound by this Agreement in the samemanner and to the same extent as the Grantee is bound hereby (or would be bound hereby had the Grantee continued to hold such REU orTransfer Restricted Common Unit). Any Transfer to an Other Holder must be undertaken in compliance with Section 3.1(a). For the avoidanceof doubt, any vesting requirement of Section 2.1 above that applies to an REU or transfer or forfeiture restrictions that are applicable to TransferRestricted Common Units (including those Transfer Restricted Common Units delivered upon Settlement of a Transferred REU) held by anOther Holder shall be satisfied or deemed to be satisfied under this Article III only to the extent that such vesting requirement or transfer orforfeiture restrictions, as applicable, would otherwise have been satisfied if the REU or Transfer Restricted Common Unit had not beenTransferred by the Grantee, and any 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 beheld by the Grantee if the REU or Transfer Restricted Common Unit had not been Transferred by the Grantee to such Other Holder.(c)In the event of a property settlement or separation agreement between the Grantee and his or her spouse, the Grantee agrees that he or she shalluse reasonable efforts to retain all of his or her REUs and Transfer Restricted Common Units and shall reimburse his or her spouse for anyinterest he or she may have under this Agreement out of funds, assets or proceeds separate and distinct from his or her interest under thisAgreement.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 on the REU Grant Certificate. 7(a)For so long as the Grantee retains his or her Employment, the Grantee (collectively with all Family Related Holders who become Other Holders,if applicable) must continuously hold an aggregate number of Common Unit Equivalents that is at least equal to fifteen percent (15%) of thecumulative amount of (x) all REUs granted to the Grantee under this Agreement and (y) all other REUs designated as “public company holdingsunits” that have been or are hereafter granted to the Grantee under the Plan, in each case that have become vested pursuant to Section 2.1(a) (orsimilar provision in any other “public company holdings units” grant agreement), prior to any net Settlement permitted by Section 4.5.(b)“ Common Unit Equivalents ” means any combination of: (i) REUs that are or become vested pursuant to Section 2.1 of this Agreement andCommon Units delivered upon Settlement of any such REUs (even if they are Transfer Restricted Common Units) and (ii) REUs designated as“public company holdings units” granted to the Grantee under the Plan that are or become vested pursuant to a provision similar to Section 2.1of this Agreement and Common Units delivered upon Settlement of any such REUs (even if a provision similar to the transfer restrictions onTransfer 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 any conditions or furtherrequirements, as determined by the Administrator in its sole discretion. Without limiting the foregoing, (i) the Administrator may imposeequivalent 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 are waived, and (ii) the Granteehereby consents in advance to the imposition of such equivalent transfer restrictions for purposes of the governing documents of Grantee’s otherequity, if any, held in KKR Holdings, L.P., the Partnership or any of their respective Affiliates (or any of their respective equity incentive plans)to the extent the Administrator 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 tothe contrary contained in this Agreement (including, without limitation, Section 4.7) this Section 3.5 shall survive any termination of thisAgreement.ARTICLE IVMISCELLANEOUSSection 4.1. Governing LawThis Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, United States of America, without giving effect to anyotherwise governing principles of conflicts of law that would apply the Laws of another jurisdiction. 8Section 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 connectionwith the validity, negotiation, execution, interpretation, performance or non-performance of this Agreement (including the validity, scope andenforceability of this arbitration provision) shall be finally settled by arbitration conducted by a single arbitrator in New York, New York inaccordance with the then-existing Rules of Arbitration of the International Chamber of Commerce. 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 International Chamber of Commerce shall make theappointment. The arbitrator shall be a lawyer and shall conduct the proceedings in the English language. Performance under this Agreementshall continue if reasonably possible during any arbitration proceedings. Except as required by Law or as may be reasonably required inconnection with ancillary judicial proceedings to compel arbitration, to obtain temporary or preliminary judicial relief in aid of arbitration, or toconfirm or challenge an arbitration award, the arbitration proceedings, including any hearings, shall be confidential, and the parties shall notdisclose any awards, any materials in the proceedings created for the purpose of the arbitration, or any documents produced by another party inthe proceedings not otherwise in the public domain. Judgment on any award rendered by an arbitration tribunal may be entered in any courthaving jurisdiction thereover.(b)Notwithstanding the provisions of Section 4.2(a), the Partnership may bring an action or special proceeding in any court of competentjurisdiction for the purpose of compelling the Grantee to arbitrate, seeking temporary or preliminary relief in aid of an arbitration hereunder, orenforcing an arbitration award and, for the purposes of this clause (b), the Grantee (i) expressly consents to the application of Section 4.2(c)below to any such action or proceeding, (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) irrevocably appoints the Secretary or GeneralCounsel of the Partnership (or any officer of the Partnership) at the address identified for the Partnership as set forth in Section 4.6 below as suchGrantee’s agent for service of process in connection with any such action or proceeding and agrees that service of process upon such agent, whoshall promptly advise such Grantee of any such service of process, shall be deemed in every respect effective service of process upon theGrantee in any such action or proceeding.(c)EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE U.S. FEDERAL AND STATE COURTSLOCATED IN NEW YORK, NEW YORK FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN ACCORDANCE WITHTHE PROVISIONS OF THIS SECTION 4.2, OR ANY JUDICIAL PROCEEDING ANCILLARY TO AN ARBITRATION ORCONTEMPLATED ARBITRATION ARISING OUT OF OR RELATING TO OR CONCERNING THIS AGREEMENT. Such ancillaryjudicial proceedings include any 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 by this clause (c) have areasonable relation to this Agreement and to the parties’ relationship with one another. The parties hereby waive, to the fullest extent permittedby applicable Law, any objection which they now or hereafter may have to personal jurisdiction or to the laying of venue of any such ancillarysuit, action or proceeding referred to in this Section 4.2 brought in any court referenced therein and such parties agree not to plead or claim thesame. 9Section 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 by any party shall not preclude orwaive its right to use any or all other remedies. Said rights and remedies are given in addition to any other rights the parties may have by Law orunder 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 Act and any rules promulgatedthereunder and any other similar Laws including but not limited to the European Directives 2011/61/EU, 2013/36/EU and 2014/91/EU, theAdministrator may specify in any other document or a policy to be incorporated into this Agreement by reference, that the Grantee’s rights,payments, and benefits with respect 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 which may be owed to the Partnershipor its Affiliates by the Grantee under this Agreement, any other relationship or otherwise. The Grantee hereby expressly authorizes thePartnership and its Affiliates to take any and all actions on the Grantee’s behalf (including, without limitation, payment, credit and satisfaction ofamounts owed) in connection 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 Certificate attached as Appendix B hereto,the Additional Terms and Conditions attached as Appendix C hereto, the Confidentiality and Restrictive Covenant Obligations attached asAppendix D hereto, and any other provisions as may be required to be appended to this Agreement under applicable local Law) may beamended, supplemented, waived or modified only in accordance with Section 4(c) of the Plan or Section 13 of the Plan, as applicable, or as maybe required for purposes of compliance or enforceability with applicable local Law; provided, however, that the REU Grant Certificate shall bedeemed amended from time to time to reflect any adjustments provided for under the Plan.(b)No failure or delay by any party in exercising any right, power or privilege hereunder (other than a failure or delay beyond a period of timespecified herein) shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof orthe exercise of any other right, power or privilege. 10Section 4.5. WithholdingRegardless of any action the Partnership or the Designated Service Recipient takes with respect to any or all income tax, social insurance, payroll tax, payment onaccount or other tax-related items related to the Grantee’s participation in the Plan and legally applicable to the Grantee (“ Tax-Related Items ”), the Granteeacknowledges that the ultimate liability for all Tax-Related Items is and remains the Grantee’s responsibility and may exceed the amount actually withheld by thePartnership or the Designated Service 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, thegrant, vesting or Settlement of the REUs, the delivery of Common Units or a Cash Payment upon Settlement of the REUs, the lapse of any restrictions imposed onthe Grantee’s Transfer Restricted Common Units, the subsequent sale of Common Units acquired under the Plan and the receipt of any distributions; and (2) do notcommit to and are under no obligation to structure the terms of the REUs or any aspect of the REUs to reduce or eliminate the Grantee’s liability for Tax-RelatedItems or achieve any particular tax result. Further, if the Grantee has become subject to tax in more than one jurisdiction, the Grantee acknowledges that thePartnership and/or the Designated Service Recipient (or the Affiliate formerly employing, engaging or retaining the Grantee, as applicable) may be required towithhold or account for Tax-Related Items in more than one jurisdiction.Prior to any relevant taxable or tax withholding event, as applicable, the Grantee will pay or make adequate arrangements satisfactory to the Partnership and/or theDesignated Service Recipient to satisfy all Tax-Related Items. In this regard, the Grantee authorizes the Partnership and/or the Designated Service Recipient, ortheir respective agents, at their discretion, to satisfy 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 the Partnership and/or theDesignated Service Recipient; or(b)withholding from proceeds of the sale of Common Units delivered upon Settlement of the REUs either through a voluntary sale or through amandatory sale arranged by the Partnership (on the Grantee’s behalf pursuant to this authorization); 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 considering applicable minimum statutory withholdingamounts or other applicable withholding rates. If the obligation for Tax-Related Items is satisfied by withholding in Common Units, for tax purposes, the Granteeis deemed to have been issued the full number of Common Units subject to the Settled Common Units, notwithstanding that a number of the Common Units areheld back solely for 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 the Partnership or the DesignatedService Recipient may be required to withhold or account for as a result of the Grantee’s participation in the Plan that cannot be satisfied by the means previouslydescribed. The Partnership may refuse to issue or deliver the Common Units, the Cash Payment or the proceeds of the sale of Common Units, if the Grantee failsto comply with the Grantee’s obligations in connection with the Tax-Related Items. 11Section 4.6. NoticesAll notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly givenupon receipt) by delivery in person, by courier service, by fax or by registered or certified mail (postage prepaid, return receipt requested) to the respective partiesat the following addresses (or at such other address for a party 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 4200New 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 the Designated 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 hereof and supersedes all prioragreements and understandings, whether oral or written, pertaining thereto. The Grantee acknowledges that the grant of REUs provided forunder this Agreement is in full satisfaction of any and all grants of equity or equity-based awards that representatives of the Partnership or itsAffiliates, on or prior to the date hereof, 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 or Transfer Restricted Common Unitsthat have been granted or delivered, as applicable, hereunder. Notwithstanding anything to the contrary herein, this Article IV shall survive anytermination 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, or public policy, all otherconditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions is notaffected in any manner materially adverse to any party. Upon a determination that any term or other provision is invalid, illegal or incapable of being enforced, theparties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptablemanner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible. 12Section 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 of Sections 10 through 19(inclusive) of Appendix D shall govern solely with respect to, and shall be applicable only to the interpretation, administration and enforcement of, the provisionsof Appendix D, but not to any other provisions of this Agreement or any other of its Appendices, including but not limited to Sections 3.2 and 3.3(c) of thisAgreement. For the further avoidance of doubt, and without limiting the foregoing sentence, Sections 3.2 and 3.3(c) of this Agreement shall only be governed by,and shall only be subject to administration and enforcement under, the provisions of this Article IV, and shall not be governed by or subject 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 to carry out the purposes and intent of thisAgreement.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 beapplicable. Unless otherwise specified, all references herein to “Articles,” “Sections” and clauses shall refer to corresponding provisions of thisAgreement. The word “including” is not meant to be exclusive, but rather shall mean “including without limitation” wherever used in thisAgreement. Reference to “hereto”, “herein” and similar words is to this entire Agreement (including any Appendices) and not a particularsentence or section of this Agreement. All references to “date” and “time” shall mean the applicable date (other than a Saturday or Sunday orany day on which the Federal Reserve Bank of New York is closed or any day on which banks in the city of New York, New York are requiredto close, in which case such date refers to the next occurring date that is not described in this parenthetical) or time in New York, New York. 13(b)This Section 4.12(b) applies to Grantees who are U.S. tax residents (such as, a U.S. citizen, greencard holder or a U.S. tax resident under thesubstantial presence test) to the extent applicable. All references to any “separation from service” or termination of the Employment of, or theservices to be provided by, the Grantee, shall be deemed to refer to a “separation from service” within the meaning of Section 409A, ifapplicable. Notwithstanding anything 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 any payments or delivery of CommonUnits otherwise payable or provided hereunder as a result of such termination of employment is necessary in order to prevent any accelerated oradditional tax under Section 409A, then the Partnership will defer the commencement of the payment of any such payments or deliveryhereunder (without any reduction in such payments or delivery of Common Units ultimately paid or provided to the Grantee) until the date thatis six months following the Grantee’s termination of Employment (or the earliest date as is permitted under Section 409A) and (ii) if any otherpayments or other deliveries due to the Grantee hereunder could cause the application of an accelerated or additional tax under Section 409A,such payments or other deliveries shall be deferred if deferral will make such payment or other delivery compliant under Section 409A, orotherwise such payment or other delivery shall be restructured, to the extent possible, in a manner, determined by the Administrator, that doesnot cause such an accelerated or additional tax. The Partnership shall use commercially reasonable efforts to implement the provisions of thisSection 4.12(b) in good faith; provided that none of the Partnership, the General Partner, the Administrator nor any of the Partnership’s, KKRGroup’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 the Employment of the Granteeby the Designated Service Recipient or any other member of the KKR Group. The grant of REUs under this Agreement in no way implies anyEmployment relationship with the General Partner, the Partnership or with any other member of the KKR Group, other than the DesignatedService Recipient with which a formal Employment relationship is currently in effect with the Grantee, or any other member of the KKR Groupwith which a formal Employment relationship is currently in effect with the Grantee. If the Grantee changes Employment from the DesignatedService Recipient as of the Grant Date to another member of the KKR Group, references to Designated Service Recipient hereunder shall referto such other 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 no way intended to describe,interpret, define or limit the scope, extent or intent of this Agreement or any provision hereof.Section 4.13. CounterpartsThis Agreement may be executed and delivered (including by facsimile transmission) in one or more counterparts, and by the different parties hereto in separatecounterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the sameagreement. Copies of executed counterparts transmitted by telecopy or other electronic transmission service shall be considered original executed counterparts forpurposes of this Agreement. [Rest of page intentionally left blank] 14IN WITNESS WHEREOF , the Partnership has executed this Agreement as of the date specified under the signature of the Grantee. KKR & CO. L.P. By: KKR MANAGEMENT LLC, its general partner By: 15IN WITNESS WHEREOF , the undersigned Grantee has caused this counterpart signature page to this Agreement to be duly executed as of the date specifiedunder the signature of the Grantee.“GRANTEE”Electronic Signature Name: Participant NameDated: Grant Date 16APPENDIX ADEFINITIONS In addition the defined terms set forth in the Plan, the following terms shall have the following meanings for purposes of the Agreement:“ Cause ” means, with respect to the Grantee, the occurrence or existence of any of the following as determined fairly on an informed basis and in good faith bythe Administrator: (i) any act of fraud, misappropriation, dishonesty, embezzlement or similar conduct by the Grantee against any member of the KKR Group(including the Partnership), KKR Holdings L.P., KKR Associates Holdings L.P., a Fund, or a Portfolio Company, (ii) a Regulatory Violation that has a materialadverse effect on (x) the business of any member of the KKR Group or (y) the ability of the Grantee to function as an employee, associate or in any similarcapacity (including consultant) with respect to the KKR Group, taking into account the services required of the Grantee and the nature of the business of the KKRGroup, or (iii) a material breach by the Grantee of a material provision of any Written Policies or the deliberate failure by the Grantee to perform the Grantee’sduties 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 theKKR Group becoming aware of such breach or failure and, where such breach or failure is curable, the Grantee has failed to cure such breach 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 reasonably necessary to cure such breach or failure providedthat the Grantee is then working diligently to cure such breach or failure. If such breach or failure is not capable of being cured, the notice given to the Grantee maycontain a date of termination that is earlier than 15 days 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 and responsibilities to the KKR Group byreason of a physical or mental disability or infirmity which inability is reasonably expected to be permanent and has continued (i) for a period of six consecutivemonths or (ii) such shorter period as the Administrator may reasonably determine in good faith.“ Employment ” means the Grantee’s employment or engagement (including any similar association determined by the Administrator to constitute employment orengagement for purposes of this Agreement) with (x) the Designated Service Recipient or any other member of the KKR Group or (y) any consultant or serviceprovider 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 mustbe approved by the Administrator 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 andsiblings-in-law, descendants of siblings, and grandchildren, (ii) any trust or other personal or estate planning vehicle established by such Grantee, (iii) anycharitable organization established by such Grantee and (iv) any successor-in-interest to such Grantee, including but not limited to a conservator, executor or otherpersonal representative.“ Group Partnerships ” means KKR Management Holdings L.P., a Delaware limited partnership, KKR Fund Holdings L.P., a Cayman Island exempted limitedpartnership, and KKR International Holdings L.P., a Cayman Island exempted limited partnership, along with any partnership designated in the future as a “GroupPartnership” by the Partnership. A-1“ KKR Capstone ” means (i) KKR Capstone Americas LLC, KKR Capstone EMEA LLP, KKR Capstone EMEA (International) LLP, KKR Capstone AsiaLimited and any other “Capstone” branded entity that provides similar consulting services to the KKR Group and Portfolio Companies and (ii) the direct andindirect parents and subsidiaries of the foregoing.“ KKR Group ” means the Group Partnerships, the direct and indirect parents of the Group Partnerships (the “ Parents ”), any direct or indirect subsidiaries of theParents or the Group Partnerships, the general partner or similar controlling entities of any investment fund, account or vehicle that is managed, advised orsponsored by the KKR Group (the “ Funds ”) and any other entity through which any of the foregoing directly or indirectly conducts its business, but shall excludePortfolio Companies.“ Law ” means any statute, law, ordinance, regulation, rule, code, executive order, injunction, judgment, decree or other order issued or promulgated by anynational, supranational, state, federal, provincial, local or municipal government or any administrative or regulatory body with authority therefrom with jurisdictionover the Partnership or any Participant, as the case may 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 accepted plea of guilt or nolo contendere ofany felony or misdemeanor crime involving moral turpitude, false statements, misleading omissions, forgery, wrongful taking, embezzlement, extortion or bribery,(ii) a final determination by any court of competent jurisdiction or governmental regulatory body (or an admission by the Grantee in any settlement agreement) thatthe Grantee 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-regulatoryorganization having authority with respect to U.S. federal or state or comparable non-U.S. securities laws, rules or regulations (or an admission by the Grantee inany settlement agreement) that the Grantee 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 Grantee of the Grantee’s Employment with the KKR Group (other than for Cause), on or after the date that theGrantee’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 a Service Vesting Date that would, ifthe Grantee’s Employment were not so terminated, occur within two years after the date of such termination due to Retirement.“ REU Grant Certificate ” means the REU Grant Certificate delivered to the Grantee and attached to this Agreement, as the same may be modified pursuant toSection 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 to time, and the applicable regulations,including temporary regulations, promulgated under such Section, as such regulations may be amended from time to time (including corresponding provisions ofsucceeding regulations). A-2“ Service Vesting Date ” means, with respect to any REU, the date set forth in the REU Grant Certificate as the “Service Vesting Date.”“ Settle ”, “ Settled ” or “ Settlement ” means the discharge of the Partnership’s obligations in respect of an REU through the delivery 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 other disposition thereof or any intereststherein or rights attached thereto, whether voluntarily or by operation of Law, or (ii) creation or placement of any mortgage, claim, lien, encumbrance, conditionalsales or other title retention agreement, right of first refusal, preemptive right, pledge, option, charge, security interest or other similar interest, easement, judgmentor imperfection of title of any nature whatsoever.“ Written Policies ” means the written policies of the KKR Group included in its employee manual, code of ethics and confidential information and informationbarrier policies and procedures and other documents relating to the Grantee's Employment, association or other similar affiliation with the KKR Group. A-3APPENDIX BREU GRANT CERTIFICATE Grantee Name: Participant NameGrant Date: Grant DateNumber of REUs: Number of Awards Granted Service Vesting Date:The following sets forth each applicable Service Vesting Date upon which the REUs granted hereunder shall become vested, subject to theGrantee’s continued Employment through each such date:Percentage of REUs that BecomeVested on Applicable ServiceVesting 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 Grant Certificate is attached.Notwithstanding the foregoing:The post-settlement transfer restrictions contained in Section 3.3 of the Agreement ☐ shall / ☐ shall not be applicable to the REUs (and any resultingCommon Units) granted under this REU Grant Certificate.The minimum retained ownership requirements contained in Section 3.5 of the Agreement ☐ shall / ☐ shall not be applicable to the REUs (and anyresulting Common Units) granted under this REU Grant Certificate. B-1APPENDIX CADDITIONAL TERMS AND CONDITIONS The terms and conditions in this Appendix C supplement the provisions of the Agreement, unless otherwise indicated herein. Capitalized terms contained in thisAppendix C and not defined herein shall have the same meaning as such terms are defined in the Agreement into which this Appendix C is incorporated byreference therein and to which this Appendix C is attached, or the Plan, as applicable. 1. Data Privacy The Grantee hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Grantee’s personal data asdescribed in this Agreement and any other Award materials (“Data”) by and among, as applicable, the Designated Service Recipient, the Partnership and itsAffiliates for the exclusive purpose of implementing, administering and managing the Grantee’s participation in the Plan.The Grantee understands that the Partnership and the Designated Service Recipient may hold certain personal information about the Grantee, including, butnot limited to, the Grantee’s name, home address and telephone number, email address, date of birth, social insurance number, passport or otheridentification number (e.g. resident registration number), salary, nationality, job title, any Common Units or directorships held in the Partnership, details of allREUs or any other entitlement to Common Units awarded, canceled, exercised, vested, unvested or outstanding in the Grantee’s favor, for the exclusivepurpose of implementing, administering and managing the Plan.The Grantee understands that Data will be transferred to any third parties assisting the Partnership with the implementation, administration and managementof the Plan. The Grantee understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipients’ country (e.g.,the United States) may have different data privacy laws and protections than the Grantee’s country. The Grantee understands that he or she may request a listwith the names and addresses of any potential recipients of the Data by contacting his or her local human resources representative. The Grantee authorizesthe Partnership, its subsidiaries, the Designed Service Recipient and any 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 purposeof implementing, administering and managing his or her participation in the Plan. The Grantee understands that Data will be held only as long as isnecessary to implement, administer and manage the Grantee’s participation in the Plan. The Grantee understands that he or she may, at any time, view Data,request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consentsherein, in any case without cost, by contacting in writing his or her local human resources representative. Further, the Grantee understands that he or she isproviding the consents herein on a purely voluntary basis. If the Grantee does not consent, or if the Grantee later seeks to revoke his or her consent, theGrantee’s employment status or service and career with the Designated Service Recipient will not be affected; the only consequence of refusing or withdrawingthe Grantee’s consent is that the Partnership would not be able to grant him or her REUs or other awards or administer or maintain such awards. Therefore,the Grantee understands that refusing or withdrawing his or her consent may affect the Grantee’s ability to participate in the Plan. For more information onthe consequences of the Grantee’s refusal to consent or withdrawal of consent, the Grantee understands that he or she may contact his or her local humanresources representative. C-12. 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 bythe Partnership at any time;(b)the grant of the REUs is voluntary and occasional and does not create any contractual or other right to receive future grants, or benefits in lieu ofREUs, 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 Service Recipient and shall notinterfere with the ability of the Designated Service Recipient to terminate the Grantee’s Employment 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 extraordinary items, which are outside the scope ofthe 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 normal or expected compensation forpurposes of calculating any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long-service awards,pension or retirement or welfare benefits or similar payments;(h)the grant of REUs and the Grantee’s participation in the Plan will not be interpreted to form an Employment or service contract or relationshipwith 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 with certainty;(j)no claim or entitlement to compensation or damages shall arise from forfeiture of the REUs resulting from termination of the Grantee’sEmployment (for any reason whatsoever and whether or not in breach of local labor laws and whether or not later found to be invalid), and inconsideration of the grant of REUs, the Grantee agrees not to institute any claim against the Partnership, the Designated Service Recipient or anyAffiliate;(k)unless otherwise agreed with the Partnership in writing, the REUs and the Common Units subject to the REUs, and the income and value ofsame, are not granted as consideration for, or in connection with, the service the Grantee may provide as a director of the Designated ServiceRecipient, the Partnership or any Affiliate; C-2(l)subject to Section 9 of the Plan, the REUs and the benefits under the Plan, if any, will not automatically transfer to another company in the caseof 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 of normal or expectedcompensation 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 to replace any pension rightsor compensation; and(iii)neither the Designated Service Recipient, the Partnership nor any Affiliate shall be liable for any foreign exchange rate fluctuationbetween the Grantee’s local currency and the United States Dollar that may affect the value of the REUs or of any amounts due to theGrantee pursuant to the vesting of the REUs or 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 regarding the Grantee’s participation in thePlan, or the Grantee’s acquisition or sale of the underlying Common Units. The Grantee should consult with his or her own personal tax, legal and financialadvisors regarding his or her participation in the Plan before taking any 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 than English and if the meaning of thetranslated 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 Plan by electronic means. The Granteehereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established andmaintained by the Partnership or a third party designated by the Partnership.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 of the Partnership set forth in thePartnership's trading window policy, Grantee may be subject to additional securities trading and market abuse laws in his or her country of residence. These lawsmay affect Grantee's ability to acquire or dispose of Common Units or rights to Common Units (e.g., REUs) under the Plan, particularly during such times as theGrantee is considered to have access to material nonpublic information concerning the Partnership (as defined by the Laws of the Grantee's country). Anyrestrictions under these Laws or regulations are separate from and in addition to any policies and procedures set forth by the Partnership. The Grantee isresponsible for ensuring compliance with any applicable restrictions and should consult his or her personal legal advisor on this matter. C-37. Foreign Asset / Account, Exchange Control ReportingDepending upon the country to which Laws the Grantee is subject, the Grantee may have certain exchange control, foreign asset and/or account reportingrequirements that may affect the Grantee’s ability to acquire or hold Common Units under the Plan or cash received from participating in the Plan (including fromany sale proceeds arising from the sale of Common Units) in the Grantee’s Fidelity brokerage account or a bank or other brokerage account outside the Grantee’scountry of residence. The Grantee’s country may require that he or she report such accounts, assets or transactions to the applicable authorities in the Grantee’scountry. The Grantee also may be required to repatriate sale proceeds or other funds received as a result of his or her participation in the Plan to his or her countrythrough a designated bank or broker and/or within a certain time after receipt. The Grantee is responsible for knowledge of and compliance with any suchregulations and should speak with his or her own personal tax, legal and financial advisors regarding same. C-4APPENDIX DConfidentiality and Restrictive Covenant ObligationsA. Capitalized terms contained in this Appendix D and not defined herein shall have the same meaning as such terms are defined in theAgreement into which this Appendix D is incorporated by reference therein and to which this Appendix D is attached, or the Plan, as applicable. Further, for thepurposes 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 of the KKR Group, theGrantee 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’s business through theirparticipation 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 similaraffiliation with the KKR Group, the Grantee will receive and have access to confidential information of the KKR Group and the Portfolio Companies (collectively,the “ KKR Related Entities ”) and have influence over and the opportunity to develop relationships with Clients, Prospective Clients, Portfolio Companies andpartners, members, employees and associates of the Company; and (ii) such confidential information and relationships are extremely valuable assets in which theKKR Group has invested, and will continue to invest, substantial time, effort and expense in developing and protecting;E. The Grantee acknowledges and agrees that (i) the REUs will materially benefit the Grantee; (ii) it is essential to protect the business interestsand goodwill of the Company and that the Company be protected by the restrictive covenants and confidentiality undertaking set forth herein; (iii) it is a conditionprecedent to the Grantee receiving REUs that the Grantee agree to be bound by the restrictive covenants and confidentiality undertaking contained herein; and (iv)the KKR Group would suffer significant 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 affiliationwith the KKR Group; andF. This Appendix D 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 D and any one of them is authorized to waivecompliance with any provision hereof by delivering a written statement clearly expressing the intent to waive such compliance to the Grantee and a duly authorizedrepresentative of the KKR Group or Designated Service Recipient.NOW, THEREFORE, to provide the Company with reasonable protection of its interests and goodwill and in consideration for (i) the REUs and any otherconsideration that the Grantee will receive in connection with and as a result of the Grantee’s employment, engagement, association or other similar affiliation withthe KKR Group; (ii) the material financial and other benefits that the Grantee will derive from such REUs and other consideration (if any); and (iii) other good andvaluable consideration, the receipt and adequacy of which are hereby acknowledged, the Grantee hereby agrees to the following restrictions: D-11.Outside Business Activities.The Grantee acknowledges that, during the course of the Grantee’s employment, engagement, association or other similar affiliation with the KKR Group,the Grantee will be subject to the Written Policies. The Written Policies include restrictions that limit the ability of the Grantee to engage in outside business andother activities without the prior approval of the Company. If the Grantee has an employment, engagement or other similar contract with the KKR Group, theGrantee may be subject to similar restrictions under that agreement. The Grantee hereby agrees that, during the Grantee’s employment, engagement, association orother similar affiliation with the KKR Group, the Grantee will comply with all such restrictions that are from time to time in effect which are applicable to theGrantee.2.Confidentiality Undertaking.The Grantee acknowledges that, 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 (as defined below) of the Company and the Portfolio Companies. Recognizing that anydisclosure of such information could have serious consequences to one or more of the Company and the Portfolio Companies, 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 the KKR Group,or at any time after the Termination Date) for any purpose other than in the ordinary course of the performance of the Grantee’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 toany person or entity, including but not 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 affiliatedperson of the KKR Group; (ii) any person or entity to the extent explicitly authorized by an executive of the Company in the ordinary course of the performance ofGrantee’s duties as an employee, consultant, associate or other affiliated person of the KKR Group; (iii) any attorney, accountant, consultant or similar serviceprovider retained by the Company who is required to know such information and is obligated to keep such information confidential; or (iv) any person or entity tothe extent the law or legal process requires disclosure by the Grantee, provided that, in the case of clause (iv), the Grantee must first give the Partnership or theDesignated Service Recipient prompt written notice of any such requirement, disclose no more information than is so required in the opinion of competent legalcounsel, and cooperate fully with all efforts by the 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 of federal law or regulation to anygovernmental agency or entity, including but not limited to the U.S. Securities and Exchange Commission, or making other disclosures to the extent protectedunder the whistleblower provisions of federal law or regulation (or comparable laws or regulations that similarly prohibit the impediment of such protecteddisclosures), and the Grantee shall not be required to advise or seek permission from the Partnership or the Designated Service Recipient prior to making any suchreport or disclosure; provided, however, that (i) Grantee shall inform such governmental agency or entity that the information Grantee is providing is confidentialand (ii) neither the Partnership nor the Designated Service Recipient authorizes the waiver of (or the disclosure of information covered by) the attorney-clientprivilege or work product protection or any other privilege or protection belonging to the Partnership, the Designated Service Recipient or their Affiliates, to thefullest extent permitted by law. D-2As 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 supervisory capacity. “ Confidential Information ” means (a) all confidential,proprietary or non-public information of, or concerning the business, operations, activities, personnel, finances, plans, personal lives, habits, history, clients,investors, or otherwise of the KKR 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 a family of any of the individualsreferred 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 deceasedrelatives), 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. ConfidentialInformation includes information about the KKR Related Entities relating to or concerning any of their (i) finances, investments, profits, pricing, costs, andaccounting, (ii) intellectual property (including but not limited to patents, inventions, discoveries, plans, research and development, processes, formulae, reports,protocols, computer software, databases, documentation, trade secrets, know-how and business methods), (iii) personnel, compensation, recruiting and training,and (iv) any pending or completed settlements, arbitrations, litigation, governmental investigations and similar proceedings. Notwithstanding the foregoing,Confidential Information does not include any portions of the foregoing that the Grantee can demonstrate by sufficient evidence satisfactory to the Company thathas been (i) lawfully published in a form generally available to the public prior to any disclosure by the Grantee in breach of this Appendix D or (ii) madelegitimately available to the Grantee by a third party without breach 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 write about, provide, disclose or use inany fashion at any time any Confidential Information that is or becomes part of the basis for, or is used in any way in connection with any part of any book,magazine or newspaper article, any interview or is otherwise published 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 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 Company promptly deliver tothe 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 theGrantee’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 theCompany, its Affiliates or Portfolio Companies); (iii) notify and fully cooperate with the Company regarding the delivery or destruction of any other ConfidentialInformation of which the Grantee is aware; and (iv) upon the request of the Company sign and deliver a statement that the foregoing has been accomplished. D-3The Grantee acknowledges that he or she is aware that applicable securities laws place certain restrictions on any person who has received from an issuermaterial, non-public information concerning the issuer with respect to purchasing or selling securities of such issuer or from communicating such information toany other person and further agrees to comply with such securities laws. Without limiting anything in this Appendix D, the Grantee hereby expressly confirms hisor her explicit understanding that the Grantee’s obligations hereunder are in addition to, and in no way limit, the Grantee’s obligations under complianceprocedures 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, without limitation of any kind, the taxtreatment and tax structure of any member of the Company in which the Grantee holds an interest and all materials of any kind (including opinions or other taxanalyses) 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 othersimilar affiliation with the Designated Service Recipient at any time for any reason or for no reason at all with or without reasons constituting Cause. TheDesignated Service Recipient 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 [●] days prior to actual termination (such [●]-dayperiod, the “ Notice Period ”); provided, however, that no advance notice shall be required by the Designated Service Recipient and the provisions of this Section 3shall not be applicable to the Designated Service Recipient if the Grantee’s employment, engagement, association or other similar affiliation is terminated by theDesignated Service Recipient for reasons constituting 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 by the Grantee to any of the ChiefExecutive Officers, Presidents, Chief Operating 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 totransition work, projects, and Client relationships internally to others) as determined and directed by the Designated Service Recipient in its sole discretion, andGrantee shall not be employed, engaged, associated or otherwise similarly affiliated with any business other than the business of the KKR Group; provided,however, the Designated Service Recipient reserves the right to require the Grantee not to be in the offices of the KKR Group, not to undertake all or any of theGrantee’s duties or not to contact Clients or Prospective Clients (as defined in Section 5 below), other persons employed, engaged, associated or otherwisesimilarly affiliated with the KKR Group, or others (or any combination thereof) unless otherwise instructed during all or any part of the Notice Period. During theNotice Period, and except as provided in the next sentence, the Grantee shall continue to receive his or her salary, and the Grantee shall not be entitled to receive orbe considered for payment of any other amount for his or her services during the Notice Period (including without limitation any bonus or equity award). Inaddition, the Designated Service Recipient in its sole discretion may elect to 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 Notice Period to the end of the original Notice Period, and the Grantee’s employment, engagement, association orother similar affiliation with the KKR Group, shall be terminated as of the day immediately following the conclusion of the reduced Notice Period. D-44.Non-Compete.The Grantee hereby agrees that, while employed, engaged, associated or otherwise similarly affiliated with the KKR Group, and in addition during theNon-Compete Period (as defined below), the Grantee will not directly or indirectly set up, be employed or engaged by, hold an office in or provide consulting,advisory or 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 with the Grantee’semployment, engagement, association or other similar affiliation with the KKR Group or (ii) that competes with a business for which the Grantee had direct orindirect managerial or supervisory responsibility with the KKR Group, including through the Grantee’s position on the Management Committee or similarcommittee or group, 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 D, a “ Competing Business ” means a business that competes (i) in a Covered Country with any business conducted bythe 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 any business that the Company was, on the Termination Date, formally considering conducting. A “ CoveredCountry ” means the United States, United Kingdom, the Republic of Ireland, France, Hong Kong, China, Japan, the Republic of Korea, Australia, India, UnitedArab Emirates, Saudi Arabia, Brazil, Canada, Singapore, Spain, Luxembourg or any other country where the Company conducted business on the TerminationDate; provided that if the Grantee is located in Japan, the definition of Covered Country shall exclude the phrase “any other country where the Company conductedbusiness 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 [●] 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 not constituting Cause, the Non-CompetePeriod will expire on the [●] month anniversary of the Termination Date.Notwithstanding the foregoing, nothing in this Appendix D shall be deemed to prohibit the Grantee from (i) associating with any business whose activitiesconsist principally of making passive investments for the account and benefit of the Grantee or members of the Grantee’s immediate family where such businessdoes not, within the knowledge of the Grantee, compete with a business of the KKR Group for specific privately negotiated investment opportunities; (ii) makingand holding passive investments in publicly traded securities of a Competing Business where such passive investment does not exceed 5% of the amount of suchsecurities that are outstanding at the time of investment; or (iii) making and holding passive investments in limited partner or similar interests in any investmentfund or vehicle with respect to which the Grantee does not exercise control, discretion or influence over investment decisions. D-55.Non-Solicitation of Clients and Prospective Clients; Non-Interference.The Grantee hereby agrees that, while employed, engaged, associated or otherwise similarly affiliated with the KKR Group, 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 ofany Client or Prospective Client for, or on behalf of, a Competing Business; (ii) provide, or assist any other person in providing, for any Client or ProspectiveClient any services that are substantially similar to those that the Company provided or proposed to be provided to such Client or Prospective Client; or (iii) impedeor otherwise interfere with or damage, or attempt to impede or otherwise interfere with or damage, any business relationship or agreement between the Companyand any Client or Prospective Client. As used in this Section 5, “ solicit ” means to have any direct or indirect communication inviting, advising, encouraging orrequesting any person to take or refrain from 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 any investor in any Fund, any clientof the KKR Group’s broker-dealer business, or any Portfolio Company 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, and involvingConfidential Information of, the Company during the 12 months prior to the Termination Date; and “ Prospective Client ” means any person with whom (I) theCompany has had negotiations or discussions concerning becoming a Client and (II) the Grantee, individuals reporting to the Grantee or any other individuals overwhom the Grantee had direct or indirect managerial or supervisory responsibility had any contact or dealings on behalf of, and involving Confidential Informationof, 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 the KKR Group, 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 in soliciting, employing,engaging or retaining, any Covered Person. As used in this Section 6, “ solicit ” means to have any direct or indirect communication inviting, advising,encouraging or requesting any Covered 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 identifying such Covered Person to the thirdparty, 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 theKKR Group as an employee or officer or otherwise associated or similarly affiliated with the KKR Group in any position, including as a member or partner, havingfunctions and duties substantially similar to those of an employee or officer; (ii) a Senior Advisor, Industry Advisor or KKR Advisor to the KKR Group; (iii)employed or engaged by KKR Capstone as an employee or officer or otherwise associated or similarly affiliated with KKR Capstone in any position, including as amember or partner, having functions and duties substantially similar to those of an employee or officer; or (iv) a person who provides services exclusively to theCompany or any Portfolio Company and has functions and duties that are substantially similar to those of a person listed in sub-clauses (i), (ii) or (iii) above. D-67.Post-Termination Restricted Period.The “ Post-Termination Restricted Period ” for the Grantee shall commence on the Termination Date and shall expire upon the [●] month anniversary ofthe Termination Date. Notwithstanding the foregoing, if the Grantee’s employment, engagement, association or other similar affiliation with the KKR Group isterminated involuntarily and for reasons not constituting Cause, the Post-Termination Restricted Period will expire on the [●] 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, the KKR Group,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 tootherwise comply with all terms and conditions imposed on the Grantee during such “garden leave” or “notice” period, the applicable Post-Termination RestrictedPeriod shall be reduced by the amount of any such “garden leave” 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 or other member of the KKR Group, asapplicable, the Grantee agrees that all work and deliverables that the Grantee prepares, creates, develops, authors, contributes to or improves, either alone or withthird parties, during the course of the Grantee’s employment, engagement, association or other similar affiliation with the KKR Group, within the scope of theservices provided to 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 other materials and all rights and intellectual property rightsthereunder including but not limited to rights of authorship (collectively, “ Work Product ”), are works-made-for-hire owned exclusively by the KKR Group. TheGrantee 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 such rights does not vest originally withthe KKR Group. The Grantee acknowledges and agrees that the Units issued pursuant to the Agreement are sufficient compensation for such assignment,transference and conveyance. To the extent the foregoing assignment is deemed to be invalid or unenforceable, Grantee grants the KKR Group, at no additionalcharge 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, association or other similar affiliation withthe Designated Service Recipient or for [●] years thereafter make any disparaging, defamatory, or derogatory written or oral statements or other communicationsabout or in reference to the Designated Service Recipient, the Partnership or any other member of the KKR Group or KKR Capstone (including their respectivebusinesses or reputations), including but not limited to any of their Clients, Prospective Clients, Portfolio Companies, or Covered Persons; provided that thisprovision shall not prevent the Grantee from (i) making reports to or testifying 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. D-710.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 the KKR Group, and that the restrictions contained herein are reasonable in all circumstances and necessary to protectthe legitimate business interests of the Company, to have and enjoy the full benefit of its business interests and goodwill. The Grantee further agrees andacknowledges that such restrictions will not unnecessarily or unreasonably restrict or otherwise limit the professional opportunities of the Grantee should his or heremployment, engagement, association or other similar affiliation with the KKR Group terminate, that the Grantee is fully aware of the Grantee’s obligations underthis Appendix D and that the livelihood of the Grantee is not impaired by the Grantee’s entry into the covenants contained herein. The Partnership and theDesignated Service Recipient shall have the right, exercisable in its sole discretion, to directly or indirectly make a payment to the Grantee or grant otherconsideration if, and to the extent, 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 the Grantee’s arrangements with theCompany. Notwithstanding anything to the contrary herein, this Appendix D does not constitute an employment, engagement or other similar agreement betweenthe Grantee and the Company, or any other of the KKR Related Entities (including but not limited to the Partnership), and shall not interfere with or otherwiseaffect any rights any such person or entity may have to terminate the Grantee’s employment, engagement, association or other similar affiliation at any time uponsuch 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 law for any breach of this Appendix Dwould be inadequate and that for any breach of this Appendix D, the Designated Service Recipient may terminate your employment, engagement, association orother similar affiliation with the Company and shall, in addition to any other remedies that may be available to it at law or in equity, or as provided for in thisAppendix D, be entitled to an 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 the Partnership and the DesignatedService Recipient shall not be required to prove, or offer proof, that monetary damages for a breach of this Appendix D would be difficult to calculate and that anyremedies at law would be inadequate for any breach of this Appendix D. The parties intend, acknowledge, and agree that each member of the KKR Group is a thirdparty beneficiary of this Agreement and is authorized to enforce any provision hereof by delivering a written statement expressing the intent to enforce theprovisions hereof to the Grantee or the Designated Service Recipient. The Grantee has executed this Agreement for the benefit of each member of the KKR Group. D-813.Amendment; Waiver.This Appendix D may not be amended, restated, supplemented or otherwise modified other than by an agreement in writing signed by the parties hereto;provided, however, that the Partnership, the KKR Group or the Designated Service Recipient may reduce the scope of, or waive compliance with any part of, anyobligation of the Grantee arising under this Appendix D, at any time without any action, consent or agreement of any other party. No failure to exercise and nodelay in exercising, on the part of any party, of any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partialexercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power orprivilege. The waiver of any particular right, remedy, power or privilege shall not affect or impair the rights, remedies, powers or privileges of any person withrespect to any subsequent default of 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 hereto shall be effective unless it is inwriting 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 theGrantee shall be deemed to have been given to the Partnership and the Designated Service Recipient (and the Grantee acknowledges that the Partnership and theDesignated Service Recipient shall therefore have the right without further consent) to assign its rights hereunder, in whole or in part, to (i) any member of theKKR Group that becomes a Designated Service Recipient or (ii) any person who is a successor of the Partnership or the Designated Service Recipient by merger,consolidation or purchase of all or substantially all of its assets, in which case such assignee shall be substituted for the Partnership and the Designated ServiceRecipient hereunder with respect to the provisions so assigned and be bound under this Appendix D and by the terms of the assignment in the same manner as thePartnership and the Designated Service Recipient was bound hereunder. Any purported assignment of this Appendix D in violation of this section shall be null andvoid.15.Governing Law.This Appendix D 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 of any party,arising out of, relating to or in connection with the validity, negotiation, execution, interpretation, performance, non performance or terminationof 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 existing Rules of Arbitration of the InternationalChamber of Commerce (the “ ICC ”). If the parties to the Dispute fail to agree on the selection of an arbitrator within 30 days of the receipt ofthe request for arbitration, the ICC shall make the appointment. The arbitrator shall be a lawyer and shall conduct the proceedings in the Englishlanguage. Performance under this Appendix D shall continue if reasonably possible during any arbitration proceedings. D-9(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 Partnership or theDesignated Service Recipient may, in its sole discretion, require all Disputes or any specific Dispute to be heard by a court of law in accordancewith paragraph (e) below and, for the purposes 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 in connection with a Dispute at the timethat the Partnership or the Designated Service Recipient commences such proceedings in accordance with this paragraph (b), such Dispute shallbe 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 thepurpose of compelling a party to arbitrate, seeking temporary or preliminary relief in aid of an arbitration hereunder or enforcing an arbitrationaward and, for the purposes of this paragraph (c), each party expressly consents to the application of paragraphs (e) and (f) below to any suchsuit, action or proceeding.(d)Except as required by law or as may be reasonably required in connection with judicial proceedings to compel arbitration, to obtain temporary orpreliminary judicial relief in aid of arbitration or to confirm or challenge an arbitration award, the arbitration proceedings, including anyhearings, shall be confidential, and the parties 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 public domain. Judgment on any award renderedby an arbitration tribunal may be entered in any court having jurisdiction 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 forum designated bythis paragraph (e) has a reasonable relation to this Appendix D, and to the parties' relationship with one another. The parties hereby waive, to thefullest extent permitted 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 suchparties 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 forbreach of the provisions of this Appendix D would be difficult to calculate and that remedies at law would be inadequate, and they irrevocablyappoint the Secretary or General Counsel of the Partnership or the Designated Service Recipient or an officer of the Partnership or theDesignated Service Recipient (at the then-current principal business address of the Partnership or the Designated Service Recipient) as suchparty’s agent for service of process in connection with any such action or proceeding and agrees that service of process upon such agent, whoshall promptly advise 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. D-1017.Entire Agreement.This Appendix D contains the entire agreement and understanding among the parties hereto with respect to the subject matter of this Appendix D andsupersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoeverwith the Partnership, the Company, or KKR Holdings L.P. with respect to the subject matter of this Appendix D (including but not limited to any prior grantagreement for an equity award under the Plan that contains one or more appendices with respect to the subject matter of this Appendix D) or any Confidentialityand Restrictive Covenant Agreement previously executed with the Partnership, the Company or KKR Holdings L.P. The express terms of this Appendix D controland supersede any course of performance and any usage of the trade inconsistent 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 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 Professional Conduct (orsuccessor rule)) shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisionshereof and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. In suchevent, the invalid provision shall be partially enforced, reformed or substituted with a valid provision which most closely approximates the intent and the economiceffect of the invalid provision to give effect to the provision to the maximum extent permitted in such jurisdiction or in such case. Grantee specificallyacknowledges that Grantee has been provided with valuable consideration in exchange for the covenants set forth herein and, accordingly, such partial enforcementor reformation is necessary to avoid frustrating the Company’s purpose in awarding the Grantee such consideration.19.Interpretation .Notwithstanding anything contained in Article IV of the Agreement, the provisions of Sections 10 through 19 (inclusive) of this Appendix D shall governwith respect to, and shall be applicable only to the interpretation, administration and enforcement of, the provisions of this Appendix D, and shall not govern orotherwise apply to, or have any administrative or interpretive effect on, any other provisions of the remainder of the Agreement or any other of its Appendices. D-11APPENDIX 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 and growth of KKR & Co. L.P., aDelaware limited partnership (the “ Partnership ”) and its Affiliates by (i) attracting and retaining directors, officers, employees, consultants or other serviceproviders of the Partnership or any of its Affiliates, including but not limited to directors of KKR Management LLC, the Partnership’s general partner (the “General Partner ”) and (ii) aligning the interests of such individuals with those of the Partnership and its Affiliates by providing them with equity-based awardsbased on the 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 Plan has been delegated pursuant toSection 4 hereof.(c) Affiliate : With respect to any specified Person, any other Person that directly or indirectly through one or more intermediaries Controls, isControlled by or is under common control with such specified Person. As used herein, the term “ Control ” (including the terms “ Controlled by ” and “ undercommon 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 of voting 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 or relating to the CommonUnits 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 any Person, other than a Personapproved by the General Partner, becoming the general partner of the Partnership, (ii) the direct or indirect sale, transfer, conveyance or other disposition (otherthan by way of merger or consolidation) in one or more series of related transactions of all or substantially all of the combined assets of the Group Partnershipstaken as a whole to any Person other than a Permitted Person, (iii) the consummation of any transaction or a series of related transactions (including any merger orconsolidation) that results in any Person (other than a Permitted Person) becoming the beneficial owner of a majority of the controlling interests in any one or moreGroup Partnerships that together hold all or substantially all of the combined assets of the Group Partnerships taken as a whole, or (iv) the occurrence of any otherevent as determined by the Board to constitute a Change in Control. Solely for the purpose of this definition, the term “ person ” shall have the meaning given tosuch term under Section 13(d)(3) of the Act or any successor provision thereto; and for purposes of the Plan, the term “ beneficial owner ” shall have the meaninggiven to such term under Rule 13d-3 promulgated under the Act or any successor provision thereto, and the combined assets of the Group Partnerships shallexclude the portion of any such assets that are allocable to holders of any non-controlling interests in any consolidated subsidiaries. E-1(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 shallsuch date be prior to the date that limited partnership interests of the Partnership become listed and traded on the New York Stock Exchange or The NASDAQStock Market.(i) Employee Exchange Agreement : That certain Exchange Agreement, dated as of July 14, 2010, by and among KKR & Co. L.P., KKRManagement 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 if the Participant is anemployee 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, thePartnership or of any of its Affiliates, and (iii) a Participant’s services as an non-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 on the New York StockExchange or The NASDAQ Stock Market (a “ U.S. Exchange ”) on that date (or, if no closing sale price is reported, the last reported sale price), (ii) if theCommon Units are not listed for trading on a U.S. Exchange, the closing sale price (or, if no closing sale price is reported, the last reported sale price) as reportedon that date in composite transactions for the 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 byPink Sheets LLC or a similar organization, or (iv) if the Common Units are not so quoted by Pink Sheets LLC or a similar organization, the average of the mid-point of the last bid and ask prices for the Common Units on that date from a nationally recognized independent investment banking firm selected by the GeneralPartner for this purpose.(l) Group Partnerships : KKR Management Holdings L.P., a Delaware limited partnership, and KKR Fund Holdings L.P., a Cayman Islandexempted limited partnership, along with any partnership designated in the future as a “Group Partnership” by the Partnership.(m) Group Partnership Unit : A “Group Partnership Unit” as defined in the Pre-Listing Plan. E-2(n) KKR Group : 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 is managed, advisedor sponsored by the KKR Group (the “ Funds ”) and any other entity through which any of the foregoing directly or indirectly conducts its business, but shallexclude any company over which a Fund 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 the Plan.(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 its Affiliates, including but notlimited to any director of the General Partner, who is selected by the Administrator to participate in the Plan.(s) Permitted Person : The term “Permitted Person” means (i) an individual who (a) is an executive of the KKR Group, (b) devotes substantiallyall of his or her business and professional time to the activities of the KKR Group and (c) did not become an executive of the KKR Group or begin devotingsubstantially all of his or her business and professional time to the activities of the KKR Group in contemplation of a Change in Control or (ii) any Person in whichany one or more such individuals 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 otherequity-based award based in whole or in part on the fair market value of any equity unit or otherwise) 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. E-33.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 shall be, as of the Effective Date,15% of the Common Units outstanding as of the Effective Date on a fully converted and diluted basis (the “ Initial Plan Amount ”), of which all or any portion maybe issued as Common Units. Notwithstanding the foregoing, beginning with the first fiscal year of the Partnership occurring after the Effective Date andcontinuing with each subsequent fiscal year of the Partnership occurring thereafter, the aggregate number of Common Units covered by the Plan will be increased,on the first day of each fiscal year of the Partnership occurring during the term of the Plan, by a number of Common Units equal to the positive difference, if any,of (x) 15% of the aggregate number of Common Units outstanding on the last day of the immediately preceding fiscal year of the Partnership minus (y) the InitialPlan Amount, as such amount may have been increased by this sentence in any prior fiscal year, unless the Administrator should decide to increase the number ofCommon Units covered by the Plan by a lesser amount on any such date. The issuance of Common Units or the payment of cash upon the exercise of an Award orany Pre-Listing Award or in consideration of the settlement, cancellation or termination of an Award or any Pre-Listing Award shall reduce the total number ofCommon Units covered by and available for issuance under the Plan, as applicable (with any Awards or Pre-Listing Awards settled in cash reducing the totalnumber of Common Units by the number of Common Units determined by dividing the cash amount to be paid thereunder by the Fair Market Value of oneCommon Unit on the date of payment), 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 number of Common Units equal to thenumber of Group Partnership Units so issued multiplied by the Exchange Rate (as defined in the Employee Exchange Agreement). Common Units which aresubject to Awards which are cancelled, forfeited, terminated or otherwise expired by their terms without the payment of consideration, and Common Units whichare used to pay the exercise price of any Award, may be granted again subject to Awards under the Plan. For the avoidance of doubt, Common Units which aresubject to Awards other than Options or Unit Appreciation Rights which are withheld to pay tax withholding obligations will be deemed not to have been deliveredand 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 tothe sum of (i) the number of Common Units available for issuance pursuant to the Plan but which are not subject to an outstanding Award or Pre-Listing Award asof such date, (ii) the number of Common Units subject to outstanding Awards or Pre-Listing Awards as of such date and (iii) the number of Group PartnershipUnits subject to outstanding Pre-Listing Awards as of such date multiplied by the Exchange Rate (as defined in the Employee Exchange Agreement) as in effect onsuch date. For purposes of this Section 3, (A) an Option or Unit Appreciation Right that has been granted under the Plan or the Pre-Listing Plan will be consideredto be an “outstanding” Award or Pre-Listing Award, as applicable, until is it exercised or cancelled, forfeited, terminated or otherwise expires by its terms, (B) aCommon Unit that has been granted as an Award under the Plan that is subject to vesting conditions will be considered an “outstanding” Award until the vestingconditions have been satisfied or the Award otherwise terminates or expires unvested by its terms, (C) a Group Partnership Unit that has been 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 conditionshave been satisfied or the Pre-Listing Award otherwise terminates or expires unvested by its terms and (D) any Award or Pre-Listing Award other than an Option,Unit Appreciation Right, Common Unit or Group Partnership Unit that is subject to vesting conditions will be considered to be an “outstanding” Award or Pre-Listing Award, as applicable, until it has been settled. 4.Administration(a) Administration and Delegation . The Plan shall be administered by the Administrator. The Administrator may delegate the authority to grantAwards under the Plan to any employee or group of employees of the Partnership or of any Affiliate of the Partnership; provided that such delegation and grantsare consistent with applicable law and guidelines established by the Board from time to time. The Administrator may delegate the day-to-day administration of thePlan to any employee or group of employees of the Partnership or the General Partner or any of their respective Affiliates or a nationally recognized third-partystock plan administrator. E-4(b) Substitution of Prior Awards . Awards may, in the discretion of the Administrator, be made under the Plan in assumption of, or in substitutionfor, outstanding awards previously granted by the Partnership, any Affiliate of the Partnership or any entity acquired by the Partnership or with which thePartnership combines. The number of Common Units underlying such substitute awards shall be counted against the aggregate number of Common Unitsavailable for Awards under the Plan.(c) Interpretation; Corrections; Final and Binding Decisions . The Administrator is authorized to interpret the Plan, to establish, amend andrescind any rules and regulations relating to the Plan, and to make any other determinations that it deems necessary or desirable for the administration of the Plan. The Administrator may correct any defect or supply any omission or reconcile any inconsistency in the Plan or Award agreement in the manner and to the extentthe Administrator deems necessary or desirable, without the consent of any Participant. Any decision of the Administrator in the interpretation and administrationof 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, butnot limited to, Participants and their beneficiaries and successors).(d) Establishment of Award Terms . The Administrator shall have the full power and authority to establish the terms and conditions of any Awardconsistent with the provisions of the Plan and to waive any such terms and conditions at any time (including, without limitation, accelerating or waiving anyvesting conditions).(e) Payment of Taxes Due . The Administrator shall require payment of any amount it may determine to be necessary to withhold for federal,state, local or other taxes as a result of the exercise, grant or vesting of an Award. To the extent that such withholding arises in connection with the settlement ofan Award with Common Units, the Administrator may, in its sole discretion, cause such payments to be funded by reducing the Common Units delivered uponsettlement by an amount of Common Units having a Fair Market Value equal to the amount of payments that would then be due (and if an Award is settled in cash,the Administrator may withhold cash in respect to such taxes due). The Administrator shall establish the manner in which any such tax obligation may be satisfiedby the Participant.5.LimitationsNo Award may be granted under the Plan after the tenth anniversary of the Effective Date, but Awards theretofore granted 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 the foregoing and the followingterms and conditions and to such other terms and conditions, not inconsistent therewith, as the Administrator shall determine: E-5(a) Option Price . The Option Price per Common Unit shall be determined by the Administrator, provided that, solely for the purposes of anOption granted under the Plan to a Participant who is a U.S. taxpayer, in no event will the Option Price be less than 100% of the Fair Market Value on the date anOption is granted.(b) Exercisability . Options granted under the Plan shall be exercisable at such time and upon such terms and conditions as may be determined bythe Administrator, but in no event shall an Option be exercisable more than ten years after 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, or from time to time any part,of the Common Units for which it is then exercisable. For purposes of this Section 6 of the Plan, the exercise date of an Option shall be the later of the date anotice of exercise is received by the Partnership and, if applicable, the date payment is received by the Partnership pursuant to clauses (A), (B), (C) or (D) in thefollowing 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 mannerdesignated by the Administrator, pursuant to one or more of the following methods: (A) in cash or its equivalent (e.g., by personal check); (B) in Common Unitshaving a Fair Market Value equal to the aggregate Option Price for the Common Units being purchased and satisfying such other requirements as may be imposedby the Administrator; provided that 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 in cash and partly in such CommonUnits; (D) if there is a public market for the Common Units at such time, through the delivery of irrevocable instructions to a broker to sell Common Unitsobtained upon the exercise of the Option and to deliver promptly to the Partnership an amount out of the proceeds of such sale equal to the aggregate Option Pricefor the Common Units being purchased, 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 other rights of a holder withrespect to Common Units subject to an Option until the Participant has given written notice of exercise of the Option, paid in full the Option Price for suchCommon Units and, if applicable, has satisfied any other conditions imposed by the Administrator pursuant to the Plan.(d) Attestation . Wherever in this Plan or any agreement evidencing an Award a Participant is permitted to pay the Option Price of an Option ortaxes relating to the exercise of an Option by delivering Common Units, the Participant may, subject to procedures satisfactory to the Administrator, satisfy suchdelivery requirement by presenting proof of beneficial ownership of such Common Units, in which case the Partnership shall treat the Option as exercised withoutfurther payment and/or shall withhold such number of Common Units from the Common Units acquired by the exercise of the Option, as appropriate. E-67.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 Unit Appreciation Right in connectionwith 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 relatedOption is granted or at any time prior to the exercise or cancellation of the related Option, (B) shall cover the same number of Common Units covered by an Option(or such lesser number of Common Units as the Administrator may determine) and (C) shall be subject to the same terms and conditions as such Option except forsuch additional limitations as are contemplated by this Section 7 (or such additional limitations as may be included in an Award agreement).(b) Exercise Price . The exercise price per Common Unit of a Unit Appreciation Right shall be an amount determined by 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 lessthan 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 whois a U.S. taxpayer, in the case of a Unit Appreciation Right that was not granted in conjunction with an Option, the exercise price per Unit Appreciation Right shallnot 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 upon exercise to an amount equalto (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 ofCommon Units covered by the Unit Appreciation Right. Each Unit Appreciation Right granted in conjunction with an Option, or a portion thereof, shall entitle aParticipant to surrender to the Partnership the unexercised Option, or any portion thereof, and to receive from the Partnership in exchange therefore an amountequal to (i) the excess of (A) the Fair Market Value on the exercise date of one Common Unit over (B) the Option Price per Common Unit, times (ii) the number ofCommon Units covered by the Option, or portion thereof, which is surrendered. Payment shall be made in Common Units or in cash, or partly in Common Unitsand partly in cash (any such Common 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 the Partnership of written notice ofexercise stating the number of Common Units with respect to which the Unit Appreciation Right is being exercised. The date a notice of exercise is received bythe Partnership shall be the exercise date. The Administrator, in its sole discretion, may determine that no fractional Common Units will be issued in payment forUnit Appreciation Rights, but instead cash will be paid for the fractional Common Units and the number of Common Units to be delivered will be roundeddownward to the next whole Common Unit.(e) Limitations . The Administrator may impose, in its discretion, such conditions upon the exercisability of Unit Appreciation Rights as it maydeem fit, but in no event shall a Unit Appreciation Right be exercisable more than ten years after the date it is granted. E-78.Other Unit-Based AwardsThe Administrator, in its sole discretion, may grant or sell Awards of Common Units, restricted Common Units, deferred restricted Common Units,phantom restricted Common Units or other Common Unit-based awards based in whole or in part on the 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 vest with respect to, one or more Common Units (or the equivalent cash value of such Common Units) upon thecompletion of a specified period of service, the occurrence of an event and/or the attainment of performance objectives. Other Unit-Based Awards may be grantedalone 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 OtherUnit-Based Awards will be made, the number of Common Units to be awarded under (or otherwise related to) such Other Unit-Based Awards; whether such OtherUnit-Based Awards shall be settled in 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 Common Units so awarded and issuedshall 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 granted under the Plan:(a) Equity Restructurings . In the event of any extraordinary Common Unit distribution or split, recapitalization, rights offering, split-up or spin-off or any other event that constitutes an “equity restructuring” (as defined under Financial Accounting Standards Board (FASB) Accounting StandardsCodification 718) with respect to Common Units, the Administrator shall, in the manner determined appropriate or desirable by the Administrator and withoutliability 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 orproperty) with respect to which Awards may be granted under the Plan, and (ii) the terms of outstanding Awards, including, but not limited to (A) the number ofCommon Units or other securities of the Partnership (or number and kind of other securities or property) subject to outstanding Awards or to which outstandingAwards relate, (B) the Option Price or exercise price of any Option or Unit 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 of warrants or other rights to purchase Common Units or other securitiesof the Partnership, or other similar corporate transaction or event that affects the Common Units such that an adjustment is determined by the Administrator in itsdiscretion to be appropriate or desirable, the Administrator in its sole discretion and without liability to any person shall make such substitution or adjustment, ifany, as it deems to be equitable as to (i) the number of Common Units or other securities of the Partnership (or number and kind of other securities or property)with respect to which Awards may be granted 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 which outstanding Awards relate, (B) theOption Price or exercise price of any Option or Unit Appreciation Right and (C) any performance targets or other applicable terms. E-8(c) Change in Control . In the event of a Change in Control after the Effective Date, (i) if determined by the Administrator in the applicableAward agreement or otherwise, any outstanding Awards then held by Participants which are unexercisable or otherwise unvested or subject to lapse restrictionsshall automatically be deemed exercisable or otherwise vested or no longer subject to lapse restrictions, as the case may be, as of immediately prior to such Changein Control and (ii) the Administrator may (subject to Sections 16 and 18), but shall not be obligated to: (A) accelerate, vest or cause the restrictions to lapse withrespect to all or any portion of an Award; (B) cancel such Awards for fair value (as determined in the sole discretion of the Administrator) which, in the case ofOptions 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 thesame number of Common Units subject to such Options or Unit Appreciation Rights (or, if no consideration is paid in any such transaction, the Fair Market Valueof the Common Units subject to such Options or Unit Appreciation Rights) over the aggregate exercise price of such Options or Unit Appreciation Rights; (C)provide that any Options or Unit Appreciation Right having an exercise price per Common Unit that is greater than the per Common Unit value of theconsideration to be paid in the Change in Control transaction to a holder of a Common Unit shall be cancelled without payment of any consideration therefor; (D)provide for the issuance of substitute Awards that will substantially preserve the otherwise applicable terms of any affected Awards previously granted hereunderas determined by the Administrator in its sole discretion; or (E) provide that for a period of at least 15 days prior to the Change in Control, such Options shall beexercisable as to all shares subject thereto and that upon the occurrence of the Change in Control, such Options shall terminate and be of no further force andeffect.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 the Employment of a Participant andshall not lessen or affect the Partnership’s or Affiliate’s right to terminate the Employment of such Participant. No Participant or other Person shall have any claimto be granted any Award (including as a result of recurring prior Award), and there is no obligation for uniformity of treatment of Participants, or holders orbeneficiaries of Awards. No Award shall constitute compensation for purposes of determining any benefits under any benefit plan. The terms and conditions ofAwards and the Administrator’s determinations and interpretations with respect thereto need not be the same with respect to each Participant (whether or not suchParticipants are similarly situated).11.Successors and AssignsThe Plan shall be binding on all successors and assigns of the Partnership and a Participant, including without limitation, the estate of such Participant andthe executor, administrator or trustee of such estate, or any receiver or trustee in bankruptcy or 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 the Participant otherwise than by willor by the laws of descent and distribution. Any transfer or assignment in violation of the prior sentence shall be null and void. An Award exercisable after thedeath of a Participant may be exercised by the legatees, personal representatives or distributees of the Participant. E-913.Amendments or TerminationThe Board may amend, alter or discontinue the Plan or any outstanding Award, but no amendment, alteration or discontinuation shall be made, withoutthe consent of a Participant, if such action would materially diminish any of the rights of the Participant under any Award theretofore granted to such Participantunder the Plan; provided , however , that the Administrator may without the Participant’s consent (a) amend the Plan or any outstanding Award in such manner asit deems necessary to permit the granting of Awards meeting the requirements of the Code or other applicable laws (including, without limitation, to avoid adversetax consequences to the Partnership or to Participants as provided in Section 14 and Section 18 below), and (b) amend any outstanding Awards in a manner that isnot adverse (other than in a de minimis manner) to a Participant, except as otherwise may be permitted pursuant to Section 9 hereof or as is otherwise contemplatedpursuant to the terms 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 sole discretion, amend the terms of thePlan or Awards with respect to such Participants in order to conform such terms with the requirements of local law or to obtain more favorable tax or othertreatment 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 to any otherwise governingprinciples 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 in its sole discretion, it determinesthat the issuance or transfer of such Common Units or such other consideration might violate any applicable law or regulation or entitle the Partnership to recoverthe same under Section 16(b) of the Act, as amended, and any payment tendered to the Partnership by a Participant, other holder or beneficiary in connection withthe exercise of such Award shall be promptly refunded to the relevant Participant, holder or beneficiary. Without limiting the generality of the foregoing, no Awardgranted hereunder shall be construed as an offer to sell securities of the Partnership, and no such offer shall be outstanding, unless and until the Administrator in itssole discretion has determined that any such offer, if made, would be in compliance with all applicable requirements of the United States federal and any otherapplicable securities laws. 17.Effectiveness of the PlanThe Plan shall be effective as of the Effective Date. E-1018.Section 409ATo the extent applicable, this Plan and Awards issued hereunder shall be interpreted in accordance with Section 409A of the Code and Department ofTreasury regulations and other interpretative guidance issued thereunder, including without limitation any such regulations or other guidance that may be issuedafter the Effective Date. Notwithstanding other provisions of the Plan or any Award agreements issued thereunder, no Award shall be granted, deferred,accelerated, extended, paid out or modified 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 the Code, payments in respect of anyAward under the Plan may not be made at the time contemplated by the terms of the Plan or the relevant Award agreement, as the case may be, without causing theParticipant holding such Award to be subject to taxation under Section 409A of the Code, consistent with the provisions of Section 13(a) above, the Partnershipmay take whatever actions the Administrator determines necessary or appropriate to comply with, or exempt the Plan and Award agreement from the requirementsof Section 409A of the Code and related Department of Treasury guidance and other interpretive materials as may be issued after the Effective Date including,without limitation, (a) adopting such amendments to the Plan and Awards and appropriate policies and procedures, including amendments and policies withretroactive effect, that the Administrator determines necessary or appropriate to preserve the intended tax treatment of the benefits provided by the Plan andAwards hereunder and/or (b) taking such other actions as the Administrator determines necessary or appropriate to avoid the imposition of an additional tax underSection 409A of the Code, which action may include, but is not limited to, delaying payment to a Participant who is a “specified employee” within the meaning ofSection 409A of the Code until the first day following the six-month period beginning on the date of the Participant’s termination of Employment . ThePartnership shall use commercially reasonable 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 to Participants with respect to thisSection 18 . E-11FIDELITy STOCK PLAN SERVICES, LLCPARTICIPANT CONSENTKKR & CO. L.P.PARTICIPANT CONSENT Pursuant 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 Name Participant Signature:Electronic Signature Date:Acceptance DateExhibit 21.1The following is a list of the subsidiaries of KKR & Co. L.P. as of December 31, 2017.Subsidiaries of the RegistrantName Jurisdiction9W Halo Parent LLC DelawareAllstar Co-Invest GP LLC DelawareASF Walter Co-Invest GP Limited Cayman IslandsAurora Holding GP L.P. DelawareAurora Holding GP LLC DelawareAvoca Capital Jersey Unlimited JerseyAvoca Capital Property Unlimited Company IrelandAvoca Capital Unlimited Company IrelandAvoca Securities Investments Unlimited Company IrelandCH Co-Investors GP Limited Cayman IslandsCitrus Restaurant Investor LLC DelawareColt Admiral A Holding GP LLC DelawareColt Admiral A Holding L.P. DelawareColt Drilling Aggregator LLC DelawareColt Real Asset Holdings GP LLC DelawareColt Real Asset Holdings L.P. DelawareCPS (US) LLC DelawareCPS Associates (US) 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. SingaporeEcho Holdings GP Limited Cayman IslandsEIGF TE GP Resource Investors GP LLC DelawareFan Co-Invest GP Limited 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 DelawareGEG Holdings S.à r.l. LuxembourgHelios Co-Invest GP Limited Cayman IslandsKAM Advisors LLC DelawareKAM Credit Advisors LLC DelawareKAM Fund Advisors LLC DelawareKAM Funds GP Limited Cayman IslandsKappa Holdings Ltd. Cayman IslandsKFH III Holdings Ltd. Cayman IslandsKFH Real Asset Holdings L.P. DelawareName JurisdictionKFH Royalties GP LLC DelawareKFH Royalties II GP LLC DelawareKFH Royalties II LLC DelawareKFH Royalties L.P. DelawareKFH Royalties LLC DelawareKFN Bellemeade Feeder LLC DelawareKFN Birch 2 Feeder 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 Osprey Feeder LLC DelawareKFN PEI IX, LLC DelawareKFN PEI XI, LLC DelawareKFN Pelican 1 Feeder LLC DelawareKFN Rad Philly Feeder LLC DelawareKFN Sullivan Feeder 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 Assets L.P. DelawareKKR Alternative Assets Limited Cayman IslandsKKR Alternative Assets LLC DelawareKKR Alternative Investment Management Unlimited Company IrelandKKR Americas XII AIV GP LLC DelawareKKR Americas XII EEA Limited Cayman IslandsKKR Americas XII EEA LLC DelawareKKR Americas XII Limited Cayman IslandsKKR AMG Co-Invest GP LLC DelawareKKR ARC India Private Limited IndiaKKR Ark Holdings Pte. Ltd. SingaporeKKR ASF Walter PE Limited Cayman IslandsName JurisdictionKKR Asia II Japan AIV Limited Cayman IslandsKKR Asia II Limited Cayman IslandsKKR Asia III Delaware AIV LLC DelawareKKR Asia III Holdings Limited Cayman IslandsKKR Asia III Japan AIV (Cayman) Limited Cayman IslandsKKR Asia III Japan AIV Limited Hong KongKKR 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 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 AIV L.P. DelawareKKR 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 Delaware AIV L.P. DelawareKKR Associates Asia III Japan AIV 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 (AIV) 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. DelawareName JurisdictionKKR Associates EIGF TE L.P. DelawareKKR Associates Europe, Limited Partnership AlbertaKKR Associates Europe II, Limited Partnership AlbertaKKR Associates Europe III, Limited Partnership Cayman IslandsKKR Associates Europe IV L.P. Cayman IslandsKKR Associates Europe V SCSp LuxembourgKKR 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 AIV L.P. DelawareKKR Associates Infrastructure II L.P. Cayman IslandsKKR Associates Infrastructure III SCSp LuxembourgKKR 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 Milton Strategic L.P. Cayman IslandsKKR Associates NGT AIV 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 RCP Europe SCSp LuxembourgKKR Associates RECOI L.P. Cayman IslandsKKR Associates RECOP (AIV) Ltd. Cayman IslandsKKR Associates RECOP Ltd. Cayman IslandsKKR Associates REPA AIV-3 L.P. DelawareKKR Associates REPA AIV-4 L.P. DelawareName JurisdictionKKR 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 IslandsKKR Associates Special Situations (EEA) II Limited Cayman IslandsKKR 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 Atlanta Co-Invest GP Limited Cayman IslandsKKR Australia Investment Management Pty Limited AustraliaKKR Australia Pty Limited AustraliaKKR Biosimilar GP LLC DelawareKKR Blue Co-Invest GP Limited Cayman IslandsKKR Brazil Aggregator GP LLC DelawareKKR Brazil LLC DelawareKKR Brickman Co-Invest GP LLC DelawareKKR Byzantium Infrastructure Co-Invest GP Limited Cayman IslandsKKR Canada LLC DelawareKKR Canada ULC Nova ScotiaKKR Capital Management LLC DelawareKKR 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 Ltd. JapanKKR Capital Markets Limited England & WalesKKR Capital Markets LLC DelawareKKR CC Co-Invest GP LLC DelawareKKR CDP PE Limited Cayman IslandsKKR Cementos GP S.à r.l. LuxembourgKKR Central Park Leasing Aggregator GP LLC DelawareKKR China Growth Limited Cayman IslandsKKR Chrome Investors GP, LLC DelawareKKR CIS Global Limited Cayman IslandsName JurisdictionKKR CK Co-Invest GP Limited Cayman IslandsKKR Co G.P S.à r.l. LuxembourgKKR Co L.P S.à r.l. LuxembourgKKR Core Investors GP Limited Cayman IslandsKKR Corporate Lending (CA) LLC DelawareKKR Corporate Lending (Cayman) Limited Cayman IslandsKKR Corporate Lending (TN) LLC DelawareKKR Corporate Lending (UK) LLC DelawareKKR Corporate Lending LLC DelawareKKR CP Partners GP Limited Cayman IslandsKKR Credit Advisors (EMEA) LLP England & WalesKKR 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 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 (AIV) 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 Aggregator GP Limited Cayman IslandsKKR Eagle Asset Financing LLC DelawareKKR 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 EnerGas Aggregator GP Limited Cayman IslandsName JurisdictionKKR Energy HF Stake II Limited Cayman IslandsKKR Energy HF Stake III Limited Cayman IslandsKKR Energy HF Stake Limited Cayman IslandsKKR Energy Investors Blocker GP Limited Cayman IslandsKKR Engage Investors GP LLC DelawareKKR Europe II Limited Cayman IslandsKKR Europe III Limited Cayman IslandsKKR Europe IV EEA Limited Cayman IslandsKKR Europe IV EEA LLC DelawareKKR Europe IV Investments GP Limited Cayman IslandsKKR Europe IV Limited Cayman IslandsKKR Europe Limited Cayman IslandsKKR Europe V Holdings Limited Cayman IslandsKKR Europe V S.à r.l. LuxembourgKKR 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 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 IslandsKKR Gaudi Investors LLC DelawareKKR Genetic Disorder GP LLC DelawareKKR GFIP Limited Cayman IslandsKKR Glory (KPE) Limited Cayman IslandsKKR GMO GP 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 DelawareName JurisdictionKKR Group Finance Co. III LLC DelawareKKR Group Finance Co. IV LLC DelawareKKR Group Finance Co. LLC DelawareKKR Group Holdings Corp. DelawareKKR Group Holdings L.P. Cayman IslandsKKR Group Limited Cayman IslandsKKR Gym GP Limited Cayman IslandsKKR Harbourview Holdings Pty Ltd AustraliaKKR HCSG GP AIV LLC DelawareKKR HCSG GP LLC DelawareKKR Heford AIV GP LLC DelawareKKR HF LP Limited Cayman IslandsKKR 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 Finance Holdings LLC DelawareKKR India Financial Investments Pte. Ltd. SingaporeKKR 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 AIV GP LLC DelawareKKR Infrastructure II EEA Limited Cayman IslandsKKR Infrastructure II EEA LLC DelawareKKR Infrastructure II Limited Cayman IslandsKKR Infrastructure III Holdings Limited Cayman IslandsKKR Infrastructure III S.à r.l. LuxembourgKKR Infrastructure Limited Cayman IslandsKKR International Holdings L.P. Cayman IslandsKKR 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 DelawareName JurisdictionKKR Landmark Partners GP AIV LLC DelawareKKR Landmark Partners GP Limited 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 Loan Administration Services LLC DelawareKKR LR Energy Limited Cayman IslandsKKR Luxembourg S.à r.l. LuxembourgKKR Mackellar Partners GP Limited Cayman IslandsKKR Magnitude GP LLC DelawareKKR 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 Maven GP Limited Cayman IslandsKKR Maven I SLP Limited Cayman IslandsKKR Maven II SLP Limited Cayman IslandsKKR MENA Holdings LLC DelawareKKR MENA Limited Dubai International Financial CentreKKR Mexico LLC DelawareKKR Mezzanine GP LLC DelawareKKR Mezzanine I Advisors LLC DelawareKKR Mezzanine Offshore Feeder I GP Limited Cayman IslandsKKR Millennium GP LLC DelawareKKR Millennium Limited Cayman IslandsKKR Milton Strategic Limited Cayman IslandsKKR Nautilus Aggregator Limited Cayman IslandsKKR Next Gen Tech Growth AIV LLC DelawareKKR Next Gen Tech Growth Limited Cayman IslandsKKR NGT EEA Limited Cayman IslandsKKR NGT EEA LLC DelawareKKR Noah GP Associates Limited Cayman IslandsKKR North America Fund XI Brazil GP LLC 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 NZSF Limited Cayman IslandsKKR Olive Co-Invest GP LLC DelawareName JurisdictionKKR Oracle Co-Invest GP LLC DelawareKKR Pacer Holdings GP Limited Cayman IslandsKKR Pacer Holdings L.P. Cayman IslandsKKR Par Holdings Ltd. Cayman IslandsKKR Partners IV GP LLC DelawareKKR 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 Phoenix Co-Invest GP Limited Cayman IslandsKKR Phorm Investors GP LLC DelawareKKR PIP GP LLC DelawareKKR Platinum Co-Invest Blocker Parent GP LLC DelawareKKR Platinum Co-Invest GP LLC DelawareKKR Point Investments 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) Limited Cayman IslandsKKR RCP Europe Limited Cayman IslandsKKR RCP Europe S.à r.l. LuxembourgKKR Real Estate Finance Holdings L.P. DelawareKKR Real Estate Finance Manager LLC DelawareKKR Real Estate Finance Trust Inc. MarylandKKR 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 RECOI (Cayman) Limited Cayman IslandsKKR RECOI (Singapore) Pte. Ltd. SingaporeKKR RECOP Aggregator (AIV) GP LLC DelawareKKR RECOP Aggregator GP LLC DelawareKKR REFT Asset Holdings LLC DelawareKKR REFT Holdings GP LLC DelawareKKR REFT Holdings L.P. DelawareKKR Renaissance Co-Invest GP LLC DelawareKKR REPA AIV-3 GP LLC DelawareKKR REPA AIV-4 GP Ltd. Cayman IslandsKKR REPA AIV-5 GP Ltd. Cayman IslandsName JurisdictionKKR REPA GP LLC DelawareKKR REPA II GP LLC DelawareKKR REPA II GP2 LLC DelawareKKR REPE EEA Limited Cayman IslandsKKR REPE EEA LLC DelawareKKR REPE GP Limited Cayman IslandsKKR Revolving Credit Associates II L.P. Cayman IslandsKKR Revolving Credit Partners II Limited Cayman IslandsKKR Revolving Credit Partners Limited Cayman IslandsKKR Ride Co-Invest GP LLC DelawareKKR Rise Co-Invest GP Limited Cayman IslandsKKR RTV Manager 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 Spark Power Holdings IV (Mauritius), Ltd. MauritiusKKR Special Situations (Domestic) II Limited Cayman IslandsKKR Special Situations (Domestic) Limited Cayman IslandsKKR Special Situations (Offshore) II Limited Cayman IslandsKKR Special Situations (Offshore) Limited Cayman IslandsKKR SPN GP Limited Cayman IslandsKKR Square GP Limited Cayman IslandsKKR STG Co-Invest GP LLC DelawareKKR Strategic Capital Institutional Fund, Ltd. Cayman IslandsKKR Strategic Capital Management, L.L.C. DelawareKKR Streaming Aggregator GP Limited Cayman IslandsKKR Subsidiary Corp. DelawareKKR Subsidiary Partnership L.P. DelawareKKR Taurus Co-Invest GP Limited Cayman IslandsKKR 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 Uno LLC DelawareKKR Upstream Associates LLC DelawareKKR Upstream LLC DelawareName JurisdictionKKR US Risk Retention Associates Ltd. Cayman IslandsKKR Victoria GP Limited Cayman IslandsKKR Vision Investors GP LLC DelawareKKR 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-Jesselton HIF Credit Partners GP Limited Cayman IslandsKKR-Keats Associates Pipeline (AIV) L.P. DelawareKKR-Keats Associates Pipeline L.P. DelawareKKR-Keats Pipeline (AIV) LLC DelawareKKR-Keats Pipeline LLC DelawareKKR-MM Vector GP LLC DelawareKKR-NWM GP Limited Cayman IslandsKKR-NYC Credit A GP LLC DelawareKKR-NYC Credit B GP LLC DelawareKKR-NYC SP GP FH LLC DelawareKKR-NYC SP GP MH LLC DelawareKKR-UWF Direct Lending GP 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 FranceKohlberg Kravis Roberts (España) Asesores SL SpainKohlberg Kravis Roberts GmbH GermanyKREF Capital LLC DelawareKREF Capital TRS LLC DelawareKREF Holdings I LLC DelawareKREF Holdings II LLC DelawareKREF Holdings III LLC DelawareKREF Holdings IV LLC DelawareKREF Holdings V LLC DelawareKREF Holdings X 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 Mezz Holdings LLC DelawareKREF RECOP Holdings LLC DelawareKREF Securities Holdings II, LLC DelawareName JurisdictionKREF Securities Holdings, LLC DelawareKREFT 625NMA, LLC DelawareKREFT REOC LLC DelawareLion Restaurant Holdings Trust CaliforniaLP III Warehouse LLC DelawareLRG 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 JerseyPing Investors LLC DelawareRanger (NZ) Pte. Ltd. SingaporeREFH 909 Half Street Investors LLC DelawareREFH 909 Half Street Investors TRS LLC DelawareREFH Holdings LLC DelawareREFH SR Mezz LLC 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 DelawareTEA GP Limited Cayman IslandsUno Co-Invest GP LLC DelawareValhalla Co-Invest GP Limited Cayman IslandsVenado EF Holdings GP LLC Delaware Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe 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 23, 2018, relating to the consolidated financial statements and financialstatement schedule of KKR & Co. L.P. and subsidiaries (the “Company”) and the effectiveness of the Company’s internal control over financial reporting,appearing in this Annual Report on Form 10-K of the Company for the year ended December 31, 2017. /s/ Deloitte & Touche LLPNew York, New YorkFebruary 23, 2018Exhibit 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, 2017 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 23, 2018 /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, 2017 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 23, 2018 /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, 2017 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 23, 2018 /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, 2017 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 23, 2018 /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, 2017 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 23, 2018 /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, 2017 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 23, 2018 /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.

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