Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	156
Consolidated Statements of Financial Condition as of December 31, 2018 and 2017	158
Consolidated Statements of Operations for the Years Ended December 31, 2018, 2017 and 2016	160
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2018, 2017 and 2016	161
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2018, 2017 and 2016	162
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, 2017 and 2016	165
Notes to Consolidated Financial Statements	167

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors of KKR & Co. Inc.:

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated statements of financial condition of KKR & Co. Inc. (formerly KKR & Co. L.P.) and its subsidiaries (the “Company”) as of December 31, 2018 and 2017, the related consolidated statements of operations, comprehensive income (loss), changes in equity, and cash flows, for each of the three years in the period ended December 31, 2018, and the related notes and the financial statement schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - 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, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of 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 our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange 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 reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial 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 error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

New York, New York

February 15, 2019

We have served as the Company's auditor since 2006.

KKR & CO. INC.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Amounts in Thousands, Except Share Data)

	December 31, 2018				December 31, 2017
Assets
Cash and Cash Equivalents	$	1,751,287			$	1,876,687
Cash and Cash Equivalents Held at Consolidated Entities	693,860				1,802,372
Restricted Cash and Cash Equivalents	196,365				56,302
Investments	44,907,982				39,013,934
Due from Affiliates	657,189				554,349
Other Assets	2,536,692				2,531,075
Total Assets	$	50,743,375			$	45,834,719
Liabilities and Equity
Debt Obligations	$	22,341,192			$	21,193,859
Due to Affiliates	275,584				323,810
Accounts Payable, Accrued Expenses and Other Liabilities	2,743,990				3,654,250
Total Liabilities	25,360,766				25,171,919
Commitments and Contingencies
Redeemable Noncontrolling Interests	1,122,641				610,540
Stockholders' Equity (1)
KKR & Co. L.P. Capital - Common Unitholders (486,174,736 common units issued and outstanding as of December 31, 2017)	—				6,722,863
Preferred Units (20,000,000 units issued and outstanding as of December 31, 2017)	—				482,554
Preferred Stock (20,000,000 shares issued and outstanding as of December 31, 2018)	482,554				—
Class A Common Stock (534,857,237 shares issued and outstanding as of December 31, 2018)	5,349				—
Class B Common Stock (1 share issued and outstanding as of December 31, 2018)	—				—
Class C Common Stock (299,081,239 shares issued and outstanding as of December 31, 2018)	2,991				—
Additional Paid-In Capital	8,106,408				—
Retained Earnings	91,953				—
Accumulated Other Comprehensive Income (Loss)	(39,645		)		(19,481		)
Total KKR & Co. Inc. Stockholders' Equity	8,649,610				7,185,936
Noncontrolling Interests	15,610,358				12,866,324
Total Equity	24,259,968				20,052,260
Total Liabilities and Equity	$	50,743,375			$	45,834,719

(1)	See Note 1 "Organization."

See notes to consolidated financial statements.

KKR & CO. INC.

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 consolidated variable interest entities ("VIEs") as of December 31, 2018 and 2017. KKR's consolidated VIEs consist primarily of (i) certain collateralized financing entities ("CFEs") holding collateralized loan obligations ("CLOs") and commercial real estate mortgage-backed securities ("CMBS") and (ii) 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 the obligations 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 any income generated from the VIEs. There are neither explicit arrangements nor does KKR hold implicit variable interests that would require KKR to provide any material ongoing financial support to the consolidated VIEs, beyond amounts previously committed, if any.

	December 31, 2018
	Consolidated CFEs				Consolidated KKR Funds and Other Entities				Total
Assets
Cash and Cash Equivalents Held at Consolidated Entities	$	428,850			$	176,264			$	605,114
Restricted Cash and Cash Equivalents	—				174,057				174,057
Investments	14,733,423				15,585,629				30,319,052
Due from Affiliates	—				11,832				11,832
Other Assets	148,221				223,054				371,275
Total Assets	$	15,310,494			$	16,170,836			$	31,481,330
Liabilities
Debt Obligations	$	13,958,554			$	1,392,987			$	15,351,541
Accounts Payable, Accrued Expenses and Other Liabilities	579,408				126,333				705,741
Total Liabilities	$	14,537,962			$	1,519,320			$	16,057,282

	December 31, 2017
	Consolidated CFEs				Consolidated KKR Funds and Other Entities				Total
Assets
Cash and Cash Equivalents Held at Consolidated Entities	$	1,467,829			$	231,423			$	1,699,252
Restricted Cash and Cash Equivalents	—				21,255				21,255
Investments	15,573,203				9,408,967				24,982,170
Due from Affiliates	—				23,562				23,562
Other Assets	176,572				168,003				344,575
Total Assets	$	17,217,604			$	9,853,210			$	27,070,814
Liabilities
Debt Obligations	$	15,586,216			$	770,350			$	16,356,566
Accounts Payable, Accrued Expenses and Other Liabilities	923,494				243,660				1,167,154
Total Liabilities	$	16,509,710			$	1,014,010			$	17,523,720

See notes to consolidated financial statements.

KKR & CO. INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in Thousands, Except Share Data)

	For the Years Ended December 31,
	2018				2017				2016
Revenues
Fees and Other	$	1,841,326			$	1,541,604			$	1,104,908
Capital Allocation-Based Income	554,510				2,015,676				935,110
Total Revenues	2,395,836				3,557,280				2,040,018
Expenses
Compensation and Benefits	1,374,363				1,695,490				1,063,813
Occupancy and Related Charges	59,706				58,722				64,622
General, Administrative and Other	655,408				582,480				567,039
Total Expenses	2,089,477				2,336,692				1,695,474
Investment Income (Loss)
Net Gains (Losses) from Investment Activities	1,254,832				928,144				210,972
Dividend Income	175,154				202,115				187,853
Interest Income	1,396,532				1,242,419				1,021,809
Interest Expense	(876,029		)		(808,898		)		(789,953		)
Total Investment Income (Loss)	1,950,489				1,563,780				630,681
Income (Loss) Before Taxes	2,256,848				2,784,368				975,225
Income Tax Expense (Benefit)	(194,098		)		224,326				24,561
Net Income (Loss)	2,450,946				2,560,042				950,664
Net Income (Loss) Attributable to Redeemable Noncontrolling Interests	(37,352		)		73,972				(8,476		)
Net Income (Loss) Attributable to Noncontrolling Interests	1,357,235				1,467,765				649,833
Net Income (Loss) Attributable to KKR & Co. Inc.	1,131,063				1,018,305				309,307
Series A Preferred Stock Dividends	23,288				23,288				17,337
Series B Preferred Stock Dividends	10,076				10,076				4,898
Net Income (Loss) Attributable to KKR & Co. Inc. Class A Common Stockholders	$	1,097,699			$	984,941			$	287,072
Net Income (Loss) Attributable to KKR & Co. Inc. Per Share of Class A Common Stock
Basic	$	2.14			$	2.10			$	0.64
Diluted	$	2.06			$	1.95			$	0.59
Weighted Average Shares of Class A Common Stock Outstanding
Basic	514,102,571				468,282,642				448,905,126
Diluted	533,707,039				506,288,971				483,431,048

See notes to consolidated financial statements.

KKR & CO. INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Amounts in Thousands)

	For the Years Ended December 31,
	2018				2017				2016
Net Income (Loss)	$	2,450,946			$	2,560,042			$	950,664
Other Comprehensive Income (Loss), Net of Tax:
Foreign Currency Translation Adjustments	(48,764		)		54,654				(34,583		)
Comprehensive Income (Loss)	2,402,182				2,614,696				916,081
Less: Comprehensive Income (Loss) Attributable to Redeemable Noncontrolling Interests	(37,352		)		73,972				(8,476		)
Less: Comprehensive Income (Loss) Attributable to Noncontrolling Interests	1,326,164				1,498,861				634,813
Comprehensive Income (Loss) Attributable to KKR & Co. Inc.	$	1,113,370			$	1,041,863			$	289,744

See notes to consolidated financial statements.

KKR & CO. INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Amounts in Thousands, Except Share Data)

The statements below for the years ended December 31, 2017 and 2016 and the six months ended June 30, 2018 represent KKR & Co. Inc. as a partnership prior to the Conversion:

	KKR & Co. L.P.
	Common Units		Capital - Common Unitholders			Accumulated Other Comprehensive Income (Loss)			Total Capital - Common Units			Capital - Series A Preferred Units			Capital - Series B Preferred Units				Noncontrolling Interests				Total Equity				Redeemable Noncontrolling Interests
Balance at January 1, 2016	457,834,875		$	5,575,981		$	(28,799	)	$	5,547,182		$	—		$	—			$	43,731,774			$	49,278,956			$	188,629
Net Income (Loss)			287,072						287,072			17,337			4,898				649,833				959,140				(8,476		)
Other Comprehensive Income (Loss)- Foreign Currency Translation (Net of Tax)						(19,563		)	(19,563		)								(15,020		)		(34,583		)
Changes in Consolidation									—										(34,240,240		)		(34,240,240		)
Exchange of KKR Holdings L.P. Units and Other Securities to KKR & Co. L.P. Common Units	7,627,578		91,357			(830		)	90,527										(90,527		)		—
Tax Effects Resulting from Exchange of KKR Holdings L.P. Units and Other			(1,495		)	96			(1,399		)												(1,399		)
Net Delivery of Common Units - Equity Incentive Plan	8,672,152		(50,515		)				(50,515		)												(50,515		)
Equity-Based and Other Non-Cash 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 a Preferred Unit Offering									—			332,988			149,566								482,554
Capital Contributions									—										2,525,635				2,525,635				479,031
Capital Distributions ($0.64 per unit)			(285,408		)				(285,408		)	(17,337		)	(4,898		)		(2,094,216		)		(2,401,859		)		(26,836		)
Balance at December 31, 2016	452,380,335		$	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						984,941			23,288			10,076				1,467,765				2,486,070				73,972
Other Comprehensive Income (Loss)- Foreign Currency Translation (Net of Tax)						23,558			23,558										31,096				54,654
Changes in Consolidation									—										(1,682		)		(1,682		)		(315,057		)
Transfer of interest under common control and Other (see Note 15 "Equity")			16,139			7,359			23,498										(23,498		)		—
Exchange of KKR Holdings L.P. Units and Other Securities to KKR & Co. L.P. Common Units	20,086,963		291,040			(1,979		)	289,061										(289,061		)		—
Tax Effects Resulting from Exchange of KKR Holdings L.P. Units and Other			(3,469		)	677			(2,792		)												(2,792		)
Net Delivery of Common Units - Equity Incentive Plan	8,979,472		(58,679		)				(58,679		)												(58,679		)
Equity-Based and Other Non-Cash Compensation			204,308						204,308										141,727				346,035
Common Units Issued in Connection with the Purchase of an Investment	4,727,966		94,181						94,181														94,181
Capital Contributions									—										3,119,917				3,119,917				220,167
Capital Distributions ($0.67 per unit)			(311,973		)				(311,973		)	(23,288		)	(10,076		)		(2,125,842		)		(2,471,179		)		(890		)
Balance at December 31, 2017	486,174,736		$	6,722,863		$	(19,481	)	$	6,703,382		$	332,988		$	149,566			$	12,866,324			$	20,052,260			$	610,540

See notes to consolidated financial statements.

KKR & CO. INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued)

(Amounts in Thousands, Except Share Data)

	KKR & Co. L.P.
	Common Units		Capital - Common Unitholders			Accumulated Other Comprehensive Income (Loss)			Total Capital - Common Units			Capital - Series A Preferred Units			Capital - Series B Preferred Units				Noncontrolling Interests				Total Equity				Redeemable Noncontrolling Interests
Balance at January 1, 2018	486,174,736		$	6,722,863		$	(19,481	)	$	6,703,382		$	332,988		$	149,566			$	12,866,324			$	20,052,260			$	610,540
Net Income (Loss)			850,483						850,483			11,644			5,038				1,294,467				2,161,632				7,658
Other Comprehensive Income (Loss)- Foreign Currency Translation (Net of Tax)						(9,237		)	(9,237		)								(14,676		)		(23,913		)
Changes in Consolidation									—										370,307				370,307
Exchange of KKR Holdings L.P. Units and Other Securities to KKR & Co. L.P. Common Units	32,722,098		507,470			(1,998		)	505,472										(505,472		)		—
Tax Effects Resulting from Exchange of KKR Holdings L.P. Units and Other			6,448			17			6,465														6,465
Net Delivery of Common Units - Equity Incentive Plan	7,652,340		(53,439		)				(53,439		)												(53,439		)
Equity-Based and Other Non-Cash Compensation			125,994						125,994										61,942				187,936
Unit Repurchases	(2,207,300	)	(52,212		)				(52,212		)												(52,212		)
Capital Contributions									—										2,410,722				2,410,722				349,451
Capital Distributions ($0.34 per share)			(167,078		)				(167,078		)	(11,644		)	(5,038		)		(1,550,955		)		(1,734,715		)		(5,502		)
Balance at June 30, 2018	524,341,874		$	7,940,529		$	(30,699	)	$	7,909,830		$	332,988		$	149,566			$	14,932,659			$	23,325,043			$	962,147

See notes to consolidated financial statements.

KKR & CO. INC.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Continued)

(Amounts in Thousands, Except Share Data)

The statement below represents KKR & Co. Inc. as a corporation subsequent to the Conversion for the six months ended December 31, 2018:

	Six Months Ended December 31, 2018
	Amounts				Shares
KKR & Co. L.P. Partners' Capital - Common Unitholders
Beginning of Period	$	7,940,529			524,341,874
Reclassifications resulting from the Conversion	(7,940,529		)		(524,341,874	)
End of Period	—				—
Preferred Units
Beginning of Period	482,554				20,000,000
Reclassifications resulting from the Conversion	(482,554		)		(20,000,000	)
End of Period	—				—
Preferred Stock
Beginning of Period	—				—
Reclassifications resulting from the Conversion	482,554				20,000,000
End of Period	482,554				20,000,000
Class A Common Stock
Beginning of Period	—				—
Reclassifications resulting from the Conversion	5,243				524,341,874
Exchange of KKR Holdings Units	65				6,428,323
Repurchases of Class A Common Stock	(53		)		(5,333,251	)
Net Delivery of Class A Common Stock	42				4,181,402
Class A Common Stock Issued in Connection with the Purchase of an Investment	52				5,238,889
End of Period	5,349				534,857,237
Class B Common Stock
Beginning of Period	—				—
Issuance of Class B Common Stock resulting from the Conversion	—				1
End of Period	—				1
Class C Common Stock
Beginning of Period	—				—
Issuance of Class C Common Stock resulting from the Conversion	3,041				304,107,762
Cancellation of Class C Common Stock	(50		)		(5,026,523	)
End of Period	2,991				299,081,239
Additional Paid-In Capital
Beginning of Period	—
Reclassifications resulting from the Conversion	7,932,245
Exchange of KKR Holdings Units	114,958
Tax Effects Resulting from Exchange of KKR Holdings Units and Other	(11,359		)
Net Delivery of Class A Common Stock	(45,399		)
Repurchases of Class A Common Stock	(120,877		)
Equity-Based Compensation	116,817
Equity Issued in Connection with the Purchase of an Investment	120,023
End of Period	8,106,408
Retained Earnings
Beginning of Period	—
Net Income (Loss) Attributable to KKR & Co. Inc.	263,898
Preferred Stock Dividends	(16,682		)
Common Stock Dividends ($0.295 per share)	(155,263		)
End of Period	91,953
Accumulated Other Comprehensive Income (Loss)
Beginning of Period	(30,699		)
Foreign Currency Translation	(8,456		)
Exchange of KKR Holdings Units to Class A Common Stock	(551		)
Tax Effects Resulting from Exchange of KKR Holdings Units	61
End of Period	(39,645		)
Total KKR & Co. Inc. Stockholders' Equity	8,649,610
Noncontrolling Interests (See Note 15 "Equity")	15,610,358
Total Equity	$	24,259,968

See notes to consolidated financial statements.

KKR & CO. INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in Thousands)

	For the Years Ended December 31,
	2018				2017				2016
Operating Activities
Net Income (Loss)	$	2,450,946			$	2,560,042			$	950,664
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided (Used) by Operating Activities:
Equity-Based and Other Non-Cash Compensation	331,708				334,820				264,890
Net Realized (Gains) Losses on Investments	(534,652		)		(38,316		)		(347,097		)
Change in Unrealized (Gains) Losses on Investments	(720,180		)		(889,828		)		136,125
Capital Allocation-Based Income	(554,510		)		(2,015,676		)		(935,110		)
Other Non-Cash Amounts	(23,211		)		(51,129		)		(24,553		)
Cash Flows Due to Changes in Operating Assets and Liabilities:
Change in Consolidation and Other	45,914				1,831				(324,522		)
Change in Due from / to Affiliates	(201,196		)		(285,562		)		(79,372		)
Change in Other Assets	24,226				86,545				(555,666		)
Change in Accounts Payable, Accrued Expenses and Other Liabilities	93,536				1,581,967				648,737
Investments Purchased	(35,663,033		)		(39,616,120		)		(20,824,349		)
Proceeds from Investments	27,143,977				34,799,260				19,649,033
Net Cash Provided (Used) by Operating Activities	(7,606,475		)		(3,532,166		)		(1,441,220		)
Investing Activities
Purchases of Fixed Assets	(102,664		)		(97,070		)		(62,663		)
Development of Oil and Natural Gas Properties	(2,563		)		(1,052		)		(2,122		)
Proceeds from Sale of Oil and Natural Gas Properties	26,630				—				858
Net Cash Provided (Used) by Investing Activities	(78,597		)		(98,122		)		(63,927		)
Financing Activities
Preferred Stock Dividends	(33,364		)		(33,364		)		(22,235		)
Common Stock Dividends	(322,341		)		(311,973		)		(285,408		)
Distributions to Redeemable Noncontrolling Interests	(16,100		)		(890		)		(26,836		)
Contributions from Redeemable Noncontrolling Interests	565,553				220,167				479,031
Distributions to Noncontrolling Interests	(3,015,655		)		(2,125,842		)		(2,086,577		)
Contributions from Noncontrolling Interests	4,359,615				3,116,722				2,496,352
Issuance of Preferred Stock (net of issuance costs)	—				—				482,554
Net Delivery of Class A Common Stock (Equity Incentive Plan)	(98,796		)		(58,679		)		(50,515		)
Repurchases of Class A Common Stock	(173,142		)		—				(296,844		)
Proceeds from Debt Obligations	17,117,987				11,657,948				7,895,320
Repayment of Debt Obligations	(11,712,014		)		(9,514,558		)		(5,482,133		)
Financing Costs Paid	(55,812		)		(9,448		)		(16,847		)
Net Cash Provided (Used) by Financing Activities	6,615,931				2,940,083				3,085,862
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(24,708		)		79,751				(22,388		)
Net Increase/(Decrease) in Cash, Cash Equivalents and Restricted Cash	(1,093,849		)		(610,454		)		1,558,327
Cash, Cash Equivalents and Restricted Cash, Beginning of Period	3,735,361				4,345,815				2,787,488
Cash, Cash Equivalents and Restricted Cash, End of Period	$	2,641,512			$	3,735,361			$	4,345,815

See notes to consolidated financial statements.

KKR & CO. INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Amounts in Thousands)

	For the Years Ended December 31,
	2018				2017				2016
Supplemental Disclosures of Cash Flow Information
Payments for Interest	$	788,220			$	773,882			$	773,032
Payments for Income Taxes	$	148,141			$	55,216			$	33,526
Supplemental Disclosures of Non-Cash Investing and Financing Activities
Equity-Based and Other Non-Cash Contributions	$	343,443			$	346,035			$	264,890
Non-Cash Contributions from Noncontrolling Interests	$	—			$	3,195			$	29,283
Non-Cash Distributions to Noncontrolling Interests	$	—			$	—			$	(7,639	)
Debt Obligations - Net Gains (Losses), Translation and Other	$	779,529			$	(512,745	)		$	228,405
Tax Effects Resulting from Exchange of KKR Holdings L.P. Units and delivery of Class A Common Stock	$	(4,833	)		$	(2,792	)		$	(1,399	)
Impairments of Oil and Natural Gas Properties	$	—			$	—			$	6,191
Gain on Sale of Oil and Natural Gas Properties	$	15,224			$	—			$	12,286
Change in Consolidation and Other
Investments	$	(2,251,865	)		$	(75,827	)		$	(35,686,489	)
Due From Affiliates	$	—			$	15,379			$	147,427
Other Assets	$	(94,853	)		$	(298,097	)		$	(532,226	)
Debt Obligations	$	(3,427,070	)		$	46,809			$	(2,355,305	)
Due to Affiliates	$	8,857			$	5,021			$	329,083
Accounts Payable, Accrued Expenses and Other Liabilities	$	198,270			$	(114,309	)		$	(129,348	)
Noncontrolling Interests	$	593,172			$	(1,682	)		$	(34,240,240	)
Redeemable Noncontrolling Interests	$	—			$	(315,057	)		$	—
Gain on Asset Contribution	$	312,644			$	—			$	—
	December 31, 2018				December 31, 2017				December 31, 2016
Reconciliation to the Consolidated Statements of Financial Condition
Cash and Cash Equivalents	$	1,751,287			$	1,876,687			$	2,508,902
Cash and Cash Equivalents Held at Consolidated Entities	693,860				1,802,372				1,624,758
Restricted Cash and Cash Equivalents	196,365				56,302				212,155
Cash, Cash Equivalents and Restricted Cash, End of Period	$	2,641,512			$	3,735,361			$	4,345,815

See notes to consolidated financial statements.

KKR & CO. INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All Amounts in Thousands, Except Unit and Share Data, and Except Where Noted)

1. ORGANIZATION

KKR & Co. Inc. (NYSE: KKR), together with its subsidiaries ("KKR"), is a leading global investment firm that manages multiple alternative asset classes including private equity, energy, infrastructure, real estate and credit, with strategic partners that manage hedge funds. KKR aims to generate attractive investment returns for its fund investors by following a patient and disciplined investment approach, employing world-class people, and driving growth and value creation with KKR's portfolio companies. KKR invests its own capital alongside the capital it manages for fund investors and provides financing solutions and investment opportunities through its capital markets business.

On July 1, 2018, KKR & Co. L.P. converted from a Delaware limited partnership to a Delaware corporation named KKR & Co. Inc. (the "Conversion"). Because the Conversion became effective on July 1, 2018, the prior period amounts in the accompanying consolidated financial statements as of December 31, 2017, for the years ended December 31, 2017 and 2016, and for the six months ended June 30, 2018, reflect KKR as a limited partnership and not a corporation. In this report, references to KKR & Co. Inc. for periods prior to the Conversion mean KKR & Co. L.P., and references to KKR's Class A common stock, Series A Preferred Stock and Series B Preferred Stock for periods prior to the Conversion mean common units, Series A preferred units and Series B preferred units of KKR & Co. L.P., respectively, in each case, except where the context requires otherwise. As a result of the Conversion, the financial impact to the consolidated financial statements contained herein consisted of (i) reclassifications from partnership equity accounts to equity accounts reflective of a corporation and (ii) a partial step-up in the tax basis of certain assets resulting in the recognition of a net income tax benefit. See Note 15 "Equity" for the impact of the Conversion on KKR's equity accounts and Note 11 "Income Taxes" for the impact of the Conversion on KKR's income taxes.

In connection with the Conversion, a wholly-owned subsidiary of KKR & Co. Inc., KKR Group Holdings Corp., became (i) a general partner of KKR Fund Holdings L.P. ("Fund Holdings") and KKR International Holdings L.P. ("International Holdings") and (ii) the sole stockholder of KKR Management Holdings Corp. (the general partner of KKR Management Holdings L.P. ("Management Holdings")) and KKR Fund Holdings GP Limited (the other general partner of Fund Holdings and International Holdings). In addition, certain wholly-owned subsidiaries of KKR & Co. Inc., namely KKR Group Holdings L.P. ("Group Holdings"), KKR Group Limited (the general partner of Group Holdings), KKR Subsidiary Corp. and KKR Subsidiary Partnership L.P., were either merged into another wholly-owned subsidiary of KKR & Co. Inc. or dissolved. Fund Holdings, Management Holdings and International Holdings are collectively referred to as the "KKR Group Partnerships."

KKR & Co. Inc. 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 & Co. Inc. As of December 31, 2018, KKR & Co. Inc. held approximately 64.1% of the KKR Group Partnership Units and principals through KKR Holdings held approximately 35.9% of the KKR Group Partnership Units. The percentage ownership in the KKR Group Partnerships will continue to change as KKR Holdings and/or principals exchange units in the KKR Group Partnerships for shares of Class A common stock of KKR & Co. Inc. or when KKR & Co. Inc. otherwise issues or repurchases shares of Class A common stock of KKR & Co. Inc. The KKR Group Partnerships also have outstanding equity interests that provide for the carry pool and preferred units with economic terms that mirror the preferred stock issued by KKR & Co. Inc.

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,
	2018				2017				2016
Net income (loss) attributable to KKR & Co. Inc.	$	1,131,063			$	1,018,305			$	309,307
Transfers from noncontrolling interests:
Exchange of KKR Group Partnership shares held by KKR Holdings L.P.(1)	570,898				247,946				90,910
Change from net income (loss) attributable to KKR & Co. Inc. and transfers from noncontrolling interests held by KKR Holdings	$	1,701,961			$	1,266,251			$	400,217

(1)	Increase in KKR's stockholders' equity for exchange of 36,890,095, 17,786,064, and 7,589,190 KKR Group Partnerships units for the years ended December 31, 2018, 2017, and 2016, respectively, held by KKR Holdings L.P., inclusive of deferred taxes.

Notes to Consolidated Financial Statements (Continued)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements (referred to hereafter as the "financial statements") have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").

KKR consolidates the financial results of the KKR Group Partnerships and their consolidated entities, which include the accounts of KKR's investment management and capital markets companies, the general partners of certain unconsolidated investment funds, general partners of consolidated investment funds and their respective consolidated investment funds and certain other entities including CFEs. References in the accompanying financial statements 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 reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, expenses and investment income (loss) during the reporting periods. Such estimates include but are not limited to (i) the determination of the income tax provision and (ii) 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 of investment 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 the specific 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 guidance under 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 if majority-owned and controlled. Rather, the consolidated funds and vehicles reflect their investments at fair value as described below in "Fair Value Measurements."

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 to permit the legal entity to finance its activities without additional subordinated financial support, (b) the holders of the equity investment at risk (as a group) lack either the direct or indirect ability through voting rights or similar rights to make decisions about a legal entity's activities that have a significant effect on the success of the legal entity or the obligation to absorb the expected losses or right to receive the expected residual returns, or (c) the voting rights of some investors are disproportionate to 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 substantially all of the legal entity's activities either involve or are conducted on behalf of an investor with disproportionately few voting rights. Limited partnerships and other similar entities where unaffiliated limited partners have not been granted (i) substantive participatory rights or (ii) substantive rights to either dissolve the partnership or remove the general partner ("kick-out rights") are VIEs under condition (b) above. KKR's investment funds that are not CFEs (i) are generally limited partnerships, (ii) generally provide KKR with operational discretion and control and (iii) generally have fund investors with no substantive rights to impact ongoing 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-out rights. 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 controlling financial 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's economic 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 the VIE that could

Notes to Consolidated Financial Statements (Continued)

potentially be significant to the VIE. The consolidation guidance requires an analysis to determine (i) whether an entity in which KKR holds a variable interest is a VIE and (ii) whether KKR's involvement, through holding interests directly or indirectly in the entity or contractually through other variable interests (for example, management and performance related fees), would give it a controlling financial interest. Performance of that analysis requires the exercise of 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 hold other economic interests in the entity that would absorb more than an insignificant amount of the expected losses or returns of the entity, would not be considered variable interests. KKR factors in all economic interests including interests held through related parties, to determine if it holds a variable interest. KKR determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a VIE and reconsiders that conclusion periodically.

For entities that are determined not to be VIEs, these entities are generally considered VOEs and are evaluated under the voting interest model. KKR consolidates 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 circumstances surrounding 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 most significantly impact the economic performance of the entity. In some, but not all cases, KKR, through its residual interest in the CLO may have variable interests that 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 KKR has 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 the CLO 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 consolidates the 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 the most subordinate tranche of the CMBS vehicle. The economic performance of the CMBS is most significantly impacted by the performance of the underlying assets. Thus, the activities that most significantly impact the CMBS economic performance are the activities that most significantly impact the performance of the underlying assets. The special servicer has the ability to manage the CMBS assets that are delinquent or in default to improve the economic performance of the CMBS. 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 the CMBS vehicle. These rights give KKR the ability to direct the activities that most significantly impact the economic performance of the CMBS. Additionally, as the 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, if any. In these cases, KKR is deemed to be the primary beneficiary and consolidates the CMBS vehicle.

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 the reporting period with changes related to exchange rate movements reflected as a component of Net Gains (Losses) from Investment Activities in the consolidated statements 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.

Credit - Consists primarily of investments in below investment grade corporate debt securities (primarily high yield bonds and syndicated bank loans), originated, distressed and opportunistic debt, real estate mortgage loans and interests in unconsolidated CLOs.

Investments of Consolidated CFEs - Consists primarily of (i) investments in below investment grade corporate debt securities (primarily high yield bonds and syndicated bank loans) held directly by the consolidated CLOs and (ii) investments in originated, fixed-rate real estate mortgage loans held directly by the consolidated CMBS vehicles.

Notes to Consolidated Financial Statements (Continued)

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.

Equity Method - Other - Consists primarily of (i) certain direct interests in operating companies in which KKR is deemed to exert significant influence under GAAP and (ii) certain interests in partnerships and joint ventures that hold private equity and real estate investments.

Equity Method - Capital Allocation-Based Income - Consists primarily of (i) the capital interest KKR holds as the general partner in certain investment funds, which are not consolidated and (ii) the carried interest component of the general partner interest, which are accounted for as a single unit of account.

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 Funds

The consolidated investment funds are, for GAAP purposes, investment companies and reflect their investments and other financial instruments, including portfolio companies that are majority-owned and controlled by KKR's investment funds, at fair value. KKR has retained this specialized accounting for the consolidated funds in consolidation. Accordingly, the unrealized gains and losses resulting from changes in fair value of the investments and other financial instruments held by the consolidated investment funds are reflected as a component of Net Gains (Losses) from Investment Activities in the consolidated statements of operations.

Certain energy investments are made through consolidated investment funds, including investments in working and royalty interests in oil and natural gas producing properties as well as investments in operating companies that operate in the energy industry. Since these investments are held through consolidated investment 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 and investments in working and royalty interests in oil and natural gas producing properties are generally classified as real asset investments.

Energy Investments held directly by KKR

Certain energy investments are made by KKR directly in working and royalty interests in oil and natural gas producing properties and not through investment funds. Oil and natural gas producing activities are accounted for under the successful efforts method of accounting and such working interests are consolidated based on the proportion of the working interests held by KKR. Accordingly, KKR reflects its proportionate share of the underlying statements of financial condition 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 as unrealized gains and losses in the consolidated statements of operations. Under the successful efforts method, exploration costs, other than the costs of drilling exploratory wells, are charged to expense as incurred. Costs that are associated with the drilling of successful exploration wells are capitalized if proved reserves are found. Lease acquisition costs are capitalized when incurred. Costs associated with the drilling of exploratory wells that do not find proved reserves, geological and 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 ratio of current production to estimated total net proved oil, natural gas and natural gas liquid reserves. Proved developed reserves are used in computing depletion rates for 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 and amortized 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 oil and natural gas properties and related equipment and facilities for impairment on a field-by-

Notes to Consolidated Financial Statements (Continued)

field basis. The determination of recoverability is made based upon estimated undiscounted future net cash flows. The amount of impairment loss, if any, is determined by comparing the fair value, as determined by a discounted cash 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 Option

For certain investments and other financial instruments, KKR has elected the fair value option. Such election is irrevocable and is applied on a financial instrument by financial instrument basis at initial recognition. KKR has elected the fair value option for certain private equity, real assets, credit, investments of consolidated CFEs, equity method - other and other financial instruments not held through a consolidated investment fund. Accounting for these investments at fair value is consistent with how KKR accounts for its investments held through consolidated investment funds. Changes in the fair value of such instruments are recognized in Net Gains (Losses) from Investment Activities in the consolidated statements of operations. Interest income on interest bearing credit securities on which the fair value option has been elected is based on stated coupon rates adjusted for the accretion of purchase discounts and the amortization of purchase premiums. This interest income is recorded within Interest Income in the consolidated statements of operations.

Equity Method

For certain investments in entities over which KKR exercises significant influence but which do not meet the requirements for consolidation and for which KKR has not elected the fair value option, KKR uses the equity method of accounting. The carrying value of equity method investments, 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 losses of the investee allocated based on KKR's respective ownership percentage, less distributions.

For equity method investments for which KKR has not elected the fair value option, KKR records its proportionate share of the investee's earnings or losses based on the most recently available financial information of the investee, which in certain cases may lag the date of KKR's financial statements by no more than three calendar months. As of December 31, 2018, equity method investees for which KKR reports financial results on a lag include Marshall Wace LLP ("Marshall Wace"). KKR evaluates its equity method investments for which KKR has not elected the fair 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 investments classified as Equity Method - Capital Allocation-Based Income approximates fair value, because the underlying investments of the unconsolidated investment funds are reported at fair value.

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 value of 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 interests in the consolidated CFEs including (i) changes in the fair value of the beneficial interests retained by KKR and (ii) beneficial interests that represent compensation for services rendered.

For the consolidated CLOs, KKR has determined that the fair value of the financial assets of the consolidated CLOs is more observable than the fair value 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 the financial 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 that are 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 represent compensation for services) and KKR's carrying value of any beneficial interests that represent compensation for services. The resulting amount is allocated to the individual 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 observable than the fair value of the financial assets of the consolidated CMBS vehicles. As a result, the financial liabilities of the consolidated CMBS vehicles are being measured 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 the beneficial interests retained by KKR), the fair value of the beneficial interests retained by KKR and the carrying value of any nonfinancial liabilities that are incidental 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.

Notes to Consolidated Financial Statements (Continued)

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 the measurement date under current market conditions. Except for certain of KKR's equity method investments (see "Equity Method" above in this Note 2 "Summary of Significant Accounting Policies") and debt obligations (as described in Note 10 "Debt Obligations"), KKR's investments and other financial instruments are recorded at fair value or at amounts whose carrying values approximate fair value. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation techniques are applied. These valuation 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 financial instruments at fair value. Market price observability is affected by a number of factors, including the type of financial instrument, the characteristics specific to the financial instrument and the state of the marketplace, including the existence and transparency of transactions between market participants. Financial instruments with readily available quoted prices in active markets generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value.

Investments and financial instruments measured and reported at fair value are classified and disclosed based on the observability of inputs used in the determination 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 financial instruments 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 fair value is determined 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 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 financial instrument. The inputs into the determination of fair value require significant management judgment or estimation. The types of financial instruments generally included in this category are private portfolio companies, real assets investments, credit investments, equity method investments for which the fair value 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 value hierarchy 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 value measurement in its entirety. KKR's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration 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 representative of fair value because in such market conditions there may be increased instances of transactions that are not orderly. In those circumstances, further analysis of transactions 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, and current 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 fair value 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 KKR recognizes 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 last quoted 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 a sale could reasonably affect the quoted price.

Notes to Consolidated Financial Statements (Continued)

Management's determination of fair value is based upon the methodologies and processes described below and may incorporate assumptions that are management'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 KKR and 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 financial assets 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 the bid-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 fair value.

Investments and Debt Obligations of Consolidated CLO Vehicles: Investments of consolidated CLO vehicles are reported within Investments of Consolidated CFEs and are valued using the same valuation methodology as described above for credit investments. Under ASU 2014-13, KKR measures CLO debt obligations on the basis of the fair value of the financial assets of the CLO.

Securities indexed to publicly-listed securities: The securities are typically valued using standard convertible security pricing models. The key inputs into these models that require some amount of judgment are the credit spreads utilized and the volatility assumed. To the extent the company being valued has other outstanding 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 the implied credit spreads observed in comparable publicly-traded debt securities. In certain cases, an additional spread will be added to reflect an illiquidity discount due to the fact that the security being valued is not publicly-traded. The volatility assumption is based upon the historically observed volatility of the underlying equity 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 a restriction.

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 first methodology 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 inputs used in this methodology include the weighted average cost of capital for the investment and assumed inputs used to calculate terminal values, such as exit EBITDA multiples. In certain cases the results of the discounted cash flow approach can be significantly impacted by these estimates. Other inputs are also used in both methodologies. In addition, when a definitive agreement has been executed to sell an investment, KKR generally 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 typically applied where appropriate. The ultimate fair value recorded for a particular investment will generally be within a range suggested by the two methodologies, except that 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 being sold pursuant to an executed definitive agreement, an estimated probability of such sale being completed. These factors can result in different weightings among investments in the portfolio and in certain instances may result in up to a 100% weighting to a single methodology.

Notes to Consolidated Financial Statements (Continued)

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 all private equity investments. KKR then evaluates such private equity investments to determine if factors exist that could make it more challenging to monetize the investment and, therefore, justify applying a higher illiquidity discount. These factors generally include (i) whether KKR is unable to freely sell the portfolio company 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 portfolio company is undergoing significant restructuring activity or similar factors and (iii) characteristics about the portfolio company regarding its size and/or whether the portfolio company is experiencing, or expected to experience, a significant decline in earnings. These factors generally make it less likely that a portfolio company would 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 tend to reduce the number of opportunities to sell an investment and/or increase the time horizon over which an investment may be monetized. Depending on the applicability of these factors, KKR determines the amount of any incremental illiquidity discount to be applied above the 5% minimum, and during the time KKR holds the investment, the illiquidity discount may be increased or decreased, from time to time, based on changes to these factors. The amount of illiquidity discount applied at any time requires considerable judgment about what a market participant would consider and is based on the facts and circumstances of each individual investment. Accordingly, the illiquidity discount ultimately considered by a market participant upon the realization of any investment may be higher or lower than that 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 analysis described above. A scenario analysis may also be conducted to subject the estimated enterprise values to a downside, base and upside case, which involves significant assumptions and judgments. A milestone analysis may also be conducted to assess the current level of progress towards value drivers that we have determined to be important, which involves significant assumptions and judgments. The enterprise value in each case may then be allocated across the investment's capital structure to reflect the terms of the security and subjected to probability weightings. In certain cases, the values of growth equity investments may be based on 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 investments are generally valued using the discounted cash flow analysis. 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 EBITDA multiples.

Energy investments are generally valued using a discounted cash flow approach, and where applicable, a market approach using comparable companies and transactions. Key inputs used in our valuations include (i) the weighted average cost of capital, (ii) future commodity prices, as quoted on indices and long-term commodity price forecasts and (iii) the asset’s future operating performance.

Real estate investments are generally valued using a combination of direct income capitalization and discounted cash flow analysis. Certain real estate investments are valued by KKR based on ranges of valuations determined by an independent valuation firm. Key inputs used in such methodologies that require estimates include an unlevered 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, credit investments are generally valued by KKR based on ranges of valuations determined by an independent valuation firm. Valuation models are based on discounted cash 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 generally employs 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 within Investments of Consolidated CFEs on the basis of the fair value of the financial liabilities of the CMBS. Debt obligations of consolidated CMBS vehicles are valued based on discounted cash flow analyses. The key input is the expected yield of each CMBS security using both observable and unobservable factors, which may include recently offered or completed trades and published yields of similar securities, security-specific characteristics (e.g. securities

Notes to Consolidated Financial Statements (Continued)

ratings issued by nationally 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 Value Measurements." KKR utilizes several unobservable pricing inputs and assumptions in determining the fair value of its Level III investments. These unobservable pricing inputs and assumptions may differ by investment and in the application of KKR's valuation methodologies. KKR's reported fair value estimates could vary materially if KKR had chosen to incorporate different unobservable pricing inputs and other assumptions or, for applicable investments, if KKR only used either the discounted cash flow methodology or the market comparables methodology instead of assigning a weighting to both methodologies.

Revenues

For the years ended December 31, 2018, 2017, and 2016, respectively, revenues consisted of the following:

	For the Years Ended December 31,
	2018				2017				2016
Management Fees	$	724,558			$	700,245			$	619,243
Fee Credits	(231,943		)		(257,401		)		(128,707		)
Transaction Fees	988,954				783,952				350,091
Monitoring Fees	87,545				82,238				65,418
Incentive Fees	14,038				4,601				8,709
Expense Reimbursements	146,989				121,927				81,549
Oil and Gas Revenue	51,465				63,460				65,754
Consulting Fees	59,720				42,582				42,851
Total Fees and Other	1,841,326				1,541,604				1,104,908
Carried Interest	441,529				1,740,661				803,185
General Partner Capital Interest	112,981				275,015				131,925
Total Capital Allocation-Based Income	554,510				2,015,676				935,110
Total Revenues	$	2,395,836			$	3,557,280			$	2,040,018

Fees and Other

Fees and Other, as detailed above, are accounted for as contracts with customers. Under the guidance for contracts with customers, KKR is required to (a) identify the contract(s) with a customer, (b) identify the performance obligations in the contract, (c) determine the transaction price, (d) allocate the transaction price to the performance obligations in the contract and (e) recognize revenue when (or as) KKR satisfies its performance obligation. In determining the transaction price, KKR has included variable consideration only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized would not occur when the uncertainty associated with the variable consideration is resolved.

Notes to Consolidated Financial Statements (Continued)

The following table summarizes KKR's revenues from contracts with customers:

Revenue Type	Customer	Performance Obligation	Performance Obligation Satisfied Over Time or Point In Time (1)	Variable or Fixed Consideration	Payment Terms	Subject to Return Once Recognized	Classification of Uncollected Amounts (2)
Management Fees	Investment funds, CLOs and other vehicles	Investment management services	Over time as services are rendered	Variable consideration since varies based on fluctuations in the basis of the management fee over time	Typically quarterly or annually in arrears	No	Due from Affiliates
Transaction Fees	Portfolio companies and third party companies	Advisory services and debt and equity arranging and underwriting	Point in time when the transaction (e.g. underwriting) is completed	Fixed consideration	Typically paid on or shortly after transaction closes	No	Due from Affiliates (portfolio companies) Other Assets (third parties)
Monitoring Fees
Recurring Fees	Portfolio companies	Monitoring services	Over time as services are rendered	Variable consideration since varies based on fluctuations in the basis of the recurring fee	Typically quarterly in arrears	No	Due from Affiliates
Termination Fees	Portfolio companies	Monitoring services	Point in time when the termination is completed	Fixed consideration	Typically paid on or shortly after termination occurs	No	Due from Affiliates
Incentive Fees	Investment funds and other vehicles	Investment management services that result in achievement of minimum investment return levels	Point in time at the end of the performance measurement period (quarterly or annually) if investment performance is achieved	Variable consideration since contingent upon the investment fund and other vehicles achieving more than stipulated investment return hurdles	Typically paid shortly after the end of the performance measurement period	No	Due from Affiliates
Expense Reimbursements	Investment funds and portfolio companies	Investment management and monitoring services	Point in time when the related expense is incurred	Fixed consideration	Typically shortly after expense is incurred	No	Due from Affiliates
Oil and Gas Revenues	Oil and gas wholesalers	Delivery of oil liquids and gas	Point in time when delivery has occurred and title has transferred	Fixed consideration	Typically shortly after delivery	No	Other Assets
Consulting Fees	Portfolio companies and other companies	Consulting and other services	Over time as services are rendered	Fixed consideration	Typically quarterly in arrears	No	Due from Affiliates

(1)	For performance obligations satisfied at a point in time, there were no significant judgments made in evaluating when a customer obtains control of the promised service.

(2)	For amounts classified in Other Assets, see Note 8 "Other Assets and Accounts Payable, Accrued Expenses and Other Liabilities." For amounts classified in Due from Affiliates, see Note 13 "Related Party Transactions."

Management Fees

KKR provides investment management services to investment funds, CLOs, and other vehicles in exchange for a management fee. Management fees are determined quarterly based on an annual rate and are generally based upon a percentage of the capital committed or capital invested during the investment period. Thereafter, management fees are generally based on a percentage of remaining invested capital, net asset value, gross assets or as otherwise defined in the respective contractual agreements. Since some of the factors that cause the fees to fluctuate are outside of KKR's control, management fees are considered to be constrained and are therefore not included in the transaction price. Additionally, after the contract is established there are no significant judgments made when determining the transaction price.

Management fees earned from private equity funds generally range from 1.5% to 2% of committed capital during the fund's investment 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. 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 earlier deployment of committed capital. Management fees

Notes to Consolidated Financial Statements (Continued)

earned from growth equity, real assets, and core investment strategy funds generally range from 1.0% to 2.0% and are generally based on the investment fund's average net asset value, capital commitments, or invested capital.

Management fees earned from credit funds and other investment vehicles in the Public Markets business line generally range from 0.25% to 1.50%. Such rates may be based on the investment fund's average net asset value, capital commitments, or invested capital. Management fees earned from CLOs include senior collateral management fees and subordinate collateral management fees. When combined, senior collateral management fees and subordinate collateral management fees are determined based on an annual rate ranging from 0.40% to 0.50% of collateral. If amounts distributable on any payment date are insufficient to pay the collateral management fees according to the priority of payments, any shortfall is deferred and payable on subsequent payment dates. For the purpose of calculating the collateral management fees, collateral, the payment dates, and the priority of payments are terms defined in the management agreements.

Management fees earned from KKR's consolidated investment funds, CLOs and other vehicles are eliminated in consolidation. However, because these amounts are funded by, and earned from, noncontrolling interests, KKR's allocated share of the net income from the consolidated investment funds, CLOs and other vehicles is increased by the amount of fees that are eliminated. Accordingly, the elimination of these fees does not impact the net income (loss) attributable to KKR or KKR stockholders' equity.

Fee Credits

Under the terms of the management agreements with certain of its investment funds, KKR is required to share with such funds an agreed upon percentage of certain fees, including monitoring and transaction fees earned from portfolio companies ("Fee Credits"). Investment funds earn Fee Credits only with respect to monitoring and transaction fees that are allocable to the fund's investment in the portfolio company and not, for example, any fees allocable to capital invested through co-investment vehicles. Fee Credits are calculated after deducting certain costs incurred in connection with pursuing potential investments that do not result in completed transactions ("broken-deal expenses") and generally amount to 80% for older funds, or 100% for newer funds, of allocable monitoring and transaction fees after broken-deal expenses are recovered, although the actual percentage may vary from fund to fund. Fee Credits are recognized and owed to investment funds concurrently with the recognition of monitoring fees, transaction fees and broken-deal expenses. Since Fee Credits are payable to investment funds, amounts owed are generally applied as a reduction of the management fee that is otherwise billed to the investment fund. Fee credits are recorded as a reduction of revenues in the consolidated statement of operations. Fee credits owed to investment funds are recorded in Due to Affiliates on the consolidated statements of financial condition (See Note 13 "Related Party Transactions").

Transaction Fees

KKR (i) arranges debt and equity financing, places and underwrites securities offerings and provides other types of capital markets services for companies seeking financing in its Capital Markets business line and (ii) provides advisory services in connection with successful Private Markets and Public Markets portfolio company investment transactions, in each case, in exchange for a transaction fee. Transaction fees are separately negotiated for each transaction and are generally based on (i) in our Capital Markets business line, a percentage of the overall transaction size and (ii) for Private Markets and Public Markets transactions, a percentage of either total enterprise value of an investment or a percentage of the aggregate price paid for an investment. After the contract is established, there are no significant judgments made when determining the transaction price.

Monitoring Fees

KKR provides services in connection with monitoring portfolio companies in exchange for a fee. Recurring monitoring fees are separately negotiated for each portfolio company. In addition, certain monitoring fee arrangements may provide for a termination payment following an initial public offering or change of control as defined in the contractual terms of the related agreement. These termination payments are recognized in the period when the related transaction closes. After the contract is established, there are no significant judgments made when determining the transaction price.

Incentive Fees

KKR provides investment management services to certain investment funds, CLOs and other vehicles in exchange for a management fee as discussed above and, in some cases an incentive fee when KKR is not entitled to a carried interest. Incentive fee rates generally range from 5% to 20% of investment gains. Incentive fees are considered a form of variable consideration as these fees are subject to reversal, and therefore the recognition of such fees is deferred until the end of each fund's measurement period (which is generally one year) when the performance-based incentive fees become fixed and

Notes to Consolidated Financial Statements (Continued)

determinable. Incentive fees are generally paid within 90 days of the end of the investment vehicles' measurement period. After the contract is established, there are no significant judgments made when determining the transaction price.

Expense Reimbursements

Providing investment management services to investment funds and monitoring KKR’s portfolio companies require KKR to arrange for services on behalf of them. In those situations where KKR is acting as an agent on behalf of its investment funds or portfolio companies, it presents the cost of services on a net basis as a reduction of Revenues. In all other situations, KKR is primarily responsible for fulfilling the services and is therefore acting as a principal for those arrangements for accounting purposes. As a result, the expense and related reimbursement associated with those services is presented on a gross basis. Costs incurred are classified as Expenses and reimbursements of such costs are classified as Expense Reimbursements within Revenues on the consolidated statements of operations. After the contract is established, there are no significant judgments made when determining the transaction price.

Oil and Gas Revenue

KKR directly holds certain working and royalty interests in oil and natural gas producing properties that are not held through investment funds. Oil and gas revenue is recognized when the performance obligation is satisfied, which occurs at the point in time when control of the product transfers to the customer. Performance obligations are typically satisfied through the monthly delivery of production. Revenue is recognized based on KKR's proportionate share of production from non-operated properties as marketed by the operator. After the contract is established, there are no significant judgments made when determining the transaction price.

Consulting Fees

Certain consolidated entities that employ non-employee operating consultants provide consulting and other services to portfolio companies and other companies in exchange for a consulting fee. Consulting fees are separately negotiated with each portfolio company for which services are provided and are not shared with KKR. After the contract is established, there are no significant judgments made when determining the transaction price.

Capital Allocation-Based Income

Capital allocation-based income is earned from those arrangements where KKR has a general partner capital interest and is entitled to a disproportionate allocation of investment income (referred to hereafter as “carried interest”). KKR accounts for its general partner interests in capital allocation-based arrangements as financial instruments under ASC 323, Investments - Equity Method and Joint Ventures (“ASC 323”) since the general partner has significant governance rights in the investment funds in which it invests, which demonstrates significant influence. In accordance with ASC 323, KKR records equity method income based on the proportionate share of the income of the investment fund, including carried interest, assuming the investment fund was liquidated as of each reporting date pursuant to each investment fund's governing agreements. Accordingly, these general partner interests are accounted for outside of the scope of ASC 606. Other arrangements surrounding contractual incentive fees through an advisory contract are separate and distinct and accounted for in accordance with ASC 606. In these incentive fee arrangements, accounted for in accordance with ASC 606, KKR’s economics in the entity do not involve an allocation of capital. See “Incentive Fees” above.

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 for each investment fund, pursuant to the fund agreements, as if the fair value of the underlying investments were realized as of such date, irrespective of whether such amounts have been realized. As the fair value of underlying investments varies between reporting periods, it is necessary to make adjustments to amounts recorded as carried interest to reflect either (a) positive performance resulting in an increase in the carried interest allocated to the general partner or (b) negative performance that would cause the amount due to KKR to be less than the amount previously recognized, resulting in a negative adjustment to carried interest allocated 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 date and to make the required positive or negative adjustments. KKR ceases to record negative carried interest allocations once previously recognized carried interest allocations for an investment fund have been fully reversed. KKR is not obligated to make payments for guaranteed returns or hurdles and, therefore, cannot have negative carried interest over the life of an investment fund. Accrued but unpaid carried interest as of the reporting date is reflected in Investments in the consolidated statements of financial condition.

Notes to Consolidated Financial Statements (Continued)

Prior to January 1, 2018, to the extent an investment fund was not consolidated, KKR accounted for carried interest within Fees and Other separately from its general partner capital interest, which was included in Net Gains (Losses) from Investment Activities in the consolidated statements of operations. Effective January 1, 2018, the carried interest component of the general partner interest and the capital interest KKR holds in its investment funds as the general partner are accounted for as a single unit of account and reported in capital allocation-based income within Revenues in the consolidated statements of operations. This change in accounting principle has been applied on a full retrospective basis. For the years ended December 31, 2017 and 2016 $1,740.7 million and $803.2 million were reclassified from Fees and Other, respectively, to Capital Allocation-Based Income in the consolidated statements of operations. For the years ended December 31, 2017 and 2016, $275.0 million and $131.9 million were reclassified from Net Gains (Losses) from Investment Activities, respectively, to Capital Allocation-Based Income in the consolidated statements of operations. KKR has concluded that investments made alongside its fund investors in investment funds which entitle KKR to a carried interest represent equity method investments that are not in the scope of the amended revenue recognition guidance.

Compensation and Benefits

Compensation and Benefits expense includes (i) cash compensation consisting of salaries, bonuses, and benefits, (ii) equity based compensation consisting of charges 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 for as Compensation and Benefits expense in the consolidated statements of operations. These employees are also eligible to receive discretionary cash bonuses based on performance, overall profitability and other matters. While cash bonuses paid to most employees are borne by KKR and certain consolidated entities and result in customary compensation and benefits expense, certain cash bonuses that are paid to certain of KKR's principals can be borne by KKR Holdings. These bonuses are funded with distributions that KKR Holdings receives on KKR Group Partnership Units held by KKR Holdings but are not then passed on to holders of unvested units of KKR Holdings. Because KKR principals are not entitled to receive distributions on units that are unvested, any amounts allocated to principals in excess of a principal's vested equity interests are reflected as employee compensation and benefits expense. These compensation charges are currently recorded based on the amount of cash expected to be paid by KKR Holdings.

Carry Pool Allocation

With respect to KKR's active and future funds and co-investment vehicles that provide for carried interest, KKR allocates to its employees and employees of certain 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%, as applicable, of the carry it earns from these funds and vehicles to its carry pool. These amounts are accounted for as compensatory profit‑sharing arrangements in Accounts Payable, Accrued Expenses and Other Liabilities within the accompanying consolidated statements of financial condition in conjunction with the related carried interest income or incentive fees and recorded as compensation expense.

Profit Sharing Plan

KKR provides certain profit sharing programs for KKR employees and other eligible personnel. In particular, KKR provides a 401(k) plan for eligible employees 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 of the plan year. For the years ended December 31, 2018, 2017 and 2016, KKR incurred expenses of $9.5 million, $8.2 million and $8.0 million, respectively, in connection with the 401(k) plan and other profit sharing programs.

General, Administrative and Other

General, administrative and other expense consists primarily of professional fees paid to legal advisors, accountants, advisors and consultants, insurance costs, travel and related expenses, communications and information services, depreciation and amortization charges, expenses (including impairment charges) incurred by oil and gas-producing entities that are consolidated, broken-deal expenses, and other general operating expenses. A portion of these general administrative and other expenses, in particular broken-deal expenses, are borne by fund investors.

Notes to Consolidated Financial Statements (Continued)

Investment Income

Investment 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 recorded in Net Gains (Losses) from Investment Activities. Upon disposition of an investment, previously recognized unrealized gains or losses are reversed and a realized gain or loss is recognized.

(ii)	Foreign exchange gains and losses relating to mark‑to‑market activity on foreign exchange forward contracts, foreign currency options and foreign denominated debt which are recorded in Net Gains (Losses) from Investment Activities.

(iii)	Dividends, which are recognized on the ex‑dividend date, or, in the absence of a formal declaration of a record date, on the date it is received.

(iv)	Interest income, which is recognized as earned.

(v)	Interest expense, which is recognized as incurred.

Income Taxes

KKR & Co. Inc. is a corporation for U.S. federal income tax purposes and thus is subject to U.S. federal, state and local corporate income taxes at the entity level on KKR’s share of net taxable income. In addition, the KKR Group Partnerships and certain of their subsidiaries operate in the United States as partnerships for U.S. federal income tax purposes and as corporate entities in certain non-U.S. jurisdictions. These entities, in some cases, are subject to U.S. state or local income taxes or non-U.S. income taxes.

Prior to the Conversion, KKR & Co. L.P.’s investment income and carried interest generally were not subject to U.S. corporate income taxes. Subsequent to the Conversion, all income earned by KKR & Co. Inc. is subject to U.S. corporate income taxes.

See Note 11 "Income Taxes" for further information on the financial statement impact of the Conversion.

Deferred Income Taxes

Income taxes are accounted for using the asset and liability method of accounting. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the carrying amounts of assets and liabilities and their respective tax basis, using tax rates in effect for the year 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 consolidated statements 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 the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. When evaluating the realizability of the deferred tax assets, all evidence, both positive and negative, is considered. Items considered when evaluating the need for a valuation allowance include the ability 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 single amount within Other Assets or Accounts Payable, Accrued and Other Liabilities, as applicable, in the accompanying statements of financial condition.

2017 Tax Act

The Tax Cuts and Jobs Act, which was enacted in December 2017 (the "2017 Tax Act") made various changes to the U.S. tax code that include, but are not limited to, (1) reducing the U.S. federal corporate income tax rate to 21% effective January 1, 2018 and (2) requiring a one-time transition tax on certain un-repatriated earnings of foreign subsidiaries.

See Note 11 "Income Taxes" for further information on the financial statement impact of the 2017 Tax Act.

Notes to Consolidated Financial Statements (Continued)

Uncertain Tax Positions

KKR analyzes its tax filing positions in all of the U.S. federal, state and local tax jurisdictions and foreign tax jurisdictions where it is required to file income tax returns, as well as for 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 reserve for uncertain tax positions is recorded in Accounts Payable, Accrued and Other Liabilities in the accompanying statements of financial condition. KKR recognizes accrued interest and penalties related to uncertain tax positions within the provision for income taxes in the consolidated statements of operations.

KKR records uncertain tax positions on the basis of a two‑step process: (a) determination is made whether it is more likely than not that the tax positions will be 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 largest amount of tax benefit that is greater than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

Cash and Cash Equivalents

KKR 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 Entities

Cash and cash equivalents held at consolidated entities represents cash that, although not legally restricted, is not available to fund general liquidity needs of KKR as the use of such funds is generally limited to the investment activities of KKR's investment funds and CFEs.

Restricted Cash and Cash Equivalents

Restricted cash and cash equivalents primarily represent amounts that are held by third parties under certain of KKR's financing and derivative transactions. The duration of this restricted cash generally matches the duration of the related financing or derivative transaction.

Due from and Due to Affiliates

KKR considers its principals and their related entities, unconsolidated investment 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 Amortization

Fixed assets consist primarily of corporate real estate, leasehold improvements, furniture and computer hardware. Such amounts are recorded at cost less accumulated depreciation and amortization and are included in Other Assets within the accompanying consolidated statements of financial condition. Depreciation and amortization are calculated using the straight‑line method over the assets' estimated economic useful lives, which for leasehold improvements are the lesser of the lease terms or the life of the asset, and three to seven years for other fixed assets.

Freestanding Derivatives

Freestanding derivatives are instruments that KKR and certain of its consolidated funds have entered into as part of their overall risk management and investment strategies. These derivative contracts are not designated as hedging instruments for accounting purposes. Such contracts may include forward, swap and option contracts related to foreign currencies and interest rates to manage foreign exchange risk and interest rate risk arising from certain assets and liabilities. All derivatives are recognized in Other Assets or Accounts Payable, Accrued Expenses and Other Liabilities and are presented on a gross basis in the consolidated statements of financial condition and measured at fair value with changes in fair value recorded in Net Gains (Losses) from Investment Activities in the accompanying consolidated statements of operations. KKR's derivative financial instruments contain credit risk to the extent that its counterparties may be unable to meet the terms of the agreements. KKR attempts to reduce this risk by limiting its counterparties to major financial institutions with strong credit ratings.

Notes 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 Assets in the accompanying consolidated statements of financial condition. Identifiable finite-lived intangible assets are amortized on a straight-line basis over their estimated 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. Goodwill is assessed for impairment annually in the third quarter of each fiscal year or more frequently if circumstances indicate impairment may have occurred. Goodwill is recorded in Other Assets in the accompanying consolidated statements of financial condition.

Securities Sold Short

Whether 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 the contracted 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 such securities sold short, which is recorded in Accounts Payable, Accrued Expenses and Other Liabilities in the statement of financial condition, is marked to market based 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 the amount 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 consolidated financial statements, comprehensive income is comprised of (i) Net Income (Loss), as presented in the consolidated statements of operations and (ii) net foreign currency translation.

Foreign Currency

Consolidated entities which have a functional currency that differs from KKR's reporting currency are primarily KKR's investment management and capital markets companies located outside the United States and certain CFEs. Foreign currency denominated assets and liabilities are translated using the exchange rates prevailing at the end of each reporting period. Results of foreign operations are translated at the weighted average exchange rate for each reporting period. Translation adjustments are included as a component of accumulated other comprehensive income (loss) until realized. Foreign currency income or expenses resulting from transactions outside of the functional currency of a consolidated entity are recorded as incurred in general, administrative and other expense in the consolidated statements of operations.

Notes to Consolidated Financial Statements (Continued)

Recently Issued Accounting Pronouncements

Adopted in 2018

Revenue from Contracts with Customers

The FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”) in May 2014 and subsequently issued several amendments to the standard. ASU 2014-09, and related amendments, provide comprehensive guidance for recognizing revenue from contracts with customers. Entities will be able to recognize revenue when the entity transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The guidance includes a five-step framework that requires an entity to: (i) identify the contracts with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contracts and (v) recognize revenue when the entity satisfies a performance obligation. The guidance in ASU 2014-09, and the related amendments, is effective for KKR beginning on January 1, 2018, and KKR adopted this guidance on that date. KKR has concluded that its Fees and Other are within the scope of the amended revenue recognition guidance. Additionally, KKR has concluded that investments made alongside its fund investors in investment funds which entitle KKR to a carried interest represent equity method investments not in the scope of the amended revenue recognition guidance. KKR has implemented ASU 2014-09 and its related amendments, and there were no changes to KKR's historical pattern of recognizing revenue. See the accounting policy for Revenues above.

Cash Flows

In 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 clarifies guidance on eight cash flow matters: (i) debt prepayment or debt extinguishment costs, (ii) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (iii) contingent consideration payments made after a business 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 and application of the predominance principle. The guidance is effective for KKR beginning on January 1, 2018, and KKR adopted this guidance on that date. This adoption did not have a material impact on KKR's consolidated statements of cash flows.

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 clarify guidance on the classification and presentation of restricted cash in the statement of cash flows. The amended guidance requires the following: (i) restricted cash and restricted cash equivalents should be included in the cash and cash-equivalents balances in the statement of cash flows; (ii) changes in restricted cash and restricted cash equivalents that result from transfers between cash, cash equivalents, and restricted cash and restricted cash equivalents should not be presented as cash flow activities in the statement of cash flows; (iii) a reconciliation between the statement of financial position and the statement of cash flows must be disclosed 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 is effective for KKR beginning on January 1, 2018, and KKR adopted this guidance on that date. Upon adoption, (i) Restricted Cash and Cash Equivalents and (ii) Cash and Cash Equivalents Held at Consolidated Entities were (a) included in the cash and cash-equivalents balances in the consolidated statements of cash flows and (b) disclosed in a reconciliation between the consolidated statements of financial condition and the consolidated statements of cash flows. This guidance has been applied on a full retrospective basis. For the years ended December 31, 2017 and 2016, $97.9 million and $121.0 million, respectively, of cash used by operating activities and $155.9 million and $1.4 million, respectively, of cash provided by investing activities were removed from net cash provided (used) by operating activities and net cash provided (used) by investing activities, respectively, and included in net increase/(decrease) in cash, cash-equivalents and restricted cash in the consolidated statements of cash flows.

Notes to Consolidated Financial Statements (Continued)

Equity-Based Compensation

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 terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. ASU 2017-09 is effective for fiscal years and interim periods beginning after December 15, 2017. This guidance has been adopted as of January 1, 2018 and did not have a material impact to KKR.

In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting ("ASU 2018-07"), which generally simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under ASU 2018-07, most of the guidance on such payments to nonemployees is generally aligned with the requirements for share-based payments granted to employees. Prior to adoption of ASU 2018-07, share-based payment arrangements with employees were accounted for under ASC 718, Compensation - Stock Compensation, while nonemployee share-based payments issued for goods and services were accounted for under ASC 505-50, Equity - Equity Based Payments to Non-Employees. ASC 505-50, before the ASU’s amendments, differed significantly from ASC 718. Differences included the guidance on (1) the determination of the measurement date (which generally is the date on which the measurement of equity-classified share-based payments becomes fixed), (2) the accounting for performance conditions, (3) the ability of a nonpublic entity to use certain practical expedients for measurement and (4) the accounting for share-based payments after vesting. ASU 2018-07 eliminates most of these differences. The guidance is effective for fiscal periods beginning after December 15, 2018. KKR has elected to early adopt ASU 2018-07 during the second quarter of 2018 with adjustments reflected as of January 1, 2018. Such adoption did not have a material impact to KKR.

Income Taxes

In 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 other than inventory. ASU 2016-16 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods. This guidance has been adopted as of January 1, 2018 and did not have a material impact to KKR.

Fair Value Measurement

In August 2018, the FASB issued ASU No. 2018-13, which changes the fair value measurement disclosure requirements. The ASU eliminates, amends and adds disclosure requirements for fair value measurements. The guidance is effective for fiscal periods beginning after December 15, 2019. KKR has elected to early adopt ASU 2018-13 in its entirety during the third quarter of 2018. Such adoption did not have a material impact to KKR.

Effective on January 1, 2019

Leases

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) which has subsequently been amended by ASU 2018-01, 2018-10, 2018-11. The guidance requires the recognition of lease assets and lease liabilities for those leases classified as operating leases under previous GAAP. The guidance retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the classification criteria for distinguishing between capital leases and operating leases under previous GAAP. The recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee have not changed 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 of the 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 cash flows. The guidance is effective for fiscal periods beginning after December 15, 2018. Early application is permitted. The only material lease arrangements KKR is engaged in are leases of office space where KKR is the lessee under the terms of operating lease agreements. KKR is finalizing its analysis of the impact of this guidance on the financial statements and such guidance is not expected to have a material impact to KKR.

Notes to Consolidated Financial Statements (Continued)

Premium Amortization on Purchased Callable Debt Securities

In March 2017, the FASB issued ASU No. 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities ("ASU 2017-08"). This guidance amends the amortization period for certain purchased callable debt securities held at a premium. 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 a discount; 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 to retained earnings as of the beginning of the period of adoption. KKR is currently evaluating the impact of this guidance on the financial statements.

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

In February 2018, the FASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects 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 tax balances 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 liabilities related to items of accumulated other comprehensive income ("OCI"). ASU 2018-02 allows entities to reclassify from accumulated OCI to retained earnings stranded 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 that relate 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 be reclassified. 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 must disclose 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 from accumulated OCI to retained earnings, if any. The guidance is effective for fiscal periods beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted for periods for which financial statement have not yet been issued or made available upon issuance, including in the period the 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 apply the 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 is currently evaluating the impact of this guidance on the financial statements.

Effective on January 1, 2020

Goodwill

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This guidance simplifies the accounting for goodwill impairments by eliminating the second step from the goodwill impairment test. The ASU requires goodwill impairments to be measured on the basis of the fair value of a reporting unit relative to the reporting unit's carrying amount rather than on the basis of the implied amount of goodwill relative to the goodwill balance of the reporting unit. The ASU also (i) clarifies the requirements for excluding and allocating foreign currency translation adjustments to reporting units related to an entity's testing of reporting units for goodwill impairment and (ii) clarifies that an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The guidance 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 interim impairment tests occurring after January 1, 2017. KKR is currently evaluating the impact of this guidance on the financial statements.

Implementation Costs Incurred in a Cloud Computing Arrangement

In August 2018, the FASB issued ASU No. 2018-15, which addresses a customer’s accounting for implementation costs incurred in a cloud computing arrangement ("CCA") that is a service contract. The ASU aligns the accounting for costs incurred to implement a CCA that is a service arrangement with the guidance on capitalizing costs associated with developing or obtaining internal-use software. The guidance is effective for fiscal periods beginning after December 15, 2019. Early adoption is permitted and this ASU can be applied on either a retrospective or prospective basis. KKR is currently evaluating the impact of this guidance on the financial statements.

Notes 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 on investments (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 other financial instruments during a period. Upon disposition of an investment or financial instrument, previously recognized unrealized gains or losses are reversed and an 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, 2018, 2017 and 2016, respectively:

	For the Year Ended December 31, 2018
	Net Realized Gains (Losses)				Net Unrealized Gains (Losses)				Total
Private Equity (1)	$	184,784			$	708,600			$	893,384
Credit (1)	(354,090		)		(420,434		)		(774,524		)
Investments of Consolidated CFEs (1)	(83,719		)		(452,331		)		(536,050		)
Real Assets (1)	92,885				67,999				160,884
Equity Method - Other (1)	(3,991		)		339,027				335,036
Other Investments (1)	(239,081		)		(434,537		)		(673,618		)
Foreign Exchange Forward Contracts and Options (2)	(90,625		)		266,938				176,313
Securities Sold Short (2)	750,007				26,465				776,472
Other Derivatives (2)	(13,273		)		1,037				(12,236		)
Debt Obligations and Other (3)	291,755				617,416				909,171
Net Gains (Losses) From Investment Activities	$	534,652			$	720,180			$	1,254,832

	For the Year Ended December 31, 2017
	Net Realized Gains (Losses)				Net Unrealized Gains (Losses)				Total
Private Equity (1)	$	223,568			$	338,720			$	562,288
Credit (1)	(470,487		)		423,603				(46,884		)
Investments of Consolidated CFEs (1)	(97,129		)		352				(96,777		)
Real Assets (1)	(18,722		)		218,728				200,006
Equity Method - Other (1)	34,190				95,968				130,158
Other Investments (1)	(796,348		)		65,516				(730,832		)
Foreign Exchange Forward Contracts and Options (2)	(31,772		)		(342,849		)		(374,621		)
Securities Sold Short (2)	1,116,325				97,811				1,214,136
Other Derivatives (2)	(7,129		)		(23,687		)		(30,816		)
Debt Obligations and Other (3)	85,820				15,666				101,486
Net Gains (Losses) From Investment Activities	$	38,316			$	889,828			$	928,144

	For the Year Ended December 31, 2016
	Net Realized Gains (Losses)				Net Unrealized Gains (Losses)				Total
Private Equity (1)	$	306,180			$	(196,892	)		$	109,288
Credit (1)	(182,858		)		87,110				(95,748		)
Investments of Consolidated CFEs (1)	(258,430		)		444,142				185,712
Real Assets (1)	87,512				141,886				229,398
Equity Method - Other (1)	3,830				(130,311		)		(126,481		)
Other Investments (1)	(646,794		)		(84,444		)		(731,238		)
Foreign Exchange Forward Contracts and Options (2)	108,404				(7,986		)		100,418
Securities Sold Short (2)	594,743				(90,607		)		504,136
Other Derivatives (2)	(49,712		)		70,534				20,822
Debt Obligations and Other (3)	384,222				(369,557		)		14,665
Net Gains (Losses) From Investment Activities	$	347,097			$	(136,125	)		$	210,972

(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."

Notes to Consolidated Financial Statements (Continued)

4. INVESTMENTS

Investments consist of the following:

	December 31, 2018				December 31, 2017
Private Equity	$	7,349,559			$	3,301,261
Credit	9,099,135				7,621,320
Investments of Consolidated CFEs	14,733,423				15,573,203
Real Assets	3,157,954				2,302,061
Equity Method - Other	4,212,874				3,324,631
Equity Method - Capital Allocation-Based Income	3,584,415				4,132,171
Other Investments	2,770,622				2,759,287
Total Investments	$	44,907,982			$	39,013,934

As of December 31, 2018 and 2017, there were no investments which represented greater than 5% of total investments. The majority of the securities underlying private equity investments represent equity securities.

Equity Method

Equity method investments include (i) certain investments in KKR's investment 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 at fair value, the carrying value of these equity method investments representing KKR's interests in unconsolidated funds approximates fair value. The carrying value of equity method investments in certain operating companies, in which KKR is determined to exert significant influence, is generally determined based on the amounts invested by KKR, adjusted for the equity in earnings or losses of the investee allocated based on KKR's respective ownership percentage, less distributions. In some cases, KKR has elected the fair value option to account for certain of these equity method investments. With respect to equity method investments where KKR has elected the fair value option, KKR's net income or loss associated with these investments predominantly represents fair value adjustments in the investments. Changes in estimated fair value are recorded in Net Gains (Losses) from Investment Activities in the consolidated statement of operations.

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 and Exchange Commission (the "SEC"). As of and for the years ended December 31, 2018, 2017, and 2016, no individual equity method investment held by KKR met the significance criteria. As such, KKR is not required to present separate financial statements for any of its equity method investments.

Investment in Marshall Wace

On November 2, 2015, KKR entered into a long-term strategic relationship with Marshall Wace and acquired a 24.9% interest in Marshall Wace through a combination of cash and Class A common stock. Subject to the exercise of a put option by Marshall Wace or a call option by KKR, at subsequent closings to occur in the second, third, and fourth years following the initial closing described above, and subject to satisfaction or waiver of certain closing conditions, including regulatory approvals, KKR may at each such closing subscribe (or be required to subscribe) for an incremental 5% equity interest. The exercise of such options would require the use of cash and/or KKR Class A common stock. KKR's investment in Marshall Wace is accounted for using the equity method of accounting.

On each of November 30, 2017 and 2018, KKR acquired an additional 5.0% interest in Marshall Wace after the exercise of the options agreed to between Marshall Wace and KKR, bringing KKR's total ownership of Marshall Wace to 34.6%, after giving effect to certain equity dilution. These acquisitions in 2017 and 2018 were funded through a combination of cash and 4,727,966 and 5,238,889 shares of Class A common stock, respectively.

Notes to Consolidated Financial Statements (Continued)

Strategic BDC Partnership with FS Investments

On April 9, 2018, KKR completed a transaction to form a new strategic BDC partnership with Franklin Square Holdings, L.P. ("FS Investments") to provide investment advisory services to Corporate Capital Trust ("CCT") and Corporate Capital Trust II ("CCT II"), which are business development companies ("BDCs") that were previously advised and sub-advised, respectively, by KKR, and four BDCs that were previously advised by FS Investments. Following the closing of this transaction in April 2018, the new strategic BDC partnership, FS/KKR Advisor, LLC, began serving as the investment adviser to all six of the aforementioned BDCs.

In connection with this transaction, KKR contributed a combination of cash and intangible assets, which consisted of advisory contractual rights, in exchange for a 50% equity interest in FS/KKR Advisor, LLC. Certain of the intangible assets contributed by KKR had a carrying amount of zero. As a result, the fair value of KKR’s 50% interest in FS/KKR Advisor, LLC received in this transaction exceeded the carrying amount of the assets contributed by approximately $313 million. KKR holds a noncontrolling financial interest in FS/KKR Advisor, LLC and reports its investment in FS/KKR Advisor, LLC using the equity method of accounting.

Summarized Financial Information

The following table shows summarized financial information relating to the statements of financial condition for all of KKR's equity method investments assuming 100% ownership as of December, 31, 2018 and 2017:

		December 31, 2018				December 31, 2017
Total Assets		$	93,577,773			$	66,989,419
Total Liabilities		$	21,296,194			$	10,510,223
Total Equity		$	72,281,579			$	56,479,196

The following table shows summarized financial information relating to the statements of operations for all of KKR's equity method investments assuming 100% ownership for the years ended December 31, 2018, 2017 and 2016:

		For the Years Ended December 31,
		2018				2017				2016
Investment Related Revenues		$	1,679,950			$	1,167,038			$	1,195,404
Other Revenues		5,304,634				3,002,987				1,201,693
Investment Related Expenses		1,258,782				482,336				464,616
Other Expenses		3,602,612				2,392,965				801,342
Net Realized and Unrealized Gain/(Loss) from Investments		1,818,861				9,217,912				3,625,293
Net Income (Loss)		$	3,942,051			$	10,512,636			$	4,756,432

Notes to Consolidated Financial Statements (Continued)

5. FAIR VALUE MEASUREMENTS

The following tables summarize the valuation of assets and liabilities measured and reported at fair value by the fair value hierarchy. Investments classified as Equity Method - Other, for which the fair value option has not been elected, and Equity Method - Capital Allocation-Based Income, have been excluded from the tables below.

Assets, at fair value:

	December 31, 2018
	Level I				Level II				Level III				Total
Private Equity	$	1,156,977			$	63,999			$	6,128,583			$	7,349,559
Credit	—				2,334,405				6,764,730				9,099,135
Investments of Consolidated CFEs	—				12,650,878				2,082,545				14,733,423
Real Assets	—				—				3,157,954				3,157,954
Equity Method - Other	245,225				43,943				1,503,022				1,792,190
Other Investments	480,192				173,844				2,116,586				2,770,622
Total Investments	1,882,394				15,267,069				21,753,420				38,902,883
Foreign Exchange Contracts and Options	—				177,264				—				177,264
Other Derivatives	—				3,879				37,116			(1)	40,995
Total Assets	$	1,882,394			$	15,448,212			$	21,790,536			$	39,121,142

	December 31, 2017
	Level I				Level II				Level III				Total
Private Equity	$	1,043,390			$	85,581			$	2,172,290			$	3,301,261
Credit	—				2,482,383				5,138,937				7,621,320
Investments of Consolidated CFEs	—				10,220,113				5,353,090				15,573,203
Real Assets	50,794				—				2,251,267				2,302,061
Equity Method - Other	60,282				247,748				1,076,709				1,384,739
Other Investments	864,872				134,404				1,760,011				2,759,287
Total Investments	2,019,338				13,170,229				17,752,304				32,941,871
Foreign Exchange Contracts and Options	—				96,584				—				96,584
Other Derivatives	—				33,125				51,949			(1)	85,074
Total 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 flow method, which includes consideration of the current portfolio, projected portfolio construction, projected portfolio realizations, portfolio volatility (based on the volatility, correlation, and size of each underlying asset class), and the discounting of future cash flows to the reporting date.

Notes to Consolidated Financial Statements (Continued)

Liabilities, at fair value:

	December 31, 2018
	Level I				Level II				Level III				Total
Securities Sold Short	$	344,124			$	—			$	—			$	344,124
Foreign Exchange Contracts and Options	—				60,749				—				60,749
Unfunded Revolver Commitments	—				—				52,066			(1)	52,066
Other Derivatives	—				18,440				17,200			(2)	35,640
Debt Obligations of Consolidated CFEs	—				12,081,771				1,876,783				13,958,554
Total Liabilities	$	344,124			$	12,160,960			$	1,946,049			$	14,451,133

	December 31, 2017
	Level I				Level II				Level III				Total
Securities Sold Short	$	692,007			$	—			$	—			$	692,007
Foreign Exchange Contracts and Options	—				260,948				—				260,948
Unfunded Revolver Commitments	—				—				17,629			(1)	17,629
Other Derivatives	—				27,581				41,800			(2)	69,381
Debt Obligations of Consolidated CFEs	—				10,347,980				5,238,236				15,586,216
Total Liabilities	$	692,007			$	10,636,509			$	5,297,665			$	16,626,181

(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 credit investments.

(2)

Includes options issued in connection with the acquisition of the equity interest in Marshall Wace and its affiliates in November 2015 to increase KKR's ownership interest in periodic increments. The options are valued using a Monte-Carlo simulation valuation methodology. Key inputs used in this methodology that require estimates include Marshall Wace's dividend yield, assets under management volatility and equity volatility. See Note 4 "Investments."

Notes to Consolidated Financial Statements (Continued)

The following tables summarize changes in investments and debt obligations measured and reported at fair value for which Level III inputs have been used to determine fair value for the years ended months ended December 31, 2018 and 2017, respectively:

	For the Year Ended December 31, 2018
	Level III Investments																												Level III Debt Obligations
	Private Equity				Credit				Investments of Consolidated CFEs				Real Assets				Equity Method - Other				Other Investments				Total				Debt Obligations of Consolidated CFEs
Balance, Beg. 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
Transfers In / (Out) Due to Changes in Consolidation	928,217				770,677				(4,153,641		)		—				—				1,065				(2,453,682		)		(4,045,957		)
Transfers In	—				154,255				1,000,000				—				—				38,782				1,193,037				—
Transfers Out	(52,568		)		(1,030,072		)		—				—				—				—				(1,082,640		)		—
Asset Purchases / Debt Issuances	2,383,277				4,265,569				—				1,309,390				657,332				814,407				9,429,975				800,350
Sales / Paydowns	(142,067		)		(1,932,299		)		(31,280		)		(545,686		)		(141,806		)		(350,484		)		(3,143,622		)		—
Settlements	—				(1,350		)		—				—				—				—				(1,350		)		(20,722		)
Net Realized Gains (Losses)	41,614				(236,595		)		13,000				55,966				(149,825		)		20,745				(255,095		)		—
Net Unrealized Gains (Losses)	797,820				(294,417		)		(98,624		)		87,017				60,612				(167,940		)		384,468				(95,124		)
Change in Other Comprehensive Income	—				(69,975		)		—				—				—				—				(69,975		)		—
Balance, End of Period	$	6,128,583			$	6,764,730			$	2,082,545			$	3,157,954			$	1,503,022			$	2,116,586			$	21,753,420			$	1,876,783
Changes in Net Unrealized Gains (Losses) Included in Net Gains (Losses) from Investment Activities related to Level III Assets and Liabilities still held as of the Reporting Date	$	808,637			$	(197,159	)		$	(98,624	)		$	68,215			$	(86,009	)		$	(120,413	)		$	374,647			$	(95,124	)

	For the Year Ended December 31, 2017
	Level III Investments																												Level III Debt Obligations
	Private Equity				Credit				Investments of Consolidated CFEs				Real Assets				Equity Method - Other				Other Investments				Total				Debt Obligations of Consolidated CFEs
Balance, Beg. of Period	$	1,559,559			$	3,290,361			$	5,406,220			$	1,807,128			$	570,522			$	1,767,573			$	14,401,363			$	5,294,741
Transfers In / (Out) Due to Changes 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 / Debt Issuances	427,914				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 Comprehensive Income	—				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 Unrealized Gains (Losses) Included in Net Gains (Losses) from Investment Activities related to Level III Assets and Liabilities still held as of the Reporting Date	$	370,136			$	424,099			$	(7,568	)		$	147,940			$	61,855			$	(22,904	)		$	973,558			$	(10,943	)

Notes 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 the accompanying consolidated statements of operations.

The following table presents additional information about valuation methodologies and significant unobservable inputs used for investments and debt obligations that are measured and reported at fair value and categorized within Level III as of December 31, 2018:

	Fair Value December 31, 2018				Valuation Methodologies		Unobservable Input(s) (1)		Weighted Average (2)		Range		Impact to Valuation from an Increase in Input (3)
Private Equity	$	6,128,583
Private Equity	$	3,813,748			Inputs to market comparables and discounted cash flow and transaction price		Illiquidity Discount		6.1%		5.0% - 15.0%		Decrease
						Weight Ascribed to Market Comparables		29.9%		0.0% - 50.0%		(4)
						Weight Ascribed to Discounted Cash Flow		67.7%		5.0% - 100.0%		(5)
						Weight Ascribed to Transaction Price		2.4%		0.0% - 90.0%		(6)
					Market comparables		Enterprise Value/LTM EBITDA Multiple		13.0x		6.1x - 18.0x		Increase
						Enterprise Value/Forward EBITDA Multiple		11.8x		4.7x - 16.1x		Increase
					Discounted cash flow		Weighted Average Cost of Capital		10.6%		5.6% - 14.1%		Decrease
						Enterprise Value/LTM EBITDA Exit Multiple		11.9x		6.0x - 15.0x		Increase
Growth Equity	$	2,314,835			Inputs to market comparables, discounted cash flow and milestones		Illiquidity Discount		11.0%		10.0% - 20.0%		Decrease
						Weight Ascribed to Market Comparables		30.2%		0.0% - 100.0%		(4)
						Weight Ascribed to Discounted Cash Flow		9.8%		0.0% - 75.0%		(5)
						Weight Ascribed to Milestones		60.0%		0.0% - 100.0%		(6)
					Scenario Weighting		Base		57.9%		40.0% - 80.0%		Increase
						Downside		16.6%		5.0% - 30.0%		Decrease
						Upside		25.5%		10.0% - 45.0%		Increase
Credit	$	6,764,730			Yield Analysis		Yield		8.4%		3.5% - 22.2%		Decrease
						Net Leverage		2.0x		0.5x - 33.0x		Decrease
						EBITDA Multiple		9.8x		1.1x - 37.2x		Increase
Investments of Consolidated CFEs	$	2,082,545		(9)
Debt Obligations of Consolidated CFEs	$	1,876,783			Discounted cash flow		Yield		6.5%		2.8% - 16.5%		Decrease
Real Assets	$	3,157,954		(10)
Energy	$	1,677,699			Discounted cash flow		Weighted Average Cost of Capital		10.3%		9.4% - 13.3%		Decrease
							Average Price Per BOE (8)		$43.67		$35.65 - $48.28		Increase
Real Estate	$	1,274,747			Inputs to direct income capitalization and discounted cash flow		Weight Ascribed to Direct Income Capitalization		31.4%		0.0% - 100.0%		(7)
						Weight Ascribed to Discounted Cash Flow		68.6%		0.0% - 100.0%		(5)
					Direct income capitalization		Current Capitalization Rate		6.2%		3.8% - 12.0%		Decrease
					Discounted cash flow		Unlevered Discount Rate		8.4%		4.8% - 18.0%		Decrease
Equity Method - Other	$	1,503,022			Inputs to market comparables, discounted cash flow and transaction price		Illiquidity Discount		9.4%		5.0% - 15.0%		Decrease
					Weight Ascribed to Market Comparables		37.4%		0.0% - 50.0%		(4)
						Weight Ascribed to Discounted Cash Flow		37.9%		0.0% - 100.0%		(5)
						Weight Ascribed to Transaction Price		24.7%		0.0% - 100.0%		(6)
					Market comparables		Enterprise Value/LTM EBITDA Multiple		11.1x		6.1x - 13.9x		Increase
						Enterprise Value/Forward EBITDA Multiple		9.8x		4.7x - 11.6x		Increase
					Discounted cash flow		Weighted Average Cost of Capital		8.6%		5.6% - 13.0%		Decrease
						Enterprise Value/LTM EBITDA Exit Multiple		10.4x		6.0x - 12.5x		Increase

Notes to Consolidated Financial Statements (Continued)

	Fair Value December 31, 2018				Valuation Methodologies		Unobservable Input(s) (1)		Weighted Average (2)		Range		Impact to Valuation from an Increase in Input (3)
Other Investments	$	2,116,586		(11)	Inputs to market comparables, discounted cash flow and transaction price		Illiquidity Discount		10.1%		5.0% - 20.0%		Decrease
					Weight Ascribed to Market Comparables		37.0%		0.0% - 100.0%		(4)
						Weight Ascribed to Discounted Cash Flow		36.8%		0.0% - 100.0%		(5)
						Weight Ascribed to Transaction Price		26.2%		0.0% - 100.0%		(6)
					Market comparables		Enterprise Value/LTM EBITDA Multiple		10.5x		1.1x - 15.2x		Increase
						Enterprise Value/Forward EBITDA Multiple		9.1x		0.9x - 12.5x		Increase
					Discounted cash flow		Weighted Average Cost of Capital		16.9%		7.2% - 30.9%		Decrease
						Enterprise Value/LTM EBITDA Exit Multiple		8.5x		6.6x - 9.4x		Increase

(1)

In determining certain of these inputs, management evaluates a variety of factors including economic conditions, industry and market developments, market valuations of comparable companies and company specific developments including exit strategies and realization opportunities. Management has determined that market participants would take these inputs into account when valuing the investments and debt obligations. LTM means last twelve months and EBITDA means earnings before interest, taxes, depreciation and amortization.

(2)	Inputs were weighted based on the fair value of the investments included in the range.

(3)	Unless otherwise noted, this column represents the directional change in the fair value of the Level III investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect. Significant increases and decreases in these inputs in isolation could result in significantly 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 market comparables approach results in a higher valuation than the discounted cash flow approach and transaction price. The opposite would be true if the market comparables approach results in a lower valuation than the discounted cash flow approach and transaction price.

(5)

The directional change from an increase in the weight ascribed to the discounted cash flow approach would increase the fair value of the Level III investments if the discounted cash flow approach results in a higher valuation than the market comparables approach, transaction price and direct income capitalization approach. The opposite would be true if the discounted cash flow approach results in a lower valuation than the market comparables approach, transaction price and direct income capitalization approach.

(6)

The directional change from an increase in the weight ascribed to the transaction price or milestones would increase the fair value of the Level III investments if the transaction price or milestones results in a higher valuation than the market comparables and discounted cash flow approach. The opposite would be true if the transaction price or milestones results in a lower valuation 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 direct income capitalization approach results in a higher valuation than the discounted cash flow approach. The opposite would be true if the direct income capitalization approach results 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 produce varying quantities of oil, condensate, natural gas liquids, and natural gas. Commodity price may be measured using a common volumetric equivalent where one barrel of oil equivalent ("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 to show the aggregate of all price inputs for the various investments over a common volumetric equivalent although the valuations for specific investments may use price inputs specific to the asset for purposes of our valuations. The discounted cash flows include forecasted production of liquids (oil, condensate, and natural gas liquids) and natural gas with a forecasted revenue ratio of approximately 88% liquids and 12% 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 $205.5 million that was valued using a discounted cash flow analysis. The significant inputs used included the weighted average cost of capital 6.9% and the enterprise value/LTM EBITDA Exit Multiple 11.0x.

(11)	Consists primarily of investments in common stock, preferred stock, warrants and options of companies that are not private equity, real assets, credit, equity method - other or investments of consolidated CFEs.

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. In addition, certain valuations of private equity investments may be entirely or partially derived by reference to observable valuation measures for a pending or consummated transaction.

The various unobservable inputs used to determine the Level III valuations may have similar or diverging impacts on valuation. Significant increases and decreases in these inputs in isolation and interrelationships between those inputs could result in significantly higher or lower fair value measurements as noted in the table above.

Notes to Consolidated Financial Statements (Continued)

6. FAIR VALUE OPTION

The following table summarizes the financial instruments for which the fair value option has been elected:

	December 31, 2018				December 31, 2017
Assets
Private Equity	$	2,977			$	3,744
Credit	4,950,819				4,381,519
Investments of Consolidated CFEs	14,733,423				15,573,203
Real Assets	310,399				343,820
Equity Method - Other	1,792,190				1,384,739
Other Investments	235,012				344,996
Total	$	22,024,820			$	22,032,021
Liabilities
Debt Obligations of Consolidated CFEs	$	13,958,554			$	15,586,216
Total	$	13,958,554			$	15,586,216

The following tables present the net realized and net unrealized gains (losses) on financial instruments for which the fair value option was elected for the years ended December 31, 2018, 2017 and 2016, respectively:

	For the Year Ended December 31, 2018
	Net Realized Gains (Losses)				Net Unrealized Gains (Losses)				Total
Assets
Private Equity	$	(4,907	)		$	5,355			$	448
Credit	(245,737		)		(148,150		)		(393,887		)
Investments of Consolidated CFEs	(83,719		)		(452,331		)		(536,050		)
Real Assets	11,184				(11,446		)		(262		)
Equity Method - Other	(150,225		)		16,916				(133,309		)
Other Investments	(13,838		)		(19,468		)		(33,306		)
Total	$	(487,242	)		$	(609,124	)		$	(1,096,366	)
Liabilities
Debt Obligations of Consolidated CFEs	4,371				521,101				525,472
Total	$	4,371			$	521,101			$	525,472
	For the Year Ended December 31, 2017
	Net Realized Gains (Losses)				Net Unrealized Gains (Losses)				Total
Assets
Private Equity	$	(1,386	)		$	38,791			$	37,405
Credit	(464,512		)		78,282				(386,230		)
Investments of Consolidated CFEs	(97,129		)		352				(96,777		)
Real Assets	13,112				44,136				57,248
Equity Method - Other	18,883				(2,635		)		16,248
Other	(32,217		)		24,923				(7,294		)
Total	$	(563,249	)		$	183,849			$	(379,400	)
Liabilities
Debt Obligations of Consolidated CFEs	83,146				11,768				94,914
Total	$	83,146			$	11,768			$	94,914

Notes to Consolidated Financial Statements (Continued)

	For the Year Ended December 31, 2016
	Net Realized Gains (Losses)				Net Unrealized Gains (Losses)				Total
Assets
Private Equity	$	(245,014	)		$	238,600			$	(6,414	)
Credit	(144,854		)		48,922				(95,932		)
Investments of Consolidated CFEs	(258,430		)		444,142				185,712
Real Assets	8,835				4,159				12,994
Equity Method - Other	3,830				(127,741		)		(123,911		)
Other	(10,361		)		(19,386		)		(29,747		)
Total	$	(645,994	)		$	588,696			$	(57,298	)
Liabilities
Debt Obligations of Consolidated CFEs	325,548				(357,321		)		(31,773		)
Total	$	325,548			$	(357,321	)		$	(31,773	)

Notes to Consolidated Financial Statements (Continued)

7. NET INCOME (LOSS) ATTRIBUTABLE TO KKR & CO. INC. PER SHARE OF CLASS A COMMON STOCK

For the years ended December 31, 2018, 2017, and 2016, basic and diluted Net Income (Loss) attributable to KKR & Co. Inc. per share of Class A common stock were calculated as follows:

	For the Years Ended December 31,
	2018				2017				2016
Net Income (Loss) Attributable to KKR & Co. Inc. Class A Common Stockholders	$	1,097,699			$	984,941			$	287,072
Excess of carrying value over consideration transferred on redemption of KFN 7.375% Series A LLC Preferred Shares	3,102				—				—
Net Income (Loss) Available to KKR & Co. Inc. Class A Common Stockholders	$	1,100,801			$	984,941			$	287,072

Basic Net Income (Loss) Per Share of Class A Common Stock
Weighted Average Shares of Class A Common Stock Outstanding - Basic	514,102,571				468,282,642				448,905,126
Net Income (Loss) Attributable to KKR & Co. Inc. Per Share of Class A Common Stock - Basic	$	2.14			$	2.10			$	0.64

Diluted Net Income (Loss) Per Share of Class A Common Stock
Weighted Average Shares of Class A Common Stock Outstanding - Basic	514,102,571				468,282,642				448,905,126
Weighted Average Unvested Shares of Class A Common Stock and Other Exchangeable Securities	19,604,468				38,006,329				34,525,922
Weighted Average Shares of Class A Common Stock Outstanding - Diluted	533,707,039				506,288,971				483,431,048
Net Income (Loss) Attributable to KKR & Co. Inc. Per Share of Class A Common Stock - Diluted	$	2.06			$	1.95			$	0.59

Weighted Average Shares of Class A Common Stock Outstanding - Diluted primarily includes unvested equity awards that have been granted under the Amended and Restated KKR & Co. Inc. 2010 Equity Incentive Plan (the "Equity Incentive Plan") as well as exchangeable equity securities issued in connection with the acquisition of Avoca. Vesting or exchanges of these equity interests dilute KKR & Co. Inc. and KKR Holdings pro rata in accordance with their respective ownership interests in the KKR Group Partnerships.

For the years ended December 31, 2018, 2017, and 2016, KKR Holdings units have been excluded from the calculation of Net Income (Loss) Attributable to KKR & Co. Inc. Per Share of Class A Common Stock - Diluted since the exchange of these units would not dilute KKR's respective ownership interests in the KKR Group Partnerships.

	For the Years Ended December 31,
	2018			2017			2016
Weighted Average KKR Holdings Units	314,458,757			344,422,095			357,873,788

Additionally, for the year ended December 31, 2018, 5.0 million shares of KKR Class A common stock subject to a market price-based vesting condition were excluded from the calculation of Net Income (Loss) Attributable to KKR & Co. Inc. Per Share of Class A Common Stock - Diluted since the vesting conditions have not been satisfied. See Note 12 "Equity Based Compensation."

Notes to Consolidated Financial Statements (Continued)

8. OTHER ASSETS AND ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES

Other Assets consist of the following:

	December 31, 2018				December 31, 2017
Unsettled Investment Sales (1)	$	101,789			$	134,781
Receivables	27,258				138,109
Due from Broker (2)	396,512				682,403
Oil & Gas Assets, net (3)	225,256				252,371
Deferred Tax Assets, net	538,161				131,944
Interest Receivable	241,547				189,785
Fixed Assets, net (4)	451,206				364,203
Foreign Exchange Contracts and Options (5)	177,264				96,584
Intangible Assets, net (6)	9,863				129,178
Goodwill (7)	83,500				83,500
Derivative Assets	40,995				85,074
Deposits	7,299				16,330
Prepaid Taxes	69,165				83,371
Prepaid Expenses	23,551				25,677
Deferred Financing Costs	13,871				7,534
Other	129,455				110,231
Total	$	2,536,692			$	2,531,075

(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, accumulated depreciation, depletion and amortization. Depreciation, depletion and amortization amounted to $22.3 million, $24.7 million, and $38.9 million for the years ended December 31, 2018, 2017, and 2016, respectively. Whenever events or changes in circumstances indicate that the carrying amounts of such oil and natural gas properties may not be recoverable, KKR evaluates its proved and unproved oil and natural gas properties and related equipment and facilities for impairment on a field-by-field basis. For the years ended December 31, 2018 and 2017, there was no impairment charge. For the year ended December 31, 2016, KKR recorded impairment charges totaling approximately $6.2 million to write down certain of its oil and natural gas properties. The impairment charge is recorded in General, Administrative and Other in the accompanying consolidated statements of operations.

(4)	Net of accumulated depreciation and amortization of $113,453 and $156,859 as of December 31, 2018 and 2017, respectively. Depreciation and amortization expense of $14,993, $15,329, and $16,045 for the years ended December 31, 2018, 2017, and 2016, respectively, is included in General, Administrative and Other in the accompanying consolidated statements of operations.

(5)

Represents derivative financial instruments used to manage foreign exchange risk arising from certain foreign currency denominated investments. Such instruments are measured at fair value with changes in fair value recorded in Net Gains (Losses) from Investment Activities in the accompanying consolidated statements of operations. See Note 3 "Net Gains (Losses) from Investment Activities" for the net changes in fair value associated with these instruments.

(6)	Net of accumulated amortization of $63,532 and $61,348 as of December 31, 2018 and 2017, respectively. Amortization expense of $7,700, $17,811, and $26,387 for the years ended December 31, 2018, 2017, and 2016, respectively, is included in General, Administrative and Other in the accompanying consolidated statements of operations.

(7)	As of December 31, 2018, the carrying value of goodwill is recorded and assessed for impairment at the reporting unit.

Notes to Consolidated Financial Statements (Continued)

Accounts Payable, Accrued Expenses and Other Liabilities consist of the following:

	December 31, 2018				December 31, 2017
Amounts Payable to Carry Pool (1)	$	922,977			$	1,220,559
Unsettled Investment Purchases (2)	541,165				885,945
Securities Sold Short (3)	344,124				692,007
Derivative Liabilities	35,640				69,381
Accrued Compensation and Benefits	107,887				35,953
Interest Payable	212,969				168,673
Foreign Exchange Contracts and Options (4)	60,749				260,948
Accounts Payable and Accrued Expenses	130,554				152,916
Taxes Payable	24,453				35,933
Uncertain Tax Positions	66,775				58,369
Unfunded Revolver Commitments	52,066				17,629
Other Liabilities	244,631				55,937
Total	$	2,743,990			$	3,654,250

(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 provide for 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 Net Gains (Losses) from Investment Activities in the accompanying consolidated statements of operations. See Note 3 "Net Gains (Losses) from Investment Activities" for the net changes 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 are measured at fair value with changes in fair value recorded in Net Gains (Losses) from Investment Activities in the accompanying consolidated statements of operations. See Note 3 "Net Gains (Losses) from Investment Activities" for the net changes in fair value associated with these instruments.

Notes 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 Accounting Policies" and which are predominately CFEs and certain investment funds. The primary purpose of these VIEs is to provide strategy specific investment opportunities to earn investment gains, current income or both in exchange for management and performance based fees or carried interest. KKR's investment strategies for these VIEs differ by product; however, the fundamental risks have similar characteristics, including loss of invested capital and loss of management and performance based fees or carried interest. 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 not consolidated predominantly include certain investment funds sponsored by KKR.

KKR's investment strategies differ by investment fund; however, the fundamental risks have similar characteristics, including loss of invested capital and loss of management and performance based fees or carried interest. KKR's maximum exposure to loss as a result of its investments in the unconsolidated investment funds is the carrying value of such investments, including KKR's capital interest and any unrealized carried interest, which was approximately $3.6 billion at December 31, 2018. Accordingly, disaggregation of KKR's involvement by type of unconsolidated investment fund would not provide more useful information. For these unconsolidated 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, 2018, KKR's commitments to these unconsolidated investment funds was $2.2 billion. KKR has not provided any financial support other than its obligated amount as of December 31, 2018.

As of December 31, 2018 and 2017, the maximum exposure to loss, before allocations to the carry pool and noncontrolling interests, if any, for those VIEs in which KKR is determined not to be the primary beneficiary but in which it has a variable interest is as follows:

	December 31, 2018				December 31, 2017
Investments	$	3,610,502			$	4,417,003
Due from (to) Affiliates, net	410,489				176,131
Maximum Exposure to Loss	$	4,020,991			$	4,593,134

Notes to Consolidated Financial Statements (Continued)

10. DEBT OBLIGATIONS

KKR enters into credit agreements and issues debt for its general operating and investment purposes. KKR consolidates and reports KFN's debt obligations which are non-recourse to KKR beyond the assets of KFN.

Certain of KKR's consolidated investment funds borrow to meet financing needs of their operating and investing activities. Fund financing facilities have been established for the benefit of certain investment funds. When an investment fund borrows from the facility in which it participates, the proceeds from the borrowings are limited for their intended use by the borrowing investment fund. KKR's obligations with respect to these financing arrangements are generally limited to KKR's pro rata equity interest in such funds.

In certain cases, KKR has majority-owned investment vehicles that make investments and purchase other assets with borrowings that are collateralized only by the investments and assets they own.

In addition, certain consolidated CFE vehicles issue debt securities to third-party investors which are collateralized by assets held by the CFE vehicle. Debt securities 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 have warehouse 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, 2018												December 31, 2017
	Financing Available				Borrowing Outstanding				Fair Value				Financing Available				Borrowing Outstanding				Fair Value
Revolving Credit Facilities:
Corporate Credit Agreement	$	1,000,000			$	—			$	—			$	1,000,000			$	—			$	—
KCM Credit Agreement	451,338				—				—				487,656				—				—
KCM Short-Term Credit Agreement	750,000				—				—				750,000				—				—
Notes Issued:
KKR Issued 6.375% Notes Due 2020 (1)	—				498,975				523,500			(14)	—				498,390				549,000			(14)
KKR Issued 5.500% Notes Due 2043 (2)	—				491,836				508,615			(14)	—				491,496				580,000			(14)
KKR Issued 5.125% Notes Due 2044 (3)	—				990,740				974,320			(14)	—				990,375				1,107,100			(14)
KKR Issued 0.509% Notes Due 2023 (4)	—				226,895				227,298			(14)	—				—				—
KKR Issued 0.764% Notes Due 2025 (5)	—				44,923				45,161			(14)	—				—				—
KKR Issued 1.595% Notes Due 2038 (6)	—				92,817				94,568			(14)	—				—				—
KFN Issued 5.500% Notes Due 2032 (7)	—				493,568				496,359				—				493,129				505,235
KFN Issued 5.200% Notes Due 2033 (8)	—				118,291				115,582				—				—				—
KFN Issued 5.400% Notes Due 2033 (9)	—				68,683				68,780				—				—				—
KFN Issued Junior Subordinated Notes (10)	—				232,142				203,135				—				236,038				201,828
Other Debt Obligations:
Financing Facilities of Consolidated Funds and Other (11)	3,840,877				5,123,768				5,123,768				2,056,096				2,898,215				2,898,215
CLO Senior Secured Notes (12)	—				11,667,970				11,667,970				—				10,055,686				10,055,686
CLO Subordinated Notes (12)	—				413,801				413,801				—				292,294				292,294
CMBS Debt Obligations (13)	—				1,876,783				1,876,783				—				5,238,236				5,238,236
	$	6,042,215			$	22,341,192			$	22,339,640			$	4,293,752			$	21,193,859			$	21,427,594

(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) unamortized debt issuance costs of $0.7 million and $1.0 million as of December 31, 2018 and 2017, 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) unamortized debt issuance costs of $3.6 million and $3.7 million as of December 31, 2018 and 2017, 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) and (ii) unamortized debt issuance costs of $8.0 million and $8.3 million as of December 31, 2018 and 2017, respectively.

(4)	¥25 billion (or $228.2 million) aggregate principal amount of 0.509% senior notes of KKR due 2023. Borrowing outstanding is presented net of unamortized debt issuance costs of $1.3 million as of December 31, 2018. These senior notes are denominated in Japanese Yen ("JPY").

(5)	¥5.0 billion (or $45.6 million) aggregate principal amount of 0.764% senior notes of KKR due 2025. Borrowing outstanding is presented net of unamortized debt issuance costs of $0.7 million as of December 31, 2018. These senior notes are denominated in JPY.

(6)	¥10.3 billion (or $94.0 million) aggregate principal amount of 1.595% senior notes of KKR due 2038. Borrowing outstanding is presented net of unamortized debt issuance costs of $1.2 million as of December 31, 2018. These senior notes are denominated in JPY.

Notes to Consolidated Financial Statements (Continued)

(7)

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 net of (i) unamortized note discount and (ii) unamortized debt issuance costs of $4.4 million and $4.7 million as of December 31, 2018 and 2017, respectively. These debt obligations are classified as Level III within the fair value hierarchy and valued using the same valuation methodologies as KKR's Level III credit investments.

(8)

KKR consolidates KFN and thus reports KFN's outstanding $120.0 million aggregate principal amount of 5.200% senior notes due 2033. Borrowing outstanding is presented net of unamortized debt issuance costs of $1.7 million as of December 31, 2018. These debt obligations are classified as Level III within the fair value hierarchy and valued using the same valuation methodologies as KKR's Level III credit investments.

(9)

KKR consolidates KFN and thus reports KFN's outstanding $70.0 million aggregate principal amount of 5.400% senior notes due 2033. Borrowing outstanding is presented net of unamortized debt issuance costs of $1.3 million as of December 31, 2018. These debt obligations are classified as Level III within the fair value hierarchy and valued using the same valuation methodologies as KKR's Level III credit investments.

(10)

KKR consolidates KFN and thus reports KFN's outstanding $258.5 million aggregate principal amount of junior subordinated notes. The weighted average interest rate is 5.0% and 3.8% and the weighted average years to maturity is 17.8 years and 19.0 years as of December 31, 2018 and 2017, respectively. These debt obligations are classified as Level III within the fair value hierarchy and valued using the same valuation methodologies as KKR's Level III credit investments.

(11)

Amounts include (i) borrowings at consolidated investment funds relating to financing arrangements with major financial institutions, generally to enable such investment funds to make investments prior to or without receiving capital from fund limited partners and (ii) borrowings by certain majority-owned investment vehicles that are collateralized only by the investments and assets they own. The weighted average interest rate is 4.6% and 4.2% as of December 31, 2018 and 2017, respectively. In addition, the weighted average years to maturity is 3.3 years and 3.6 years as of December 31, 2018 and 2017, respectively.

(12)	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."

(13)	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."

(14)	The notes are classified as Level II within the fair value hierarchy and fair value is determined by third party broker quotes.

Revolving Credit Facilities

Corporate Credit Agreement

On December 7, 2018, Kohlberg Kravis Roberts & Co. L.P. and the KKR Group Partnerships, as borrowers, entered into and closed on an Amended and Restated Credit Agreement (the "Corporate Credit Agreement") by and among the borrowers, the other borrowers from time to time party thereto, the guarantors from time to time party thereto, the lending institutions from time to time party thereto and HSBC Bank USA, National Association, as Administrative Agent, which amended and restated in its entirety the credit agreement dated as of October 22, 2014.

The Corporate Credit Agreement provides the borrowers with a senior unsecured multicurrency revolving credit facility in an aggregate principal amount of $1.0 billion, as of the closing date, with the option to request an increase in the facility amount of up to an additional $500 million, for an aggregate principal amount of $1.5 billion, subject to certain conditions, including obtaining new or increased commitments from new or existing lenders. The credit facility is a five-year facility, scheduled to mature on December 7, 2023, with the borrowers’ option to extend the maturity date, subject to the consent of the applicable lenders, and the borrowers may prepay, terminate or reduce the commitments under the credit facility at any time without penalty. Borrowings under the credit facility are available for general corporate purposes. Interest on borrowings under the credit facility will be based on either London Interbank Offered Rate (LIBOR) or Alternate Base Rate, with the applicable margin per annum based on a corporate ratings-based pricing grid ranging from 56.5 basis points to 110 basis points (for LIBOR borrowings). The borrowers have agreed to pay a facility fee on the total commitments (whether used or unused) at a rate per annum also based on a corporate ratings-based pricing grid ranging from 6 basis points to 15 basis points. Borrowings under the credit facility are guaranteed by (i) KKR & Co. Inc., (ii) any other entity (other than the borrowers) that guarantees the 2020 Senior Notes, the 2043 Senior Notes or the 2044 Senior Notes (each as defined below), and (iii) any other entity (other than the borrowers) that guarantees the JPY Notes (as defined below).

KCM Credit Agreement

KKR Capital Markets maintains a revolving credit agreement with a major financial institution (the "KCM Credit Agreement") for use in KKR's capital markets business. This financial institution also holds a noncontrolling ownership interest in our capital markets business. The KCM Credit Agreement provides for revolving borrowings of up to $500 million with a $500 million sublimit for letters of credit.

On March 30, 2016, the KCM Credit Agreement was amended to extend the maturity date from March 30, 2017 to March 30, 2021. If a borrowing is made on the 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 LIBOR plus the applicable margin which ranges initially between 1.25% and 2.50%, depending on the amount and nature of the loan. If the loan is an ABR Loan, it will be based on the prime rate plus the applicable margin which ranges initially between 0.25% and 1.50% depending on the amount and nature of the loan. Borrowings under this facility may only be used for KKR's capital markets business, and its only

Notes to Consolidated Financial Statements (Continued)

obligors are entities involved in KKR's capital markets business, and its liabilities are non-recourse to other parts of KKR's business. A facility fee ranging between 0.20% and 0.40% is also payable on the entire facility amount.

As of December 31, 2018 and 2017, no amounts were outstanding under the KCM Credit Agreement, however various letters of credit were outstanding in the amount of $48.7 million and $12.3 million, respectively, which reduce the overall borrowing capacity of the KCM Credit Agreement.

KCM Short-Term Credit Agreement

On June 28, 2018, KKR Capital Markets Holdings L.P. and certain other capital market subsidiaries of KKR & Co. Inc. (collectively, the “KCM Borrowers”) entered into a 364-day revolving credit agreement (the “KCM Revolver Agreement”) with the same financial institution that provides the KCM Credit Agreement, as administrative agent. The KCM Revolver Agreement provides for revolving borrowings of up to $750 million, expires on June 27, 2019, and ranks pari passu with the KCM Credit Agreement. The prior 364-day revolving credit agreement, dated as of June 29, 2017, between the KCM Borrowers, expired according to its terms on June 28, 2018. Borrowings under the KCM Revolver Agreement may only be used to facilitate the settlement of capital markets transactions syndicated by KKR’s capital markets business. Obligations under the KCM Revolver Agreement are limited to the KCM Borrowers, which are solely entities involved in KKR’s capital markets business, and liabilities under the KCM Revolver Agreement are non-recourse to other parts of KKR.

If a borrowing is made under the KCM Revolver Agreement, the interest rate will vary depending on the type of drawdown requested. If the borrowing 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 the loan. 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 of the loan. A facility fee of 0.20% is also payable on the entire facility amount.

The KCM Revolver Agreement contains customary representations and warranties, events of default, and affirmative and negative covenants, including a financial covenant providing for a maximum debt to equity ratio for the KCM Borrowers. The KCM Borrowers’ obligations under the KCM Revolver Agreement are secured by certain assets of the KCM Borrowers.

Notes Issuances

KKR Issued 6.375% Notes Due 2020

On September 29, 2010, KKR Group Finance Co. LLC, a subsidiary of KKR Management Holdings Corp., issued $500 million aggregate principal amount of 6.375% Senior Notes due 2020 (the "2020 Senior Notes"), which were issued at a price of 99.584%. The 2020 Senior Notes are unsecured and unsubordinated obligations of KKR Group Finance Co. LLC and will mature on September 29, 2020, unless earlier redeemed or repurchased. The 2020 Senior Notes are fully and unconditionally guaranteed, jointly and severally, by KKR & Co. Inc. and the KKR Group Partnerships. The guarantees are unsecured and unsubordinated obligations 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 on March 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 Group Finance Co. LLC and the guarantors' ability to, subject to exceptions, incur indebtedness secured by liens on voting stock or profit participating equity interests of their subsidiaries or 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 the holders of not less than 25% in aggregate principal amount of the outstanding 2020 Senior Notes may declare the 2020 Senior Notes immediately due and payable upon the occurrence and during the continuance of any event of default after expiration of any applicable grace period. In the case of specified events of bankruptcy, insolvency, receivership or reorganization, the principal amount of the 2020 Senior Notes and any accrued and unpaid interest on the 2020 Senior Notes automatically 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 any time, 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 repurchase event 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 the 2020 Senior Notes repurchased plus any accrued and unpaid interest on the 2020 Senior Notes repurchased to, but not including, the date of repurchase.

Notes to Consolidated Financial Statements (Continued)

KKR Issued 5.500% Notes Due 2043

On February 1, 2013, KKR Group Finance Co. II LLC, a subsidiary of KKR Management Holdings Corp., issued $500 million aggregate principal amount of 5.50% Senior Notes due 2043 (the "2043 Senior Notes"), which were issued at a price of 98.856%. The 2043 Senior Notes are unsecured and unsubordinated obligations 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 and unconditionally guaranteed, jointly and severally, by KKR & Co. Inc. and the KKR Group Partnerships. The guarantees are unsecured and unsubordinated obligations 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 1 and August 1 of each year.

The indenture, as supplemented by a first supplemental indenture, relating to the 2043 Senior Notes includes covenants, including limitations on KKR Group Finance Co. II LLC and the guarantors' ability to, subject to exceptions, incur indebtedness secured by liens on voting stock or profit participating equity interests of their subsidiaries or 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 the holders of not less than 25% in aggregate principal amount of the outstanding 2043 Senior Notes may declare the 2043 Senior Notes immediately 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 of specified events of bankruptcy, insolvency, receivership or reorganization, the principal amount of the 2043 Senior Notes and any accrued and unpaid interest on the 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 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 2043 Senior Notes. If a change of control repurchase 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 principal amount of the 2043 Senior Notes repurchased plus any accrued and unpaid interest on the 2043 Senior Notes repurchased to, but not including, the date of repurchase.

KKR Issued 5.125% Notes Due 2044

On May 29, 2014, KKR Group Finance Co. III LLC, a subsidiary of KKR Management Holdings Corp., issued $500 million aggregate principal amount of 5.125% Senior Notes due 2044 (the "2044 Senior Notes"), which were issued at a price of 98.612%. The 2044 Senior Notes are unsecured and unsubordinated obligations 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. Inc. 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 and December 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 at 101.062%. 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 for the 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's and the guarantors' ability to, subject to exceptions, incur indebtedness secured by liens on voting stock or profit participating equity interests of their subsidiaries or 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 the holders of not less than 25% in aggregate principal amount of the outstanding 2044 Senior Notes may declare the 2044 Senior Notes immediately 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 of specified events of bankruptcy, insolvency, receivership or reorganization, the principal amount of the 2044 Senior Notes and any accrued and unpaid interest on the 2044 Senior Notes automatically becomes due and payable. All or a portion of the 2044 Senior Notes may be 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 event occurs, 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 2044 Senior Notes repurchased plus any accrued and unpaid interest on the 2044 Senior Notes repurchased to, but not including, the date of repurchase.

Notes to Consolidated Financial Statements (Continued)

KKR Issued 0.509% Senior Notes Due 2023, 0.764% Senior Notes Due 2025, and 1.595% Senior Notes Due 2038

On March 23, 2018, KKR Group Finance Co. IV LLC ("KKR Group Finance IV"), a subsidiary of KKR Management Holdings Corp., completed the offering of ¥40.3 billion, aggregate principal amount of its (i) ¥25.0 billion 0.509% Senior Notes due 2023 (the "2023 Notes"), (ii) ¥5.0 billion 0.764% Senior Notes due 2025 (the "2025 Notes") and (iii) ¥10.3 billion 1.595% Senior Notes due 2038 (the "2038 Notes" and, together with the 2023 Notes and the 2025 Notes, the "JPY Notes"). The JPY Notes are fully and unconditionally guaranteed, jointly and severally, by KKR & Co. Inc. and the KKR Group Partnerships. The guarantees are unsecured and unsubordinated obligations of the Guarantors.

The 2023 Notes bear interest at a rate of 0.509% per annum and will mature on March 23, 2023 unless earlier redeemed. The 2025 Notes bear interest at a rate of 0.764% per annum and will mature on March 21, 2025 unless earlier redeemed. The 2038 Notes bear interest at a rate of 1.595% per annum and will mature on March 23, 2038 unless earlier redeemed. Interest on the JPY Notes accrues from March 23, 2018 and is payable semiannually in arrears on March 23 and September 23 of each year, commencing on September 23, 2018 and ending on the applicable maturity date. The JPY Notes are unsecured and unsubordinated obligations of KKR Group Finance IV.

The indenture, as supplemented by the first supplemental indenture, related to the JPY Notes includes covenants, including limitations on KKR Group Finance IV's and the guarantors' ability to, subject to exceptions, incur indebtedness secured by liens on voting stock or profit participating equity interests of their subsidiaries or 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 the holders of not less than 25% in aggregate principal amount of the outstanding JPY Notes may declare the JPY Notes immediately 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 of specified events of bankruptcy, insolvency, receivership or reorganization, the principal amount of the JPY Notes and any accrued and unpaid interest on the JPY Notes automatically become due and payable. KKR Group Finance IV may redeem the JPY Notes at its option, in whole but not in part, at a redemption price equal to 100% of the principal amount of the JPY Notes to be redeemed, together with interest accrued and unpaid to, but excluding, the date fixed for redemption, at any time, in the event of certain changes affecting taxation as provided in the JPY Indenture.

KFN Issued 5.500% Notes Due 2032

On 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 net proceeds 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 is payable 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 on KFN's ability to, subject to exceptions, incur indebtedness secured by liens on voting stock or profit participating equity interests of certain of its subsidiaries or merge, 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 events of default and further provides that the trustee or the holders of not less than 25% in aggregate principal amount of the outstanding KFN 2032 Senior Notes may declare the KFN 2032 Senior Notes immediately 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 of specified events of bankruptcy, insolvency, receivership or reorganization, the principal amount of the KFN 2032 Senior Notes and any accrued and unpaid interest on the KFN 2032 Senior Notes automatically becomes due and 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 may redeem 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 Senior Notes. 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 the aggregate principal amount of the KFN 2032 Senior Notes repurchased plus any accrued and unpaid interest on the KFN 2032 Senior Notes repurchased to, but not including, 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 outstanding aggregate principal amount of $500.0 million. The additional KFN 2032 Senior Notes, which were issued under the indenture related to the existing KFN 2032 Senior Notes as supplemented by a second

Notes to Consolidated Financial Statements (Continued)

supplemental indenture, constitute a further issuance of and are part of the same series as the KFN 2032 Senior Notes first issued on March 30, 2017.

KFN Issued 5.200% Notes Due 2033

On 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 2033 Senior Notes are unsecured and unsubordinated obligations of KFN, which do not provide for recourse to KKR beyond the assets of KFN. The KFN 2033 Senior Notes are not guaranteed by KKR & Co. Inc. or the KKR Group Partnerships. The KFN 2033 Senior Notes will mature on February 12, 2033, unless earlier redeemed or repurchased. The KFN 2033 Senior 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 August 12 of each year.

The indenture, as supplemented by a first supplemental indenture, relating to the KFN 2033 Senior Notes includes covenants, including (i) limitations on KFN's ability to, subject to exceptions, incur indebtedness secured by liens on voting stock or profit participating equity interests of certain of its subsidiaries or merge, 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 events of default and further provides that the trustee or the holders of not less than 25% in aggregate principal amount of the outstanding KFN 2033 Senior Notes may declare the KFN 2033 Senior Notes immediately 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 of specified events of bankruptcy, insolvency, receivership or reorganization, the principal amount of the KFN 2033 Senior Notes and any accrued and unpaid interest on the KFN 2033 Senior Notes automatically becomes due and payable.

Beginning on February 12, 2023, KFN may redeem the KFN 2033 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 February 12, 2023, KFN may redeem the KFN 2033 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 2033 Senior Notes. If a change of control occurs, the KFN 2033 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 KFN 2033 Senior Notes repurchased plus any accrued and unpaid interest on the KFN 2033 Senior Notes repurchased to, but not including, the date of repurchase.

KFN Issued 5.400% Notes Due 2033

On May 23, 2018, KFN issued $70.0 million aggregate principal amount of 5.400% Senior Notes due 2033 (the "KFN 5.400% Senior Notes"). The KFN 5.400% Senior Notes are unsecured and unsubordinated obligations of KFN, which do not provide for recourse to KKR beyond the assets of KFN. The KFN 5.400% Senior Notes are not guaranteed by KKR & Co. Inc. or the KKR Group Partnerships. The KFN 5.400% Senior Notes will mature on May 23, 2033, unless earlier redeemed or repurchased. The KFN 5.400% Senior Notes bear interest at a rate of 5.400% per annum, accruing from May 23, 2018. Interest is payable semi-annually in arrears on May 23 and November 23 of each year.

The indenture, as supplemented by a second supplemental indenture, relating to the KFN 5.400% Senior Notes includes covenants, including (i) limitations on KFN's ability to, subject to exceptions, incur indebtedness secured by liens on voting stock or profit participating equity interests of certain of its subsidiaries or merge, 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 minimum Cash and Liquid Investments (as defined in the indenture). The indenture, as supplemented, also provides for events of default and further provides that the trustee or the holders of not less than 25% in aggregate principal amount of the outstanding KFN 5.400% Senior Notes may declare the KFN 5.400% Senior Notes immediately 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 of specified events of bankruptcy, insolvency, receivership or reorganization, the principal amount of the KFN 5.400% Senior Notes and any accrued and unpaid interest on the KFN 5.400% Senior Notes automatically becomes due and payable.

Beginning on May 23, 2023, KFN may redeem the KFN 5.400% 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 May 23, 2023, KFN may redeem the KFN 5.400% 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 5.400% Senior Notes. If a change of control occurs, the KFN 5.400% 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 KFN 5.400% Senior Notes repurchased plus any accrued and unpaid interest on the KFN 5.400% Senior Notes repurchased to, but not including, the date of repurchase.

Notes to Consolidated Financial Statements (Continued)

KFN Issued Junior Subordinated Notes

KFN established six 30‑year trusts between 2006 and 2007 for the sole purpose of issuing trust preferred securities. These trusts issued preferred securities 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 the trusts and mature between 2036 and 2037. Interest is payable on the junior subordinated notes quarterly and based 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 in part, at any time, at a redemption price equal to 100% of the principal amount redeemed plus accrued and unpaid interest to the redemption date.

Other Debt Obligations

Financing Facilities of Consolidated Funds and Other

Certain of KKR's consolidated 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 (beyond KKR's capital interest) or its management companies. Such borrowings have varying maturities and bear interest at floating rates. Borrowings are generally secured by the investment purchased with the proceeds of the borrowing and/or the uncalled capital commitment of each respective fund. When an investment vehicle borrows, the proceeds are available only for use by that investment vehicle and are not available for the benefit of other investment vehicles or KKR. Collateral within each investment vehicle is also available only against borrowings by that investment vehicle and not against the borrowings of other investment vehicles or KKR.

Certain investments and other assets held directly by majority-owned investment vehicles have been funded with borrowings that are collateralized by the investments and assets they own. These borrowings are non-recourse to KKR beyond the investments and assets serving as collateral. Such borrowings have varying maturities and generally bear interest at fixed rates.

Debt Obligations of Consolidated CFEs

As of December 31, 2018, debt obligations of consolidated CFEs consisted of the following:

	Borrowing Outstanding				Weighted Average Interest Rate			Weighted Average Remaining Maturity in Years
Senior Secured Notes of Consolidated CLOs	$	11,667,970			3.2	%		11.7
Subordinated Notes of Consolidated CLOs	413,801				(1)			12.0
Debt Obligations of Consolidated CMBS Vehicles	1,876,783				4.1	%		24.6
	$	13,958,554

(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 CLO vehicle. 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 to satisfy the liabilities of another. As of December 31, 2018, the fair value of the consolidated CFE assets was $15.3 billion. This collateral consisted of Cash and Cash Equivalents Held at Consolidated Entities, Investments, and Other Assets.

Notes to Consolidated Financial Statements (Continued)

Debt Covenants

Borrowings of KKR contain various debt covenants. These covenants do not, in management's opinion, materially restrict KKR's operating business or investment strategies as of December 31, 2018. KKR is in compliance with its debt covenants in all material respects as of December 31, 2018.

Scheduled principal payments for debt obligations at December 31, 2018 are as follows:

	Revolving Credit Facilities				Notes Issued				Other Debt Obligations				Total
2019	$	—			$	—			$	1,561,700			$	1,561,700
2020 - 2021	—				500,000				2,030,100				2,530,100
2022 - 2023	—				228,200				770,600				998,800
2024 and thereafter	—				2,588,100				14,960,300				17,548,400
	$	—			$	3,316,300			$	19,322,700			$	22,639,000

Notes to Consolidated Financial Statements (Continued)

11. INCOME TAXES

The provision (benefit) for income taxes consists of the following:

	For the Years Ended December 31,
	2018				2017				2016
Current
Federal Income Tax	$	105,245			$	(34,611	)		$	(3,440	)
State and Local Income Tax	16,997				5,229				(443		)
Foreign Income Tax	41,716			(1)	79,371				38,052
Subtotal	163,958				49,989				34,169
Deferred
Federal Income Tax	(300,536		)		178,449				(15,032		)
State and Local Income Tax	(52,240		)		(424		)		1,348
Foreign Income Tax	(5,280		)	(1)	(3,688		)		4,076
Subtotal	(358,056		)		174,337				(9,608		)
Total Income Taxes	$	(194,098	)		$	224,326			$	24,561

(1)	The foreign income tax provision was calculated on $141.0 million, $171.6 million, and $102.1 million of pre-tax income generated in foreign jurisdictions in the years 2018, 2017, and 2016, respectively.

KKR & Co. Inc. is a corporation for U.S. federal income tax purposes and thus is subject to U.S. federal, state and local corporate income taxes at the entity level on KKR’s share of net taxable income. In addition, the KKR Group Partnerships and certain of their subsidiaries operate in the United States as partnerships for U.S. federal income tax purposes and as corporate entities in certain non-U.S. jurisdictions. These entities, in some cases, are subject to U.S. state or local income taxes or non-U.S. income taxes.

Prior to the Conversion, KKR & Co. L.P.’s investment income and carried interest generally were not subject to U.S. corporate income taxes. Subsequent to the Conversion, all income earned by KKR & Co. Inc. is subject to U.S. corporate income taxes, which we believe will result in an overall higher income tax expense (or benefit) when compared to periods prior to the Conversion.

As a result of the Conversion, KKR recognized a partial step-up in the tax basis of certain assets that will be recovered as those assets are sold or the basis is amortized. On the date of the Conversion, we recorded an estimated net tax benefit and estimated net deferred tax asset of $257.1 million relating to this partial step-up in tax basis. Our overall tax provision is based on, among other things, an estimate of the amount of such partial step-up in tax basis that is derived from an analysis of the basis of our unitholders in their ownership of KKR common units at December 31, 2017, as adjusted by partial information received by KKR for some trades made in KKR common units in 2018. While this information does not completely reflect the actual basis of our unitholders at June 30, 2018, our estimate is based on the most recent unitholder basis information available to us. The amount of partial step-up in tax basis cannot be finally determined until complete trading information with respect to common units of KKR & Co. L.P. for the six months ended June 30, 2018 becomes available. KKR does not currently expect such information to become available until later in the first quarter of 2019 and after the filing of this Annual Report, and the timing and the availability of this information is not within KKR’s control. Since the unitholder basis information currently available to us does not completely reflect the actual basis of our unitholders at June 30, 2018, the amount of partial step-up in tax basis as finally determined is expected to differ, possibly materially, from the current estimate, which in turn is expected to cause KKR’s income tax provision and effective tax rate under GAAP to differ, possibly to a material extent, from the current estimate described herein. If the amount of the partial step-up in tax basis as finally determined is higher than the current estimate, KKR would record a higher net tax benefit and an incrementally greater deferred tax asset, which would have the effect of decreasing the amount of taxes payable by KKR in the future. If the amount of partial step-up in tax basis as finally determined is lower than the current estimate, KKR would record a lower net tax benefit and an incrementally lower deferred tax asset, which would have the effect of increasing the amount of taxes payable by KKR in the future. Realizations reported for the third and fourth quarters of 2018 will be adjusted to the extent that the updated step-up in tax basis changes the amount of step-up benefit that was realized.

Notes 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,
	2018			2017			2016
Statutory U.S. Federal Income Tax Rate	21.00	%		35.00	%		35.00	%
Income not attributable to KKR & Co. Inc. (1)	(20.13	)%		(38.64	)%		(42.68	)%
Foreign Income Taxes	1.66	%		2.62	%		4.32	%
State and Local Income Taxes	(0.16	)%		0.05	%		0.05	%
Compensation Charges Borne by KKR Holdings	1.69	%		6.29	%		8.20	%
Conversion Benefit	(11.19	)%		—	%		—	%
Change in Valuation Allowance	(0.53	)%		—	%		(1.03	)%
Impact of the 2017 Tax Act	—	%		3.52	%		—	%
Other	(0.94	)%		(0.78	)%		(1.34	)%
Effective Income Tax Rate	(8.60	)%		8.06	%		2.52	%

(1)	Represents primarily income attributable to (i) redeemable noncontrolling interests for all periods and (ii) noncontrolling interests for all periods. This item also includes investment income of certain entities and net carried interest of certain general partners of KKR investment funds that were not subject to U.S. federal income taxes prior to the Conversion.

Deferred income taxes reflect the net tax effects of temporary differences that may exist between the carrying amounts of assets and liabilities for financial reporting 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. A summary of the tax effects of the temporary differences is as follows:

	December 31, 2018				December 31, 2017
Deferred Tax Assets
Fund Management Fee Credits & Refunds	$	60,740			$	51,662
Equity Based Compensation	21,949				19,749
KKR Holdings Unit Exchanges (1)	127,275				93,229
Depreciation and Amortization (2)	293,481				13,421
Federal Foreign Tax Credit	—				15,028
Investment Basis Differences / Net Unrealized Gains & Losses (2)	16,613				—
Net Operating Loss Carryforwards	3,607				4,346
Other	14,496				5,875
Total Deferred Tax Assets before Valuation Allowance	538,161				203,310
Valuation Allowance	—				(11,872		)
Total Deferred Tax Assets	538,161				191,438
Deferred Tax Liabilities
Investment Basis Differences / Net Unrealized Gains & Losses	—				59,494
Total Deferred Tax Liabilities	—				59,494
Total Deferred Taxes, Net	$	538,161			$	131,944

(1)

In connection with exchanges of KKR Holdings units into Class A common stock of KKR & Co. Inc., KKR records a deferred tax asset associated with an increase in KKR & Co. Inc.'s share of the tax basis of the tangible and intangible assets of the KKR Group Partnerships. This amount is offset by an adjustment to record amounts due to KKR Holdings and principals under the tax receivable agreement, which is included within Due to Affiliates in the consolidated statements of financial condition. The net impact of these adjustments was recorded as an adjustment to equity at the time of the exchanges.

(2)	This deferred tax item includes a portion of the tax benefit KKR recognized as a result of the step-up in tax basis generated by the Conversion.

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 are expected to reverse. KKR considers projections of taxable income in evaluating its ability to utilize those deferred tax assets. In projecting its taxable income, KKR begins with historical results and incorporates assumptions concerning the amount and timing of future pretax operating income. Those assumptions require significant judgment and are consistent with the plans and estimates that KKR uses to manage its business. KKR has determined that it is

Notes to Consolidated Financial Statements (Continued)

more likely than not that all deferred tax assets will be realized and that a valuation allowance is not needed as of December 31, 2018.

As of December 31, 2018, KKR has a U.S. federal income tax net operating loss ("NOL") carryforward of $45.2 million attributable to 2016 and a cumulative state and local NOL carryforward of $90.2 million that will begin to expire in 2036. KKR intends to carry back its U.S. federal NOL to past years during 2019, and is reflecting the estimated refund related to the carryback within other assets as a prepaid tax. KKR has elected to treat taxes paid in foreign jurisdictions as a deduction in lieu of a Foreign Tax Credit (“FTC”), because of U.S. federal limitations on FTC utilization. As a result, the valuation allowance that was previously recorded due to the uncertainty as to whether or not KKR would be able to utilize its FTC carryover balance is no longer applicable.

Tax Contingencies

KKR files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, KKR is subject to examination by U.S. federal and certain state, local and foreign tax regulators. As of December 31, 2018, tax returns of KKR and its predecessor entities for the years 2015 through 2017 for U.S. federal purposes and 2011 through 2017 for state and local tax purposes are open under general statute of limitations provisions and therefore subject to examination.

At December 31, 2018, 2017 and 2016, KKR's unrecognized tax benefits relating to uncertain tax positions, excluding related interest and penalties, consisted of the following:

	For the Years Ended December 31,
	2018				2017				2016
Unrecognized Tax Benefits, beginning of period	$	48,170			$	43,996			$	22,792
Gross increases in tax positions in prior periods	—				—				—
Gross decreases in tax positions in prior periods	—				—				(1,351		)
Gross increases in tax positions in current period	5,542				4,406				22,810
Lapse of statute of limitations	(114		)		(232		)		(255		)
Unrecognized Tax Benefits, end of period	$	53,598			$	48,170			$	43,996

If the above tax benefits were recognized it would reduce the effective income tax rate. KKR believes that there will not be a significant increase or decrease 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 accrued related to unrecognized tax benefits as income tax expense. Related to the unrecognized tax benefits, KKR accrued penalties of $0.3 million and interest of $2.6 million during 2018 and in total, as of December 31, 2018, recognized a liability for penalties of $2.6 million and interest of $10.6 million. During 2017, penalties of $0.1 million and interest of $2.2 million were accrued and in total, as of December 31, 2017, recognized a liability for penalties of $2.3 million and interest of $7.9 million.

Notes 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, 2018, 2017 and 2016, respectively.

	For the Years Ended December 31,
	2018				2017				2016
Equity Incentive Plan	$	242,811			$	204,308			$	186,227
KKR Holdings Principal Awards	104,625				143,204				44,837
Other Exchangeable Securities	—				—				12,091
Total (1)	$	347,436			$	347,512			$	243,155

(1)	Includes $11,735 and $11,214 of equity based charges for the years ended December 31, 2018 and 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. Inc. Class A common stock. Vested awards under the Equity Incentive Plan dilute KKR & Co. Inc. common stockholders and KKR Holdings pro rata in accordance with their respective percentage interests in the KKR Group Partnerships.

The total number of Class A common stock that may be issued under the Equity Incentive Plan is equivalent to 15% of the number of fully diluted shares of Class A common stock outstanding, 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 retained ownership 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 these awards are also subject to minimum retained ownership rules requiring the award recipient to continuously hold shares of Class A common stock equivalents equal to at least 15% of their 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. Inc. Class A common stock on the date of grant, discounted for the lack of participation rights in the expected dividends on unvested shares. The discount range for awards granted prior to December 31, 2015 was based on management's estimates of future dividends that the unvested equity awards would not be entitled to receive between the grant date and the vesting date which ranged from 8% to 56%. The following table presents information regarding the discount for the lack of participation rights in the expected dividends for shares granted subsequent to December 31, 2015.

Date of Grant		Discount per share (1)
January 1, 2016 to December 31, 2016		$	0.64
January 1, 2017 to December 31, 2017		$	0.68
January 1, 2018 to June 30, 2018		$	0.68
July 1, 2018 to Present		$	0.50

(1)	Represents the annual discount for the lack of participation rights on expected dividends. The total discount on any given tranche of unvested shares is calculated as the discount per share multiplied by the number of years in the applicable vesting period.

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 by class of recipient.

Notes to Consolidated Financial Statements (Continued)

Market Condition Awards

On November 2, 2017, KKR's Co-Presidents and Co-Chief Operating Officers were each granted equity awards representing 2.5 million shares of KKR Class A common stock subject to a market price-based vesting condition ("Market Condition Awards"). These awards were granted under the Equity Incentive Plan. All of such awards will vest upon the market price of KKR Class A common stock reaching and maintaining a closing market price of $40 per share for 10 consecutive trading days on or prior to December 31, 2022, subject to 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 unvested Market Condition Awards will be automatically canceled and forfeited. These Market Condition Awards are subject to additional transfer restrictions and minimum retained ownership requirements after vesting. Due to the existence of the market condition, the vesting period for the Market Condition Awards is not explicit, and as such, compensation expense will be recognized over the period derived from the valuation technique used to estimate the grant-date fair value of the award (the "Derived Vesting Period").

The fair value of the Market Condition Awards at the date of grant was $4.02 per share based on a Monte-Carlo simulation valuation model due to the existence of the market condition described above. Below is a summary of the significant assumptions used to estimate the grant date fair value of the Market Condition Awards:

Closing KKR share price as of valuation date		$19.90
Risk 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 dividends until such awards have met their vesting 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, 2018, there was approximately $12.3 million of estimated unrecognized compensation expense related to unvested Market Condition Awards and such awards did not meet their market-price based vesting condition.

As of December 31, 2018, there was approximately $400.0 million of total estimated unrecognized expense related to unvested awards, including Market Condition Awards. That cost is expected to be recognized as follows:

Year		Unrecognized Expense (in millions)
2019		$	191.9
2020		133.7
2021		57.7
2022		15.8
2023		0.9
Total		$	400.0

Notes 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, 2018 through December 31, 2018 is presented below:

	Shares			Weighted Average Grant Date Fair Value
Balance, January 1, 2018	46,422,733			$	14.98
Granted	5,489,046			22.42
Vested	(16,101,190	)		15.02
Forfeitures	(2,410,406	)		14.37
Balance, December 31, 2018	33,400,183			$	16.23

The weighted average remaining vesting period over which unvested awards are expected to vest is 1.3 years.

A summary of the remaining vesting tranches of awards granted under the Equity Incentive Plan is presented below:

Vesting Date		Shares
April 1, 2019		9,134,599
October 1, 2019		4,811,012
April 1, 2020		7,294,238
October 1, 2020		3,633,747
April 1, 2021		4,178,268
October 1, 2021		2,131,927
April 1, 2022		923,830
October 1, 2022		1,201,390
October 1, 2023		91,172
		33,400,183

KKR Holdings Awards

KKR Holdings units are exchangeable for KKR Group Partnership Units and allow for their exchange into Class A common stock of KKR & Co. Inc. on a one-for-one basis. As of December 31, 2018 and 2017, KKR Holdings owned approximately 35.9% or 299,081,239 units and 40.9% or 335,971,334 units, respectively, of outstanding KKR Group Partnership Units. Awards for KKR Holdings units that have been granted are generally subject to service based vesting, typically over a three 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 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, the recipients are also subject to minimum retained ownership rules requiring them to continuously hold 25% of their vested interests. Upon separation from KKR, award recipients are subject to the terms of a confidentiality and restrictive covenants agreement that would require the forfeiture of certain vested and unvested units should the terms of the agreement be violated. Holders of KKR Holdings units are not entitled to participate in distributions made on KKR Group Partnership Units underlying their KKR Holdings units until such units are vested. All of the KKR Holdings units (except for less than 0.3% of the outstanding KKR Holdings units) have been granted as of December 31, 2018, and certain Holdings units remain subject to vesting.

The fair value of awards granted out of KKR Holdings is generally based on the closing price of KKR & Co. Inc. Class A common stock on the date of grant discounted for the lack of participation rights in the expected distributions on unvested units. KKR determined this to be the best evidence of fair value as KKR & Co. Inc. Class A common stock 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 KKR & Co. Inc. Class A common stock. Specifically, units in KKR Holdings and shares of KKR & Co. Inc. represent ownership interests in KKR Group Partnership Units and, subject to any vesting, minimum retained ownership requirements and transfer restrictions, each KKR Holdings unit is exchangeable into a KKR Group Partnership Unit and then into a share of KKR & Co. Inc. Class A common stock on 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 vesting that were subsequently modified in November 2016 to eliminate the market condition vesting and instead require only service-based vesting in equal annual installments over a five year period. At the date of

Notes to Consolidated Financial Statements (Continued)

modification, total future compensation expense amounted to $320.9 million, net of estimated forfeitures, to be recognized 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 increase the number of KKR Holdings units outstanding or outstanding KKR & Co. Inc. Class A common stock on a fully-diluted basis. If and when vested, these awards will not dilute KKR's respective 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 award discounted for the lack of participation rights in the expected distributions on unvested units. This discount is consistent with that noted above for shares issued under the Equity Incentive Plan.

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 class of recipient.

As of December 31, 2018, there was approximately $257.2 million of estimated unrecognized expense related to unvested KKR Holdings awards. That cost is expected to be recognized as follows:

Year		Unrecognized Expense (in millions)
2019		$	96.2
2020		88.1
2021		47.5
2022		25.4
Total		$	257.2

A summary of the status of unvested awards granted under the KKR Holdings Plan from January 1, 2018 through December 31, 2018 is presented below:

	Units			Weighted Average Grant Date Fair Value
Balance, January 1, 2018	30,848,583			$	14.42
Granted	450,000			20.90
Vested	(6,494,590	)		15.15
Forfeitures	(680,000	)		11.99
Balance, December 31, 2018	24,123,993			$	14.42

The weighted average remaining vesting period over which unvested awards are expected to vest is 1.9 years.

A summary of the remaining vesting tranches of awards granted under the KKR Holdings Plan is presented below:

Vesting Date		Units
April 1, 2019		229,514
May 1, 2019		3,680,000
October 1, 2019		2,455,000
April 1, 2020		124,479
May 1, 2020		3,680,000
October 1, 2020		2,940,000
May 1, 2021		3,680,000
October 1, 2021		3,425,000
October 1, 2022		3,910,000
		24,123,993

Notes to Consolidated Financial Statements (Continued)

13. RELATED PARTY TRANSACTIONS

Due from Affiliates consists of:

	December 31, 2018				December 31, 2017
Amounts due from portfolio companies	$	82,204			$	129,594
Amounts due from unconsolidated investment funds	568,211				415,907
Amounts due from related entities	6,774				8,848
Due from Affiliates	$	657,189			$	554,349

Due to Affiliates consists of:

	December 31, 2018				December 31, 2017
Amounts due to KKR Holdings in connection with the tax receivable agreement	$	117,862			$	84,034
Amounts due to unconsolidated investment funds	157,722				239,776
Due to Affiliates	$	275,584			$	323,810

Tax Receivable Agreement

KKR is required to acquire KKR Group Partnership Units from time to time pursuant to the exchange agreement with KKR Holdings. The KKR Group Partnerships have each made an election 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 Group Partnership Units for Class A common stock occurs, which may result in an increase in KKR's tax basis of the assets of the KKR 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's share of the tax basis of the tangible and intangible assets of the KKR Group Partnerships, primarily attributable to a portion of the goodwill inherent in KKR's business that would not otherwise have been available. This increase in tax basis may increase depreciation and amortization deductions for tax purposes and therefore reduce the amount of income tax KKR otherwise would be required to pay in the future. This increase in tax basis may also decrease gain (or increase loss) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.

KKR has entered into a tax receivable agreement with KKR Holdings, which requires KKR to pay to KKR Holdings, or to current and former principals who have exchanged KKR Holdings units for shares of Class A common stock (as transferees of KKR Group Partnership Units), 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax that KKR realizes as a result of the increase in tax basis described above, as well as 85% of the amount of any such savings KKR actually realizes as a result of increases in tax basis that arise due to future payments under the agreement. KKR expects to benefit from the remaining 15% of cash savings, if any, in income tax that it realizes. A termination of the agreement or a change of control could give rise to similar payments based on tax savings that KKR would be deemed to realize in connection with such events.

These payment obligations are obligations of KKR & Co. Inc. and certain of its intermediate holding companies and not of any KKR Group Partnership and are recorded within Due to Affiliates in the accompanying consolidated statements of financial condition. Payments made under the tax receivable agreement are required to be made within 90 days of the filing of KKR's tax returns, which may result in a timing difference between the tax savings received by KKR and the cash payments made to the exchanging holders of KKR Group Partnership Units.

As a result of the 2017 Tax Act, which lowered the U.S. federal corporate tax rate from 35% to 21%, expected future cash savings generated as a result of KKR Holdings exchanges are expected to decrease. Accordingly, KKR has decreased the liability associated with the tax receivable agreement to reflect lower future payments to individuals who exchanged KKR Holdings units for shares of Class A common stock. 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.

For the years ended December 31, 2018 and 2017, no cash payments have been made under the tax receivable agreement. For the year ended December 31, 2016, cash payments that have been made under the tax receivable agreement were $5.0 million. KKR expects its intermediate holding companies to benefit from the remaining 15% of cash savings, if any, in income tax that they realize. As of December 31, 2018, $4.2 million of cumulative income tax savings have been realized.

Notes to Consolidated Financial Statements (Continued)

Discretionary Investments

Certain 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, in side-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 on the 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 to management fees or a carried interest. The cash contributed by these individuals aggregated $415.0 million, $505.1 million, and $328.3 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Aircraft and Other Services

Certain of the senior employees own aircraft that KKR uses for business purposes in the ordinary course of its operations. These senior employees paid for the purchase of these aircraft with personal funds and bear all operating, personnel and maintenance costs associated with their operation. The hourly rates that KKR pays for the use of these aircraft are based on current market rates for chartering private aircraft of the same type. KKR incurred $3.6 million, $3.9 million, and $5.1 million for the use of these aircraft for the years ended December 31, 2018, 2017 and 2016, respectively.

Facilities

Certain 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 $7.9 million, $7.6 million, and $7.4 million for the years ended December 31, 2018, 2017 and 2016, respectively.

Notes to Consolidated Financial Statements (Continued)

14. SEGMENT REPORTING

KKR operates through one operating and reportable segment. This single reportable segment reflects how the chief operating decision makers allocate resources and assess performance under KKR's "one-firm approach," which includes operating collaboratively across business lines, with predominantly a single expense pool.

KKR’s segment reporting is presented prior to giving effect to the allocation of income (loss) between KKR & Co. Inc. and KKR Holdings L.P. and as such represents the business in total. In addition, KKR’s segment reporting is presented without giving effect to the consolidation of the investment funds and CFEs that KKR manages as well as other consolidated entities that are not subsidiaries of KKR & Co. Inc. The segment measures used in KKR’s segment reporting, including segment revenues, segment expenses, after-tax distributable earnings, segment assets, segment liabilities and segment book value are used by management in making operational and resource deployment decisions as well as assessing the overall performance of KKR’s business.

After-tax Distributable Earnings

After-tax distributable earnings is a performance measure of KKR’s earnings on a segment basis excluding mark-to-market gains (losses). Starting with the second quarter of 2018, it is defined as the amount of net realized earnings of KKR for a given reporting period, after deducting equity-based compensation. KKR revised the definition of after-tax distributable earnings starting in the second quarter of 2018, because it reflects how the chief operating decision makers allocate resources and assess the performance of KKR’s business. KKR believes that after-tax distributable earnings is useful to stockholders as it aligns KKR’s net realization performance with the manner in which KKR receives its revenues and determines the compensation of its employees. After-tax distributable earnings does not represent and is not used to calculate actual dividends under KKR’s dividend policy. Historically, equity-based compensation expense relating to the Equity Incentive Plan was not reflected in our calculation of after-tax distributable earnings. Under KKR’s segment presentation, equity-based compensation expense is included in after-tax distributable earnings as a component of compensation expense in order to reflect the dilutive nature of these non-cash equity-based awards. For comparability, after-tax distributable earnings for the comparable prior periods have been calculated using this definition.

Modification of Segment Information

In connection with a change of KKR's chief operating decision makers, KKR's management has reevaluated the manner in which it makes operational and resource deployment decisions and assesses the overall performance of KKR's business. As a result, KKR has modified the presentation of its segment financial information effective as of and for the three months ended June 30, 2018, with retrospective application to all prior periods presented.

The most significant changes between KKR's current segment presentation and its previous segment presentation reported prior to the three months ended June 30, 2018, are as follows:

•

After-tax Distributable Earnings - After-tax distributable earnings is the performance measure for KKR's profitability and is used by management in making operational and resource deployment decisions since after-tax distributable earnings aligns KKR's net realized performance with the manner in which KKR receives its revenues and determines the compensation of its employees. Previously, economic net income was a key performance measure. The key distinction between after-tax distributable earnings and economic net income is that after-tax distributable earnings reflects the earnings of KKR excluding mark-to-market gains (losses).

•

Single Reportable Segment - KKR operates through one operating and reportable segment as the chief operating decision makers assess performance of and allocate resources to all of its business lines on a collective basis. These performance assessments and resource allocation decisions are based both on individual and group performance and on broad considerations reflecting KKR's "one-firm approach," which includes operating collaboratively across business lines with predominantly a single expense pool. Historically, KKR operated as four reportable segments.

•

Elimination of Expense Allocation Process - In previous periods, certain expenses were allocated among four historical reportable segments. For the reasons discussed above, a majority of our expenses, namely compensation expense and interest expense, are not specifically allocated among our business lines. Accordingly, KKR has eliminated the expense allocation process that was used in prior periods.

•	Inclusion of Equity Based Compensation in After-tax Distributable Earnings - Historically, equity-based compensation expense relating to the Equity Incentive Plan was not reflected in our calculation of after-tax distributable earnings.

Notes to Consolidated Financial Statements (Continued)

Under KKR's current segment presentation, equity-based compensation expense is included in after-tax distributable earnings as a component of compensation expense in order to reflect the dilutive nature of these non-cash equity-based awards. For comparability, after-tax distributable earnings for the comparable prior periods have been calculated using this new definition.

•

Interest Expense Excluded from Segment Revenues - Historically, KKR's interest expense on its debt capital was allocated entirely to the Principal Activities business line (one of the four historical reportable segments) as a reduction of investment income. As such, interest expense was included as a reduction to total segment revenues. Under KKR's current segment presentation, interest expense is not allocated among its business lines, as its debt capital supports KKR's entire business and not any particular business line. As such, KKR's current segment presentation excludes interest expense from total segment revenues.

In connection with these modifications, segment information as of and for the years ended December 31, 2017 and 2016 have been presented in this Annual Report on Form 10-K to conform to KKR's current segment presentation for comparability purposes. Consequently, this information will be different from the historical segment financial results previously reported by KKR in its reports filed with the SEC.

Notes to Consolidated Financial Statements (Continued)

The following tables set forth information regarding KKR's segment results.

		As of and for the Years Ended December 31,
		2018				2017				2016
Segment Revenues
Fees and Other, Net
Management Fees		$	1,069,074			$	905,188			$	797,862
Transaction Fees		977,485				777,247				344,274
Monitoring Fees		87,520				81,021				64,354
Fee Credits		(280,136		)		(261,429		)		(131,628		)
Total Fees and Other, Net		1,853,943				1,502,027				1,074,862
Realized Performance Income (Loss)
Carried Interest		1,218,647				1,198,981				1,256,208
Incentive Fees		138,330				73,395				33,346
Total Realized Performance Income (Loss)		1,356,977				1,272,376				1,289,554
Realized Investment Income (Loss)
Net Realized Gains (Losses) (1)		365,324				194,020				371,563
Interest Income and Dividends		286,468				285,696				322,857
Total Realized Investment Income (Loss)		651,792				479,716				694,420
Total Segment Revenues		$	3,862,712			$	3,254,119			$	3,058,836
Segment Expenses
Compensation and Benefits (2)		1,533,431				1,282,745				1,119,564
Occupancy and Related Charges		57,022				56,410				62,400
Other Operating Expenses (3)		293,621				243,772				234,348
Total Segment Expenses		$	1,884,074			$	1,582,927			$	1,416,312
Segment Operating Earnings		1,978,638				1,671,192				1,642,524
Interest Expense		187,379				181,612				188,761
Preferred Dividends		33,364				33,364				22,235
Income (Loss) Attributable to Noncontrolling Interests		8,807				6,551				2,336
Income Taxes Paid		151,848				94,065				87,723
After-tax Distributable Earnings		$	1,597,240			$	1,355,600			$	1,341,469
Segment Assets		$	17,587,636			$	15,761,312			$	13,333,141
Segment Liabilities		$	4,081,694			$	3,565,216			$	3,016,986
Segment Book Value		$	12,980,560			$	11,673,909			$	9,796,591

(1)	Given the extraordinary nature of the Conversion, the reported segment financial results for the year ended December 31, 2018 exclude approximately $729.4 million of losses on certain investments which were realized in the second quarter of 2018 in advance of the Conversion.

(2)	Includes equity-based compensation of $242.8 million, $204.3 million, and $186.2 million for the years ended December 31, 2018, 2017, and 2016, respectively.

(3)	For the year ended December 31, 2018, excludes approximately $11.5 million of non-recurring costs in connection with the Conversion.

Notes to Consolidated Financial Statements (Continued)

KKR's business lines are differentiated primarily by their business objectives, investment strategies and sources of revenue, and are summarized below.

KKR's revenue activity is predominantly generated domestically. KKR North America Fund XI contributed more than 10% of KKR's total segment revenues for the year ended December 31, 2018 in the amount of $515.3 million. KKR 2006 Fund contributed more than 10% of KKR's total segment revenues for the years ended December 31, 2017 and 2016 in the amounts of $577.9 million and $529.0 million, respectively.

Through KKR's Private Markets business line, KKR manages and sponsors private equity funds and co-investment vehicles, which invest capital for long-term appreciation, either through controlling ownership of a company or strategic minority positions. In addition to its traditional private equity funds, KKR sponsors investment funds that invest in growth equity and core investments. KKR also manages and sponsors investment funds and co-investment vehicles that invest capital in real assets, such as infrastructure, energy and real estate.

Through KKR's Public Markets business line, KKR operates its combined credit and hedge funds platforms. KKR's credit platform invests capital in leveraged credit strategies, including leveraged loans, high-yield bonds, opportunistic credit and revolving credit strategies, and alternative credit strategies including special situations and private credit opportunities, such as direct lending and private opportunistic credit investment strategies. KKR's hedge funds platform consists of hedge fund partnerships with third-party hedge fund managers in which KKR owns a minority stake.

KKR's Capital Markets business line 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 underwriting securities offerings and providing other types of capital markets services.

Through KKR's Principal Activities business line, KKR manages the firm's assets and deploys capital to support and grow its business lines including making capital commitments as general partner to its funds, to seed new business strategies or investments for new funds or to bridge capital selectively for its funds' investments. The Principal Activities business line also provides the required capital to fund the various commitments of KKR's Capital Markets business line or to meet regulatory capital requirements.

Notes to Consolidated Financial Statements (Continued)

The following tables provide KKR's segment revenues on a disaggregated basis by business line for the years ended December 31, 2018, 2017, and 2016:

		For the Year Ended December 31, 2018
		Private Markets				Public Markets				Capital Markets				Principal Activities				Total
Fees and Other, Net
Management Fees		$	665,026			$	404,048			$	—			$	—			$	1,069,074
Transaction Fees		303,902				42,531				631,052				—				977,485
Monitoring Fees		87,520				—				—				—				87,520
Fee Credits		(239,441		)		(40,695		)		—				—				(280,136		)
Total Fees and Other, Net		817,007				405,884				631,052				—				1,853,943
Realized Performance Income (Loss)
Carried Interest		1,208,747				9,900				—				—				1,218,647
Incentive Fees		1,041				137,289				—				—				138,330
Total Realized Performance Income (Loss)		1,209,788				147,189				—				—				1,356,977
Realized Investment Income (Loss)
Net Realized Gains (Losses)		—				—				—				365,324				365,324
Interest Income and Dividends		—				—				—				286,468				286,468
Total Realized Investment Income (Loss)		—				—				—				651,792				651,792
Total		$	2,026,795			$	553,073			$	631,052			$	651,792			$	3,862,712

		For the Year Ended December 31, 2017
		Private Markets				Public Markets				Capital Markets				Principal Activities				Total
Fees and Other, Net
Management Fees		$	575,451			$	329,737			$	—			$	—			$	905,188
Transaction Fees		288,879				48,370				439,998				—				777,247
Monitoring Fees		81,021				—				—				—				81,021
Fee Credits		(220,710		)		(40,719		)		—				—				(261,429		)
Total Fees and Other, Net		724,641				337,388				439,998				—				1,502,027
Realized Performance Income (Loss)
Carried Interest		1,198,981				—				—				—				1,198,981
Incentive Fees		—				73,395				—				—				73,395
Total Realized Performance Income (Loss)		1,198,981				73,395				—				—				1,272,376
Realized Investment Income (Loss)
Net Realized Gains (Losses)		—				—				—				194,020				194,020
Interest Income and Dividends		—				—				—				285,696				285,696
Total Realized Investment Income (Loss)		—				—				—				479,716				479,716
Total		$	1,923,622			$	410,783			$	439,998			$	479,716			$	3,254,119

Notes to Consolidated Financial Statements (Continued)

		For the Year Ended December 31, 2016
		Private Markets				Public Markets				Capital Markets				Principal Activities				Total
Fees and Other, Net
Management Fees		$	466,422			$	331,440			$	—			$	—			$	797,862
Transaction Fees		132,602				30,155				181,517				—				344,274
Monitoring Fees		64,354				—				—				—				64,354
Fee Credits		(103,579		)		(28,049		)		—				—				(131,628		)
Total Fees and Other, Net		559,799				333,546				181,517				—				1,074,862
Realized Performance Income (Loss)
Carried Interest		1,252,370				3,838				—				—				1,256,208
Incentive Fees		—				33,346				—				—				33,346
Total Realized Performance Income (Loss)		1,252,370				37,184				—				—				1,289,554
Realized Investment Income (Loss)
Net Realized Gains (Losses)		—				—				—				371,563				371,563
Interest Income and Dividends		—				—				—				322,857				322,857
Total Realized Investment Income (Loss)		—				—				—				694,420				694,420
Total		$	1,812,169			$	370,730			$	181,517			$	694,420			$	3,058,836

The following tables reconcile the most directly comparable financial measures calculated and presented in accordance with GAAP to KKR's segment information:

Revenues

		For the Years Ended December 31,
		2018				2017				2016
Total GAAP Revenues		$	2,395,836			$	3,557,280			$	2,040,018
Add: Management Fees - Consolidated Funds and Other		457,314				267,032				196,375
Deduct: Fee Credits - Consolidated Funds		48,193				4,028				2,921
Deduct: Capital Allocation-Based Income (GAAP)		554,510				2,015,676				935,110
Add: Segment Realized Carried Interest		1,218,647				1,198,981				1,256,208
Add: Segment Realized Investment Income (Loss)		651,792				479,716				694,420
Deduct: Revenue Earned by Other Consolidated Entities		111,185				106,042				108,605
Deduct: Expense Reimbursements		146,989				123,144				81,549
Total Segment Revenues		$	3,862,712			$	3,254,119			$	3,058,836

Notes to Consolidated Financial Statements (Continued)

Expenses

		For the Years Ended December 31,
		2018				2017				2016
Total GAAP Expenses		$	2,089,477			$	2,336,692			$	1,695,474
Deduct: Equity-based and Other Compensation - KKR Holdings L.P.		100,182				141,727				78,663
Deduct: Unrealized Performance Income Compensation		(295,794		)		247,601				(161,510		)
Deduct: Amortization of Intangibles		7,700				17,821				41,803
Deduct: Reimbursable Expenses		176,126				155,173				111,016
Deduct: Operating Expenses relating to Other Consolidated Entities		179,818				172,920				216,958
Deduct: One-time Non-recurring Costs (1)		11,501				—				—
Add: Other		(25,870		)		(18,523		)		7,768
Total Segment Expenses		$	1,884,074			$	1,582,927			$	1,416,312

(1)	Represents non-recurring costs in connection with the Conversion.

Net Income (Loss) Attributable to KKR & Co. Inc. Class A Common Stockholders

		For the Years Ended December 31,
		2018				2017				2016
GAAP Net Income (Loss) Attributable to KKR & Co. Inc. Class A Common Stockholders		$	1,097,699			$	984,941			$	287,072
Add: Net Income (Loss) Attributable to Noncontrolling Interests held by KKR Holdings L.P.		561,052				791,021				212,878
Add: Equity-based and Other Compensation - KKR Holdings L.P.		100,632				141,727				78,663
Add: Amortization of Intangibles and Other, net		26,116				122,870				(17,267		)
Add: One-time Non-recurring Costs (1)		11,501				—				—
Add: Realized Losses on Certain Investments (2)		729,425				—				—
Deduct: Unrealized Carried Interest		(756,467		)		600,242				(420,372		)
Deduct: Net Unrealized Gains (Losses)		1,043,912				395,358				(584,423		)
Add: Unrealized Performance Income Compensation		(295,794		)		247,601				(161,510		)
Deduct: Gain from remeasurement of tax receivable agreement liability (3)		—				67,221				—
Add: Income Tax Provision		(194,098		)		224,326				24,561
Deduct: Income Taxes Paid		151,848				94,065				87,723
After-tax Distributable Earnings		$	1,597,240			$	1,355,600			$	1,341,469

(1)	Represents non-recurring costs in connection with the Conversion.

(2)	Represents losses on certain investments which were realized in the second quarter of 2018 in advance of the Conversion.

(3)	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 Tax Act.

Notes to Consolidated Financial Statements (Continued)

The items that reconcile KKR's reportable segment income (loss) attributable to noncontrolling interests to the corresponding consolidated amounts calculated and presented in accordance with GAAP for net income (loss) attributable to redeemable noncontrolling interests and income (loss) attributable to noncontrolling interests are primarily attributable to the impact of KKR Holdings L.P., KKR's consolidated funds, and certain other consolidated entities.

Assets
	As of December 31,
	2018				2017				2016
GAAP Assets	$	50,743,375			$	45,834,719			$	39,002,897
Impact of Consolidation of Funds and Other Entities	(31,888,471		)		(28,659,078		)		(24,367,570		)
Carry Pool Reclassification	(922,977		)		(1,220,559		)		(987,994		)
Other Reclassifications	(344,291		)		—				—
Impact of KKR Management Holdings Corp.	—				(193,770		)		(314,192		)
Segment Assets (1)	$	17,587,636			$	15,761,312			$	13,333,141

Liabilities
	As of December 31,
	2018				2017				2016
GAAP Liabilities	$	25,360,766			$	25,171,919			$	21,884,814
Impact of Consolidation of Funds and Other Entities	(20,011,804		)		(20,636,610		)		(18,090,554		)
Carry Pool Reclassification	(922,977		)		(1,220,559		)		(987,994		)
Other Reclassifications	(344,291		)		373,750				373,750
Impact of KKR Management Holdings Corp.	—				(123,284		)		(163,030		)
Segment Liabilities (1)	$	4,081,694			$	3,565,216			$	3,016,986

Stockholders' Equity
	As of December 31,
	2018				2017				2016
KKR & Co. Inc. Stockholders' Equity - Common Stockholders	$	8,167,056			$	6,703,382			$	5,457,279
Impact of Consolidation of Funds and Other Entities	205,502				214,188				118,635
Other Reclassifications	(17,446		)		(17,446		)		(17,446		)
Noncontrolling Interests Held by KKR Holdings L.P.	4,625,448				4,844,271				4,389,285
Impact of KKR Management Holdings Corp.	—				(70,486		)		(151,162		)
Segment Book Value (1)	$	12,980,560			$	11,673,909			$	9,796,591

(1)	As of December 31, 2018, KKR's segment assets, liabilities, and book value reflects KKR's tax assets and liabilities prepared under GAAP.

Notes to Consolidated Financial Statements (Continued)

15. EQUITY

Stockholders' Equity

KKR & Co. Inc.'s common stock consists of Class A common stock, Class B common stock and Class C common stock. On July 1, 2018, as a result of the Conversion, (i) each outstanding common unit representing limited partner interests in KKR & Co. L.P. converted into one issued and outstanding, fully paid and nonassessable share of Class A common stock, (ii) each outstanding managing partner unit of KKR & Co. L.P. converted into one issued and outstanding, fully paid and nonassessable share of Class B common stock, and (iii) each outstanding special voting unit of KKR & Co. L.P. converted into one issued and outstanding, fully paid and nonassessable share of Class C common stock. KKR & Co. Inc.'s certificate of incorporation and bylaws provide stockholders with substantially the same rights and obligations that unitholders had immediately prior to the Conversion. Under the laws of the state of its incorporation, KKR & Co. Inc. is deemed to be the same entity as KKR & Co. L.P. In connection with the Conversion, each 6.75% Series A Preferred Unit and 6.50% Series B Preferred Unit of KKR & Co. L.P. was converted into one share of 6.75% Series A Preferred Stock ("Series A Preferred Stock") and 6.50% Series B Preferred Stock ("Series B Preferred Stock") of KKR & Co. Inc., respectively.

Upon Conversion, KKR's authorized capital stock consists of 5,000,000,000 shares, all with a par value of $0.01 per share, of which: (i) 3,500,000,000 are designated as Class A common stock; (ii) one is designated as Class B common stock; (iii) 499,999,999 are designated as Class C common stock; and (iv) 1,000,000,000 are designated as preferred stock, of which (a) 13,800,000 shares are designated as Series A Preferred Stock and (b) 6,200,000 shares are designated as Series B Preferred Stock.

Below is a summary of the reclassification from partnership equity accounts to equity accounts reflective of a corporation following the Conversion. See statements of changes in equity.

KKR & Co. L.P. Partners' Capital - Common Unitholders as of June 30, 2018		$	7,940,529
Less: Reclassifications to Class A Common Stock ($0.01 par value, 524,341,874 shares)		5,243
Less: Reclassifications to Class B Common Stock ($0.01 par value, 1 share)		—
Less: Reclassifications to Class C Common Stock ($0.01 par value, 304,107,762 shares)		3,041
Less: Reclassifications to Additional Paid-In Capital		7,932,245
KKR & Co. L.P. Partners' Capital - Common Unitholders as of July 1, 2018		$	—

Retained Earnings

Upon Conversion, there were no Retained Earnings as a corporation.

Accumulated Other Comprehensive Income (Loss)

There was no impact to Accumulated Other Comprehensive Income (Loss) upon Conversion.

Class A, Class B and Class C Common Stock

Class A common stock and Class C common stock are non-voting and are not entitled to vote on any matter that is generally subject to a vote of the stockholders, except as expressly provided in the certificate of incorporation and bylaws or required by Delaware law or the rules of the NYSE. Class B common stock is voting and is entitled to one vote per share on any matter that is submitted to a vote of the stockholders generally. For matters on which our Class A common stock is entitled to vote, as provided in the certificate of incorporation or bylaws or required by Delaware law or the rules of the NYSE, so long as the ratio at which KKR Group Partnership Units are exchangeable for Class A common stock remains on a one-for-one basis, Class C common stock will vote together with Class A common stock as a single class and on an equivalent basis unless required otherwise by Delaware law, except Class C common stock will vote separately as a class on any amendment to the certificate of incorporation that changes certain terms, rights or preferences of Class C common stock.

The holder of Class B common stock and holders of Class C common stock do not have any economic rights to receive dividends or receive distributions upon the dissolution, liquidation or winding up of KKR. Class A common stock, Class B common stock and Class C common stock are not entitled to preemptive rights, and, except in the case of impermissible

Notes to Consolidated Financial Statements (Continued)

transfers of the Class B common stock, which would result in KKR’s redemption of such Class B common stock, are not subject to conversion, redemption or sinking fund provisions.

Series A and Series B Preferred Stock

The board of directors is authorized, subject to limitations prescribed by Delaware law, to issue preferred stock in one or more series, to establish from time to time the number of shares to be included in each series, and to fix the designation, powers (including voting powers), preferences and rights of the shares of each series and any of its qualifications, limitations or restrictions, in each case without further vote or action by the stockholders (except as may be required by the terms of any preferred stock then outstanding).

KKR & Co. Inc. has outstanding 13,800,000 shares of Series A Preferred Stock and 6,200,000 shares of Series B Preferred Stock. Series A Preferred Stock and Series B Preferred Stock trade on the NYSE under the symbols "KKR PR A" and "KKR PR B", respectively, and were originally issued on March 17, 2016 and June 20, 2016, respectively. The terms of the preferred stock are set forth in our certificate of incorporation.

If declared, dividends on the Series A Preferred Stock and Series B Preferred Stock are payable quarterly on March 15, June 15, September 15 and December 15 of each year, at a rate per annum equal to 6.75%, in the case of Series A Preferred Stock, and 6.50%, in the case of Series B Preferred Stock. Dividends on the Series A Preferred Stock and Series B Preferred Stock are discretionary and non-cumulative. Holders of the Series A Preferred Stock and Series B Preferred Stock will only receive dividends on such shares when, as and if declared by the board of directors. KKR has no obligation to declare or pay any dividends for any dividend period, whether or not dividends on any series of preferred stock are declared or paid for any other dividend period.

Unless dividends have been declared and paid (or declared and set apart for payment) on Series A Preferred Stock and Series B Preferred Stock for a quarterly distribution period, KKR & Co. Inc. may not declare or pay dividends on, or repurchase, any of its shares that are junior to Series A Preferred Stock and Series B Preferred Stock, including Class A common stock, during such dividend period. A dividend period begins on a dividend payment date and extends to, but excludes, the next dividend payment date.

If KKR & Co. Inc. dissolves, then the holders of the Series A Preferred Stock and Series B Preferred Stock are entitled to receive payment of a $25.00 liquidation preference per share, plus declared and unpaid dividends, if any, to the extent that KKR has sufficient gross income (excluding any gross income attributable to the sale or exchange of capital assets) such that holders of such preferred stock have capital account balances equal to such liquidation preference, plus declared and unpaid dividends, if any.

The Series A Preferred Stock and Series B Preferred Stock do not have a maturity date. However, Series A Preferred Stock may be redeemed at KKR & Co. Inc.’s option, in whole or in part, at any time on or after June 15, 2021, at a price of $25.00 per share, plus declared and unpaid dividends, if any. Series B Preferred Stock may be redeemed at KKR & Co. Inc.’s option, in whole or in part, at any time on or after September 15, 2021, at a price of $25.00 per share, plus declared and unpaid dividends, if any. Holders of Series A Preferred Stock and Series B Preferred Stock have no right to require the redemption of such stock.

If a certain change of control event with a ratings downgrade occurs prior to June 15, 2021, in the case of Series A Preferred Stock, and September 15, 2021, in the case of Series B Preferred Stock, then Series A Preferred Stock or Series B Preferred Stock, as applicable, may be redeemed at KKR & Co. Inc.’s option, in whole 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 share, plus declared and unpaid dividends, if any. If such a change of control event occurs (whether before, on or after June 15, 2021, in the case of the Series A Preferred Stock, or September 15, 2021, in the case of the Series B Preferred Stock) and we do not give such notice, the dividend rate per annum on the applicable series of preferred stock will increase by 5.00%, beginning on the 31st day following such change of control event.

Series A Preferred Stock and Series B Preferred Stock are not convertible into common stock of KKR & Co. Inc. and have no voting rights, except that holders of Series A Preferred Stock and Series B Preferred Stock have certain voting rights in limited circumstances relating to the election of directors following the failure to declare and pay dividends, certain amendments to the terms of the preferred stock, and the creation of preferred stock that are senior to the Series A Preferred Stock and Series B Preferred Stock.

Notes to Consolidated Financial Statements (Continued)

In connection with the issuance of the Series A Preferred Stock and Series B Preferred Stock, the KKR Group Partnerships issued for the benefit of KKR & Co. Inc. corresponding series of preferred units with economic terms that mirror those of the Series A Preferred Stock and Series B Preferred Stock, as applicable.

Share Repurchase Program

On May 3, 2018, KKR increased the available amount under its repurchase program to $500 million, which may be used for the repurchase of its shares of Class A common stock of KKR & Co. Inc. and retirement of equity awards issued pursuant to the Equity Incentive Plan (and any successor equity plan thereto). Under this repurchase program, shares of Class A common stock of KKR & Co. Inc. may be repurchased from time to time in open market transactions, in privately negotiated transactions or otherwise. The timing, manner, price and amount of any 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 the maximum approved dollar amount has been used. The program does not require KKR to repurchase any specific number of shares of Class A common stock of KKR & Co. Inc., and the program may be suspended, extended, modified or discontinued at any time. During the years ended December 31, 2018 and 2016, approximately 7.5 million and 21.8 million shares of Class A common stock, respectively, were repurchased pursuant to this program. There were no shares of Class A common stock repurchased pursuant to this program during the year ended December 31, 2017. During the year ended December 31, 2018, approximately 1.6 million equity awards were retired pursuant to this program. No equity awards were retired pursuant to this program for the years ended December 31, 2017 or 2016.

Noncontrolling Interests

Noncontrolling interests represent (i) noncontrolling interests in consolidated entities and (ii) noncontrolling interests held by KKR Holdings. There was no impact to Noncontrolling Interests upon Conversion.

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 consolidated funds and certain other entities;

(ii)	third parties entitled to up to 1% of the carried interest received by certain general partners of KKR's funds that have made investments on or prior to 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 equity funds that was allocated to them with respect to private equity investments made during such former principals' tenure with KKR prior to October 1, 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 funds prior to October 1, 2009 and any returns thereon; and

(v)	third parties in KKR's capital markets business line.

On January 16, 2018, KKR Financial Holdings LLC ("KFN") completed the redemption of all of its outstanding 7.375% Series A LLC Preferred Shares.

During the third quarter of 2018, all remaining holders of exchangeable equity securities representing ownership interests in a subsidiary of a KKR Group Partnership issued in connection with the acquisition of Avoca Capital ("Avoca") have exchanged such securities for shares of Class A common stock.

Noncontrolling Interests held by KKR Holdings

Noncontrolling interests held by KKR Holdings include economic interests held by principals indirectly in the KKR Group Partnership Units. Such principals receive financial benefits from KKR's business in the form of distributions received from KKR Holdings and through their direct and indirect participation in the value of KKR Group Partnership Units held by KKR Holdings. These financial benefits are not paid by KKR & Co. Inc. and are borne by KKR Holdings.

Notes to Consolidated Financial Statements (Continued)

The following tables present the calculation of total noncontrolling interests.

		For the Year Ended December 31, 2018
		Noncontrolling Interests in Consolidated Entities				Noncontrolling Interests Held by KKR Holdings				Total Noncontrolling Interests
Balance at the beginning of the period		$	8,072,849			$	4,793,475			$	12,866,324
Net income (loss) attributable to noncontrolling interests (1)		796,183				561,052				1,357,235
Other comprehensive income (loss), net of tax (2)		(18,512		)		(12,559		)		(31,071		)
Exchange of KKR Holdings Units to Class A Common Stock and Other(3)		(52,585		)		(567,309		)		(619,894		)
Equity-based and other non-cash compensation		—				100,632				100,632
Capital contributions		4,357,219				2,396				4,359,615
Capital distributions		(2,763,416		)		(252,239		)		(3,015,655		)
Changes in consolidation		593,172				—				593,172
Balance at the end of the period		$	10,984,910			$	4,625,448			$	15,610,358

		For the Year Ended December 31, 2017
		Noncontrolling Interests in Consolidated Entities				Noncontrolling Interests Held by KKR Holdings				Total Noncontrolling Interests
Balance at the beginning of the period		$	6,252,565			$	4,293,337			$	10,545,902
Net income (loss) attributable to noncontrolling interests (1)		676,744				791,021				1,467,765
Other comprehensive income (loss), net of tax (2)		9,192				21,904				31,096
Exchange of KKR Holdings Units to Class A Common Stock and Other(3)		(50,120		)		(238,941		)		(289,061		)
Equity-based and other non-cash compensation		—				141,727				141,727
Capital contributions		3,116,889				3,028				3,119,917
Capital distributions		(1,890,232		)		(235,610		)		(2,125,842		)
Changes in consolidation		(1,682		)		—				(1,682		)
Transfers of interests under common control and Other		(40,507		)		17,009				(23,498		)
Balance at the end of the period		$	8,072,849			$	4,793,475			$	12,866,324

(1)	Refer to the table below for calculation of net income (loss) attributable to noncontrolling interests held by KKR Holdings.

(2)	With respect to noncontrolling interests held by KKR Holdings, 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 and other exchangeable securities exchanged for KKR & Co. Inc. Class A common stock during the reporting period. The exchange agreement with KKR Holdings provides for the exchange of KKR Group Partnership Units held by KKR Holdings for KKR & Co. Inc. Class A common stock.

Net income (loss) attributable to each of KKR & Co. Inc. Class A common stockholders and KKR Holdings, with the exception of certain tax assets and liabilities that are directly allocable to KKR & Co. Inc., is attributed based on the percentage of the weighted average KKR Group Partnership Units directly or indirectly held by KKR & Co. Inc. and KKR Holdings, each of which directly or indirectly holds equity of the KKR Group Partnerships. However, primarily because of the (i) contribution of certain expenses borne entirely by KKR Holdings, (ii) the periodic exchange of KKR Holdings units for KKR & Co. Inc. Class A common stock pursuant to the exchange agreement and (iii) the contribution of certain expenses borne entirely by KKR associated with the Equity Incentive Plan, equity allocations shown in the consolidated statement of changes in equity differ from their respective pro rata ownership interests in KKR's net assets.

Notes to Consolidated Financial Statements (Continued)

The following table presents net income (loss) attributable to noncontrolling interests held by KKR Holdings:

	For the Years Ended December 31,
	2018				2017				2016
Net income (loss)	$	2,450,946			$	2,560,042			$	950,664
Less: Net income (loss) attributable to Redeemable Noncontrolling Interests	(37,352		)		73,972				(8,476		)
Less: Net income (loss) attributable to Noncontrolling Interests in consolidated entities	796,183				676,744				436,955
Less: Preferred Stock Dividends	33,364				33,364				22,235
Plus: Income tax expense (benefit) attributable to KKR & Co. Inc.	(229,232		)		150,812				(18,937		)
Less: Gain from remeasurement of tax receivable agreement liability attributable to KKR & Co. Inc.(1)	—				67,221				—
Net income (loss) attributable to KKR & Co. Inc. Class A Common Stockholders and KKR Holdings	$	1,429,519			$	1,859,553			$	481,013
Net income (loss) attributable to Noncontrolling Interests held by KKR Holdings	$	561,052			$	791,021			$	212,878

(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 2017 Tax Act.

Redeemable Noncontrolling Interests

Redeemable Noncontrolling Interests represent noncontrolling interests of certain investment funds and vehicles that are subject to periodic redemption by fund investors following the expiration of a specified period of time (typically one year), or may be withdrawn subject to a redemption fee during the period when capital may not be otherwise withdrawn. Fund investors interests subject to redemption as described above are presented as Redeemable Noncontrolling Interests in the accompanying consolidated statements of financial condition and presented as Net Income (Loss) Attributable to Redeemable Noncontrolling Interests in the accompanying consolidated statements of operations. There was no impact to Redeemable Noncontrolling Interests upon Conversion.

When redeemable amounts become legally payable to fund investors, they are classified as a liability and included in Accounts Payable, Accrued Expenses and Other Liabilities in the accompanying consolidated statements of financial condition. For all consolidated investment vehicles and funds in which redemption rights have not been granted, noncontrolling interests are presented within Stockholders' Equity in the accompanying consolidated statements of financial condition as noncontrolling interests.

The following table presents the rollforward of Redeemable Noncontrolling Interests:

		For the Year Ended December 31,
		2018
Balance at the beginning of the period		$	610,540
Net income (loss) attributable to Redeemable Noncontrolling Interests		(37,352		)
Capital contributions		565,553
Capital distributions		(16,100		)
Balance at the end of the period		$	1,122,641

Notes to Consolidated Financial Statements (Continued)

Transfer of Interests Under Common Control and Other

On March 30, 2017, KKR's Indian capital markets and credit asset management businesses were reorganized 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 value before 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 to third-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 was recognized in the consolidated financial statements.

Both transactions above resulted in an increase to KKR's equity and to noncontrolling interests held by KKR Holdings.

16. COMMITMENTS AND CONTINGENCIES

Funding Commitments

As of December 31, 2018, KKR had unfunded commitments consisting of $5,274.0 million to its active investment vehicles. In addition to the uncalled commitments to KKR's investment funds, KKR has entered into contractual commitments with respect to (i) the purchase of investments and other assets in its Principal Activities business line and (ii) underwriting transactions, debt financing, and syndications in KKR's Capital Markets business line. As of December 31, 2018, these commitments amounted to $370.5 million and $663.7 million, respectively. Whether these amounts are actually funded, in whole or in part, depends on the contractual terms of such commitments, including the satisfaction or waiver of any conditions to closing or funding. The unfunded commitments shown for KKR's Capital Markets business line are shown without reflecting arrangements that may reduce the actual amount of contractual commitments shown occurring after December 31, 2018. KKR's capital markets business has an arrangement with a third party, which reduces its risk when underwriting certain debt transactions, and thus our unfunded commitments as of December 31, 2018 are reduced to reflect the amount to be funded by such third party. In the case of purchases of investments or assets in KKR's Principal Activities business line, the amount to be funded includes amounts that are intended to be syndicated to third parties, and the actual amounts to be funded may be less than shown.

Non-cancelable Operating Leases

KKR's non-cancelable operating leases consist of leases of office space around the world. There are no material rent holidays, contingent rent, rent concessions or leasehold improvement incentives associated with any of these property leases. In addition to base rentals, certain lease agreements are subject to escalation provisions and rent expense is recognized on a straight‑line basis over the term of the lease agreement.

As of December 31, 2018, the approximate aggregate minimum future lease payments, net of sublease income, required on the operating leases are as follows:

2019	$	50,649
2020 - 2021	69,263
2022 - 2023	29,687
2024 and thereafter	76,332
Total minimum payments required	$	225,931

Notes to Consolidated Financial Statements (Continued)

Contingent Repayment Guarantees

The partnership documents governing KKR's carry-paying investment funds and vehicles 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 the fund. Under a clawback obligation, upon the liquidation of a fund, the general partner is required to return, typically on an after-tax basis, previously distributed carry to the extent that, due to the diminished performance of later investments, the aggregate amount of carry distributions received by the general partner during the term of the fund exceed the amount to which the general partner was ultimately entitled, including the effects of any performance thresholds. As of December 31, 2018, no carried interest was subject to this clawback obligation, assuming that all applicable carry-paying funds were liquidated at their December 31, 2018 fair values. Had the investments in such funds been liquidated at zero value, the clawback obligation would have been approximately $2.0 billion. Carried interest is recognized in the consolidated statements of operations based on the contractual 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 investments were realized at the then estimated fair values. Amounts earned pursuant to carried interest are earned by the general partner of those funds to the extent that cumulative investment returns are positive and where applicable, preferred return thresholds have been met. If these investment amounts earned decrease or turn negative in subsequent periods, recognized carried interest will be reversed and to the extent that the aggregate amount of carry distributions received by the general partner during the term of the fund exceed the amount to which the general partner was ultimately entitled, a clawback obligation would be recorded. For funds that are consolidated, this clawback obligation, if any, is reflected as an increase in noncontrolling interests in the consolidated statements of financial condition. 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 carried interest is initially recorded.

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 to environmental and other matters and have provided nonrecourse carve-out guarantees for fraud, willful misconduct and other customary wrongful acts, each in connection with the financing of certain real estate investments that KKR has made and for certain investment vehicles that KKR manages. 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 partner to 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 certain investment losses and/or for providing liquidity in the events specified in the governing documents of other investment vehicles. KKR has also provided credit support regarding repayment obligations to third-party lenders to certain of its employees, excluding its executive officers, in connection with their personal investments in KKR investment funds and to a hedge fund partnership regarding the ownership of its business. KKR also may become liable for certain fees payable to sellers of businesses or assets if a transaction does not close, subject to certain conditions, if any, specified in the acquisition agreements for such businesses or assets. KKR's maximum exposure under these arrangements is currently unknown and KKR's liabilities for these matters would require a claim to be made against KKR in the future.

Notes to Consolidated Financial Statements (Continued)

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 also subject 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 former subsidiary of KKR, manages for the Kentucky Retirement Systems. Also named as defendants in the lawsuit are certain current and former trustees and officers of the Kentucky Retirement Systems, Prisma Capital Partners LP, and various other service providers to the Kentucky Retirement Systems and their related persons. The defendants' motion to dismiss was denied in November 2018.

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 Regulatory Authority, 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 or fines against KKR or its personnel.

Moreover, in the ordinary course of business, KKR is and can be both the defendant and the plaintiff in numerous lawsuits with respect to acquisitions, bankruptcy, insolvency and other types of proceedings. Such lawsuits may involve claims that adversely affect the value of certain investments owned by KKR's funds.

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 not probable or reasonably estimable (or both) at the time of determination. Such matters may be subject to many uncertainties, including among others: (i) the proceedings may be in early stages; (ii) damages sought may be unspecified, unsupportable, unexplained or uncertain; (iii) discovery may not have been started or is 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) there may 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 of potential 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 as contributions 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 large and/or indeterminate amounts. As of such date, based on information known by management, management has not concluded that the final resolutions of the matters above will have a material effect upon the financial statements. However, given the potentially large and/or indeterminate amounts sought or may be sought 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.

Notes to Consolidated Financial Statements (Continued)

17. QUARTERLY FINANCIAL DATA (UNAUDITED)

	For the Three Months Ended,
	March 31, 2018				June 30, 2018				September 30, 2018				December 31, 2018
Statement of Operations Data:
Total Revenues	$	472,606			$	971,620			$	1,129,666			$	(178,056	)
Total Expenses	436,601				675,050				740,090				237,736
Total Investment Income (Loss)	584,530				1,330,786				833,288				(798,115		)
Income (Loss) Before Taxes	620,535				1,627,356				1,222,864				(1,213,907		)
Income Tax Expense / (Benefit)	17,641				60,960				(129,405		)		(143,294		)
Net Income (Loss)	602,894				1,566,396				1,352,269				(1,070,613		)
Less: Net Income (Loss) Attributable to Redeemable Noncontrolling Interests	25,674				(18,016		)		12,236				(57,246		)
Less: Net Income (Loss) Attributable to Noncontrolling Interests	398,777				895,690				691,494				(628,726		)
Net Income (Loss) Attributable to KKR & Co. Inc.	178,443				688,722				648,539				(384,641		)
Less: Series A Preferred Stock Dividends	5,822				5,822				5,822				5,822
Less: Series B Preferred Stock Dividends	2,519				2,519				2,519				2,519
Net Income (Loss) Attributable to KKR & Co. Inc. Class A Common Stockholders	$	170,102			$	680,381			$	640,198			$	(392,982	)
Net Income (Loss) Attributable to KKR & Co. Inc. Per Share of Class A Common Stock
Basic	$	0.36			$	1.33			$	1.22			$	(0.74	)
Diluted	$	0.32			$	1.24			$	1.17			$	(0.74	)
Weighted Average Shares of Class A Common Stock Outstanding
Basic	487,704,838				510,586,631				525,240,214				532,266,521
Diluted	535,918,274				548,745,498				545,672,953				532,266,521

	For the Three Months Ended,
	March 31, 2017				June 30, 2017				September 30, 2017				December 31, 2017
Statement of Operations Data:
Total Revenues	$	767,755			$	1,015,800			$	749,652			$	1,024,073
Total Expenses	540,014				629,728				530,247				636,703
Total Investment Income (Loss)	610,695				500,990				177,953				274,142
Income (Loss) Before Taxes	838,436				887,062				397,358				661,512
Income Tax Expense / (Benefit)	40,542				18,538				18,420				146,826
Net Income (Loss)	797,894				868,524				378,938				514,686
Less: Net Income (Loss) Attributable to Redeemable Noncontrolling Interests	20,933				22,387				20,876				9,776
Less: Net Income (Loss) Attributable to Noncontrolling Interests	509,277				432,150				196,158				330,180
Net Income (Loss) Attributable to KKR & Co. Inc.	267,684				413,987				161,904				174,730
Less: Series A Preferred Stock Dividends	5,822				5,822				5,822				5,822
Less: Series B Preferred Stock Dividends	2,519				2,519				2,519				2,519
Net Income (Loss) Attributable to KKR & Co. Inc. Class A Common Stockholders	$	259,343			$	405,646			$	153,563			$	166,389
Net Income (Loss) Attributable to KKR & Co. Inc. Per Share of Class A Common Stock
Basic	$	0.57			$	0.87			$	0.33			$	0.35
Diluted	$	0.52			$	0.81			$	0.30			$	0.32
Weighted Average Shares of Class A Common Stock Outstanding
Basic	453,695,846				466,170,025				471,758,886				481,165,742
Diluted	496,684,340				501,177,423				506,873,177				520,156,583

Notes to Consolidated Financial Statements (Continued)

18. SUBSEQUENT EVENTS

Common Stock Dividend

A dividend of $0.125 per share of Class A common stock of KKR & Co. Inc. was announced on February 1, 2019, and will be paid on February 26, 2019 to Class A common stockholders of record as of the close of business on February 11, 2019. KKR Holdings will receive its pro rata share of the distribution from the KKR Group Partnerships.

Preferred Stock Dividend

A dividend of $0.421875 per share of Series A Preferred Stock has been declared as announced on February 1, 2019 and set aside for payment on March 15, 2019 to holders of record of Series A Preferred Stock as of the close of business on March 1, 2019.

A dividend of $0.406250 per share of Series B Preferred Stock has been declared as announced on February 1, 2019 and set aside for payment on March 15, 2019 to holders of record of Series B Preferred Stock as of the close of business on March 1, 2019.

Equity Incentive Plan

On January 28, 2019, common stockholders of KKR & Co. Inc. approved the KKR & Co. Inc. 2019 Equity Incentive Plan (our "New Equity Incentive Plan"). Our New Equity Incentive Plan will become effective on March 29, 2019.