KKR Private Equity Investors, L.P. (Euronext Amsterdam: KPE), a Guernsey limited partnership that invests its assets in private equity and opportunistic investments identified by Kohlberg Kravis Roberts & Co. ("KKR"), today reported its financial results for the quarter and six months ended June 30, 2008. As of June 30, 2008, KPE's net asset value ("NAV") was $4,558.2 million, or $22.25 per unit.
Results of Operations
Operating results of KPE for the quarter ended June 30, 2008 are highlighted as follows:
- Net realized loss on investments and foreign currency was $42.5 million. The net realized loss was primarily comprised of $23.4 million from the secondary sales of investments in limited partner interests of the KKR 2006 Fund L.P. ("KKR 2006 Fund") and the KKR Millennium Fund L.P. ("KKR Millennium Fund") and $19.9 million from the sale of opportunistic investments in public equities and derivative instruments, offset by a realized gain of $5.7 million from the partial sale of security holdings in Rockwood Holdings, Inc. and the final disposition of KSL Holdings - La Costa by KKR's private equity funds;
- Net unrealized depreciation on investments and foreign currency
transactions was $98.7 million. The changes in the unrealized fair
value of investments from March 31, 2008 to June 30, 2008 were:
- A net decrease of $138.2 million in the value of the investment in ProSiebenSat.1 Media AG ("ProSieben"), which was marked on a Euro basis from 0.7 times original cost as of March 31, 2008 to 0.2 times as of June 30, 2008, and the related foreign currency exchange contract. Including foreign currency translation, the ProSieben investment was marked on a U.S. dollar basis from 0.9 times to 0.2 times as of June 30, 2008;
- A net decrease of $48.7 million in the value of the investment in PagesJaunes Groupe S.A. ("PagesJaunes"), based on a market quotation on a U.S. dollar basis, and the related foreign currency exchange contract;
- A decrease of $48.9 million in the value of the convertible senior note investment in Sun Microsystems, Inc. ("Sun");
- A decrease of $34.2 million in the value of Aero Technical Support & Services S.Ã r.l. ("ACTS"), which was marked on both a Canadian dollar and U.S. dollar basis from 1.0 times original cost to 0.7 times as of June 30, 2008;
- A decrease of $25.3 million in the value of Legrand Holdings S.A. ("Legrand"), based on a market quotation on a U.S. dollar basis;
- A decrease of $14.8 million in the value of Capmark Financial Group Inc. ("Capmark"), which was marked from 1.2 times KPE's cost as of March 31, 2008 to 1.1 times as of June 30, 2008;
- An increase of $132.8 million in the value of Energy Future Holdings Corp. ("EFH"), which was marked from 1.0 times original cost to 1.4 times as of June 30, 2008;
- An increase of $31.0 million in the value of the convertible preferred stock investment in Orient Corporation ("Orico") and the related foreign currency exchange contract; and
- An increase of $21.2 million in the value of The Nielsen Company, B.V. ("Nielsen"), which was marked from 1.1 times original cost as of March 31, 2008 to 1.2 times as of June 30, 2008.
- Net investment loss was $18.5 million, which principally represented interest expense and management fees, offset by interest and dividend income; and
- The net decrease in net assets resulting from operations was $159.7 million and KPE's total return was (3.4) percent during the quarter. KPE's total return of (3.4) percent compared to a (3.2) percent return in the S&P 500 Index for the quarter ended June 30, 2008.
Operating results of KPE for the six months ended June 30, 2008 are highlighted as follows:
- Net realized loss on investments and foreign currency was $38.5 million. The net realized loss was primarily comprised of $26.3 million from the sale of opportunistic investments in public equities and derivative instruments and $23.5 million from the secondary sales of investments in limited partner interests of the KKR 2006 Fund and the KKR Millennium Fund, offset by realized gains of $16.0 million from the sale of Demag Holdings, S.Ã r.l., the partial sale of security holdings in Rockwood Holdings, Inc. and the final disposition of KSL Holdings - La Costa by KKR's private equity funds;
- Net unrealized depreciation on investments and foreign currency
transactions was $350.5 million. The changes in the unrealized fair
value of investments from December 31, 2007 to June 30, 2008 were:
- A decrease of $175.6 million in the value of the investment in PagesJaunes, based on a market quotation on a U.S. dollar basis, and the related foreign currency exchange contract;
- A decrease of $133.6 million in the value of the investment in ProSieben, which was marked on a Euro basis from 0.7 times original cost as of December 31, 2007 to 0.2 times as of June 30, 2008, and the related foreign currency exchange contract. Including foreign currency translation, the ProSieben investment was marked on a U.S. dollar basis from 0.8 times to 0.2 times as of June 30, 2008;
- A decrease of $94.0 million in the value of the convertible senior note investment in Sun;
- A decrease of $60.6 million in the value of Legrand, based on a market quotation on a U.S. dollar basis;
- A decrease of $37.3 million in the value of ACTS, which was marked on both a Canadian dollar and U.S. dollar basis from 1.0 times original cost to 0.7 times as of June 30, 2008;
- A decrease of $29.9 million in the value of Capmark, which was marked from 1.3 times KPE's cost as of December 31, 2007 to 1.1 times as of June 30, 2008;
- An increase of $132.8 million in the value of EFH, which was marked from 1.0 times original cost to 1.4 times as of June 30, 2008; and
- An increase of $42.7 million in the value of Nielsen, which was marked from 1.0 times original cost to 1.2 times as of June 30, 2008.
- Net investment loss was $39.5 million, which principally represented interest expense and management fees, offset by interest and dividend income; and
- The net decrease in net assets resulting from operations was $428.6 million and KPE's total return was (8.6) percent during the six months ended June 30, 2008. KPE's total return of (8.6) percent compared to a (12.8) percent return in the S&P 500 Index for the six months ended June 30, 2008.
Investments
KPE invests its capital as the sole limited partner of KKR PEI Investments, L.P. (the "Investment Partnership"). As of June 30, 2008, the Investment Partnership's portfolio of private equity investments, net of related financing, and opportunistic investments with a fair value of $5,019.4 million, was comprised of the following:
- Investments of $1,666.9 million through KKR's
private equity funds:
- $1,159.0 million in KKR 2006 Fund L.P.,
- $186.2 million in KKR European Fund, Limited Partnership,
- $182.9 million in KKR Millennium Fund L.P.,
- $86.4 million in KKR European Fund II, Limited Partnership,
- $43.8 million in KKR Asian Fund, L.P., and
- $8.6 million in KKR European Fund III, Limited Partnership.
- Co-investments of $2,506.4 million in the following portfolio companies of KKR's private equity funds:
-- Alliance Boots plc. | Â | -- KION Group GmbH |
-- Biomet, Inc. | -- The Nielsen Company B.V. | |
-- Capmark Financial Group Inc. | -- NXP B.V. | |
-- Dollar General Corporation | -- PagesJaunes Groupe S.A. | |
-- Energy Future Holdings Corp. | -- ProSiebenSat. 1 Media AG | |
-- First Data Corporation | -- U.S. Foodservice, Inc. | |
-- HCA Inc. |
- Negotiated equity investments of $502.1 million, net of related
financing:
- $224.0 million (net of long-term financing of $350.0 million) of convertible senior notes of Sun, a leading technology company;
- $196.8 million of convertible preferred stock of Orico, one of the largest consumer credit companies in Japan; and
- $81.3 million invested in ACTS, a Canadian aircraft maintenance, repair and overhaul company.
- Opportunistic investments of $344.0 million:
- Non-private equity fund investment of $173.9 million in SCF;
- $116.5 million of a fixed income investment; and
- $53.6 million of publicly traded securities and related derivative instruments.
Subsequent Investment Activity
Subsequent to June 30, 2008 and through July 25, 2008, the Investment Partnership had investment activity as described below.
- Dispositions of opportunistic investments valued at $9.7 million as of June 30, 2008 for cash proceeds of $9.6 million, which included sales of publicly traded securities and related derivative instruments and proceeds from securities sold short.
- Net return of capital of $4.3 million related to an investment in the KKR 2006 Fund.
- Purchases of opportunistic investments of $9.5 million, which included acquisitions of public equities and related derivative instruments and settlements of securities sold short.
As of July 25, 2008, the Investment Partnership's remaining capital commitments related to limited partner interests in KKR's private equity funds were as follows, with amounts in thousands, after taking into account the subsequent investment activity described above:
 | |||
KKR 2006 Fund L.P. | $ | 454,393 | |
KKR European Fund III, Limited Partnership | 291,192 | ||
KKR Asian Fund L.P. | 244,812 | ||
KKR Millennium Fund L.P. | 4,440 | ||
KKR European Fund II, Limited Partnership | 1,010 | ||
$ | 995,847 |
Liquidity and Capital Resources
As of July 25, 2008, the Investment Partnership had a pro forma cash balance of $122.2 million, which represented the cash balance as of June 30, 2008 and the net proceeds of cash from investment activity, described above, and the repayment of borrowings outstanding under the revolving credit facility, described below, that occurred from July 1, 2008 to July 25, 2008.
As of July 25, 2008, the Investment Partnership had drawn, on a pro forma basis, $508.0 million of its $1.0 billion five-year senior secured credit facility established on June 11, 2007, which represented borrowings outstanding as of June 30, 2008 less the repayment of borrowings with a fair value of $90.1 million that occurred from July 1, 2008 to July 25, 2008. The amount of cash used to pay such borrowings, which were denominated in British pounds sterling, was $89.8 million. As of July 25, 2008, the Investment Partnership's pro forma availability for further borrowings under the credit facility was $492.0 million.
Business Combination Transaction
As announced today in a separate press release, KPE and KKR & Co. L.P. have entered into an agreement providing for the acquisition of all of the assets and assumption of all of the liabilities of KPE by KKR & Co. L.P. Please refer to such press release for further information.
Financial Report
KPE has posted its interim financial report, which includes its unaudited financial statements and the unaudited consolidated financial statements of the Investment Partnership, to its website (www.kkrprivateequityinvestors.com). KPE encourages investors to carefully read these documents accompanying this news release.
Information for Investors - Teleconference and Webcast
KPE will discuss its financial results and the previously announced business combination, described above, on a teleconference to be broadcast live on the Internet on Monday, July 28, 2008 at 2:00 p.m. CET (Amsterdam) / 1:00 p.m. GMT (Guernsey/London) / 8:00 a.m. EDT (New York City). A webcast (listen only) of the teleconference can be accessed via the Investor Relations section of KPE's website at www.kkrprivateequityinvestors.com, as well as on KKR's website at www.kkr.com.
About KPE
KKR Private Equity Investors, L.P. (Euronext Amsterdam: KPE) is a Guernsey limited partnership that seeks to create long-term value by participating in private equity and opportunistic investments selected, evaluated, structured, monitored and exited by investment professionals of Kohlberg Kravis Roberts & Co. ("KKR"). As of June 30, 2008, over 90% of KPE's $5.4 billion portfolio was comprised of limited partner interests in six KKR private equity funds, co-investments in 13 companies alongside the private equity funds and negotiated equity investments. The remainder of KPE's portfolio as of June 30, 2008 was invested in opportunistic and temporary investments. KPE is governed by its general partner's board of directors, which has a majority of independent directors, and makes its investments as the sole limited partner of another Guernsey limited partnership, KKR PEI Investments, L.P.
The common units and related restricted depositary units of KPE are subject to a number of ownership and transfer restrictions. Information concerning these ownership and transfer restrictions is included in the Investor Relations section of KPE's website at www.kkrprivateequityinvestors.com.
No Offering Statement
This release does not constitute an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from registration. Any public offering of securities to be made in the United States will be made by means of a prospectus that may be obtained from KPE and that will contain detailed information about KPE and management, as well as financial statements.
Forward-Looking Statements
This release may contain certain forward-looking statements with respect to the financial condition, results of operations, liquidity, investments, business, net asset value and prospects of KPE. By their nature, forward-looking statements involve risk and uncertainty, because they relate to events and depend on circumstances that will occur in the future, and there are many factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. KPE does not undertake to update any of these forward-looking statements.
KKR PRIVATE EQUITY INVESTORS, L.P. STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) (Amounts in thousands, except unit and per unit amounts) | |||||||
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June 30, 2008 | December 31, 2007 | ||||||
ASSETS: | |||||||
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Investments in limited partner interests of KKR PEI Investments, L.P., at fair value (cost of $4,826,568) | $ | 4,553,622 | $ | 4,984,533 | |||
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Cash and cash equivalents | 5,795 | 452 | |||||
Prepaid expenses | Â | 376 | Â | Â | 141 | ||
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Total assets | Â | 4,559,793 | Â | Â | 4,985,126 | ||
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LIABILITIES: | |||||||
Accrued liabilities | 1,353 | 1,823 | |||||
Due to affiliate | Â | 264 | Â | Â | 930 | ||
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Total liabilities | Â | 1,617 | Â | Â | 2,753 | ||
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NET ASSETS | $ | 4,558,176 | Â | $ | 4,982,373 | ||
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NET ASSETS CONSIST OF: | |||||||
Partners' capital contributions, net (common units outstanding of 204,902,226 and 204,550,001, respectively) | $ | 4,834,517 | $ | 4,830,110 | |||
Distributable earnings (loss) | Â | (276,341 | ) | Â | 152,263 | ||
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$ | 4,558,176 | Â | $ | 4,982,373 | |||
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Net asset value per common unit | $ | 22.25 | Â | $ | 24.36 | ||
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Market price per common unit | $ | 12.75 | Â | $ | 18.16 |
KKR PRIVATE EQUITY INVESTORS, L.P. STATEMENTS OF OPERATIONS (UNAUDITED) (AMOUNTS IN THOUSANDS) | |||||||||||||
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Quarter Ended | Six Months Ended | ||||||||||||
June 30, 2008 | Â | June 30, 2007 | June 30, 2008 | Â | June 30, 2007 | ||||||||
NET INVESTMENT INCOME (LOSS) ALLOCATED FROM KKR PEI INVESTMENTS, L.P.: | |||||||||||||
Investment income | $ | 15,480 | $ | 44,130 | 30,721 | $ | 83,182 | ||||||
Expenses | Â | 32,669 | Â | Â | 20,109 | 67,584 | Â | Â | 32,738 | ||||
(17,189 | ) | 24,021 | (36,863 | ) | 50,444 | ||||||||
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INVESTMENT INCOME"”Interest income | 34 | 19 | 60 | 28 | |||||||||
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EXPENSES"”General and administrative expenses | Â | 1,297 | Â | Â | 1,496 | 2,743 | Â | Â | 2,862 | ||||
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NET INVESTMENT INCOME (LOSS) | Â | (18,452 | ) | Â | 22,544 | (39,546 | ) | Â | 47,610 | ||||
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REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS AND FOREIGN CURRENCY ALLOCATED FROM KKR PEI INVESTMENTS, L.P: | |||||||||||||
Net realized gain (loss) | (42,511 | ) | 5,094 | (38,521 | ) | 16,604 | |||||||
Net change in unrealized appreciation (depreciation) | Â | (98,718 | ) | Â | 122,327 | (350,537 | ) | Â | 242,684 | ||||
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Net gain (loss) on investments and foreign currency transactions | Â | (141,229 | ) | Â | 127,421 | (389,058 | ) | Â | 259,288 | ||||
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NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | (159,681 | ) | $ | 149,965 | (428,604 | ) | $ | 306,898 |
KKR PRIVATE EQUITY INVESTORS, L.P. STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (Amounts in thousands) | ||||
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NET ASSETS"”DECEMBER 31, 2006 | $ | 5,035,599 | Â | |
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NET DECREASE IN NET ASSETS FROM OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2007: | ||||
Net investment income | 19,029 | |||
Net loss on investments and foreign currency transactions. | Â | (23,163 | ) | |
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Net decrease in net assets resulting from operations | Â | (4,134 | ) | |
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Distribution to unitholders | Â | (49,092 | ) | |
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NET ASSETS"”DECEMBER 31, 2007 | $ | 4,982,373 | Â | |
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NET DECREASE IN NET ASSETS FROM OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2008: | ||||
Net investment loss | (39,546 | ) | ||
Net loss on investments and foreign currency transactions. | Â | (389,058 | ) | |
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Net decrease in net assets resulting from operations | Â | (428,604 | ) | |
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Partners' capital contributions (issued 352,225 common units) | Â | 4,407 | Â | |
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NET ASSETS"”JUNE 30, 2008 | $ | 4,558,176 | Â |
KKR PRIVATE EQUITY INVESTORS, L.P. STATEMENTS OF CASH FLOWS (UNAUDITED) (Amounts in thousands) | ||||||||
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Six Months Ended June 30, 2008 | Six Months Ended June 30, 2007 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net increase (decrease) in net assets resulting from operations | $ | (428,604 | ) | $ | 306,898 | |||
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to cash and cash equivalents provided by (used in) operating activities: | ||||||||
Net investment loss (income) allocated from KKR PEI Investments, L.P. | 36,863 | (50,444 | ) | |||||
Net loss (gain) on investments and foreign currency transactions allocated from KKR PEI Investments, L.P. | 389,058 | (259,288 | ) | |||||
Share-based compensation expense. | 24 | 8 | ||||||
Changes in operating assets and liabilities: | ||||||||
Distribution received from KKR PEI Investments, L.P. | 4,990 | 1,996 | ||||||
Increase in prepaid expenses | (235 | ) | (198 | ) | ||||
Increase (decrease) in accrued liabilities | (494 | ) | 239 | |||||
Increase (decrease) in due to affiliate | Â | (666 | ) | Â | 32 | Â | ||
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Net cash flows provided by (used in) operating activities | Â | 936 | Â | Â | (757 | ) | ||
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CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Partners' capital contributions | Â | 4,407 | Â | Â | "” | Â | ||
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 5,343 | (757 | ) | |||||
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CASH AND CASH EQUIVALENTS"”Beginning of period | Â | 452 | Â | Â | 1,116 | Â | ||
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CASH AND CASH EQUIVALENTS"”End of period | $ | 5,795 | Â | $ | 359 | Â |
KKR PEI INVESTMENTS, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) (Amounts in thousands) | |||||||
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June 30, 2008 | December 31, 2007 | ||||||
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ASSETS: | |||||||
Investments, at fair value: | |||||||
Opportunistic investments"”Class A (cost of $210,637 and $512,607, respectively) | $ | 170,071 | $ | 458,792 | |||
Co-investments in portfolio companies of private equity funds"”Class B (cost of $2,635,583 and $2,635,583, respectively) | 2,506,347 | 2,653,039 | |||||
Negotiated equity investments"”Class B (cost of $992,582 and $992,582, respectively) | 852,121 | 985,557 | |||||
Private equity funds"”Class C (cost of $1,651,452 and $1,813,751, respectively) | 1,666,940 | 1,847,887 | |||||
Non-private equity funds"”Class D (cost of $196,093 and $195,869, respectively) | Â | 173,953 | Â | Â | 189,345 | ||
5,369,432 | 6,134,620 | ||||||
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Cash and cash equivalents | 207,613 | 255,415 | |||||
Cash and cash equivalents held by a non-private equity fund | 139 | 1,091 | |||||
Restricted cash | 73,766 | 42,237 | |||||
Due from affiliate of a non-private equity fund | 814 | "” | |||||
Other assets | Â | 6,743 | Â | Â | 8,044 | ||
Total assets | Â | 5,658,507 | Â | Â | 6,441,407 | ||
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LIABILITIES: | |||||||
Accrued liabilities | 35,443 | 30,730 | |||||
Due to affiliates | 11,399 | 11,961 | |||||
Securities sold, not yet purchased (proceeds of $4,682) | 3,945 | "” | |||||
Options written (proceeds of $1,135 and $7,290, respectively ) | 1,008 | 5,265 | |||||
Unrealized loss on foreign currency exchange contracts and interest rate swap, net | 95,307 | 46,051 | |||||
Other liabilities | 116 | 182 | |||||
Revolving credit agreement | 598,064 | 1,002,240 | |||||
Long-term debt | Â | 350,000 | Â | Â | 350,000 | ||
Total liabilities | Â | 1,095,282 | Â | Â | 1,446,429 | ||
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NET ASSETS | $ | 4,563,225 | Â | $ | 4,994,978 | ||
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NET ASSETS CONSIST OF: | |||||||
Partners' capital contributions | $ | 4,836,568 | $ | 4,836,568 | |||
Distributable earnings (loss) | Â | (273,343 | ) | Â | 158,410 | ||
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$ | 4,563,225 | Â | $ | 4,994,978 |
KKR PEI INVESTMENTS, L.P. AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS (UNAUDITED) (Amounts in thousands, except percentage amounts) | |||||||||||
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June 30, 2008 | |||||||||||
Investment | Class | Cost | Â | Fair Value | Â | Fair Value as a Percentage of Net Assets | |||||
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INVESTMENTS BY TYPE: | |||||||||||
Opportunistic investments: | A | ||||||||||
Fixed income investment | $ | 140,940 | $ | 116,487 | 2.5 | % | |||||
Public equities - common stocks | 69,283 | 53,072 | 1.2 | ||||||||
Derivative instruments | Â | 414 | Â | 512 | 0.0 | Â | |||||
 | 210,637 |  | 170,071 | 3.7 |  | ||||||
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Co-investments in portfolio companies of private equity funds: | B | ||||||||||
HCA Inc. | 250,000 | 300,000 | 6.6 | ||||||||
Alliance Boots plc. | 301,352 | 298,797 | 6.5 | ||||||||
Energy Future Holdings Corp. | 200,000 | 280,000 | 6.1 | ||||||||
Dollar General Corporation | 250,000 | 250,000 | 5.5 | ||||||||
The Nielsen Company B.V. | 200,000 | 240,000 | 5.3 | ||||||||
NXP B.V. | 250,000 | 232,475 | 5.1 | ||||||||
Biomet, Inc. | 200,000 | 200,000 | 4.4 | ||||||||
First Data Corporation | 200,000 | 200,000 | 4.4 | ||||||||
Capmark Financial Group Inc. | 137,321 | 148,500 | 3.2 | ||||||||
KION Group GmbH. | 112,824 | 135,029 | 3.0 | ||||||||
U.S. Foodservice, Inc. | 100,000 | 100,000 | 2.2 | ||||||||
PagesJaunes Groupe S.A. | 235,201 | 74,314 | 1.6 | ||||||||
ProSiebenSat.1 Media AG | Â | 198,885 | Â | 47,232 | 1.0 | Â | |||||
 | 2,635,583 |  | 2,506,347 | 54.9 |  | ||||||
Negotiated equity investments: | B | ||||||||||
Sun Microsystems, Inc. convertible senior notes. | 701,164 | 574,000 | 12.6 | ||||||||
Orient Corporation convertible preferred stock. | 169,706 | 196,780 | 4.3 | ||||||||
Aero Technical Support & Services S.Ã r.l. | Â | 121,712 | Â | 81,341 | 1.8 | Â | |||||
 | 992,582 |  | 852,121 | 18.7 |  | ||||||
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Private equity funds: | C | ||||||||||
KKR 2006 Fund L.P. | 1,104,954 | 1,159,029 | 25.3 | ||||||||
KKR European Fund, Limited Partnership | 202,115 | 186,219 | 4.1 | ||||||||
KKR Millennium Fund L.P. | 199,278 | 182,882 | 4.0 | ||||||||
KKR European Fund II, Limited Partnership | 95,940 | 86,358 | 1.9 | ||||||||
KKR Asian Fund L.P. | 40,188 | 43,834 | 1.0 | ||||||||
KKR European Fund III, Limited Partnership | Â | 8,977 | Â | 8,618 | 0.2 | Â | |||||
 | 1,651,452 |  | 1,666,940 | 36.5 |  | ||||||
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Non-private equity funds - Investments by KKR Strategic Capital Institutional Fund, Ltd. | D | Â | 196,093 | Â | 173,953 | 3.9 | Â | ||||
$ | 5,686,347 | $ | 5,369,432 | 117.7 | % |
KKR PEI INVESTMENTS, L.P. AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS (UNAUDITED), CONTINUED (Amounts in thousands, except percentage amounts) | |||||||||
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June 30, 2008 | |||||||||
Investment | Cost | Â | Fair Value | Â | Fair Value as a Percentage of Net Assets | ||||
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INVESTMENTS BY GEOGRAPHY : | |||||||||
North America | $ | 3,739,474 | $ | 3,754,707 | 82.3 | % | |||
Europe | 1,643,757 | 1,266,671 | 27.8 | ||||||
Asia Pacific | Â | 303,116 | Â | 348,054 | 7.6 | Â | |||
$ | 5,686,347 | $ | 5,369,432 | 117.7 | % | ||||
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INVESTMENTS BY INDUSTRY : | |||||||||
Health Care | $ | 1,083,373 | $ | 1,133,065 | 24.8 | % | |||
Financial Services | 972,630 | 1,004,830 | 22.0 | ||||||
Technology | 1,109,353 | 965,849 | 21.2 | ||||||
Retail | 649,362 | 625,624 | 13.7 | ||||||
Media/Telecom | 932,049 | 593,054 | 13.0 | ||||||
Energy | 391,725 | 527,744 | 11.6 | ||||||
Industrial | 448,059 | 417,582 | 9.2 | ||||||
Consumer Products | 80,625 | 72,682 | 1.6 | ||||||
Chemicals | Â | 19,171 | Â | 29,002 | 0.6 | Â | |||
$ | 5,686,347 | $ | 5,369,432 | 117.7 | % |
KKR PEI INVESTMENTS, L.P. AND SUBSIDIARIES CONSOLIDATED SCHEDULES OF SECURITIES SOLD, NOT YET PURCHASED (UNAUDITED) (Amounts in thousands) | ||||||||||||
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June 30, 2008 | December 31, 2007 | |||||||||||
Geography/Instrument Type/Industry | Fair Value | Â | Proceeds | Fair Value | Â | Proceeds | ||||||
North America - Public equities, common stock: | ||||||||||||
Financial Services | $ | 3,945 | $ | 4,682 | $ | "” | $ | "” |
CONSOLIDATED SCHEDULES OF OPTIONS WRITTEN (UNAUDITED) (Amounts in thousands) | ||||||||||||
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June 30, 2008 | December 31, 2007 | |||||||||||
Geography/Instrument Type/Industry | Fair Value | Â | Proceeds | Fair Value | Â | Proceeds | ||||||
North America - Public equities, common stock: | ||||||||||||
Energy | $ | 459 | $ | 235 | $ | 5,265 | $ | 7,290 | ||||
Financial Services | 263 | 240 | "” | "” | ||||||||
Industrial | 194 | 455 | "” | "” | ||||||||
Technology | Â | 92 | Â | 205 | Â | "” | Â | "” | ||||
$ | 1,008 | $ | 1,135 | $ | 5,265 | $ | 7,290 |
KKR PEI INVESTMENTS, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (Amounts in thousands) | ||||||||||||||
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Quarter Ended | Six Months Ended | |||||||||||||
June 30, 2008 | Â | June 30, 2007 | June 30, 2008 | Â | June 30, 2007 | |||||||||
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INVESTMENT INCOME: | ||||||||||||||
Interest income | $ | 10,126 Â | $ | 27,894 | $ | 22,027 Â | $ | 63,223 | ||||||
Dividend income, net of withholding taxes of $178, $139, $249 and $765, respectively | Â | 5,385 | Â | Â | 16,327 | Â | 8,756 | Â | Â | 20,131 | ||||
Total investment income | Â | 15,511 | Â | Â | 44,221 | Â | 30,783 | Â | Â | 83,354 | ||||
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EXPENSES: | ||||||||||||||
Management fees | 13,331 | 12,319 | 26,738 | 19,457 | ||||||||||
Incentive fees | "” | 884 | "” | 1,776 | ||||||||||
Interest expense | 17,784 | 5,711 | 37,424 | 9,606 | ||||||||||
Dividend expense | 322 | "” | 896 | "” | ||||||||||
General and administrative expenses | Â | 1,270 | Â | Â | 1,210 | Â | 2,611 | Â | Â | 1,926 | ||||
Total expenses | Â | 32,707 | Â | Â | 20,124 | Â | 67,669 | Â | Â | 32,765 | ||||
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NET INVESTMENT INCOME (LOSS) | Â | (17,196 | ) | Â | 24,097 | Â | (36,886 | ) | Â | 50,589 | ||||
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REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS AND FOREIGN CURRENCY: | ||||||||||||||
Net realized gain (loss), net of withholding tax (benefit) of $(37), $488, $(37) and $977, respectively | (42,600 | ) | 5,104 | (38,602 | ) | 16,638 | ||||||||
Net change in unrealized appreciation (depreciation) | Â | (98,922 | ) | Â | 122,581 | Â | (351,265 | ) | Â | 243,188 | ||||
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Net gain (loss) on investments and foreign currency transactions | Â | (141,522 | ) | Â | 127,685 | Â | (389,867 | ) | Â | 259,826 | ||||
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NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | (158,718 | ) | $ | 151,782 | $ | (426,753 | ) | $ | 310,415 |
KKR PEI INVESTMENTS, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (Amounts in thousands) | ||||||||||||
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General Partner | Limited Partner | Total | ||||||||||
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NET ASSETS"”DECEMBER 31, 2006 | $ | 10,454 | Â | $ | 5,035,945 | Â | $ | 5,046,399 | Â | |||
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DECREASE IN NET ASSETS FROM OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2007: | ||||||||||||
Net investment income | 150 | 25,833 | 25,983 | |||||||||
Net realized gain on investments and foreign currency transactions | 236 | 113,196 | 113,432 | |||||||||
Net change in unrealized depreciation on investments and foreign currency transactions | Â | (283 | ) | Â | (136,359 | ) | Â | (136,642 | ) | |||
Net increase in net assets resulting from operations | 103 | 2,670 | 2,773 | |||||||||
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Fair value of distributions. | Â | (112 | ) | Â | (54,082 | ) | Â | (54,194 | ) | |||
DECREASE IN NET ASSETS | Â | (9 | ) | Â | (51,412 | ) | Â | (51,421 | ) | |||
 | ||||||||||||
NET ASSETS"”DECEMBER 31, 2007 | Â | 10,445 | Â | Â | 4,984,533 | Â | Â | 4,994,978 | Â | |||
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DECREASE IN NET ASSETS FROM OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2008: | ||||||||||||
Net investment loss | (23 | ) | (36,863 | ) | (36,886 | ) | ||||||
Net realized loss on investments and foreign currency transactions | (81 | ) | (38,521 | ) | (38,602 | ) | ||||||
Net change in unrealized depreciation on investments and foreign currency transactions | Â | (728 | ) | Â | (350,537 | ) | Â | (351,265 | ) | |||
Net decrease in net assets resulting from operations | (832 | ) | (425,921 | ) | (426,753 | ) | ||||||
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Fair value of distributions. | Â | (10 | ) | Â | (4,990 | ) | Â | (5,000 | ) | |||
DECREASE IN NET ASSETS | Â | (842 | ) | Â | (430,911 | ) | Â | (431,753 | ) | |||
 | ||||||||||||
NET ASSETS"”JUNE 30, 2008 | $ | 9,603 | Â | $ | 4,553,622 | Â | $ | 4,563,225 | Â |
KKR PEI INVESTMENTS, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Amounts in thousands) | ||||||||
 |  | |||||||
Six Months Ended June 30, 2008 | Six Months Ended June 30, 2007 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net increase (decrease) in net assets resulting from operations | $ | (426,753 | ) | $ | 310,415 | |||
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to cash and cash equivalents provided by (used in) operating activities: | ||||||||
Amortization of deferred financing costs | 435 | 73 | ||||||
Net realized loss (gain) | 38,602 | (16,638 | ) | |||||
Net change in unrealized depreciation (appreciation) on investments | 302,009 | (252,417 | ) | |||||
Increase in unrealized loss on foreign currency exchange contracts and interest rate swap | 49,256 | 9,229 | ||||||
Changes in operating assets and liabilities: | ||||||||
Purchase of opportunistic investments | (61,601 | ) | (582,551 | ) | ||||
Purchase of securities to settle short sales | (188,291 | ) | "” | |||||
Purchase of options | (4,781 | ) | "” | |||||
Purchase of co-investments in portfolio companies of private equity funds | "” | (490,639 | ) | |||||
Purchase of negotiated equity investments | "” | (520,870 | ) | |||||
Purchase of investments by private equity funds | (167,060 | ) | (155,444 | ) | ||||
Purchase of investments by KKR Strategic Capital Institutional Fund, Ltd. | (7,549 | ) | (116,894 | ) | ||||
Proceeds from sale of opportunistic investments | 331,293 | 70,987 | ||||||
Proceeds from securities sold short, not yet purchased | 195,324 | "” | ||||||
Proceeds from options written | 2,109 | "” | ||||||
Proceeds from sale of investments by private equity funds | 321,788 | 31,758 | ||||||
Proceeds from sale of investments by KKR Strategic Capital Institutional Fund, Ltd. | 94 | 14,938 | ||||||
Decrease in cash and cash equivalents held by a non-private equity fund | 952 | "” | ||||||
Decrease in time deposit | "” | 650,000 | ||||||
Increase in due from affiliate of a non-private equity fund | (814 | ) | "” | |||||
Decrease in other assets | 866 | 18,208 | ||||||
Increase in restricted cash | (31,529 | ) | (12,708 | ) | ||||
Increase in accrued liabilities | 4,713 | 11,571 | ||||||
Increase (decrease) in due to affiliates | (562 | ) | 2,327 | |||||
Decrease in other liabilities | Â | (66 | ) | Â | (18,054 | ) | ||
Net cash flows provided by (used in) operating activities | Â | 358,435 | Â | Â | (1,046,709 | ) |
KKR PEI INVESTMENTS, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED), CONTINUED (Amounts in thousands) | ||||||||
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Six Months Ended June 30, 2008 | Six Months Ended June 30, 2007 | |||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Payments on borrowings under the revolving credit agreement | (401,237 | ) | "” | |||||
Distributions to partners | Â | (5,000 | ) | Â | (2,000 | ) | ||
Net cash flows used in financing activities | Â | (406,237 | ) | Â | (2,000 | ) | ||
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NET DECREASE IN CASH AND CASH EQUIVALENTS | (47,802 | ) | (1,048,709 | ) | ||||
CASH AND CASH EQUIVALENTS"”Beginning of period | Â | 255,415 | Â | Â | 2,139,621 | Â | ||
CASH AND CASH EQUIVALENTS"”End of period | $ | 207,613 | Â | $ | 1,090,912 | Â | ||
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SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
Interest paid | $ | 32,043 | $ | "” | ||||
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NON-CASH FINANCING ACTIVITIES: | ||||||||
Increase in long-term debt related to Sun financing | $ | "” | $ | 350,000 |