KW 12.31.2014 10-K/A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1
to
Form 10-K
(Mark One)
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2014
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number: 001-33824
Kennedy-Wilson Holdings, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
 
26-0508760
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
 
 
9701 Wilshire Blvd., Suite 700
Beverly Hills, CA
 
90212
(Address of Principal Executive Offices)
 
(Zip Code)
(310) 887-6400
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
______________________________________________________________________
Title of Each Class
 
Name of Each Exchange on which Registered
Common Stock, $.0001 par value
 
NYSE
Securities registered pursuant to Section 12(g) of the Act: None
______________________________________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   x    No  o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  o    No  x
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer
 
x
 
 
Accelerated filer
 
o
 
 
 
 
 
Non-accelerated filer
 
o
  (Do not check if a smaller reporting company)
 
Smaller reporting company
 
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  o    No  x
Based on the last sale at the close of business on June 30, 2014, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $1,977,279,477.
The number of shares of common stock outstanding as of March 2, 2015 was 96,013,684.

DOCUMENTS INCORPORATED BY REFERENCE
Part III of the registrant's Annual Report on Form 10-K filed on March 2, 2015 incorporates certain information by reference from the registrant’s proxy statement for the annual meeting of stockholders to be held on or around June 11, 2015, which proxy statement will be filed no later than 120 days after the close of the registrant’s fiscal year ended December 31, 2014.

1


EXPLANATORY NOTE

Kennedy-Wilson Holdings, Inc., a Delaware corporation (the “Company”), is filing this Amendment No. 1 (this “Amendment”) to its Annual Report on Form 10-K for the fiscal year ended December 31, 2014, which was originally filed with the Securities and Exchange Commission (the “SEC”) on March 2, 2015 (the “Original Report”), to amend Item 15 of the Original Report and include separate financial statements of the following entities, as required pursuant to Rule 3-09 of Regulation S-X under the Securities Exchange Act of 1934, as amended:

Bay Fund Opportunity, LLC and Subsidiaries
Kennedy Wilson Real Estate Fund IV, L.P.
One Baxter Way, LP
KW Funds - 303 North Glenoaks, LLC and KW Funds - 6100 Wilshire, LLC
Bay Area Smart Growth Fund II, LLC
Egret Limited and its subsidiaries
KWVF Panther Holdco Limited
WH Valle Di Oro 79, LLC
KW Stadium Gateway Partners, LLC
KW Marina View, LLC
KWF Real Estate Venture VI, L.P


Other than as set forth herein, this Amendment does not affect any other parts of, or exhibits to, the Original Report, and those unaffected parts or exhibits are not included in this Amendment. This Amendment continues to speak as of the date of the Original Report, and the Company has not updated the disclosure contained in this Amendment or the Original Report to reflect events that have occurred since the filing of the Original Report. Accordingly, this Amendment should be read in conjunction with the Company's other filings with the SEC since the filing of the Original Report.



2


PART IV
 


Item 15.
Exhibits and Financial Statement Schedules
(a) The following documents are filed as part of this annual report:
(1)
Financial Statements. The consolidated financial statements of the Company, as listed in Item 8 of the Original Report, are included in Item 8 of the Original Report
(2)
Financial Statement Schedules. The financial statement schedules of the Company, as listed in Item 8 of the Original Report, are included in Item 8 of the Original Report.
(3)
Exhibits. See the Exhibit List beginning of page 5 of this Amendment.

(b) Exhibits. The exhibits listed on the Exhibit Index set forth below on page 5 are filed as part of, or are incorporated by reference into, this annual report on Form 10-K.
(c) Financial Statements Required by Rule 3-09 of Regulation S-X. The financial statements required by Rule 3-09 of Regulation S-X under the Securities Exchange Act of 1934, as amended, are filed as schedules to this report and are incorporated by reference into this Item 15.






3


SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 27th day of March 2015.
 
 
 
 
KENNEDY-WILSON HOLDINGS, INC.,
a Delaware corporation
 
 
By:
 
/s/    WILLIAM J. MCMORROW        
 
 
William J. McMorrow
 
 
Chief Executive Officer


4


EXHIBIT INDEX

Exhibit
No.
Description
3.1(2)
Amended and Restated Certificate of Incorporation.
3.2(3)
Amended and Restated Bylaws.
4.1(14)
Specimen Common Stock Certificate.
4.2(4)
Form of Warrant Certificate.
4.3(5)
Amended and Restated Warrant Agreement between Continental Stock Transfer & Trust Company and Kennedy- Wilson Holdings, Inc.
4.4(21)
Indenture, dated as of April 5, 2011, among Kennedy-Wilson, Inc., as Issuer, Kennedy-Wilson Holdings, Inc., as guarantor, certain subsidiaries of the Issuer signatories thereto, as guarantors, and Wilmington Trust FSB, as trustee, including the form of 8.750% Notes due 2019.
4.5(21)
Registration Rights Agreement, dated April 5, 2011, among Kennedy-Wilson, Inc., Kennedy-Wilson Holdings, Inc., certain subsidiaries of the Issuer signatories thereto, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. Incorporated.
4.6(22)
Registration Rights Agreement, dated April 12, 2011, among Kennedy-Wilson, Inc., Kennedy-Wilson Holdings, Inc., certain subsidiaries of the Issuer signatories thereto, and Merrill Lynch, Pierce, Fenner & Smith Incorporated.
4.7(23)
Certificate of Designation of Series A Preferred Stock.
4.8(24)
Certificate of Designation of Series B Preferred Stock.
4.9(26)
First Supplemental Indenture dated August 5, 2011 among Kennedy-Wilson, Inc., KW Residential Group, Inc. and Wilmington Trust, National Association.
4.10(26)
Second Supplemental Indenture dated August 5, 2011 among Kennedy-Wilson, Inc., KW Telstar Partners, LLC and Wilmington Trust, National Association.
4.11(26)
Third Supplemental Indenture dated August 5, 2011 among Kennedy-Wilson, Inc., KWF Manager V, LLC and Wilmington Trust, National Association.
4.12(26)
Fourth Supplemental Indenture dated August 5, 2011 among Kennedy-Wilson, Inc., KW Fund IV - Kohanaiki, LLC and Wilmington Trust, National Association.
4.13(26)
Fifth Supplemental Indenture dated August 5, 2011 among Kennedy-Wilson, Inc., Kennedy Wilson Property Equity IV, LLC and Wilmington Trust, National Association.
4.14(26)
Sixth Supplemental Indenture dated August 5, 2011 among Kennedy-Wilson, Inc., KW Ireland, LLC and Wilmington Trust, National Association.
4.15(26)
Seventh Supplemental Indenture dated August 5, 2011 among Kennedy-Wilson, Inc., KW Manager IV, LLC and Wilmington Trust, National Association.
4.16(26)
Eighth Supplemental Indenture dated September 26, 2011 among Kennedy-Wilson, Inc., KWF Investors IV, LLC, KWF Investors V, LLC and Wilmington Trust, National Association.
4.17(26)
Ninth Supplemental Indenture dated December 28, 2011 among Kennedy-Wilson, Inc., KW Anaheim Land Partners LLC, Pacifica West Coast Partners, LLC, KW Multi-Family Management Group, KW Mill Creek Property Manager, LLC, KW Sunrise Carlsbad, LLC, Sunrise Property Associates, LLC, certain guarantors listed therein and Wilmington Trust, National Association.
4.18(31)
Tenth Supplemental Indenture, dated as of June 12, 2012, among Kennedy-Wilson, Inc., Meyers Research, LLC, KW Armacost, LLC, Santa Maria Land Partners Manager, LLC, KW Investment Adviser, LLC, NWLACDFI - Southern Oaks, LLC, Kennedy-Wilson Capital, KW Captowers Partners, LLC, KW Four Points, LLC, KW Loan Partners VII, LLC and Wilmington Trust, National Association, as trustee
4.19(32)
Eleventh Supplemental Indenture, dated as of November 21, 2012, among Kennedy-Wilson, Inc., NWLACDFI-Southern Oaks, LLC, the subsidiary guarantor parties thereto, Kennedy-Wilson Holdings, Inc., and Wilmington Trust, National Association, as trustee
4.20(33)
Twelfth Supplemental Indenture, dated as of November 21, 2012, among Kennedy-Wilson, Inc., KWF Investors VII, LLC, KWF Manager VII, LLC, KW Residential Capital, LLC, KW Boise Plaza, LLC, KW Loan Partners VIII, LLC, KW UR Investment 1, LLC, KW UR Investment 2, LLC, Kennedy Wilson Property Services IV, L.P., Kennedy Wilson Property Services IV GP, LLC, KW/CV Third-Pacific Manager, LLC, KW EU Loan Partners II, LLC, KWF Investors VIII, LLC, KWF Manager VIII, LLC, KW HP 11, LLC, KW 1200 Main LLC, KW
4.21(50)
Thirteenth Supplemental Indenture, dated as of February 13, 2013, among Kennedy-Wilson, Inc., KW Fund IV La Barranca, LLC (formerly KW HP 11, LLC), the subsidiary guarantor parties thereto, Kennedy-Wilson Holdings, Inc., and Wilmington Trust, National Association, as trustee

5


4.22(51)
Fourteenth Supplemental Indenture, dated as of February 14, 2013, among Kennedy-Wilson, Inc., KWF Manager X, LLC, KWF Manager XI, LLC, KWF Manager XII, LLC and Wilmington Trust, National Association, as trustee
4.23(29)
Form of Indenture, dated as of November 28, 2012, between Kennedy-Wilson, Inc. and Wilmington Trust, National Association, as trustee
4.24(30)
Supplemental Indenture No. 1, dated as of November 28, 2012, among Kennedy-Wilson, Inc., Kennedy-Wilson Holdings, Inc., the subsidiary guarantor parties thereto and Wilmington Trust, National Association, as trustee
4.25(52)
Supplemental Indenture No. 2, dated as of February 14, 2013, among Kennedy-Wilson, Inc., the subsidiary guarantor parties thereto and Wilmington Trust, National Association, as trustee
4.26(34)
Registration Rights Agreement, dated as of December 6, 2012, among Kennedy-Wilson, Inc., Kennedy-Wilson Holdings, Inc., the subsidiary guarantor parties thereto, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. LLC
4.27(80)
Nineteenth Supplemental Indenture to the 2019 Notes Indenture, dated as of January 6, 2014, among Kennedy-Wilson, Inc., the guarantors party thereto and Wilmington Trust, National Association, as trustee.
4.28(29)
Form of Indenture (the “2042 Notes Indenture”), dated as of November 28, 2012, between Kennedy-Wilson, Inc. and Wilmington Trust, National Association, as trustee.
4.29(30)
Supplemental Indenture No. 1 to the 2042 Notes Indenture, dated as of November 28, 2012, among Kennedy-Wilson, Inc., Kennedy-Wilson Holdings, Inc., the subsidiary guarantor party thereto and Wilmington Trust, National Association, as trustee.
4.30(52)
Supplemental Indenture No. 2 to the 2042 Notes Indenture, dated as of February 14, 2013, among Kennedy-Wilson, Inc., the subsidiary guarantor parties thereto and Wilmington Trust, National Association, as trustee.
4.31(53)
Supplemental Indenture No. 3 to the 2042 Notes Indenture, dated as of May 28, 2013, among Kennedy-Wilson, Inc., the guarantors party thereto and Wilmington Trust, National Association, as trustee.
4.32(54)
Supplemental Indenture No. 4 to the 2042 Notes Indenture, dated as of July 15, 2013, among Kennedy-Wilson, Inc., the guarantors party thereto and Wilmington Trust, National Association, as trustee.
4.33(55)
Supplemental Indenture No. 5 to the 2042 Notes Indenture, dated as of September 6, 2013, among Kennedy-Wilson, Inc., the guarantors party thereto and Wilmington Trust, National Association, as trustee.
4.34(56)
Supplemental Indenture No. 6 to the 2042 Notes Indenture dated as of October 31, 2013, among Kennedy-Wilson, Inc., the guarantors party thereto and Wilmington Trust, National Association, as trustee.
4.35(81)
Supplemental Indenture No. 7 to the 2042 Notes Indenture dated as of January 6, 2014, among Kennedy-Wilson, Inc., the guarantors party thereto and Wilmington Trust, National Association, as trustee.
4.36(34)
Registration Rights Agreement, dated as of December 6, 2012, by and among Kennedy-Wilson, Inc., Kennedy-Wilson Holdings, Inc., the subsidiary guarantors party thereto, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. LLC
4.37(60)

Base Indenture dated March 25, 2014 between Kennedy-Wilson, Inc. and Wilmington Trust, National Association.
4.38(61)

Supplemental Indenture No. 1 dated March 25, 2014 among Kennedy-Wilson Holdings, Inc., the subsidiary guarantors named therein and Wilmington Trust, National Association.
4.39(62)

Supplemental Indenture No. 2 dated September 5, 2014 among Kennedy-Wilson Holdings, Inc., the subsidiary guarantors named therein and Wilmington Trust, National Association.
4.40(63)

Supplemental Indenture No. 3 dated November 11, 2014 among Kennedy-Wilson Holdings, Inc., the subsidiary guarantors named therein and Wilmington Trust, National Association.
4.41(64)

Supplemental Indenture No. 8 dated January 6, 2014 among Kennedy-Wilson, Inc., the subsidiary guarantors named therein and Wilmington Trust, National Association.
4.42(65)

Supplemental Indenture No. 9 dated March 18, 2014 among Kennedy-Wilson, Inc., the subsidiary guarantors named therein and Wilmington Trust, National Association.
4.43(66)

Supplemental Indenture No. 10 dated September 5, 2014 among Kennedy-Wilson, Inc., the subsidiary guarantors named therein and Wilmington Trust, National Association.
4.44(67)

Supplemental Indenture No. 11 dated November 11, 2014 among Kennedy-Wilson, Inc., the subsidiary guarantors named therein and Wilmington Trust, National Association.

6


4.45(68)

Twentieth Supplemental Indenture dated January 16, 2014 among Kennedy-Wilson, Inc., the subsidiary guarantors named therein and Wilmington Trust, National Association.
4.46(69)

Twenty First Supplemental Indenture dated March 18, 2014 among Kennedy-Wilson, Inc., the subsidiary guarantors named therein and Wilmington Trust, National Association.
4.47(70)

Twenty-Second Supplemental Indenture dated September 5, 2014 among Kennedy-Wilson, Inc., the subsidiary guarantors named therein and Wilmington Trust, National Association.
4.48(71)

Twenty-Third Supplemental Indenture dated November 11, 2014 among Kennedy-Wilson, Inc., the subsidiary guarantors named therein and Wilmington Trust, National Association.
10.1(38)
Kennedy-Wilson Holdings, Inc. 2009 Equity Participation Plan.
10.2(39)
Form of Amended and Restated Consultant Restricted Stock Award Agreement to Kennedy-Wilson Holdings, Inc. 2009 Equity Participation Plan.
10.3(39)
Form of Amended and Restated Director Restricted Stock Award Agreement to Kennedy-Wilson Holdings, Inc. 2009 Equity Participation Plan.
10.4(39)
Form of Amended and Restated Employee Restricted Stock Award Agreement to Kennedy-Wilson Holdings, Inc. 2009 Equity Participation Plan.
10.5(37)
Promissory Note issued by Kennedy-Wilson, Inc. to The Guardian Life Insurance Company of America on November 3, 2008.

10.6†(37)
Fifteenth Amendment to Employment Agreement by Kennedy-Wilson, Inc. and William J. McMorrow.
10.7(39)
Employment Agreement dated August 14, 1992 between Kennedy-Wilson and William J. McMorrow.
10.8†(37)
Amendment to Employment Agreement dated as of January 1, 1993 between Kennedy-Wilson and William J. McMorrow.
10.9†(37)
Second Amendment to Employment Agreement dated as of between January 1, 1994 Kennedy-Wilson and William J. McMorrow.
10.10(40)
Third Amendment to Employment Agreement dated as of March 31, 1995 between Kennedy-Wilson and William J. McMorrow.
10.11†(40)
Fourth Amendment to Employment Agreement dated as of January 1, 1996 Kennedy-Wilson and William J. McMorrow.
10.12†(37)
Amendment to Employment Agreement dated as of February 28, 1996 between Kennedy-Wilson and William J. McMorrow.
10.13†(15)
Fifth Amendment to Employment Agreement dated as of May 19, 1997 between Kennedy-Wilson and William J. McMorrow.
10.14†(37)
Sixth Amendment to Employment Agreement dated as of August 20, 1998 between Kennedy-Wilson and William J. McMorrow.
10.15†(37)
Seventh Amendment to Employment Agreement dated as of August 9, 1999 between Kennedy-Wilson and William J. McMorrow.
10.16†(37)
Eighth Amendment to Employment Agreement dated as of January 3, 2000 between Kennedy-Wilson and William J. McMorrow.
10.17†(37)
Ninth Amendment to Employment Agreement dated as of October 1, 2000 between Kennedy-Wilson and William J. McMorrow.
10.18†(37)
Tenth Amendment to Employment Agreement dated as of April 22, 2002 between Kennedy-Wilson and William J. McMorrow.
10.19†(37)
Eleventh Amendment to Employment Agreement dated as of October 1, 2003 between Kennedy-Wilson and William J. McMorrow.
10.20†(37)
Twelfth Amendment to Employment Agreement dated as of April 21, 2004 between Kennedy-Wilson and William J. McMorrow.
10.21†(37)
Thirteenth Amendment to Employment Agreement dated as of January 1, 2008 between Kennedy-Wilson and William J. McMorrow.
10.22†(37)
Fourteenth Amendment to Employment Agreement dated as of February 1, 2009 between Kennedy-Wilson and William J. McMorrow.
10.23†(37)
Employment Agreement dated February 1, 2009 between Kennedy-Wilson and Mary L. Ricks.
10.24†(37)
First Amendment to Employment Agreement dated June 1, 2009 between Kennedy-Wilson and Mary L. Ricks.
10.25†(37)
Second Amendment to Employment Agreement by Kennedy-Wilson, Inc. and Mary L. Ricks.
10.26†(37)
Employment Agreement dated June 15, 2009 between Kennedy-Wilson and Donald J. Herrema.
10.27†(37)
First Amendment to Employment Agreement by Kennedy-Wilson, Inc. and Donald J. Herrema.

7


10.28†(37)
Employment Agreement dated April 1, 1996 between Kennedy-Wilson and Freeman Lyle.
10.29†(37)
Business Loan Agreement dated July 29, 2009 between Kennedy-Wilson, Inc. and Pacific Western Bank.
10.30†(41)
Amended and Restated Loan Agreement dated June 5, 2008 between Kennedy-Wilson, Inc. and U.S. Bank National Association.
10.31†(1)
Revolving Loan Agreement, dated as of August 5, 2010, by and among Kennedy-Wilson, Inc., U.S. Bank National Association, as agent, lead arranger and book manager, U.S. Bank National Association, as lender, East-West Bank, as lender, and any other bank that becomes a party thereto.
10.32†(57)
Repayment Guaranty, dated as of August 5, 2010, by Kennedy-Wilson Holdings, Inc. in favor of U.S Bank National Association, as agent for the lenders.
10.33†(58)
Fee Letter, dated as of August 5, 2010.
10.34†(1)
Modification Agreement, dated June 29, 2012, by and among Kennedy-Wilson, Inc., U.S. Bank National Association, as administrative agent, U.S. Bank National Association, as lender and East-West Bank, as lender.
10.35†(1)
Second Modification Agreement, dated September 19, 2013, by and among Kennedy-Wilson, Inc., U.S. Bank National Association, as administrative agent, U.S. Bank National Association, as lender, East-West Bank, as lender and The Governor and Company of the Bank of Ireland, as lender.

10.36†(37)
Junior Subordinated Indenture dated, January 31, 2007 between Kennedy-Wilson, Inc. and The Bank of New York Trust Company, National Association, as trustee.
10.37†(37)
First Amendment to Office Lease dated March 5, 1999 between Wilshire-Camden Associates and Kennedy-Wilson, Inc.
10.38(37)
Second Amendment to Lease dated June 2, 1999 between Wilshire-Camden Associates and Kennedy-Wilson, Inc.
10.39(37)
Third Amendment to Office Lease dated December 20, 2002 between Brighton Enterprises, LLC and Kennedy-Wilson, Inc.
10.40(37)
Fourth Amendment to Office Lease dated September 11, 2003 between Wilshire-Camden Associates and Kennedy-Wilson, Inc.
10.41(37)
Fifth Amendment to Office Lease dated January 7, 2006 between Douglas Emmett 2000, LLC and Kennedy-Wilson, Inc.
10.42(37)
Standard Office Lease dated March 3, 2009 by and among 9701-Hempstead Plaza, LLC, 9701-Carolina Gardens LLC, 9701-West Point Realty LLC, 9701-Dakota Leasing LLC and 9701-Iowa Leasing LLC and Kennedy-Wilson Inc.
10.43(37)
Second Amended and Restated Guaranty of Payment dated November 4, 2008 by Arthur S. Levine, as Trustee of the Ray J. Rutter Trust, Arthur S. Levine, as Trustee of the Susan Ray Rutter Trust, and Arthur S. Levine, as Trustee of the Robert Jonathan Rutter Trust, and Kennedy-Wilson Inc., to Bank Midwest N.A.
10.44(37)
Amended and Restated Guaranty dated October 25, 2007 Agreement by Kennedy-Wilson, Inc. in favor of Bank of America, N.A., as agent for lenders.
10.45(37)
Amendment to Irrevocable standby letters of credit dated October 26, 2007 from Bank of America to the beneficiary, City of Walnut Creek on behalf of Fairways 340 LLC.
10.46( 37)
Guaranty Agreement made as of August 14, 2007 by Kennedy-Wilson, Inc. in favor of Bank of America, N.A., as agent for lenders.
10.47 (37)
Repayment Guaranty made as of September 4, 2007 by Kennedy-Wilson, Inc. in favor of Wachovia Bank, N.A., as agent for lenders.
10.48( 37)
Commercial Guaranty made as of September 13, 2007 by Kennedy-Wilson, Inc., to Pacific Western Bank, on behalf of Windscape Village LLC.
10.49(37)
Repayment Guaranty made as of May 9, 2007 by Kennedy-Wilson, Inc. and KW Property Fund I, L.P. for the benefit of Wachovia Bank National Association.
10.50(37)
Commercial Guaranty dated January 16, 2009 to Pacific Western Bank by KWI Property Fund I, L.P.
10.51 (37)
Guaranty made as of May 29, 2008 by Kennedy-Wilson, Inc. and KW Property Fund III, L.P. for the benefit of Deutsche Bank, AG.
10.52(37)
Guaranty made as of September 9, 2005, by Kennedy-Wilson, Inc., a Delaware corporation, in favor of Bank of America, N.A.
10.53 (37)
Repayment Guaranty made as of September 4, 2007 by KWI Property Fund I, L.P. and KW Property Fund II, L.P., Delaware limited partnerships in favor of Wachovia Bank, N.A., as agent for lenders. x

8


10.54(40)
Fourteenth Amendment to Employment Agreement dated January 1, 2009 between Kennedy-Wilson Properties and James Rosten.
10.55(40)
First Amendment to Forfeiture Agreement dated October 22, 2009 between Prospect Acquisition Corp., De Guardiola Advisors, Inc., De Guardiola Holdings, Inc., Flat Ridge Investments LLC, LLM Structured Equity Fund L.P, LLM Investors L.P., CMS Platinum Fund, L.P., SJC Capital LLC, Michael P. Castine, Daniel Gressel, Michael Downey, James J. Cahill, John Merchant and Kennedy-Wilson, Inc.
10.56†(40)
Waiver and Modification with respect to Employment Agreements dated October 22, 2009 between Kennedy-Wilson, Inc. and William J. McMorrow, Mary L. Ricks and Donald J. Herrema.
10.57(42)
Agreement, dated as of November 11, 2009, by and between Prospect Acquisition Corp. and Victory Park Capital Advisors, LLC.
10.58(42)
Form of Stock Purchase Agreement, among Prospect Acquisition Corp., David A. Minella, LLM Structured Equity Fund L.P., and LLM Investors L.P.

10.59(42)
Stock Purchase Agreement, dated as of November 12, 2009, by and between Prospect Acquisition Corp. and Credit Suisse Securities (USA) LLC.
10.60(42)
Stock Purchase Agreement, dated as of November 11, 2009, by and between Prospect Acquisition Corp. and Nisswa Acquisition Master Fund, Ltd.
10.61(42)
Share Purchase Agreement, dated as of November 12, 2009, by and between Prospect Acquisition Corp. and Milton Arbitrage Partners, LLC.
10.62(43)
Stock Purchase Agreement.
10.63(44)
Stock Purchase Agreement, dated as of November 12, 2009, by and between Prospect Acquisition Corp. and Arrowgrass Master Fund Ltd.
10.64(44)
Stock Purchase Agreement, dated as of November 12, 2009, by and between Prospect Acquisition Corp. and Bulldog Investors.
10.65(44)
Stock Purchase Agreement, dated as of November 12, 2009, by and between Prospect Acquisition Corp. and Del Mar Master Fund Ltd.
10.66(44)
Stock Purchase Agreement, dated as of November 12, 2009, by and between Prospect Acquisition Corp. and Citigroup Global Markets Inc.
10.67(44)
Share Purchase Agreement, dated as of November 12, 2009, by and between Prospect Acquisition Corp. and IBS (MF) Ltd. In Respect of Glazer Merger Arbitrage Series.
10.68(44)
Stock Purchase Agreement, dated as of November 12, 2009, by and between Prospect Acquisition Corp. and Glazer Offshore Fund Ltd.
10.69(44)
Stock Purchase Agreement, dated as of November 12, 2009, by and between Prospect Acquisition Corp. and Glazer Capital Management, LP.
10.70(44)
Stock Purchase Agreement, dated as of November 12, 2009, by and between Prospect Acquisition Corp. and HFR MA Select Opportunity Master Trust.
10.71(44)
Stock Purchase Agreement, dated as of November 12, 2009, by and between Prospect Acquisition Corp. and GSS Offshore SPC-Glazer Segregated Portfolio.
10.72(45)
Waiver and Modification With Respect to Employment Agreement Amendments.
10.73(46)
Securities Purchase Agreement, dated June 28, 2011, by and among Kennedy-Wilson Holdings, Inc., a Delaware corporation and the Purchasers named thereto.
10.74(47)
Transfer Agreement dated December 28, 2011 between KW Executive Loan Partners I LLC and K-W Properties.
10.75(47)
Membership Interest Acquisition Agreement dated December 28, 2011 by and among KW Summer House Manager, LLC, K-W Properties, KW Summer House Executives, LLC and the members of KW Summer House Executives, LLC as set forth therein.
10.76(47)
Membership Interest Acquisition Agreement dated December 28, 2011 by and among KW Montclair, LLC, K-W Properties, KW Montclair Executives, LLC and the members of KW Montclair Executives, LLC set forth therein.
10.77(47)
Membership Interest Acquisition Agreement dated December 28, 2011 by and among KW Montclair, LLC, K-W Properties, KW Montclair Executives, LLC and the members of KW Montclair Executives, LLC set forth therein
10.78(47)
Membership Interest Acquisition Agreement dated December 28, 2011 by and among KW Blossom Hill Manager, LLC, K-W Properties, KW Blossom Hill Executives, LLC and the members of KW Blossom Hill Executives, LLC set forth therein.
10.79(47)
Membership Interest Acquisition Agreement dated December 28, 2011 by and among KWF Investors I, LLC, K-W Properties, KWF Executives I, LLC and the members of KWF Executives I, LLC set forth therein

9


10.80(47)
Membership Interest Acquisition Agreement dated December 28, 2011 by and among KWF Investors II, LLC, K-W Properties, KWF Executives II, LLC, and the members of KWF Executives II, LLC set forth therein.
10.81(47)
Membership Interest Acquisition Agreement dated December 28, 2011 by and among KWF Investors III, LLC, K-W Properties, KWF Executives III, LLC, and the members of KWF Executives III, LLC set forth therein.
10.82(47)
Membership Interest Acquisition Agreement dated December 28, 2011 by and among KWF Investors V, LLC, K-W Properties, KWF Executives V, LLC, and the members of KWF Executives V, LLC set forth therein.
10.83(47)
Membership Interest Acquisition Agreement dated December 28, 2011 by and among KW - Richmond, LLC, K-W Properties, KW Executives - Richmond, LLC, and the members of KW Executives - Richmond, LLC set forth therein.
10.84(47)
Membership Interest Acquisition Agreement dated December 28, 2011 by and among SG KW Venture I Manager, LLC, K-W Properties, SG KW Venture I Executives, LLC, and the members of SG KW Venture I Executives, LLC set forth therein.
10.85(48)
Kennedy-Wilson Holdings, Inc. Amended and Restated 2009 Equity Participation Plan.
10.86(82)
Form of First Amendment to Kennedy-Wilson Holdings, Inc. Amended and Restated 2009 Equity Participation Plan Restricted Stock Award Agreement
10.87†(83)
Form of Kennedy-Wilson Holdings, Inc. Amended and Restated 2009 Equity Participation Plan Employee Restricted Stock Award Agreement
10.88†(84)
Form of Kennedy-Wilson Holdings, Inc. Amended and Restated 2009 Equity Participation Plan Consultant Restricted Stock Award Agreement
10.89(59)
Consulting Agreement, dated as of December 31, 2013, among Kennedy-Wilson, Inc., Barry S. Schlesinger and CV I R.E. Services, LLC.
10.90† (72)
First Amendment to Amended and Restated 2009 Equity Participation Plan.
10.91†(73)
Third Modification Agreement, dated July 16, 2014, by and among Kennedy-Wilson, Inc., U.S. Bank National Association, a national banking association (“U.S. Bank”), as administrative agent, lead arranger and book manager, and U.S. Bank, East-West Bank, a California banking corporation, The Governor and Company of the Bank of Ireland, Bank of America N.A., a national banking association, Deutsche Bank AG New York Branch and J.P. Morgan Chase Bank, N.A., a national banking association, as lenders.
10.92†(74)
Form of Employee Restricted Stock Award Agreement.
10.93†(75)
Sixteenth Amendment to Employment Agreement dated August 6, 2014 by and between Kennedy-Wilson, Inc. and William J. McMorrow.
10.94†(76)
Fourth Amendment to Employment Agreement dated August 6, 2014 by and between Kennedy-Wilson, Inc., and Mary L. Ricks.
10.95† (77)
Employment Agreement dated December 29, 2014 between Kennedy-Wilson, Inc. and Kent Mouton.
10.96† (78)
Employment Agreement dated December 29, 2014 between Kennedy-Wilson, Inc. and Matt Windisch.
10.97† (79)
Employment Agreement dated December 29, 2014 between Kennedy-Wilson, Inc. and Justin Enbody.
21**
List of Subsidiaries
23.1**
Consent of Independent Registered Public Accounting Firm for the consolidated financial statements of Kennedy-Wilson Holdings, Inc.
23.2*
Consent of Independent Auditors for the consolidated financial statements of Bay Fund Opportunity, LLC and Subsidiaries
23.3*
Consent of Independent Auditors for the financial statements of Kennedy Wilson Real Estate Fund IV, L.P.
23.4*
Consent of Independent Auditors for the financial statements of One Baxter Way , LP
23.5*
Consent of Independent Auditors for the combined financial statements of KW Funds - 303 North Glenoaks, LLC and KW Funds - 6100 Wilshire, LLC
23.6*
Consent of Independent Auditors for the financial statements of Bay Area Smart Growth Fund II, LLC
23.7*
Consent of Independent Auditors for the financial statements of Egret Limited
23.8*
Consent of Independent Auditors for the consolidated financial statements of KWVF Panther Holdco Limited
23.9*
Consent of Independent Auditors for the consolidated financial statements of WH Valle Di Oro 79, LLC
23.10*
Consent of Independent Auditors for the consolidated financial statements of KW Stadium Gateway Partners, LLC
23.11*
Consent of Independent Auditors for the financial statements of KW Marina View, LLC

10


23.12*
Consent of Independent Auditors for the consolidated financial statements of KWF Real Estate Venture VI, L.P.
24.1
Power of Attorney (included on signature page).
31.1*
Certification Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 of the Principal Executive Officer.
31.2*
Certification Pursuant to Rule 13a-14(a) under Securities Exchange Act of 1934 of the Principal Financial Officer.
32.1*
Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer.
32.2*
Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer
101**
The following materials from Kennedy-Wilson Holdings, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2014 formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets (ii) the Consolidated Statements of Operations and Comprehensive (Loss) Income (iii) the Consolidated Statements of Equity (iv) the Consolidated Statements of Cash Flows (v) related notes to those financial statements and (vi) Schedule III - Real Estate and Accumulated Depreciation.*
__________
Management Contract, Compensation Plan or Agreement.
(1)
Filed as an Exhibit 10.1 to Registrant’s Current Report on Form 8-K (File No.: 001-33824) filed August 5, 2010.
(2)
Filed as Annex D to Amendment No. 5 to the Registrant's Registration Statement on Form S-4 (File No.: 333-162116) filed on October 28, 2009 and incorporated by reference herein.
(3)
Filed as Exhibit 3.2 to Amendment No. 3 to the Registrant's Registration Statement on Form S-1 (File No. 333-145110) filed October 26, 2007 and incorporated by reference herein.
(4)
Filed as Exhibit A to Annex C to Amendment No. 5 to the Registrant's Registration Statement on Form S-4 (File No.: 333-162116) filed on October 28, 2009 and incorporated by reference herein.
(5)
Filed as Annex C to Amendment No. 5 to the Registrant's Registration Statement on Form S-4 (File No.: 333-162116) filed on October 28, 2009 and incorporated by reference herein.
(6)
Reserved.
(7)
Reserved.
(8)
Reserved.
(9)
Reserved.
(10)
Reserved.
(11)
Reserved
(12)
Reserved.
(13)
Reserved.
(14)
Filed as an Exhibit to the Registrant's Registration Statement on Amendment no. 1 to Form 8-A (File No.: 333-145110) filed on November 16, 2009 and incorporated by reference herein.
(15)
Reserved.
(16)
Reserved.
(17)
Reserved.

11


(18)
Reserved.
(19)
Reserved.
(20)
Reserved.
(21)
Filed as an Exhibit to the Registrant's Current Report on Form 8-K (File No.: 001-33824) filed April 7, 2011.
(22)
Filed as an Exhibit to the Registrant's Current Report on Form 8-K (File No.: 001-33824) filed April 13, 2011.
(23)
Filed as an Exhibit to the Registrant's Current Report on Form 8-K (File No.: 001-33824) filed May 21, 2010.
(24)
Filed as an Exhibit to the Registrant's Current Report on Form 8-K (File No.: 001-33824) filed August 16, 2010.
(25)
Reserved.
(26)
Filed as an Exhibit to the Registrant's Current Report on Form 8-K (File No.: 001-33824) filed December 30, 2011.
(27)
Reserved.
(28)
Filed as Exhibit 10.1 to Kennedy-Wilson Holding, Inc.'s Current Report on Form 8-K (File No.: 001-33824) filed June 29, 2012.
(29)
Filed as Exhibit 4.3 to Kennedy-Wilson Holding, Inc.'s Registration Statement on Form S-3 (File No. 333-184752) filed November 5, 2012.
(30)
Filed as Exhibit 4.2 to Kennedy-Wilson Holding, Inc.'s Current Report on Form 8-K (File No.: 001-33824) filed November 28, 2012.
(31)
Filed as Exhibit 4.11 to Kennedy-Wilson Holding, Inc.'s Current Report on Form 8-K (File No.: 001-33824) filed December 7, 2012.
(32)
Filed as Exhibit 4.12 to Kennedy-Wilson Holding, Inc.'s Current Report on Form 8-K (File No.: 001-33824) filed December 7, 2012.
(33)
Filed as Exhibit 4.13 to Kennedy-Wilson Holding, Inc.'s Current Report on Form 8-K (File No.: 001-33824) filed December 7, 2012.
(34)
Filed as Exhibit 4.14 to Kennedy-Wilson Holding, Inc.'s Current Report on Form 8-K (File No.: 001-33824) filed December 7, 2012.
(35)
Filed as Exhibit 10.105 to Kennedy-Wilson Holdings, Inc.'s Registration Statement on Form S-4 (File No.: 333-162116) filed September 24, 2009.
(36)
Filed as Exhibit 10.11 to Kennedy-Wilson Holdings, Inc.'s Current Report on Form 10-K (File No.: 001-33824) filed on March 31, 2008 and incorporated by reference herein.
(37)
Filed as an Exhibit to Kennedy-Wilson Holdings, Inc.'s Registration Statement on Form S-4 (File No.: 333-162116) filed on September 24, 2009 and incorporated by reference herein.
(38)
Filed as Annex E to Amendment No. 5 to Kennedy-Wilson Holdings, Inc.'s Registration Statement on Form S-4 (File No.: 333-162116) filed on October 28, 2009 and incorporated by reference herein.
(39)
Filed as an Exhibit to Kennedy-Wilson Holdings, Inc.'s Registration Statement on Form S-8 (File No.: 333-164928) filed on February 16, 2010 and incorporated by reference herein.
(40)
Filed as an Exhibit to Amendment No. 2 to Kennedy-Wilson Holdings, Inc.'s Registration Statement on Form S-4 (File No.: 333-162116) filed on October 23, 2009 and incorporated by reference herein.

12


(41)
Filed as an Exhibit to Amendment No. 1 to Kennedy-Wilson Holdings, Inc.'s Registration Statement on Form S-4 (File No.: 333-162116) filed on October 16, 2009 and incorporated by reference herein.
(42)
Filed as an Exhibit to Kennedy-Wilson Holdings, Inc.'s Current Report on Form 8-K (File No.: 001-33824) filed November 11, 2009.
(43)
Filed as an Exhibit to Kennedy-Wilson Holdings, Inc.'s Current Report on Form 8-K (File No.: 001-33824) filed November 12, 2009.
(44)
Filed as an Exhibit to Kennedy-Wilson Holdings, Inc.'s Current Report on Form 8-K (File No.: 001-33824) filed November 13, 2009.
(45)
Filed as an Exhibit to Kennedy-Wilson Holdings, Inc.'s Current Report on Form 8-K (File No.: 001-33824) filed November 19, 2009.
(46)
Filed as an Exhibit to Kennedy-Wilson Holdings, Inc.'s Current Report on Form 8-K (File No.: 001-33824) filed June 29, 2011 and incorporated by reference herein.
(47)
Filed as an Exhibit to the Registrant's Current Report on Form 8-K (File No.: 001-33824) filed December 30, 2011.
(48)
Filed as an Exhibit to the Registrant's Current Report on Form 8-K (File No.: 001-33824) filed January 30, 2012..
(49)
Filed as an Exhibit to Registrant's Current Report on Form 8-K (File No.: 001-33824) filed June 29, 2012 and incorporated by reference herein.
(50)
Filed as Exhibit 4.21 to Kennedy-Wilson Holdings, Inc.'s Current Report on Form 10-K (File No.: 001-33824) filed on March 12, 2013 and incorporated by reference herein.
(51)
Filed as Exhibit 4.22 to Kennedy-Wilson Holdings, Inc.'s Current Report on Form 10-K (File No.: 001-33824) filed on March 12, 2013 and incorporated by reference herein.
(52)
Filed as Exhibit 4.25 to Kennedy-Wilson Holdings, Inc.'s Current Report on Form 10-K (File No.: 001-33824) filed on March 12, 2013 and incorporated by reference herein.
(53)
Filed as Exhibit 4.2 to the Registrant’s Current Report on Form 8-K (File No. 001-33824) filed on May 29, 2013.
(54)
Filed as Exhibit 4.27 to the Registrant’s Registration Statement on Form S-3 (File No. 333-192059) filed November 1, 2013.
(55)
Filed as Exhibit 4.28 to the Registrant’s Registration Statement on Form S-3 (File No. 333-192059) filed November 1, 2013.
(56)
Filed as Exhibit 4.29 to the Registrant’s Registration Statement on Form S-3 (File No. 333-192059) filed November 1, 2013.
(57)
Filed as Exhibit 10.2 to Registrant’s Current Report on Form 8-K (File No.: 001-33824) filed August 5, 2010.
(58)
Filed as Exhibit 10.3 to Registrant’s Current Report on Form 8-K (File No.: 001-33824) filed August 5, 2010.
(59)
Filed as Exhibit 10.1 to Registrant’s Current Report on Form 8-K (File No.: 001-33824) filed on December 31, 2013.
(60)
Filed as Exhibit 4.1 to Registrant’s Quarterly Report on Form 10-Q (001-33824) filed May 12, 2014.
(61)
Filed as Exhibit 4.2 to Registrant’s Current Report on Form 8-K (001-33824) filed March 26, 2014.
(62)
Filed as Exhibit 4.1 to Registrant’s Quarterly Report on Form 10-Q (001-33824) filed November 10, 2014.

13


(63)
Filed as Exhibit 4.4 to Registrant’s Current Report on Form 8-K (001-33824) filed November 18, 2014.
(64)
Filed as Exhibit 4.37 to Registrant’s Annual Report on Form 10-K filed March 3, 2014.
(65)
Filed as Exhibit 4.5 to Registrant’s Quarterly Report on Form 10-Q (001-33824) filed May 12, 2014.
(66)
Filed as Exhibit 4.2 to Registrant’s Quarterly Report on Form 10-Q (001-33824) filed November 10, 2014.
(67)
Filed as Exhibit 4.6 to Registrant’s Current Report on Form 8-K (001-33824) filed November 18, 2014.
(68)
Filed as Exhibit 4.28 to Registrant’s Annual report on Form 10-K filed March 3, 2014.
(69)
Filed as Exhibit 4.6 to Registrant’s Quarterly Report on Form 10-Q (001-33824) filed May 12, 2014.
(70)
Filed as Exhibit 4.3 to Registrant’s Quarterly Report on Form 10-Q (001-33824) filed November 10, 2014.
(71)
Filed as Exhibit 4.7 to Registrant’s Current Report on Form 8-K (001-33824) filed November 18, 2014.
(72)
Filed as Exhibit 10.1 to Registrant’s Current Report on Form 8-K (001-33824) filed June 19, 2014.
(73)
Filed as Exhibit 10.1 to Registrant’s Current Report on Form 8-K (001-33824) filed July 17, 2014.
(74)
Filed as Exhibit 10.1 to Registrant’s Current Report on Form 8-K (001-33824) filed July 18, 2014.
(75)
Filed as Exhibit 10.1 to Registrant’s Current Report on Form 8-K (001-33824) filed August 8, 2014.
(76)
Filed as Exhibit 10.2 to Registrant’s Current Report on Form 8-K (001-33824) filed August 8, 2014.
(77)
Filed as Exhibit 10.1 to Registrant’s Current Report on Form 8-K (001-33824) filed December 30, 2014.
(78)
Filed as Exhibit 10.2 to Registrant’s Current Report on Form 8-K (001-33824) filed December 30, 2014.
(79)    Filed as Exhibit 10.3 to Registrant’s Current Report on Form 8-K (001-33824) filed December 30, 2014.

(80)     Filed as Exhibit 4.27 to Registrant’s Annual Report on Form 10-K filed March 3, 2014.

(81)     Filed as Exhibit 4.36 to Registrant’s Annual Report on Form 10-K filed March 3, 2014.

(82)     Filed as Exhibit 10.114 to Registrant’s Annual Report on Form 10-K filed March 12, 2013.

(83)     Filed as Exhibit 10.115 to Registrant’s Annual Report on Form 10-K filed March 12, 2013.

(84)
Filed as Exhibit 10.116 to Registrant’s Annual Report on Form 10-K filed March 12, 2013.
*
Filed herewith
**
Filed with the Original Report
(c) Financial Statement Schedules. Reference is made to Item 15(a)(2) above


14


3-09 FINANCIAL STATEMENTS
Kennedy-Wilson Holdings, Inc.
Index to 3-09 Financial Statements
 
 
 
Page
3-09 Financial Statements
 
 
 
 
 
 
 
 
 
 
 
 
 


15


    

Independent Auditors' Report
The Members
Bay Fund Opportunity, LLC and Subsidiaries:

We have audited the accompanying consolidated financial statements of Bay Fund Opportunity, LLC and subsidiaries, which comprise the consolidated balance sheet as of December 31, 2012, and the related consolidated statements of operations, changes in members' equity, and cash flows for each of the years in the two-year period then ended, and the related notes to the consolidated financial statements.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Bay Fund Opportunity, LLC and subsidiaries as of December 31, 2012, and the results of their operations and their cash flows for each of the years in the two-year period then ended, in accordance with U.S. generally accepted accounting principles.
The accompanying consolidated balance sheet of Bay Fund Opportunity, LLC and subsidiaries as of December 31, 2014 and December 31, 2013 and the related statements of operations, changes in members' equity, and cash flows for the years then ended were not audited by us, and accordingly, we do not express an opinion on them.

/s/ KPMG LLP

Dallas, Texas
March 21, 2013

16


BAY FUND OPPORTUNITY, LLC AND SUBSIDIARIES
(A California Limited Liability Company)
Consolidated Balance Sheets

 
 
December 31,
 
 
2014
 
2013
Assets
 
(unaudited)
 
(unaudited)
Real estate
 
 
 
 
Land
 
$
21,874,072

 
$
21,874,072

Building and improvements
 
87,566,335

 
87,566,335

Fixtures and equipment
 
1,071,800

 
944,198

Total
 
110,512,207

 
110,384,605

Less accumulated depreciation
 
(14,971,517
)
 
(12,610,146
)
Total real estate, net
 
95,540,690

 
97,774,459

Cash and cash equivalents
 
1,718,359

 
1,585,568

Tax escrow
 
240,641

 
225,950

Capital and financing escrow deposits
 
637,174

 
499,473

Deferred financing costs, net
 
512,348

 
666,053

Accounts receivable
 
47,882

 
68,229

Prepaid expenses and other assets
 
28,609

 
18,802

Total assets
 
$
98,725,703

 
$
100,838,534

Liabilities and members' equity
 
 
 
 
Liabilities
 
 
 
 
Accounts payable and accrued expenses
 
$
1,455,706

 
$
1,431,038

Reserve for future warranty claims
 
332,000

 
344,500

Security deposits from tenants
 
398,998

 
415,654

Prepaid rent
 
3,104

 
13,036

Mortgages payable
 
46,219,467

 
47,610,010

Total liabilities:
 
48,409,275

 
49,814,238

Commitments and contingencies (note 6)
 
 
 
 
Members' equity
 
 
 
 
Bay Fund Opportunity, LLC
 
50,316,428

 
51,024,296

Total members' equity
 
50,316,428

 
51,024,296

Total liabilities and members' equity
 
$
98,725,703

 
$
100,838,534

See accompanying notes to the consolidated financial statements.


17


BAY FUND OPPORTUNITY, LLC AND SUBSIDIARIES
(A California Limited Liability Company)
Consolidated Statements of Operations

 
 
Year ended December 31,
 
 
2014
 
2013
 
2012
 
 
(unaudited)
 
(unaudited)
 
 
Revenue
 
 
 
 
 
 
Rental income
 
$
9,553,943

 
$
8,647,554

 
$
8,088,922

Total revenue
 
9,553,943

 
8,647,554

 
8,088,922

Expenses
 
 
 
 
 
 
Real estate and other taxes
 
1,780,964

 
1,444,142

 
1,356,675

Property insurance
 
52,549

 
52,048

 
57,797

Homeowners association fees
 
2,034,751

 
1,970,786

 
1,926,489

Repairs, maintenance and utilities
 
668,652

 
658,131

 
560,523

Depreciation
 
2,361,372

 
2,274,451

 
2,292,647

Marketing and promotion
 
170,522

 
188,413

 
148,936

General, administrative and other
 
134,341

 
76,881

 
85,963

Management fees (note 5)
 
429,298

 
410,409

 
399,906

Letter of credit fees
 
—    

 
9,823

 
50,000

Mortgage interest
 
1,434,362

 
1,744,442

 
1,746,528

Total expenses
 
9,066,811

 
8,829,526

 
8,625,464

Net income (loss) attributable to Bay Fund Opportunity, LLC
 
$
487,132

 
$
(181,972
)
 
$
(536,542
)
See accompanying notes to the consolidated financial statements.




18


BAY FUND OPPORTUNITY, LLC AND SUBSIDIARIES
(A California Limited Liability Company)
Consolidated Statements of Members' Equity
 
 
Members' Equity
Balance, December 31, 2011 (unaudited)
 
43,467,810

Contributions
 
(825,000
)
Net loss
 
(536,542
)
Balance, December 31, 2012
 
42,106,268

Contributions (unaudited)
 
9,800,000

Distributions (unaudited)
 
(700,000
)
Net loss (unaudited)
 
(181,972
)
Balance, December 31, 2013 (unaudited)
 
51,024,296

Distributions (unaudited)
 
(1,195,000
)
Net income (unaudited)
 
487,132

Balance, December 31, 2014 (unaudited)
 
$
50,316,428

See accompanying notes to the consolidated financial statements.




19


BAY FUND OPPORTUNITY, LLC AND SUBSIDIARIES
(A California Limited Liability Company)
Consolidated Statements of Cash Flows
 
 
Year ended December 31,
 
 
2014
 
2013
 
2012
Cash flows from operating activities:
 
(unaudited)
 
(unaudited)
 
 
Net income (loss)
 
$
487,132

 
$
(181,972
)
 
$
(536,542
)
Adjustments to reconcile net income (loss) to net cash provided by
     operating activities:
 
 
 
 
 
 
Depreciation
 
2,361,372

 
2,274,451

 
2,292,647

Amortization of deferred financing costs
 
153,705

 
340,943

 
266,817

Change in assets and liabilities:
 
 
 
 
 
 
Tax escrow
 
(14,691
)
 
(82,501
)
 
160,515

Accounts receivable
 
20,347

 
(20,708
)
 
(364
)
Prepaid expenses and other assets
 
(9,807
)
 
19,035

 
5,866

Accounts payable and accrued expenses
 
24,668

 
(20,145
)
 
(31,902
)
Reserve for future warranty claims
 
(12,500
)
 
(47,500
)
 

Security deposits from tenants
 
(16,656
)
 
31,351

 
(12,932
)
Prepaid rent
 
(9,932
)
 
8,313

 
1,602

Net cash flow provided by operating activities
 
2,983,638

 
2,321,267

 
2,145,707

Cash flows from investing activities:
 
 
 
 
 
 
Additions to real estate
 
(127,603
)
 
(105,260
)
 
(124,927
)
Net cash flow used in by investing activities
 
(127,603
)
 
(105,260
)
 
(124,927
)
Cash flow from financing activities:
 
 
 
 
 
 
Principal payments on mortgage loans
 
(1,390,543
)
 
(58,788,338
)
 
(892,515
)
Origination of mortgage loan
 
—    

 
48,400,000

 

Mortgage loan costs
 
—    

 
(776,698
)
 
(116,355
)
Changes in capital and financing escrow deposits
 
(137,701
)
 
215,276

 
12,615

Contributions from members
 
—    

 
9,800,000

 

Distributions to members
 
(1,195,000
)
 
(700,000
)
 
(825,000
)
Net cash flow used in financing activities
 
(2,723,244
)
 
(1,849,760
)
 
(1,821,255
)
Net increase in cash and cash equivalents
 
132,791

 
366,247

 
199,525

Cash and cash equivalents, beginning of year
 
1,585,568

 
1,219,321

 
1,019,796

Cash and cash equivalents, end of year
 
$
1,718,359

 
$
1,585,568

 
$
1,219,321

Supplemental disclosure of noncash financing activities:
 
 
 
 
 
 
Interest paid
 
$
1,284,015

 
$
1,417,975

 
$
1,504,773

See accompanying notes to the consolidated financial statements.




20

Table of Contents
BAY FUND OPPORTUNITY, LLC AND SUBSIDIARIES
(A California Limited Liability Company)
Notes to Consolidated Financial Statements
December 31, 2014 (unaudited), 2013 (unaudited), and 2012

NOTE 1ORGANIZATION
Bay Fund Opportunity, LLC (the Company), a California limited liability company, was formed by and among, KW - Richmond, LLC, a Delaware limited liability company, KW Fund III - Richmond, LLC, a Delaware limited liability company, and BASGF II - Richmond, LLC, a Delaware limited liability company (collectively, the Managers). The Company was formed upon the filing of the Articles of Formation with the California Secretary of State on April 18, 2008. The term of the Company extends until the date that the Company is terminated pursuant to the terms defined in the Company's operating agreement.
The Company was organized to form, invest in, capitalize and own 50% of the equity in Emerald Marina Shores Richmond, LLC, a Delaware limited liability company, and 50% of the equity in Emerald Marina Cove Richmond, LLC, a Delaware limited liability company, which collectively own the real property located in Richmond, California (Marina Cove and Shores). Initial capital contributions to acquire these investments are $6,076,000 from KW - Richmond, LLC, $5,000,000 from KW Fund III - Richmond, LLC, and $14,000,000 from BASGF II - Richmond, LLC, for a total initial investment of $25,076,000.
The Managers may elect from time to time to distribute available cash to the Members in proportion to their percentage interests at the time of distribution.
The limited liability companies (LLCs) within the accompanying consolidated balance sheets will continue in existence until dissolved in accordance with the provisions of their operating agreements and are funded through the equity contributions of their members. As LLCs, except as may otherwise be provided under applicable law, no member shall be bound by, or personally liable for, the expenses, liabilities, or obligations of the individual companies. The members are not obligated to restore capital deficits.
Profit and loss for each fiscal period shall be allocated among the members in proportion to their percentage interests. If any membership interest is transferred or otherwise changed during any fiscal year, profit and loss for that fiscal year, shall be assigned pro rata to each day in the particular period of that fiscal year to which such item is attributable and shall be allocated to the members based upon their respective percentage interest at the close of that day. Gain or loss of the Company realized in connection with a sale or other disposition of any of the assets of the Company shall be allocated solely to the parties owning membership interests as of the date that sale or other disposition occurs.
NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION—The Company consolidates entities in which it holds a greater than 50% voting interest and real estate entities that are deemed variable interest entities (VIEs) in which the Company was determined to be the primary beneficiary. The Company accounts for investments over which it has significant influence but not a controlling financial interest using the equity method of accounting.
VARIABLE INTEREST ENTITIES—The VIEs (Marina Cove and Shores) lease, manage, operate, improve, finance and sell real estate property. Management determined that the Company is the primary beneficiary of the VIEs by determining the Company has (i) the power to direct the activities that most significantly impact the VIE's economic performance and (ii) the right to receive benefits or the obligation to absorb losses which could potentially be significant to the VIE based on the terms of the VIE's operating agreement. Activities that most significantly impact the VIE's performance include selling real estate.
USE OF ESTIMATES—The preparation of the accompanying financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, and reported amounts of income and expenses. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Such estimates and assumptions are adjusted when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.
CASH AND CASH EQUIVALENTS—Cash and cash equivalents include highly liquid investments purchased with original maturities of three months or less. Periodically, the Company maintains cash balances in various bank accounts in excess of federally insured limits. To date, no losses have been experienced related to such amounts. The Company places cash with quality financial institutions and does not believe there is a significant concentration of credit risk.
REAL ESTATE ASSETS—Real estate is carried at depreciated cost, less impairment, if any. Depreciation on buildings and improvements has been provided for in the accompanying financial statements using the straight-line method based on estimated useful lives of 40 years for building and improvements and five to ten years for fixtures and equipment. Maintenance and repairs are charged to expense as incurred, and costs of renewals or betterments are capitalized and depreciated at the appropriate rates.

21

Table of Contents
BAY FUND OPPORTUNITY, LLC AND SUBSIDIARIES
(A California Limited Liability Company)
Notes to Consolidated Financial Statements
December 31, 2014 (unaudited), 2013 (unaudited), and 2012

IMPAIRMENT OF LONG-LIVED ASSETS—In accordance with Financial Standards Accounting Board (FASB) Accounting Standards Codification (ASC) 360, Property, Plant, and Equipment, for long‑lived assets, the asset or asset group is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If indications of impairment exist, the Company will evaluate the property by comparing the carrying amount of the asset or asset group to the estimated future undiscounted cash flows of the property. Estimated future cash flows include estimated costs to develop the property whether these costs would be recognized as an expense or capitalized in future periods. Future interest costs that are necessary to develop the property, and therefore capitalizable, are also included. If impairment exists, an impairment loss will be recognized based on the amount by which the carrying amount exceeds the fair value of the asset or asset group. For the years ended December 31, 2014 (unaudited), 2013 (unaudited), and 2012, there were no impairments recorded.
CONCENTRATION OF RISK—The Company's real estate is concentrated in California. Adverse conditions in the sector or geographic location would likely result in a material decline in the value of the Company's investments.
NONCONTROLLING INTERESTS—Noncontrolling interests in the financial statements reflect the interests of noncontrolling members in Marina Cove and Shores.
ACCOUNTS RECEIVABLE—Accounts receivable primarily consist of amounts due for rental and operating expense payments in accordance with tenants' lease agreements.
REVENUE RECOGNITION—Rental revenue related to multifamily investments is recognized on the straight-line basis over the terms of the lease.
DEFERRED FINANCING COSTS, NET—Financing costs incurred in obtaining long-term debt are capitalized and amortized over the term of the related debt on a straight-line basis.
INCOME TAXES—As a limited liability company, the members elected for the Company to be a pass-through entity for income tax purposes; therefore, the Company's taxable income or loss is allocated to members in accordance with their respective ownership, and no provision or liability for income taxes has been included in the financial statements.
Management has evaluated the Company's tax positions and concluded that the Company had taken no uncertain tax positions that require adjustment to the financial statements in order to comply with the provisions of ASC 740, Income Taxes. The Company is not subject to income tax examinations by U.S. federal, state or local tax authorities for years before 2010.
NOTE 3MORTGAGES PAYABLE
Mortgages secured by Marina Cove and Shores totaled $46,219,467 (unaudited) and $47,610,010 (unaudited) as of December 31, 2014 and 2013, respectively. In April 2013 (unaudited), the Company paid off its existing mortgages with the proceeds of new mortgages in the aggregate principal amount of $48,400,000 (unaudited) and additional capital contributions of $9,800,000 (unaudited) from the members. The mortgages are collateralized by the properties and bear interest of 3 month LIBOR + 2.50% (approximately 2.75% (unaudited) at December 31, 2014). The mortgages mature on May 1, 2018 and require monthly principal and interest payments through maturity.
Aggregate principal payments due under the loans secured by real estate are as follows (unaudited):
 
 
Marina Cove
Marina Shores
Total
2015
 
$
430,955

$
997,690

$
1,428,645

2016
 
442,893

1,025,328

1,468,221

2017
 
455,162

1,053,731

1,508,893

2018
 
12,613,366

29,200,342

41,813,708

Total
 
$
13,942,376

$
32,277,091

$
46,219,467


NOTE 4MEMBERSHIP INTEREST CHANGES
In May 2011, KW - Richmond, LLC acquired an additional interest of 24.07% in the Company for $7,000,000 from BASGF II - Richmond, LLC, increasing its interest in the Company from 24.23% to 48.30%.
Marina Cove and Marina Shores had mortgage notes payable that had total balances of $65,249,799 (unaudited) at December 31, 2010. On December 2, 2011, their loans were extended to June 26, 2013, with a required principal paydown of $6,358,937, which was funded by the capital contributions from two of the three members of the Company. These capital

22

Table of Contents
BAY FUND OPPORTUNITY, LLC AND SUBSIDIARIES
(A California Limited Liability Company)
Notes to Consolidated Financial Statements
December 31, 2014 (unaudited), 2013 (unaudited), and 2012

contributions increased KW - Richmond, LLC's interest from 48.30% to 48.61% and KW Fund III - Richmond, LLC's interest from 19.94% to 25.43%.
On December 28, 2011, KW Executives - Richmond, LLC transferred its interest in KW - Richmond, LLC to the Company, in exchange for a 3.57% interest directly in the Company. As a result of this exchange, KW - Richmond, LLC's interest in the Company was reduced from 48.61% to 45.04%.
Membership interest as of December 31, 2014 (unaudited), 2013 (unaudited), and 2012
 
 
KW Richmond, LLC
 
KW Richmond, LLC
 
BASGF II Richmond, LLC
 
KW Executives Richmond, LLC
 
Total
12/31/2014
 
45.04
%
 
25.43
%
 
25.96
%
 
3.57
%
 
100.00
%
12/31/2013
 
45.04
%
 
25.43
%
 
25.96
%
 
3.57
%
 
100.00
%
12/31/2012
 
45.04
%
 
25.43
%
 
25.96
%
 
3.57
%
 
100.00
%
NOTE 5FEES PAID TO AFFILIATES
The Company has entered into an agreement with Emerald Fund, Inc., an affiliate of the Company to provide various asset and property management services in return for a management fee. During the years ended December 31, 2014, 2013, and 2012, management fees incurred for such services totaled $429,298 (unaudited), $410,409 (unaudited), and $399,906, respectively.
NOTE 6COMMITMENTS AND CONTINGENCIES
Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. Currently, the Company does not have any material commitments or contingencies.
NOTE 7SUBSEQUENT EVENTS
In preparing these consolidated financial statements, the Company has evaluated events and transactions for potential recognition and disclosure through March 27, 2015, the date at which the financial statements were available to be issued, and determined there are no other items to disclose.



23




Independent Auditors’ Report



The Partners
Kennedy Wilson Real Estate Fund IV, L.P.

We have audited the accompanying financial statements of Kennedy Wilson Real Estate Fund IV, L.P., which comprise the statement of financial condition, including the schedules of investments, as of December 31, 2013, and the related statements of operations, partners' capital, and cash flows for the years ended December 31, 2013 and 2012, and the related notes to the financial statements.

Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Kennedy Wilson Real Estate Fund IV, L.P. as of December 31, 2013, and the results of its operations and its cash flows for the years ended December 31, 2013 and 2012, in accordance with U.S. generally accepted accounting principles.
The accompanying statement of financial condition, including the schedules of investments, of Kennedy Wilson Real Estate Fund IV, L.P., as of December 31, 2014 and the related statements of operations, partners' capital and cash flows for the year ended December 31, 2014 were not audited by us, and accordingly, we do not express an opinion on them.



/s/ KPMG LLP

Los Angeles, California
March 31, 2014

24


KENNEDY WILSON REAL ESTATE FUND IV, L.P.
Statements of Financial Condition

 
 
December 31,
 
 
2014
 
2013
Assets
 
(unaudited)
 
 
Investments at fair value (cost $207,444,759 in 2014 and $177,681,995 in 2013)
 
$
234,033,108

 
$
194,060,981

Cash and cash equivalents
 

 
1,322

Total assets
 
$
234,033,108

 
$
194,062,303

Liabilities and partners' capital
 
 
 
 
Liabilities
 
 
 
 
Accounts payable and accrued expenses
 
$
308

 
$
700

Total liabilities
 
308

 
700

Partners' capital
 
 
 
 
General partner and special limited partner
 
8,085,966

 
3,343,086

Limited partners
 
225,946,834

 
190,718,517

Total partners’ capital
 
234,032,800

 
194,061,603

Total liabilities and partners’ capital
 
$
234,033,108

 
$
194,062,303


See accompanying notes to financial statements.



25


KENNEDY WILSON REAL ESTATE FUND IV, L.P.
Schedule of Investments
December 31, 2014 (unaudited)
Ownership interest
 
Security description
 
Percentage of total investments
 
Cost
 
Fair value
 
 
 
 
 
 
 
 
 
85.02
%
 
Kennedy Wilson REF IV AG, LLC, an entity holding interests in twenty-five office, retail and multifamily real estate investments located in California, Oregon, Washington, Arizona, Utah, Colorado and Hawaii, and four investments in loan pool participations and notes

 
100.00
%
 
$
207,444,759

 
$
234,033,108

 
 
Total investments
 
100.00
%
 
$
207,444,759

 
$
234,033,108


See the following page for the full listing of investments held by Kennedy Wilson REF IV AG, LLC.
















































26


KENNEDY WILSON REAL ESTATE FUND IV, L.P.
Schedule of Investments - Kennedy Wilson REF IV AG, LLC
December 31, 2014 (unaudited)


 Ownership
interest
 
Security description
 
Percentage
of
total
investments
 

Cost
 

Fair value
 
 
Interests in real estate assets:
 
 
 
 
 
 
100.00
%
 
KW Fund IV-Westview Heights, LLC, a single-purpose entity holding a fee simple interest in a 132-unit multifamily project located in Portland, Oregon. (The property was sold in August 2014, and the entity is int he process of winding down.)
 
0.05
%
 
$
137,595

 
$
137,595

100.00

 
KW Fund IV-Westview Heights 66, LLC, a single-purpose entity holding a fee simple interest in a 66-unit multifamily project located in Portland, Oregon. (The property was sold in August 2014, and the entity is int he process of winding down.)
 
0.02

 
62,897

 
62,897

100.00

 
KW Royal Beverly Glen, LLC, a single-purpose entity holding a fee simple interest in 77,749 square foot office building located in Los Angeles, California
 
4.66

 
13,575,821

 
12,223,911

100.00

 
KW TriCenter, LLC, a single-purpose entity holding a fee simple interest in a 143,256-square foot office building and a four-level parking structure located in Van Nuys, California
 
7.06

 
14,388,400

 
18,529,773

100.00

 
KW Vancouver Partners, LLC, a single-purpose entity holding a fee simple interest in a 388-unit multifamily project located in Vancouver, Washington
 
6.63

 
12,229,000

 
17,400,223

100.00

 
KW El Cerrito, LLC, a single-purpose entity holding a fee simple interest in a 159-unit multifamily project located in El Cerrito, California
 
8.22

 
18,147,500

 
21,574,442

100.00

 
KW 245 Los Robles, LLC, a single-purpose entity holding a fee simple interest in a 175,792-square foot office project and a four-level parking structure located in Pasadena, California
 
6.79

 
19,263,045

 
17,836,732

96.66

 
KW Aurora Land Partners, LLC, an entity holding an interest in a single-purpose entity holding a fee simple interest in a 420 unit multifamily project located in Aurora, Colorado
 
6.66

 
12,163,335

 
17,497,330

50.00

 
KW Huntington, LLC, an entity holding an interest in a single-purpose entity holding a fee simple interest in a 277-unit multifamily project located in Huntington Beach, California
 
4.74

 
12,175,713

 
12,454,855

50.00

 
KW CapTowers, LLC, an entity holding an interest in a single-purpose entity holding a fee simple interest in a 409-unit apartment building comprising a fifteen-story tower and 206 garden-style villas located in Sacramento, California
 
3.31

 
9,667,830

 
8,701,808

50.00

 
KW Redwood Shores, LLC, an entity holding an interest in a
single-purpose entity holding a fee simple interest in a 89,455 square foot office building located in Redwood City, California
 
2.43

 
4,170,562

 
6,377,695

50.00

 
KW Stadium Gateway, LLC, an entity holding an interest in a
single purpose entity holding a fee simple interest in a 272,826 square foot office building located in Anaheim, California
 
4.81

 
9,478,025

 
12,641,418

50.00

 
KW Marina View, LLC, a single purpose entity holding a fee simple interest in a six-story, 60,918 square-foot office building with 14,774 square feet of ground floor retail space and a two-level parking deck located in Marina Del Rey, California
 
3.73

 
7,929,603

 
9,784,243

50.00

 
KW 5161 Lankershim, LLC, a single purpose entity holding a fee simple interest in a 182,369 square foot office building located in North Hollywood, California
 
3.75

 
11,007,225

 
9,857,438

48.81

 
KW University Partners, LLC, a single-purpose entity holding a fee simple interest in a 209,329 square foot retail shopping center located in Orem, Utah
 
3.64

 
5,361,370

 
9,548,096

48.45

 
KW Paradise Hills, LLC, an entity holding an interest in a single-purpose entity holding a fee simple interest in a retail shopping center located in Phoenix, Arizona
 
1.89

 
2,245,724

 
4,958,493

45.40

 
KW Mission Blvd, LLC, a single-purpose entity holding a fee simple interest in a 188-unit multifamily community in Hayward, California
 
3.04

 
5,059,838

 
7,970,298

33.33

 
KW Telstar, LLC, a single-purpose entity holding a fee simple interest in a two-story, 246,912-square foot flex building and a four-level parking structure located in El Monte, California
 
1.57

 
5,588,038

 
4,130,938

33.33

 
Kennedy Wilson 145 Fairfax, LLC, a single-purpose entity that held a fee simple interest in a four-story, 55,574-square foot office building and a two-level subterranean parking garage located in Los Angeles, California (The property was sold in September 2013, and the entity is in the process of winding down.)
 

 
17,625

 
5,039




27





KENNEDY WILSON REAL ESTATE FUND IV, L.P.
Schedule of Investments - Kennedy Wilson REF IV AG, LLC (continued)
December 31, 2014 (unaudited)
33.33

 
KW Warner Atrium, LLC, a single-purpose entity that held a fee simple interest in a three-story, 126,436-square foot office building and a three-level parking structure located in Woodland Hills, California
 
0.35

 
2,608,068

 
911,417

25.00

 
KW 9301 Partners, LLC, an entity holding an interest in a single-purpose entity that held a fee simple interest in a six-story, 86,529-square foot office building and a three-level subterranean parking garage located in Beverly Hills, California. (The property was sold in July 2014, and the entity is int he process of winding down.)
 
0.02

 
64,532

 
64,532

20.00

 
KW Hilltop Manager, LLC, an entity holding an interest in a single-purpose entity holding a fee simple interest in a 1,008-unit multifamily project located in Richmond, California
 
6.65

 
9,444,840

 
17,457,524

15.57

 
KW/CV Sunset, LLC, an entity holding an interest in a single-purpose entity holding a fee simple interest in a 251-unit multifamily project located in West Covina, California
 
1.22

 
2,298,910

 
3,195,769

15.00

 
KW Kohanaiki Shores Member, LLC, an entity holding an interest in a single-purpose entity holding a fee simple interest in a 450-acre planned community under development for up to 474 residences and a golf course on the Kona Coast of Hawaii
 
14.66

 
38,937,327

 
38,495,056

10.00

 
Guardian/KW Hayward, LLC, an entity holding an interest in a single-purpose entity holding a fee simple interest in a 544-unit multifamily project located in Hayward, California
 
2.35

 
3,074,296

 
6,163,368

 
 
Interests in loan pool participations and notes:
 
 
 
 
 
 
25.00

 
KW Loan Investors VII, LLC, an entity holding a portfolio initially consisting of nine construction and term loans with an outstanding principal balance of approximately $51,000,000, collateralized by seven retail properties located in Arizona, California and Utah. As of December 31, 2014, two loans remain
 
0.30

 
786,728

 
768,728

50.00

 
Participation interest in KW Residential Capital, an entity holding a participating loan interest in a single-purpose entity owning a project under development consisting of nine single-family residences located in Ventura, California
 
0.41

 
1,078,000

 
1,078,000

50.00

 
Participation interest in KW Residential Capital, an entity holding a participating loan interest in a single-purpose entity owning a project under development consisting of seventeen single-family residences located in Los Angeles, California
 
1.04

 
2,712,500

 
2,712,500

 
 
Total investments
 
100.00
%
 
$
223,674,347

 
$
262,558,118


See accompanying notes to financial statements
























28




KENNEDY WILSON REAL ESTATE FUND IV, L.P.
Schedule of Investments
December 31, 2013
Ownership interest
 
Security description
 
Percentage of total investments
 
Cost
 
Fair value
 
 
 
 
 
 
 
 
 
85.02
%
 
Kennedy Wilson REF IV AG, LLC, an entity holding interests in twenty-four office, retail and multifamily real estate investments located in California, Oregon, Washington, Arizona, Utah, Colorado and Hawaii, and four investments in loan pool participations and notes

 
100.00
%
 
$
177,681,995

 
$
194,060,981

 
 
Total investments
 
100.00
%
 
$
177,681,995

 
$
194,060,981


See the following page for the full listing of investments held by Kennedy Wilson REF IV AG, LLC.














































29




KENNEDY WILSON REAL ESTATE FUND IV, L.P.
Schedule of Investments - Kennedy Wilson REF IV AG, LLC
December 31, 2013
 Ownership
interest
 
Security description
 
Percentage
of
total
investments
 

Cost
 

Fair value
 
 
Interests in real estate assets:
 
 
 
 
 
 
100.00
%
 
KW Fund IV-Westview Heights, LLC, a single-purpose entity holding a fee simple interest in a 132-unit multifamily project located in Portland, Oregon
 
4.81
%
 
$
9,120,589

 
$
11,071,237

100.00

 
KW Fund IV-Westview Heights 66, LLC, a single-purpose entity holding a fee simple interest in a 66-unit multifamily project located in Portland, Oregon
 
3.16

 
5,004,609

 
7,288,048

100.00

 
KW Royal Beverly Glen, LLC, a single-purpose entity holding a fee simple interest in 77,749-square foot office building located in Los Angeles, California
 
5.72

 
12,614,333

 
13,166,799

100.00

 
KW TriCenter, LLC, a single-purpose entity holding a fee simple interest in a 143,256-square foot office building and a four-level parking structure located in Van Nuys, California
 
7.29

 
13,068,200

 
16,792,942

100.00

 
KW Vancouver Partners, LLC, a single-purpose entity holding a fee simple interest in a 388-unit multifamily project located in Vancouver, Washington
 
4.88

 
11,260,000

 
11,241,393

100.00

 
KW El Cerrito, LLC, a single-purpose entity holding a fee simple interest in a 159-unit multifamily project located in El Cerrito, California
 
7.75

 
18,147,500

 
17,863,490

96.66

 
KW Aurora Land Partners, LLC, an entity holding an interest in a single-purpose entity holding a fee simple interest in a 420 unit multifamily project located in Aurora, Colorado
 
5.73

 
9,952,007

 
13,193,017

50.00

 
KW Huntington, LLC, an entity holding an interest in a single-purpose entity holding a fee simple interest in a 277-unit multifamily project located in Huntington Beach, California
 
6.14

 
12,008,213

 
14,143,199

50.00

 
KW CapTowers, LLC, an entity holding an interest in a single-purpose entity holding a fee simple interest in a 409-unit apartment building comprising a fifteen-story tower and 206 garden-style villas located in Sacramento, California
 
4.23

 
8,647,830

 
9,741,273

50.00

 
KW Redwood Shores, LLC, an entity holding an interest in a single-purpose entity holding a fee simple interest in a 89,455-square foot office building located in Redwood City, California
 
2.08

 
3,964,062

 
4,785,956

50.00

 
KW Stadium Gateway, LLC, an entity holding an interest in a single-purpose entity holding a fee simple interest in a 272,826-square foot office building located in Anaheim, California
 
4.44

 
9,392,525

 
10,218,720

50.00

 
KW Marina View, LLC, a single-purpose entity holding a fee simple interest in a six-story, 60,918-square foot office building with 14,774 square feet of ground floor retail space and a two-level parking deck located in Marina Del Rey, California.
 
2.25

 
5,726,603

 
5,176,360

50.00

 
KW 5161 Lankershim, LLC, a single-purpose entity holding a fee simple interest in a 182,369-square foot office building located in North Hollywood, California
 
3.49

 
8,090,000

 
8,049,395

48.81

 
KW University Partners, LLC, a single-purpose entity holding a fee simple interest in a 209,329 square foot retail shopping center located in Orem, Utah
 
2.57

 
5,068,482

 
5,912,791

48.45

 
KW Paradise Hills, LLC, an entity holding an interest single-purpose entity holding a fee simple interest in a retail shopping center located in Phoenix, Arizona
 
1.55

 
2,145,174

 
3,564,997

45.40

 
KW Mission Blvd, LLC, a single-purpose entity holding a fee simple interest in a 188-unit multifamily community in Hayward, California
 
2.77

 
4,412,434

 
6,383,240

33.33

 
KW Telstar, LLC, a single-purpose entity holding a fee simple interest in a two-story, 246,912-square foot flex building and a four-level parking structure located in El Monte, California
 
2.37

 
5,588,038

 
5,451,923

33.33

 
Kennedy Wilson 145 Fairfax, LLC, a single-purpose entity that held a fee simple interest in a four-story, 55,574-square foot office building and a two-level subterranean parking garage located in Los Angeles, California (The property was sold in September 2013, and the entity is in the process of winding down.)
 
0.01

 
17,625

 
17,625








30



KENNEDY WILSON REAL ESTATE FUND IV, L.P.
Schedule of Investments - Kennedy Wilson REF IV AG, LLC (continued)
December 31, 2013

33.33

 
KW Warner Atrium, LLC, a single-purpose entity holding a fee simple interest in a three-story, 126,436-square foot office building and a three-level parking structure located in Woodland Hills, California
 
0.71

 
2,214,157

 
1,632,097

25.00

 
KW 9301 Partners, LLC, an entity holding an interest in a single-purpose entity holding a fee simple interest in a six-story,
86,529-square foot office building and a three-level subterranean parking garage located in Beverly Hills, California
 
2.82

 
6,061,123

 
6,507,080

20.00

 
KW Hilltop Manager, LLC, an entity holding an interest in a single-purpose entity holding a fee simple interest in a 1,008-unit multifamily project located in Richmond, California
 
4.59

 
9,326,040

 
10,584,986

15.57

 
KW/CV Sunset, LLC, an entity holding an interest in a single-purpose entity holding a fee simple interest in a 251-unit multifamily project located in West Covina, California
 
1.24

 
2,298,910

 
2,855,541

15.00

 
KW Kohanaiki Shores Member, LLC, an entity holding an interest in a single-purpose entity holding a fee simple interest in a 450-acre planned community under development for up to 474 residences and a golf course on the Kona Coast of Hawaii
 
14.20

 
33,298,227

 
32,711,439

10.00

 
KW Hayward Manager, LLC, an entity holding an interest in a single-purpose entity holding a fee simple interest in a 544-unit multifamily project located in Hayward, California
 
1.82

 
3,074,296

 
4,205,409

 
 
Interests in loan pool participations and notes:
 
 
 
 
 
 
25.00

 
KW Loan Investors VII, LLC, an entity holding a portfolio initially consisting of nine construction and term loans with an outstanding principal balance of approximately $51,000,000, collateralized by seven retail properties located in Arizona, California and Utah. As of December 31, 2013, four loans remain
 
0.66

 
1,676,155

 
1,526,283

50.00

 
Participation interest in KW Residential Capital, an entity holding a participating loan interest in a single-purpose entity owning a project under development consisting of 79 single-family residences located in Santa Clarita, California
 
1.15

 
2,644,526

 
2,644,526

50.00

 
Participation interest in KW Residential Capital, an entity holding a participating loan interest in a single-purpose entity owning a project under development consisting of nine single-family residences located in Ventura, California
 
0.37

 
863,000

 
863,000

50.00

 
Participation interest in KW Residential Capital, an entity holding a participating loan interest in a single-purpose entity owning a project under development consisting of seventeen single-family residences located in Los Angeles, California
 
1.20

 
2,766,800

 
2,766,800

 
 
Total investments
 
100.00
%
 
$
208,451,458

 
$
230,359,566

See accompanying notes to financial statements
























31




32


KENNEDY WILSON REAL ESTATE FUND IV, L.P.
Statements of Operations

 
 
Year ended December 31,
 
 
2014
 
2013
 
2012
 
 
(unaudited)
 
 
 
 
Investment income:
 
 
 
 
 
 
Dividends
 
$
7,810,775

 
$
3,628,660

 
$
1,842,575

Interest
 
1,129,846

 
1,220,900

 
1,854,804

Total investment income
 
8,940,621

 
4,849,560

 
3,697,379

Expenses:
 
 
 
 
 
 
Management fees
 
3,036,444

 
4,767,106

 
1,720,041

Organization costs
 
—    

 
115,294

 
409,387

Interest expense
 
229,763

 
378,325

 
585,404

Other professional and administrative costs
 
617,452

 
443,852

 
566,602

Total expenses
 
3,883,659

 
5,704,577

 
3,281,434

Net investment income (loss)
 
5,056,962

 
(855,017
)
 
415,945

Realized and unrealized gain on investments:
 
 
 
 
 
 
Net realized gain on investments
 
9,988,150

 
1,028,741

 

Net change in unrealized appreciation on investments
 
14,305,289

 
18,145,836

 
13,294,030

Net income
 
$
29,350,401

 
$
18,319,560

 
$
13,709,975

See accompanying notes to financial statements.


33


KENNEDY WILSON REAL ESTATE FUND IV, L.P.
Statements of Partners' Capital

 
 
General partner and special limited partner
 
Limited partners
 
Total
Partners' capital, December 31, 2012
 
1,508,996

 
141,432,701

 
142,941,697

Capital contributions
 
86,183

 
47,177,507

 
47,263,690

Capital distributions
 
(28,927
)
 
(14,434,417
)
 
(14,463,344
)
Net income
 
1,776,834

 
16,542,726

 
18,319,560

Partners' capital, December 31, 2013
 
3,343,086

 
190,718,517

 
194,061,603

Capital contributions(unaudited)
 
87,792

 
46,545,695

 
46,633,487

Capital distributions (unaudited)
 
(72,025
)
 
(35,940,666
)
 
(36,012,691
)
Net income (unaudited)
 
4,727,113

 
24,623,288

 
29,350,401

Partners' capital, December 31, 2014 (unaudited)
 
$
8,085,966

 
$
225,946,834

 
$
234,032,800


See accompanying notes to financial statements.


34


KENNEDY WILSON REAL ESTATE FUND IV, L.P.
Statements of Cash Flows

 
 
Year ended December 31,
 
 
2014
 
2013
 
2,012
 
 
(unaudited)
 
 
 
 
Cash flows from operating activities:
 
 
 
 
 
 
Net income
 
$
29,350,401

 
$
18,319,560

 
$
13,709,975

Adjustments to reconcile net income to net cash used in operating activities:
 
 
 
 
 
 
Change in accreted interest
 
(1,129,846
)
 
(1,219,448
)
 
(1,852,806
)
Net realized loss on sale of investments
 
(9,988,150
)
 
(1,028,741
)
 

Net change in unrealized appreciation on investments
 
(14,305,289
)
 
(18,145,836
)
 
(13,294,030
)
Change in operating assets and liabilities:
 
 
 
 
 
 
Purchases of investments
 
(42,750,758
)
 
(82,125,268
)
 
(97,157,671
)
Transfer of cash and cash equivalents
 

 
(2,159,975
)
 

Proceeds from sale of investments
 
28,201,916

 
41,292,902

 
29,948,591

Accounts receivable
 

 
52,078

 
(67,127
)
Costs related to investments to be acquired
 

 
(46,056
)
 

Prepaid expenses
 

 
(167,276
)
 
(151,071
)
Accounts payable and accrued expenses
 
(392
)
 
17,800

 
15,424

Net cash used in operating activities
 
(10,622,118
)
 
(45,210,260
)
 
(68,848,715
)
Cash flows from financing activities:
 
 
 
 
 
 
Borrowings under line of credit
 
—    

 
23,621,580

 
26,461,756

Payments under line of credit
 
—    

 
(12,817,485
)
 
(23,448,851
)
Capital contributions
 
46,633,487

 
47,263,690

 
88,703,157

Capital distributions
 
(36,012,691
)
 
(14,463,344
)
 
(24,145,272
)
Net cash provided by financing activities
 
10,620,796

 
43,604,441

 
67,570,790

Net decrease in cash and cash equivalents
 
(1,322
)
 
(1,605,819
)
 
(1,277,925
)
Cash and cash equivalents, beginning of year
 
1,322

 
1,607,141

 
2,885,066

Cash and cash equivalents, end of year
 
$

 
$
1,322

 
$
1,607,141

Supplemental disclosure of cash paid during the year:
 
 
 
 
 
 
Cash paid for interest
 
$
237,552

 
$
252,451

 
$
568,259

 
 
 
 
 
 
 
Supplemental disclosure of net assets and liabilities transferred to Kennedy Wilson REF IV AG, LLC:
 
 
 
 
 
 
Cash and cash equivalents
 
$

 
$
2,159,975

 
$

Accounts receivable
 

 
15,049

 

Costs related to investments to be acquired
 

 
46,056

 

Prepaid expenses
 

 
701,700

 

Accounts payable
 

 
(34,345
)
 

Notes payable
 

 
(13,817,000
)
 

Total net assets and liabilities transferred to Kennedy Wilson REF IV AG, LLC
 
$

 
$
(10,928,565
)
 
$

See accompanying notes to financial statements.


35

Table of Contents
KENNEDY WILSON REAL ESTATE FUND IV, L.P.
Notes to Financial Statements
December 31, 2014 (unaudited), 2013, and 2012


NOTE 1ORGANIZATION
Kennedy Wilson Real Estate Fund IV, L.P. (the Partnership), a Delaware limited partnership, was formed on January 28, 2011. The Agreement of Limited Partnership of the Partnership (Partnership Agreement) was executed on May 13, 2011. The general partner of the Partnership is Kennedy Wilson Property Services IV, L.P., a Delaware limited partnership (the General Partner), and the special limited partner is Kennedy Wilson Property Special Equity IV, LLC, a Delaware limited liability company (the Special Limited Partner). The Partnership Agreement was amended and restated on January 1, 2013 to allow for the creation of a parallel fund structure to enable foreign investors to co-invest with the Partnership. On March 20, 2013, Kennedy Wilson Real Estate Fund IV (IP), L.P. (the Investment Partnership) was created and Kennedy Wilson REF IV AG, LLC (the Aggregator), was formed for the purpose of aggregating the investments of the Partnership. On July 16, 2013, the Partnership contributed 100% of its net assets to the Aggregator in exchange for an 85.02% ownership interest in the Aggregator and was equalized by the investors of the Investment Partnership who afterwards owned 14.98% of the Aggregator. The contribution of net assets from the Partnership to the Aggregator and the admittance/equalization of the Investment Partnership were done as prescribed in the Partnership's amended and restated agreement of limited partnership. Per the agreement, any admitted limited partner shall be (a) treated as having been a party to the agreement and any such increased capital commitment shall be treated as having been made, as if they had been invested from day 1 of the Partnership for all purposes, (b) required to bear and contribute its portion of the management fee from day 1 of the Partnership, other Partnership expenses from day 1 and all organizational expenses whenever incurred, and (c) unless otherwise determined by the General Partner, required to pay to the Partnership an additional amount calculated at 10% per annum (determined as of the date of such limited partner's admittance to the Partnership or increase in capital commitment (with respect to the increase in capital commitment), as applicable, on each portion of its capital contribution (including, as applicable, to fund management fees) from the date such portion of such capital contribution would have been made if such Partner had been admitted as a Partner for its full capital commitment on day 1. The Partnership’s investment objective has remained unchanged and continues to be to acquire office, multifamily, and other real estate investments, including real estate loans and condominiums through its ownership in the Aggregator. In accordance with this objective, the Partnership may form joint ventures with appropriate strategic coinvestors or invest in real estate related financings, such as first trust deeds. Partnership investments will generally involve real estate located in the western United States and Hawaii. Under the terms of the Partnership Agreement, the Partnership shall continue until the eighth anniversary of the effective date of May 13, 2011 and may be extended for an additional one-year period by the General Partner in its discretion, and for an additional one-year period by the General Partner with the prior consent of the limited partners with a majority of aggregate commitments.
NOTE 2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION—The Partnership is an investment company and follow specialized accounting and reporting requirements for investment companies established under U.S. generally accepted accounting principles.
USE OF ESTIMATES—The preparation of the accompanying financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, and reported amounts of revenue and expenses. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Such estimates and assumptions are adjusted when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in those estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.
CASH AND CASH EQUIVALENTS—The Partnership considers its investment in a money market account to be a cash equivalent.
The Partnership maintains its cash in federally insured banking institutions. The account balances at these institutions periodically exceed the Federal Deposit Insurance Corporation’s (FDIC) insurance coverage, and as a result, there is a concentration of credit risk related to amounts in excess of FDIC’s insurance coverage. To mitigate this risk, the Partnership places its cash with quality financial institutions.
FAIR VALUE MEASUREMENT—Fair value is defined as the price that would be received to sell an asset or would be paid to transfer a liability (the exit price) in an orderly transaction between market participants at the measurement date.
A three-level hierarchy was established for fair value measurements that distinguishes between market participant assumptions developed based on market data obtained from sources independent of the reporting entity (observable inputs) and the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The hierarchy level assigned to each investment of the Partnership is based on the

36

Table of Contents
KENNEDY WILSON REAL ESTATE FUND IV, L.P.
Notes to Financial Statements
December 31, 2014 (unaudited), 2013, and 2012


assessment of the transparency and reliability of the inputs used in the valuation of such investment at the measurement date. The three hierarchy levels are defined as follows:
Level 1 - Valuations based on unadjusted quoted market prices in active markets for identical securities.
Level 2 - Valuations based on observable inputs (other than Level 1 prices), such as quoted prices for similar assets and quoted prices in markets that are not active.
Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement, and involve management judgment.
The availability of valuation techniques and observable inputs can vary from investment to investment. 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. Those estimated values do not necessarily represent the amounts that may be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the investments existed. Accordingly, the degree of judgment exercised by the General Partner in determining fair value is greatest for investments classified as Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest-level input that is significant to the fair value measurement.
Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the General Partner's own assumptions are set to reflect those that market participants would use in valuing the asset or liability at the measurement date. The General Partner uses prices and inputs that it believes are current as of the measurement date.
VALUATION OF INVESTMENTS—The Partnership's investments in real estate assets are stated at fair value using the income and market approaches. For the Limited Liability Companies (LLC) in which the Partnership has a partial ownership interest, the LLC's investments in real estate are also stated at fair value using the income and market approaches. The income approach requires the General Partner to estimate the projected operating cash flows of the real estate on an asset-by-asset basis, apply a capitalization (cap) rate to the reversion year's cash flows and discount the cash flows with a risk-adjusted rate for the respective holding periods. The market approach requires the General Partner to identify transactions for similar assets, if any, and apply asset specific adjustments for items such as location, physical condition, and other pertinent factors which would impact fair value. The Partnership's investments in notes and loan pool participations are stated at fair value based on a comparison of the yield that would be required in a current transaction, taking into consideration the risk of the underlying collateral and the credit risk of the borrower to the current yield of similar fixed-income securities.
The accuracy of estimating fair value for Level 3 investments cannot be determined with precision, cannot be substantiated by comparison to quoted prices in active markets, and may not be realized in a current sale or immediate settlement of the asset or liability. Additionally, there are inherent uncertainties in any fair value measurement technique, and changes in the underlying assumptions used, including discount rates, liquidity risks, and estimates of future cash flows, could significantly affect the fair value measurement amounts.
The Partnership's investments in real estate and real estate related assets and real estate related fixed income securities are accounted for on a closing-date basis.
CONCENTRATION OF RISK—Substantially all of the Partnership's investments are concentrated in real estate related investments in California, Oregon, and Hawaii. Adverse conditions in the sector or geographic locations would likely result in material declines in the value of the Partnership's investments.
REVENUE RECOGNITION—Dividend income from investments in real estate and real estate related entities is recorded when a disbursement has been approved and declared from the underlying investments of the Partnership. Undistributed earnings from real estate and real estate related entities are considered by the General Partner in estimating the fair value of these investments. The Partnership also records its proportionate share of the Aggregator’s income, expenses, realized and unrealized gains (losses) after July 16, 2013 (date of equalization).
INCOME TAXES—The Partnership is not subject to federal or state income taxes, and accordingly, no provision for income taxes has been made in the accompanying financial statements. The partners are required to report their proportional share of income, gains, loss, credit, or deduction on their respective tax returns.
The Partnership is required to determine whether a tax position is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits

37

Table of Contents
KENNEDY WILSON REAL ESTATE FUND IV, L.P.
Notes to Financial Statements
December 31, 2014 (unaudited), 2013, and 2012


of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement, which could result in the Partnership recording a tax liability that would reduce net assets. Based on its analysis, the Partnership has determined that there are no tax benefits that would have a material impact on the Partnership's financial position or results of operations. The tax year 2011 (year of inception) is the earliest year that remains open to examination by the taxing jurisdictions to which the Partnership is subject.
NOTE 3FAIR VALUE OF INVESTMENTS
The following table presents the classification of the Partnership's fair value measurements as of December 31, 2014 (unaudited):
 
 
Level 1
 
Level 2
 
Level 3
 
Total
Interests in real estate assets
 
$

 
$

 
$
229,960,932

 
$
229,960,932

Interests in loan pool participations and notes
 

 

 
4,072,176

 
4,072,176

 
 
$

 
$

 
$
234,033,108

 
$
234,033,108

The following table presents changes in Level 3 investments for the year ended December 31, 2014 (unaudited):
 
 
January 1, 2014
 
Purchases
 
Sales
 
Realized gains
 
Accretion on loans
 
Unrealized appreciation (depreciation)
 
December 31, 2014
Interests in real estate assets
 
$
187,501,720

 
$
42,280,778

 
$
(24,115,005
)
 
$
9,988,150

 
—    

 
$
14,305,289

 
$
229,960,932

Interests in loan pool participations and notes
 
6,559,261

 
469,980

 
(4,086,911
)
 
—    

 
1,129,846

 
—    

 
4,072,176

 
 
$
194,060,981

 
$
42,750,758

 
$
(28,201,916
)
 
$
9,988,150

 
$
1,129,846

 
$
14,305,289

 
$
234,033,108

The net change in unrealized appreciation on investments that use Level 3 inputs still held as of December 31, 2014 was $18,294,962 (unaudited).
The following table presents the classification of the Partnership's fair value measurements as of December 31, 2013:
 
 
Level 1
 
Level 2
 
Level 3
 
Total
Interests in real estate assets
 
$

 
$

 
$
187,501,720

 
$
187,501,720

Interests in loan pool participation and notes
 

 

 
6,559,261

 
6,559,261

 
 
$

 
$

 
$
194,060,981

 
$
194,060,981

The following table presents changes in Level 3 investments for the year ended December 31, 2013:
 
 
January 1, 2013
 
Purchases
 
Transfers from real etate to loans
 
Transfer to Aggregator
 
Sales
 
Realized gains
 
Accretion on loans
 
Unrealized appreciation (depreciation)
 
December 31, 2013
Interests in real estate assets
 
$
140,888,821

 
$
78,445,308

 
$
(1,818,081
)
 
$
(10,067,162
)
 
$
(39,166,000
)
 
$
1,028,741

 
$

 
$
18,190,093

 
$
187,501,720

Interests in loan pool participations and notes
 
2,874,334

 
3,679,960

 
1,818,081

 
(861,403
)
 
(2,126,902
)
 

 
1,219,448

 
(44,257
)
 
6,559,261

 
 
$
143,763,155

 
$
82,125,268

 
$

 
$
(10,928,565
)
 
$
(41,292,902
)
 
$
1,028,741

 
$
1,219,448

 
$
18,145,836

 
$
194,060,981


The net change in unrealized appreciation on investments that use Level 3 inputs still held as of December 31, 2013 was $20,299,207.


38

Table of Contents
KENNEDY WILSON REAL ESTATE FUND IV, L.P.
Notes to Financial Statements
December 31, 2014 (unaudited), 2013, and 2012


The following table presents the classification of the Partnership's fair value measurements as of December 31, 2012:
 
 
Level 1
 
Level 2
 
Level 3
 
Total
Interests in real estate assets
 
$

 
$

 
$