KKR Private Equity Conglomerate Financial Report Summaries

Risks

• Risk management activities may not be effective and, consequently, may adversely affect our return.
• Extensive regulation of our business affects our activities and creates the potential for significant liabilities and penalties, which could materially and adversely affect our business.
• Misconduct of employees of the Manager or by third-party service providers could cause significant losses to us.
• Complex regulations may limit our ability to raise capital, increase the costs of our capital raising activities and may subject us to penalties.
• Operational risks, including those relating to third parties who provide services to us, may disrupt our businesses, result in losses or limit our growth.
• Federal, state and foreign anti-corruption and trade sanctions laws and restrictions on foreign direct investment applicable to us and our portfolio companies create the potential for significant liabilities and penalties, the inability to complete transactions, imposition of significant costs and burdens, and reputational harm.
• We are subject to focus by some of our Shareholders, regulators and other stakeholders on ESG.
• Conflicts between KKR or its affiliates and the Company regarding syndication of portfolio companies and warehousing may not be resolved in favor of the Company.
• Our acquisitions and holdings may be subject to a number of inherent risks.
• We may acquire interests in portfolio companies through arrangements with third parties, including a minority interest, to the extent consistent with maintaining our exclusion from the Investment Company Act.
• We may enter into Joint Ventures with third parties to acquire portfolio companies, which could result in shared decision-making authority and conflicts of interest.
• We may make a limited number of acquisitions, or acquisitions that are concentrated in certain portfolio companies or geographic regions, which could negatively affect our performance to the extent those concentrated holdings perform poorly.
• We may acquire portfolio companies involved in heavily regulated industries.
• We may acquire portfolio companies subject to commodity price risk and energy industry market dislocation.
• We may acquire portfolio companies that may be exposed to interest rate risk, meaning that changes in prevailing market interest rates could negatively affect the value of such portfolio companies.
• If a portfolio company is unable to increase its revenue in times of higher inflation, its profitability might be adversely affected.
• We may acquire portfolio companies involved in the health care sector, which is subject to risks of changes in government policies, regulatory approval and continual regulatory review.
• We may acquire portfolio companies in the renewable energy industry, which is subject to risks of a rapidly evolving market.
• We may acquire portfolio companies experiencing or expected to experience financial difficulties, or that otherwise may become distressed, which may ultimately cause such portfolio companies to become subject to bankruptcy proceedings.
• We may acquire emerging and less established companies that are heavily dependent on new technologies, where success is less certain.
• We may acquire companies that are heavily dependent on patents, trademarks and other intellectual property.
• We may acquire portfolio companies involved in the technology industry, which is subject to risks of technological disruption, increased competition and rapidly changing market conditions.
• We may acquire portfolio companies involved in the media industry, which is subject to risks of adverse government regulation.
• We may acquire “middle market” portfolio companies, which involves certain risks that are not encountered in large-sized acquisitions.
• We may acquire portfolio companies that are based outside of the United States, which may expose us to additional risks not typically associated with acquiring companies that are based in the United States.
• We may be impacted by changes in trade policies.
• Fluctuations in currency values could adversely affect the U.S. dollar value of portfolio companies, interest, dividends and other revenue streams received by us, gains and losses realized on the sale of portfolio companies and the amount of distributions, if any, to be made by us.
• We may acquire portfolio companies based in Asia, which may be dependent upon international trade.
• We will depend on the Manager and KKR to achieve our business objectives.
• Our ability to achieve our business objective depends on the ability of the Manager to identify, acquire and support our portfolio companies.
• We will rely on the ability of the management teams of our portfolio companies to implement any agreed-upon business plans but cannot assure they will be able to do so in accordance with the Company’s expectations.
• There are various conflicts of interest in our relationship with KKR, including with our Manager and in the allocation of management resources to KKR Vehicles and us, which could result in decisions that are not in the best interests of our Shareholders.
• We would not be able to operate our business according to our business plan if we are required to register as an investment company under the Investment Company Act.
• Extensive regulation of the Manager’s business may impede its ability to effectively manage our portfolio companies, which could materially and adversely affect our business.
• Our LLC Agreement contains provisions that reduce or eliminate duties (including fiduciary duties) of our Board and limit remedies available to Shareholders for actions that might otherwise constitute a breach of duty. It will be difficult for Shareholders to successfully challenge a resolution of a conflict of interest in accordance with the LLC Agreement.
• Our LLC Agreement includes a jury trial waiver that could limit the ability of Shareholders of the Company to bring or demand a jury trial in any claim or cause of action arising out of or relating to the LLC Agreement, or the business or affairs of the Company.
• Our LLC Agreement designates the Court of Chancery of the State of Delaware or, if such court lacks jurisdiction, the state or federal courts in the State of Delaware and any appellate court thereof, as applicable, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by Shareholders, which could limit our Shareholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.
• KKR, the Manager, their respective affiliates, our directors, officers and certain service providers are entitled to exculpation and indemnification resulting in limited right of action for Shareholders.
• We have certain reporting obligations not applicable to private companies. We will need to make significant capital expenditures to be in compliance with certain regulations not applicable to private companies. Failure to comply with such regulations may have an adverse effect on our business.
• We could be subject to review and approval by CFIUS or other regulatory agencies resulting in limitations or restrictions on our acquisitions and joint ventures.
• We could become subject to the fiduciary responsibility and prohibited transaction provisions of Title I of ERISA and/or the prohibited transaction provisions of Section 4975 of the Code, and we could be subject to potential controlled group liability.
• Failure to comply with Data Protection and Privacy Laws could lead to significant fines, sanctions and penalties.
• Cybersecurity risks could result in the loss of data, interruptions in our business and damage to our reputation, and subject us to regulatory actions, increased costs and financial losses, each of which could have a material adverse effect on our business and results of operations.
• There is no public trading market for the Shares and Shareholders will bear the risks of owning Shares for an extended period of time due to limited repurchases. If a Shareholder sells its Shares to us, the Shareholder may receive less than the price it paid.
• We may amend the LLC Agreement without Shareholder approval and Shareholders will not be entitled to vote for the election of directors or have any right to influence or control the Company’s operations.
• We do not expect to make distributions on a regular basis.
• Valuations of our portfolio companies are estimates of fair value and may not necessarily correspond to realizable value.
• Monthly NAV calculations are not governed by governmental or independent securities, financial or accounting rules or standards.
• Prospective shareholders will not know the NAV per Share of their investment until after the investment has been accepted.
• We are a new company and have a limited operating history.
• Due to the nature of our holdings in portfolio companies, Shareholders have limited liquidity and may not receive a full return of their invested capital if they elect to have their Shares repurchased by the Company.
• A Shareholder’s ability to have its Shares repurchased by us is limited.
• Economic events that may cause our Shareholders to request that we repurchase their Shares may materially and adversely affect our cash flows, our results of operations and our financial condition.
• The Company may require a Shareholder to have its Shares repurchased at any time in its sole discretion.
• Holders of Class R-S Shares, Class R-U Shares and Class R-I Shares may have their shares automatically converted to Class S Shares, Class U Shares and Class I Shares, respectively.
• Payment of the Management Fee or Performance Participation Allocation in Shares will dilute a Shareholder’s interest in the Company.
• We may hold corporate bonds.
• We may invest in convertible securities.
• We may be subject to the risk of commercial mortgage-backed securities (“CMBS”).
• We may be subject to residential mortgage-backed securities (“RMBS”) risk.
• Our holdings of pass-through certificates, securitization vehicles or other special purpose entities (collectively, “asset-backed securities”) may involve risks that differ from or are greater than risks associated with other types of instruments.
• Collateralized bond obligations, collateralized loan obligations and other collateralized debt obligations are subject to additional risk.
• The Company’s ability to make distributions depends on it receiving sufficient cash distributions from its underlying Operating Subsidiaries, and we cannot assure our Shareholders that our Company will be able to make cash distributions to them in amounts that are sufficient to fund their tax liabilities.
• If the Company or the Operating Subsidiaries were to be treated as a corporation for U.S. federal income tax purposes, the value of our Shares might be adversely affected.
• Changes in tax laws related to partnerships and the “qualifying income” exception under the “publicly traded partnership” provisions may have a material adverse effect on the Company’s qualification as a partnership for U.S. federal income tax purposes.
• The Company structure involves complex provisions of U.S. federal income tax law for which no clear precedent or authority may be available. The tax characterization of the Company structure is also subject to potential legislative, judicial, or administrative change and differing interpretations, possibly on a retroactive basis.
• To meet U.S. federal income tax and other objectives, the Company and the Operating Subsidiaries may invest through U.S. and non-U.S. subsidiaries that are treated as corporations for U.S. federal income tax purposes, and such subsidiaries may be subject to corporate income tax or be classified as passive foreign investment companies (“PFICs”) or controlled foreign corporations (“CFCs”).
• Tax-exempt organizations may face certain adverse U.S. tax consequences from owning Shares if the Company generates UBTI.
• If the Company were engaged in a U.S. trade or business, non-U.S. persons would face certain adverse U.S. tax consequences from owning Shares.
• The Company’s delivery of required tax information for a taxable year may be subject to delay, which could require a Shareholder who is a U.S. taxpayer to request an extension of the due date for such Shareholder’s income tax return.
• The U.S. Internal Revenue Service (“IRS”) may not agree with certain assumptions and conventions that the Company uses in order to comply with applicable U.S. federal income tax laws or that the Company uses to report income, gain, loss, deduction, and credit to Shareholders.
• If the IRS makes an audit adjustment to the Company’s income tax returns, it may assess and collect any taxes (including penalties and interest) resulting from such audit adjustment directly from us, in which case cash available for distribution to Shareholders might be substantially reduced.
• Under the Hiring Incentives to Restore Employment Act of 2010 (“FATCA”), certain payments made or received by the Company may be subject to a 30% federal withholding tax, unless certain requirements are met.
• If we are required to register as an investment company under the Investment Company Act, we would likely be treated as a publicly traded partnership that is subject to corporate income taxes.