KKR Japan Stewardship Code

In 2014, Japan’s Financial Services Authority (“FSA”) published the "Principles for Responsible Institutional Investors" (or the "Code") to promote the sustainable growth of companies through investment and dialogue. In March 2020, the FSA published the second revision of the Code. This revision serves as a framework for institutional investors, aiming “to promote sustainable growth of companies through investment and dialogue”. Kohlberg Kravis Roberts & Co. L.P. (together with its subsidiaries that operate the applicable asset management business, “KKR,” “the Firm,” “we” or “us”) is proud to endorse the FSA’s effort and document how we are working to meet the principles set forth in the Code, outlined below. These principles are based on KKR’s private equity investments but can also extend in principle to other similar investments when appropriate.

Principle 1 — Institutional investors should have a clear policy on how they fulfill their stewardship responsibilities, and publicly disclose it.

KKR maintains that the thoughtful management of sustainability, regulatory, geopolitical, and reputational issues helps us make better investments, and is an essential part of long-term business success in a rapidly changing world. Given this tenet, KKR has focused on supporting our investee companies’ efforts in managing their material sustainability topics and engaging with companies on a diverse set of issues.

In particular, KKR seeks to consider material sustainability issues both in the pre-investment phase and in the post-investment phase of our investment process because we believe that doing so helps us both create and protect value. Our approach to identifying material risks and opportunities — which are based on a variety of factors, such as the company’s industry, its stakeholders, and where it operates, including where its supply chain is located — is integrated into our existing investment processes. We recognize that each investment has a unique set of business-relevant sustainability risks and opportunities, and how they are managed is not “one size fits all.” Since 2011, KKR has comprehensively outlined its efforts through the publication of an annual Sustainability Report (then called the “ESG and Citizenship” report), and in 2014 KKR published a Responsible Investment Policy (then called the “Global Private Equity ESG Policy”) to help guide our decisions during the pre- and post-investment period (both publicly available at https://www.kkrvip.net/about/sustainability/resource-center ).

KKR Global Public Affairs, including KKR Asia Public Affairs, works closely with regional deal team leaders and investment teams to monitor and manage material sustainability opportunities and risks, and the team’s evaluations are discussed with investment partners and investee company management teams where relevant.

Principle 2 — Institutional investors should have a clear policy on how they manage conflicts of interest in fulfilling their stewardship responsibilities, and publicly disclose it.

KKR aims to foster a culture of compliance and ethics to meet the expectations of our clients, shareholders, employees, and other stakeholders. The Firm maintains policies and procedures that foster ethical conduct in our business activities and interactions to promote ethical behavior across KKR. The Global Conflicts Committee oversees compliance with the Firm’s policies in its Global Conflicts Policy and will review and analyze specific issues, such as potential investment fund-related conflicts of interest and other compliance risks related to KKR’s business as a whole or individual transactions. We expect all directors, officers, and employees of KKR to adhere to KKR’s Code of Business Conduct and Ethics, which outlines our expectations on business ethics and personal integrity. Further, our employees are guided by our Ethics and Compliance Handbook, which highlights significant existing policies as well as KKR’s values, principles, and core rules that we follow, including rules governing personal investing, conflicts of interest, financial crimes, information security, media and communication usage, and workplace social behavior. KKR’s various oversight committees and management work together to help make sure all business conduct, ethics, and compliance policies are rigorously upheld. As part of these efforts, policies are reviewed on a periodic basis and updated as appropriate to reflect changing regulations, company strategy, and industry trends.

Principle 3 — Institutional investors should monitor investee companies so that they can appropriately fulfill their stewardship responsibilities with an orientation towards the sustainable growth of the companies.

AND

Principle 4 — Institutional investors should seek to arrive at an understanding in common with investee companies and work to solve problems through constructive engagement with investee companies.

Once an investment is made, we closely monitor a company’s performance with the objective of driving growth, enhancing profitability and optimizing long-term value for shareholders. In private equity, we work closely with company management teams to define strategic priorities and develop operating budgets, and we encourage our investee companies to invest in their own development to enhance future competitiveness, improve operating efficiencies, make strategic acquisitions and incentivize employees by developing and deploying employee engagement and ownership programs. The KKR Investment teams, together with the KKR Sustainability and KKR Capstone teams as needed, support company-specific implementation of sustainability performance improvements. Sustainability professionals develop resources for investee companies. KKR Capstone is a team of operating professionals and is at the center of our value creation strategy, working side-by-side with investment teams and portfolio companies to identify and deliver sustainable operational value. This process is enhanced by the localized expertise of KKR’s teams on the ground: across our seven offices in Asia Pacific, nearly all members of KKR’s investment team and KKR Capstone teams are local to the markets where they work. This gives team members a strong understanding of the culture, language, business environment, risks and sentiment in the markets where KKR invests. KKR also supports investee companies to reduce risk where appropriate, whether through assistance on corporate governance or the sharing of best practices.

At our core, KKR looks to partner with management teams and entrepreneurs that have track records of success. We believe that the combination of KKR’s industry knowledge, investment experience, and operational expertise provides the Firm with an edge in identifying and creating value in investment opportunities. KKR’s strategy is not only to work as partners with the management of its investee companies, but also to leverage all the resources of our global platform.

Principle 5 — Institutional investors should have a clear policy on voting and disclosure of voting activity. The policy on voting should not be comprised only of a mechanical checklist; it should be designed to contribute to the sustainable growth of investee companies.

KKR has adopted policies with respect to proxy voting, and it is the Firm’s general policy to vote in the interest of maximizing shareholder value. To that end, KKR will vote in a way that we believe is consistent with our obligations to our clients.

For further information on our policy, please refer to the description of our proxy voting policies and procedures available in our Sustainability Report.

Principle 6 — Institutional investors in principle should report periodically on how they fulfill their stewardship responsibilities, including their voting responsibilities, to their clients and beneficiaries.

Since 2008, KKR has sought to incorporate certain leading global frameworks and standards into our reporting, disclosure, and processes, and also has supported certain industry groups and cross-sector initiatives. We have reported publicly on our sustainability efforts since 2011. We seek to align our annual Sustainability Report with select global sustainability frameworks and standards, including applicable Sustainability Accounting Standards Board ("SASB") Standards and the recommendations of the Task Force on Climate-related Financial Disclosures ("TCFD"). KKR communicates and reports about our stewardship activity through periodic written public reports, and confidential fund or asset-level reports and annual meetings with KKR fund investors.

Principle 7 — To contribute positively to the sustainable growth of investee companies, institutional investors should develop skills and resources needed to appropriately engage with the companies and to make proper judgments in fulfilling their stewardship activities based on in-depth knowledge of the investee companies and their business environment and consideration of sustainability consistent with their investment management strategies.

The KKR investment Sustainability, and Capstone professionals work with investee companies to drive operational improvements. We identify areas of value creation during due diligence and then aim to support boards and management teams to develop value creation plans. When conducting our investment due diligence, we rely upon our experience and also look to the topics and industry-specific issues identified by the SASB Standards as an input when identifying business-relevant sustainability issues. Once the operational priorities are set, KKR teams work in partnership with management to support operational improvements within investee companies.

For over 15 years, KKR has focused on supporting our investee companies’ efforts on managing their material sustainability topics with a global ambition to help companies create and protect long-term value. Sustainability subject-matter experts across KKR are deeply integrated across multiple teams and serve as resources to our investment professionals and investee companies. Our one-firm approach enables us to effectively utilize a valuable network of resources and experts across sectors and investment platforms, nonprofit organizations, and technical experts. For example, KKR is a founding partner of Ownership Works, a nonprofit created to support public and private companies transitioning to shared ownership models. KKR has been publicly committed to responsible investment since Kohlberg Kravis Roberts & Co L.P. became a signatory of the voluntary framework of the United Nations-backed Principles for Responsible Investment (“PRI”) in 2009. We believe that we have a history of innovation and progress when it comes to thoughtfully integrating and managing sustainability-related issues in a manner that is designed to manage risk and create value.