TUNDRA SUSTAINABLE FRONTIER FUND inspec-on began, a comprehensive plan was created ... Gul Ahmed The texle ... , strategic planning, risk

TUNDRA SUSTAINABLE FRONTIER FUND

QUARTERLY SUSTAINABILITY REPORT Q3 2016

Introduc)on 3

Currentpor.olio CompanyViola-onWatch 4

Countryfocusandcorporategovernancereports

Pakistan 5SriLanka 6Vietnam 7

Conclusions,EngagementandSelectedreferences 8

AppendixI SustainableDevelopmentGoals(SDGs) 9

AppendixIISustainabilityguidelines 10

AppendixIIITundra’sESGprocess 11

Disclaimer 12

Capitalinvestedinafundmayeitherincreaseordecreaseinvalueanditisnotcertainthatyouwillbeabletorecoverallofyourinvestment.Historicalreturnisnoguaranteeoffuturereturn.Thevalueofinvestedcapitalmayvarysubstan-allyduetothecomposi-onofthefundandtheinvestmentprocessusedbythefundmanager.TheFullProspectus,KIIDetc.areavailableonourhomepage.Youcanalsocontactustoreceivethedocumentsfreeofcharge.Pleasecontactusifyourequireanyfurtherinforma-on:+468-55114570.

SustainabilityReportTableofcontents

INTRODUCTION Thisreportsummarizesthethirdquarterofthisyear,andhighlightsthebestprac-cesofgoodcorporategovernanceofthecompaniesincludedintheTundraSustainableFron-erFund.Globally,thereisaconsensusthatmechanismsforcorporate governance compel a company to self-regulate, which in turn leads to accountability, be\er riskmanagementandanefficientuseof resources.Most companies thathaveexemplary corporategovernance strictlyadheretoafewrules;theseincludehavingaclearstrategyfortheorganiza-on,thedisciplinetoenforcethatstrategy,guidelinesforethicalbehaviour,businesstransparencyandsocialresponsibility.Tofurtherdisplaytheircommitmentforthegreatergood,companiesinthelastdecadeincreasinglyhavebeenemployingsustainableini-a-vesthatformthe benchmark for good prac-ces. These include the OECD’sPrinciples of Corporate Governance, United Na-on’sGlobalCompact,theUN-supportedPrinciplesofResponsibleInvestmentandtheGlobalRepor6ngIni6a6veamongothers. It is observed that companies that are opera-ng in countries where the public sector is more prone tocorrup-onduetoalackofstatecontrol,usuallyaretheonesthatfacehighlevelsofbriberyorfraudintheirday-to-day businesses. Thus, it is fair to say that the governance of a country may be linked to, and even influence, itscorpora-ons.

TheworldmapaccordingtotheCorrup-onPercep-onsIndex2015.Source:TransparencyInterna-onal

The map above illustrates percep-ons of corrup-on,acrosstheglobeintheyearlyreportfromTransparencyInterna-onal [1].Ascanbeseen,mostof the fron-ermarkets fall under the mid- to highly corrupt level,corresponding to a score of 0-50 (a lower scoreindicatesahigherlevelofcorrup-on).Forty(outofthe46 included in the index) na-ons in Africa can bedescribed as seriously corrupt. Tradi-onally, manyinterna-onal investors consider entering intocon-nents suchasAfrica tobeassociatedwithahighrisk.JudgingfromthismapofAfricaitisnotdifficulttounderstand that there is a general sense thatlawlessness and corrup-on prevails. However, inrecentyears,external lawsonan--briberydemandinggood governance, along with local laws againstcorrup-on,guidethereduc-onoffraudulentprac-cesin many of these countries. In fact, one of the mainhurdles to smooth governance is the implementa-on

3

of these law [2]. This is where corporate companies,watchdog bodies and the government have to cometogether and strictly enforce regula-ons. Argen-na, acountrygenerallyalsoconsideredtohaveahighlevelofcorrup-on (32/100 in the Corrup-on Index), has beenstrugglingwithconsequencesofitsgovernment’slackoftransparency and problems with money laundering.However,withtherecent“an--corrup-onwave”inLa-nAmerica,anewtrend is selng [3].Peopleare takingastand and protests against corrup-on scandals areincreasing. Following major events such as the taxevasion scandal that led to the resigna-on of thepresident of Guatemala or the leak of the PanamaPapers, countries like Argen-na are demandingaccountability fromcorrupt rulersandbureaucrats.Thesustainable developmental goal 16 (#SDG16, seeAppendix I) underlines the importance of effec-ve,accountableandtransparentins-tu-onsatalllevels.

SustainabilityReportQ32016

RichardPieris&CoThe rubber and planta-on giant, Richard Pieris & Co(RPCo) in Sri Lanka has been going through anunusually drama-c ac-vity in the last fewmonths. InAugust, all three independent directors at RPCo hadresigned from their posi-ons. It is alleged that thecommi\ees served by these directors – namely theAudit Commi6ee, the Related Party Transac-onsReview Commi6ee, the Nomina-ons Commi6ee andthe Remunera-on Commi6ee – did not take themseriously. Accordingtosources,independentdirectorsatthecompanyseemtohavebeenappointedonlytofulfil regulatory requirements whi le “theircontribu-ons at board level are observed to beinfluencedbytheirappoin-ngauthori-es”.Allega-onsof insider tradingalsosurfacedthismonthwhen a working director of the company wassummoned by the Securi-es Exchange Commission(SEC)inrela-ontoma\erspertainingtoitssubsidiary,Kegalleplanta-ons.Thesameplanta-onwasunderfirein 2009 when SEC doled out a tough warning to thecompanyoninsidertrading.Tundra is in themidst of establishing a dialoguewiththecompanyand/ortheresigneddirectors.

COMPANY VIOLATION WATCH

CURRENT PORTFOLIO By the end of the third quarter of 2016, there are 48 companies in the Tundra Sustainable Fron-er Fund. Threecompanies were added during the period. First, an Argen-nian company, Grupo Supervielle S.A., that providesfinancialservicesto individualsandsmall tomediumenterprises,based inBuenosAires.Thesecondcompany isalogis-cscompany(peopletransporta-on)-DaewooPakistanExpressBusServiceLtd.Thecompanyisdueforlis-ngin thefirsthalfof2017.A separatecase studyon this companywillbe launchedata later stage. Lastly,a tractormanufacturing company established in 1964 called Millat Tractors Limited was also added to the fund. OneArgen-nianfinancialconglomerate(CresudS.A)wassoldduringtheperiod,butthetransac-onwasnotrelatedtoanyESGissues.

NuiPhaoistheworld’slargesttungstenminewithanes-matedreserveof66mtons.Photo:MiningGlobal

MasanGroupIn July this year, residents from Vietnam’s Dai TuDistrict lodged complaints againstNui PhaoMiningCoLtd.Allegedly,theminingcompanywasaccusedof causing environmental damage in the northernprovince of ThaiNguyen. Themining company is asubsidiaryofMasanGroup,oneofthecompaniesinTundraSustainableFron-erFund.In the wake of these allega-ons, the Ministry ofNatural Resources and Environment conducted aninspec-on in the Nui Phaomine in August. Beforethe inspec-on began, a comprehensive plan wascreated in partnership with the local ProvincialPeople’s Commi\ee. Collabora-onshave alsobeenestablishedwithotheragenciesandexpertsinordertodetermine the impactof these viola-onson theenvironment and the local inhabitants. If thefindings in the report deem it necessary, arese\lement plan will also be devised for theresidents.Thecompany insists that ithascompliedwiththeWorldBank’sEquatorPrincipleswhicharethe “gold standard for the development of thecommunity and the environment around miningprojects”.Tundrahasini-atedadialoguewiththecompany.Al i st of our concerns have a lready beencommunicatedtothemandafollow-upmee-nghasbeenscheduled.

COMPANY VIOLATION WATCH

AtaleEstate–oneoftheestatesattheKegallePlanta-on.Photo:RichardPieris&Co


4

PAKISTAN AccordingtoasurveyundertakenbyTransparencyInterna-onalin2010,49%oftheci-zensinPakistanwerereportedtohavepaidabribeforatleast one service. Accordingly, around 73% of the people felt that thegovernment’seffortstofightcorrup-onwereineffec-ve.Theins-tu-onperceived to be the most corrupt in the country is the police. Manyci-zens,especiallywomenandethnic/religiousminori-es,wouldprefertonotreportacrimebecausetheyknowtheywillbemetwithdemandsfor bribes or even face abusive behaviour. However, if a complainantdoesreachthepolicesta-on,thereisnoguaranteethattheircomplaintwill actually be registered. Unless the complainant has powerfulconnec-ons,thepolicewillnotregisteracasesoastoavoidtheirlegaldutytoinves-gate.Ontheflipside,thecountry’spolicefacesamyriadoflimita-onswhichincludealackoffunds,pi-ableworkingcondi-ons,

REPORTS FROM COMPANIES GulAhmedThe tex-le manufacturing and retail company enjoyssuperior reputa-on in the market. It has a detailedstatement of business conduct and ethics code which thecompany insists is adhered to when undergoing orrecommending any ac-on. On its board of seven, thecompanyhasthreeindependent,non-execu-vedirectors.HabibBankLtd.The largestprivatebankinPakistan,HabibBankLtd.(HBL)has expanded extensively since its incep-on in 1941. Thebank even has an interna-onal presence which isopera-onal in over 25 countries. The company complieswith the Code of Corporate Governance and applies itsprinciples in its day-to-day func-ons and decision-makingprocesses. HBL’s board comprises seven directors withthree categorized as independent, non-execu-ve directors.In2015,thebankwon15awardsowingtoitsperformance;one of these was the ‘Safest Bank Award’ by the GlobalFinance Magazine. The Bank is also among the top 25companies on the Pakistan Stock Exchange for 2014 and2015. This award is given to companies that excel inprofitability,marketac-vityandcorporategovernance.K-ElectricLtd.Thepoweru-litycompanyisoneofthelargestemployersinthecountrywith11,000employees.KarachiElectricLtd.(KE)has a detailed Code of Conduct for its Board ofDirectors(BoD)andemployees.Thereare13BoardofDirectorsatthecompany, with one independent director. At the AsianPowerAwards2015,KEwas awarded the ‘PowerU-lityofthe Year’ for Pakistan. At present, the company’s majorshareholder(AbraajGroup)isevalua-ngthepossibilityofadivestment and a preliminary agreement has been madewithChineseShanghaiElectric.

Capital:IslamabadPopula)on:188900000Area:796095km2

IncomeLevel:LowerMiddleIncomeAdultLiteracyRate:57%(2012)Corrup)onPercep)onRank:117/168StateAn)-Corrup)onBody:Na-onalAccountabilityBureauFinancialRegulatoryBody:Securi-esExchangeCommissionofPakistan

Sources:WorldBank,TransparencyIntl

5

AvanceonLtd.In2014, theengineering companywhichprovidesautoma-onsolu-ons conducted two workshops which covered the role,importanceandstructureof theboard,strategicplanning,riskmanagement etc. In its ethics program, the company trainsemployeesandprovidesamechanismtoreportwrongdoing,asystem for detec-on and conduc-ng inquiries, and takingcorrec-ve ac-on. The company has an elaborate whistleblowing policy which relates to finance, accoun-ng, internalcontrolandan--corrup-onma\ers.Outofthesevendirectorsonthecompany’sboard,threearelistedasindependent.CenturyPaper&BoardMillAs the name suggests, the companymanufactures paper andpaperboard. The company’s Code of Ethics focuses oncorporate governance principles, transparency, fair businessprac-ces and business riskmanagement, to name a few. Thecompanyhas eight directors on the board,with onebeing anindependent. In 2012, the company was awarded ‘BestCorporateAward’onitsAnnualReportfortheyear2010bytheIns-tute of Chartered Accountants of Pakistan. The awardpromotesexcellenceincorporaterepor-nginPakistanandtheawarding ins-tu-on insists that the award helps improve acompany’soverallcorporategovernance.PakistanStateOilThe company markets and distributes petroleum, oils andlubricants. Recently, the company became a signatory to theUnited Na-ons Global Compact. The company will adhere tothe Compact’s principles regarding human rights, labor andan--corrup-on, to name a few. In February 2015, thegovernment of Pakistan dissolved the board of Pakistan StateOil allegedly over their failure to prevent the petrol crisis inPunjabinJanuary.Bytheendoftheyear,arecons-tutedboardofmanagementwithfournewboardmemberscametogetherfortheirfirstmee-ng.

Shortfacts


lackoftrainedpersonneletc.whichonlyexacerbatetheproblem[4].Whiletheseperspec-vearelikelytoreflectthe reality, as far as the governance of the country is concerned, it should also bemen-oned that the financial andprivate sector of the country is one of the best prac-ses in the region. In 2015, Khaleej Times reported that thePakistani stock exchangewas theworld’s best performing fron-er stockmarketwith a benchmark index that hasgained15%[5]. In June2016,MSCI tookadecisiontoupgradePakistantoemergingmarketsstatusas therewereimprovementsinthecountry’stransparencyandliquidity.ThiswillbeimplementedinMay2017.

SRI LANKA Nepo-sm,cronyism,payingbribesforservicesandinordertoavoidbureaucra-credtapeareafewexamplesofcorrup-onprevalentinSriLanka.Thecountryis,however,amongthebe\erperformersinfron-er markets with a score of 83/168 on the Corrup-onPercep-on Index. The new government (represented by Primeminister Wickremasinghe/President Sirisena, elected in January2015), was commended by Ban Ki-moon for their efforts andcommitment to good governance (yahapalayanaya in Singhalese)andreconcilia-on[6].TheGovernmentalcapacityhasbeenreducedin the past decade due to the efforts and ac-vi-es demanded torebuild the country awer the devasta-ng impact and loss ofinfrastructurefollowingthetsunamiin2004.Thecountryalsofaces

REPORTS FROM COMPANIES AccessEngineeringPlcAcivilengineeringfirm,AEwasestablishedin2001.Thecompanyhasasubstan-alCodeofEthicsinplacewhichisoverseenbyitsinternalauditdepartment.Therearethree independent directors on the board of 10. Thecompany was awarded the Best Corporate Ci-zenSustainability Award by the Ceylon Chamber ofCommercein2014.CargillsCeylonPlcThe companyhas12directors,outofwhich four areindependent. The company also demonstratescompliancewith its corporate governance disclosures.Cargills declares that only responsible businessprac-ces are employed during its processes andfunc-ons. Thecompanyalsostatesthat ithasazero-tolerancepolicytowardsbriberyandcorrup-on.TokyoCementCo.(Lanka)PlcThecompany is the largestmanufacturerand supplierof cement in Sri Lanka. Out of the ten board ofdirectors, four are independent. A number of sub-commi\ees (such as the audit, remunera-on andnomina-on commi\ee) help the board govern thecompany.RichardPieris&CoOne of the largest conglomerates in the country, thecompany is known for its rubber and planta-ons.

TokyoSuperHouse,TokyoCementCo.’scustomereduca-onfacilitywhereconsumerscanexperiencethecompany’snewproductsandtheircorrectuse.

Photo:TokyoCementCo.

As explained earlier, the company has been under firerecentlywithamyriadofallega-ons.Chiefoftheseisanaccusa-onofinsidertradingwhichwasheightenedwhenthe three independent directors on the board resignedfromtheirposi-ons(seedetailsonpage4).JohnKeellsHoldingsPlcThe Sri Lankan conglomerate is amember of theWorldEconomicForumalongwiththeUNGlobalCompact.JKHreleasesanextensivedocumentthatdetailsini-a-vesthecompany’s corporate governance ini-a-ves undertakenevery year. The company has been ranked the “MostRespected En--es in Sri Lanka” for ten years by thecountry’sleadingbusinessmagazine,LMD.

Capital:ColomboPopula)on:20970000Area:65610km2IncomeLevel:LowerMiddleIncomeAdultLiteracyRate:91%(2010)Corrup)onPercep)onRank:83/168StateAn)-Corrup)onBody:CommissiontoInves-gateAllega-onsofBriberyorCorrup-onFinancialRegulatoryBody:Securi-es&ExchangeCommissionofSriLanka

Sources:WorldBank,UNDPHDIs

Short facts


6

difficul-es following a lack of coordina-on between the na-onal and district levels concerning alloca-on ofresponsibili-es.Obviouslythe26-yearlongconflict(1983-2009)betweenthegovernmentandamilitantorganiza-oncalledtheLibera-onTigersofTamilEelam(LTTE)havecontributedtothedifficul-esfacedbythecountrypresently[7]. Intheimmediateawermathofthewar,thegovernmentallegedlycarriedoutseveralviola-onswhichincludeddeprivingalmost300,000displacedpeopleof theircivil liber-es. Individualssuspectedof linkswiththeLTTEwererandomly selected, detained and/or tortured for further inves-ga-on [8]. In an effort to uphold jus-ce andaccountabilityfortheviola-onsduringtheconflict,thenewgovernmentalongwiththeHumanRightsCouncil,aimstoestablishaspecialhybridcourtwhichwillintegrateinterna-onaljudgesandprosecutorswithanindependentSriLankanprosecu-ngbody.InJune,thenewgovernmentbroughtinthe19thamendmenttothecons-tu-on.Itplacesnewchecksonthepoweroftheexecu-veandseekstorestoretheindependenceofpolice, judicial,humanrights,andelec-oncommissions[7].

VIETNAMIncultureswheregiw-givingisanorm–likeinmostAsiancountries–itcan be difficult to draw a line between right and wrong, advertentlyallowing bribery to flourish. In recent years Vietnam has madeimprovements concerning several aspects of governance, with theimplementa-onofacomprehensiveregulatoryframework.Thecountryhasmadegreatprogressinshareholderrightsandequitabletreatmentand overall corporate governance, although issues with boards’independenceandeffec-venesss-llexist[9].Variousprotec-onlawsonenvironmentandlabourrightshavebeenputinplace,butenforcement

7

Capital:HanoiPopula)on:91700000Area:330972km2

AdultLiteracyRate:94%(2009)Corrup)onPercep)onRank:112/168FinancialRegulatoryBody:StateSecuri-esCommission

Source:WorldBank,UNDPHDIs

Short facts

REPORTS FROM COMPANIES HoChiMinhCityInfrastructureInvestmentEstablished in 2001, the company was founded to raisefunds to invest in infrastructure development. Thecompany has a detailed governancemanual that lists therole and responsibili-es of the management and theemployees. In 2016, the companywas ranked among thetop 50 best performing companies in Vietnam asannouncedbyForbesVietnam.FPTCorp.Oneoftheleadingtechnologycorpora-onsinthecountry,FPT Corp was established in 1988. There are sevendirectorson theboardof the company,outofwhomtwoare independent. Reportedly, the company strives toemulate the criteria of OECD’s Principles of CorporateGovernance in its own processes. In 2015, FPT wasrecognised as the “Overall Best Company in Vietnam forCorporateGovernance”byAsiaMoneymagazine.

MilitaryCommercialBankFoundedin1994,thecompanyprovidespersonalandcorporate banking services in the country. In anassessmentofitsstrategicgovernanceobjec-ves,thebank reportedly enhanced its governance in 2015 by‘consolida-ngthegovernanceandopera-onstructureof member en--es, increasing capacity of riskmanagement, IT management and cross-sellingmanagement’.Thebankalsolearntthatthereisagapin opera-ng efficiency between different brancheswhich needs to be bridged. There are eleven boardmembersinthecompany-oneisindependent.VinamilkIn the posi-on of the largest dairy company in thecountry,thecompanyenjoysagreatreputa-oninthemarket and amongst the ci-zens. Prior to 2015, theCEO of the company, Ms. Lien was also theChairperson of the board. However, a newchairwoman has since been elected to establish asepara-on between the two posi-ons in order toconformtogoodcorporategovernanceprac-ces.Thecompany has an extensive corporate governanceregula-onmanualandacodeofconductinplace. InNovember2015,VinamilkwasnamedoneofASEAN’stop 50 companies during the first ASEAN CorporateGovernanceConferenceandAwardsCeremony.


LeQ:VisitatVinamilkHeadOfficeRight:HoChiMinhstreetview.Photo:Tundra

s-ll lagsbehindascomparedtoothercountriesinAsia[10,11].Accordingtothepercep-onsofVietnameseurbanci-zens,thesectorsmostlyaffectedbycorrup-onarethepolice,followedbyeduca-on,publicofficials,judiciaryandthen the business sector [11]. Civil society and media are increasingly taking on a greater role in advocacy ofgovernanceandan--corrup-onissues,pulngfurtherpressureongovernmentalac-oninthearea.


ENGAGEMENT / ACTIVITIES Asanexampleofourengagement wepresenttwoexamplesofdialogueswithcompaniesfromthelastquarter:theseareMasanGroupandDaewooPakistanExpressBusServiceLtd.•  OneofthelargestprivatesectorcompaniesinVietnam,MasanGrouprecentlycameunderfireforpollu-ngin

itsNuiPhaominefordevelopingapolymetallicprojectinthecountry’sDaiTuDistrict(detailsonpage4).Tundraini-atedcontactwiththeHeadofInvestorRela-onsatthecompanyandrelayedourconcerns.Amee-nghasbeenscheduled inmid-Novemberbetween representa-ves fromtheMasanGroupand theTundra team.Weaimtodiscussenvironmentalrisksfromtheiropera-onsandhowtominimizetheirimpactontheirsurroundingcommuni-es.Wewillalsodiscusspoten-alrisksfortheiremployeesandanygovernancerelatedissues.

•  AsthelargestorganizedtransportcompanyinPakistan,Daewooisaverypromisinginvestment.However,therearecertainESGconcernsthatstemfromthelocaltransporta-onsectorthatwewanttoabsolutelyavoid.Theseinclude unethical behaviour by some public transporta-on drivers. Awer thorough research a dialogue withDaewoowas ini-atedwhere our general concernswere expressed. This has been followed up by a detailedques-onnaireinves-ga-ngtheirpoliciesandprocesses.OtherthanthegeneralESGconcerns,ourques-onnairefocused on the company’s employees – their code of conduct and their awareness of illegi-mate and illegalac-ons.Theaimistopre-emptanypoten-alproblema-cbehaviourandpreventincidentswithinthecompany.Afollow-upmee-nghasbeenscheduledforthelastweekofNovember.

CONCLUSIONS This report summarizes the third quarter of this year, and highlights the best prac-ces of good corporategovernanceinthecompaniesincludedinthefund.Globally,thereisaconsensusthatmechanismsforcorporategovernanceincludingaclearstrategyfororganiza-ons,thedisciplinetoenforcethatstrategy,ethicalbehaviour,business transparencyand social responsibilityareessen-al.During the lastdecadecompaniesare increasinglyemployingsustainableini-a-vesthatformthebenchmarkforgoodprac-ces.TheseincludetheOECD’sPrinciplesof Corporate Governance, United Na-on’s Global Compact, the UN-supported Principles of ResponsibleInvestmentandtheGlobalRepor6ngIni6a6ve.GenerallythecompaniesinTundraSustainableFron-erFundhada sa-sfactory coverage on corporate governancewith informa-on available to the public. The excep-onweresome of the Vietnamese companies where 36% (4/11) did not have informa-on on the company website inEnglish. It isobservedthatcompanieswhoareopera-ng incountrieswherethepublicsector ismorepronetocorrup-onduetoalackofstatecontrol,usuallyaretheonesthatfacehighlevelsofbriberyorfraudintheirday-to-day businesses. Several countries in fron-er markets have implemented laws concerning governance, butenforcement of these laws is lagging. Civil society,media and corpora-ons all need to work together to holdgovernmentsaccountablefortheirac-onsandstandupagainstcorrup-on.

SELECTED REFERENCES: [1]Corrup-onPercep-onsIndex2015.TransparencyInterna-onal.h\p://www.transparency.org/cpi2015[2] A Review of Corporate Governance in Africa: Literature, Issues and Challenges. (2003). Clean Clothes Campaign. GlobalCorporateGovernanceForum.237256378_A_Review_of_Corporate_Governance_in_Africa_Literature_Issues_and_Challenges[3]DemiseofBrazilianleQismwillreverberateacrosstheAmericas.(2016).FinancialTimes.h\ps://www.w.com/content/6c58ffc4-18a3-11e6-b8d5-4c1fcdbe169f[4]Thiscrookedsystem.PoliceabuseandreforminPakistan.(2016).HumanRightsWatchh\ps://www.hrw.org/report/2016/09/25/crooked-system/police-abuse-and-reform-pakistan[5]KSEworld’sbestperformingfron-erstockmarket:report.(2015).APP.TheExpressTribune.h\p://tribune.com.pk/story/896886/kse-worlds-best-performing-fron-er-stock-market-report[6]MarkingAnniversaryofSriLanka’sPoli-calTransi-on,Secretary-GeneralUrgesCon-nuedProgresstowardsStrengtheningGoodGovernance.(2016).UnitedNa-ons.h\p://www.un.org/press/en/2016/sgsm17446.doc.htm[7]SriLanka.Worldreport2015.(2016).HumanRightsWatch.h\ps://www.hrw.org/world-report/2016/country-chapters/sri-lanka#ff850f[8]ReportoftheOHCHRInves-ga-ononSriLanka.HumanRightsCouncil[2015].UnitedNa-ons.h\p://www.ohchr.org/EN/HRBodies/HRC/RegularSessions/Session30/Documents/A_HRC_30_CRP_2.docx[9]ReportontheObservanceofStandardsandCodes.CorporateGovernanceCountryAssessmentVietnam.(2013).TheWorldBank.h\ps://openknowledge.worldbank.org/bitstream/handle/10986/20587/887590ROSC0P130x385228B00OUO0900ACS.pdf?sequence=1&isAllowed=yRC/RegularSe[10]ResponsibleInves-ngInVietnam.IssuesforResponsibleInvestors.(2011).ResponsibleResearch/DragonCapital.h\ps://pla{orm.reprisk.com/downloads/partnerreports/6/Responsible_Inves-ng_in_Vietnam-Issues_for_Responsible_Investors.pdf[11]Overviewofcorrup-onandan--corrup-oninVietnam.(2012).An--corrup-onResourceCentre.U4.h\p://www.transparency.org/files/content/corrup-onqas/315_Overview_of_corrup-on_and_an--corrup-on_in_Vietnam.pdf

8

AppendixISustainableDevelopmentalGoals

Partnerships for thegoals. “The SustainableDevelopmentGoals (SDGs) canonlybe realizedwith a strongcommitmenttoglobalpartnershipandcoopera-on.”Thisgoalrequirescomingtogetherandsuppor-ngtheleastdevelopedcountriesinanywaypossible.•  Providefinancialresourcestodevelopingcountries.In2015,theOfficialDevelopmentAssistancetotalled

$131.6billion–thehighestever.•  Access to science and technology should be available to all. In 2015, developed regions had a 29%

penetra-onoffixed-broadbandservices,whileindevelopingcountriesitwas7.1%andinleastdevelopedregions,itwasonly0.5%.Buildingci-zens’capacityshouldalsobeapriority.

•  Encourageexportsfromdevelopingcountries. In2014, leastdevelopedcountriescontributedto1.1%ofworldmerchandiseexports(doubledfrom0.6%in2000).

•  The weighted average of applied tariffs in interna-onal trade has been decreasing over -me, but s-llvarieswidelyacrossregionsandcountrygroupsonmainproductsectors.

•  Tofacilitatesustainableini-a-vespolicycoherenceneedstobestrengthened.

Peace,jus)ceandstrongins)tu)onsarecloselylinkedtohumanrightsandeffec-vegovernance.Allcountriesneedtotakeac-onagainstsexualviolence,crime,exploita-onandtorture.Tomeetthisgoal,governmentsneedtoupholdtheruleoflawforall,withoutanydiscrimina-on.Termina-ngcorrup-oninallitsformsisextremelyimportantforachievingthisgoal.•  Globally,thepropor-onofpeopleheldindeten-onwithoutsentencingdecreasedslightly,from32%oftotal

detaineesin2003-2005to30%in2012-2014.Thepercentagefordevelopingregionshasconsistentlybeenmorethantwicethanthatofdevelopedregions.

•  Effortstomakena-onalandinterna-onalins-tu-onsmoreeffec-ve,inclusiveandtransparentareincreasing.Duringthepasttenyears,nearlytwothirdsof144countrieswithavailabledatawereabletoplantheirna-onalbudgetseffec-vely.

•  Afreepressiscloselylinkedtoaccesstoinforma-onandtheprotec-onofhumanrights,butthetrendinthisregardisdiscouraging.Thenumberofjournalistskilledincreasedfrom65in2010to114in2015,despitethefactthat,by2013,90Stateshadadoptedlawsonfreedomofand/oraccesstoinforma-on.

•  95%ofrefugeesoriginatefromthesame10conflictssince1991.

Tundra aims to incorporate all aspects of theprinciplesoftheSDGsthatareconsideredrelevanttothe business and the ESG-process. This is to beinterpretedaswork inprogress,andwillbeupdatedcon-nuously.

SUSTAINABLE DEVELOPMENT GOALS (SDGs) TheSustainableDevelopmentGoals(SDGs)wereadoptedby world leaders on the 25thof September 2015 at theUnitedNa-on’ssummit.Theoverallaimofthe17goalsisto end poverty, fight inequality and injus-ce and tackleclimate change by year 2030. These goals stand as anextended version of the eightMillennium DevelopmentGoals(MDGs)targe-ngpoverty,hunger,disease,genderinequali-es,accesstowaterandsanita-on.Allofthe17Sustainable Development Goals are connected to theUN’sDevelopmentProgramme’sstrategicplan,focussingonsustainabledevelopment;democra-cgovernanceandpeacebuilding;climateanddisasterresilience.A full descrip-on of SDGs can be found here: h\p://www.undp.org/content/undp/en/home/sdgoverview/post-2015-development-agenda/

9

Sources:UNDP,GlobalGoals,Children&ArmedConflict,WorldBank,UN

Strengthenthemeansofimplementa)onandrevitalizetheglobalpartnershipforsustainabledevelopment

Promotepeacefuland inclusivesocie)es for sustainabledevelopment,provideaccesstojus)ceforallandbuildeffec)ve,accountableandinclusiveins)tu)onsatalllevels

AppendixIISustainabilityguidelines

SUSTAINABILITY GUIDELINES Tundra’s ESG process is governed by interna-onalstandards of responsible inves-ng. These includescreening for “norm-based” viola-ons, “controversialweapons”and“sector-based”breaches(seeTable1).Norm-basedbreachesincludescreeningforbreachesthatareincontraven-onwiththeUnitedNa-onsGlobalCompact (see Table 3) - the guiding principles onBusiness and Human Rights, OECD Guidelines forMul-na-onal Enterprises and the ILO Tripar-teDeclara-on of Principles concerning Mul-na-onalEnterprises and Social Policy. During this screening,companies’ adherence to interna-onal norms forhuman rights, the environment, labor standards andan--corrup-onareassessed.Controversial weapons. During this screening, acompany’s involvement with prohibited or bannedweaponsisassessed.Thereisazerotoleranceasfarasthese weapons are concerned. Companies with anyinvolvementincontroversialweaponsareautoma-callyexcludedfromthefund.Sector-specific breaches. There are certain sectorsthat are considered to be no-go areas in the‘sustainability’ universe. These are sectors involved inalcohol, pornography, tobacco, weapons or gambling.However,ifthetotalrevenuefromaproductfromoneofthesesectorsdoesnotexceed5%,thecompanymays-llbeeligibleforthesustainablefund.

0

Norm-BasedBreaches

ControversialWeapons*

Sector-specificBreaches

• Environment• HumanRights• LabourRights• Corrup-on

• NuclearWeaponsBiologicalWeapons• ChemicalWeapons• Non-detectableFragments• BlindingLaserWeapons• An--personnelmines• ClusterMuni-ons• IncendiaryWeapons• DepletedUraniumAmmuni-on

*AllProduc-on/Distribu-on:0%

• Alcohol(Produc-on:5%/Distribu-on:5%)• Pornography(Produc-on:0%/Distribu-on:5%• Tobacco(Produc-on:0%,Distribu-on:5%)• Weapon5%• Gambling5%

Environmental

Social

Table2.CentralESGFactorsMeasuresforSustainabilityandEthicalImpactofinvestments

• EnvironmentalManagementSystems• RawMaterialSourcing• EnergyConsump-on• WasteProcessing• Cer-fica-on

• LabourRights/Standards• HumanRights• GenderEquality&Diversity• ProductIntegrity• CommunityInvolvement

• ManagementStructure• Board&InvestorOversight• GoodGovernance• An--Bribery/Corrup-on• TaxTransparency/Repor-ngGovernance

HumanRightsPrinciple1:Businessesshouldsupportandrespecttheprotec-onofinterna-onallyproclaimedhumanrights;Principle2:makesurethattheyarenotcomplicitinhumanrightsabuses.LabourPrinciple3:Businessesshouldupholdthefreedomofassocia-onandtheeffec-verecogni-onoftherighttocollec-vebargaining,Principle4:theelimina-onofallformsofforcedandcompulsorylabour;Principle5:theeffec-veaboli-onofchildlabour;Principle6:theelimina-onofdiscrimina-oninrespectofemploymentandoccupa-on.EnvironmentPrinciple7:Businessesshouldsupportaprecau-onaryapproachtoenvironmentalchallenges;Principle8:undertakeini-a-vestopromotegreaterenvironmentalresponsibility;Principle9:encouragethedevelopmentanddiffusionofenvironmentallyfriendlytechnologies.An)-Corrup)onPrinciple10:Businessesshouldworkagainstcorrup-oninallitsforms,includingextor-onandbribery.

Table3.TheTenPrinciplesoftheUNGlobalCompact

Table1.Guidelinesindetail

10

TUNDRA’S ESG PROCESS Asshownbelow,thescreeningprocessforsustainabilityencompassesdifferentphases.Theini-alphasebeginswithanideatoinvestinapar-cularcompanybyTundra’spor{oliomanagersandresearchteam.Thereisapreliminaryscreeningcarriedoutandaweritisconfirmedthatthecompanydoesnotbelongtoa“no-go”sectorandthattherearenoreportedeventsthatareinconflictwithinterna-onalguidelines(seeAppendixII),theinvestmentismade.Thereawer,theESGResearchteam,alongwithanexternalESGAdvisor,carriesoutan in-depthresearch intotheinvestedcompanytoverifyandensureabsolutecompliancetointerna-onalstandards.Intheeventofapossiblebreachincontroversialweaponorasectorbreach,thereisanimmediatedivestmentfromtheoffendingcompany.However,ifthebreachis“norm-based”,theESGResearchteamwillcreateandimplementatwelve-month engagement strategy with the company’s higher management. The aim of this dialogue is toencouragethemanagementtoimproveandtoextracttheirwillingnesstoworktowardsresolvingtheissue(s).Thesemee-ngswould usually take the formof interviews, discussions, and answering quan-ta-ve data sets. If, on theotherhand,thecompanyisunwillingtocooperate,thiswillresultinanimmediatedivestment.

AppendixIIITundra’sESGProcess

11

Important:Pleasereadthisinforma)on/disclaimerThis presenta-on is issued by Tundra Fonder AB (”Tundra”). The informa-on – assump-ons, opinions, valua-ons,recommenda-ons etc – presented in this publica-on have been compiled by Tundra. The publica-on is based on generallyavailable informa-onfromsourcesthatTundrabelievestobereliable.However,Tundracannotguaranteetheaccuracyofthisinforma-on. This presenta-on – as well as all or parts of its content – may not be duplicated or distributed under anycircumstanceswithoutthewri\enpermissionofTundra.Useofinforma)onThispresenta-onisintendedexclusivelyfortheuseofTundra’sclientsinSwedenandisthusnotintendedforanyindividualorcompanyintheUSA,Canada,JapanorAustralia,orinanyothercountrywherethepublica-onoravailabilityofthematerial isprohibitedorrestrictedinanyway.TheFundortheFundCompanyTundraFonderisnotregisteredundertheUnitedStatesSecuri-esActof1933,theUnitedStatesInvestmentCompanyActof1940,oranyotherapplicablelawoftheUnitedStates.Thereforefundunitsmaynotbeoffered,soldorinanyotherwaydistributedtophysicalorlegalpersonsintheUnitedStatesofAmerica.Itistheresponsibilityofindividualsoren--esacquain-ngthemselveswiththispresenta-ontoinformthemselvesofandcomplywiththeseregula-ons.Alegalen-tymaybeprevented from inves-ng in Tundra’s fundby lawor internal regula-ons. Foreign lawmayprevent investments tobemade fromoutsideof Sweden. Tundrawill not verify that investments fromoutsideof Sweden aremade in accordancewithforeign law and Tundrawill not accept responsibility for any such investments. It is the responsibility of persons reading thispresenta-ontoinformthemselvesof,andtofollowtheserules.Shouldanysuchpersonorcompanynonethelessacceptoffersfrom Tundra, of whatever kind they may be, it may be disregarded. No part of this presenta-on should be construed as asolicita-onorrecommenda-ontoconductormakeuseofanytypeof investmentortoenter intoanyothertransac-ons.Theopinions expressed in this presenta-on reflect the present views of the par-cipants andmay thus be subject to change. Theinforma-on in this presenta-on does not take into account the specific investment goal, financial situa-on or needs of anyspecificrecipient.Theinforma-onshouldnotberegardedasapersonalrecommenda-onorinvestmentadvice.Theclientshouldalways seek adequate professional advice before taking any investment decision and each such investment decision is takenindependentlybytheclientandattheclient'sownrisk.Tundraacceptsnoliabilitywhatsoeverforanydirectorconsequen-allossofanykindarisingfromtheuseofthispresenta-on.Tundra’semployeesmayhold,indirectorindirectinvestmentsmen-onedinthispresenta-on.ThestateoftheoriginoftheFundisSweden.ThisdocumentmayonlybedistributedinorfromSwizerlandtoqualifiedinvestorswithin the meaning of Art. 10 Para. 3,3bis and 3ter CISA. The representa-ve in Switzerland is ACOLIN Fund Service AG,Stadelhoferstrasse18,CH-8001Zurich,whilst thePayingAgent isBankVontobel Ltd,Go\hardstrasse43,CH-8022Zurich. TheBasicdocumentsof the fundaswellas theannual reportmaybeobtained freeofchargeat theregisteredofficeof theSwissRepresenta-veRisksInvestmentsinfinancialinstrumentsareassociatedwithriskandaninvestmentmaybothincreaseanddecreaseinvalueorevenbecomeworthless.Historical returns areno guaranteeof future returns. Interna-onal investments, par-cularly thoseonnewmarkets in developing and growth countries (such as Eastern Europe (including Russia), Asia, La-n America and Africa), arenormallyassociatedwithahigher levelofriskthan investments inSwedishorotherdevelopedmarkets’securi-es.Theserisksincludebothpoli-calandeconomicuncertainty inothercountriesaswellas currencyfluctua-ons.These risksarepar-cularlyhighonnewmarketssincethesecountriesmayhaverela-velyunstablegovernmentsandimmaturemarketsandeconomies.

AppendixIVDisclaimer

12