Sandvik Pension Plan 2001
Statement of Investment Principles – March 2021
1

Introduction
The Trustees of the Sandvik Pension Plan 2001 (the “Plan”) have drawn up this Statementof Investment Principles (the “Statement”) to comply with the requirements of thePensions Act 1995 (the “Act”) and associated legislation including the Occupational
Pension Schemes (Investment) Regulations 2005 (as amended). The Statement isintended to affirm the investment principles that govern decisions about the Plan’sinvestments. The Trustees’ investment responsibilities are governed by the Plan’s Trust
Deed and Rules, of which this Statement takes full regard.
This statement replaces the previous statement dated August 2020.
In preparing this Statement, the Trustees have consulted a suitably qualified person byobtaining written advice from Mercer Limited (“Mercer”). In addition, consultation has been
undertaken with the Sponsoring Company (the “Sponsor”) to ascertain whether there are
any material issues of which the Trustees should be aware in agreeing the Plan’sinvestment arrangements and, in particular on the Trustees’ objectives.
The Trustees are also cognisant of any views on investment issues from the Sandvik
Group Pension Committee (“GPC”), which has been established to provide a consistentframework for the Sandvik occupational pension schemes globally.

2

Process For Choosing Investments
The Trustees have appointed Mercer to act as discretionary investment manager, by way
of Mercer’s Dynamic De-risking Solution, to implement the Trustees’ strategy whereby
the level of investment risk reduces as the Plan’s funding level improves. In this capacity,and subject to agreed restrictions, the Plan’s assets are invested in multi-client collective
investment schemes (“Mercer Funds”). The Mercer Funds are domiciled in Ireland (fortraditional asset classes) and in Luxembourg (for private markets assets). The Irelanddomiciled collective investment schemes are managed by a management company(Mercer Global Investments Management Limited (“MGIM”)) and the Luxembourgdomiciled funds are managed by Mercer Alternatives (Luxembourg) S.à r.l. and,
respectively, these entities have appointed Mercer Global Investments Europe Limited(“MGIE”) and Mercer Alternatives AG (“Mercer AG”) as investment managers of the
Mercer Funds.
In practice, assets in the Mercer Funds are invested with third party fund managers basedin countries such as Ireland, UK and USA. Mercer and its affiliates have expertise in
identifying, selecting and combining highly rated fund managers who are best placed andresourced to manage the Plan’s assets on a day to day basis.
In considering appropriate investments for the Plan, the Trustees have obtained andconsidered the written advice of Mercer, whom the Trustees believe to be suitably
qualified to provide such advice. The advice received and arrangements implemented
are, in the Trustees’ opinion, consistent with the requirements of Section 36 of thePensions Act 1995 (as amended).

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3

Investment Policy and Risk
Overall investment policy falls into two parts. The strategic management of the assets,that being the structure of the funding level de-risking triggers which determines the
allocation between the growth and matching assets, which is fundamentally the
responsibility of the Trustees acting on advice from their investment consultant, and isdriven by their investment objectives as set out below. The remaining elements of policy
are part of the day-to-day management of the assets; this is delegated to professional
investment managers and described in the Statement of Investment Arrangements(“SIA”). The format of this SIP is designed to provide a logical statement rather than anordered response to the Act. The Trustees believe, however, that it incorporates a
response to all the requirements of the Act.

4

Investment Objectives
The Trustees understand that taking some investment risk, with the support of theSponsor, is necessary to improve the Plan’s funding level. The Trustees recognise that
equity investment (and other growth assets) will bring increased volatility to the funding
level, but in the expectation of improvements in the Plan’s funding level through growth
asset outperformance of the liabilities over the long term.
The Trustees’ primary objective is to make sure the Plan can meet its obligations to thebeneficiaries of the Plan. The long-term objective of the Trustees is therefore to reach aposition such that the assets would be sufficient to meet the liabilities with the assets theninvested in a low risk manner.
The Trustees recognise that this ultimately means investing in a portfolio of bonds andother liability driven investments but believe that at the current time some investment inequity and other growth assets (“Growth Portfolio”) is justified to target enhanced return
expectations and thereby target funding level improvements. The Trustees recognise that
this introduces investment risk and these risks are discussed below.
The Trustees have agreed that the Plan should move progressively towards a long-termtarget of reaching a fully funded position, on a low risk basis, and moving to a bond-based
investment strategy (“Matching Portfolio”) in order to minimise the volatility of the funding
level relative to the liabilities. Further detail on the funding basis and timeframes are given
in Section 6. The Trustees will monitor progress against this target.
The Trustees believe that the investment strategy adopted for achieving this objective will
also be appropriate for achieving the objectives of avoiding significant volatility in thecontribution rate over the longer term. The Trustees recognise that investment in the
Growth Portfolio could potentially lead to volatility in the contribution rate over shorter time
periods.
The objectives set out above and the risks and other factors referenced in section 5 ofthis Statement are those that the Trustees determine to be financially material
considerations. Non-financial considerations are discussed in section 12.

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5

Risk Management and Measurement
There are various risks to which any pension Plan is exposed. The Trustees’ policy onrisk management, over the Plan’s anticipated lifetime, is as follows:

The primary risk upon which the Trustees focus is that arising through a mismatch
between the Plan’s assets and its liabilities and the Sponsor’s ability to support
this mismatch risk.



The Trustees recognise that whilst increasing investment risk increases potential
returns over a long period, it also increases the risk of a shortfall in returns relative
to that required to cover the Plan’s accruing liabilities as well as producing morevolatility in the Plan’s funding position.



To control the risk outlined above, the Trustees, having taken advice, set the split
between the Plan’s Growth and Matching Portfolio such that the return on theoverall portfolio is expected to be sufficient to meet the objectives outlined in
section 3. As the funding level improves, investments will be switched from the
Growth Portfolio into the Matching Portfolio with the aim of reducing investment
risk. Mercer provides the Trustees with regular reports regarding the Plan’s asset
allocation.



The Trustees recognise that even if the Plan’s assets are invested in the Matching
Portfolio there may still be a mismatch between the interest-rate and inflation
sensitivity of the Plan’s assets and the Plan’s liabilities due to the mismatch induration between the assets in the Matching Portfolio and actuarial liabilities.
Mismatch risk also arises from demographic risk (primarily longevity risk) in theliabilities.



The Trustees recognise the risks that may arise from the lack of diversification of
investments. To control this risk, the Trustee has delegated the asset allocation
decisions within the Growth and Matching Portfolios to Mercer (subject to certain
restrictions). Mercer aims to ensure the asset allocation policy in place results inan adequately diversified portfolio. Mercer provides the Trustee with regularmonitoring reports regarding the level of diversification with the portfolio.

To help the Trustees ensure the continuing suitability of the current investments
Mercer provides the Trustees with regular reports regarding the performance of
the underlying asset managers appointed within the relevant Mercer Funds toenable the monitoring of differences between the expected and experienced levelsof risk and return.

There is a risk that the day-to-day management of the assets will not achieve therate of investment return expected by the Trustees. The Trustees recognise thatthe use of some active investment managers involves such a risk. However, for
specific asset classes, the Trustees believe that this risk is outweighed by thepotential gains from successful active management. Likewise, passive
management will be used for one of a number of reasons, namely to diversify andreduce risk and when investing in certain asset classes where, due to relatively
efficient markets, the scope for achieving added value is more limited.

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To help diversify manager specific risk, within the context of the Growth andMatching Portfolios, the Trustees expect that the Plan’s assets are managed byappropriate underlying asset managers. By investing in the Mercer Funds theTrustees have delegated the selection of these underlying asset managers to
Mercer.



By investing in the Mercer Funds, with the exception of those investments madewithin private markets assets, the Trustees do not make investments in securities
that are not traded on regulated markets. The Plan’s investments in securities nottraded on regulated market are made in recognition of the associated risks (inparticular liquidity and counterparty exposure) and for the purpose of reducing thePlan’s mismatch risk relative to its liabilities or to facilitate efficient portfolio
management. In any event, the Trustees ensure that the assets of the Plan are
predominantly invested on regulated markets.

The Trustees recognise the risks inherent in holding illiquid assets. The Trustees
have carefully considered the Plan’s liquidity requirements and time horizon whensetting the investment strategy and liquidity risk is managed by ensuring illiquid
asset classes represent an appropriate proportion of the overall investment
strategy.



The Trustees recognise that environmental, social and corporate governanceconcerns, including climate change, have a financially material impact on return.
Section 12 sets out how these risks are managed.



The Plan is subject to currency risk because some of the investment vehicles inwhich the Plan invests are denominated or priced in a foreign currency. To limit
currency risk, the Trustees invest in currency hedged share classes for funds inwhich these share classes are available.

Longevity risk is a demographic risk that members live longer than expected inaggregate. To manage this, the Trustees consider the use of longevity hedges tomitigate this risk where appropriate.

Should there be a material change in the Plan’s circumstances, the Trustees will advise
Mercer, who will review whether and to what extent the investment arrangements shouldbe altered; in particular whether the current strategy remains appropriate.
In addition, the investment strategy will be reviewed approximately annually.
6

Investment Strategy
The Trustees, with advice from the Plan’s investment consultant and Scheme Actuary
and in conjunction with the Company, regularly review the Plan’s investment strategy.
These reviews consider the Trustees’ investment objectives, their ability and willingness
to take risk (the risk budget) and how the agreed risk budget should be allocated andimplemented (including de-risking strategies).
The current strategy reduces the risk in the Plan’s assets relative to its liabilities over timeusing a trigger based framework. The approach relates the asset allocation to the Plan’sfunding level, currently, this is on an actuarial basis using a discount rate of 0.5% p.a. inexcess of appropriate gilt yields.

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As part of the 2018 strategy review, the Trustees agreed to retain the decisions relating
to the underlying composition of assets with the Plan’s Growth Portfolio and delegate thedecisions relating to the underlying composition of the Matching Portfolio to Mercer.
In 2021, the Trustees agreed to delegate the decisions relating to the underlying
composition of the Growth Portfolio to Mercer. The Trustees keep this decision underregular review.
The approach is based on the following principles:To hold sufficient growth assets to target full funding on a “gilts +0.5% p.a.” basis
within 10-15 years of the valuation date;To reduce the volatility in the funding level by reducing un-hedged liability
exposures;To monitor the progress in the funding level and to capture improvements in thefunding level promptly, if they arise.

The funding level triggers which form the basis of the Plan’s dynamic investment strategy
are set out in a separate document – the Statement of Investment Arrangements.
Once the funding level has moved through a band, the asset allocation will not be
automatically “re-risked” should the funding level deteriorate. The investment strategy will
be reviewed on a broadly annual basis to ensure that the triggers set remain appropriate
and amended if required.
Responsibility for monitoring the Plan’s asset allocation, and undertaking any rebalancing
activity, is delegated to Mercer. Mercer reports quarterly to the Trustees on its rebalancing
activities.
7

Day–to-Day Management of the Assets
The Trustees have delegated day-to-day management of the assets to Mercer who in turndelegates responsibility for the investment of the assets to a range of underlying third
party asset managers.
At the time of writing, the Plan maintains a holding in a pooled property fund with Lothbury
Investment Management Ltd (“Lothbury”) which will remain in place until such time as theTrustees, having obtained advice from Mercer, agrees that it is appropriate to disinvest
from this fund and invest the proceeds with Mercer. The Trustees therefore continue todelegate the day-to-day management of these assets to Lothbury (who are also
responsible for arranging the safe custody of these assets).

8

Additional Assets
Under the terms of the Trust Deed the Trustees are responsible for the investment of
AVCs paid by members. The Trustees review the investment performance of the chosenproviders on a periodic basis and take advice as to the providers’ continued suitability.

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9

Realisation of Investments
The Trustees, on behalf of the Plan, hold shares in the Mercer Funds. The investment
managers to the Mercer Funds (including the underlying third party asset managers
appointed by MGIE and Mercer AG), within the parameters stipulated in the relevant
appointment documentation, have discretion in the timing of the realisation of investments
and in considerations relating to the liquidity of those investments.

10 Cashflow and cash flow management
Cashflows, whether positive or negative, are taken into account by Mercer when it
rebalances the Plan’s assets in line with the Plan’s strategic allocation. Mercer is
responsible for raising cash flows to meet the Plan’s requirements.
11 Rebalancing
As noted, responsibility for monitoring the Plan’s asset allocation and any rebalancing
activity is undertaken by Mercer. Mercer reviews the balance between the Growth andMatching Portfolios on an ongoing basis. If at any time the balance between the Growthand Matching Portfolios is deemed to be outside an agreed tolerance range, Mercer willseek to rebalance these allocations back towards the target allocations. Although Mercer
has discretion to vary the tolerance range, it is the intention that the Growth Portfolio
allocation will not drift by more than 5%, in absolute terms, away from the relevant target
allocation.
The ranges have been designed to ensure that unnecessary transaction costs are notincurred by frequent rebalancing.
In the event of a funding level trigger being breached, the assets will be rebalanced tobring them in line with the reduced growth portfolio weighting, under the new de-risking
band, as defined in the Statement of Investment Arrangements.
Rebalancing takes place in accordance with the provisions of the discretionary investment
management agreement entered into between the Trustees and Mercer, and unlessspecifically agreed, any assets outside of the Growth and Matching Portfolios will not be
part of such rebalancing.
12 ESG, Stewardship, and Climate Change
The Trustees believe that environmental, social, and corporate governance (ESG) factors
may have a material impact on investment risk and return outcomes, and that goodstewardship can create and preserve value for companies and markets as a whole. The
Trustees also recognise that long-term sustainability issues, particularly climate change,
present risks and opportunities that increasingly may require explicit consideration.

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As noted above, the Trustees have appointed Mercer to act as discretionary investment
manager in respect of the Plan’s assets and such assets are invested in a range of Mercer
Funds managed by MGIE. The Trustees, Mercer, Mercer AG and MGIE support andexpect the asset managers appointed to manage the Mercer Funds which are registeredwith the Financial Conduct Authority to comply with the UK Stewardship Code and UK
Corporate Governance Code, including public disclosure of compliance via an external
website. An assessment of each manager’s compliance against the seven underlying
principles of the UK Stewardship Code is part of the MGIE’s and Mercer AG’s review
process of all underlying equity managers appointed to manage assets of the Mercer
Funds in which the Plan invests. Those managers exercise voting rights and undertake
engagement (collaborative or otherwise) in accordance with their own corporate
governance policies
The Trustees consider how ESG, climate change and stewardship is integrated within
Mercer’s, Mercer AG’s, and MGIE’s, investment processes and those of the underlying
asset managers in the monitoring process. Mercer, MGIE, and Mercer AG, are expected
to provide reporting to the Trustees on a regular basis, at least annually, covering thefollowing topics:

UK Stewardship Code Review which assesses each underlying equity manager’s
compliance against the seven principles of the UK Stewardship Code

Stewardship monitoring reporting which assesses each underlying equity
manager’s record of executing and disclosing voting activity, and the extent towhich they are engaging with the underlying companies in which they invest.



ESG ratings of all investment managers versus the asset class universe ESG
ratings. In addition, ESG ratings are disclosed in the quarterly performance reportwhich is reviewed by the Trustees.



Carbon footprint analysis versus the index on the Mercer equity portfolios the Plan
invests in.

Climate scenario modelling on the Mercer Funds used within the Growth Portfolio.

The Trustees have considered and will continue to consider sustainability themed
investments.
Member views
Member views are currently not taken into account in the selection, retention andrealisation of investments but may be in the future. However, the Trustees will only takeactions that are in the best interests of the Plan as a whole and so will act on member
views accordingly.
Investment Restrictions
The Trustees have considered MGIE’s exclusion framework for the equity and fixedincome portfolios. MGIE and Mercer AG has given their appointed third party asset
managers investment restrictions in relation to particular products or activities. The
Trustees have not set any investment restrictions on the appointed investment managers
in relation to particular products or activities, but may consider this in future.

Page 813 Trustees’ policies with respect to arrangements with, and evaluation of theperformance and remuneration of, asset managers and portfolio turnover costs
When engaging Mercer as discretionary investment manager to implement the Trustees’
investment strategy outlined in section 6, the Trustees are concerned that, as appropriate
and to the extent applicable, Mercer is incentivised to align its strategy and decisions withthe profile and duration of the liabilities of the Plan, in particular, long-term liabilities.
Although making up a smaller proportion of the Plan’s assets the Trustees have similar
concerns regarding the incentives of Lothbury in their management of the Lothbury
Property Trust, in which the Plan invests.
As Mercer manages the Plan’s assets by way of investment in Mercer Funds, which are
multi-client collective investment schemes, the Trustees accept that they do not have theability to determine the risk profile and return targets of specific Mercer Funds but theTrustees expect Mercer to manage the assets in a manner that is consistent with theTrustees’ overall investment strategy as outlined in section 6. The Trustees have taken
steps to satisfy themselves that Mercer has the appropriate knowledge and experience
to do so and keeps Mercer’s performance under ongoing review.
Should Mercer fail to align its investment strategies and decisions with the Trustees’
policies, it is open to the Trustees to disinvest some or all of the assets invested managed
by Mercer, to seek to renegotiate commercial terms or to terminate Mercer’s appointment.
To evaluate performance, the Trustees receive, and consider, investment performance
reports produced on a quarterly basis, which presents performance information andcommentary in respect of the Plan’s funding level and the Mercer Funds in which theTrustees are invested. Such reports have information covering fund performance for theprevious three months, one-year, three years and since inception. The Trustees review
the absolute performance and relative performance against a portfolio’s and underlying
investment manager’s benchmark (over the relevant time period) on a net of fees basis.
The Trustees’ focus is on the medium to long-term financial and non-financial
performance of Mercer and the Mercer Funds.
Neither Mercer, MGIE or Mercer AG make investment decisions based on theirassessment about the performance of an issuer of debt or equity. Instead, assessmentsof the medium to long-term financial and non-financial performance of an issuer are madeby the underlying third party asset managers appointed by MGIE and Mercer AG to
manage assets within the Mercer Funds. Those managers are in a position to engage
directly with such issuers in order to improve their performance in the medium to longterm. The Trustees are, however, able to consider Mercer’s, Mercer AG’s and MGIE’s
assessment of how each underlying third party asset manager embeds ESG into theirinvestment process and how the manager’s responsible investment philosophy aligns
with the Trustees’ own responsible investment policy. This includes the asset managers’
policies on voting and engagement. Section 12 provides further details of the steps taken,
and information available, to review the decisions made by managers, including voting
history and the engagement activities of managers to identify decisions that appear outof line with a Mercer Fund’s investment objectives or the objectives/policies of the Plan.
The asset managers are incentivised as they will be aware that their continued
appointment by MGIE and Mercer AG may be based, at least in part, on their success inmeeting expectations.

Page 9The Trustees are long-term investors and are not looking to change their investment
arrangements on an unduly frequent basis. However, the Trustees do keep thosearrangements under review, including the continued engagement of Mercer using, among
other things, the reporting described above.
The Trustees monitor, and evaluate, the fees it pays for asset management services on
an ongoing basis taking into account the progress made in achieving its investment
strategy objectives as outlined in section 4. Mercer’s, and MGIE’s, fees are based on apercentage of the value of the Plan’s assets under management which covers the design
and annual review of the de-risking strategy, and investment management of the assets.
In addition, the underlying third party asset managers of the Mercer Funds also charge
fees based on a percentage of the value of the assets under management. In someinstances, some of the underlying managers may also be entitled to charge fees basedon their performance.
Mercer AG fees are charged based on net commitment for the first four years following
the final close and, thereafter, by reference to the Net Asset Value of the Mercer Fund.
MGIE reviews the fees payable to third party asset managers managing assets invested
in the Mercer Funds on a regular basis with any negotiated fee savings passed directly to
the Plan. Mercer’s, MGIE’s and Mercer AG’s and the third party asset managers’, fees
are outlined in a quarterly investment strategy report prepared for the Trustees, excluding
performance-related fees and other expenses involved in the Mercer Funds not directly
related with the management fee.
Details of all costs and expenses are included in the Mercer Fund’s Supplements, theReport & Accounts and within the Plan’s annualised, MiFID II compliant Personalised
Cost & Charges statement. The Plan’s Personalised Cost & Charges statement also
include details of the transaction costs associated with investment in the Mercer Funds.
The Trustees do not have an explicit targeted portfolio turnover range, given the de-risking
mandate, but rebalancing ranges have been designed to avoid unnecessary transaction
costs being incurred by unduly frequent rebalancing. Other than in respect of private
markets investments where turnover in the Mercer Funds does not usually apply,
performance is reviewed net of portfolio turnover costs, with the review of portfolio
turnover of the underlying investment managers undertaken by MGIE.
Similar to the Mercer Funds, the Plan’s investment with Lothbury is made by way of amulti-client investment scheme. The same restrictions of the Trustee regarding the risk
profile and return targets of this fund exists with the Lothbury invested assets as withthose assets invested in the Mercer Funds. The Trustees have therefore taken similar
steps to ensure they are satisfied that Lothbury’s management of the fund, their expertiseand incentives in doing so, and the fees incurred by the Plan align with the Trustees
objectives and expectations. The Trustees continue to review to monitor Lothbury in its
capacity as manager of these assets.
14 Fee Structures
Details of fees in relation to the Mercer Funds are set out in section 13.
For longevity hedge contracts, risk transfer fees for the longevity hedge are embedded in
the fixed leg payable by the Trustees under the longevity hedge agreed with the Insurer
at the contract inception, and are a fixed percentage. Mercer agrees with the Trustees thescope of their services for supporting the ongoing running of the longevity hedge inperiodic engagement letters which set out corresponding expected fees.

Page 1015 Review of this Statement
The Trustees will review this Statement at least once every three years and in responseto any material changes to any aspects of the Plan, its liabilities, finances the attitude torisk of the Trustees and the Sponsor which they judge to have a bearing on the statedinvestment policy. Any change to this Statement will only be made after having obtained
and considered the written advice of someone who the Trustees reasonably believes tobe qualified by their ability in and practical experience of financial matters and to have theappropriate knowledge and experience of the management of pension plan investments.

For and on behalf of the Sandvik Pension Plan 2001
March 2021