STATEMENT OF CONTINUED SUPPORT FROM THE CHIEF EXECUTIVE OFFICER

September 13, 2019

To our stakeholders:

I am pleased to share that Khan Bank reaffirms its support of the Ten Principles of the United Nations Global Compact in the areas of Human Rights, Labor, Environment, and Anti-Corruption.

In this annual Communication on Progress, we report on our actions to continually improve the integration of the Global Compact and its principles into our business strategy, culture, and daily operations. We also commit to sharing this information with our stakeholders through our primary channels of communication.

Khan Bank has continuously made efforts to comply with sustainable development principles in our day-to-day business, as well as through our corporate social responsibility and localization of its sustainability initiatives. In 2007, the Bank created the Khan Bank Foundation in an attempt to implement corporate social responsibility more systematically and sustainably. In 2017, the Khan Bank Foundation expanded its activities to include sustainable development in each of the Bank’s activities.

Since 2018, we have been expanding our CSR activities and have embedded the United Nations' Sustainable Development Goals in all of the bank's operations and services, and have also defined a new sustainable development framework for Khan Bank. Khan Bank’s sustainability policy includes establishing sustainability in four key areas of banking: sustainable financing, sustainable operations, sustainable investment, and sustainable partnerships.

In the future, we will continue to lead the banking sector in environmentally friendly and socially responsible practices, and will further contribute to the nation's economy and social well-being as a whole. We will also try our best to continue sharing our best practices with Mongolian businesses and organizations.

Sincerely yours,

JOHN BELL

CHIEF EXECUTIVE OFFICER OF KHAN BANK

Khan Bank, with over 6,000 employees throughout the country, is the largest commercial bank in Mongolia. As the 3rd largest employer in Mongolia, the Bank is recognized for its significant contribution to people’s lives, as well as the country’s social and economic growth. Khan Bank prioritizes all kinds of equality in day to day decision-making processes. As of September 2019, female employees accounted for 66% of all employees and 45% of senior management, and on average, 600-700 employees were on maternity leave throughout the year.

All of Khan Bank’s Internal policies and procedures are consistent with Mongolian laws and regulations, including Khan Bank’s Human Resource Policies, Code of Ethics, Employment agreement and Contract, and Internal Labor Procedures. Khan Bank is compliant with all human rights and eligibility standards, and committed to providing equal opportunities for all employment candidates, employees, and customers, regardless of age, race, religion, social status, marital status, disability, political party affiliation, political views, sexual orientation, job title, position, financial status, and education.

As a gender inclusive and socially responsible employer, Khan Bank guarantees an equitable, safe, and healthy work environment, and ensures that our day-to-day business activities are conducted in an appropriate manner. The Bank's headquarters, Khan Bank Tower, which was financed and built by the Bank, is equipped with eco-friendly features and smart control systems. The building provides a professional and up to date, yet environmentally friendly, cost and time efficient space for employees.

The Bank does not allow any sort of illegal employment or labor, and complies with all of the international conventions adopted by the UN and the International Labor Organization.

In addition to employee welfare, Khan Bank is also deeply committed to protecting customer rights. Every Khan Bank branch serves seniors, persons living with disabilities, and pregnant women without making them wait in line.

Khan Bank has safety regulations and emergency response procedures for the movement of customers in the case of emergency in addition to having a Business Continuing Plan (BCP) in place.

Through the Khan Bank Foundation, Khan Bank has been implementing a variety of projects aimed at protecting and increasing awareness of human and children’s rights. Children living with disabilities were welcomed to Khan Bank's headquarters for a special International Children's Day event, to help them realize their potential and give them hope for a brighter future.

In addition to employee human rights ensured by our HR policies and procedures, we put an emphasis on the wellbeing of our employees and have a number of different policies and approaches to ensuring that the Bank is a happy and welcoming place for our employees, to support them in maintaining a healthy work/life balance. Such policies and procedures include:

• Balanced Life Program (BLP): In order to ensure that employees are happy and satisfied with their job and employment at Khan Bank, and to encourage their healthy and active lifestyle, we launched the BLP in 2011. Within the program, various clubs were created by employees, such as the Hiking Club, Dancing Club, Cooking Club, English Speaking Club, Cyber Sport Club, Book Lovers Club and Publishers’ Club. They run various activities on a regular basis with some funding provided by Khan Bank HR.
• Paid leave
• Flexible work schedules
• Savings program dedicated to Khan Bank employees with discounted conditions
• Paid internships
• Social Development Fund for each department, to be used for team building activities, events, and socializing
• Regular health screenings for employees
• Scholarship program for employees to support their academic and career development, and scholarships for their children, to help release some of the financial burden of university tuition
• Aid and assistance for employees for family-related issues: In the event of an employee's family hardship or severe medical problems, the Bank grants paid/unpaid leave with one–time aid, determined on a case-by-case basis
• Family-oriented events: Khan Bank arranges events and competitions for Children’s Day celebrations held for employees' families, and provides gifts to the children of employees
• In order to improve the physical and mental health of employees, who are usually seated in front of a computer, the Bank partners with fitness centers to provide discounted memberships
• In-house doctor located in the Bank's headquarters

As for Khan Bank’s contributions to supporting the human rights of the Mongolian public, Khan Bank Foundation carries out many projects and campaigns targeting healthcare needs. Furthermore, the Bank provides financial support to students in financial need through scholarships, and encourages rational decision-making and consumer choices through financial knowledge sharing activities.

Khan Bank pays special attention to employee working conditions, the work environment, and employee satisfaction. Front managers are responsible for monitoring and regulating any violations of human rights.

During the reporting period, the Human Resources Department didn’t receive any human rights violations complaints or reported incidents. We forbid business relations with entities that support human trafficking, child labor, or sexual exploitation.

The Bank considers all aspects of human rights into decision-making process. In the first half of 2019, the Bank installed a total of 33 special roads dedicated to the people with disabilities at branch entrance, of which 6 in Ulaanbaatar city and 27 in rural areas. Which total up to 352 special roads at the end of the June, 2019, 83 in Ulaanbaatar city and 269 in rural areas.

The largest and most impactful campaigns initiated and organized by the Khan Bank Foundation are the National Campaign Against Cancer, implemented every year since 2011, and the Campaign Against Hypertension, implemented since 2017. Both campaigns reach out not only to urban residents, but also rural residents. Through the campaigns, 11,680 doctors and medical professionals in rural areas have received training, and 142,159 people have received free medical check-ups and/or medical help since their launch.

Khan Bank operates with consistent human rights definitions and realizes the importance of education, both academically and personally. The Khan Bank Foundation, the unit of Khan Bank responsible for CSR and sustainability, provides Khan Bank Foundation scholarships every year. During the reporting period, a total of 60 scholarships were provided to university freshmen who came to the city from rural areas of Mongolia. As of June 2019, the Khan Bank Foundation has provided approximately 1,785 scholarships, valued at 1.85 trillion MNT, since 2007.

All of our policies are in accordance with the Labor Law of Mongolia, domestic labor regulations, international standards, and are free from any political, social, or external influence and pressures.

Khan Bank ensures that there is no pay gap between genders and provides equal opportunities for skill-based career advancement. From the standpoint of labor safety and creating a healthy working environment, internal and external audit reviews are performed regularly, in accordance with international standards, to ensure the functional and stable operations of the Bank.

The Khan Bank Board of Directors have been involved and engaged in all 17 Sustainable Development Goals since the Bank’s rejoining of the United Nations Global Compact (UNGC). The immediate outcome of such positive interest from the Board is that the Bank’s internal sustainability policy is in its last stage of approval. This policy includes all 10 principles of the UNCG, and those principles will be embedded in all of relevant regulations, rules, and laws. Specifically, the Human Resources and Labor Regulations will be upgraded and other principles will be explicitly included.

The Bank is committed to promoting engagement with every employee, listening to their voices in decision making process at all levels, and taking annual employee engagement surveys for the improvement of our human resources policies and procedures.

Wages at branches are calculated based on an employee’s performance, while providing a basic fixed-wage range. Salary calculations are always monitored, on time, and operate under a policy of wages being systematically increased to motivate employees and provide sustainable employment.

Employee social insurance, health insurance, and tax payments are made on time, in accordance with Mongolia's laws and regulations. Khan Bank supports and implements maternity and parental leave regulations, and provides employees with an equal opportunity to return to their employment position after their leave has concluded.

Khan Bank offers the opportunity for senior university students to enroll in a paid internship at the Bank to build real life, practical experience. Occasionally, Khan Bank offers employment opportunities to exceptional students after their internship period has ended.

At Khan Bank we incorporate specific norms for the prevention of sexual harassment in the workplace, and redress for such complaints.

Within the scope of its corporate social responsibility, to encourage the employment of single mothers, Khan Bank organized training for women residing in suburban areas on handicrafts and growing plants on their premises, to help them find new and stable income sources.

Under the above-mentioned principles, Khan Bank currently employs a total of 6,000 employees, including contractual employees and employees on leave.

Employee social insurance, health insurance, and tax payments are made in accordance with the applicable laws and regulations of Mongolia, and the Bank provides equal opportunities to employees on leave to return their jobs. Furthermore, Khan Bank provides the possibility of contracted employment to stay-at-home moms, allowing them to work from home for our Call Centers.

Khan Bank strives to lead the banking sector in environmentally friendly and socially responsible practices, and to contribute to the nation's economy and social well-being.

Khan Bank’s sustainability policy includes establishing sustainability in four key areas of banking: sustainable financing, sustainable operations, sustainable investment, and sustainable partnerships.

Khan Bank's loan operation procedures focus on supporting eco-friendly, green businesses and projects. In doing so, the Bank collaborates with international financial institutions to learn from their experiences and best practices, improve its loan operations, and implement sustainable development goals into its banking activities.

Environmental and social evaluation is currently being done in two-stages for loans and projects of high value, utilizing new software solutions. In the framework of the IFC Performance Standard, there are ongoing improvements being made to environmental and social risk assessments for loan operations.

Moreover, with expert opinions from external consultants, Khan Bank received consultancy and directions for upgrading its internal operations environment regulation to become Bank policy. After several revisions, the policy is in the final stage of development and approval. The Bank is also in the final stage of creating a Social Officer employment position dedicated to work environment evaluation.

In order to cultivate an eco-friendly employee culture, Khan Bank has been organizing training and campaigns for employees to encourage the efficient consumption of water, paper, electricity, and waste management, as well as raising awareness about environmental issues.

Khan Bank became a member of the ToC program in 2013, and since then, the Bank has started to follow and implement the eight principles of sustainable finance.

The ToC program was initiated by the Mongolian Sustainable Finance Association, and its eight principles are protecting our natural environment, respecting human rights, protecting our historic and cultural heritage, promoting green growth, promoting financial inclusion, complying with a list of items prohibited from being financed, promoting transparency and accountability, and practicing what we preach.

Relationship Managers, who are responsible for loan application analysis, have to receive training on sustainable financing and environmental impact analysis methodology. Khan Bank is in the testing stage for an online course to expands the effect, scope, and access of this training, so that it can reach all of the Bank's Relationship Managers, regardless of when they were first hired, and all other employees of Khan Bank.

Khan Bank has membership with many organizations, as part of its business and sustainable development and CSR objectives, and works to develop CSR and sustainable development in Mongolia, and to share the experience it has gained with others.

Khan Bank is contributing to ways to collaborate with organizations and project beneficiaries within the scope of its sustainable development policy.

Khan Bank offers a green loan product to its customers with a discounted interest rate and long-term borrowing to raise consumer awareness of environmental impacts and to encourage the systematic improvement of consumer choices. During the reporting period, a total of 39 green loans were granted.

As part of the process of developing the Sustainability Process of Khan Bank, the Bank updated and automated the loan evaluation process. This upgrade resulted in increased numbers of green loan applications evaluated.

In 2018, a total of 103 green loan applications were evaluated by employees without automation. However, as of September 2019, a total of 101 green loan applications were evaluated. Such results indicate a great kick-start to our long-term policy goals.

Khan Bank introduced the first “eco” ATM in Mongolia in 2015. Each year, the Bank expands the number of eco-ATMs available to customers. During the reporting period, 126 eco-ATM’s were installed, which brings the total number of installed and active eco-ATMs to 983 since they were first launched.

Khan Bank has been implementing, cooperating, and investing in a range of environmental projects aimed at protecting Mongolia's strictly protected areas and national parks, as well as supporting the preservation of endangered species, especially the Mazalai bear, through the Khan Bank Foundation.

Khan Bank continued its contributions to the fight against global warming and desertification through the Khan Bank Foundation’s annual Khan Bank Forest project, by planting 25,200 trees nationwide with the help of its branch employees, regular customers, and partner organizations since 2007.

Khan Bank also spreads awareness about ongoing climate change and the SDGs in a bi-weekly newsletter called the “2030 Newsletter”.

Khan Bank prohibits its employees and the organization itself from being involved in corruption and bribery involving the Bank's operational procedures, and puts integrity first in its daily operations. A shared definition of responsible ethical conduct is provided in the Khan Bank Code of Ethics, which is introduced to and signed by each employee.

Khan Bank established its Anti-Money Laundering and Counter-Terrorism Financing Regulation in 2014, and ever since, has been continuously updating it, in accordance with international standards and new regulations.

Specifically, anti-corruption regulations are reflected in the Bank's Code of Ethics, internal labor procedure, and employment agreement, and the consequences of violations and negligence are explicitly defined and explained to Bank employees. According to domestic laws and regulations, there is a complete ban on corruption, including bribery, and these principles and rules are applied to all Khan Bank employees.

Quarterly internal and annual external audit reviews are regularly conducted by the Bank to prevent employee and senior management involvement in corruption and bribery.

New employees are provided with training on the importance of ethical behavior and integrity in the banking industry, to help them adapt to the Bank’s culture of honesty and equality from the very beginning.

Khan Bank receives an external audit each year from internationally recognized authorities and announces its results to the public through our media channels.

Khan Bank was ranked 3rd among the top 100 entities in Mongolia and named “Taxpayer of the Year” for the last three consecutive years, in recognition of its business ethics, transparent reporting, prompt tax payment, and continuous contributions to the Mongolian economy.

We received an external evaluation report in 2018 and in 2019 from International Finance Cooperation, regarding company governance, with the goal of assessing current development and to analyze future possibilities for improvement, as Khan Bank always strives to improve and its business model in line with international demand and trends.

Moreover, Khan Bank organized the Bribery and Business training event, in partnership with the Mongolian National Chamber of Commerce and Industry, under the scope of its sustainability policy. The event involved 67 high-ranking authorities at Khan Bank's rural branches.

Since 2018, Khan Bank has been publishing the Sustainability Report for partner organizations, and plans to follow the GRI standard of reporting starting in 2019.

For internal training participation and involvement during the reporting period, approximately 275 employees were educated on our sustainability policy and CSR activities via three training events.