ESG Brochure

ANNUALESG REPORT 2016 1

ESG report ESG report contents2016 About the Report 4 About Lone Star 5 About Hudson Advisors 5 ESG at a Glance 6 The Process 8 A report to our OUR INVESTMENTS employees, partners, Forterra 11 and investors on Dynamic Bulk LLC 12 Lone Star Global Foundation Building 13 Acquisitions Ltd Southeastern Grocers 14 and Hudson LP’s Balta 15 Environmental, Social, GTC 16 and Governance (ESG) Initiatives. Continental Building Products 17 Our 7 Pledges 18 Serving Our Community 20 Contact us 2223

about usthe report ABOUT THIS REPORT ABOUT LONE STAR We believe that responsible and sensible corporate Lone Star is a global private equity firm that invests in real estate, citizenship is an essential tool for good investing. equity, credit and other financial assets. Since the establishment of its We make our very best efforts to factor these first fund in 1995, Lone Star has organized fifteen private equity funds considerations into every phase of our investment with aggregate capital commitments totaling approximately $60 billion. process from identification of opportunities to Its origins trace back to 1993 with a joint venture between the Federal monetization and exit. Deposit Insurance Corporation and a third party investment group Our goal is to set out clear targets, both for named Brazos Partners. Brazos Fund closed in 1995 with approximately ourselves and for our underlying portfolio $250 million of capital commitments and subsequently targeted companies, which we are pleased to highlight here investments primarily in debt and real estate in North America. in our inaugural ESG report. For more information about Lone Star, please visit This report covers the year 2015 and documents www.lonestarfunds.com. some of the recent initiatives undertaken by our organization and within our portfolio companies. It CAPITAL RAISED $65 billion also sets out our future ESG goals and plans. 16 We strive to continuously improve our own Aggregate commitments to the funds governance as well as to have a positive impact 909,805 on our community and society. We believe that Fact bytes responsible investing is our appropriate means to achieve long-term success as an organization. Aggregate capital commitments at Lone Star For further information or to learn more about our initiatives, please Private equity funds contact Jordan Hooks at [email protected]. Assets managed by Hudson purchased for an aggregate4 consideration of approximately $162 billion 1995 1997 1999 2000 2002 2004 2008 2011 2013 2014 2015 2016 Total 5.8bn 5.8bn 1.3bn 7.2bn 7.0bn 65.6 bn 5.1bn 5.5bn 4.6bn 2.4bn 7.5bn 5.1bn 4.2bn 250m 396m 2.3bn 1.2bn 5

CommittmentESG ESG at a glance Five stages of investing With our focus on the future, ESG practices l Identifying Investment Opportunities are considered throughout the life cycle of l Due Diligence Process our investments. Lone Star offers expertise l Development of Financial Structure and Capital Support and guidance for each investment and their l Responsible Ownership Period, Including Providing Support management teams with responsible investing for the Growth of the Business informing at each phase of the investment l Monetisation of Assets What ESG means to us SOCIAL GOVERNANCE ENVIRONMENTAL We believe that employee We have a strong internal relations and labor engagements are governance process, and one that we Protecting our Earth and its extremely important for our underlying apply to our wider portfolio investments. ecology is one of the biggest challenges We take matters of regulation, fraud, and that the global community faces and has portfolio assets as well as our own corruption extremely seriously. We focus on become more important than ever. At Hudson employees and the wider community ethics and integrity in our own businesses and Lone Star, we believe that environmental we engage with. We think health and and in the businesses we engage with. considerations should include: land use, wellness, safety, consumer protection, We believe in transparency and open carbon and greenhouse gas emissions, natural data privacy and human rights are all communication with stakeholders and gas scarcity, priority chemicals and water scarcity. important social factors we must in a strong alignment of interests Whether an underlying portfolio consider in our investment between shareholders and company produces textile floor coverings or process. management teams. provides building products for the construction industry, we 7 challenge them on these considerations.6

our processour process The process From identification of opportunities to monetization and exit. 1Identify ESG issues compliance and assessment between all parties. We believe as the company-derived ESG Moving forward, we will of the quality of relationship that integrating ESG into company initiatives that are in place. The consider embedding ESG with the regulator. We have a structure is a continuous, ongoing Lone Star Global Environmental, initiatives at the foundation hand’s on approach. We conduct process, and one we are always Social and Governance Policy is of any investment. While we look assessments through interviews striving to improve. the basis for all of our ESG work for companies which provide the with management and through within our portfolio companies. most financially advantageous using external consultants to ensure Lone Star then rigorously tracks opportunities, we also take into that ESG factors that impact the 4Responsible ownership performance through regular account their ethical standards, company and the wider industry are Responsible ownership monitoring of detailed operational core values, community impact and taken into consideration. If we are and stewardship are and financial metrics as well as management structure. Our goal is uncomfortable with a company’s critical components of our appropriate ESG issues. to leave our underlying investments previous practices, the level of stronger than when we acquired fiduciary control, the transparency of approach during the ownership 5Monetization of Assets them. data or environmental stewardship, phase of the investment process We believe that our we will work to ensure that here at Lone Star. As we integrate commitment to responsible 2Considering ESG Factors improvements are made. We price the new investments, we have a ownership for the long through the Due Diligence cost of risk mitigation into our bid to dedicated ESG representative in Process ensure that we have the resources to both America and Europe who ESG factors are considered properly address any issues that we work with our asset management term is critical to our success early on into the due diligence choose to inherit. teams to help provide support as a company and to the value process. When identifying investment for each ESG program within our of our investments. We believe opportunities, investment teams 3Integrating ESG Factors as underlying companies. These that strong ESG programs may evaluate a number of important we Acquire Assets representatives analyze what provide potential future investors business, financial, tax, accounting, As we make new investments, current ESG initiatives are in place and owners with comfort as environmental, social, governance, we integrate ESG factors into and provide input to help develop they consider the quality of and legal and regulatory issues to our onboarding process, specifically them further. Additionally, we these assets. Through our determine whether an investment implementing a sound governance are working to implement a stewardship, we hope to set each is suitable. Additionally, we are very program, is essential as we begin training program focused on the of our companies on a path to focused on alignment of interests to our ownership period. This involves education of the ESG topics that sustainable ESG success, which ensure our management teams will securing control of the board of the currently exist within our portfolio will outlive our ownership tenure. be motivated by the same things investee company, having oversight companies. This content will we are. Employee relations are a over strategic decisions, developing continue to evolve and grow. With good barometer for ESG conditions. an annual business plan, appointing our asset management team at Lone Star pays particular attention auditors, making chief executive and Lone Star, we hope to be able to to workplace health and safety, board appointments and ensuring quickly share best practices across employee litigation, remuneration that there is a strong management the portfolio and around the levels and the structure of senior team with good incentives. Through globe to ensure that continuous management incentive plans. To an employee co-investment program, improvement occurs. Lone Star’s the extent that Lone Star invests in Lone Star provides incentives to annual ESG report will be made regulated entities, the due diligence key employees and consultants to available to key constituents. Our exercise will focus on regulatory ensure an alignment of interests ESG representatives will provide education to our employees about these initiatives as well8 9

our investmentsour investments“Forterra’s ForterraOSHA safetyincident rate is Forterra is one of the largest manufacturers of light and heavy buildingcurrently half products within the construction industry.of the industryaverage” Forterra is one of the largest manufacturers of Company Base/ Irving, Texas light and heavy building products within the Headquarters March 2015Fact bytes construction industry. Time of Acquisition 5603 Forterra creates artificial reefs that increase and Number of CORAL-REEF ECOSYSTEMS support biodiversity in the ocean and along the Employees Forterra has launched coast. Scrap box culverts and pipes are installed (Approximate) internal initiatives to drive According to the 2010 report of the World on the Florida and Louisiana coastlines to ESG Impact Since EBITDA growth, recruited a Meteorological Organization titled, “Climate, Carbon create the reefs, and this program may be Acquisition senior management team, and Coral Reefs” oceans cover 70 percent of the Earth’s expanded to assist with oyster cultivation as and made two bolt-on surface area forming the largest habitat on the planet. well. acquisitions, with more Coral reefs cover only 0.2 percent of the world’s oceans, The firm has been certified by the US Green acquisitions closing shortly. but they contain about 25 percent of marine species Building Council’s Leadership in Energy and and are renowned for their biological diversity. Environment Design (LEED), which recognizes Employees participate in ongoing education They yield more than $30 billion annually in global best in class building strategies and practices. efforts including visiting lectures in the goods and services such as coastline protection, This certification means that Forterra’s bricks engineering department at University of tourism and food. can be used in LEED-certified structures. The Texas at Arlington (industry-leading research firm is Carbon Scheme-compliant in the UK. support) and attending presentations at the As a part of ongoing efforts to monitor and ACPA Pipe School, which provides instruction stay ahead of carbon legislation and the latest around engineering, technical issues and trends in the area, their North American office participates in studies that support the attended the 2015 Toronto Climate Change ongoing understanding of the industry and our Summit as an industry representative. environment. Family Safety Day occurs annually where every employee and their families celebrate the Forterra employees also have strong leadership workplace and emphasize the safety and well- skills in the wider community. Employees hold being of employees at work and at home. memberships on multiple boards including the Chairmanship of the American Concrete Pressure Pipe Association board. Forterra focuses on safety and prevention Compliance initiatives are ongoing to review including a high emphasis at the senior and revise existing policies and implement new management level on reporting. The company or stand-alone policies where appropriate (e.g. reports near misses and helps solve potential Anti-Bribery and Modern Slavery Act Policies in problems before they result in injuries. the UK, and a Social Media Policy. Forterra’s OSHA safety incident rate is currently Forterra employees also have strong leadership half of the industry average. skills in the wider community. Employees hold Forterra supports Habitat for Humanity by memberships on multiple boards, including providing free and discounted bricks to the the Chairmanship of the American Concrete organization at certain locations. Pressure Pipe Association board. n10 11

our investmentsour investmentsDynamic Bulk LLC Foundation Building MaterialsDynamic Bulk is a world-wide shipping fleet company with a strong focus Foundation Building Materials is a leading national distributor of aon compliance with all global environment law. comprehensive range of building products.Dynamic Bulk is one of the top three shipping Company Base/ Athens, Greece All of Foundation Building Materials gypsum FOUNDATION BUILDING MATERIALSfleet companies world-wide with a strong focus Headquarters suppliers use a high content of recycled AND THE CREWon compliance with all global environment law. Time of Acquisition May 2014 materials to manufacture mined and syntheticThe company has voluntarily implemented Number of Employees 120 gypsum board. The Crew is a company organized communityinternational ISO standards, which specifies (Approximate) One supplier, Pabco Gypsum in Northern support group at Foundation Buildingrequirements for establishing, implementing, California, also provides a recycling point in the Materials, which spearheads communitymaintaining and improving an energy market for contractors and dealers to return fundraising and goodwill events. The Crew inmanagement system whose purpose is to material. Omaha, Nebraska, has raised substantial fundsenable an organization to follow a systematic Foundation Building Materials is currently for The Nebraska Children’sapproach to achieving continual improvement partnering with Armstrong Commercial Ceiling Home, a charity thatof energy performance, including energy and Tiles for recycling. provides help for children,efficiency, energy use and consumption. young mothers andDuring our investment search, we looked for a • Minimizing the use of anti-fouling paints Company Base/ Tustin, California wayward families inpartner that highly considered ESG topics and containing biocides Headquarters need.which operated with the highest integrity. During Time of Acquisition October 2015due diligence, Technomar showed all of the signs • Promoting environmentally friendly ship Number of Employees 1700 For the past 15 years, the FBM locations inthat they could be this type of operator. recycling practices (Approximate) Michigan, Texas, Kansas, Missouri, Nebraska andEnvironmental Objectives include: Colorado have participated in the joint recycling• Enhancing the on-board energy conservation • Increasing the environmental awareness program. n of office and shipboard personnel on efficiency and reduce air emissions minimizing the impacts of their activities• Continual improvement of the efficiency and • Implementing environmental practices on effectiveness of the on-board systems and handling paper consumption and disposal practices for handling petrol chemical waste of batteries• Continual improvement of the efficiency and effectiveness of the on-board systems, and • Minimizing uncontrolled discharge of heavy practices for handling of sewage and grey metals, metallic scrap and noise. n water discharges “During our investment 13 search, we looked for a partner that highly considered ESG topics and which operated with the highest integrity.”12

our investmentsour investments Southeastern Grocers Balta SEG, parent company and home of Bi-Lo, Harveys and Winn-Dixie grocery Balta is the largest producer of textile floor coverings in Europe. stores, is the fifth largest conventional supermarket chain in the US. Balta is Lean Manufacturing ISO 9001 certified Company Base/ Jacksonville, Florida and thus created an environmental policy actively Company Base/ Sint-Baafs-Vijve, Belgium Headquarters committing to the following elements: Headquarters Time of Acquisition January 2005 (BI-LO)/March • Creating a framework for the permanent Time of Acquisition 2015 2012 (Winn-Dixie) Number of 2,500 Number of 72,000 (22,000 full-time, determination, assessment and improvement Employees Employees and 50,000 part-time) of the environmental objectives and the (Approximate) (Approximate) environmental assignment proposal ESG Impact Since SEG has invested heavily • Permanently improving and preventing water. Water saving measures are designed to Acquisition in stores, from employee environmental pollution reduce both the use of ground water and the training to providing • Carrying out all economically sound energy- discharge of waste water. continuous development reducing measures programs. • Reducing water consumption, and reducing Since 2012-2013, none of Balta’s waste has gone water discharge and to assess the re-use of to landfill and more than 75percent of all waste To help make a larger impact in the fight against water generated is recycled. Balta is committed to world hunger, SEG has partnered with Feeding • To drawing up the list of unclean water streams reduce their kg/m2 waste by another 33percent America, the nation’s leading domestic hunger and to reducing them continually by 2020. relief charity. Together they are working on a • Avoiding soil pollution number of initiatives including a food recovery The Balta Group created a phased plan in 2004 Balta has invested in 3 solar energy projects. With program and a company-wide hunger relief to implement energy saving measuring at all the installation of these solar panels, Balta will program held twice a year. In 2015, SEG do production sites. Results of this plan include: reduce carbon dioxide emissions to just 95 million all production processes are optimized for kilograms over the next 20 years. energy use, better insulation of steam pipes, Food Recovery Program: replacement of engines and lighting by more Balta has also implemented a safety policy with Through the food recovery program, SEG donates energy friendly alternatives, use of gas-driven the following elements: usable fresh and shelf-stable products to local generators for electricity with heat recuperation • The permanent analysis with execution of area food banks to help provide meals for and optimization of ovens. families in need. Water purification installations were built for the corresponding measures to reduce risks to an treatment of water used in the production process. acceptable level SEG donated over $3 million to the Wounded Fact bytes $3 million The facilities are constantly being improved in • To provide instructions, training and information Warriors Project in 2015. Through a combination 100,000 order to satisfy the waste standards for surface campaigns at all levels of the organization. of customer, vendor, employee and company Donated by SEG to the Wounded • To integrate health and safety aspects in all contributions, this money was fundraised over Warriors Project in 2015 28,869,569 managerial and operational processes and the Independence Day holiday. During the last flows. n quarter, a ‘Wall of Honor’ was set up in all store Veterans and their family members locations where customers could purchase served by the Wounded Warriors “The Balta Group created tribute tags to hang on the wall in exchange for a Project a phased plan in 2004 to donation to the Wounded Warriors Project. implementenergy saving SEG invests capital each year to re-light and Pounds of food donated by SEG to re-commission many of their stores to lower their 27 Feeding America affiliate food measures at all carbon footprint and energy expenditure. In banks production sites.” addition, SEG continues to invest capital focused on store maintenance with concentration on Householders in the United States 17.5 million energy efficient lighting, refrigeration and who were food insecure in 2014 heating, ventilation & air conditioning (HVAC). n (According to worldhunger.org)14 15

positive impactour investments GTC Continental Building Products Globe Trade Centre is one of the leading commercial real estate companies One company we are proud to have owned is Continental Building in Central, Eastern and Southern Europe. Products, which was acquired by Lone Star in 2013 and sold in 2016. and CBP had a positive impact on the environment and on the community dur- Since 2010, GTC’s office projects have been built Company Base/ Warsaw, Poland ing our period of ownership. in compliance with standards defined by the Headquarters US Green Building Council enabling them to Time of Acquisition 2015 CPBX is the North American leader in wallboard meet the requirements for the prestigious LEED Number of 150 and joint compound materials. It was an certificate. Employees attractive investment proposition because of GTC takes part in many non-profit activities (Approximate) its strong fundamentals and environmental either as a partner, organizer or sponsor. They credentials. support initiatives such as registration of new and safety, traffic levels, noise levels, energy CBPX’s material is made of 99 percent recycled bone marrow donors, aid actions for orphanages consumption and specific local conditions such gypsum and paper. A by-product of scrubbing and conduct activities aimed at improving the as groundwater table level, etc. Conducting systems in power plants, CPBX’s gypsum quality of citizens’ lives. these studies allows their buildings to have a dramatically reduces sulphur dioxide that Each investment is carefully analyzed using the positive impact on the ecosystem. causes acid rain. Because of this, CBPX products following environmental parameters: security can help buildings trying to achieve LEED Another environmental contribution GTC (Leadership in Energy and Environmental makes during the construction phase when Design) status, which is important for building energy usage, thereby reducing their carbon possible, is to use locally produced raw materials. owners trying to demonstrate that they are footprint, which will help alleviate global Every investment is made in consultation environmentally aware. warming. with international green building experts. CBPX also sponsors the Bison exhibit at the During Lone Star’s period of ownership, CBPX Every solution fully considers national and Smithsonian National Zoo. This allowed the was able to make a positive impact on the international standards in the field of energy Smithsonian to bring bison back to the zoo for environment and in building labor relationships. efficiency, productivity and use of ecological the first time in over a decade, in honor of the It also built a strong safety framework and has solutions. 125th anniversary of the zoo’s founding. CBPX is posted robust financial health in a growing a member of EPA’s Energy Star program, which housing market. n GTC investments feature a whole array of energy- was designed to help companies reduce their saving, environmentally friendly solutions that boost efficiency including reduction in the consumption of natural resources, (mainly water and energy), reduction in the amount of waste produced and recycling. Each office building employs construction and technical solutions that increase comfort of work without compromising the environment by utilizing the following: maximum use of daylight, ensuring the greatest possible amount of fresh air, use of modern, individually controlled heating and air conditioning systems, use of effective and energy-efficient thermal insulation solutions, wise management of energy used for manufacturing and transportation, adhering to the highest construction standards within environment protection and special protection of green areas. n16 17

our pledgeour pledge Our goals “We also highly encourage our employees on responsible to participate in several responsible investing volunteering opportunities we sponsor throughout the year’ 1To identify ESG issues 4To continue to focus on during our due diligence ESG integration as an process for any future ongoing task. Our ESG potential investments. representatives will engage with leadership and 2To continue to actively asset management on a semi- work with our existing annual basis to further review operating companies our policy’s effectiveness and and real estate implementation. investments on environmental, social and governance issues. 5To ensure that all Lone Star employees 3To continue to have receive adequate dedicated ESG ESG education and representatives who information. All employees will focus on the creation be provided access to our ESG and implementation of policy as well as we hope to all ESG resources. These be able to provide them with representatives continuously all relevant training necessary actively engage with our to adhere to that policy. We leadership as well as our asset also highly encourage our management teams regarding employees to participate ESG issues. in several responsible volunteering opportunities we sponsor throughout the year 6To maintain an open 7To circulate our ESG as well as donate to non-profit dialogue with our policy and our ESG organizations. investors and partners Annual Report to about how we handle appropriate parties and engage in ESG initiatives including employees within within our companies. our organization and portfolio companies.18 19

our communityour comminityServing our communityLone Star and its affiliates believes in setting various charities. child in need, complete with cake, decorationsstrong examples within our own organization Ronald McDonald House and a bounce house.through our community involvement and Twice a year, a birthday party is thrown for a Charity Runsphilanthropic endeavors. We donate across child in need complete with cake, decorations Each year, a specific number of spots areseveral non-profit organizations annually, and and a bounce house. donated to employees allowing them toour employees volunteer their time to help participate in charity 5Ks. In 2015, employeesbuild homes for veterans, to serve meals to Rebuilding Together ran to help raise money for the Ronaldfamilies in need and give back to those less This annual event invites our employees to McDonald House, Color out Cancer and Thefortunate. volunteer and help build or repair homes Family Place.Jeans Day owned by low-income elderly, the disabled and Special OlympicsEach month a charity is chosen and funds are families with small children. Each year, employees volunteer with SpecialEach month a charity is chosen and funds are Birthday Party Project Olympics. They provide assistance whereverraised by allowing our employees to donate $5 Twice a year, a birthday party is thrown for a it’s needed. In years past, we have handedto the cause in exchange for getting to wear out medals, escorted athletes to eventsjeans. In 2015, over $14,000 was raised for and served as lane monitors. United Wear Pink donate £1 - Germany Kingdom Cancer Research Our offices in In our London Germany donate office, there are a Once a year, usually in October, €5,000 to a local Cancer number of charities employees are encouraged to Charity annually. the company wear pink to the office and £1 is supports donated to charity that is focused Spain The Madrid officeEuropean Initiatives on finding a cure for breast currently collects plastic cancer. caps from bottles and donates Red Nose Day – them to a local charity, which funds Cake Bake Sale Jeans for Genes Day £1 different projects linked to wheelchair Employees bake cakes and the genetic disorders bound children. money raised is donated to The office also provides containers Red Nose Day. The money raised on Jeans for where employees can donate perished Money raised is donated to Comic Genes Day funds a range of initiatives food items and clothes, which are Relief, which is an operating British sent to local homeless shelters. charity founded in 1985 by the comedy that improve the quality of life of scriptwriter Richard Curtis and children affected by genetic disorders. 21 comedian Lenny Henry in response Employees who participate can wear to famine in Ethiopia. jeans for a day in the workplace20 when they donate £1.

Contact us„„ BELGIUM - WAVRE (BRUSSELS) „„ GERMANY - FRANKFURT „„ LUXEMBOURG „„ USA - CHICAGOLone Star Investment Hudson Advisors Germany GmbH Hudson Advisors Luxembourg S.a.r.l. Hudson Americas L.P.Management Sprl Lone Star Germany Acquisitions Lone Star Capital Investments S.a.r.l.Bermuda - Hamilton GmbH Lorac Investment Management „„ USA - DALLASLone Star Global Acquisitions, Ltd. S.a.r.l. Hudson Advisors L.P. „„ IRELAND - DUBLIN Hudson Americas L.P.„„ CANADA - MONTREAL Hudson Advisors Europe Limited „„ NETHERLANDS - AMSTERDAM Lone Star Global Acquisitions, LTDHudson Americas LLC Hudson Advisors Ireland Limited Hudson Advisors Netherlands B.V. Lone Star Americas Acquisitions, LLCLone Star Americas Acquisitions, LLC Lone Star International Finance Lone Star Netherlands Acquisitions, Limited B.V. „„ USA - HOUSTON„„ ENGLAND - LONDON Hudson Advisors L.P.Hudson Advisors UK, Limited „„ JAPAN - TOKYO „„ PUERTO RICO - SAN JUANLone Star Europe Acquisitions LLP Hudson Japan KK Hudson Puerto Rico LLC „„ USA - NEW YORK CITY Lone Star Japan Acquisitions, Ltd. Hudson Advisors L.P.„„ FRANCE - PARIS „„ SPAIN - MADRID Hudson Americas L.P.Hudson Advisors France S.à r.l. Hudson Advisors Spain S.L.U. Lone Star Americas Acquisitions, LLC Lone Star Spain Acquisitions S.L.U. www.hudson-advisors.com