Copyright© JSE Limited 2008

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Corli le RouxHead of SRI Index

2009 Review

Socially Responsible Investment IndexCompany briefing

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Highlights of Index evolution

Established May 2004

• Crystallise debate

• Enable SRI

• Identify companies with good sustainability practices

• Aspirational benchmark

Broad sustainability assessment

• Triple bottom line

• Corporate governance

2007 introduction of automatic assessment and international data provider

• Automatic universe expanded in 2008

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Value proposition

Highlight imperatives of sustainability

• Globally aligned

• Locally relevant – close the loop for companies around local concerns

Framework for –

• internal risk management

• comprehensive reporting

Enhanced reputation

Framework/reference for awards, investment, ratings tools

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Eligibility

Base Universe: FTSE/JSE All Share Index

• For 2009 review: All Share as at March 2009

Automatic assessment

• 2008 SRI Index constituents

• Top 40

• Mid Cap

Voluntary assessment

• Small Cap

If excluded from All Share at any time during process or after review, not eligible for SRI Index

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Eligibility (cont.)

Companies with structural complexities

• Holding companies

• Holding company policies and influence over holdings as guiding principle

• Full consideration of holdings above revenue threshold (to be determined)

• Board practice and other governance issues at holding company level

• Property investment funds and companies without staff

• Appropriate approach still being investigated

• For the time being, assessed with basic approach or similar to holding companies

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Criteria overview: General

Full sustainability approach structured along ESG lines

Criteria as for 2008

Core and desirable indicators

• Core indicators reflect what should be regarded as minimum by companies (even though index does not at present require meeting all core indicators)

• Desirable indicators reflect aspirations – as Index becomes more demanding, desirables will gradually become core

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Criteria overview: General (cont.)

Policy, Management and Reporting

• Policy statements and documents, strategies and undertakings – ideally publicly available

• Management and performance cover implementation of systems, programmes, targets, objectives, includes monitoring and measuring of performance

• Reporting – content areas specified by indicators, should ideally be publicly available, Index does at present still accept internal reporting – aim to move towards public only in 2010

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Criteria overview: Environment

Aligned with FTSE4Good

Impact classification

• High, medium, low - activity-based, assessed by EIRIS in relation to five key issues: climate change, air pollution, water pollution, waste, water consumption

• Overall classification based on highest impact

• High impact in one key issue or medium in more than four = high

• Medium impact in at least two issues = medium

• Rest = low

Thresholds based on impact and coverage of environmental policies, systems and reporting

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Criteria overview: Social

Thematic approach

BEE and HIV/Aids

• Applies only to companies with South African operations

Threshold at two / three levels, all of which must be met

• Majority of all indicators (core and desirable) – half plus one

AND

• One third of indicators met must be core

AND

• SA companies only third level requirement: at least one core in each of BEE and HIV/Aids

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Criteria overview: Governance and related sustainability concerns

Thematic approach

Covers basic corporate governance and listings requirements

Covers economic issues and indirect impacts

Threshold at two levels, both of which must be met

• Majority of all indicators (core and desirable) – half plus one

AND

• One third of indicators met must be core

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Criteria overview: Additional issues - roadmap

Climate change

• Intention to include specific criteria in 2010

• Climate change questionnaire included to help gather data for benchmarking

• Engagement will take place during the year to set level for SRI Index criteria

Reporting

• Move towards core indicators met by public data only

• To be implemented 2010 – bear in mind for upcoming reporting

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Process: Timelines

Review comprises second half of the year

Phase 1: EIRIS review of public information – commences in July

Profile mailings to companies in three tranches:

• Tranche 1 – end July

• Tranche 2 – mid-August

• Tranche 3 – end August

Phase 2: All companies have three weeks from receipt of preliminary profile to respond (extensions considered on merit by EIRIS)

EIRIS submits results to JSE mid-October for JSE QA and borderline engagements

Advisory Committee meeting mid-November

Results announced end November

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Process: Phase 1

EIRIS review of public information

• Most recently available public information

• Web sites, most recent annual report, brochures, etc.

Preliminary profile of company compiled

• Contains general overview of business, environmental impact classification and assessment of public data against criteria

Profiles mailed to companies in three tranches:

• No longer by year-end date, but intending to allow longer time for assessment of new or extensive data

• Tranche 1 – mostly companies failing in 2008

• Tranche 2 – best performers, unsuccessful companies with more progress

• Tranche 3 – established constituents and companies not publishing large amounts of data

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Process: Phase 2

Company response to profile assessment

• Respond directly on profile

AND/OR

• Complete survey questionnaire in full or in part

Directly on profile

• Typically where reporting is more advanced and most indicators met

• Mark up changes particularly to provide evidence for areas that still have to be met, to improve on met areas or update with new information

• Refer to surveys for guidance on type of information requested

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Process: Phase 2 (cont.)

Survey questionnaires

• Complete to the extent necessary in relation to areas that still have to be met, or to improve on met areas

• Useful where reporting is limited, to provide detail

Attach additional information that is relevant

• Return to original researcher

EIRIS incorporates new information in analysis and updates profiles

• Final profiles only sent to companies after results announced

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What information?*For policies –

• Send the document

• If no text, proof of commitment/undertaking (e.g. Board resolution/minutes)

For management systems –

• Adequate supporting evidence and information indicating that all relevant aspects of system exist

• E.g. training, managerial responsibility, identified targets/goals, monitoring against performance indicators, regular review, extent of coverage, feedback/correction mechanisms

Reporting –

• Public document with evidence of publication

• Evidence of consideration by relevant internal reporting mechanism

Confidentiality?

• Any document can be provided for consideration by EIRIS

• If confidential, mark clearly as such

• Only analysis included in profile, not raw data

* Source: EIRIS FAQs

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Borderline companies (BLs)

Companies that meet most areas but fail marginally on one area

Process:

• EIRIS submits final analysis to JSE

• JSE engages on that specific area with BL companies

• Deadline of a few days provided

• JSE decides whether to include or not

Repeat borderline issues:

• Ground Rules (to be approved by Advisory Committee) will limit number of times company can be considered for BL inclusion

• Must show commitment to improve after second BL status

• If no actual improvement, excluded from Index

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Best performers (BPs)

Companies that meet

• Relevant environmental threshold

• All core indicators in social

• All core indicators in governance and related concerns

Disclosed by environmental impact

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Controversial issues / major news stories

EIRIS conducts news search flagging specific issues

• Environmental violations, health & safety issues, major competition incidents, human rights violations

• First comprehensive search completed by end July, subsequent spot search end September

JSE considers which issues warrant further engagement

• Severity of issue, local impact

Engagement with company regarding handling of issue

• Will take place during course of review

• JSE may exclude company if deemed sufficient impact on broader sustainability

Ground Rules (to be approved by Advisory Committee) will deal with process for re-entry by excluded company

• E.g. must show improvement or commitment to avoid

Ground Rules already provide for exclusion in between reviews

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Results correspondence

Cover letter

• Indicates individual company result and salient matters, e.g. relevant controversial stories that were considered

Summary sheet

• Indicates overall performance in relation to each pillar

• Environment overall met/not met

• Social and governance indicates number of indicators met relative to possible number

Final profile

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Salient issues

Publication of results

• Press release

• Names of successful constituents and best performers

• Quotes by constituent companies

• No naming and shaming

Value of research data

• Profile – guidance for companies on areas of improvement

• 2008 saw milestone collaboration with GEPF for data based on JSE criteria

• Further opportunities for research distribution – under discussion with EIRIS

• Creation of further products currently under development

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Contact information

JSE

• sri@jse.co.za

• Corli le Roux +27 11 520 7104

• Makhiba Mollo +27 11 520 7022

EIRIS

• jse@eiris.org

• Shelley McCluskey – Project Leader

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