Strate Corporate Brochure 2.FH10

Since its inception over ten years ago, Strate Ltd is proud to be the licensed Central Securities Depository (CSD) for the electronic settlement of financial instruments in South Africa. Strate's core purpose is to mitigate risk, bring efficiencies to the South Africa’s financial markets and improve it’s profile as an investment destination. Strate is aligned to international best practices and continually strives to ensure operational excellence and provide enhancements for the good of the Southern African financial markets. Strate handles the settlement of a number of securities including equities and bonds for the Johannesburg Stock Exchange (JSE) as well as a range of derivative products such as warrants, Exchange Traded Funds (ETFs), retail notes and tracker funds. It has now added the settlement of money market securities to its portfolio of services. It provides services to Issuers for their investors in terms of the Companies Act and Securities Services Act (SSA), 2004. Strate's clients include South Africa's authorised Participants, the JSE, Securities Lending and Borrowing Business Partners, Money Market Business Partners as well as Issuers of listed and unlisted securities. The authorised Participants are: ABSA Bank Limited Computershare Limited FirstRand Bank Limited Nedbank Limited Société Générale (Johannesburg) South African Reserve Bank Standard Bank of South Africa Limited The JSE (including the former Bond Exchange of South Africa) is licensed as an exchange under the SSA. It has operated as a market place for the trading of financial products for nearly 120 years. It connects buyers and sellers in four different markets; equities (including primary and secondary board) equity derivatives, agricultural derivatives and fixed income. The JSE holds a treasured position as one of the top 20 exchanges in terms of market capitalisation and the fixed income market is amongst the largest in the world. It is regarded as a mature, efficient, secure market with world class regulation, trading, clearing, settlement assurance and risk management. 44.547% 12.679% 14.996% 14.996% 12.679% 0.103% The Strate Board endorses the principles of accountability, integrity and transparency underlying the Code of Corporate Practices and Conduct as contained in the King Report on Corporate Governance for South Africa. Strate monitors its compliance with the King Code and ensures that the company’s policies and procedures are appropriate on an ongoing basis. Subcommittees of the Board The Strate Board has established six permanent subcommittees to assist in the execution of its responsibilities. These committees are the Audit and Risk Committee, the Regulatory and Supervisory Committee, the Remuneration Committee, the New Business Committee, the Nomination Committee and the Transformation Committee. BOARD * FSB Independent Assurance (including Internal / External Audit) Nominations Remunerations Audit & Risk Risk Policy Strate Supervision Corporate Score - card Perspectives Financial Stakeholders Internal processes People, learning, growth MANAGEMENT COMMITEE IT C&S Mkting ERM Legal Finance COO HR Process Assurance Change Advisory Board Project Steering Committee Change Control Release Management Project Office * The Strate Board structure makes provision for a non-executive chairman, four shareholder representatives (two from the JSE and two from the banks), two executive directors and seven independent non-executive directors. Market Advisory Committees / Steering Committees Regulatory & Supervisory Transformation New Business Process Assurance Chief Executive Officer Monica Singer Head of Custody & Settlement Iann Seymour-Smith Chief Operating Officer Anthony van Eden Head of IT Manoj Puri Head of Finance & Company Secretary Hannes van Eeden Head of Marketing Tanya Knowles Head of Client Relations Leigh Daniel Head of Risk Dale Connock Head of HR Lulama Gumede Head of Legal Dr. Maria Vermaas The efficiency of the control environment at Strate is fundamental to the successful operating of the CSD on a day-to-day basis and is built on the effective integration of a number of interrelated components. This starts essentially with the governance structure within which Strate operates, where the “tone at the top” is set by the Board of Directors, a number of purpose-driven internal and external committees, a dedicated senior management team and the regulatory oversight of the Financial Services Board (FSB). A comprehensive structure of control activities permeates all levels of the organisation, directed and supported by clearly defined policies and procedures which are designed to guide staff in the execution of their duties. Continuous monitoring of these control activities helps ensure that weaknesses and/or deficiencies are identified timeously and that these are escalated appropriately and that corrective action is taken without delay. Supporting this structure is a communication strategy which is The internal control framework forms part of the overarching enterprise-wide risk management framework which has, as one of its core imperatives, the identification, evaluation and treatment of risks (both internal and external) that may prevent the depository from achieving its corporate objectives. designed to provide decision-makers with the right information, at the right time to make the right decisions. Effective risk management is one of the cornerstones upon which the success of Strate has been built. Strate is committed to ensuring that its services are provided in a secure and controlled environment and that the integrity of the South African market infrastructure is enhanced through the effective operation of a world-class depository. Enterprise Risk Management (ERM) at Strate comprises: The Risk Management function; Business Continuity Management (including Disaster Recovery); Information Security; and The Internal Audit program which uses a combination of external (inter alia Pricewaterhouse Coopers) and independent internal resources (Process Assurance) The ERM Division effectively co-ordinates and manages the overall risk management program for Strate by: 1. Assisting each division within the company to identify, assess and measure risks according to the probability (or likelihood) of occurrence and the potential impact that the identified risk may have. A process-based ERM framework which is linked to Strate's strategic objectives has been defined for this purpose; 2. Assisting divisions in undertaking an initial assessment of the effectiveness of relevant controls identified to mitigate the specific risks. These assessments drive regular risk reporting through the Management Team to the Audit and Risk Committee and ultimately the Board of Directors who measure risk exposure against pre-determined risk tolerances and the management actions being taken to bring specific risk exposures back to within acceptable levels of tolerance; 3. Identifying risk-based focus areas for independent review in terms of the Internal Audit plan; 4. Coordinating a comprehensive risk review in respect of each and every new product/service under development by Strate; and 5. Ensuring that all system enhancements/changes are channeled through an effective Change Advisory Board and that the underlying Change Control and Release Management processes are followed in accordance with a defined and documented System Development Life Cycle (SDLC). A risk review is undertaken of each change / enhancement to ensure a comprehensive understanding of the likely impact and that the necessary /appropriate controls have been incorporated prior to implementation. Establish the Content Communicate and Consult Analyse Risks Evaluate Risks Mitigate Risks ERM Framework Source: 4360: AU/NZS 2004 Monitor and Review Identify Risks Risk Assessment The Business Continuity Management (BCM) program at Strate is managed by the ERM Division which: 1. Oversees the establishment and maintenance of: effective business continuity plans which are capable of supporting all core business activities of the depository; identifying areas of weakness and, in conjunction with the relevant business resources, developing and testing appropriate business continuity capabilities; 2. Provides effective co-ordination of all BCM testing to ensure that identified plans are, in fact, capable of supporting the relevant service and/or function and that the recovery time and point objectives can, indeed, be met; and 3. Promotes awareness and preparedness across the organisation and with those parties with whom Strate has direct interfaces such as its Participants, the JSE and the Central Bank. In recognition of its role in the South African financial services industry, Strate has been particularly mindful of the obligation to ensure state-of-the-art preparedness across all of its key services. Recent enhancements to the Strate network, and the introduction of high levels of virtualisation across these services, ensure that disruptions are kept to a minimum and that recovery from disruptions can be effected with a minimum delay - often without any impact on downstream users. Strate, in conjunction, with other stakeholders, undertakes regular testing. The outcomes of each and every test are recorded and, where necessary, enhancements are made to improve identified weaknesses. A clear and accurate communication strategy exists and Escalation procedures have been documented throughout the company. These are reviewed/updated regularly. Strate's Project and Innovation Management Office (PIMO) has adopted the Prince2™ and Managing Successful Programmes (MSP)™ methodologies, together with a Business Analysis method that uses Use Case Responsibility Driven Analysis and Design (URDAD) to create business and IT designs that deliver transformational change to the market. The PIMO aligns all initiatives and projects to Strate's objectives of diversifying revenue streams, improving efficiencies, reducing cost, and managing risk. The initiatives and projects are transitioned through a series of Steering Committee meetings to assure throughput and delivery to expectation. The PIMO acts on behalf of Strate to deliver projects for the market. Its operations are subject to regular internal process assurance reviews and, from time-totime, to audit by independent assurance providers and external auditors. A dashboard of PIMO initiatives and projects in progress is tabled at every Strate Board meeting. The introduction of electronic trading, clearing and rolling, contractual, settlement significantly enhanced the appeal of South Africa as an investment destination. This required the adoption of a number of common standards and benchmarks which had already been identified in other, leading, markets around the world. Strate has been guided by organisations such as the International Organisation for Securities Commissions (IOSCO) and the Group of 30 (G30) in the establishment of a world class facility. The adoption of these standards has proven invaluable to the South African market and has greatly enhanced our ability to reduce (and even remove) barriers which have previously existed in respect of our securities industry. The ability to capitalise on desirable characteristics of products and services (such as, inter alia, quality, reliability and efficiency) which have been identified elsewhere has led to the timeous sharing of key technological advancements and good management practices in an industry which is inherently reliant on sound practices. It is, however, imperative that we continue to protect an environment which is built on the promotion of level playing fields which ascribe to the highest standards for entities providing custody and settlement services. Solutions to common problems and areas of innovation can be quickly disseminated around the world and provide an ideal opportunity for fairer trade across legislative boundaries. Strate has, as one of its core objectives, the aim to drive global best practices and develop value added opportunities for itself and the South African market infrastructure as a whole. We pursue this objective by serving as a catalyst for new thinking in a rapidly changing environment. EQUITIES The successful introduction of the Johannesburg Equity Trading (JET) system in the 1990's highlighted the deficiencies in the JSE's paper-based settlement system. Strate was introduced to the market to facilitate the dematerialisation and electronic settlement of the equities market. Shares were no longer traded on an open-outcry trading floor and this contributed to a massive leap in the number of trades each day. Back-office support services were incapable of handling this increase in daily transactions efficiently in a paper-based environment. to develop an electronic settlement system using a CSD. The same shareholders got together to form CD Limited in 1991. In May 1994, UNEXcor was appointed as the Clearing House for the South African bond market. The first full electronic settlement through UNEXcor and CD took place on 26 October 1995. In 2003, UNEXcor merged with Strate to become South Africa’s only CSD. MONEY MARKET The transition to an efficient electronic settlement system has increased market activity and has improved the international perception of the South African market by reducing settlement and operational risk in the market, increasing efficiency and ultimately reducing costs. Accordingly, by heightening investor appeal, Strate enables South Africa to compete effectively with other international markets, and not just those of emerging markets. BONDS Prior to the 1990s, bond trading in South Africa took place via a trading floor or a screen and telephone system with both parties agreeing on prices and amounts to be bought and sold. With the growth in turnover and value, settlement risks also grew. In 1989, the bond market participants (consisting of banking groups, large issuers, stockbrokers and a number of major financial institutions and intermediaries) formed a voluntary association called the Bond Market Association (BMA) to facilitate the development of a self-regulated bond market exchange. That same year, the major clearing and bond settlement banks and the Reserve Bank created UNEXcor with the express purpose An initiative was established by a number of market participants to address the electronic settlement of money market securities. The Money Market Forum was established and a Blue Print was issued in 2002 for the dematerialisation of money market securities. UNEXcor was awarded the system development contract and following the Strate/UNEXcor merger, Strate assumed the responsibility for the delivery of this project. In conjunction with extensive market consultation, Strate developed the Business Requirement Specification documents. Tata Consultancy Services (TCS) was employed on behalf of Strate to develop the code for the project. Successful market scripted testing of Version 1 was completed in October 2008 and Rand Merchant Bank issued the first electronic security to Strate via FirstRand Bank in November 2008. In April 2009 the Money Market Securities System code enhancements were effected and market participants commenced testing immediately thereafter. The South African market intends on implementing the electronic settlement of newly issued money market securities in the latter half of 2009. The features and benefits of Strate emerge from the variety of advanced, technological features and business principles incorporated in Strate’s underlying software, South African Financial Instruments Real-time Electronic Settlement system (SAFIRES) for equities, and the Bonds and Money Market System for these securities respectively. SAFIRES is an adaptation of the Swiss Settlement system, SECOM, which has been providing investors with secure and efficient settlement since 2000. The features of Strate’s systems are numerous and each provides a very significant, risk-reducing benefit to the South African financial market. ELECTRONIC CUSTODY OF SECURITIES Shareholding is recorded electronically by each of the Participants and collated at a Participant level within Strate for equities and bonds. In the money market environment the custody of shares occurs in a Securities Ownership Register (SOR). These electronic records provide issuers with the register of investors for the dematerialised portion of their register. The records of the Participant’s are reconciled daily with the records kept by Strate, where the total balance of dematerialised securities is kept. Investors receive regular statements which take the place of share certificates. This is in direct contrast to the paper settlement environment where risks of lost, forged or stolen documents abound. Naturally, the costs associated with the replacement of such documents are also eliminated under Strate. SECURITY OF STRATE’S SYSTEMS The electronic record of shareholding in Strate is subject to extensive controls. This is thanks to the sophisticated encryption and authentication in the coding of the software where the security of the electronic records has never been compromised. Furthermore, Strate utilises the renowned Society for Worldwide Interbank Financial Telecommunications (SWIFT) network for the relay of electronic information. SWIFT is a network owned by the major banks in the world and therefore the provider of choice for all major financial institutions, globally. This is one of the most secure network in the world with consistent 99% up-time since its inception. As one of the highest users of the SWIFT network globally, Strate also provides SWIFT network services to other financial institutions and large corporates in South Africa. This provides a cost effective mechanism for them to utilise the SWIFT network without having to contract directly with SWIFT. ELECTRONIC SETTLEMENT OF TRANSACTIONS At the point of settlement, the electronic records are updated realtime via book-entry. Settlement via book entry is both secure and efficient. It is no longer necessary for the seller to submit his share certificate to his broker for further submission to the Transfer Secretary who issues a new certificate in the name of the buyer. This manual process was risky, administratively burdensome and time consuming. ROLLING SETTLEMENT Rolling settlement refers to a settlement environment in which transactions (securities and funds) become due for settlement a set number of business days after trade. In South Africa, rolling settlement has been introduced on a T+5 basis for equities, a T+3 basis for bonds and a T+0 basis for money market securities (where T= trade date). Rolling settlement represents a significant departure from the ‘account period’ methodology employed in the past by the equities market whereby trades of any given week were settled from Tuesday of the following week. Investors know when their trade will settle and can plan/ budget accordingly. The ‘account period’ methodology of the paper-based settlement environment operated on an indefinite basis; some transactions remained unsettled for months. As every day is a trading day, under Strate every day is also a settlement day. CONTRACTUAL SETTLEMENT Investors obtain the assurance that their transactions settle on the specified settlement day. The appropriate cash and securities accounts are debited/credited on settlement day and the risk of delayed settlement and loss of earnings is significantly reduced. SIMULTANEOUS FINAL IRREVOCABLE DELIVERY VERSUS PAYMENT (SFIDVP) Strate is proud to be amongst the CSDs to have achieved true Simultaneous, Final, Irrevocable, Delivery versus Payment (SFIDvP) in Central Bank funds. This has been achieved with the use of the Continuous Batch Processing Line (CBPL) functionality for equities, the Continuous Processing Line (CPL) for bonds and the RealTime Line (RTL) for money market securities in the National Payment System at the Central Bank. In terms thereof, payment obligations must be provided for in the South African Multiple Options System (SAMOS) system before the settlement run can be commenced. the South African financial markets is that it provides for final and irrevocable payment. Similarly, Strate provides the investor with contractual settlement and finality of ownership transfer for all instruments settled. By synchronising securities ownership transfer through Strate with cash payment through SAMOS, the market is able to provide local and international investors with SFIDvP, as explained above. SAMOS provides for final and irrevocable payment settlement, while Strate provides the investor with real-time settlement and finality of ownership transfer. By making the SAMOS settlement infrastructure available for the settlement of financial market transactions, the Reserve Bank has greatly boosted the capability and competitiveness of the South African financial markets. The interdependence of these two systems is in line with the worldwide drive towards consolidation and the resultant economies of scale. ACCURACY OF THE REGISTER The electronic register is updated on a T+5 basis for equities, a T+3 for bonds and T+0 basis for money market securities when the simultaneous transfer of securities and funds takes place. This means that all trades are reflected on the register of investors With the implementation of a netting model for on-market equities transactions, settlement efficiency within Strate has been maximised through netting of securities at Safe Custody Account (SCA) level and funds at Participants level. Further efficiencies are provided to the market through a gross settlement model for bonds and money market securities. CONNECTIVITY THROUGH SAMOS In 1998, the South African Reserve Bank granted Strate permission to integrate its settlement processing directly with their own SAMOS system. The main benefit that SAMOS brings to for dematerialised securities in the Strate environment as there are no outstanding securities transactions. Listed companies wishing to obtain an accurate record of their investors find themselves in a far more efficient position in the Strate environment. ELECTRONIC EXECUTION OF CORPORATE ACTIONS Strate executes all corporate actions events in respect of dematerialised securities for the market. The benefits of Strate’s corporate actions model cannot be underestimated given the significant risk reduction and cost savings in the corporate action arena. For example, interest, dividends and proceeds are credited to the SCA directly with the electronic execution of corporate actions occurring in a quick and secure manner. Payments are transferred electronically with same-day value eliminating the costs and risk associated with cheque payments. Issuers and investors therefore benefit from a dramatically increased level of efficiency and cost effectiveness and the most importantly, the elimination of market claims. INCREASED MARKET REGULATION Strate is the regulator of the Participants under the authority of the FSB. The regulation of the market players is significant as Participants and qualifying brokers (regulated by the JSE) act as agents for investors and have a statutory and contractual duty to protect the records of the investor in the electronic environment. Investors gain the peace of mind that all business processes associated with electronic settlement are regulated by Strate. As illustrated by the examples above, the key features of electronic settlement contributed to a massive reduction of risk in the South African market. This increases South Africa’s standing as an investment destination for international investors which undoubtedly provides a significant boost to both trading and liquidity. 1. CLEARING AND SETTLEMENT SERVICES The clearing and settlement of dematerialised securities is Strate's core function. Strate's services include the settlement of all transactions concluded on the JSE (including the former Bond Exchange of South Africa) as well as those executed “off-market” in listed and unlisted securities and money market securities. Strate also facilitates the settlement of Securities Lending and Borrowing transactions, Depository Receipt transactions, account transfers and portfolio movements. CSD Participants Issuers STRATE SAMOS JSE (BESA) Members JSE/ Yield-X CSD Participants OTC Traders Clearing and Settlement Model 2. OVERVIEW OF STRATE’S CORPORATE ACTION SERVICES In 2001, Strate successfully implemented the electronic processing of corporate actions in the South African market. The significance of this automation milestone cannot be overestimated with the benefits to the market including: The elimination of costs, significant risks and administration previously associated with corporate actions processing; The marketability of South Africa financial services infrastructure; The elimination of the costs and risks associated with cheque payments and the improved efficiency of share distribution; The processing of corporate actions and the payment of dividends on due date and, most importantly; The elimination of market claims. The elimination of market claims is an objective which still eludes many of the leading CSDs worldwide. The attainment of this objective ranks Strate and the South African market as a world leader in the administration of corporate actions. Despite the increasing complexity of corporate action events in the market, Strate continues to process all events on behalf of Issuers in South Africa. 3. CORPORATE ACTIONS ENHANCEMENT PROJECT By their very nature, corporate actions carry high levels of risk and increasing complexity. Self-evidently, the outcomes depend on how diligently one manages those risks and complexities. As a result, Strate has undertaken to review how we can better manage the corporate actions environment through its extensive Corporate Actions Enhancement Project. Benefits of the project: Improved risk management of approximately 2000 events that are processed within Strate’s system on an annual basis; Providing robust functionality to assist the market in dealing with the increasingly complex corporate events thereby mitigating risk; Supporting the SWIFT and Securities Market Practice Group (SMPG) messaging standards for announcements, instructions, entitlements and payments; Standardising event types and their application; Providing a web browser access with better reporting and export functionality; and Offering a "dashboard" technology platform that pushes critical information to the forefront for viewers. Strate Corporate Actions Enhancement Project is due to go live during 2010. Purpose of the project: Strate has embarked on its Corporate Actions Enhancement Project with the purpose of: Mitigating associated market risks; Aligning the organisation with evolving global standards and best practice principles; Supporting the JSE’s project to move to a T+3 settlement cycle for equities; and Improving South Africa’s risk ratings from agencies such as Thomas Murray which utilises corporate actions processing within a CSD as a gauge to measure overall market risk. As such, Strate is compelled to reduce the risk inherent in the corporate actions system in order to ensure that our overall risk rating is not impacted. 4. IT SERVICES 4.1. SWIFT Services The South African market makes its financial payments and securities related transactions with speed, certainty and confidence through the SWIFT network. Over 8,300 banking organisations, securities institutions and corporate customers in more than 208 countries exchange millions of standardised financial messages every day over SWIFT. Following the introduction of ISO 15022 message standards, South Africa was the first community to roll out the new and improved messages over the SWIFT network 9 years ago. Strate manages one of Africa’s largest SWIFT infrastructure. As one of the top 2 % of SWIFT users in the world, our centralised SWIFT services allow market players to save costs and ultimately bring new efficiencies to their own organisations. Strate provides some of the following benefits: A Premium Plus Partnership with SWIFT; Cost-effective infrastructure and state-of-the-art IBM platform; 24/7 monitoring and support, with direct support that includes an on-call SWIFT certified engineer; Easy connectivity to Strate participants and other SWIFT users; Shared connectivity with a host of users, thereby providing an extraordinarily cost-effective service; Scalable SWIFT services, rendering them readily accessible to a range of users; and Various SWIFT products eg. SWIFT Alliance Messenger and SWIFT Alliance Gateway. At the heart of the Strate Gateway Services lies Strate's Gateway and Tracker Applications. The Gateway application processes and routes messages to and from the required Strate target application while the Tracker application stores a copy of the messages processed by the Gateway application on a database that resides on the Strate high availability infrastructure. The messages are stored for a period of 5 years and thereafter achieved. These applications were developed and are maintained by Strate's development team. Additional functionality is periodically added to the application to satisfy the clients requirements and to enhance Strate's service offering. This Network used is a secure and private network that uses state of the art infrastructure. 4.2. Strate Gateway Services The Strate Gateway Service offering provides the South African financial market Participants with an alternative to send and receive ISO15022 format messages directly to and from Strate, without utilising the SWIFT network, thereby realising cost savings. 5. MONEY MARKET PRODUCT Strate's Money Market Product enables the electronic settlement of money market securities. The System boasts a number of world firsts, which Strate has made available to international markets and counterparts. Notwithstanding the concomitant reduction in the security, settlement and operational risks and inefficiencies inherent in traditional paper based money markets, Issuers of money market securities enjoy real time secure access to a complete data base of the registered owners of its issued money market securities. Investors can manage their liquidity with greater confidence through secure real-time settlement of coupon and maturity payments and trades, on a gross principal-to-principal basis. A central SOR obviates the onerous controls over paper certificates and provides real time transactional audit trail of primary and secondary market trading. Some of the key features include, inter alia: The facilitation of the real-time electronic issue of unique International Securities Identification Numbers (ISIN) for each money market Security issued; A SOR which is the centralised real time record of ownership at beneficial level of every electronic security; Post-trade electronic trade matching to eliminate settlement mismatches; The facilitation of secure real-time gross settlement of trades on a principal-to principal basis; The ability to calculate coupon payments and facilitate the settlement of both coupons and maturities; Provide Simultaneous Final, Irrevocable Delivery-versusPayment at beneficial ownership level for securities; The opportunity for enhanced straight-through processing; The System was developed in conjunction with the South African money market and TCS. Over the last ten years, Strate has developed a strategic partnership with TCS to provide world class infrastructure to the financial markets industry in South Africa and one that can be customised to suit other markets around the world. The reduction of operating risk through a single point of electronic capture of executed trades, settlement information and coupon and maturity payment amounts and dates as well as the opportunities for fraud and theft; Comprehensive electronic real-time query and reporting facilities; and Communication through standard ISO 15022 message types; communication with the System through integration of proprietary back office systems or via a stand-alone frontend portal. 6. STRATE REPORTING SERVICES Strate's systems house enterprise-wide data that can assist toplevel executives to analyse, compare and highlight trends in important variables so that they can monitor performance and identify opportunities and problems. Strate’s Reporting Services (SRS) enables detailed analysis on different aspects of it’s clients business including time, usage, customer and products. The SRS system is able to produce the required information in an easy to read graphical format. Through this information, users may be able to identify strengths and weaknesses in their own internal processes thereby increasing efficiencies and potentially unlocking cost savings. SRS include statistics, data and analysis of: All equities, bonds and money market securities transactions and settlements; Custody and dematerialised holdings; Trade types, values and market share; SWIFT messaging, usage and volumes; and Gateway / WAN messaging, usage and volumes. Strate Training offers the following: 7. VALUE-ADDED SERVICES TO LISTED COMPANIES To comply with the current legislation, section 140A and section 91A of the Companies Act, Strate provides full beneficiary disclosure 12 times per year to the Issuers or their Registrars / Transfer Agents. To enhance the value of the statutory beneficial download, Strate also provides a number of different layouts of the reports, which enables the recipients to better analyse the breakdown or makeup of the shareholder base. One day Seminars - the purpose of which is to provide up to date, continuous training on Strate specific functionality, procedures and legislation; Computer based knowledge disks for each component of a study module; Handbooks (Equities, Bonds and Money Market) These handbooks encapsulate the entire spectrum of a particular market from a Strate perspective and include information about, inter alia, the current settlement and custody functionality, procedures and legal framework. The Handbooks are updated and edited on an annual basis (or as necessary). 8. STRATE TRAINING AND EXAMS Strate is committed to educating and upgrading the standing of those individuals working in the Securities or Financial Services industry. Strate has partnered with the South African Institute of Financial Markets (SAIFM) and with effect from 1 March 2008 offers on-line examinations through the use of SAIFM examination facilities. Strate offers training and exams for equities, bonds and money market securities. Top 100 shareholders; A breakdown between residents and non- residents; Categorization by investor classification; Shareholders by band; Shareholders movements from month to month; and The percentages held by shareholder, category or band. Some of these reports include: 8 7 6 5 4 3 2 1 0 Dematerialised value of equities Total market capitalisation 2004 2005 2006 2007 2008 2000000 1500000 Number of on-market settlements 1000000 Number of off-market settlements Total on-market trades 50000 0 2004 2005 2006 2007 2008 900 800 700 600 500 400 300 200 100 0 Nominal Value under Management (in ZAR Billions) 2004 2005 2006 2007 2008 400000 350000 300000 250000 200000 150000 100000 50000 0 2004 2005 2006 2007 2008 Bond Trades Settlement Positions Strate is currently licensed as South Africa's only CSD in terms of the SSA. The SSA provides the legal framework to support electronic securities services performed by Strate as the CSD. Although the SSA sets out a framework for market regulation, it leaves much of the detailed substantive provisions to secondary legislation. Strate is required to issue and amend Rules within the framework of the SSA where the basic principles are set out. The objectives of the SSA that are expressly stated protect the public interest and provide the principles for the supervisory approach adopted by the Registrar of Securities Services (the Registrar). The SSA provides a framework for Strate when issuing Rules and Directives. The Executive Officer of the FSB fulfils the function of the Registrar and the Capital Markets Department within the FSB is responsible for ensuring that the objectives of the SSA are met by Strate in its function as a Self-Regulatory Organisation (SRO) and Clearing House. In terms of section 33(o) of the SSA, Strate must act with due regard to the rights of Participants, clients and Issuers. Thus, the legislation establishes a co-regulatory regime in terms of which Strate's self-regulatory responsibilities arise. Strate must regulate its activities and those of its Participants by making and enforcing Rules that comply with the requirements prescribed by the SSA. The FSB is required to supervise compliance with the SSA by every regulated person. In relation to Strate, and in line with the IOSCO Recommendations, broad-base participation in the CSD is encouraged. The CSD Rules stipulate the participation eligibility criteria for any entity wishing to operate as a Participant. The entry criteria include reviews of financial soundness, technical and human capacity and capability, adequate skills, knowledge and expertise, adequate insurance, disaster recovery and business continuity plans and procedures. The entry criteria promote both local and international entities to be licensed as Participants. The entry criteria of Strate are reviewed periodically to ensure appropriateness and relevancy to new developments. Head of Supervision Beverley Furman In terms of section 31 of the SSA, a CSD must have made arrangements for the proper supervision of compliance by Participants with the depository rules. The Controlling Body of Strate has delegated its supervisory obligations to a sub-committee of the Controlling Body, namely the Strate Regulatory and Supervisory Committee. The Committee's overall objective is to assist the Controlling Body in discharging its regulatory and supervisory obligations in terms of the SSA and the Rules. The Supervision Division is accountable to the Committee for the supervisory and enforcement functions and reporting to the Committee and the FSB on each Participant's compliance with the SSA, Rules and Directives. STRATE Supervision strives to build fair and credible supervisory processes consistent with low to medium intensity supervision. The Supervision Division aims to apply and enforce its risk-based, supervisory approach consistently. Appropriate “Chinese walls” have been established between Strate's two roles, namely, the role of performing security services as the appointed CSD and the role of a SRO tasked with supervision of compliance by Participants. A “Chinese walls” manual details the structures that have been established and the procedures which must be followed to prevent the inadvertent spread of confidential information between these two roles. Broad-Based Black Economic Empowerment (B 3 E 2 ) aims at substantially increasing black participation at all levels in the economy. This strategic imperative tries to redress the imbalances of the past by transferring more ownership, management and control of South Africa's financial and economic resources to the majority of its citizens. It also aims to ensure broader and more meaningful participation in the economy by black people. Strate believes that B3E2 is a component of the broader Strate's approach to transformation is to address the elements of the B3E2 scorecard as identified in the Codes of Good Practice. In executing its B3E2 strategy, Strate will remain focused, delivering clearing and settlement services while ensuring good corporate governance and citizenship. The company will follow an integrated approach which seeks to engage all stakeholders in creating an enabling environment that contributes to the development of the country and the transformation of South Africa's economy. In its ongoing quest to meet its transformation objectives, Strate has devised its transformation strategy and plan for the next 5 years. transformation imperative in our country. Strate believes that the starting point of our sustainable business is to understand the moment we are in, to understand the forces that shape the behaviour of our clients, and to lead our employees towards using our resources to create sustainable value to the market. Strate Charity Shares (SCS) is a non-profit organisation charity donation programme run by Strate and Computershare Investor Services. SCS serves as a convenient mechanism whereby shareholders can quickly and easily donate small or large amounts of shares to charity. It does not cost the person making the donation anything and is tax-deductible. SCS is a highly effective vehicle for investors to tidy up their portfolios by getting rid of small holdings of shares that are too costly to sell through a stockbroker, since shareholders incur no cost if they donate their shares to charity. To date, SCS has donated in excess of one million rand to various charities. For further details, queries and / or donations contact the Strate Charity Shares toll free help line on 0800 202 363 or +27 11 506 4713 if you are phoning outside South Africa. Investing in our local communities is an essential part of our business and we support a number of worthy causes which have a positive impact on people's lives and their futures. Strate encourages its staff to become involved in our Socio-Economic Development (SED) initiatives, and they regularly participate in community outreaches. We also have a programme in place where staff members can nominate worthy causes within their communities. The following educational and community initiatives are supported by Strate: Sekolo sa Borokgo: Each year Strate selects a flagship charity for the year. This has included such organisations as Sekolo sa Borokgo. Formed in 1993, Sekolo sa Borokgo is a non-profit, coeducational, independent school, registered with the Gauteng Department of Education, from whom it receives a small subsidy. The school is caters mainly for previously disadvantaged learners who come from areas such as Soweto, Alexandra, Vosloorus and Diepsloot, Cosmo City and the East Rand. The aim of the school is to develop learners with potential, who have strong academic ability, in a structured environment, with particular emphasis on Maths, Science and English. Ebenezer Care Centre: The centre provides a loving home environment for about 80 destitute people and helps them to become self-reliant through education and skills development. Since 1999, Strate has supported the Care Centre through both financial support and by volunteering at the centre. JSE Adopt-a-School programme: The programme encourages schools in disadvantaged communities to participate in the JSE's Investment Challenge. Strate contributes financially to the programme, provides schools with access to financial media and teaches learners how to trade shares. The biennial CSD conference has been the common platform of information sharing and networking among the executive members of the post-trade securities industry across the world for the past ten years. The Africa and Middle East Central Depositories Association (AMEDA) was awarded the bid to host the CSD11 conference which is scheduled to take place in Cape Town, South Africa from 6 - 8 April 2011. The conference is an intensive threeday event. It expects to attract approximately 200 delegates from depositories and the industry around the world. AMEDA Strate became a member of the African and Middle-Eastern Depositories Association (AMEDA) in 2007. AMEDA's main purpose is to be a forum for the exchange of information and experiences among its members in a spirit of mutual cooperation and to promote best practice recommendations in services such as securities depository, clearance, settlement, and risk management. AMEDA's goal is also to support local markets in their efforts to adopt securities market regulations, while considering their specific circumstances and to serve as a dialogue channel with other organizations worldwide. AMEDA is formed for the benefit of its Member community, as an elective, inter-professional and regional facility to foster a spirit of cooperation, reciprocity and harmony among members, to achieve those objectives it determines from time to time. ACSDA Strate is a member of The American Central Securities Depository Association (ACSDA). Strate was invited to join ACSDA as South Africa shares a common interest with the emerging South American markets. ACSDA is made up of CSDs in North, Central and South America. ACSDA's main purpose is to be a forum for the exchange of information and experiences among its members in a spirit of mutual co-operation and to promote the best practice recommendations in services such as securities depository, clearing, settlement and risk management. The benefits for Strate to be part of these two international associations are:The attendance of yearly conferences regarding the latest issues, trends and developments in the industry; Contact with other CSDs for advice and recommendations; forum to discuss issues affecting emerging markets; As the USA and Canada are leading the way forward in terms of industry initiatives, this will allow Strate to learn from their experiences without the need to reinvent what already exists in this industry; and Representation at an international forum. Strate believes that all businesses have a ‘Genetic Code’ – a distinctive DNA which is the unique and optimum way in which they function within their micro business and macro social environments. In order to extract our DNA, Strate embarked on an extensive process of interviewing both internal and external stakeholders and asking them to identify principles which added value to our business and which principles detracted value from our business. Strate was able to identify 14 principles that add value, these are our ‘have to haves’ and are represented as the Top Line Principles and 14 principles which detract value, these are our ‘can’t afford to haves’ and form the Bottom Line Principles. These principles were then converted into iconographic forms through artwork and set into a weighted mathematical formula which is measured on a quarterly basis. Strate’s DNA can be seen as follows: The following principles add value to Strate’s business in terms of its DNA: The following principles detract value to Strate’s business in terms of its DNA: Tata Consultancy Services (TCS) Limited is an IT services, business solutions and outsourcing organization that delivers real results to global businesses, ensuring a level of certainty no other firm can match. TCS offers a consulting-led, integrated portfolio of IT and IT-enabled services delivered through its unique Global Network Delivery ModelTM, recognized as the benchmark of excellence in software development. More than 99% of TCS customers reward the company’s reliability, passion, creativity, and unique ability to handle the broadest range of their IT needs by continually extending and deepening their partnerships with TCS. With over 1,12,500 of the world’s best trained IT consultants located across the world, TCS is uniquely positioned to deliver its flexible world class services seamlessly to any location. TCS reported consolidated revenues of USD 5.7 billion in the fiscal year 2007-2008. The company is listed on the National Stock Exchange and Bombay Stock Exchange in India. Zensar Technologies Ltd is a Global Information Technology and Business Process Outsourcing (BPO) Services Company, providing full spectrum of services from IT development to Business Process outsourcing, from consulting to implementation to support over 250 active Fortune 500 and other customers. Zensar is also named among Top 10 Global Offshore Outsourcing Providers from India by the prestigious Fortune Magazine in the Leaders' Category. Zensar is headquartered in India and spread over 18 countries across the globe including South Africa, with the delivery centers in India, China, and Poland offering 24 X 7 complete business solutions across diverse technology platforms and industry domains spanning across Retail, Manufacturing, Banking, Finance, Insurance, Telecommunications, Utilities and Pharmaceutical amongst others, through its Innovative Global Delivery Model (GDM). The Society for Worldwide Inter-bank Financial Telecommunication (SWIFT) is a member-owned cooperative that provides the communications platform, products and services to connect over 8,500 banking organisations, securities institutions and corporate customers in more than 200 countries. SWIFT enables its users to exchange automated, standardised financial information securely and reliably, thereby lowering costs, reducing operational risk and eliminating operational inefficiencies. SWIFT also brings the financial community together to work collaboratively to shape market practice, define standards and debate issues of mutual interest. SWIFT is solely a carrier of messages. It does not hold funds nor does it manage accounts on behalf of customers, nor does it store financial information on an on-going basis. As a data carrier, SWIFT transports messages between two financial institutions. This activity involves the secure exchange of proprietary data while ensuring its confidentiality and integrity. BlueWorx IT Solutions is a Vendor Independent and Objective Services and Consulting Company specialising in Mainframe and Open Systems Services. The experience and know-how of our technical consultants forms a key component of delivering end-to end solutions based on the clients business and infrastructure requirements. BlueWorx core business is focused on vendor neutral service offerings from strategy, architecture, consulting, solution design and project driven implementation services for hardware and software in both the Mainframe and Open Systems environments to on-site support services. The organisation thrives on delivering superior quality services and fully integrated innovative solutions to assist companies of all sizes to adapt quickly and achieve real business results in the rapidly changing and increasingly competitive marketplace. BlueWorx has a long lasting partnership at Strate and has been privileged to establish this relationship when the company was formed; making Strate its very first client and partner. Its service delivery objectives share common values with Strate, namely, the success of its business is largely a result of superior services, extra attention to detail, a highly experienced group of employees, loyal and dedicated staff and the ability to successfully differentiate its services from the competition. Connection42 was established twenty years ago with the intention of providing application development and database administration services to a number of clients. Since those beginnings this competency has flourished and expanded into a complete outsource offering, covering software products from all the major relational database vendors (IBM, Microsoft, Oracle). In addition to Administrative services, its expertise now also includes product upgrades, technical support, performance tuning, application design and installation auditing. Connection42 has been the DB2 Administrative Outsource providers for Strate since 2005. It has also undertaken multiple optimisation exercises with measurable improvements to Strate's applications. The Connection42offering provides Strate with complete 24x7 monitoring, maintenance and administration of the completel DB2 database service. it has recently extended this role to include Microsoft SQL server Obsidian has been providing open source and related technology and services to the Southern African market since 1995. Obsidian is currently South Africa's only Red Hat Premier Partner, and is also a Red Hat and JBoss training provider. Obsidian currently provides consulting and monthly maintenance and support services to Strate's Red Hat and JBoss environments. ACSDA AMEDA B3E2 BESA BCM BMA BND BPO CBPL CPL CSD DNA ERM ETF FSB G30 GDR IOSCO ISIN ISO JET JSE MSP American Central Securities Depository Association Africa and Middle Eastern Depository Association Broad - Based Black Economic Empowerment Former Bond Exchange of South Africa Business Continuity Management Bond Market Association Beneficial Ownership Download Business Process Outsourcing Continuous Batch Processing Line Continuous Processing Line Central Securities Depository Deoxyribonucleic acid Enterprise Risk Management Exchange Traded Funds Financial Services Board The Group of Thirty Global Depository Receipts International Organisation of Securities Commissions International Securities Identification Number International Standards Organisation Johannesburg Equity Trading JSE Limited trading as the Johannesburg Stock Exchange Managing Successful Programmes OTC PIMO RTL SAFIRES SAIFM SAMOS SARB SCA SCS SDLC SED SFI DVP SMPG SOR SRO SRS SSA SWIFT TCS URDAD WAN Over the Counter (off-market) Project and Innovation Management Office Real-Time Line Southern African Financial Instruments Real Time Electronic Settlement System South African Institute of Financial Markets South African Multiple Options System South African Reserve Bank Safe Custody Account Strate Charity Shares System Development Lifecycle Socio-Economic Development Simultaneous, Final, Irrevocable Delivery versus Payment Securities Market Practice Group Securities Ownership Register Self Regulatory Organisation Strate Reporting Services Securities Services Act (No 36 of 2004) Society for Worldwide Inter-bank Financial Telecommunication Tata Consultancy Services Use Case Responsibility Driven Analysis and Design Wide Area Network