C O R P O R A T E P R O F I L E

Strate Ltd is proud to be licenced as South Africa'sCentral Securities Depository (CSD) providingpost-trade products and services to the financialmarkets.

The mitigation and management of risk is atthe heart of the company's vision and purpose, asStrate brings efficiencies to the market andenhances the country's profile as an investmentdestination.

Strate is aligned to international best practicesand incessantly endeavours to maintainoperational excellence, improve transparencyand provide enhancements for the good of thesouthern African financial markets.

“As South Africa’s world-class Central Securities Depository, we are always

asking ourselves: What can go wrong? Through our passionate management

of risk for the financial markets, Strate is trusted to provide certainty to the

post-trade securities environment, ensuring we leave nothing to chance.”

A probability or threat ofdamage, injury, liability, lossor any other negativeoccurrence that is caused byexternal or internalvulnerabilities and that maybe neutralised throughpre-emptive action.

Contents

Message from the CEO

About Strate

History of Strate

Shareholding Structure

Fast Facts

Corporate Governance

Executive Committee and Management

International Benchmarks and Standards

International Memberships and Affiliations

Risk Management

Internal Controls and Management

Features and Benefits of Strate

Electronic Custody of Securities

Security of Strate's Systems

Electronic Settlement of Transactions

Rolling Settlement

Contractual Settlement

Simultaneous Final Irrevocable Delivery versus

Payment (SFIDvP)

Connectivity Through SAMOS

Accuracy of the Register

Segregated Depository Accounts (SDAs)

Electronic Execution of Corporate Actions

Increased Market Regulation

Money Market

Products and Services

1. Clearing and Settlement

2. Corporate Action Services

3. IT Services

4. Money Market ISIN Enquiry Web Portal

5. Segregated Depository Accounts (SDAs)

6. Value-added Services to Listed Companies

7. Strate Training and Exams

Market Statistics

Strate Projects

Strate Landscape

Regulatory Environments

Supervisory Function

Transformation

Caring for People

Strate's DNA Formula

Acronyms

2

3

4

5

6

7

8

9

10

12

14

16

16

16

16

16

16

17

17

17

17

17

18

18

18

20

20

21

21

22

23

23

23

24

27

28

29

30

32

33

36

39

“The management ofrisk is pivotal toStrate’s role as a CSD,reducing uncertaintyand building resiliencefor South Africa’sfinancial markets.”

1

Message from the CEO

2

WELCOME. As South Africa's licenced Central SecuritiesDepository (CSD), Strate is entrusted to mitigate risk and bringefficiencies to South Africa's financial markets. It is ourresponsibility to be pro-active and drive our financial marketsthrough Strate's projects and initiatives. The company placesthe needs of the financial market as a high-level priority.

We pride ourselves in managing risks in such a way that ineverything the company does, it leaves nothing to chance.Strate continues to engage with key players and deliver solutionsthat support the industry's risk-mitigation objectives.

Considering the events our industry has endured both locallyand globally since 2007, Strate cannot afford to take risks asa Financial Markets Infrastructure (FMI). There is no doubt thatthe past five years took the wind from the global market's sailsas it entered uncharted rough seas, yet locally, the SouthAfrican f inancial market has shown its resi l ience.It is truly an honour to be at the helm of Strate and collaboratewith the industry to create innovative and responsive servicesin the interest of achieving a common goal: To enhance thestabil i ty and sustainabil ity of the financial system.

Our company faces a number of new reforms from local andinternational regulatory bodies, such as the new recommendedprinciples from the Committee on Payment and SettlementSystems (CPSS) and the International Organisation of SecuritiesCommissions (IOSCO). I’m pleased to report that Strate has,since its inception, always sought to embed best practice in allit does and this already ensures very high levels of alignmentto the Principles.

Strate will continue to leverage off the relationships it has withstakeholders as we navigate through this period of transformationtogether. With new regulations coming to the fore to de-riskthe financial system, financial institutions have a tough taskahead. They need to raise returns on equity, retain cash ontheir balance sheets and maintain profitability when they facegreater competition and are legally required to meet capitaland higher liquidity ratios.

Although we face a number of challenges together, I lookforward to the journey ahead. I am confident that Strate andits stakeholders will move forward as a collective and continueto showcase the robust strength and durability of the SouthAfrican financial market as we invest in the South Africa oftomorrow.

From a business perspective, I am very proud of the initiativeswe have brought to the drawing board. As these come tofruition, Strate and its CSD Participants will adopt pioneeringprojects that propose to change the South African electronicpost-trade environment and risk-management landscape.Two such initiatives include the proposed launch of a Tri-PartyCollateral Management service and the introduction ofSegregated Depository Accounts (SDAs), both of which aimto further de-risk the South African financial markets, protectcollateral, enhance transparency and liquidity, while addressingcosts and inefficiencies.

Risk management and stakeholder value is the lifeblood ofStrate and our team invests a wealth of time and dedicationinto delivering results that meet our core purpose.Strate is proud to live beyond a bottom-line approach,passionately giving back to society with initiatives thathave changed lives over the years. It is in our DNA toembrace corporate socio-economic investment initiativeswholeheartedly and staff members, along with theirfamilies, adopt these regularly by participating in community-outreach programmes. Strate continues to support South Africancharities. It is very rewarding to be associated with the goodcauses that they stand for. We would like to thank each andevery individual at Strate for their support of these organisations,such as Bread of Life Ministries, Cell C Day, Choc ChildhoodCancer Foundation, Cornucopia , Ebenezer Care Centre, IsiZuluTour, JAG Foundation, JSE/Liberty Life Investment Challenge,Kgosi Neighbourhood Foundation, Outlier Programme, Roseof Sharon Day Care Centre, Sekolo Sa Borokgo, Serenity,Shoshana Foundation, Smile Foundation, Thuthuka BursaryFund, Valued Citizen (Strate Siyakhula) and Zondi Community.

Ultimately, I'd like to thank everyone at Strate for theirloyalty, dedication and passion. Together, we acknowledgeand express our gratitude towards our clients, shareholders,partners and other stakeholders who continue to support us.

Monica SingerCEO, Strate Ltd.

About Strate

3

We are the leading independent

South African provider of innovative

post-trade products and services.

We fac i l i t a te r i sk management ,

enabling transparency and efficiencies

for the financial markets.

vision

Strate’s purpose is to provide post-

trade services for the securities market,

enab l i ng end- to -end p ragmat i c ,

rel iable, innovat ive solut ions that

faci l i tate the management of r isk

and the realisation of value for all

stakeholders.

• To ensure operational excellence,

transparency and the effective management

of risk while driving innovation and market

best practice

• To be stakeholder centric;

• To be profitable; and

• To be a learning organisation enabling

corporate and personal growth.

• Integrity

• Reliability

• Passion

• Dynamic innovation

• Accountability

• Teamwork

values

clientsStrate's clients include South Africa's authorised CSD Participants, the Johannesburg Stock Exchange (JSE), Securities

Lending and Borrowing Business Partners, Money Market Business Partners and Issuers of listed and unlisted securities.

The authorised CSD Participants are:

• ABSA Bank Ltd;

• Citibank NA - South Africa;

• Computershare Ltd;

• Eskom Holdings SOC Ltd;

• FirstRand Bank Ltd;

• Link Investor Services (Pty) Ltd;

• Nedbank Ltd;

• South African Reserve Bank;

• The Standard Bank of South Africa Ltd;

• Standard Chartered Bank - Johannesburg Branch;

• Société Général - Johannesburg Branch.

purpose

strategic objectives

The Bonds MarketPrior to the 1990s, bond trading in South Africa took place ona trading floor or a via a screen and telephone system withboth parties agreeing on prices and amounts to be bought andsold. As growth in turnover and value rose, settlement risksalso grew.

In 1989, bond market participants (consisting of banking groups,large issuers, stockbrokers and a number of major financialinstitutions and intermediaries) formed a voluntary associationcalled the Bond Market Association (BMA) to facilitate thedevelopment of a self-regulated bond market exchange. Thatsame year, the major clearing and bond settlement banks andthe South African Reserve Bank (SARB) created UNEXcor todevelop an electronic settlement system using a CSD. Thesame shareholders got together to form CD Limited in 1991.

In May 1994, UNEXcor was appointed as the Clearing Housefor the South African bond market. The first fully electronicsettlement through UNEXcor and CD Ltd took place on 26October 1995.

In 2003, UNEXcor merged with Strate to become South Africa'sonly CSD.

Due to the aging nature of the UNEXcor platform, Strate enteredinto market consultation during 2011 to replace the currenttechnology with a world-class system and move to a SecuritiesOwnership Register (SOR) for bonds.

The Equities MarketThe successful introduction of the Johannesburg Equity Trading(JET) system in the 1990s highlighted the deficiencies in theJSE's paper-based settlement system.

Strate was introduced to the market to facilitate thedematerialisation and electronic settlement of equities. Shareswere no longer traded on an open-outcry trading floor and thiscontributed to a massive leap in the number of trades eachday.

Back office support services were incapable of handling thisincrease in daily transactions in a paper-based environment.

Starting with the shares of gold mining group Harmony in 1999,Strate began the full dematerialisation of securities on the JSE.The transition to an efficient electronic-settlement systemincreased market activity and improved the internationalperception of the South African market by reducing settlementand operational risk in the market, increasing efficiency andultimately reducing costs. Accordingly, by heightening investorappeal, Strate has enabled South Africa to compete effectivelywith other international markets and not just those of emergingmarkets. Since 2000, Strate has used the South African FinancialInstruments Real-time Electronic Settlement system (SAFIRES),an adaptation of the Swiss securities settlement system(SECOM), operated by SIX SIS Ltd, to continuously provideinvestors with secure and efficient settlement of equities.

The Money MarketAn initiative was established by a number of market participantsto address the electronic settlement of money market securities.The Money Market Forum was established and a Blue Printwas issued in 2002 for the dematerialisation of money marketsecurities. UNEXcor was awarded the system developmentcontract and, following Strate's merger with UNEXcor, Strateassumed the responsibility for the delivery of this project.

In conjunction with extensive market consultation, Stratedeveloped the business requirement and Tata ConsultancyServices (TCS) was employed on behalf of Strate to developthe code for the project. Successful market scripted testing ofversion 1 was completed in October 2008 and Rand MerchantBank issued the first electronic security to Strate via FirstRandBank in November 2008. In April 2009, the Money MarketSecurities System code enhancements were effected andmarket participants commenced testing immediately thereafter.The South African market implemented the electronic settlementof newly issued money market securities in the latter half of2009.

TThe History of Strate

4

Shareholding Structure

5

JSE ABSA BANK STANDARD BANK

NEDBANK FIRSTRAND BANK CITI BANK

44.547%

12.679%

14.996%

14.996%

12.679%

0.103%

Fast Facts

6

Licenced CSD in South Africa in terms of section 32 (1) of theSecurities Services Act No 36 of 2004, or SSA (to be replacedby the Financial Markets Act (FMA))

Self-Regulatory Organisation (SRO) in terms of section 31of the SSA

Over 13 years in operation

Equities market including a range of derivative products such aswarrants, Exchange Traded Funds (ETFs), retail notes andtracker funds (T+5 > T+3), Alt-X (T+5 > T+3), Bonds (T+3), Money Market Securities (T+0) and transactions for the NamibianStock Exchange (NSX) (T+5) Bank for International Settlement (BIS) Model:

Equities: On-market - Model 3Off-market - Model 2

Bonds: Settlement run 1 - Model 3Settlement run 2 - Model 2

Money Market: Model 1 for all settlement runs

Strate provides services to Issuers for their investors in terms ofthe Companies Act and Securities Services Act (SSA), 2004

Adopts international benchmarks and standards

A Memorandum of Understanding (MoU) is in place betweenSTRATE Supervision and the South African Reserve Bank(SARB)

Overall “AA -“Capital Markets infrastructure rating from ThomasMurray

Maintains an average uptime of 99.995% on all IT services

Level 3 Broad-Based Black Economic Empowerment (BBBEE)rating

Approximately 120 permanent staff and +/- 15 contractors andconsultants

Winner of multiple titles since its inception, including the southernAfrican regional winner in the Deloitte Best Company To WorkFor Survey’s in the small company category

STRATE FAST FACTS

SOUTH AFRICA FAST FACTS

Area 1 219 010 square kilometres

Population 51 million

Currency Rand

Time GMT +2

Legal system Roman Dutch Law

Languages 11 official languages: Afrikaans, English, IsiNdebele, IsiXhosa, IsiZulu, Sesotho, Northern Sotho,Setswana, SiSwati, Tshivenda and Xitsonga

Approximate GDP R2, 964.261 billion

Approximate GDP per capita R58, 593.81

Main trading partners China, United States, Japan, Netherlands, Germany, United Kingdom, India, Zambia

Global rankings 52nd out of 144 global nations in the World Economic Forum's Global Competitiveness Report of2012/13. It’s also ranked 35 out of 183 economies, in terms of the ease of doing business in theWorld BankGroup's report; Doing Business 2012

The Strate Board of Directors endorses the principles ofaccountability, integrity and transparency underlying the Codeof Corporate Practices and Conduct as contained in the revisedCode of and Report on Governance Principles for South Africa(King III). Strate monitors its compliance with the King Codeand ensures that the company's policies and procedures areappropriate on an ongoing basis.

The company started its journey of Integrated Reporting,including social, environmental and governance requirements,

with its financial reporting in 2009. This enhanced its reportingwith recommendations presented in King III and requirementsset by the Companies Act, 2008 of South Africa.

Committees of the BoardThe Strate Board has established four permanent committeesto assist in the execution of its responsibilities. These are theAudit and Risk Committee with additional statutory duties, theRegulatory and Supervisory Committee and the Remunerationand Nomination Committee.

Corporate Governance

7*The Strate Board structure makes provision for a non-executive chairman, four shareholder representatives, two executive directors andseven independent non-executive directors.

Inde

pend

ent A

ssur

ance

(inc

ludi

ng In

tern

al /

Exte

rnal

Aud

it)

Proc

ess

Ass

uran

ce

Process Assurance

Independent Assurance (including Internal / External A

udit)

Remuneration & Nomination Regulation & Supervisory

Stakeholders Financial Learning & GrowthInternal

Change AdvisoryBoard

Project SteeringCommittee

ReleaseManagement

ChangeControl

Project & InnovationManagement Office

(PIMO)

Marketing Finance Legal & Regulation Risk Management Training

IT HR CRM C&SPIMO COO

RISK POLICY

Corporate Score - card Perspectives

MANAGEMENT COMMITEE

STRATE SUPERVISION

FSBBOARD *

Audit & Risk

Executive Committee and Management Structure

8

CEOMonica Singer

Chief Financial Officer& Company Secretary

Hannes van Eeden

Head of Legal& Regulatory

Maria Vermaas

Head of MarketingTanya Knowles

Head of Custody& Settlement

Iann Seymour-Smith

Head of HRLulama Gumede

Head of StakeholderRelations

Leigh Bevis

Head of RiskDale Connock

Head of ITRudi Steenkamp

Head of PIMOLouis Rushin

Head of SupervisionBeverley Furman

COOAnthony van Eden

The introduction of electronic trading, clearing and settlementhas enhanced the appeal of South Africa as an investmentdestination. This required the adoption of a number of globalstandards and benchmarks identified in other leadinginternational markets. Strate has been guided by organisationssuch as the Committee on Payment and Settlement Systems(CPSS), International Organisation of Securities CommissionsIOSCO and the Group of 30 (G30) to establish a world-classfacility.

The adoption of these standards has proven to be invaluableto the South African market. It has greatly enhanced thecompany's ability to reduce and remove barriers that previouslyexisted in respect of its securities industry, while fosteringfinancial stability and promoting economic growth. Strateembraces the principles and responsibilities related togovernance, risk management, efficiency and transparency.

To ensure the integrity of securities issued and minimise andmanage the risks associated with the safekeeping and transferof securities, Strate has implemented the appropriate rules,regulations and procedures for the electronic settlement offinancial instruments in South Africa.

The ability to capitalise on desirable characteristics of productsand services (such as, inter alia, quality, reliability and efficiency)that have been identified elsewhere, has led to the timeoussharing of key technological advancements and effectivemanagement practices in an industry that is inherently relianton sound practices.

It is, however, imperative that Strate continues to protect anenvironment that is built on the promotion of level playing fieldsthat ascribe to the highest standards for entities providing post-trade services.

Strate has, as one of its core objectives, an aim to drive globalbest practices and develop value-added opportunities for itselfand the South African market infrastructure as a whole. Wepursue this objective by serving as a catalyst for new thinkingin a rapidly changing environment through thought leadershipon both the local and international stage.

Strate constantly endeavours to adhere and support globalefforts that promote the mitigation and management of risk andstrengthen market infrastructures. In 2012, The CPSS and theTechnical Committee of the IOSCO released new internationalstandards for FMIs, such as CSDs, Securities SettlementSystems (SSSs) and Central Counterparties (CCPs).

The standards harmonise and, where appropriate, strengthenthe existing international standards for payment systemsthat are systemically important for FMIs. The revised standardsalso incorporate additional guidance for over-the-counter(OTC) derivatives, CCPs and Trade Repositories (TRs).According to the CPSS IOSCO, FMIs that facilitate therecording, clearing, and settlement of monetary and otherfinancial transactions can strengthen the markets they serveand play a critical role in fostering financial stability. However,if not properly managed, they can pose significant risks to thefinancial system and be a potential source of contagion,particularly in periods of market stress.

The new and more demanding international standards, madeup of a comprehensive set of 24 principles, support the G20'sstrategy to make the financial system more resilient. Comparedwith the current standards, the new principles introduce moredemanding requirements in many important areas, includingthe financial resources and risk management procedures anFMI uses to cope with the default of participants, the mitigationof operational risk and the links and other interdependenciesbetween FMIs through which operational and financial riskscan spread.

Strate aims to align itself with the 24 Principles released by theCPSS IOSCO to the extent that those Principles are applicableto Strate as a CSD.

International Benchmarks and Standards

9

International Memberships andAffiliations

10

AMEDA was established in 2005 to reduce risks related to depository, clearing and settlement issues and to support efforts toraise efficiency by means of promoting internationally-oriented policies on local bases in the African and Middle Eastern region.

It supports local markets in their efforts to adopt securities market regulations, while considering their specific circumstances andto serve as a dialogue channel with other organisations worldwide.

AMEDA is a forum for the exchange of information and experiences among its members in a spirit of mutual co-operation. Itpromotes best-practice recommendations in services, such as securities, depository, settlement, clearing and risk management.

The Committee of SADC Stock Exchanges (CoSSE) was established in 1997 and is a collective and co-operative body of the variousstock exchanges in the Southern African Development Community (SADC).

Although CoSSE is essentially a private sector association, it forms part of SADC structures as it has a formal status under the SADCFinance and Investment Protocol (FIP).

CoSSE aims to improve the operational, regulatory and technical requirement underpinnings and capabilities of SADC exchanges,while making the securities markets of SADC exchanges more attractive to both regional and international investors.Furthermore, it promotes the development of efficient, fair and transparent securities markets and encourages the development ofa harmonised securities market environment within the SADC region.

Launched in March 2009, Link-Up Markets has established a common infrastructure allowing for easy implementation of links betweenCSD markets and introducing efficient cross-border processing capabilities.

By connecting to the common infrastructure, each participating CSD has access to the services of the other participating CSD marketsacross all available asset classes.

Link-Up Markets absorbs differences in communication standards across the markets, while leveraging the existinginfrastructures and processes of CSDs. Customers benefit from a single access to 50 % of the European securities market as wellas approximately 90% of the African market and receive consistent best-in-class CSD settlement and custody services.

ACSDA comprises Central Securities Depositories and Clearing Houses of the Americas and was established in August 1999.ACSDA's main purpose is to be a forum for the exchange of information and experiences among its members in a spirit of mutualco-operation and to promote best practice recommendations in services such as securities depository, clearing, settlement andrisk management. ACSDA's goal is also to support local markets in their efforts to adopt securities market regulations, whileconsidering their specific circumstances and to serve as a channel for dialogue with other organisations worldwide.

The WFC (the World Forum of CSDs) was established in April 2011.

The WFC provides a forum for five regional CSD associations to exchange information, discuss issues of common interest andincrease their influence and engagement on cross-regional and global developments, as well as provide a common voice on issuesrelevant to the various associations and their members.

The five regional CSD associations (representing 125 member CSDs) involved in the formation of the WFC are the European CentralSecurities Depositories Association (ECSDA), Asia - Pacific CSD Group (ACG), Americas' Central Securities Depositories Association(ACSDA), Africa & Middle East Depositories Association (AMEDA) and the Association of Eurasian Central Securities Depositories(AECSD).

The ISSA was formulated in 1979.

The organisation was created to be able to collect and disseminate information on the developments in the rapidly changinginternational securities markets.

It also offers securities operations professionals a forum to exchange ideas and issues of common interest.Furthermore, the ISSA provides leadership in the formulation and promotion of best practice to improve efficiency as well as riskmanagement in the global asset servicing industry.

WorldForum of

CSDs(WFC)

“Risk management isviewed as a corecompetency. As such,Strate has adopted astructured anddisciplined approachto the management ofrisk.”

11

Strate is committed to playing its part in ensuring and enhancingthe integrity of the South African financial market infrastructurethrough the effective operation of a world-class CSD thathas, as one of its core objectives, 'the effective managementof risk'. This risk-management philosophy also gives rise toStrate's tagline and mantra - 'Leaving nothing to chance'.

In order to achieve this, Strate has adopted a structured anddisciplined approach to the management of risk. In terms of itsrisk-management principles, Strate promotes and maintainsan enterprise-wide culture that values the importance of effectiverisk management, encouraging open and frank dialogueregarding the effectiveness of risk management-practices andpotential risk-management deficiencies. It clearly defines the responsibilities and levels of authority for risk-taking acrossthe organisation and employs efficient and effective tools,methods, models and technology to support risk management.

The Strate Risk Management Policy underpins each corporateand operational activity and is embedded throughout thecompany. The risk-management activities of the company(including the review and revision of the Risk Policy andFramework) are subjected to ongoing scrutiny by the Audit andRisk Committee of the Board.

Adherence to internationally recognised risk-managementstandards is an important aspect for Strate, given the role thatit performs in the South African market. This is supported byactive participation in reviews undertaken by the likes of ThomasMurray and the Association of Global Custodians to obtain anindependent assurance thereof.

Enterprise Risk Management (ERM) at Strate comprises:• the Risk Management function;• the Compliance function;• Business Continuity Management (including Disaster

Recovery);• Information Security; and• the Internal Audit program, which uses a combination of

external and independent internal resources (Process Assurance).

The RISK Division effectively co-ordinates and managesthe overall risk-management program for Strate, by:

1. assisting divisions with the identification, assessment andmeasurement of risk according to the probability of an occurrence and the potential impact that each identified riskmay have. A process-based ERM framework that is linkedto 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 mitigatethe specific risks. These assessments drive regular risk reporting through the Executive to the Audit and Risk Committee and ultimately the Board of Directors, whomeasure risk exposure against pre-determined risk tolerancesand manage the 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. co-ordinating a comprehensive risk review in respect of each and every new product/service under development by Strate;

5. ensuring that all system enhancements/changes are channelled through an effective Change Advisory Board and that the underlying Change Control and Release Management processes are followed in accordance witha defined and documented System Development LifeCycle (SDLC). A risk review is undertaken for each change/enhancement to ensure a comprehensive understanding of the likely impact and that the necessary/appropriate controls have been incorporated prior to implementation; and

6. establishing appropriate links with stakeholders with a viewto increasing risk awareness and the focus on introducingbest-practice initiatives across the market, which could contribute to the overall reduction of risk for South AfricanFMIs as a whole.

Risk Management

12

13

Information Security and ComplianceInformation security protects information and information systemsfrom unauthorised access, use, disclosure, disruption,modification, perusal, inspection, recording or destruction. Asthe CSD, it is imperative that Strate be effective in the securemanagement of any such information entrusted to it. To achievethis, Strate has developed and implemented a comprehensiveInformation Security Management system.

ERM at Strate (in conjunction with the Legal and Regulatorydepartment) fulfils the role of an independent compliancefunction. It identifies, assesses, advises on, monitors and reportson the CSD's compliance risk, such as the risk of legal orregulatory sanctions, financial loss or loss to reputation thatthe CSD may suffer as a result of its failure to comply with allapplicable laws, regulations, codes of conduct and standardsof good practice.

Business Continuity Management(including disaster recovery)The Business Continuity Management (BCM) program at Strateis also managed by the ERM Division to:

1. oversee the establishment and maintenance of effective business continuity plans, which are capable of supportingall core business activities of the CSD;

2. assist in the identification of areas of weakness and, in conjunction with the relevant business resources, developand test appropriate business-continuity capabilities;

3. provide effective co-ordination of all BCM testing to ensurethat identified plans are, in fact, capable of supporting therelevant service and/or function and that the recovery timeand point objectives can, indeed, be met; and

4. promote awareness and preparedness across the organisation and with those parties with which Strate has direct interfaces, such as its CSD Participants, the JSE andthe Central Bank.

In recognition of its role in the South African financial markets,Strate has been particularly mindful of the obligation to ensurestate-of-the-art preparedness across all of its key services.

Regular and ongoing enhancements to the Strate networkcombined with high levels of virtualisation across servicesensure that disruptions are kept to a minimum and that recoveryfrom disruptions can be effected with a minimum delay - oftenwithout any impact on downstream users.

Project Management and GovernanceStrate's Project and Innovation Management Office (PIMO) hasadopted the Prince2™ and Managing Successful Programmes(MSP) ™ methodologies, together with a Business Analysismethod that uses Use Case Responsibility Driven Analysis andDesign (URDAD), to create business and IT requirements thatdeliver transformational change to the market. The PIMO alignsall initiatives and projects to Strate's strategic objectives ofdiversifying revenue streams, improving efficiencies, reducingcosts and managing risk.

The initiatives and projects are transitioned through a seriesof Project Steering Committee meetings that assign prioritisationto assure throughput and delivery to planned expectation. ThePIMO acts on behalf of Strate to deliver projects for the marketfrom inception through design to final implementation. Itsoperations are subject to regular internal process-assurancereviews and audit by independent assurance providers andexternal auditors.

A performance dashboard of the PIMO initiatives and projectsin progress is tabled at every Audit and Risk Committee andStrate Board meeting.

Risk Management

The efficacy of Strate's control framework is fundamental to thesuccess of the day-to-day operations of the CSD and is built onthe effective integration of a number of interrelated components.This begins with the governance structure, where the 'tone atthe top' is set by the Board of Directors and is supported by anumber of purpose-driven internal and external committees aswell as a dedicated senior management team. Ongoing regulatoryoversight is also provided by the FSB and the SARB (in respectof the CSD's Payment Systems Operator role).

The internal control framework forms part of the all-encompassingenterprise-wide risk management framework. As the foundationon which Strate is built, it identifies, evaluates and treats therisks (both internal and external) that may prevent the CSD fromachieving its corporate objectives.

A comprehensive structure of control activities permeates alllevels of the organisation, directed and supported by clearlydefined policies and procedures that are designed to guide staffin the execution of their duties. Continuous monitoring of thesecontrol activities helps to ensure that weaknesses and/ordeficiencies are identified timeously, escalated appropriately andcorrective action is taken without delay.

Supporting this structure is a communication strategy designedto provide decision-makers with the correct information at theright time, to facilitate proactive and appropriate decisions.

Internal Controls and Management

14

“Strate complies withinternationallyrecognised riskmanagement standardsrelevant to the servicesit provides.”

15

The qualities and benefits of Strate emerge from a variety ofadvanced, technological features and business principlesincorporated in Strate's underlying technology. The features ofStrate's systems for equities, bonds and the money market arenumerous and each provides significant risk-reducing benefitsto the South African financial market.

Electronic Custody of SecuritiesShareholding is recorded electronically by each of the CSDParticipants and collated at a Participant level within Strate forbonds and equities. In the money market environment, thecustody of shares occurs in an SOR. These electronic recordsprovide issuers with the register of investors for thedematerialised portion of their register.

The records of the CSD Participants are reconciled daily withthe records kept by Strate, where the total balance ofdematerialised securities is kept. Investors receive regularstatements that take the place of share certificates. This is indirect contrast to the paper-settlement environment where risksof lost, forged or stolen documents abound. Naturally, the costsassociated with the replacement of such documents are alsoeliminated under Strate.

Security of Strate's SystemsThe electronic record of shareholding in Strate is subject toextensive controls, thanks to the sophisticated encryption andauthentication in the coding of the software where the securityof the electronic records has never been compromised.

Furthermore, Strate utilises the renowned Society for WorldwideInterbank Financial Telecommunications (SWIFT) network forthe relay of electronic information. This is one of the mostsecure networks in the world with a consistent 99% up-timesince its inception. As one of the highest users of the SWIFTnetwork globally, Strate also provides SWIFT network servicesto other financial institutions and large corporates in SouthAfrica. This provides a cost-effective mechanism for them toutilise the SWIFT network without having to contract directlywith SWIFT.

Electronic Settlement of TransactionsAt the point of settlement, the electronic records are updatedin real-time via book entry. Settlement via book entry is bothsecure and efficient. For example, in equities it is no longernecessary for sellers to submit their share certificate to theirbrokers for further submission to the Transfer Secretarywho issues a new certificate in the name of the buyer.This manual process was risky, administratively burdensomeand time-consuming.

Rolling SettlementRolling settlement refers to a settlement environment in whichtransactions (securities and funds) become due for settlementa set number of business days after trade.

In South Africa, rolling settlement has been introduced on aT+0 basis for money market securities (where T=trade date),a T+3 basis for bonds and a T+5 basis for equities, the latterof which is currently looking at reducing the settlement cyclefurther. Rolling settlement represents a significant departurefrom the 'account period' methodology employed in the past(for example, where trades were settled on Tuesday of thefollowing week). Investors know when their trade will settle andcan plan/budget accordingly. The 'account period' methodologyof the paper-based settlement environment operated on anindefinite basis; some transactions remained unsettled formonths. As every day is a trading day, under Strate every dayis also a settlement day.

Contractual SettlementInvestors obtain the assurance that their transactions settle onthe specified settlement day. The appropriate cash and securitiesaccounts are debited/credited on settlement day and the riskof delayed settlement and loss of earnings is reducedsignificantly.

Features and Benefits of Strate

16

Simultaneous Final Irrevocable Delivery versusPayment (SFIDvP)Strate is proud to be among the CSDs that have achieved trueSimultaneous, Final, Irrevocable, Delivery versus Payment(SFIDvP) in Central Bank funds. This has been achieved withthe use of the Continuous Processing Line (CPL) for bonds,the Continuous Batch Processing Line (CBPL) functionality forequities and the Real-Time Line (RTL) for money marketsecurities in the National Payment System (NPS) at the CentralBank. In terms thereof, payment obligations must be providedfor in the South African Multiple Options System (SAMOS)before the settlement run can commence.

With the implementation of a netting model for on-marketequities transactions, settlement efficiency within Strate hasbeen maximised through netting of securities at Safe CustodyAccount (SCA) level and funds at CSD Participant level.Further efficiencies are provided to the market through a grosssettlement model for bonds and money market securities.

Connectivity through SAMOSIn 1998, the SARB granted Strate permission to integrate itssettlement processing directly with its own SAMOS infrastructure.The main benefit that SAMOS brings to the South Africanfinancial markets is the provision for final and irrevocablepayment. Similarly, Strate provides the investor with contractualsettlement and finality of ownership transfer for all instrumentssettled.

By synchronising securities ownership transfer through Stratewith cash payment through SAMOS, the market is able toprovide local and international investors with SFIDvP, asexplained above. The SARB has greatly boosted the capabilityand competitiveness of the South African financial markets bymaking the SAMOS settlement infrastructure available for thesettlement of financial market transactions. The interdependenceof these two systems is in line with the global drive towardsconsolidation and the resultant economies of scale.

Accuracy of the RegisterThe electronic register is updated on settlement day when thesimultaneous transfer of securities and funds takes place. Alltrades are reflected on the register of investors for dematerialisedsecurities in the Strate environment as there are no outstandingsecurities transactions. Listed companies wishing to obtain anaccurate record of their investors find themselves in a far moreefficient position in the Strate environment.

Segregated Depository AccountsAn international trend has recently developed where clientsare increasingly insisting on having their securities safe-keepingaccounts opened directly in the books of the CSD to furtherprotect themselves in the event of Insolvency Proceedingsbeing instituted against their chosen Custodian or CSDParticipant in the local market.

In an effort to address these trends, Strate and STRATESupervision, in conjunction with local CSD Participants, havecreated the concept of Segregated Depository Accounts (SDAs)to increase client and investor protection and manage continuityin the event of Insolvency Proceedings against one of the CSDParticipants.

The key purpose of the SDAs is to provide a safe-keepingaccount structure for investors. Should their intermediary orcustodian collapse, the client's full-legal ownership of securitieswould remain undisturbed. SDAs significantly enhance theportability of investors' listed securities, allowing them toengage with an alternate service provider at short notice. Asa result, SDAs are designed to reduce market, price andoperational risk by avoiding a situation where the investor'ssecurities may be trapped in the books of the failed entity, whilethe curator or other administrator endeavours to identify theirownership and return the securities to their rightful owner.

The implementation of the new Companies Act (2008)provides enabling legislation to allow for enhanced legalprotection for investors. Therefore, Strate has introduced SDAsto take advantage of this protection for the benefit of investors.

17

Features and Benefits of Strate

Electronic Execution of Corporate ActionsStrate executes all corporate actions events for the market,many of which are processed electronically. The benefits ofStrate's corporate actions model cannot be underestimatedgiven the significant risk reduction and cost savings in thecorporate action arena.

For example, interest, dividends and proceeds are crediteddirectly to the CSD Participants who in turn credit clients'accounts directly with the electronic execution of corporateactions occurring in a quick and secure manner. Payments aretransferred electronically with same-day value, eliminating thecosts and risk associated with cheque payments. Issuers andinvestors therefore benefit from a dramatically increased levelof efficiency and cost effectiveness, and most importantly, theelimination of market claims.

Money MarketStrate's money market system enables the electronic settlementof money market securities. The system boasts a number ofworld firsts for Discounted (Category 1) and Fixed CouponRate, Fixed Maturity Date (Category 2) money marketinstruments and the more complex Category 3 money marketinstruments, which are securities with variable coupon ratesand fixed maturity dates.

Some of the key features include the facilitation of the real-timeelectronic issue of unique International Securities IdentificationNumbers (ISIN) for each money market security issued,a Securities Ownership Register (SOR) that is the centralisedreal-time record of ownership at beneficial level of everyelectronic security and post-trade electronic trade matching toeliminate settlement mismatches.

Increased Market RegulationSTRATE Supervision is the regulator of CSD Participants andthe JSE regulates members under the authority of the FSB.

The regulation of the market players is significant as CSDParticipants and qualifying brokers act as agents for investorsand have a statutory and contractual duty to protect the recordsof the investor in the electronic environment. Investors gain thepeace-of-mind that all business processes associated withelectronic settlement via CSD Participants are regulated bySTRATE Supervision.

The key features of electronic settlement contributed to asignificant reduction of risk in the South African market. Thisincreases South Africa's standing as an investment destinationfor international investors, which undoubtedly provides asignificant boost to both trading and liquidity.

18

Features and Benefits of Strate

“In providing services toits Participants andcustomers, Strate’s riskmanagement policyunderpins eachcorporate andoperational activity andis embedded throughoutthe company.”

19

1. Clearing and SettlementThe clearing and settlement of dematerialised securities isStrate's core function. Strate's services include the settlementof all transactions concluded on the JSE (including the formerBond Exchange of South Africa) as well as those executed

'off market' in listed and unlisted securities and money marketsecurities. Strate also facilitates the settlement of SecuritiesLending and Borrowing (including loan and collateral), DepositoryReceipt, Account Transfers and Portfolio Movementstransactions.

Products and Services

20

CSD Participant A CSD Participant B

SARB(SAMOS)

Client A

Members/Brokers A Members/Brokers B

Client B

JSE

Flow for Equities and Bonds

STRATE

2. Overview of Strate's Corporate Action ServicesIn 2001, Strate successfully implemented the electronicprocessing of corporate actions in the South African market.Strate provides the following corporate actions services to theIssuer:-

2.1 Bonds Corporate EventsThrough its Debt Instruments Department, Strate processesall corporate events for the bond market, which includes:• interest payments;• interest calculations, including:

• fixed coupon rates. The coupon rate does not changethroughout the life of the security;

• variable coupon rates. Quarterly on-the-day-after-interest date, the coupon rate will be changed according to a formula declared when the security wasissued. The new coupon rate is declared by the Issuer; and

• zero coupon rates. This security is sold at discountedrates and no interest is paid during the life of the security.

• full and partial redemptions;• dematerialisation;• splitting;• deposit and withdrawals (top-ups and buy-backs); and• maintenance of market-related information on behalf of the

issuer.

2.2 Equities Corporate ActionsStrate facilitates all equities corporate action events inthe marke t on beha l f o f the i ssuer f rom theannouncements/declarat ion date, when the l istedcompanies publishes their SENS (Stock Exchange NewsService) announcement to the ultimate payment date.

The facilitation of these types of events includes:• new issues;• Initial Public Offerings (IPOs);• private placements;• take up of shares/ nil paid letters (NPLs) in respect of a

rights issue;• applications to take up additional shares in a rights issue

(excess rights take-up);• elections;

• fractions of shares resulting from the calculation of entitlements;

• claims in respect of entitlements on open trades as at recorddate; and

• proxy voting.

Strate is also able to provide market advisory and consultancyservices to issuers and sponsors regarding the processing ofpotential corporate actions events. Its team of experts haveextensive experience in the corporate action environment andare able to ensure the issuers' events runs smoothly inaccordance with the necessary Strate rules and directives.

2.3 Money Market Corporate EventsWhile the money market remains an informal market, Stratenow processes all corporate/capital events in an electronicformat, including:• coupon payments;• maturity payments; and• real-time reports and queries can be provided to the issuer

agent.

3. IT Services

3.1 SWIFT ServicesThe South African market makes its financial payments andsecurities-related transactions with speed, certainty andconfidence through the SWIFT network.

Over 8,300 banking organisations, securities institutions andcorporate customers in more than 208 countries exchangemillions of standardised financial messages daily over SWIFT.Following the introduction of ISO 15022 message standards,South Africa was one of the first communities to roll out thenew and improved messages over the SWIFT network over adecade ago.

Strate manages one of Africa's largest SWIFT infrastructures.As one of the top two percent of SWIFT users in the world, itscentralised SWIFT services allow market players to save costsand bring new efficiencies to their own organisations. Strateprovides some of the following benefits:• a Premium Plus Partnership with SWIFT;• cost-effective infrastructure and state-of-the-art IBM platform;

21

Products and Services

• 24/7 monitoring and support, with direct support that includesan on-call SWIFT certified engineer;

• easy connectivity to Strate Participants and other SWIFT users;

• shared connectivity with a host of users, thereby providingan extraordinarily cost-effective service;

• scalable SWIFT services, rendering them readily accessibleto a range of users; and

• various SWIFT products, e.g. SWIFT Alliance Messenger and SWIFT Alliance Gateway.

3.2 Strate Gateway ServicesThe Strate Gateway service offering provides the South Africanfinancial market Participants with an alternative way to sendand receive ISO15022 format messages directly to and fromStrate, without utilising the SWIFT network, thereby realisingcost savings.

It also caters for message enrichment and message typeconversions; this enables Strate to shield its core applicationsfrom message definition updates as well as enabling Strate tocommunicate with non-ISO15022 compliant institutions.

This network is a secure and private network that uses state-of-the-art infrastructure. At the heart of the Strate Gatewayservices lies Strate's implementation of the Incentage MiddlewareSuite. The Strate Gateway service is divided in to the followingthree logical segments:• the Incentage Rules Studio offers a platform for developing

highly customisable messaging logic and thus increasing Strate's agility;

• the Incentage Management Console gives Strate a real-time view of its current messaging performance and proactively raises alerts if there are any problems experiencedin its Straight Through Processing (STP) cycle; and

• the Incentage Message Bus is a Service Oriented Architecture (SOA) based solution that couples multiple components to enable the overall solution to work and dueto the SOA, it drastically increases the scalability of the Strate Gateway service.

This solution was developed and maintained by Strate'sdevelopment team in conjunction with SWIFT Gold CertifiedPartner, Incentage. Additional functionality is periodicallyadded to the application to satisfy the clients' requirements andto enhance Strate's service offering.

4. Money Market ISIN Enquiry Web PortalStrate's Money Market ISIN Enquiry Web Portal enablesstakeholders to obtain rapid, real-time access to all ISIN datafrom a single source.

Through an easy to access and secure web-based application,users are able to acquire a complete view of all money marketsecurities information for single or multiple ISINs via a varietyof useful search criteria such as:• embargoed ISIN information via the ISIN number search;• non-embargoed ISINs via the ISIN number;• easy to use multiple ISIN searches using a range of various

criteria such as date issued, issuer name, generic category,security type, etc.;

• advanced search criteria into specific money market categories and/or specific issuers;

• various ISIN data download options (single, multi-selectedor full file); and

• download format options (PDF or CSV file).

The Money Market ISINs Enquiry Web Portal is designed withthe 'intelligence' to identify and exclude embargoed ISINs whennecessary (to restrict stakeholders who are not party to thetrade). Therefore, all ISIN instrument details are available,including the 48-hour embargoed ISINs.

The web portal has been designed and built to ensure theutmost security and integrity of the data provided, includingfeatures such as the use of Internet Solutions' secure connectionlayer, which allows the user a secure entry point into Strateand provides Strate with the assurance that the user is an'authorised' user. Initial logon password details are sent viaSMS or email and it also has the option of using either a mobileapplication solution, allowing mobile phone users to generateone-time passwords on demand or obtain a physical 'TokenCard' to generate the one-time access passwords when required.As a value-added service offering real-time access to themoney market industry, there are no fees applicable to usersof the Strate Money Market ISIN Enquiry Web Portal.

Products and Services

22

23

Products and Services

5. SDAsIn line with international trends and clients' evolving requirementsand needs, the South African market provides local andinternational investors with an option to better manage theirrisk profile with SDAs in the case of insolvency proceedingsbeing instituted against a CSD Participant.

The following principles apply to all SDAs:• the SDA is opened in the records of the CSD by the primary

administrator;• the client/investor may pre-appoint a secondary administrator

and details of the appointment are provided to the CSD viathe primary administrator as well as by the secondary administrator; and

• the primary and secondary administrators are responsiblefor entering into or amending a Safe Custody Agreement/Client Mandate.

SDAs offer numerous benefits to clients and investors, including:• the option of opening a direct SDA at the CSD as opposed

to remaining in a sub-register holding chain in the name ofa CSD Participant Nominee;

• clients/investors who select the option of an SDA have thelegal security and protection of their securities in case of Insolvency Proceedings against their CSD Participant, thereby reducing both operational and systemic risks;

• the segregated account allows the client relative ease to continue reporting securities transactions in the event of insolvency proceedings against a CSD Participant; and

• the ability to appoint a primary and secondary administratorwhere, in the event of insolvency proceedings against theprimary administrator, the custody and administration of theclient's securities can be switched to their appointed secondary administrator almost immediately. This has theeffect of significantly reducing the risks associated with timedelays and other operational impacts when having to movea portfolio from one service provider to another.

6. Value-Added Services to Listed CompaniesTo comply with the current legislation, section 56(3) of theCompanies Act, Strate provides full beneficiary disclosuremonthly to the Issuers or their Registrars/Transfer Agents.

To enhance the value of the statutory beneficial download,Strate also provides a number of different reports, enabling therecipients to better analyse the breakdown or makeup of thedematerialised shareholder base.

Some of these reports include:• top registered and beneficial shareholders; including

percentage of issued shares;• a breakdown between resident and non-resident

shareholders;• summary of shareholders by country;

• beneficial shareholders by band;• comparison of movements; and• trade settlements.

7. Strate Training and ExamsStrate is committed to educating and upgrading the standingof those individuals working in the Securities or FinancialServices industry. Strate has partnered with the South AfricanInstitute of Financial Markets (SAIFM) and has continued tooffer online examinations through the use of SAIFM examinationfacilities since 1 March 2008.

Strate provides training and exams for equities, bonds andmoney market securities. Strate Training offers the followingcourses:

• one day seminars - to provide up-to-date, continuous trainingon Strate-specific functionality, procedures and legislation;

• Handbooks (Equities, Bonds and Money Market) - These Handbooks encapsulate the entire spectrum of a particularmarket 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 (oras necessary).

Market Statistics

24

Annual Number of Trades and Settlement 2006-2011 (Equities)

Trades Off Market SettlementOn Market Settlement

Number of Trades and Settlements for the Equities Market (Monthly)

25

Market Statistics

Number of Trades and Settlements for the Money Market (Monthly)

Total Number of Money Market Trades Total Number of Money Market Settlements

Number of Trades and Settlements for the Bond Market (Monthly)

Total Number of Bonds Trades Total Number of Bonds Settlements

Market Statistics

26

Value of Settlements for all Strate Markets (Rands Billions)

Value of Equities Settlements Value of Bond Settlements Value of Money Markets Settlements

Strate Projects

27

Key Strategic ProjectsOver the years, Strate has embarked on a number of projectsand innovative solutions that facilitate risk management withinthe market and add value and deliver benefits to all itsstakeholders, while aligning South Africa's financial marketsinfrastructure to international benchmarks and global bestpractice.

Examples of successful projects include the implementation ofdematerialised money market instruments, corporate actionsenhancement project, the introduction of SDAs and the beneficialdownload rewrite project.

It is focusing on delivering a number of key strategic initiativesand projects for the future, which include:

Bonds ReplacementThe current bonds clearing and settlement system, initiallyimplemented in 1991 by UNEXCor, is currently being replacedwith new technology. While enhancements have been made tothe system over the years, a complete replacement of the systemwill ensure the provision of best practices in the South Africanmarket. The system will include a Securities Ownership Register(SOR) for bonds.

Tri-Party Collateral ManagementOne of the most commonly used drivers for efficient and effectivecollateral management is based on certain regulatory pressuresthat impact liquidity requirements, such as Basel III. AlthoughSouth African financial institutions use cash more so than liquidsecurities, a global move to largely use securities as a form ofcollateral has become a solution to enhance liquidity and meetregulatory requirements.

Strate, in the role of “Triparty Agent”, has launched a centralised,market-wide system to complement current collateral managementfunctions within financial institutions for the valuation, automaticallocation, substitution and optimisation of local securities ascollateral, aimed to mitigate counterparty risk and enhanceliquidity in the market.

T+3 for equitiesIn order to maintain global best practice and adopt internationalbenchmarks, the South African market is currently workingtowards reducing the equities settlement cycle from T+5 to T+3.

Trade Repository for OTC DerivativesIn line with Strate’s core purpose to mitigate risk, improvetransparency and bring efficiencies to the South African financialmarket, the company is seeking to establish a local TradeRepository (TR) for the South African financial market that iscompliant with both global and local regulations as well asinternational standards.

A TR is in line with recommendations set forth by the G-20 whereall standardised over-the-counter (OTC) derivative contractsshould be traded on exchanges or electronic platforms, whereappropriate, and cleared through central counterparties. OTCderivatives contracts should be reported to a TR. The TR willrecord, measure exposures and track OTC derivatives – an areawhere the biggest financial risk existed to the market during thefinancial crisis.

Securities ownership register (SOR)In order to benchmark the present South African Capital Marketrisk management against international best market practice,Strate aims to implement an SOR in South Africa.

This project will affect the equities and bond market in an attemptto bring it on par with the SOR currently used for money markets.

African StrategyOne of Strate's objectives is to build partnerships with local andinternational stakeholders. It is through these partnerships thatStrate is able to offer various countries in Africa access to asophisticated, world-class settlement infrastructure. Strate iscurrently in discussions with various countries on this initiative.

28

Strate Landscape

The Global Financial Crisis (GFC) has been well publicisedincluding the negative impact on the world economy, leading toa poor perception of the financial services industry. The crisishighlighted the interconnectedness of the global financial markets,lack of transparency and segregation and flaws in riskmanagement models. Today risk management and transparencyhave taken centre stage, particularly systemic and counterpartyrisk with the erosion of trust between parties.

CSDs around the world proved their resilience during the crisis.As the financial industry faces a wave of government policy andinternational, regional and local legislation / recommendationsand a myriad of new regulation, the role and profile of the CSDhas been growing as regulators push towards greater use ofmarket infrastructures. The Strate Landscape infographic hasbeen devised to show the role of the CSD within the industryand reflect Strate’s projects and potential future products andservices to meet market needs.

CPSS IOSCO: Committee on Payment and Settlement Systems and the Technical Committee of the International Organisation of SecuritiesCommissions. EDR: Electronic Depository Receipts. FSB: Financial Services Board. G20: Group of 20. LEI: Legal Entity Identifier.LUCM: Link-Up Capital Markets. MFA: Master File Administration. MIS: Management Information System. RDC: Randburg Data Centre (BusinessContinuity Site). SDA: Segregated Depository Account. SDC: Sandton Data Centre. SOR: Securities Ownership Register. TCS BaNCS: SecuritiesOwnership Register Tata Consultancy Services BaNCS system. XBRL: eXtensible Business Reporting Language.

A C R O N Y M S

Strate is licensed as South Africa's only CSD in terms of theSSA (to be replaced by the Financial Markets Act (FMA)). TheSSA provides the legal framework to support electronic securitiesservices 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 secondarylegislation. Strate is required to issue and amend rules withinthe framework of the SSA where the basic principles are setout. The objectives of the SSA that are expressly stated protectthe public interest and provide the principles for the supervisoryapproach adopted by the Registrar of Securities Services (theRegistrar).

The SSA provides a framework for Strate when issuing rulesand directives. The Executive Officer of the FSB fulfils thefunction of the Registrar and the Capital Markets Departmentwithin the FSB is responsible for ensuring that the objectivesof the SSA are met by Strate in its function as an SRO andClearing House.

In terms of section 33(o) of the SSA, Strate must act with dueregard to the rights of CSD Participants, clients and issuers.Thus, the legislation establishes a co-regulatory regime interms of which Strate's self-regulatory responsibilities arise.Strate must regulate its activities and those of its Participantsby making and enforcing rules that comply with therequirements prescribed by the SSA. The FSB is required tosupervise compliance with the SSA by every regulated person.

In relation to Strate, and in l ine with the IOSCOrecommendations, broad-base participation in the CSDis encouraged. The CSD Rules stipulate the participationeligibility criteria for any entity wishing to operate as a CSDParticipant. The entry criteria include reviews of financialsoundness, technical and human capacity and capability,adequate skills, knowledge and expertise, adequate insurance, disaster recovery and business continuity plansand procedures. The entry criteria promote both local andinternational entities to be licensed as CSD Participants. Theentry criteria of Strate are reviewed periodically to ensureappropriateness and relevancy to new developments.

Regulatory Environments

29

In terms of section 31 of the SSA (to be replaced by the FMA),a CSD must have made arrangements for the proper supervisionof compliance by CSD Participants with the depository rules.The Controlling Body of Strate has delegated its SRO obligationsto a Committee of the Controlling Body, namely the StrateRegulatory and Supervisory Committee.

The Committee's overall objective is to assist the ControllingBody in discharging its regulatory and supervisory obligationsin terms of the SSA and the Rules. The Strate Legal andRegulatory division and STRATE Supervision report to theCommittee on their respective regulatory, supervisory andenforcement activities. An annual SRO report provides detailedinformation of Strate's SRO functions and is available onwww.strate.co.za.

The FSB, which is the statutory regulator to which Strate reports,acts as an observer on the Strate Board and Board Committeesand constantly monitors the CSD's activities and actions. Strateis required to annually renew its CSD and Clearing Houselicences with the FSB. Failure by Strate to adhere to the SSAand further the objectives of this Act may result in the non-renewal, suspension or withdrawal of licences or the impositionof conditions on the licences.

The Supervision Division is accountable to the Committee forthe supervisory and enforcement functions and reporting to theCommittee and the FSB on each Participant's compliance withthe SSA, Rules and Directives. STRATE Supervision strivesto build fair and credible supervisory processes consistent withlow-to-medium intensity supervision. The Supervision Divisionaims to apply and enforce its risk-based, supervisory approachconsistently.

In this context, STRATE Supervision continues to ensure thatadequate oversight and monitoring controls are deployed tocontrol the specific risks which the division does, or can,confront. The division aligns itself with the wider Strate riskmethodology - completing quarterly risk matrix exercises andcomprehensive risk reporting to the Committee. The Committeecontinuously monitors and reviews the Supervision division'srisk management programs, systems and performance, andreports this to the Strate Audit and Risk Committee on acontinual basis.

Appropriate 'Chinese Walls' have been established betweenStrate's two roles, namely, the role of performing securityservices as the appointed CSD and the role of an SRO taskedwith supervision of compliance by CSD Participants. A 'ChineseWalls' manual details the structures that have been establishedand the procedures that must be followed to prevent theinadvertent spread of confidential information between thesetwo roles.

The 'Chinese Walls' structures prevents STRATE Supervisionfrom sharing confidential CSD Participant-related informationwith Strate's business units, but there are no confidentialitybarriers in respect of Strate's business units sharing informationwith STRATE Supervision where a CSD Participant is believedto be contravening the SSA, CSD Rules and Directives orintroducing risk into the market.

STRATE Supervision staff are bound by very stringentconfidentiality and code of conduct clauses in their employmentcontracts. In addition, staff sign an annual declaration asconfirmation of their understanding and adherence to the'Chinese Walls' policies and procedures adopted by Strate.All staff in the division are constantly reminded of their duty toobserve the highest professional standards and are given clearguidance to avoid conflicts of interest, the possible abuse ofconfidential information, the observance of confidentiality andsecrecy, and the observance of procedural fairness.

Supervisory Function

30

“Strate focuses onintroducing bestpractice initiativesacross the market thatcould contribute to theoverall reduction of riskfor the South Africansecurities marketinfrastructure as awhole.”

31

BBBEE aims at substantially increasing black participation at alllevels in the economy. This strategic imperative tries to redressthe imbalances of the past by transferring more ownership,management and control of South Africa's financial and economicresources to the majority of its citizens.

Transformation touches every area of Strate's business, includingits staff, shareholders, clients, procurement practices, businesspartners, the community and the environment as depicted below:

As such, Strate recognises that it needs to invest time, moneyand effort in the short-to-medium term in order to reap the rewardsof transformation in the long-term. At Strate, there is a commitmentto move beyond compliance and into the realm of truesustainability for both the business and society. As such, thecompany's strategies are aimed at recognising the need totransform. Transformation is seen as a strategic imperative andbusiness opportunity for Strate, rather than a matter of a legislativerequirement.

During the execution of its transformation strategy, Strate remainsfocused while it delivers clearing and settlement services thatincorporate sound corporate governance and citizenship.Strate believes that BBBEE is a component of the broadertransformation imperative in South Africa. Strate's approach totransformation is to address the elements of the BBBEEscorecard as identified in the Codes of Good Practice (CoGP).Furthermore, Strate looks forward to the national implementationof Phase II of the Financial Sector Charter (FSC) CoGPon BBBEE that has been issued by the Department of Tradeand Industry (dti).

Strate is rated a level three (100% recognition) 137.5% BEEcontributor by Empowerdex. The company continues to exploreand unlock innovative ways to improve its BBBEE score withinits unique environment, continuously seeking to adopt andincorporate global best-practice initiatives as part of itstransformation strategy.

Workforce ProfileStrate continues to create an increasingly diverse workforcethrough the advancement of previously disadvantaged peopleand the empowerment of women.

Demonstrating the diversity of Strate's staff, women comprisemore than half of all the staff and black women account for31.9% of all staff members. Staff from the designated grouprepresent 56.0% of the total workforce.

Preferential ProcurementStrate has adopted and developed a supportive procurementpolicy to simplify and influence the growth of black owned (beingmore than 50% black owned) and black female owned (beingmore than 30% black female owned) South African companies.

This includes broadening the company's supplier base to supportthe growth of Exempted Micro Enterprises (EMEs) and QualifyingSmall Enterprises (QSEs) as per the CoGP. Strate is alsocommitted to working with its existing suppliers to help transformthem, as well as source products and services from new suppliersthat symbolise the philosophies of transformation. Strate iscurrently a level three BEE contributor and classified as a value-adding supplier, a benefit that accrues to those that utilise Strateas a supplier and procurement recognition can further beenhanced to137.5%.

Enterprise DevelopmentStrate successfully implemented the early payment system toassist smaller black-owned companies with their cash flow. Thismechanism is only available if payment is made within less thanten days from the date of invoice by the qualifying supplier,allowing the amount to be claimed as a percentage of the invoiceamount. Strate will continue with the early payment system,which has proven to be a successful enterprise developmentproject. It has also embarked on additional methods of improvingthe score by increasing the number of enterprise developmentbeneficiaries on the early payment system.

Transformation

32

Strate Ltd

StaffStaff

Suppliers

Environment

Community

Shareholders

BusinessPartners

Deloitte Best Company to Work ForStrate recognises that the wellbeing of its employees is a criticalfactor for its future progress and prosperity, especially in theface of global competition. It invests in a number of employeeretention and growth initiatives, recognising the need to buildrelationships with a key stakeholder group – its staff.

From skills development and training, to wellness days,performance bonuses and independent support for the emotionaland financial wellbeing of staff, Strate aims to build long-standingrelationships with its employees and provide them with theopportunities that promote self-development and job satisfaction,resulting in Strate becoming a company people look to beemployed by.

As a South African Financial Markets Infrastructure (FMI), Strateprides itself in being recognised as an employer of choice.

It is well documented that a happy employee that is held withhigh regard is a productive and loyal employee. Stratecontinuously strives to keep its staff content and aims to createa happy, healthy workplace environment.

In 2012, Strate was awarded with the Deloitte Best Companyto Work For (BCTWF) title in southern Africa in the smallcompany category and a previous winner in various othercategories. In this survey, Strate is rated on a number ofdimensions i.e. job satisfaction, management style, leadership,values and culture, training and development, HR policiesand procedures, change management, diversity andtransformation, performance management, recognition,reward and innovation. Since the survey’s inception, Strate hasbeen a winner of multiple titles and constantly excels in thissurvey.

The BCTWF survey has been conducted annually by Deloittesince 2000. It identifies and celebrates companies acrossSouth Africa that have been rated by their employees.

Strate Charity SharesStrate Charity Shares (SCS) is a non-profit organisation andcharity donation programme run by Strate and ComputershareInvestor Services to conveniently allow shareholders to quicklyand easily donate small or large amounts of shares to charity.There is no cost for the donator and the donation is tax-deductible.

Following the introduction of Strate over 13 years ago, theseholdings cannot be sold until they have been converted toelectronic records of ownership.

The cost of conversion to an electronic record of ownership,plus brokerage expenses, can together exceed the shares'market value. Therefore, disposal of the shares is frequentlynot practical, with the result that investors find their portfoliosuntidy and unwieldy.At the same time, the issuing companiescontinue to incur the considerable costs of retaining a recordof these holdings on their registers.

SCS is a highly-effective vehicle for investors to tidy up theirportfolios by getting rid of small holdings of shares that are toocostly to sell through a stockbroker than they are worth, sinceshareholders incur no cost if they donate their shares in thisunique way to charity.

To date, SCS has donated in excess of two million rand tovarious charities by releasing money tied up in tiny lots ofshares. It enables investors to tidy up their portfolios, reducetheir tax liability and give much needed financial support toneedy causes by the donation of small holdings of shares inany company listed on the JSE. Lost share certificates andunclaimed dividends may also be donated.

To encourage participation in SCS, The South African RevenueService (SARS) has agreed that the value of any shares donatedmay be deducted from taxable income, as the scheme isregistered under section 18A of the Income Tax Act.

Among the charities to have benefited from SCS are theSalvation Army, the African Children's Feeding Scheme, Hospice,the Red Cross, the World Wildlife Fund SA and Bethany House.For further details, queries and / or donations contact the SCStoll-free helpline on 0800 202 363 or +27 11 506 4713 if youare phoning outside South Africa.

Caring for People

33

Investing in staff as well as in local communities is an essentialpart of Strate's business. Not only does the company have anumber of internal programmes, it also supports a number ofworthy causes that have a positive impact on people's livesand their futures.

Learnership ProgrammeThe Learnership Programme at Strate is aimed at facilitatingthe implementation of learnerships for people with disabilities.This supports and assists Strate's BBBEE Strategy, in retainingtalent and meeting scarce skills needs. The LearnershipProgramme has a direct positive impact on Employment Equityand the Skills Development elements of the BBBEE scorecard.The implementation of the learnerships included training toexisting staff which addressed issues relating to disabilitiesand the integration of people with disabilities in the workplace.

Mentorship ProgrammeThe Mentorship Programme focuses on both the general andspecific leadership skills required for managers at Strate.The mentees meet their mentors once a month to discuss theircareer path, topics of interest and to clear the path for oneanother. The mentees are also involved in several CorporateSoc io -Economic Deve lopment (SED) in i t ia t i ves .

Strate has adopted the principles of FranklinCovey as a self,leadership and management methodology within theorganisation. The Mentorship Programme is aligned to thismethodology.

Socio-Economic DevelopmentStrate supports a number of worthy causes and encouragesits staff to get involved in SED initiatives and they regularlyparticipate in community outreach programmes. Strate alsohas a programme in place whereby staff can nominate aworthy cause within their communities to receive support.

Community InitiativesThe following educational and community initiatives aresupported by Strate:Valued Citizen - Strate Siyakhula ProjectThe Siyakhula programme (Siyakhula) focuses on Grade 10girl learner and aims to create a platform where learners areempowered to make life choices. Siyakhula runs an afterschoolprogramme that is focused on leadership, communication,

negotiation skills and decision-making skills, which are viewedas essential skills required to achieve the project's objectives.

Thuthuka Bursary FundThe South African Institute of Chartered Accountants (SAICA)has, for over two decades, been running numerous programmesto assist students from disadvantaged backgrounds with entryinto the accounting profession.

This contributes to changing the membership demographics ofthe Chartered Accountancy profession with the ultimate aimthat the membership of the profession will reflect the country'spopulation demographics.

Sekolo sa BorokgoThe high school mainly caters for previously-disadvantagedlearners from areas such as Soweto, Alexandra, Vosloorus,Diepsloot, Cosmo City and the East Rand. The school aims todevelop learners in a structured environment with particularemphasis on Mathematics, Science and Engl ish.

Ebenezer Care CentreEbenezer Care Centre provides a loving home environmentfor about 80 destitute adults and 60 children. It ensures thatthe children get the necessary education that enables them tolead fulfilling lives.

JSE/Liberty Life Investment ChallengeThe programme encourages schools in disadvantagedcommunities to participate in the JSE's Investment Challenge,which teaches learners how to trade shares.

Other initiatives supported by Strate:• Cell C Day;• Choc Childhood Cancer Foundation;• Cornucopia;• Outlier Programme;• JAG Foundation;• Isizulu Tour;• Rose of Sharon Day Care Centre;• Bread of Life Ministries;• Smile Foundation;• Shoshana Foundation;• Zondi Community;• Kgosi Neighbourhood Foundation; and• Serenity Foundation.

Caring for People

34

“The management ofrisk is pivotal toStrate’s role as a CSD,reducing uncertaintyand building resiliencefor South Africa'sfinancial markets.”

35

Strate believes that all businesses have a ‘Genetic Code’ –a distinctive DNA that is the unique and optimum way in whichthey function within their micro business and macro socialenvironments.

In order to extract its DNA, Strate embarked on an extensiveprocess of interviewing both internal and external stakeholdersand asking them to identify principles that added value to itsbusiness and which principles detracted value from the business.

Strate was able to identify 14 principles that add value, theseare the ‘have to haves’ and are represented as the Top LinePrinciples and 14 principles that detract value, these are the‘can’t afford to haves’ and form the Bottom Line Principles.

These principles were then converted into iconographicforms through artwork and set into a weighted mathematicalformula that is measured on a quarterly basis. Strate’s DNA canbe seen as follows:

Strates DNA Formula

36

Strate’s DNA - Top Line Principles

37

CorporateSocial

Responsibility

Customer ServiceFocused

Ensure RegulatoryCompliance

FinanciallySound

Global BestPratices

Supportive Board ofDirectors

Passion andCommitment

Strong OperationalCapabilities

Teamwork Trusted ThirdParty

Absolute Integrity Accountability andResponsibility

An Achievableand Clear Strategy

ComprehensiveRisk

Management

38

BlurringSupervisory and

OperationalFunctions

Complacency/Lack of Urgency

Failure toDeliver

Fire Fighting/Reactive Approach

to Business

Inadequate orLack of

Resources

Inadequate Skillsand

Knowledge

Poor Planningand

Project Management

Negative Attitudesand Mindsets

Politics andPower Plays

PreferentialTreatment/

Inconsistencies/Favouritism

SiloSyndrome

Abusing ourMonopoly Status

Bureaucracy/Red Tape

CommunicationBreakdown

Strate’s DNA - Bottom Line Principles

Acronyms

39

AACG - Asia-Pacific CSD GroupACSDA - Americas' Central Securities Depositories AssociationAECSD - Association of Eurasian Central Securities DepositoriesAMEDA - Africa & Middle East Depositories Association

BBBEEE - Broad-Based Black Economic EmpowermentBCM - Business Continuity ManagementBIS - Bank for International SettlementBMA - Bond Market Association

CC&S - Custody and SettlementCBPL - Continuous Batch Processing LineCCP - Central Counter PartyCEO - Chief Executive OfficerCoGP - Codes of Good PracticeCOO - Chief Operating OfficerCoSSE - Committee of SADC Stock ExchangesCPL - Continuous Processing LineCPSS - Committee on Payment and Settlement SystemsCRM - Customer Relations ManagementCSD - Central Securities DepositoryCSV - Comma-Separated Values

DDTI - Department of Trade and Industry

EECSDA - European Central Securities Depositories AssociationEMEs - Exempted Micro EnterprisesERM - Enterprise Risk Management

FFIP - Finance and Investment ProtocolFMA - Financial Markets ActFMI - Financial Markets InfrastructureFSB - Financial Services BoardFSC - Financial Sector Charter

GG20 - Group of 20 NationsG30 - Group of 30 NationsGDP - Gross Domestic Product

HHR - Human Resources

IIOSCO - International Organisation of Securities CommissionsIPOs - Initial Public OfferingsISIN - International Securities Identification NumbersISO - International Organisation for StandardisationISSA - International Securities Services AssociationIT - Information Technology

JJET - Johannesburg Equity TradingJSE - Johannesburg Stock Exchange

KKing III - revised Code and Report on Governance Principles for South Africa

MMoU - Memorandum of UnderstandingMSP - Managing Successful Programmes

NNPL - Nil Paid LetterNPS - National Payment System

OOTC - Over-The-Counter

PPDF - Portable Document FormatPIMO - Project and innovation Management Office

QQSE - Qualifying Small Enterprise

RRTL - Real-Time Line

SSADC - Southern African Development CommunitySAFIRES - South African Financial Instruments Real-time Electronic SettlementSAICA - South African Institute of Chartered AccountantsSAIFM - South African Institute of Financial MarketsSAMOS - South African Multiple Options SystemSARB - South African Reserve BankSARS - South African Revenue ServiceSCA - Safe Custody AccountSCS - Strate Charity SharesSDA - Segregated Depository AccountSDLC - System Development Life CycleSECOM - Settlement Communication SystemSED - Socio-Economic DevelopmentSENS - Stock Exchange News ServiceSFIDvP - Simultaneous, Final, Irrevocable, Delivery versus PaymentSMS - Short Message ServiceSOA - Service Oriented ArchitectureSOR - Securities Ownership RegisterSRO - Self-Regulatory OrganisationSSA - Securities Services Act No 36 of 2004SSSs - Securities Settlement SystemsSTP - Straight Through ProcessingSWIFT - Society for Worldwide Interbank Financial Telecommunications

TT+N - Trade date plus number of daysTCS - Tata Consultancy ServicesTRs - Trade Repositories

UURDAD - Use Case Responsibility Driven Analysis and Design

WWFC - World Forum of CSDs

Follow Strate Ltd

ww

w.

st

ra

te

.c

o.

za

Tel: +27 (11) 759 5300 • Fax: +27 (11) 759 5500 • Email: info@strate.co.za1st Floor, 9 Fricker Road, Illovo Boulevard, Illovo, Sandton, 2196, South Africa.

www.strate.co.za