151003 jse nkonki top 100 report email version

Experience Ingenuity.

Insights into the Top 100* JSE Listed Companies

Integrated Reporting Trends

© Nkonki Proprietary 2015

Also available on:

Insights into the Top 100* JSE Listed Companies Integrated Reporting Trends

*An analysis of the Top 100 JSE Listed Companies

Disclaimer

This document is proprietary to Nkonki and the information herein is confidential. It is supplied in confidence and should not be disclosed, duplicated or otherwise revealed in whole or in part to any third parties without the prior written consent of Nkonki.

Foreword

Executive Summary

Chapter 1 – Research findings and results

Chapter 2 – Industry analysis

Chapter 3 – Qualitative insights

Chapter 4 – New trends in integrated reporting in South Africa

Annexure A – The mark plan, adjudication process and panel

Annexure B – Integrated reporting ratings, rankings and industries

Annexure C – Maturity chart

Annexure D - High level roadmap

About Nkonki

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1


Transparency with a purpose

South Africa is in a unique position when it comes to Integrated Reporting. Since 2010 companies listed on the Johannesburg Stock Exchange have been required to prepare integrated reports because the principles of King III (which include the preparation of integrated reports) fall into the Listing Requirements on an apply or explain basis.

As CEO of the International Integrated Reporting Council, the South African experience has offered me many crucial insights. Initially, it enabled us to draw on the learnings of South African companies when developing the International <IR> Framework - which was piloted by many companies in South Africa as well as internationally - to ensure it was aligned to the needs of businesses.

Now, the South African experience enables us to reflect on how the Framework is being applied by businesses that have been working towards <IR> for many years, giving us case studies and research to share with the wider world as more and more businesses move towards <IR>. Nkonki’s report gives crucial insight in this respect into the opportunities and challenges experienced by mature integrated reporters.

Three indicators stood out for me in this survey. Firstly, that companies have scored well for their strategic focus. Integrated Reporting is about entering the company through the doorway of strategy. This is important, because when organizations think about their strategy for the short, medium and long term they start to actively consider future risks and what actions they can take now to alleviate them. It also gives providers of financial capital the reassurance they need to invest over longer time horizons, because they understand how businesses are planning for the future. Future orientation is a clear distinction between the corporate reporting system of old and the new form of reporting that is taking shape. Instead of reporting backward-looking sets of financial results, that quickly become outdated, an integrated report delves into how value will be created now and in the future.

The second thing to stand out to me was that businesses are struggling with the fundamental concepts in the Framework. This is striking, because it suggests these businesses are not taking advantage of the opportunity that now exists to articulate a business strategy that goes beyond financial transactions. Businesses should articulate the multi-capitals they are using in their business models, using Integrated Reporting as a vehicle to explain how the company creates value. If South Africa’s biggest companies really do only have financial transactions as the drivers of their business models, then that might cause problems for the South African economy over time. But I do not believe that this is the case in reality and I hope, as they advance their corporate reporting further, they will be able to start to articulate the multi-capitals (or resources and relationships) they use and affect in their business models, and furthermore, recognise the benefits of doing so.

Finally, this report recognizes a struggle that is common to all businesses – the art of being concise. As Mark Twain eloquently phrased it, “I didn’t have time to write you a short letter, so I wrote a long one instead.” Being concise, when faced with ever increasing demands to be transparent, is a challenge. However it is one that organizations need to tackle, because a report is only useful if the reader can understand what the key, pertinent messages they should be taking away from it are. As the Financial Chief of General Electric said when it was pointed out to him that General Electric’s annual report is 32,950 words longer than Harry Potter and the Philosopher’s Stone, “Not a retail investor on planet Earth could get through it, let alone understand it.”

Instead of being transparent for the sake of transparency, Integrated Reporting encourages a business to be transparent with a purpose – a purpose of communicating how all of its resources create value over time. There are great opportunities for this concise form of reporting to become a reality. Not least if we take advantage of the digital revolution which has swept across the world thanks to the success of cloud, social and mobile technologies. Although this revolution has created new challenges for businesses as they deal with faster and vaster flows of information both inside the company and externally with stakeholders, if harnessed properly it can bring new meaning to the corporate reporting process as businesses get used to the new world of real-time engagement with stakeholders.

I would like to thank Nkonki for compiling this research, it gives me confidence that businesses are finding the Framework to be valuable guidance as they evolve their corporate reporting practices. But what is the end game? Why does corporate reporting need to keep up – what is its importance?

FOREWORD

FOREWORD

Paul Druckman, CEO, International Integrated Reporting Council

2

2014 market capitalisation of Top 100 companies: Total revenue:

R8.6 trillion

2014:

R3.2 trillion2013:

R2.9 trillion

R7.4 trillion

2014:

R10.7 trillion2013:

R9.6 trillion

2013 market capitalisation of Top 100 companies:

Total assets:

FOREWORD

Interesting Statistics

Longest integrated report:

2014: 516 pages

2013: 456 pages

2012: 426 pages

2014: 1692013: 1572012: 175

Average number of pages of integrated reports:

The International Integrated Reporting Council (IIRC) believes that corporate reporting reform can help align capital allocation and corporate behaviour to the wider goals of financial stability and sustainable development.

For obvious reasons corporate reporting reform alone will not bring about financial stability and sustainable development. The work of the IIRC goes hand in hand with other efforts around the world, which is why we are working through our networks and within our coalition to encourage three shifts. Firstly, a shift from a financial capital market system to an inclusive capital market system. We are encouraging governments, central banks, stock exchanges and standard setters to recognise the interconnection between elements such as finance, knowledge and other resources, and embed systems of governance that enable this. The second shift the IIRC is calling for is from short-term capital markets to sustainable capital markets - to end the incentive

systems that perpetuate short-term thinking and decision-making. And finally, the third shift is from silo reporting to Integrated Reporting. Together these three shifts can be a force for financial stability and sustainable development in markets around the world.

For many, such as these businesses in South Africa, the third shift towards Integrated Reporting is already a reality. There are currently around 1,000 businesses around the world who are using the International <IR> Framework to think holistically about their strategy and plans. Many of them – around 750 people – engage with the IIRC through <IR> Networks to advance corporate reporting together, learning from each other to find the best ways of moving towards <IR>. If you would like to become part of an <IR> Network and work with others to advance your corporate reporting in the areas identified in this report visit www.integratedreporting.org or email [email protected].

3


This is the fifth year that Nkonki is recognising the top companies listed on the Johannesburg Stock Exchange (JSE) for their integrated reports. The annual award started in 2011 and initially covered only the Top 40 companies by market capitalisation. In 2012 to 2014, the scope was extended to cover the Top 100 companies due to the prevalence of integrated reporting in South Africa.

Nkonki is proud that South African companies have embraced integrated reporting and have a wealth of experience to share with others. We are proud that, through this award, our firm is playing an active role in assisting companies to improve their reports and strive for best practice reporting. Nkonki has developed tools to assist companies, both listed and public sector, in their integrated reporting journey: the Nkonki Roadmap to Integrated Reporting and the Nkonki Integrated Reporting Maturity Chart. These tools are available on www.nkonki.com and provide essential insights to companies planning to prepare an integrated report and those wishing to

assess their readiness to do so or their maturity level.

In this year’s awards, a new mark plan was introduced based solely on the International Integrated Reporting Council’s (IIRC) International <IR> Framework (Framework) issued in December 2013. The mark plan evaluated the application of the guiding principles and content elements (indicators) of the Framework. It also includes a points allocation for the “Wow Factor”, rewarding innovation in the report. The mark plan differs significantly from those of previous years which included other aspects such as King III and certain JSE Listings Requirements. This should be taken into account when considering comparative figures. (See Annexure A for detailed information on the mark plan). In the past surveys, those companies featured on the JSE’s Socially Responsible Investment (SRI) Index were included and therefore the number of companies exceeded 100, however for the 2014 reports the focus is only on the top 100 JSE listed companies, even though 105 companies were surveyed.

An analysis of the 105 companies surveyed (2013:107 companies) is covered in chapter 1. The results, as seen in the table below, show that the companies scored above 70% in six of the ten indicators. This is an admirable performance and testament to their experience in integrated reporting despite the Framework having been issued only in December 2013. The companies did

particularly well in covering Strategic Focus information as well as Comparable and Consistent information. They scored less favourably (below 50%), however, in Fundamental Concepts and the Wow Factor for innovation. Conciseness is on the borderline coming in at a score of 54%.

EXECUTIVE SUMMARY

EXECUTIVE SUMMARY

0

20

40

60

80

100

62%

78%71% 69%

54%

71% 73%

84%

45%

72%

14%

Stra

tegi

c Fo

cus

Stak

ehol

der

Rela

tions

hips

The

Wow

Fac

tor

Tota

l ave

rage

fin

al s

core

Cont

ent

Elem

ents

*Fun

dam

enta

l Co

ncep

ts

Cons

iste

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and

Com

para

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Relia

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d Co

mpl

eten

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Conc

isen

ess

Mat

eria

lity

Conn

ectiv

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f In

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Average Score per Framework Indicator

* Companies need to improve on the Fundamental concepts. In terms of the <IR> Framework, Fundamental concepts deal with the disclosure of how value is created and how companies use the various 6 capitals in their value creation process. Companies are expected to consider and disclose the impact of their value creation process on their overall stock of capitals over the long term.

4

Tsogo Sun Holdings Limited emerged as a surprise winner this year as the company was not previously included in the Top 100 due to its market capitalisation. All of the companies in the top 10 list achieved excellence in integrated reporting and are fine examples of current best practice in South Africa, and indeed globally.

Chapter 2 sets out Industry analysis, in nine sectors, based on the average scores of the surveyed companies. The leading sectors, shown in the table below, are Telecommunications and Basic Materials (Oil & Gas was excluded as there is only one company in the sector). The Technology sector fell into last place after ranking highly in previous years.

EXECUTIVE SUMMARY

The Top 10 Companies

Congratulations to the following companies whose reports are in this year’s Top 101 list:

Tsogo Sun Holdings Limited

Royal Bafokeng Platinum Limited

ArcelorMittal South Africa

Limited

Nedbank Group Limited

Liberty Holdings Limited

• Nampak Limited and

• Redefine Properties Limited

Pretoria Portland Cement Limited Sanlam Limited Sasol Limited Barloworld

Limited

6

1

7

2

8

3

9

4

10

5

1 There are a total of 12 companies as a result of three companies sharing 6th position.

5


EXECUTIVE SUMMARY

In chapter 3, there are excerpts from the reports of companies covering elements such as the business model, capitals and value creation. While these excerpts will be helpful to other companies it’s worth remembering that each company will find its own way to best tell its value creation story with the input of the board or other governance body and the executive.

Once again, we extend our congratulations to each of the award winners. We thank the adjudicators for their hard work and dedication in the task of marking over 100 reports and we look forward to another year of promoting better corporate reporting in South Africa.

The winning companies in each Industry are:

Industry Company Name

Basic Materials Royal Bafokeng Platinum Limited

Consumer Goods Tongaat Hulett Limited

Consumer Services Tsogo Sun Holdings Limited

Financials Nedbank Group Limited

Healthcare Life Healthcare Group Holdings Limited

Industrials Nampak Limited

Oil & Gas Sasol Limited

Technology Business Connexion Group Limited

Telecommunications Vodacom Group

Average Score per Industry

0

20

40

60

80

100

Basi

c M

ater

ials

72%

58% 58% 57%61%

66%

82%

50%

78%

Cons

umer

G

oods

Fina

ncia

ls

Tele

com

mun

i-ca

tions

Tech

nolo

gy

Oil

& G

as

Indu

stria

ls

Hea

lthca

re

Cons

umer

Se

rvic

es

This chapter covers the analysis of the Top 100 JSE Listed Companies (2013: 107 companies). The mark plan was changed this year to focus on the International <IR> Framework (refer to Annexure A), and this should be taken into account when considering comparative figures. The mark plan covered the following indicators of the Framework:

• Strategic Focus 17• Connectivity of Information 17• Stakeholder Relationships 17• Materiality 17• Conciseness 17• Reliability and Completeness 17• Consistency and Comparibility 17• Fundamental Concepts 32• Content Elements 32• The Wow Factor 17

Total: 200 marks

RESEARCH FINDINGS AND RESULTS

CHAPTER 1

6

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0

5

10

15

20

25

30

35

Percentage Rating of Companies

Seventy-six of the 105 companies (2013:101 of the 107 companies), scored above 50% and the average was 62% (2013:69%). Although this decrease might be perceived as negative, it should be taken into account that the marking was stricter due to the new mark plan that was implemented this year as outlined in Annexure A. Further, comparison can be made against the average score of 59% allocated to the integrated reporting section in last year’s mark plan. Furthermore, one should bear in mind that the “low-hanging fruit” in the previous mark plan became easier to implement, such as reporting on directors and their remuneration became so much better that many companies could earn top scores for these and similar items.

The 2014 results, with the mark plan around the International <IR> Framework, offers a useful baseline for assessing the integrated reports of the Top 100 companies on the JSE going forward.

Below is the trend analysis of the average scores over the years albeit with different mark plans:

The analysis of the 2014 average score is represented below (including the comparative figures), indicating the percentage of companies with ratings of between A and D:

CHAPTER 1

A Rating80% – 100%

B Rating70% – 79%

C Rating60% – 69%

D Rating50% – 59%

Below D Rating0 – 49%

CHAPTER 1 – RESEARCH FINDINGS AND RESULTS

A B C D Below D

15%

21%

26%

29%

19%

33%

16%

11%

24%

6%

2013 2014

2011

59%2012

66%

2013

69%2014

62%

8

Average Score Per Framework Indicator


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20

40

60

80

100

Stra

tegi

c Fo

cus

62%

78%71% 69% 71%

54%

73%

84%

72%

14%

45%

Stak

ehol

der

Rela

tions

hips

The

Wow

Fac

tor

Tota

l ave

rage

fin

al s

core

Cont

ent E

lem

ents

Fund

amen

tal

Conc

epts

Cons

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and

Com

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d Co

mpl

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Mat

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30

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50

60

70

80

1.1 Scores Achieved in each Indicator

1.1.1 Strategic Focus

A B C D Below D

67%

3%

19%

2%

9%

91 of the companies scored higher than a D rating and the average

score was 78%.

The results highlight a substantial gap between

“Strategic Focus” and “Consistency and Comparability” on the one hand (scores around 80%) and “The Wow

Factor” and “Fundamental Concepts” scoring below 50% on the other. Conciseness is on the borderline

with a score of 54%.

The survey reveals that the reports have a strong strategic focus, scoring an average of 78.4% in this area. Some of the companies showed how strategic priorities will create long-term shareholder value, which was linked to performance metrics for directors in the short-, medium- and long-term. Most strategies were presented in an illustrative manner through tables and info-graphics making them clear and understandable. Many of the statements made by the chairman of the board and the chief executive in the integrated reports made good connections to the companies’ strategies, reiterating and reinforcing the future outlook of the company by the leadership.

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1.1. 2 Connectivity of Information

CHAPTER 1

1.1.3 Stakeholder Relationships


0

10

20

30

40

50

0

10

20

30

40

50

A

A

B

B

C

C

D

D

Below D

Below D

49%

47%

7%

10%

24%

31%

3%

0%

18%

11%

89 of the companies scored higher than a D rating and the

average score was 71%.

82 of the companies

scored higher than a D rating and the


The level of Connectivity of information in the reports, with an average score of 71% is good, with the majority of companies demonstrating a logical approach to the structure and content of their reports. The survey found that most companies are making use of cross references, tables and graphics, which makes the information flow and the connection between processes and information more comprehensible and easier to read. The content elements are being interlinked, with good flow between qualitative and quantitative information and information linked to future outlook. It is also notable that most companies had cross-referenced to additional reports and detailed information on their websites. Room for improvement though is in the area of connecting the capitals by indicating their interdependencies.

The majority of companies mention stakeholders in their reports with most identifying the various stakeholder groups, which range from communities to providers of capital. Forty-nine percent of the companies that are A rated, articulated how they engage with their stakeholders. The impact of these engagements on the company’s value creation process was also well articulated. The effective use of tables and cross referencing, as well as links to other content elements, helped to clarify the approach taken in terms of stakeholder relationships. Some companies address their reports to investors (providers of financial capital) while others address it to all stakeholders.

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0

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A

A

B

B

C

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D

D

Below D

Below D

1.1.4 Materiality

1.1.5 Conciseness

58%

4%

21%

3%

15%

38%

5%

15%

1%

42%

85 of the companies



58 of the companies scored

higher than a D rating and the


Only 15% of the Top 100 companies did not disclose material issues or the determination process. On the opposite end of the continuum, 58% of companies scored highly in Materiality. The majority of companies that disclose material issues, do so upfront in the report and then connect these to other content elements such as risks and opportunities, strategy, resource allocation and KPIs. These material items identified by companies range across financial and non-financial aspects. In some instances companies indicate that stakeholders had an influence on the prioritisation of material issues.

Many companies in the Top 100 are still struggling when it comes to the conciseness of their reports. With the longest report at 516 pages and 42% of the companies scoring below a D rating, it is clear that improvement is required. The average number of pages in the 2014 reports is 169 (2013: 157) Thirty-eight percent of companies surveyed made good use of diagrams and tables, but only some included summarised Annual Financial Statements in their reports which is an easy way to cut down on the number of pages.

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0

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A B C D Below D

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A B C D Below D

CHAPTER 1


1.1.6 Reliability and Completeness

1.1.7 Consistency and Comparability

60%

3%

20%

1%

16%

81%

2%

14%

0% 3%

84 of the companies



97 of the companies



The surveyed companies scored an average of 74.9% on Reliability and Completeness. A number of companies’ reports deal with the concept of combined assurance, clearly articulating the various lines of defense and the well-established governance structures with defined terms of references. The long history of King III and discipline in financial reporting are two of the factors Nkonki believes have contributed to South African companies scoring well in this indicator.

Consistency and comparability of information, which scored an average of 84%, with 81% of the companies obtaining an A rating, is clearly an element that is understood within the Top 100 companies. In particular the financial information, performance against targets and KPIs, and the governance information, have a strong connection to similar information published in prior year. Nkonki believes the maturity of this guiding principle can be attributed to the maturity of corporate reporting, such as embracing the International Financial Reporting Standards (IFRS) and code of governance principles of King III, of the companies listed on the JSE.

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1.1.8 Fundamental Concepts

0

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30

40

50

60

A B C D Below D

25%

8%6% 6%

57%

1.1.9 Content Elements

0

10

20

30

40

50

A B C D Below D

47%

22%

12%9% 9%

91 of the companies



It is clear from the results, with 57% of the companies scoring below a D rating, that South African companies are still on a journey with respect to being able to articulate their business models, in other words, how they create value through the use of all of the capitals over the short-, medium- and long-term. In most cases, the majority of the companies do, however, have a good understanding of the business model in terms of “financial capital” and the value creation thereof, but there is clearly a need to improve in terms of reporting on non-financial capitals.

The content elements outlined in the International <IR> Framework were mostly disclosed and presented in the reports of the Top 100 companies with an average score of 72%. As mentioned in the Connectivity commentary, 47% of companies made good links between the content elements, making the value creation story of the company unique and more easily understood. While the presentation of the information differed from company to company, there were some similarities between companies within the same sector, particularly those in Financial Services and Basic Materials.

Only 43 of the companies



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CHAPTER 1


1.1.10 The Wow Factor

0

20

40

60

80

100

A B C D Below D

0% 0% 6% 3%

92%

92 of the companies

scored lower than a D rating and the

average score was just 14%.

It is obvious from the scores achieved that one of the areas needing the most attention is the so-called “Wow Factor”. The “Wow Factor” indicates innovation and uniqueness and these can only be achieved once a company is very mature in its integrated reporting process, when those in charge of governance are so familiar with the process that new and exciting ideas start formulating.

“The reliability of information is affected by its balance and freedom from material error. Reliability (which is often referred to as faithful representation) is enhanced by mechanisms such as robust internal control and reporting systems, stakeholder engagement, internal audit or similar functions, and independent, external assurance.”

The above is the only reference in the International <IR> Framework to assurance. Following the release of the IIRC’s paper Overview of Feedback and Call for Action, the baton has now been handed to the International Auditing and Assurance Standards Board (IAASB), specifically its Integrated Reporting Working

Group. The group released a publication Exploring Assurance on Integrated Reporting and Other Emerging Developments in External Reporting in July 2015 and the next step will be the release of a discussion paper.

1.2 Reliability of Information

The International <IR> Framework states:

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It is of concern that 36% of the Top 100 listed companies in South Africa do not obtain any assurance on their non-financial disclosure in their reports.

25%

6%Internal audit and external assurance

Internal audit

Internal audit and other

External assurance and other

External assurance

None

Other

36%

11%16%

2%

4%

Types of non-financial assurance providers

The Top 100 companies referred to various assurance providers in their reports. Some explained their assurance policy, as set by the board, and listed the context of assurance and the assurance providers.

The graphic below shows the various assurance provider used to assure certain non-financial information disclosed in the report.

Types of Non-Financial Assurance Providers:

Non-Financial Assurance Providers:

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CHAPTER 1


1.3 Timing of Reports versus Scores Achieved

One would expect, that with the release of the International <IR> Framework in December 2013, that companies with a year-end later in the 2014 year would have done better in their scores and

ratings as opposed to those with year-ends earlier in year. This is because it would have taken time for companies to process the latest guidelines and apply these in their integrated reports. Looking at the graph of the average and highest scores per year-end this certainly seemed to be the case.

This analysis should, however, determine how good a company’s integrated report is. An example is the winner, Tsogo Sun Holdings Limited, which scored the highest, even having a 31 March 2014 year-end. Furthermore, it was the first time that this company was part of the Top 100 group. Therefore better integrated reports can be produced by any company, despite its year-end or even history (to an extent).

1.4 Length of Reports

The average number of pages of the report was 169, with the longest report being 516 pages. In 2013, the average number of pages was 157, with the longest report being 456 pages. In 2012, the average number of pages was 175, with the longest report being 426 pages, so this can be regarded as a negative trend.

The shortest report in 2014 is 63 pages compared to 36 pages in 2013 and 63 in 2012.

It is clear that conciseness is still an issue for many companies. This might be because of a lack of focus on material items. A factor could be that 53 of the companies still included in 2014 the full AFS in their reports. Many companies however, included only abridged or summarised AFS. One company included both a full and an abridged set of AFS in its report. On the opposite end of the scale, four companies did not include any financial statement in their integrated reports.

47 companies produced separate sustainability or similar reports, being an average of 55 pages.

Timeline: Average and Highest Score Per Year-End

0

20

40

60

80

100

February - 14 March - 14 June - 14 August - 14 September - 14 December - 14

48%

60%

92%

82%

48% 48%

65%

85%

70%

89%

59% 59%

Average % Highest%

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1.5 Title of Reports

Integrated Report

Annual Integrated Report

Annual Report

Annual Report and Accounts

Integrated Annual Report

38%

9%

9%

4%

40%

Title of the JSE Top 100 Companie’s Reports

“Research commissioned by the International Integrated Reporting Council (IIRC) has revealed significant behavioural change and strong benefits to both preparers and users of financial reports arise that from a move to integrated reporting. The research reports indicate that 91% of respondents have seen a positive impact on external engagement with stakeholders, including investors. Eighty seven percent of the businesses that have published at least one integrated report, believe that investors better understand their strategy; 79% of respondents report improvements in decision making; 68% report a better understanding of risks and opportunities, and 78% seeing better collaborative thinking by the board about goals and targets.”

The IIRC, 2015

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CHAPTER 1


The title “Integrated Report” is the most mature name, indicating that there is only one kind of report, which is produced annually and which integrates all relevant information into one integrated package.

The name “Integrated Annual Report” is still the most popular. However, this creates the perception that there are other annual reports over and above the integrated one (which can be regarded as true in many instances, where there are also sustainability reports, annual financial statements, etc.). This has, however, decreased from 46% in 2013.

The “Annual Integrated Report” alludes to the fact that there are other integrated reports, for example half-yearly integrated reports, or quarterly integrated reports. This accounts for 9% of the names, the same as in 2013.

Although there is not a direct relationship, most of the companies that still publish “Annual Reports” were still en route to Integrated <IR> Reporting. They represent 9% of the companies (2013: 8%). The term “Annual Report and Accounts” are all used by either UK or Swiss registered companies (four in total).

1.6 Commendable Features

Some commendable features in the report noted by the adjudicators during the assessments (excluding the Top 10 companies) include the following:

• AECI Limited has a very good risk maturity model as well as a corporate governance self-assessment model.

• Sappi Limited’s sustainable business model.

• Grindrod Limited’s disclosure of its integrated business model.

• Wilson Bayly Holmes-Ovcon Limited’s strategic risk matrix, as well as four pages dedicated to the future outlook.

• Exxaro Resources Limited, the winner last year, still displayed pockets of excellence. Its G4 Core table is exceptionally comprehensive, and there is an excellent environmental graphic, as well as graphics relating to strategy and philosophy. There is excellent risk disclosure and a top 10 risk heat map is included.

• Life Healthcare Group Holdings Limited shows a very good link between capitals and strategic objectives.

• Gold Fields Limited impressed with its dashboard, its internal

and external standards and principles and its risk and materiality graphs.

• Tongaat Hulett Limited went the extra mile in disclosing land development maps.

• Some of the PLC companies already include the latest long-form external audit report in their annual reports and accounts, e.g. Redefine International PLC, Capital & Counties Properties PLC, Intu Properties PLC, Mondi PLC, Old Mutual PLC, Investec PLC, Anglo American PLC, BHP Billiton PLC, Lonmin PLC, British American Tobacco PLC and SABMiller PLC.

• Hyprop Investments Limited drafted a unique graphic combining focus areas, material issues, measures and risks.

• Mondi Limited and PLC discloses excellent stakeholder engagement activities in the sustainability report – it is unfortunate that a summary wasn’t included in the integrated report.

• Although Woolworths Holdings discloses a good stakeholder engagement model in its integrated report, the only discussion takes place in the sustainability report.

• AngloGold Ashanti Limited discloses that it has a Serious Concerns Committee which started in 2014, to investigate ethical and other allegations.

• Sibanye Gold describes an excellent strategic risk matrix, as well as including a graphic of the report content and material issues. It also has a summarised integrated report in addition to the “normal” one of 240 pages.

• Standard Bank Group Limited shows its integrated pillars for strategy, and states that integrated thinking was adopted.

• Telkom SA SOC Limited has a very good section on stakeholder engagement.

• Mediclinic International Limited includes an excellent table for combined assurance, but it is a pity it is in the sustainability report and not in the integrated report. The integrated report contains an excellent materiality assessment matrix.

• Imperial Holdings Limited has an excellent governance model in its integrated report, as well as an excellent combined assurance model.

• Old Mutual PLC outlines five pillars of responsible business which are then linked to the largest stakeholders.

This chapter gives analysis of the integrated reports of the Top 100 JSE listed companies in terms of their Sectors. As in the past, the Telecommunications sector performed well, in terms of its overall score (Oil & Gas should be ignored as the sector is represented by one company only). The winners in each category are named in the Executive Summary.

Industry Analysis

CHAPTER 2

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19


The Industry analysis shows that the leading sectors are Telecommunications, Basic Materials and Industrials (Oil & Gas has not included as there is only one company in that sector). The Healthcare sector has always done reasonably well in this analysis, although it has now been surpassed by Basic Materials and Industrials. The Technology sector lagged with an average score of 50%.

The award winners in each of the sectors (all those companies which scored an A rating, except for Sasol again) are the following:

CHAPTER 2

Industry and Companies

Basic Materials


ArcelorMittal South Africa Limited

Anglo American Platinum Limited

Gold Fields Limited

Consumer Services


Financials


CHAPTER 2 – INDUSTRY ANALYSIS

Average Score per Industry

Overall Ratings

0

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72%

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Industry and Companies

Financials continued


Redefine Properties Limited

Sanlam Limited

Healthcare

Life Healthcare Group Holdings Limited

Industrials

Nampak Limited

Pretoria Portland Cement Limited

Barloworld Limited

Wilson Bayly Holmes-Ovcon Limited

Oil & Gas

Sasol Limited

Industry Evaluation

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Basic Materials Consumer Goods Consumer Services Financials Healthcare Industrial Technology Telecommunications

21


It is useful to analyse the disclosure recommendations of the International <IR> Framework in terms of which sectors are leading or lagging in each indicator. The graph above and the table below exclude the Oil & Gas sector, as it is represented by only one company, and the sector is also excluded from the analysis in the remainder of this chapter.

Leading and Lagging Industries

Industry Evaluation Continued

CHAPTER 2

Framework Indicator Leading Industry Lagging Industry

Strategic Focus Telecommunications Technology

Connectivity of Information Telecommunications Consumer Services

Stakeholder Relationships Telecommunications Financials

Materiality Basic Materials Technology

Conciseness Telecommunications Technology

Reliability and Completeness Telecommunications Technology

Consistency and Comparability Telecommunications Consumer Services

Fundamental Concepts Basic Materials Technology

Content Elements Telecommunications Technology

The Wow FactorBasic Materials and Financials and Industrial

Technology


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Basic Materials Consumer Goods Consumer Services Financials Healthcare Industrial Technology Telecommunications

22

It is clear that Telecommunications is the strongest Industry in terms of integrated reporting, while the Technology sector is lagging in almost every respect. Having said that, one should remember that each of these industries is represented by only three companies in the Top 100 and that this may skew average statistics. It should be noted, however, that Technology was one of the leading industries in previous years.

In the category analysis that follows, only the top three positions in each category are Listed. A full list of all the company ratings per Industry is given in Annexure B.

2.2 Basic Materials

Top rated performers in the Basic Materials Sector are:

The winner, Royal Bafokeng Platinum Limited, was sixth in 2013. Exxaro Resources Limited was the winner in 2013 and in 2012, and is fifth in 2014. Harmony Gold Mining Company Limited was the winner in 2011.

Company Name Rating

Royal Bafokeng Platinum Limited 1

ArcelorMittal South Africa Limited 2

Anglo American Platinum Limited 3


0

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100

Stra

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90%

75%81%

89%

41%

87% 89%

62%

18%

72%

84%

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The Basic Materials Sector scored very well on Strategic Focus, Materiality, and Consistency and Comparability. However, more work can be done on Conciseness and on being innovative and creative (the Wow Factor). Overall the Industry scored an average of 72% (2013:75% and 2012:69%) against the highest average Sector score of 78% (2013:77% and 2012:72%) excluding Oil & Gas.

The reports of all three winners in this sector can be regarded as good examples for those wishing to follow their lead. They are among the top seven overall.

2.3 Consumer Goods

Top rated performers in the Consumer Goods Sector are:

Tongaat Hulett limited was the winner in 2012 and in 2011, and was second in 2013. Illovo Sugar Limited was first in 2013, and is now fourth.

CHAPTER 2

Company Name Rating

Tongaat Hulett Limited 1

Oceana Group Limited 2

Steinhoff International Holdings Limited 3


0

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73%67% 66% 65%

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The Consumer Goods Sector scored very well on Consistency and Comparability, Strategic Focus, and on Reliability and Completeness. More work can be done on applying the Fundamental Concepts and on being innovative and creative (the Wow Factor). Overall the Sector scored an average of 58% (2013:63% and 2012:58%) against the highest average Sector score of 78% (2013:77% and 2012:72%) excluding Oil & Gas.

2.4 Consumer Services

Top rated performers in the Consumer Services Sector are:

Woolworths was the winner in this sector from 2011 to 2013, and is now second placed. Tsogo Sun Holdings Limited, the winner, was not included in the awards in previous years.

Company Name Rating

Tsogo Sun Holdings Limited 1

Woolworths Holdings 2

The Foschini Group Limited 3

Truworths International Limited 3


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66% 64% 67% 67%61%

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58%

68%

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The Consumer Services Sector scored very well on Consistency and Comparability and on Strategic Focus. More work can be done on applying the Fundamental Concepts and on being innovative and creative (the Wow Factor). Overall the Sector scored an average of 58% (2013:69% and 2012:69%) against the highest average Sector score of 78% (2013:77% and 2012:72%).

The report of Tsogo Sun Holdings Limited (the overall winner)

can be regarded as an excellent example for those wishing to follow its lead.

2.5 Financials

Top rated performers in the Financials Sector are:

The winner, Nedbank Group Limited, was also the winner in 2011 and was second in 2013. Standard Bank Group Limited was the winner in 2012 and 2013 and has now dropped to seventh place.

CHAPTER 2

Company Name Rating

Nedbank Group Limited 1

Liberty Holdings Limited 2

Sanlam Limited 3


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75%69% 60% 58%

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The Financials Sector scored very well on Consistency and Comparability and on Strategic Focus. More work can be done on applying the Fundamental Concepts and on being innovative and creative (the Wow Factor). Overall the Sector scored an average of 57% (2013:64% and 2012:59%) against the highest average Sector score of 78% (2013:77% and 2012:72%) excluding Oil & Gas.

The reports of all four winners in this sector can be regarded as good examples for those wishing to follow their lead. They are among the top eight overall in this award.

2.6 Healthcare

Top rated performers in the Healthcare Sector are:

Life Healthcare Group Holdings Limited was third in 2013 while Aspen Pharmacare Holdings was the winner in 2012 and 2011. Mediclinic International Limited was first in 2013.

Company Name Rating

Life Healthcare Group Holdings Limited 1

Aspen Pharmacare Holdings Limited 2

Mediclinic International Limited 3


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70% 70% 68%

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50%

74%82%

38%

12%

61%

73%

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The Healthcare Goods Sector scored outstandingly in terms of Materiality and Consistency and Comparability. More work can be done on applying the Fundamental Concepts and on being innovative and creative (the Wow Factor). Overall the Sector scored an average of 61% (2013:73% and 2012:66%) against the highest average Sector score of 78% (2013:77% and 2012:72%).

The report of Life Healthcare Group Holdings Limited (in eleventh overall place) can be regarded as a good example for those wishing to follow its lead.

2.7 Industrials

Top rated performers in the Industrials Sector are:

Nampak Limited came in as the winner after being in seventh place in 2013. Pretoria Portland Cement Limited was the winner in 2013, 2012 and in 2011, while Barloworld Limited was in second place in 2013.

CHAPTER 2

Company Name Rating

Nampak Limited 1

Pretoria Portland Cement Limited 2

Barloworld Limited 3


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72%78%

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The Industrials sector scored very well on Consistency and Comparability and in a number of other Indicators. More work can be done on being innovative and creative (the Wow Factor). Overall the Sector scored an average of 66% (2013:70% and 2012:71%) against the highest average Sector score of 78% (2013:77% and 2012:72%).

The reports of all three winners in this Sector can be regarded as good examples for those wishing to follow their lead.

2.8 Technology

Top-rated performers in the Technology Sector are (this Sector only has three companies which were included in the study):

Datatec Limited was the winner in 2013 and in 2012. Business Connexion Group Limited was the winner in 2011 and was in second place in 2013 (only two companies were in this Sector then).

Company Name Rating

Business Connexion Group Limited 1

EOH Holdings Ltd. 2

Datatec Limited 3


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The Technology Sector scored well on Consistency and Comparability. More work can be done on a number of Indicators, but particularly on applying the Fundamental Concepts, on being innovative and creative (the Wow Factor), and on Conciseness. Overall the Sector scored an average of 50% (2013:66% and 2012:63%) against the highest average Sector score of 78% (2013:77% and 2012:72%).

2.9 Telecommunications

Top-rated performers in the Telecommunications Sector are (this Sector only has three companies which were included in the study):

The Telecommunications Sector scored extremely well on:

• Consistency and Comparability• Strategic Focus• Reliability and Completeness• The Content Elements• Connectivity of Information

• Stakeholder Relationships• Materiality

More work should be done on being innovative and creative (the Wow Factor). Overall the Sector scored an average of 78% (2013:77% and 2012:72%), the highest of all the industries.

This is the Sector with the highest scores and is thus very competitive.

CHAPTER 2

Company Name Rating

Vodacom Group 1

Telkom SA SOC 2


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QUALITATIVE INSIGHTS

CHAPTER 3

It is obvious from the scores achieved that the two areas needing the most attention are the so-called “Wow Factor” and the “Fundamental Concepts”. The “Wow Factor” shows innovation and distinctiveness and can only be achieved once a company is so mature in its integrated reporting process that those in charge of governance are very familiar with the process that new and exciting ideas start developing.

The “Fundamental Concepts”, which includes having a business model with the input and output capitals and the process of value creation, is a relatively new concept, having only come into being in December 2013, when the International <IR> Framework was published.

Most of the other Indicators have been around for some time now (King III, etc.), and so are familiar to most companies. For this reason they have done fairly well in terms of disclosing risks and opportunities, governance, performance and future outlook, to name but a few.

For these reasons, this chapter will focus solely on the “Fundamental Concepts” (business model, capitals and value creation) and how these were reported by the Top Five.

30

31


A number of excellent practical examples from the Top 5 companies have been included this year to help provide clarity on many aspects of the business model, capitals and value creation, as well as give tangible examples of what can be done to improve this aspect of integrated reporting, which can be quite difficult to fully comprehend based on the available theory alone.


The winner, Tsogo Sun Holdings Limited, gives an excellent and comprehensive view of its business model. A brief description is included below:

1. The model takes into consideration all six capitals as inputs in line with the International <IR> Framework. The elements of each capital are also listed, e.g. natural capital consists of physical locations, energy consumption, water consumption and biodiversity. The key to the graphic states that “we create value through the operation of quality assets in leading locations in key markets and by investing in and building our portfolio across a range of consumer segments”.

2. Alongside the inputs (the six capitals) the actual activities and processes are shown. The business model is introduced as an integrated model, explicitly stating: “Integration – An integrated approach across the divisions’ results in leveraging the assets and resources within the group under a unified management structure with a common corporate identity.”

3. The two divisions, namely the Gaming Division and the Hotel Division, are then outlined with a brief description of each business, its key market differentiators and key business processes. Arrows from the centre (displaying the key support processes, such as Corporate, Finance, Internal Audit, IT, Procurement, Marketing, etc.) point to the various stakeholders, with page numbers included where these are discussed in more detail). The model thus shows how the two divisions are bound by common support processes, leading to an integrated approach in terms of the business model. A common line named “Governance” (with its page number reference) cuts across the entire activities and processes block.

A further indication of the integrated approach is the key line at the bottom of the graphic, containing common aspects and the pages where they are to be found – cutting across the whole picture from inputs to outputs and outcomes:

• Legislation and Regulations• Economic Conditions• Industry Sector• External Environment• Technology• Consumer Preferences• Societal Issues• Environmental Challenges

4. The second last part of the business model contains the outputs (detailing each of the two divisions as well) consisting of “quality hospitality and leisure experiences relevant to our customers at appropriate price points” and of “Environmental and social impacts”. Again, each of these contains page number references.

5. The final part of the business model contains the outcomes, linked to strategic priorities:

• Deliver to our stakeholders, e.g. taxation and returns to investors

• Financial strength and durability, e.g. prudent gearing levels and adequate funding

• Product relevance to customer experience, e.g. customer satisfaction

• Regulatory compliance, e.g. licence to trade• Human resources, e.g. employee development and wellness• Organic growth, e.g. profit and cash flow• Inorganic growth, e.g. capacity increases

It is a well though-out, complete and fairly innovative model, giving a holistic view of the business. From the page references in the business model and from the way in which the index has been developed, it is clear that the integrated report is structured around the business model.

Whereas some integrated reports only included a business model, sometimes isolated from the rest of the content, this report contains an additional seven pages describing the business model. The application of materiality is obvious where the material risks and opportunities are described. This includes heat maps regarding the risk scenarios.

It is concise and only 100 pages long (with summarised consolidated AFS included).

CHAPTER 3

CHAPTER 3 – QUALITATIVE INSIGHTS

32


Although this integrated annual report contains a business model which is not unique, the impact of how it connected to other sections makes this a very good example.

The business model is a fairly simple table broken down into the six capitals as suggested in the International <IR> Framework. Next to each, the inputs, activities, outputs and outcomes are listed. It is introduced, however, as the pillars supporting the strategy and the factors influencing the strategy.

The business model is followed by an overview of the business, outlining the vision, mission and purpose, as well as giving a brief history of the company. The group structure is then shown graphically and this is followed by the employee value proposition, as well as some project and performance figures.

An exceptional section details issues material to the business, consisting of columns for the material issues, e.g. “Health and wellness of our employees”. There is a descriptive paragraph on why the issue is important. The next column contains a ranking for the inherent risk of each issue, which is followed by the focus in 2014 and what was achieved. This is followed by the KPIs against which performance was measured. The last column details the main stakeholders and their expectations.

An excellent piece of work was done in terms of risk management, and the report discloses the journey from 2010. A framework is created for enterprise risk management (ERM) – a total of six pages is dedicated to risk management. After this follows the assurance model and the strategic risk profile.

The section ends with a reasonably detailed discussion of the key risks, providing the ranking of residual risk and inherent risk since 2012.

Coming back to the business model and the capitals, over 100 pages of this 260 page-report discusses the performance against each of the six capitals. This is excellent disclosure, and makes for a remarkable report.

The 260 pages include the full set of AFS. Had the summary or abridged AFS, but had been included, the report could have been more concise.

ArcelorMittal South Africa Limited

Close to the third place achieved by Royal Bafokeng Platinum Limited was ArcelorMittal South Africa Limited. The difference between third and fourth place was less than one per cent.

Its business model is also very good and the report is a concise 106 pages long (including summarised AFS). The business model covers all six capitals, but some of them are either input or output capitals.

The business model is brought together in a integrated manner in a two-page graphic of the sustainable business journey, which includes the vision, mission and values, the key stakeholders, the material issues, the KPIs, and the top 10 risks. Central to all this are the strategic objectives of:

• Creating a high-performance culture• Maintaining the licence to operate• Protecting the health and safety of the people• Driving profitability.

These four strategic objectives are then discussed in the next two pages, as well as later on in the report where a chapter is dedicated to achieving the objectives, covering another 24 pages. Most of the content elements are linked in the sustainable business journey.


The integration in the report is clear from the start as 95 pages of the 200 A5 pages is grouped into three major sections:

• How we create value• Delivering value to our stakeholders• Ensuring sustainable value creation

The value-creating business model runs as a graphic (almost in a table format) over two pages. It starts with all six capitals as enablers, then follows the flow of money, and what Nedbank does with that money in each part of the business. It then details the businesses through which Nedbank provides products and services, followed by the risks related to activities and the relevant largest stakeholders. Good referencing to page numbers and sections is done and some KPIs are also supplied.

The chief executive’s review is linked to the business environment and key aspects of strategy, strategic focus areas and delivery of value to stakeholders. The Chief Financial Officer’s (CFO) review also focuses on the delivery of value through the Nedbank businesses.

One of the most remarkable disclosures in the report is the section on engaging with stakeholders. It covers a full 22 pages of real value-adding information, covering all the significant parts of stakeholder relationships.



CHAPTER 3


The report has used a logical approach to structure and connectivity of content elements, and there is a strong focus on key stakeholder partnerships that will assist the group in creating sustainable value. The strategy highlights the strategic risks and also how the strategy will impact the stakeholders in the future. The Liberty business model is linked to risks and how risk is mitigated through the combined assurance model, risk appetite and governance structures, and there is excellent use of infographics and icons to illustrate information (as an example, icons have been used to connect material risks in the integrated report to a full listing of risks in a separate report available on the website).

The creation of value and sustainability is set to be the theme of the report and is mentioned in most aspects throughout the report. There is an excellent introduction by the Chairman and the Chief Executive, setting the tone and direction of the report.

The use of logos and technology is very good – right at the beginning of the report, a “readers guide” is provided, indicating what is available online or in print and icons are used throughout the report to assist readers in this respect. There is also good connectivity between current performance and the 2015 targets, as well as to the group’s long -term 2020 strategy. Also notable is the performance review by stakeholders.

33


Business Model

• Oceana Group Limited• Sanlam Limited• Tsogo Sun Holdings Limited• Royal Bafokeng Platinum

Limited• Pretoria Portland Cement

Limited

Value Creation

• Barloworld Limited• Liberty Holdings Limited• Nedbank Group Limited• Standard Bank Group Limited• Woolworths Holdings Limited

Capitals

• Grindrod Limited• Redefine Properties Limited• Royal Bafokeng Platinum

Limited• Santam Limited• Sasol Limited

Stakeholder Relationships

• Kumba Iron Ore Limited• Liberty Holdings Limited• Pretoria Portland Cement

Limited• Telkom SA SOC Limited• Gold Fields Limited

Below is a list of companies which have good examples displayed in their integrated reports relating to main concepts of International <IR>Framework concepts.

Conclusion

We highly recommend readers to take a look at the reports mentioned in this chapter – they will provide clarity on many aspects of the business model, capitals and value creation, as well as give tangible examples of what can be done to improve this aspect of integrated reporting, which can be quite difficult to fully comprehend based on the available theory alone. However, it must be stressed that listed companies wanting to move towards true integrated reporting must take time in deciding how to comprehensively capture these elements – this will require thought and the input of both the board and the executive into this process is highly recommended.

The Business Model, Capitals and Value Creation

Heading

34

NEW TRENDS IN INTEGRATED REPORTING IN SOUTH AFRICA

CHAPTER 4

Many of South Africa’s listed companies have prepared integrated reports since 2010. The impetus was the King Code of Governance for South Africa (King III) principle which called for integrated reporting. The principles of King III were included in the Listings Requirements of the JSE on an ‘apply or explain’ basis. Now, six years later, integrated reporting is common place in South Africa: the largest state-owned companies prepare integrated reports, professional bodies prepare reports, and non-governmental organisations prepare reports. It is accepted that integrated reporting is better reporting.

It is also increasingly accepted that integrated reporting is a good management tool that helps to embed integrated thinking in a company. Chief Executives of some listed companies proudly say that integrated thinking is the way they

run their business, and there’s been friendly rivalry between Chief Financial Officer’s as to how deeply integrated thinking is embedded in their organisations.

This is not the case, however, with all organisations in South Africa. Some of the listed companies – mostly those beyond the top 40 largest companies – need to further improve their reports and to heed the words of investors who would like to see more evidence of integrated thinking.

There are a number of aspects that will work to shape the integrated reports of South African companies in the next few years.

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The final version of the fourth King Code of Governance for South Africa (King IV) is expected in the second half of 2016. This will mark the next major impetus to integrated reporting in South Africa.

The Release of King IV

The next big impetus to integrated reporting in South Africa will be the release of the fourth King Code of Governance for South Africa (King IV). The public consultation draft of King IV will be released in the next few months with the final version expected in the second half of 2016.

There was wide consultation in developing the content of King IV and some common themes emerged during the consultation workshops. Themes such as integrated thinking, integrated reporting, the role of the audit committee, strategy, and integrated assurance. These themes could feature prominently in King IV. Materiality could also feature in King IV as the reporting of the material matters in the integrated report can give an indication of how the board governs the company.

Relevant items that have been summarised in the King IV Progress Report include the following (broadly stated):

• King IV should be more accessible to most types of entities, including the public sector, NPOs and SMEs. Special attention should also be given to pension funds and medical schemes.

• Be even more principles-based and less compliance-based.• Greater focus on value creation and sustainability. Value

creation should embrace ethical behaviour, healthy stakeholder relationships, and effective and efficient allocation of the six capitals. The board should define what it means by value creation.

• Further exploration and research into the current combined assurance framework, which might become the integrated assurance framework (and relevant policies). This should include guidance for setting standards for the assurance of non-financial information, as well as better guidance to determine materiality. Further, material information should be defined and assured.

• Promotion of more face-to-face interaction with stakeholders, including increased shareholder activism, and stakeholders should be informing strategy.

• The creation and implementation of policies that drive risk-based integrated thinking.

it should be noted that while many South African organisations use the International <IR> Framework, the Integrated Reporting Committee (IRC) of South Africa has endorsed it as guidance on preparing an integrated report), they also refer to the principles and recommendations of the current King III, released in September 2009.

The chairman of the King Committee, Professor Mervyn King, is also the chairman of the Council of the IIRC and the chairman of the IRC of South Africa.

Assurance on the Integrated Reports

Directors or those charged with the governance of the organisation have a responsibility for the integrity of the integrated report. The International <IR> Framework calls for a statement to this effect to be included in the report. This responsibility, added to the call by some investors, is likely to encourage the move to assurance on the integrated report.

Some key points have emerged from the international debate:

• Organisations use a range of mechanisms to enhance credibility and trust, of which assurance is only one.

• Internal systems needed for integrated reporting are far less mature than systems for financial information; they may often be ad hoc and in some cases do not exist at all.

• Integrated reporting is relatively new and is still evolving; assurance on integrated reporting will need to evolve alongside the practice of reporting itself.

• Ongoing consultation will help ensure that assurance maintains the focus on being market-led and delivering value for money.

• Innovation and experimentation is necessary, although existing assurance principles and methodologies should not be prematurely rejected.

• The total costs and benefits of assurance are difficult to assess, however it is likely that assurance will become more cost effective as time goes by.

• Assurance practitioners will need to develop a comprehensive understanding of how value is created (for the organisation and for others) across the full range of capitals. This will require an appreciation of “systems thinking”.

• A range of technical challenges will need to be considered by assurance standard-setters.

While South African companies wait for international guidance or standards in this area, they will take note of what King IV says about integrated assurance. The term integrated assurance could encompass the blended efforts of internal assurance by the organisation’s internal auditor together with the work of external assurance providers.

CHAPTER 4

CHAPTER 4 – NEW TRENDS IN INTEGRATED REPORTING

36

Integrated Thinking

In March 2015 the South African Institute of Chartered Accountants (SAICA) released a publication Integrated Thinking: An exploratory survey1. The survey covered the views of executives and non-executive directors of the biggest listed and state-owned companies in South Africa. Their view on the benefits of integrated thinking included improved decision-making at board and management level resulting from the enhanced information that had been made available. Further, they noted that governance processes had improved, as had the risk management process.

As more investors start to demand evidence of integrated thinking in a company, it is likely that South African companies will be at pains to show such evidence in their integrated reports. Many of the top listed companies already refer to integrated thinking in their reports and it is expected that they will include considered information on integrated thinking in future reports particularly in the governance element.

In the words of an investor2: “Integrated thinking will help break down silos, communicate your strategy across the organisation, and help your people better understand the purpose of the company and what they are expected to do to create and sustain value.”

Interestingly, the SAICA survey highlighted the challenges experienced by companies in embedding integrated thinking. These included overcoming a silo mentality and “protection of turf” by employees, the need to improve the reliability of non-financial information reporting systems to get them on a par with financial systems, and inappropriate key performance indicators and remuneration practices being used which were often set primarily against financial targets1.

Value Creation and Outcomes

The reporting of outcomes is an area that the IRC has recognised

as an area requiring improvement in South African reports. The IRC commissioned its Working Group to develop an information paper on outcomes and this is expected to be released in December 2015.

A review of the reports of the largest companies shows that some companies have confused outcomes with stakeholder value (thereby excluding the outcomes on other capitals), while others have stated outcomes as expenditure amounts rather than the consequence on the capitals.

The release of the IRC paper will highlight this area and greater attention is likely to be given to the disclosure of outcomes in the future reports of South African companies. The measurement of impacts and outcomes has not yet gained broad popularity in South Africa, but there are some companies that have already invested the time and resources and it is expected that others will follow suit.

It is also increasingly accepted that integrated reporting is a good management tool that helps to embed integrated thinking in a company. Chief Executives of some listed companies proudly say that integrated thinking is the way they run their business, and there’s been friendly rivalry between Chief Financial Officers as to how deeply integrated thinking is embedded in their organisations.

CHAPTER 4 – NEW TRENDS IN INTEGRATED REPORTING

1 South African Institute of Chartered Accountants, Integrated Thinking: An exploratory survey, 2015 www.integratedreportingsa.org

2 David Couldridge, senior investment analyst at Element Investment Managers, as quoted in his article “Investors and Integrated Reporting in South Africa” appearing

in SAICA’s ASA magazine of November 2014.

South Africa has valuable experience in integrated reporting to share with others. Experience in what works and what doesn’t, the ways to embed integrated thinking, the involvement of the board, the practical implementation steps, and more. Given the head start that South African companies have had in integrated reporting, the emergence of new trends will be of interest to companies in other parts of the world.

37


ANNEXURE A

ANNEXURE A – THE MARK PLAN, ADJUDICATION PROCESS AND THE PANEL

An important aspect of good corporate governance is to follow best practice and this survey aims to support the continued effort and improvement of integrated reporting by listed companies. It also seeks to offer insights in order to provide guidance to others.

This year’s survey also forms a bridge from the old to the new,

with the same purpose of encouraging improved integrated reports by all relevant companies over a period of time. The companies that have not yet acted, should start immediately or will simply be left behind, which would be an enormous set-back in the progress shown to date in terms of disclosure to shareholders and other stakeholders.

An additional 17 marks were allocated for the “Wow Factor”, for those companies displaying innovative and uniqueness in their integrated reports. The total is a score out of 200, which was then converted to percentage scores to determine the ranking and ratings of the Top 100. The integrated reports (annual reports) of the listed companies in Annexure C were used in the survey.

THE ADJUDICATION PROCESS

The most recent reports were downloaded from the websites of the companies in the beginning of 2015, which resulted in the panel having access to reports with financial year-ends between January 2014 and December 2014. The panel prepared a grading sheet with weighting assigned to the respective guidelines of the

International <IR> Framework, as indicated above.Three of the four panelists performed the initial ratings and rankings. The companies which were rated in the top half the previous year, were evaluated independently by at least two of these three experts (the lower half were evaluated by one expert only), while the fourth expert acted as an independent adjudicator, who also graded a representative sample of the reports, including those of the best-rated companies. The scores were then further analysed and re-marked where necessary. Finally, the results were used to determine the ratings and rankings for the companies.

It must be stated that none of the companies surveyed entered a competition or submitted data to the panel and none had

The mark plan covered the following indicators of the Framework:

THE MARK PLAN

TOTAL: 200 marks

Stra

tegi

c Fo

cus

17 17 17 17 17 17 1717 32 32

Conn

ectiv

ity

of

Info

rmat

ion

Stak

ehol

der

Rela

tions

hips

Mat

eria

lity

Conc

isen

ess

Relia

bilit

y an

d Co

mpl

eten

ess

Cons

iste

ncy

and

Com

parib

ility

Fund

amen

tal

Conc

epts

Cont

ent

Elem

ents

Stra

tegi

c Fo

cus T

he

Wow

Fac

tor

Guide to the Ratings

0 20 40 60 80 100

80% – 100%

70% – 79%

60% – 69%

50% – 59%

0 – 49%

ABCDD

38

any knowledge of this evaluation process. In the spirit of true transparency the idea is to evaluate/survey/judge the information available to any citizen in the world (either via Internet access or via access to printed reports from registrars). Therefore, in the data collection process, the panel used all annual reports, integrated reports and sustainability reports openly available on the Internet. The scores are, however, based on the single main integrated report or annual report of each company.

Integrated reporting by itself had a scoring of 97/195 in 2013 (2012:70/150), which was 50% (2012:47%, 2011:35%) of the score. The rest of the marks were allocated for compliance to King III, some JSE requirements, and the use of GRI Guidelines and the application of the International <IR> Framework. Integrated reporting now accounts for 100% of the marks, based solely on the International <IR> Framework.

ANNEXURE A – THE MARK PLAN, ADJUDICATION PROCESS AND THE PANEL

THE PANEL

Nkonki appointed an independent panel of experts to conduct the research. The panel consisted of the following scholars affiliated with Monash South Africa (hereinafter “MSA”), a campus of Monash University, Australia:

1. Prof Anton du Toit, CA(SA), BA, B Compt, Hons B Compt, CTA, M Com, M.Inst.D., RA, is a corporate governance expert and director of companies. He was the Director of Accountancy Studies at MSA (Monash South Africa), accredited with SAICA as a service provider for CTA, from 2006 to 2014. He is an adjunct professor at the University of Zululand. He held the position of Professor in Accounting at both the University of Johannesburg and North-West University for a total of 19 years, during which time he served on the senates of both universities. He is an accomplished computer auditor with research interests in business ethics, corporate governance and sustainability. Anton presented various seminars and conferences, both internationally and locally, on auditing concepts. He has evaluated numerous articles in accredited journals, and is a founding presenter of the newly-established Postgraduate Diploma in Management specialising in Corporate Governance at MSA.

Anton is on early retirement due to health reasons (paraplegic: limited mobility), but still consults privately and lectures part- time at MSA. He also serves on the Audit Committees of ICASA, Spectramed Medical Aid, the Tswane University of Technology (TUT), Tlokwe City Council, Capricorn District Municipality and Aganang Municipality.

He is a non-executive director of NG Welfare (NG Welsyn) and chairman of the Audit Committee. He served as member of the Audit Committee of the Gauteng Provincial Government. He serves on the Boards of three companies. He serves on various committees and interest groups in the profession. He is a past alternate Board member of the Independent Regulatory Board of Auditors; past President of the Southern African Accounting Association; past Vice-President of the International Association for Accounting Education and Research; and past editor of Meditari, the accredited professional journal of accountancy.

Anton has been involved in audit and advisory services for many clients and in association with a variety of big audit firms. The largest clients include Workforce, Basil Read, Atlas Finance, IOM, SEW, International SOS and Rand Mutual Assurance. Previous clients include Afrox, Honda SA, BP, the JSE, Sappi, Mondi, South-West Coop, AGN of ABSA and Sanlam.

2. Blanche Steyn, B Com, B Compt (Honours), M Com, CA(SA), ACMA, CGMA, CISA and CIA. She focuses on research in accountancy education and governance. She has been an academic for more than 20 years and is currently a senior lecturer at MSA and the auditing subject leader responsible for teaching auditing at a third year level. She has presented various conferences, symposiums and workshops on auditing and related topics internationally and locally. Blanche is the author of various articles on governance, accountancy education, internal and computer auditing for professional magazines and academic journals. She is an adjudicator for three academic journals and the chairperson of the Johannesburg region of the South African Accounting Association. She was also a founding presenter of the newly-established Postgraduate Diploma in Management specialising in Corporate Governance at MSA.

3. Adrian Pilley – BCompt, BCompt (Honours) MCom, CA(SA) RA. Adrian has been lecturing taxation for seven years at Monash at third-year level and financial accounting for the last four years. Prior to lecturing, Adrian enjoyed a successful career in commerce and Industry Sector for over 15 years. His research interests are in the field of integrated reporting.

4. Rufaro Gweshe – LLB, LLM (UCT). Rufaro has been a part of academia since 2008. She has been lecturing business law for the past five years and has lectured students ranging from first to final year at MSA since 2013. Her research interests lie generally within the field of company law, and specifically in business rescue. Rufaro’s two publications and two conference papers lie within the fields of public and commercial law. She is also the former editorial assistant for the South African Journal of Criminal Justice.

39


ANNEXURE B

ANNEXURE B – RATINGS AND RANKINGS BY INDUSTRY

Rank

ing

2014

Com

pany

N

ame

Indu

stry

Year

-end

Rank

ing

in

Top

100

2013

A

war

ds

Rank

ing

in

Top

100

2012

A

war

ds

Rank

ing

in

Top

100

2011

A

war

ds

Rati

ngs

1Tsogo Sun Holdings Limited

Consumer Services 31-Mar-14 A (80-100%)

2Royal Bafokeng Platinum Limited

Basic Materials 31-Dec-14 12 28 A

3ArcelorMittal South Africa Limited

Basic Materials 31-Dec-14 9 93 80 A

4 Nedbank Group Limited Financials 31-Dec-14 4 4 5 A

5 Liberty Holdings Limited Financials 31-Dec-14 34 36 51 A

6 Nampak Limited Industrials 30-Sep-14 44 15 34 A

7Redefine Properties Limited

Financials 31-Aug-14 43 62 53 A

8Pretoria Portland Cement Limited

Industrials 30-Sep-14 5 1 2 A

9 Sanlam Limited Financials 31-Dec-14 13 16 6 A

10 Sasol Limited Oil & Gas 30-Jun-14 3 8 17 A

11 Barloworld Limited Industrials 30-Sep-14 7 9 3 A

12Anglo American Platinum Limited

Basic Materials 31-Dec-14 6 41 21 A

13Life Healthcare Group Holdings Limited

Healthcare 30-Sep-14 41 54 26 A

14Wilson Bayly Holmes-Ovcon

Industrials 30-Jun-14 105 84 73 A

15 Gold Fields Limited Basic Materials 31-Dec-14 21 25 11 A

16 Exxaro Resources Basic Materials 31-Dec-14 1 3 22B (70-79%)

*This list contains Top 100 Companies and those listed on the JSE SRI index only.

40


Rank

ing

2014

Com

pany

N

ame

Indu

stry

Year

-end

Rank

ing

in T

op 1

00

2013

Aw

ards

Rank

ing

in T

op 1

00

2012

Aw

ards

Rank

ing

in T

op 1

00

2011

Aw

ards

Rati

ngs

17 Kumba Iron Ore Limited Basic Materials 31-Dec-14 16 5 24 B

18 Tongaat Hulett Limited Consumer Goods 31-Mar-14 25 17 19 B

19Northam Platinum Limited

Basic Materials 30-Jun-14 59 31 60 B

20 Santam Limited Financials 31-Dec-14 46 55 69 B

21 Woolworths Holdings Consumer Services 29-Jun-14 14 6 1 B

22 Anglo American PLC Basic Materials 31-Dec-14 71 73 78 B

23 Grindrod Limited Industrials 31-Dec-14 18 7 44 B

24 Mpact Ltd Industrials 31-Dec-14 - - - B

25 Oceana Group Limited Consumer Goods 30-Sep-14 67 74 70 B

26 Sappi Limited Basic Materials 30-Sep-14 31 40 41 B

27 AECI Limited Basic Materials 31-Dec-14 23 34 50 B

28 Aveng Group Limited Industrials 30-Jun-14 30 21 12 B

29AngloGold Ashanti Limited

Basic Materials 31-Dec-14 8 27 25 B

30 Sibanye Gold Basic Materials 31-Dec-14 - - - B

31 Vodacom Group Telecommunications 31-Mar-14 33 14 9 B

32The Foschini Group Limited

Consumer Services 31-Mar-14 47 33 16 B

33Truworths International Limited

Consumer Services 29-Jun-14 28 13 35 B

41


ANNEXURE BRa

nkin

g 20

14

Com

pany

N

ame

Indu

stry

Year

-end

Rank

ing

in T

op 1

00

2013

Aw

ards

Rank

ing

in T

op 1

00

2012

Aw

ards

Rank

ing

in T

op 1

00

2011

Aw

ards

Rati

ngs

34 African Oxygen Limited Basic Materials 31-Dec-14 62 86 90 B

35Hyprop Investments Limited

Financials 31-Dec-14 92 85 91 B

36Mondi Limited and Mondi PLC

Basic Materials 31-Dec-14 39 37 23 B

37Standard Bank Group Limited


38Barclays Africa Group Limited


39 Sun International Limited Consumer Services 30-Jun-14 20 24 10 B

40Murray & Roberts Holdings

Industrials 30-Jun-14 19 39 45 B

41 Telkom SA SOC Telecommunications 31-Mar-14 45 18 B

42Aspen Pharmacare Holdings Limited

Healthcare 30-Jun-14 27 11 4C (60-69%)

43Mediclinic International Limited

Healthcare 31-Mar-14 11 47 63 C

44Steinhoff International Holdings Limited

Consumer Goods 30-Jun-14 50 32 56 C

45Harmony Gold Mining Company Limited

Basic Materials 30-Jun-14 10 19 7 C

46 Illovo Sugar Limited Consumer Goods 31-Mar-14 22 59 75 C

47BHP Billiton Limited and PLC


48 Imperial Holdings Limited Industrials 30-Jun-14 45 38 59 C

49 JD Group Limited Consumer Services 30-Jun-14 55 10 8 C

50 Old Mutual PLC Financials 31-Dec-14 87 80 76 C


42

Rank

ing

2014

Com

pany

N

ame

Indu

stry

Year

-end

Rank

ing

in T

op 1

00

2013

Aw

ards

Rank

ing

in T

op 1

00

2012

Aw

ards

Rank

ing

in T

op 1

00

2011

Aw

ards

Rati

ngs

51 Lonmin PLC Basic Materials 30-Sep-14 61 61 48 C

52 Bidvest Group Limited Industrials 30-Jun-14 77 49 84 C

53 Capital Property Fund Financials 31-Dec-14 98 100 99 C

54 Mr Price Group Limited Consumer Services 29-Mar-14 57 70 64 C

55Pioneer Food Group Limited

Consumer Goods 30-Sep-14 73 56 55 C

56African Rainbow Minerals Limited


57Allied Electronics Corporation (Altron)

Industrials 20-Feb-14 26 18 37 C

58Business Connexion Group Limited

Technology 31-Aug-14 82 82 40 C

59 Investec Ltd and PLC Financials 31-Mar-14 29 30 14 C

60 Omnia Holdings Limited Basic Materials 31-Mar-14 72 78 - C

61 Reunert Limited Industrials 30-Sep-14 69 77 68 C

62Impala Platinum Holdings Limited

Basic Materials 30-Jun-14 24 26 65D (50-59%)

63Coronation Fund Managers Limited

Financials 30-Sep-14 64 60 79 D

64 Intu Properties plc Financials 31-Dec-14 95 87 93 D

65 SABMiller PLC Consumer Goods 31-Mar-14 74 63 61 D

66 MMI Holdings Limited Financials 30-Jun-14 53 95 81 D

67 Brait SE Financials 31-Mar-14 104 102 D


43


ANNEXURE B


Rank

ing

2014

Com

pany

N

ame

Indu

stry

Year

-end

Rank

ing

in T

op 1

00

2013

Aw

ards

Rank

ing

in T

op 1

00

2012

Aw

ards

Rank

ing

in T

op 1

00

2011

Aw

ards

Rati

ngs

68 Famous Brands Limited Consumer Services 28-Feb-14 101 D

69 FirstRand Limited Financials 30-Jun-14 35 35 38 D

70 JSE Limited Financials 31-Dec-14 56 83 71 D

71 Adv Tech Limited Financials 31-Dec-14 96 98 86 D

72British American Tobacco PLC

Consumer Goods 31-Dec-14 75 46 D

73Capitec Bank Holdings Limited

Financials 28-Feb-14 66 90 58 D

74 KAP Industrial Holdings Industrials 30-Jun-14 89 - - D

75 Clicks Group Limited Consumer Services 31-Aug-14 48 42 27 D

76Massmart Holdings Limited

Consumer Services 28-Dec-14 36 92 31 D

77 RMB Holdings Limited Financials 30-Jun-14 91 91 77 D

78 Tiger Brands Limited Consumer Goods 30-Sep-14 80 72 72 D

79Discovery Holdings Limited

Financials 30-Jun-14 51 29 33E (40-49%)

80Growthpoint Prop Limited

Financials 30-Jun-14 76 64 36 E

81 Naspers Limited Consumer Services 31-Mar-14 52 23 15 E

82 Netcare Limited Healthcare 30-Sep-14 79 71 52 E

83 RCL Foods Limited Consumer Goods 30-Jun-14 68 51 32 E

84 The Spar Group Limited Consumer Services 30-Sep-14 54 75 62 E

85 EOH Holdings Ltd. Technology 31-Jul-14 E

44


Rank

ing

2014

Com

pany

N

ame

Indu

stry

Year

-end

Rank

ing

in T

op 1

00

2013

Aw

ards

Rank

ing

in T

op 1

00

2012

Aw

ards

Rank

ing

in T

op 1

00

2011

Aw

ards

Rati

ngs

86Capital & Counties Properties PLC

Financials 31-Dec-14 97 94 E

87 Pick N Pay Stores Limited Consumer Services 02-Mar-14 83 52 67 E

88Redefine International PLC

Financials 31-Aug-14 E

89 Assore Ltd Basic Materials 30-Jun-14 85 67 42 E

90 Invicta Holdings Industrials 31-Mar-14 E

91Resilient Property Income Fund

Financials 30-Jun-14 99 97 100 E

92 AVI Limited Consumer Goods 30-Jun-14 93 79 83 E

93 Datatec Limited Technology 28-Feb-14 60 53 43 E

94 Remgro Limited Industrials 30-Jun-14 58 65 49 E

95 Lewis Group Limited Consumer Services 31-Mar-14 70 50 47 E

96Rand Merchant Insurance Holdings Limited

Financials 30-Jun-14 84 96 E

97 Trencor Limited Industrials 31-Dec-14 100 104 E

98 Attacq Limited Financials 30-Jun-14 F (30-39%)

99Adcock Ingram Holdings Limited

Healthcare 30-Sep-14 65 88 54 F

100Hosken Consolidated Investments Limited

Financials 31-Mar-14 86 99 95 F

101New Europe Property Investments PLC

Financials 31-Dec-14 103 F

102 Reinet Investments SCA Financials 31-Mar-14 107 107 101 F

103 PSG Group Financials 28-Feb-14 103 96 F

104Compagnie Financiere Richemont AG

Consumer Goods 31-Mar-14 106 106 97 F

105Shoprite Holdings Limited

Consumer Services 30-Jun-14 63 76 87 F

45


ANNEXURE B


Basic Materials:

Consumer Goods:

Ranking 2014 Company Name Sector Year-end Rating

1 Royal Bafokeng Platinum Limited Basic Resources 31-Dec-14 A (80-100%)

2 ArcelorMittal South Africa Limited Basic Resources 31-Dec-14 A

3 Anglo American Platinum Limited Basic Resources 31-Dec-14 A

4 Gold Fields Limited Basic Resources 31-Dec-14 A

5 Exxaro Resources Basic Resources 31-Dec-14 B (70-79%)

6 Kumba Iron Ore Limited Basic Resources 31-Dec-14 B

7 Northam Platinum Limited Basic Resources 30-Jun-14 B

8 Anglo American PLC Basic Resources 31-Dec-14 B

9 Sappi Limited Basic Resources 30-Sep-14 B

10 AECI Limited Chemicals 31-Dec-14 B

11 AngloGold Ashanti Limited Basic Resources 31-Dec-14 B

12 Sibanye Gold Basic Resources 31-Dec-14 B

13 African Oxygen Limited Chemicals 31-Dec-14 B

14 Mondi Limited and Mondi PLC Basic Resources 31-Dec-14 B

15 Harmony Gold Mining Company Ltd Basic Resources 30-Jun-14 C (60-69%)

16 BHP Billiton Limited and PLC Basic Resources 30-Jun-14 C

17 Lonmin PLC Basic Resources 30-Sep-14 C

18 African Rainbow Minerals Limited Basic Resources 30-Jun-14 C

19 Omnia Holdings Limited Chemicals 31-Mar-14 C

20 Impala Platinum Holdings Limited Basic Resources 30-Jun-14 D (50-59%)

21 Assore Ltd Basic Resources 30-Jun-14 E (40-49%)


1 Tongaat Hulett Limited Food & beverages 31-Mar-14 B (70-79%)

2 Oceana Group Limited Food & beverages 30-Sep-14 B

3 Steinhoff International Holdings Limited Personal & Household Goods 30-Jun-14 C (60-69%)

4 Illovo Sugar Limited Food & beverages 31-Mar-14 C

5 Pioneer Food Group Limited Food & beverages 30-Sep-14 C

6 SABMiller PLC Food & beverages 31-Mar-14 D (50-59%)

46


Consumer Goods:

Consumer Services:


7 British American Tobacco PLC Personal & Household Goods 31-Dec-14 D

8 Tiger Brands Limited Food & beverages 30-Sep-14 D

9 RCL Foods Limited Food & beverages 30-Jun-14 E (40-49%)

10 AVI Limited Food & beverages 30-Jun-14 E

11 Compagnie Financiere Richemont AG Personal & Household Goods 31-Mar-14 F (30-39%)


1 Tsogo Sun Holdings Limited Travel & Leisure 31-Mar-14 A (80-100%)

2 Woolworths Holdings Retail 29-Jun-14 B (70-79%)

3 The Foschini Group Limited Retail 31-Mar-14 B

4 Truworths International Limited Retail 29-Jun-14 B

5 Sun International Limited Travel & Leisure 30-Jun-14 B

6 JD Group Limited Retail 30-Jun-14 C (60-69%)

7 Mr Price Group Limited Retail 29-Mar-14 C

8 Famous Brands Limited Travel & Leisure 28-Feb-14 D (50-59%)

9 AdvTech Limited Retail 31-Dec-14 D

10 Clicks Group Limited Retail 31-Aug-14 D

11 Massmart Holdings Limited Retail 28-Dec-14 D

12 Naspers Limited Media 31-Mar-14 E (40-49%)

13 The Spar Group Limited Retail 30-Sep-14 E

14 Pick N Pay Stores Limited Retail 02-Mar-14 E

15 Lewis Group Limited Retail 31-Mar-14

16 Shoprite Holdings Limited Retail 30-Jun-14 F (30-39%)

Healthcare:


1 Life Healthcare Group Holdings Limited Healthcare 30-Sep-14 A (80-100%)

2 Aspen Pharmacare Holdings Limited Healthcare 30-Jun-14 C (60-69%)

3 Mediclinic International Limited Healthcare 31-Mar-14 C

4 Netcare Limited Healthcare 30-Sep-14 E (40-49%)

5 Adcock Ingram Holdings Limited Healthcare 30-Sep-14 F (30-39%)

47


ANNEXURE B

ANNEXURE B – RATINGS AND RANKINGS BY INDUSTRY SECTOR

Financials:


1 Nedbank Group Limited Banks 31-Dec-14 A (80-100%)

2 Liberty Holdings Limited Insurance 31-Dec-14 A

3 Redefine Properties Limited Real Estate 31-Aug-14 A

4 Sanlam Limited Insurance 31-Dec-14 A

5 Santam Limited Insurance 31-Dec-14 B (70-79%)

6 Hyprop Investments Limited Real Estate 31-Dec-14 B

7 Standard Bank Group Limited Banks 31-Dec-14 B

8 Barclays Africa Group Limited Banks 31-Dec-14 B

9 Old Mutual PLC Insurance 31-Dec-14 C (60-69%)

10 Capital Property Fund Real Estate 31-Dec-14 C

11 Investec Ltd & PLC Financial Services 31-Mar-14 C

12 Coronation Fund Managers Limited Financial Services 30-Sep-14 D (50-59%)

13 Intu Properties plc Real Estate 31-Dec-14 D

14 MMI Holdings Limited Insurance 30-Jun-14 D

15 Brait SE Financial Services 31-Mar-14 D

16 FirstRand Limited Banks 30-Jun-14 D

17 JSE Limited Financial Services 31-Dec-14 D

18 Capitec Bank Holdings Limited Banks 28-Feb-14 D

19 RMB Holdings Limited Banks 30-Jun-14 D

20 Discovery Holdings Limited Insurance 30-Jun-14 E (40-49%)

21 Growthpoint Prop Limited Real Estate 30-Jun-14 E

22 Capital & Counties Properties PLC Real Estate 31-Dec-14 E

23 Redefine International PLC Real Estate 31-Aug-14 E

24 Resilient Property Income Fund Real Estate 30-Jun-14 E

25 Rand Merchant Insurance Holdings Limited Investment Instruments 30-Jun-14 E

26 Attacq Limited Real Estate 30-Jun-14 F (30-39%)

27 Hosken Consolidated Investments Ltd Investment Instruments 31-Mar-14 F

28 New Europe Property Investments PLC Real Estate 31-Dec-14 F

29 Reinet Investments SCA Investment Instruments 31-Mar-14 F

30 PSG Group Financial Services 28-Feb-14 F

48

ANNEXURE B – RATINGS AND RANKINGS BY INDUSTRY SECTOR

Industrials:

Oil & Gas:

Technology:


1 Nampak Limited Industrial Goods & Services 30-Sep-14 A (80-100%)

2 Pretoria Portland Cement Limited Construction & Materials 30-Sep-14 A

3 Barloworld Limited Industrial Goods & Services 30-Sep-14 A

4 Wilson Bayly Holmes-Ovcon Construction & Materials 30-Jun-14 A

5 Grindrod Limited Industrial Goods & Services 31-Dec-14 B (70-79%)

6 Mpact Ltd Industrial Goods & Services 31-Dec-14 B

7 Aveng Group Limited Construction & Materials 30-Jun-14 B

8 Murray & Roberts Holdings Construction & Materials 30-Jun-14 B

9 Imperial Holdings Limited Industrial Goods & Services 30-Jun-14 C (60-69%)

10 Bidvest Group Limited Industrial Goods & Services 30-Jun-14 C

11Allied Electronics Corporation Limited (Altron)

Industrial Goods & Services 28-Feb-14 C

12 Reunert Limited Industrial Goods & Services 30-Sep-14 C

13 KAP Industrial Holdings Industrial Goods & Services 30-Jun-14 D(50-59%)

14 Invicta Holdings Industrial Goods & Services 31-Mar-14 E (40-49%)

15 Remgro Limited Industrial Goods & Services 30-Jun-14 E

16 Trencor Limited Industrial Goods & Services 31-Dec-14 E


1 Sasol Limited Oil & Gas 30-Jun-14 A (80-100%)


1 Business Connexion Group Limited Technology 31-Aug-14 C (60-69%)

2 EOH Holdings Ltd Technology 31-Jul-14 E (40-49%)

3 Datatec Limited Technology 28-Feb-14 E

Telecommunications:


1 Vodacom Group Telecommunications 31-Mar-14 B (70-79%)

2 Telkom SA SOC Telecommunications 31-Mar-14 B

49


ANNEXURE C – MATURITY CHART

ANNEXURE C

The maturity levels have been derived from the Dreyfus Model of Skill Acquisition©

INTEGRATED REPORTING MATURITY LEVELS

• The board decides to start the integrated reporting journey and produce its first report

• There is board and executive awareness training on integrated reporting, integrated thinking, the International <IR> Framework and other relevant regulations

• The board articulates, guided by the International <IR> Framework, the business model, the capitals used or affected by the organisation’s activities, and the key stakeholders

• The board sets strategic objectives over the short, medium and long term after considering the capitals used or affected, the risks and opportunities, and sets KPIs and targets

• The executives are tasked with setting up systems for internal reporting for the non-financial KPIs, and for stakeholder engagement and the organisation’s responsiveness

• The first integrated report tells, at least, the business model, strategic objectives, key stakeholders, and risks and opportunities noting when other information will be available

• The board understands the need for integrated thinking and actively seeks to include consideration of the capitals used or affected in its decision-making

• The remuneration policy reflects incentives to achieve the short, medium and long term strategic objectives

• The executive in charge of the integrated report leads a multi-divisional steering committee that develops and monitors the project plan for the report

• The material matters are approved by the board together with the process of determining them

• The internal reporting system spews out reliable non-financial performance information

• There is internal and external assurance of the strategic objectives’ KPIs on the realisation that these are core to the business

• Integrated thinking is embedded at board and executive levels with decision-making that includes the capitals used or affected

• The integrated report contains truly connected information

• The governance element of the integrated report has been fine tuned to reflect information that relates to the value creation process of the organisation

• There is greater understanding of outcomes (consequences on the capitals) with a move to seek quantitative information in addition to qualitative information

• The integrated report is more concise than in previous years on the better understanding of the material matters process and greater comfort in housing detailed information on the website and/ or in supplementary reports

Novice Company Advanced Beginner Competent Role Player

1 2 3

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ANNEXURE C – MATURITY CHART

• There is a standing board agenda item on the quality of the organisation’s relationships with its key stakeholders and the material matters

• Remuneration incentives throughout the organisation are linked to the strategic objectives’ KPIs for the short, medium and long term

• The integrated report is easily and quickly compiled at year-end as a seamless extension of internal integrated reporting and embedded integrated thinking

• Key stakeholders are fully aware that the integrated report holds strategic, material and forward-looking information and that they can find detailed information on the website

• Internal audit assures elements of the integrated report with other key elements being assured by external parties

• Integrated thinking is fully embedded at board, executive and staff levels

• The executives acknowledge that integrated thinking is the way they run the business

• The strategic objectives and the importance of the capitals used or affected are understood by all in the organisation

• There is external assurance on the whole integrated report

• The integrated report is looked forward to by the organisation’s key stakeholders

• The organisation is, and is seen to be, a good corporate citizen with excellent corporate reporting

The Company is Proficient in Integrated Reporting

Integrated Reporting Expert Company

4 5

INTEGRATED REPORTING MATURITY LEVELS

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1. The project plan

3. Structure of the integrated report

6. Writing the report4. Assurance needs

5. Material matters

2. Octopus model

ANNEXURE D

The high level roadmap to your integrated report

ANNEXURE D – THE HIGH LEVEL ROADMAP

7. Approval

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1. The project plan

Set up a project plan for the preparation of the report which includes assigned responsibilities and deadlines.It’s a good idea to set deadlines by starting at the end of the process (the final sign-off date of the typeset report) and then work backwards. Remember to co-ordinate deadlines with the timing of other detailed reports such as the annual financial statements, sustainability report or corporate governance report.

A constructive review of the previous year’s integrated report by an external technical expert can highlight areas where connectivity and readability can be improved or where the report is out of line with the requirements of the International <IR> Framework.

2. Octopus model

Adopt the octopus model for your corporate reporting suite. This is where the integrated report is seen as the head of the octopus (a concise report with strategic, material and future-oriented information) while other detailed reports such as the annual financial statements, sustainability report or corporate governance report, are regarded as the arms of the octopus. Decide on whether these reports will be printed or housed on the website.

3. Structure of the integrated report

Decide on how the report will be structured - either around the strategic objectives, the capitals used or affected by the organisation’s activities, or consider if there is another way that better suits the organisation’s story. Consider the information needed for all of the content elements set out in the International <IR> Framework. Information on the organisational overview and operating context, business model, strategy and strategic objectives, and risks and opportunities should be readily available as these would be considered by the board. Processes and actions may be needed to get the performance information required for the report (ideally, the internal reporting systems should already be equipped to give performance information on the strategic objectives’ non-financial KPIs). When considering the ambit of the report a decision on its boundary must be made and the International <IR> Framework gives guidance on this.

Thought should be given to whether info-graphics can be used to better show connectivity and improve readability. It’s a good idea to have a table that links strategic objectives to KPIs, targets, risks and opportunities, performance, remuneration and outlook. Also useful is a table that shows the key stakeholders, their important needs and issues raised during the year, how the organisation responded, and the organisation’s assessment of the quality of its relationship with the stakeholders.

4. Material matters

The International <IR> Framework sets out a clear process for determining the matters that are material to the organisation’s value creation process. The board approves the material matters and the process of determination. The material matters should, if not already included, be discussed at board meetings throughout the year. The list of material matters will need to be reviewed at the end of the year. The materiality process will include consideration of the important issues raised by key stakeholders.

5. Writing the report

Remember less may be more! It’s better to use everyday language and avoid jargon. The ideal is for the report to be written internally rather than hiring an external writer, but it is helpful to have an external technical expert review the draft report giving suggestions for ‘quick win’ improvements.

6. Approval

The integrated report is the voice of the board and as such will be signed off by the board. The report should carry an approval statement by the board acknowledging responsibility for the integrity of the report, that it has applied its collective mind to the preparation, and that the report is presented in accordance with the International <IR> Framework.

7. Assurance needs

The board (or audit committee) will decide on the information to be assured, the types of assurance required, and the assurance provider. The planning process needs to ensure this happens.

ANNEXURE D – THE HIGH LEVEL ROADMAP

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ABOUT NKONKI

Nkonki is registered with the Independent Regulatory Board for Auditors (IRBA), and is accredited by the JSE to audit JSE-listed companies. With an in-house accredited IFRS advisor, a Technical department to support assurance services, and an in-house Learning Centre to empower professional staff to excel in technical knowledge and service delivery, Nkonki provides thought leadership on a number of pertinent issues through its annual Audit Committee Conferences, Annual Integrated Reporting Awards for the Top 100 JSE Listed Companies and for the Schedule 2 State Owned Companies in South Africa. The firm is also partnered with the Institute of Directors in Southern Africa (IoD) to train Audit Committee members on Audit Committee effectiveness using the ACE Model – Winning Formula for Audit Committees, a book authored by Nkonki CEO, Sindi Zilwa. In 2004 Nkonki was awarded the “Top Emerging Female Owned Company of the Year”, and in 2013 Nkonki’s CEO was awarded the “Overall Professional of the Year” as a result of the professional integrity applied by the firm in formulating audit opinions.

Our Vision:

To be a globally respected assurance and advisory services firm through ingenuity, efficacy and holistic knowledge.

Our Mission:

To be a resourceful trusted brand that consistently partners with clients to ingeniously enhance their ability to continuously achieve their business aspirations.

Our Brand Promise:

To deliver relevant and forward-thinking insights, through ingenious professional teams, that are obsessed with quality and provide real value-add to your business with utmost integrity.

Our Brand Personality:

Introduction

ABOUT NKONKI

Ingenious Inspirational Insightful Impactful Integrity

54

Nkonki at a Glance

ABOUT NKONKI

In 2014 Nkonki’s CEO was awarded the “Overall Professional of the Year” due to the professional integrity applied by the firm in formulating audit opinions

More than 22 years old (Established January

1993)

More than 40 partners and registered auditors

Access to Global Expertise as a Member firm of Kreston International, with more than 20 000 professionals through 186 firms spread across 100 countries

More than 400 professional staff

Black women-owned

Black-owned

In 2004 was awarded the “Top Emerging Female Owned Company of the Year

20 000

40

51%

100%

22

Has an in-house Learning Centre to empower professional staff to excel in technical knowledge and service delivery

Registered firm of auditors, accountants and advisors

JSE-accredited to audit JSE listed companies

Thought leadership initiatives include the Annual Audit Committee Conference held since 2011 and Integrated Reporting Awards for SOCs and Top100 JSE Listed Companies

55


ABOUT NKONKI

Capacity

Learning and Development Centre

Nkonki has a fully fledged Learning and Development Centre which offers technical training, soft skills and leadership training. All these are packaged and delivered in such a way that our professional staff can ingeniously service our clients.

Technical Department

Nkonki has a technical department that provides leadership in:

• Updating methodologies to keep our employees up-to-date and increase efficiency• Providing technical support to the professional team,• Providing technical opinions to clients.

Quality Control

Quality control is key and in addition to the in-house capabilities, Nkonki has outsourced the full quality assurance to Protect A Partner, a professional firm that specialises in quality reviews.

More than 40 partners and registered auditors

More than 400 professional staff

Global expertise accessed through Kreston International from more than

20 000 professionals through 186 firms spread across 100 countries

Our PeopleIngenious and insightful high-performers who are professionally presented, inspirational, resourceful, impactful, collaborative, solutions driven, respectful, ethical, accountable and client centric.

ABOUT NKONKI

56

Industry Experience

Nkonki Industry experience includes:

“Our industry experience accumulated since 1993 enables us to offer an impactful service to our clients, a service that reflects the depth and breadth of our experience across all industries we service. Our membership of the Institute of Chartered Accountants of England and Wales (ICAEW) faculties provide further access to the latest industry trends.”

Aviation Media

Banking Medical Schemes

Development Finance Institutions Passenger Rail

Engineering Pension Funds

Manufacturing Ports

Fuel and Gas Pipelines Professional Services

Freight Property Investment Fund Managers

Insurance (Long Term and Short Term) Regulators

Investment Companies Sector Education Training Authority

Logistics Telecommunications

ABOUT NKONKI

57


ABOUT NKONKI

Thought Leadership

United States

United Kingdom

Australia

China

New Zealand

Nkonki’s thought leadership initiatives include:

Audit Committee Conferences for:

• Retirement Funds• Public Sector Entities• Provincial and National Government

Departments• Listed Companies

Round table discussions for:

• State Owned Companies• Audit Committee Chairs• CFOs• Investors

Publications:

• Insights based on surveys• Audit Committees:• Audit Committee Alerts• Audit Committee Guide• Audit Committee checklist• Integrated Reporting:• Insights into Top 100 Integrated Reporting Trends• Insights into SOC Integrated Reporting

Thought leadership publications are also downloaded from the Nkonki website by a number of countries including the following:

All these downloadable from:

ABOUT NKONKI

South Africa downloads a number of publications from the Nkonki website.

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Client Service

Ingenious Inspirational Insightful Impactful Integrity

In servicing our clients we keep in mind our brand promise: “To deliver relevant and forward-thinking insights, through ingenious professional teams that are obsessed with quality and provide real value-add to your business with utmost integrity.”

We train our people to enable them to deliver on our brand promise, at all times:

· Reliability We always have to be reliable to our clients, from our level of knowledge and insights through to our ability to deliver on time and exceed expectations. Our brand promise is delivered across all levels to promote the reliability of our brand. · Responsiveness We are always responsive to our clients’ needs as this is viewed as the core of our client service. We understand the client’s brief and the intended impact of our service. We are agile and capable of responding to unanticipated circumstances, additional client needs, or tighter deadlines. · Assurance We provide assurance in what we say, in what we do, and in the opinion we provide. · Tangibles Our people are trained to provide tangibles to ensure that all they bring to the client’s attention proven facts supported by tangible results. · Empathy We are always empathetic to our clients’ needs and are able to provide impact where it is intended the most and within the expected time. We trigger our responsiveness to ensure that we are aligned to our clients’ latest concerns and are continuously remain empathetic to our clients.

Our clients range across a number of sectors including Public and Private sector, state-owned companies, government departments, listed companies and unlisted companies. For a list of our clients, please visit our website, www.nkonki.com In servicing these clients, we do so with utmost integrity.

ABOUT NKONKI

59


Kreston International:

Nkonki is a member firm of Kreston International and this provides access to global expertise through more than 20 000 professionals through 186 firms spread across 100 countries.

International Integrated Reporting Council (IIRC):

• Nkonki participates in the IIRC global webinars for Integrated reporting• Nkonki presented at the global IIRC conference for integrated reporting• Nkonki is a member of the IIRC Public Sector Network• Nkonki is a member of the IIRC Business Network

Institute of Chartered Accountants of England and Wales (ICAEW):

Nkonki subscribes to various ICAEW faculties allowing our professional staff access to the latest global developments.

Chartered Institute of Public Finance and Accountancy (CIPFA): Nkonki is a member of CIPFA. The professional membership of CIPFA provides Nkonki with access to the latest global insights into Public Sector financial reporting and emerging issues, enhancing our ability to deliver an ingenious service.

Global Secondments:

Nkonki has a global secondment agreement with Kreston International member firms to enable our professional staff to gain international exposure. This will enhance our staff capability to be ingenious when servicing our clients.

ABOUT NKONKI

• Industries and Sectors Faculty

• Audit and Assurance Faculty

• Corporate Finance Faculty

• Corporate Governance Faculty

• Ethics Faculty

• Finance and Management Faculty

• Financial Reporting Faculty

• Information Technology Faculty

• Legal and Regulatory Faculty

• Sustainability Faculty

• Tax Faculty

ABOUT NKONKI

For more insight visit

nkonki.com

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Johannesburg - Head Office

Physical Address:Nkonki House 11 Simba RoadSunninghillJohannesburg2157

Tel: +27 11 517 3000

Postal Address:P.O Box 1503Saxonwold2132

Cape Town Office

Physical Address:1st floor, Block A, Regent SquareKenilworth7708Tel: +27 21 797 4594Postal Address:P.O Box 2926Cape Town8000

Durban Office

Physical Address:131 Jan Hofmeryer RoadWestville3630

Tel: +27 31 274 7400

Postal Address:P.O Box 1427Wandsbeck3631

Alberton Office

Physical Address:DVM Office Park, 1st Floor16 Kingfisher CrescentMeyersdal

Tel: +27 11 867 1400

Postal Address:P.O Box 1363Alberton1450

Pretoria Office

Physical Address:116 Louis AvenueMenlyn Square0181

Tel: +27 12 361 1485

Postal Address:P.O Box 12366HatfieldGauteng0028

Northwest Office

Physical Address:48 Proctor AvenueGolf ViewMafikeng2745

Tel: +27 18 318 1660

email:[email protected]

www.nkonki.com

CONTACT DETAILS

South Africa

International footprint

Kreston International presence

Also available on:

151003 jse nkonki top 100 report email version

Documents