Contents. Highlights 9 Rating Assessment Results Index Series Performance

Transcription

1 06 Results

2 Contents Index Series Introduction Description Milestones Constituent Companies Selection Logo for Constituent Companies Hang Seng Corporate Sustainability Index Series Methodology Overview Highlights 9 Rating Assessment Results Index Series Performance Hong Konglisted Companies 3 Rating Assessment Results Index Series Performance List of Constituent Companies Mainlandlisted Companies 9 Rating Assessment Results Index Series Performance List of Constituent Companies Sustainability Rating Assessment 4 Introduction HKQAA SRR Assessment Model Methodology Timeline of the HKQAA Sustainability Rating and Research Company Background 5

3 Index Series Introduction

4 Index Series Introduction Index Series Introduction Description Hang Seng Indexes Company Limited ( Hang Seng Indexes ) launched the Hang Seng Corporate Sustainability Index Series in July 00. This is the first index series of its kind to focus exclusively on Hong Kong and mainland China. The Hang Seng Corporate Sustainability Index Series provides benchmarks for sustainability investments. It includes five indexes: Hang Seng Corporate Sustainability Index Series Hong Konglisted Mainlandlisted Tradable Series Hang Seng Corporate Sustainability Index ("HSSUS") Hang Seng (China A) Corporate Sustainability Index ("HSCASUS") Hang Seng (Mainland and HK) Corporate Sustainability Index ("HSMHSUS") Benchmark Series Hang Seng Corporate Sustainability Benchmark Index ("HSSUSB") Hang Seng (China A) Corporate Sustainability Benchmark Index ("HSCASUSB") All companies primarily listed on the Main Board of HKEX Hang Seng Corporate Sustainability Benchmark Index Hang Seng Corporate Sustainability Index Hang Seng (China A) Corporate Sustainability Index Hang Seng (China A) Corporate Sustainability Benchmark Index All A shares primarily listed on the Main Board of Shanghai Exchange or the Shenzhen Exchange Hang Seng (Mainland and HK) Corporate Sustainability Index Milestones 00 Jul Aug Sep 03 Nov Hang Seng Indexes announced the launch of Hang Seng Corporate Sustainability Index Series, composed of three indexes: Hang Seng Corporate Sustainability Index Hang Seng (China A) Corporate Sustainability Index Hang Seng (Mainland and HK) Corporate Sustainability Index First indextracking fund linked to HSSUS was launched Hang Seng Corporate Sustainability Index Series added two new benchmark indexes: Hang Seng Corporate Sustainability Benchmark Index Hang Seng (China A) Corporate Sustainability Benchmark Index Hang Seng Indexes announced the appointment of the Hong Kong Quality Assurance Agency to undertake sustainability assessment refer to page 67 for the universe and eligibility screening details 3

5 Index Series Introduction Index Series Introduction Constituent Companies Selection Constituent companies selection is based on a robust process that includes market capitalisation screening, turnover screening, listing history requirement and consideration of the results from a sustainability assessment undertaken by Hong Kong Quality Assurance Agency ( HKQAA ), an independent and professional assessment body, using its proprietary sustainability assessment and rating framework. The process ensures that indexes in the Hang Seng Corporate Sustainability Index Series are objective, reliable and of high investability, making them excellent benchmarks for index funds that adopt a corporate sustainability theme. Logo for Constituent Companies The Hang Seng Corporate Sustainability Index Series includes companies that perform well with regard to corporate sustainability. Being a constituent member of this index series reflects high environmental, social and corporate governance standards in a company. Constituent companies can use the logos of the index series, with such permission renewed on an annual basis. The right to use the logos on corporate and promotional materials reflects a company s achievements in the area of corporate sustainability. Index Universe Eligibility Screening: Market Capitalisation Screening Turnover Screening Listing History Requirement Eligible Companies Constituent Selection: Ranked and selected according to eligible companies sustainability performance score Constituent Companies Changes in the constituent companies will be effective in September every year 4 5

6 Index Series Introduction Hang Seng Corporate Sustainability Index Series Methodology Overview Hang Seng Corporate Sustainability Benchmark Index ("HSSUSB") Hang Seng Corporate Sustainability Index ("HSSUS") Hang Seng (China A) Corporate Sustainability Benchmark Index ("HSCASUSB") Hang Seng (China A) Corporate Sustainability Index ("HSCASUS") Hang Seng (Mainland and HK) Corporate Sustainability Index ("HSMHSUS") Methodology. Universe All companies primarily listed on the Main Board of HKEX [Note ] Constituent companies of HSSUSB All A shares primarily listed on the Main Board of Shanghai Exchange or the Shenzhen Exchange Constituent companies of HSCASUSB. Eligibility Screening [Note ] Market Capitalisation Screening Turnover Screening Listing History Requirement Top 95th percentile > year Top 50 companies from the Universe of HSSUSB Velocity 0.05% Velocity 0.% A300 List [Note 3] > year Top 50 companies on the A300 List Constituent companies of HSSUS and HSCASUS 3. Constituent Selection Weighting Hong Kong Quality Assurance Agency carried the sustainability assessment Eligible companies will be ranked by their sustainability performance score Top 0% companies Top 30 companies Top 0% companies Top 5 companies Freefloatadjusted MV weighted with a 0% cap Number of Constituent Companies Variable (9 in 06) Fixed at 30 Variable (30 in 06) Fixed at 5 Variable [Note 4] (4 in 06) Other information Launch Date Backdated to Base Date Base Value Currency Review Frequency Rebalance Frequency Vendor Codes Bloomberg Vendor Codes Thomson Reuters 5 Sep 6 Jul 00 5 Sep 6 Jul 00 6 Jul 00 Sep,000 HKD Annually (Effective in September) Quarterly HSSUSB HSSUS.HSSUSB.HSSUS Jan 008 Sep Jan 008 Jan 008 3,000,000 3,000 3,000 CNY USD Annually (Effective in September) Quarterly HSCASUSB HSCASUS HSMHSUS.HSCASUSB.HSCASUS.HSMHSUS Note Excluding securities that are secondary listings, foreign companies, preference shares, debt securities, mutual funds and other derivatives. Note 4 In cases where different classes of shares of a company are included in the HSSUS and the HSCASUS and these different classes Note Refer to the Index Methodology for details. It can be found in do not reflect a holding company arrangement, the company will only count as one constituent company of the HSMHSUS. Therefore, the number of constituents of the HSMHSUS may vary. Note 3 The A300 list is formed by the top 300 companies in terms of past month average Ashare market value that meet the below conditions. Rank in the top 90% of total market turnover over the past month period;. Not be classified as an ST / ST stock or S stock; and 6 3. Not have been suspended for over one month as of the end of any review period (for nonexisting constituents only). 7

7 Highlights 8 9

8 Rating Assessment Results Index Series Performance Hang Seng Corporate Sustainability Index Series Top Three Performers HSSUSB and HSSUS Delivered Better Longterm Returns than the Market Benchmark HSI Company Name (HKEX Code) Hang Seng Bank (00) Sino Land (0083) HKEX (0388) Shown in ascending stock code order Industry Financials Properties & Construction Financials Index Performance,600,500 HSSUSB (HKD) HSSUS (HKD) HSI (HKD),400,300,00 Hang Seng Corporate Sustainability Index Series Top Core Subject Performers Core Subjects Company Name (HKEX Code) Industry Corporate Governance Human Rights Labour Practices The Environment Fair Operating Practices Consumer Issues CLP Holdings (000) HSBC Holdings (0005) HKEX (0388) HSBC Holdings (0005) NWS Holdings (0659) Orient Overseas (036) Utilities Financials Financials Financials Conglomerates Industrials Community Involvement and Development HSBC Holdings (0005) Financials Among constituent companies with the highest scores in each of the core subjects across the Index Series,00, Jul0 Jul Jul Jul3 Jul4 Jul5 Jul6 HSI and HSSUS were rebased to,000 on 6 Jul 00, i.e. index launch date of HSSUS HSSUSB was rebased to the index level of HSSUS on 5 Sep, i.e. index launch date of HSSUSB By Year Return (%) Annualised Volatility (%) HSSUSB HSSUS HSI HSSUSB HSSUS HSI ^ By Period Return (%) Annualised Volatility (%) HSSUSB HSSUS HSI HSSUSB HSSUS HSI 3 months 6 months year 3 year 5 year Since Launch HSSUSB Hang Seng Corporate Sustainability Benchmark Index Since launch on 6 Jul 00 HSSUS Hang Seng Corporate Sustainability Index ^ As at the end of Sep 06 0 HSI Hang Seng Index

9 Index Series Performance HSCASUSB Delivered Better Longterm Returns than the HSCAIT Index Performance,000 HSCASUSB (CNY) HSCASUS (CNY) HSCAIT (CNY),800,600 Hong Konglisted Companies,400,00, Jul0 Jul Jul Jul3 Jul4 Jul5 HSCAIT and HSCASUS were rebased to,000 on 6 Jul 00, i.e. index launch date of HSCASUS HSCASUSB was rebased to the index level of HSCASUS on 5 Sep, i.e. index launch date of HSCASUSB By Year ^ Return (%) HSCASUSB HSCASUS HSCAIT Annualised Volatility (%) HSCASUSB HSCASUS HSCAIT By Period Return (%) Annualised Volatility (%) HSCASUSB HSCASUS HSCAIT HSCASUSB HSCASUS HSCAIT 3 months 6 months year 3 year 5 year Since Launch HSCASUSB Hang Seng (China A) Corporate Sustainability Benchmark Index Since launch on 6 Jul 00 HSCASUS Hang Seng (China A) Corporate Sustainability Index ^ As at the end of Sep 06 HSCAIT Hang Seng China A Industry Top Index 3

10 Hong Konglisted Companies Rating Assessment Results Hong Konglisted Companies Rating Assessment Results Assessed Hong Konglisted Companies by Industry Trend in Sustainability Performance TEL 9 (%) CGM 9 (%) Percentage of Assessed Hong Konglisted Companies Achieving Stable or Satisfactory Rating in Sustainability Performance ENE 5 (3%) 30% Stable (AA) Satisfactory (A) 464 Hong Konglisted companies: MAT UTI 3 (5%) 3 (7%) IT 40 (9%) SER 44 (9%) FIN 50 (%) IND 5 (%) CSG 09 (4%) P&C 83 (8%) 5% 0% 5% 0% 5% 0% 6.8% 5.4% 6.8% 4.6% 3.5%.5% 0.7% 8.8% 5.9% 6.4% 3.5% 4.% Constituent Companies Focused More on The Environment and Labour Practices Constituent Companies of HSSUSB and HSSUS Achieved A to AA Sustainability Ratings Core Subject Scores of Hong Konglisted Companies by the Seven Core Subjects Core Subject Score FIN Financials P&C Properties & Construction IT Information Technology Index Universe HSSUSB Constituents NonHSSUSB Constituents 0 Index Universe HSSUSB Constituents NonHSSUSB Constituents CG HR LP ENV FOP CI CID TEL Telecommunications CGM Conglomerates UTI Utilities CSG SER IND Consumer Goods Consumer Services Industrials ENE MAT Energy Materials Sustainability Rating Distribution of Assessed Hong Konglisted Companies 35% 30% 5% 0% 5% 0% 5% 0% 4.5% HSSUSB Constituents (9) 0.9% 3.% 8.4% 7.% 4.7% 5.9% 4.% 4.% 4.8% AAA AA+ AA AA A+ A A BBB+ BBB BBB BB+ BB BB B C CG Corporate Governance LP Labour Practices FOP Fair Operating Practices CID Community Involvement HSSUSB Hang Seng Corporate Sustainability Benchmark Index 4 HR Human Rights ENV The Environment CI Consumer Issues and Development HSSUS Hang Seng Corporate Sustainability Index 5 No. of Companies.9%

11 Hong Konglisted Companies Rating Assessment Results Hong Konglisted Companies Rating Assessment Results Conglomerates Strongest Sustainability Performance Ranking of Sustainability Performance Scores of HSSUS Constituent Companies by Industry Sustainability Performance Scores of Assessed Hong Konglisted Companies by Industry Sustainability Performance Score Maximum Minimum Average CGM TEL P&C FIN UTI ENE IND IT MAT SER CSG Rank P&C FIN UTI IT,SER, CGM, CSG, TEL Sustainability Performance Scores of HSSUSB Constituent Companies by Industry Total Sustainability Performance Score Maximum Minimum Average CGM TEL P&C FIN UTI ENE 58.7 IND IT MAT SER CSG Sustainability Performance Scores of nonhssusb Constituent Companies by Industry 80 Sustainability Performance Score Maximum Minimum Average CGM TEL P&C FIN UTI ENE IND IT MAT SER CSG Max and min are suppressed for sectors with less than 3 companies FIN Financials TEL Telecommunications CSG Consumer Goods ENE Energy HSSUSB Hang Seng Corporate Sustainability Benchmark Index P&C Properties & Construction CGM Conglomerates SER Consumer Services MAT Materials HSSUS Hang Seng Corporate Sustainability Index 6 IT Information Technology UTI Utilities IND Industrials 7

12 Hong Konglisted Companies Rating Assessment Results Hong Konglisted Companies Index Series Performance Ranking of Sustainability Performance Scores of HSSUSB Constituent Companies by Industry Demonstrated Better Risk and Return Characteristics Rank P&C FIN CSG IND IT SER CGM UTI 5 MAT, TEL, ENE Return (%) HSSUSB HSSUS HSI ^ Annualised Volatility (%) HSSUSB HSSUS HSI Total HSSUSB Hang Seng Corporate Sustainability Benchmark Index ^ Since launch on 6 Jul 00 ^ As at the end of Sep 06 FIN Financials TEL Telecommunications CSG Consumer Goods ENE Energy HSSUSB Hang Seng Corporate Sustainability Benchmark Index P&C Properties & Construction CGM Conglomerates SER Consumer Services MAT Materials HSSUS Hang Seng Corporate Sustainability Index 8 IT Information Technology UTI Utilities IND Industrials HSI Hang Seng Index 9

13 Hong Konglisted Companies Index Series Performance Hong Konglisted Companies Index Series Performance Higher Dividend Yield, Revenue and Net Profit Financials Highest Weighting Industry Net Dividend Yield (%) HSSUSB HSSUS HSI Industry distribution 50% 40% 30% 0% HSSUSB HSSUS HSI 0% 0 Net Profit (HKD Mn in logscale),000,000 00,000 0,000, ^ HSSUS Constituents = 30 HSSUSB (nonhssus) Constituents = 6 NonHSSUSB Constituents = 37 Since launch on 6 Jul 00 ^ As at the end of Sep 06 0% HSSUSB HSSUS HSI FIN Financials P&C Properties & Construction IT Information Technology TEL Telecommunications CGM Conglomerates UTI Utilities CSG SER IND Hong Kong Companies Better Sustainability Performance Share Class Distribution HSI FIN P&C IT TEL UTI CGM CSG SER IND ENE MAT 44.4% 5.0%.8% 9.5% 6.% 5.3%.6%.0%.%.0% 0.% 43.3% 0.3%.8% 9.6%.6% 9.% 0.7%.6% 0.0% 0.0% 0.0% 45.9%.%.5% 8.4% 5.8% 4.9%.4% 3.0% 0.4% 6.5% 0.0% Data as at 30 Sep 06 47% Consumer Goods Consumer Services Industrials ENE Energy MAT Materials HK Hshares Redchips Other Mainland 5% 6% 3% 00 HSSUS 64% 0% 4% % 0 HSSUSB 44% 30% % 4% ,000 0,000 00,000,000,000 0,000,000 Revenue (HKD Mn logscale) Data as at 30 Sep 06 HSSUSB Hang Seng Corporate Sustainability Benchmark Index HSSUS Hang Seng Corporate Sustainability Index HSI Hang Seng Index 0% 0% 0% 30% 40% 50% 60% 70% 80% 90% 00% Data as at 30 Sep 06

14 Hong Konglisted Companies List of Constituent Companies Hong Konglisted Companies List of Constituent Companies Constituent Companies of HSSUSB, HSSUS and HSI Code Joined Index (Year) Index Weighting (%) Name HSSUS HSSUSB HSSUS HSSUSB HSI Code Joined Index (Year) Index Weighting (%) Name HSSUS HSSUSB HSSUS HSSUSB HSI Financials Properties & Construction (cont d) 5 HSBC Holdings SwireProperties ICBC Hysan Dev Bank of China CK Property HKEx China Vanke Hang Seng Bank China Railway BOC Hong Kong China State Con CM Bank Kerry Ppt CCB Champion REIT Ping An Great Eagle H China Life Yuexiu REIT Bankcomm China Jinmao CITIC Bank China Res Land 339 PICC Group Utilities CEB Bank CLP Holdings BCQ HK & China Gas AIA 8. 6 Power Assets Bank of E Asia China EB Int'l Properties & Construction Towngas China 0. 6 SHK Ppt CKI Holdings Link REIT China Res Power China Overseas Telecommunications Wharf Holdings China Mobile New World Dev PCCW 0.3 Henderson Land HKBN Sino Land HutchTel HK 0. 0 Hang Lung Ppt China Unicom 0.7 HSSUSB Hang Seng Corporate Sustainability Benchmark Index HSSUS Hang Seng Corporate Sustainability Index HSI Hang Seng Index 3

15 Hong Konglisted Companies List of Constituent Companies Hong Konglisted Companies List of Constituent Companies Constituent Companies of HSSUSB, HSSUS and HSI (cont d) Code Joined Index (Year) Index Weighting (%) Name HSSUS HSSUSB HSSUS HSSUSB HSI Code Joined Index (Year) Index Weighting (%) Name HSSUS HSSUSB HSSUS HSSUSB HSI Conglomerates Consumer Goods CKH Holdings Li & Fung Swire Pacific A Shenzhou Intl NWS Holdings ANTA Sports Shanghai Ind H Esprit Holdings 0. 4 Shun Tak Hold Tsingtao Brew CITIC SkyworthDigital Information Technology Fosun Pharma AAC Tech Chow Tai Fook Lenovo Group Li Ning Tencent Man Wah Hldgs SMIC China Agri VTech Holdings Global Brands ChinaComservice Vinda Int'l ZTE Sa Sa Int'l Comba Hengan Int'l 0.6 Consumer Services Mengniu Dairy MTR Corporation Belle Int'l ShangriLa Asia Want Want China Cathay Pac Air MGM China Cafe de Coral H Melco Int'l Dev China East Air Sands China Ltd. 7 Galaxy Ent 0.9 HSSUSB Hang Seng Corporate Sustainability Benchmark Index HSSUS Hang Seng Corporate Sustainability Index 4 HSI Hang Seng Index 5

16 Hong Konglisted Companies List of Constituent Companies Hong Konglisted Companies List of Constituent Companies Constituent Companies of HSSUSB, HSSUS and HSI (cont d) Historical Changes in Hang Seng Corporate Sustainability Index Constituent Companies Code Joined Index (Year) Index Weighting (%) Name HSSUS HSSUSB HSSUS HSSUSB HSI Year of Assessment Additions Deletions Code Name Code Name Industrials CRRC Times Elec COSCO Ship Port China COSCO SITC HK & China Gas Shangrila Asia China State Con Tencent Hopewell Hldgs China Telecom Shangrila Asia China Railway Orient Overseas Kerry Log Net Hopewell Infr Tianneng Power Sino Land Hopewell Hldgs China EB Int'l China Life Anta Sports SHK Ppt Energy Pacific Basin CIMC China Mer Port ICBC AAC Tech Wharf (Hldgs) China Agri PetroChina Hutchison 088 China Shenhua SHK Ppt 54 Hopewell Hldgs China Oilfield CNOOC Sinopec Corp New World Dev Link REIT Tencent CCB 857 PetroChina.4 97 Swire Properties 33 China State Con 35 Materials Kunlun Energy ShangriLa Asia 36 Orient Overseas 333 China Zhongwang MMG Sinofert 0.03 Total Data as at 30 Sep 06 HSSUSB Hang Seng Corporate Sustainability Benchmark Index HSSUS Hang Seng Corporate Sustainability Index 6 HSI Hang Seng Index 7

17 Mainlandlisted Companies 8 9

18 Mainlandlisted Companies Rating Assessment Results Mainlandlisted Companies Rating Assessment Results Assessed Mainlandlisted Companies by Industry Trend in Sustainability Performance TEL (%) CGM (%) Percentage of Assessed Mainland listed Companies Achieving Stable or Satisfactory Rating in Sustainability Performance SER 4 (8%) ENE UTI 5 (5%) 0 (7%) CSG 60 (0%) 8% 6% 4% % Stable (AA) Satisfactory (A).4% 0.7% 98 Mainlandlisted companies: P&C 9 (0%) MAT 30 (0%) IT 3 (0%) IND 38 (3%) FIN 47 (6%) 0% 8% 6% 4% % 0% 5.% 4.%.8% 9.7% 6.3% 7.% Constituent Companies Focused More on Labour Practices and Consumer Issues Constituent Companies of HSCASUSB and HSCASUS Achieved A to A+ Sustainability Ratings Core Subject Scores of Mainlandlisted Companies by the Seven Core Subjects Core Subject Score Index Universe HSCASUSB Constituents NonHSCASUSB Constituents FIN Financials P&C Properties & Construction IT Information Technology 0 Index Universe HSCASUSB Constituents NonHSCASUSB Constituents CG HR LP ENV FOP CI CID TEL Telecommunications CGM Conglomerates UTI Utilities CSG SER IND Consumer Goods Consumer Services Industrials ENE MAT Energy Materials Sustainability Rating Distribution of Assessed Mainlandlisted Companies 30% 5% 0% 5% 0% 5% 0%.3% 6.7% 5.0% 6.4% 3.8% 3.8% AAA AA+ AA AA A+ A A BBB+ BBB BBB BB+ BB BB B C 3.0% 7.% CG Corporate Governance LP Labour Practices FOP Fair Operating Practices CID Community Involvement HSCASUSB Hang Seng (China A) Corporate Sustainability Benchmark Index 30 HR Human Rights ENV The Environment CI Consumer Issues and Development HSCASUS Hang Seng (China A) Corporate Sustainability Index 3 No. of Companies HSCASUSB Constituents (30).7%

19 Mainlandlisted Companies Rating Assessment Results Mainlandlisted Companies Rating Assessment Results Telecommunication Strongest Sustainability Performance Ranking of Sustainability Performance Scores of HSCASUSB Constituent Companies by Industry Sustainability Performance Scores of Assessed Mainlandlisted Companies by Industry Sustainability Performance Score Maximum Minimum Average TEL 5.5 FIN CGM 48.3 ENE P&C IND MAT SER CSG UTI IT Rank FIN CSG IND P&C, IT, MAT, ENE, SER,UTI,TEL Sustainability Performance Scores of HSCASUSB Constituent Companies by Industry Total 4 3 Sustainability Performance Score Maximum Minimum Average TEL FIN CGM ENE 58.7 P&C 6.4 IND MAT 58. SER CSG UTI IT 60.7 Sustainability Performance Scores of nonhscasusb Constituent Companies by Industry 80 Sustainability Performance Score Maximum Minimum Average TEL FIN CGM 48.3 ENE P&C IND MAT SER CSG UTI CSG Max, min and average are suppressed for sectors with only company or none Max and min are suppressed for sectors with less than 3 companies FIN Financials TEL Telecommunications CSG Consumer Goods ENE Energy P&C Properties & Construction CGM Conglomerates SER Consumer Services MAT Materials 3 IT Information Technology UTI Utilities IND Industrials 33

20 Mainlandlisted Companies Index Series Performance Mainlandlisted Companies Index Series Performance Delivered Higher Returns During 04 Higher Dividend Yield, Revenue and Net Profit Return (%) HSCASUSB HSCASUS HSCAIT Net Dividend Yield (%) 6.0 HSCASUSB HSCASUS HSCAIT ^ Annualised Volatility (%) 45 HSCASUSB HSCASUS HSCAIT ,000,000 00,000 0,000, Net Profit (HKD Mn in logscale) ^ HSCASUS Constituents = 5 HSCASUSB (nonhscasus) Constituents = 5 NonHSCASUSB Constituents = 68.5 Since launch on 6 Jul 00 ^ As at the end of Sep ^ Since launch on 6 Jul 00 ^ As at the end of Sep ,000 0,000 00,000,000,000 0,000,000 HSCASUSB Hang Seng (China A) Corporate Sustainability Benchmark Index Revenue (HKD Mn logscale) Data as at 30 Sep 06 HSCASUS Hang Seng (China A) Corporate Sustainability Index 34 HSCAIT Hang Seng China A Industry Top Index

21 Mainlandlisted Companies Index Series Performance Mainlandlisted Companies List of Constituent Companies Financials Highest Weighting Industry Constituent Companies of HSCASUSB, HSCASUS and HSCAIT Industry distribution 80% 70% 60% HSCASUSB HSCASUS HSCAIT Code Financials Joined Index (Year) Index Weighting (%) Name HSCASUS HSCASUSB HSCASUS HSCASUSB HSCAIT Shang Pudong % 6038 Ping An % CM Bank ICBC % 6038 Bankcomm % 0% Bank of China Ping An Bank China Life % HSCASUSB HSCASUS HSCAIT FIN 67.6% 7.% 4.9% CSG 7.3% % 8.9% IND.7% 0.0% 7.4% P&C 9.5% 4.% 3.5% ENE.4% 0.0% 7.0% IT 4.7% 9.3% 7.9% MAT.5% 0.0% 3.9% SER.% 0.0% 5.5% TEL.9% 3.7%.4% UTI 0.3% 0.0% 7.% CGM 0.0% 0.0%.3% CCB Industrial Bank CEB Bank China Merchant Securities Data as at 30 Sep Agricultural Bank 6. Consumer Goods Saic Motor Qingdao Haier Fosun Pharma Tsingtao Brew Kweichow Mouta Gree Electric Midea Group Co GreatWall Motor 0.6 Information Technology BOE Technology ZTE Hangzhou Hikvi.0 FIN Financials TEL Telecommunications CSG Consumer Goods ENE Energy HSCASUSB Hang Seng (China A) Corporate Sustainability Benchmark Index P&C Properties & Construction CGM Conglomerates SER Consumer Services MAT Materials HSCASUS Hang Seng (China A) Corporate Sustainability Index 36 IT Information Technology UTI Utilities IND Industrials HSCAIT Hang Seng China A Industry Top Index 37

22 Mainlandlisted Companies List of Constituent Companies Mainlandlisted Companies List of Constituent Companies Constituent Companies of HSCASUSB, HSCASUS and HSCAIT (cont d) Code Joined Index (Year) Index Weighting (%) Name HSCASUS HSCASUSB HSCASUS HSCASUSB HSCAIT Code Joined Index (Year) Index Weighting (%) Name HSCASUS HSCASUSB HSCASUS HSCASUSB HSCAIT Information Technology (cont d) Consumer Services Sanan Optoelec Suning Commerc Aisino Corp China East Air. Properties & Construction Shenzen Overse China Railway China South Air China Vanke Air China China State 3.7 Materials China Rail Cons Baoshan Iron China Comm Cons Shanxi Taigang Telecommunications Zijin Mining China United Jiangxi Copper China Spacesat Shanghai Pechem 0.6 Industrials CMOC Tbea Co Ltd. Utilities China COSCO Guangzhou Deve CIMC Huaneng Power CRRC Zhejiang Zhene Daqin Railway Gd Power Devel SH Electric China Yangtze Sh Intl Port Huadian Power Ningbo Port Co 0.7 Conglomerates.3 Energy China Baoan China Shenhua Wuchan Zhongda China Oilfield Total Sinopec Corp 3. Data as at 30 Sep PetroChina China Coal HSCASUSB Hang Seng (China A) Corporate Sustainability Benchmark Index HSCASUS Hang Seng (China A) Corporate Sustainability Index HSCAIT Hang Seng China A Industry Top Index 39

23 Mainlandlisted Companies List of Constituent Companies Historical Changes in Hang Seng (China A) Corporate Sustainability Index Constituent Companies Year of Assessment Code Additions Name Code Deletions Name ICBC Agricultural Bank Yunnan Baiyao Ping An Insurance Sustainability Rating Assessment China Southern Air China Shenhua China Vanke Tebian Electric China Eastern Airlines Ping An Insurance China Southern Air PetroChina Ping An Bank Shanghai Pudong China United Network China Shenhua 6038 Bank of Communications 6066 Industrial Bank BOE Technology Baoshan Iron & Steel Shanghai Pudong 6005 China East Air Saic Motor Corporation 6088 Agricultural Bank 40 4

24 Sustainability Rating Assessment Introduction Eligible companies will undergo a sustainability assessment that has been developed and is carried out by Hong Kong Quality Assurance Agency ( HKQAA ). The HKQAA sustainability rating and research ( HKQAA SRR ) is designed to rate a company s system maturity and risks with regard to sustainability performance, based on and with reference to international guidelines such as ISO 6000: 00 Guidance on social responsibility and Global Reporting Initiative (GRI). A score (0 to 00) and rating (D to AAA) reflecting its sustainability performance will be assigned to each assessed eligible company. The higher the score, the better the company s sustainability performance. Descriptions of Ratings: Rating Description Rating Description Rating Description Rating Description AAA Reliable BBB Moderate CCC Vulnerable D At risk AA Stable BB Moderate CC At risk A Satisfactory B Unstable C At risk 4 43

25 Sustainability Rating Assessment Sustainability Rating Assessment HKQAA SRR Assessment Model Methodology HKQAA SRR Assessment Model contains six elements. The sustainability performance of each eligible company will be measured against seven core subjects. Element. Seven Core Subjects Forty recommended practices are consolidated under seven core subjects. Element 4. Risk Exposure Accountability Rating ( AR ) Accountability rating reflects how much a company involves its stakeholders in identifying, understanding and responding to sustainability issues and concerns with respect to a particular subject, when the company reports on sustainability, and the extent to which it explains and is answerable to stakeholders for its decisions, actions and performance. Corporate Governance Human Rights Labour Practices The Environment Fair Operating Practices Consumer Issues Community Involvement and Development Country Risks ( CR ) & Industry Risks ( IR ) The operating location(s) and industryspecific operations of a company are assessed to give comprehensive risk ratings on the performance of each subject. For example, risk factors may apply for operations in developing countries or polluting industries. Element. Practice Types Mandatory practices refer to those that all the participants shall implement. Desired practices refer to the mandatory practices assigned to designated industries that may have higher potential impact on these particular issues. Voluntary practices refer to advanced practices that a company is encouraged to implement. Scores gained for these practices will be taken into account if they can help improve the subject scores. Element 3. PlanDoCheckAct Scoring Approach A company s performance on managing the practices is collected in the form of a questionnaire. Performance is rated using a fivepoint scoring approach. Points point points 3 points Stage Starting Phase Forming Phase (Plan) Implementing Phase (Do) 4 points Confirming Phase (Check) Description No action taken. Actions are under development/ established without full implementation/ implemented on an adhoc basis. Actions have been fully implemented with advance planning to realise the recommended practice. Data collection and analysis on the actions are conducted to gather relevant information to evaluate the effectiveness of the implemented practice. Media Watch Rating ( MWR ) Media commentaries and other publicly available information on a company are assessed through an ongoing monitoring mechanism to determine if these may result in damage to a company s sustainability performance. Element 5. Calculation of Each Core Subject Score Each core subject score is the average score of all applicable practices with the accountability and risk ratings taken into account. Each core subject score = Sum of individual practice score Element 6. Calculation of Sustainability Performance Score and Rating Sustainability performance score = Total number of applicable practices x AR x CR x IR x MWR x Sum of each core subject score Seven core subjects 0 (to obtain the score out of a maximum final score of 00) According to the assessment results, sustainability ratings ranging from AAA (reliable) to D (at risk) as above are assigned to each eligible company. Plus (+) or minus () signs may be assigned to show relative standing within the rating categories. 5 points Improving Phase (Act) There is a review of the implemented actions for identifying improvement areas

26 Sustainability Rating Assessment Timeline of the HKQAA Sustainability Rating and Research Hang Seng Indexes Notifies HKQAA of eligible companies Considers selection of constituent companies for Hang Seng Corporate Sustainability Index Series Announces index review results Research Process Preliminary assessment of eligible companies Responding and assessment period Analysis of companies responses and calculate sustainability performance scores and ratings HKQAA SRR Methodology Review Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec HKQAA Prefills HKQAA SRR questionnaires based on preliminary webbased research Sends out prefilled questionnaires to individual companies for review, comments and/or confirmation Submits Annual Sustainability Rating Report containing final scores and ratings to Hang Seng Indexes Releases free summary report to questionnaire respondents Ongoing Media Watch Monitoring 46 47

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28 Company Background Hang Seng Indexes Company Limited ( Hang Seng Indexes ), a whollyowned subsidiary of Hang Seng Bank, was established in 984 and is Hong Kong s leading index compiler covering Hong Kong and mainland China markets. Hang Seng Indexes calculates and manages the Hang Seng Family of Indexes. Starting in 969 with the launch of the Hang Seng Index, now widely recognised as the barometer of the Hong Kong stock market, Hang Seng Indexes has been at the forefront of the market, developing numerous market measures to help investors make their investment decisions. Indexes in the Hang Seng Family of Indexes are grouped into five categories Flagship Indexes, Benchmark Indexes, Thematic Indexes, Strategy Indexes and Bond Indexes then classified as Hong Konglisted, Crossmarket or Mainlandlisted according to where their constituents are listed. Currently, the Hang Seng Family of Indexes comprises over 400 realtime and daily indexes. Going forward, Hang Seng Indexes will continue to broaden its index series to meet the widening spectrum of investor demand for index investment solutions. If you prefer not to receive marketing materials from Hang Seng Indexes Company Limited in the future, please notify us by to 50 info@hsi.com.hk with the word unsubscribe in the subject line or contact us at (85)

29 For more information, please contact Hang Seng Indexes Company Limited Address : 83 Des Voeux Road Central Hong Kong Tel : (85) info@hsi.com.hk Website : The information contained herein is for reference only. Hang Seng Indexes Company Limited ( Hang Seng Indexes ) ensures the accuracy and reliability of the information contained herein to the best of its endeavours. However, Hang Seng Indexes makes no warranty or representation as to the accuracy, completeness or reliability of any of the information contained herein and accepts no liability (whether in tort or contract or otherwise) whatsoever to any person for any damage or loss of any nature arising from or as a result of reliance on any of the contents of this document, or any errors or omissions in its contents and such contents may change from time to time without notice. The information contained herein does not constitute any express or implied advice or recommendation by Hang Seng Indexes for any investments. Investment involves risks. Prospective investors should seek independent investment advice to ensure that any of their decisions is made with regard to their own investment objectives, financial circumstances and other particular needs. Prospective investors should also note that value of securities and investments can go down as well as up and past performance is not necessarily indicative of future performance. Hang Seng Indexes Company Limited 06. All rights reserved. /66OA