Hang Seng Corporate Sustainability Index Series Description International focus on corporate sustainability encompassing environmental, social and corporate governance has risen dramatically in recent years. Sustainability investment is growing across the globe as investors diversify their investments to increasingly focus on those companies that perform strongly with regard to corporate sustainability. The Hang Seng Corporate Sustainability Index Series provides benchmark for sustainability investments. It composes of five indexes, namely: 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") HSSUS and HSSUSB include Hong Kong-listed companies that perform well with respect to corporate sustainability, while HSCASUS and HSCASUSB include Mainland listed companies that perform well with respect to corporate sustainability. The HSMHSUS is a cross-market index that covers corporate sustainability leaders in Hong Kong and on the Mainland.
Constituent selection is based on a robust process that includes 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. Universe Hang Seng Corporate Sustainability Index ("HSSUS") The constituents of HSSUSB form the universe of securities for HSSUS. Hang Seng Corporate Sustainability Benchmark Index ("HSSUSB") The universe of the HSSUSB comprises all securities primarily listed on the Main Board of HKEX, excluding securities that are secondary listings, foreign companies, preference shares, debt securities, mutual funds and other derivatives. Hang Seng (China A) Corporate Sustainability Index ("HSCASUS") The constituents of HSCASUSB form the universe of stocks for HSCASUS. 2
Hang Seng (China A) Corporate Sustainability Benchmark Index The universe of the HSCASUSB comprises all A shares primarily listed on the Main Board of Shanghai Stock Exchange ("SSE") and the Shenzhen Stock Exchange ("SZSE"). Selection Criteria Hang Seng Corporate Sustainability Benchmark Index ("HSSUSB") Market Capitalisation Screening 1. All securities are ranked by their full market capitalisation, in terms of average month-end market capitalisation in the past 12 months. 2. Eligible security in the top 95th percentile of the total market value Turnover Screening 1. Turnover velocity in each of the past 12 months is calculated for each security based on the following formula: Minimum requirement of turnover velocity is 0.05%. 2. Turnover velocity of an eligible security must meet the minimum requirement for at least 10 out of the past 12 months and for at least five out of the latest six months. Securities should be listed for at least one year by the review cut-off date. Securities in the Universe that pass all of the above eligibility criteria form the Eligibility List for constituent selection. 3
1. Companies on the Eligibility Lists will undergo the sustainability assessment developed and carried out by HKQAA. 2. Under the sustainability assessment, the sustainability performance of each eligible company will be measured against each of the core areas as follows: Organisational Governance; Human Rights; Labour Practices; Environment; Fair Operating Practices; Consumer Issues; and Community Involvement and Development. 3. A rating and score will be assigned to each assessed eligible company reflecting its sustainability performance. The higher the score, the better its sustainability performance. The eligible securities will be ranked by the sustainability performance score. The Top 20% of the eligible securities with the highest sustainability performance will be selected as constituents of the HSSUSB. Hang Seng (China A) Corporate Sustainability Benchmark Index ("HSCASUSB") Market Capitalisation Screening and Turnover Screening To be eligible for selection, stocks in the Universe must: 1. Rank in the top 90% of total market turnover over the past 12-month period; 2. Not be classified as an ST / *ST stock or S stock; and 3. Not have been suspended for over one month as of the end of any review period (for non-existing constituents only). The top 300 companies in terms of past 12-month average A-share market capitalisation that meet the above conditions form the A300 list. 4
Stocks should be listed for at least one year by the review cut-off date. Stocks in the Universe that pass all of the above eligibility criteria form the Eligibility List for constituent selection. The eligible stocks will be ranked by the highest sustainability performance score. The Top 10% of the eligible stocks with the sustainability performance will be selected as constituents of the HSCASUSB. Hang Seng Corporate Sustainability Index ("HSSUS") Market Capitalisation Screening Eligible securities which rank in the top 150 stocks in terms of average month-end market capitalisation in the past 12 months from the Universe of HSSUSB. Turnover Screening 1. Minimum requirement of turnover velocity is 0.1%. 2. New constituent entering the HSSUS must meet the minimum requirement for at least 10 out of the past 12 months and for all of the latest 3 months. 3. Existing constituent entering the HSSUS must meet the minimum requirement for at least 10 out of the past 12 months. Securities should be listed for at least one year by the review cut-off date. Securities in the Universe that pass all of the above eligibility criteria form the Eligibility List for constituent selection. The number of constituent securities is currently fixed at 30. The top 30 securities with the highest sustainability performance score in the eligible list will be selected as constituents of the HSSUS. 5
Hang Seng (China A) Corporate Sustainability Index ("HSCASUS") Market Capitalisation Screening The top 150 stocks in terms of average month-end market capitalisation in the past 12 months from the eligible list of HSCASUSB. Stocks should be listed for at least one year by the review cut-off date. Stocks in the Universe that pass all of the above eligibility criteria form the Eligibility List for constituent selection. The number of constituent stocks is currently fixed at 15. The 15 stocks with the highest sustainability performance scores in the eligible list will be selected as constituents of HSCASUS. Hang Seng (Mainland and HK) Corporate Sustainability Index ("HSMHSUS") Constituent companies or REITs of the HSSUS and the HSCASUS form the HSMHSUS. Constituent companies or REITs either joining or leaving the HSSUS or the HSCASUS after review are automatically included in or excluded from the HSMHSUS. All classes of listed shares on the Main Board of the HKEX, SSE and SZSE of constituent companies will be selected as constituent stocks of the HSMHSUS. Methodology The Hang Seng Corporate Sustainability Index Series adopts a freefloat-adjusted market capitalisation weighted methodology with a 10% cap. For the Hang Seng (Mainland and HK) Corporate Sustainability Index, the cap is on the total weighting of individual companies, while for other indexes, the cap is on the weighting of individual stocks. The Hang Seng Corporate Sustainability Index Series is calculated on Hong Kong dollar, US dollar and Chinese yuan terms. 6
Index Overview HSSUS HSCASUS HSMHSUS HSSUSB HSCASUSB Launch Date 26 July 2010 5 September 2011 Backdated to 2 January 2008 - Base Date 2 January 2008 2 September 2011 Base Value 3,000 2,000 Currency HKD CNY USD HKD CNY Number of Constituent Companies 30 15 Variable* Variable Variable Review Frequency Annually Annually Rebalance Frequency Quarterly Quarterly Vendor Codes Bloomberg HSSUS HSCASUS HSMHSUS HSSUSB HSCASUSB Thomson Reuters.HSSUS.HSCASUS.HSMHSUS.HSSUSB.HSCASUSB *In cases where different classes of shares of a company are included in the HSSUS and the HSCASUS and these different classes 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. Disclaimer: All information contained herein is provided for reference only. Hang Seng Indexes Company Limited ( HSIL ) ensures the accuracy and reliability of the above information to the best of its endeavours. However, HSIL 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 in this document is not intended to provide professional advice and should not be relied upon in that regard. Persons intending to use any information obtained from this document are advised to obtain appropriate professional advice. Hang Seng Indexes Company Limited 2016. All rights reserved. 7