www.jse.co.za

Johannesburg Stock Exchange

Ground Rules for the Management of the JSE Fixed Income Index Series

Indices

MARKET DATA

JSE Fixed Income Index Series: Ground Rules

Contents

1 Index Series History.............................................................................................................................................................................................4

1.1 Key Milestones ..............................................................................................................................................................................................4

1.2 Credits ..........................................................................................................................................................................................................................4

1.2.1 Actuarial Society of South Africa........................................................................................................4

2 Governance ........................................................................................................................................................................................................................5

2.1 Role of the JSE ................................................................................................................................................................................................5

2.2 RoleoftheAdvisoryCommittee....................................................................................................................................5

3 IndexValuation ...........................................................................................................................................................................................................6

3.1 IndexSeriesFunction ........................................................................................................................................................................6

3.1.1 A barometer for daily movements in the bond market ..............................6

3.1.2 Abenchmarkformeasuringportfolioperformance ........................................6

3.1.3 Analysing sub-sectors of the market ...........................................................................................6

3.1.4 Passive index tracking ...........................................................................................................................................6

3.2 Published Index Values ...................................................................................................................................................................6

3.3 Performance Measurement ..................................................................................................................................................7

4 Index Family ......................................................................................................................................................................................................................8

4.1 CompositeIndexCategorisation....................................................................................................................................8

4.1.1 Coupon Type ...........................................................................................................................................................................8

4.1.2 Guarantee Type ................................................................................................................................................................8

4.1.3 Replicability..............................................................................................................................................................................8

4.2 Composite Indices ...................................................................................................................................................................................9

4.3 Sub-Indices ...........................................................................................................................................................................................................9

4.3.1 Term to Maturity ............................................................................................................................................................9

4.3.2 Issuer Class ........................................................................................................................................................................... 10

4.4 IndexListing................................................................................................................................................................................................... 10

5 ConstituentSelection .................................................................................................................................................................................. 11

5.1 Overview ............................................................................................................................................................................................................. 11

5.2 DefinitionsandTimelines ..................................................................................................................................................... 11

5.2.1 Reconstitution................................................................................................................................................................. 11

5.2.2 Reweighting ....................................................................................................................................................................... 11

5.2.3 Non-trading Days ..................................................................................................................................................... 11

5.2.4 Cut Date .................................................................................................................................................................................... 12

5.2.5 Averaging Period ....................................................................................................................................................... 12

5.3 Core Eligibility ............................................................................................................................................................................................ 12

5.3.1 Index Series Eligibility Criteria ............................................................................................................ 12

5.3.2 IndexSpecificEligibilityCriteria ...................................................................................................... 12

5.4 ReconstitutionofCompositeIndices ................................................................................................................ 12

5.4.1 Dual Ranking Methodology ................................................................................................................... 13

5.4.2 MarketRepresentationPercentageMethodology ........................................ 13

5.5 Capping of Issuer Weight ....................................................................................................................................................... 13

5.6 Capping of Number of Bonds ......................................................................................................................................... 14

5.7 ReconstitutionofSub-Indices........................................................................................................................................ 14

5.8 Reweighting ................................................................................................................................................................................................... 14g

2

6 Special Events ............................................................................................................................................................................................................ 15

7 CalculationGuide ............................................................................................................................................................................................... 16

7.1 Overview ............................................................................................................................................................................................................. 16

7.2 Re-basing ............................................................................................................................................................................................................ 16

7.3 TotalReturnIndex .............................................................................................................................................................................. 16

7.3.1 Preface......................................................................................................................................................................................... 16

7.3.2 Time Structure ............................................................................................................................................................... 17

7.3.3 Bonds ............................................................................................................................................................................................. 17

7.3.4 WeightingFactor ....................................................................................................................................................... 17

7.3.5 InflationFactor ............................................................................................................................................................. 18

7.3.6 Initialisation ....................................................................................................................................................................... 18

7.3.7 ValuationDateDiscountFactors ................................................................................................... 18

7.3.8 TheBondPortionofthePortfolio ................................................................................................ 20

7.3.9 The Ex-Period ................................................................................................................................................................... 21

7.3.10 The Ex-Coupon of an individual bond ................................................................................... 21

7.3.11 TheValueoftheEx-CouponPortion........................................................................................ 22

7.3.12 Re-investment of Coupons ........................................................................................................................ 22

7.3.13 RecalculationoftheNominalFactor,Kt ............................................................................ 23

7.3.14 Total Return Index Value .............................................................................................................................. 23

7.4 Clean Price Index .................................................................................................................................................................................. 23

7.5 All in Price Index .................................................................................................................................................................................... 24

7.6 Coupon Yield Index ........................................................................................................................................................................... 24

7.7 DurationandConvexity ............................................................................................................................................................ 24

7.7.1 ModifiedDuration................................................................................................................................................... 25

7.7.2 Convexity ................................................................................................................................................................................. 25

7.7.3 Application ........................................................................................................................................................................... 26

7.8 Precision and Rounding ............................................................................................................................................................ 26

3

1 Index Series History

1.1 Key MilestonesTheoriginalcompilationoftheAllBondIndexanditssub-indiceswasmanagedbyDrJamesGreeneranddevelopedinconjunctionwiththeActuarialSocietyofSouthAfrica,withtheinitialindexlaunchin July 2000.

TheAllBondIndexitself,aswellastheoriginaldocumentfromwhichthemajorityofthisdocumentdrawsitscontent,wasoriginallycompiledwithassistancefromRoganEtheridgeofQuantFinancialResearch. Please refer to BEASSA Fixed Income Indices, August 2000, ASSA and BESA. Professor RobThomsonof theUniversityofWitwatersrandprovided theoriginal impetusandmathematicalprinciplesviatheInvestmentCommitteeoftheActuarialSocietyofSouthAfrica.

Severalgatheringsofmarketparticipantswereheldinthecourseofpreparingtheoriginalspecificationandtheircontributionsarealsonotedwiththanks. Inparticular, JillMannofRandMerchantBankactedasacontinualspurtovariousparticipantsintheprocesstokeepfocusandmomentum.GlenManningofJPMorganprovidedadviceandvaluableinformationontheJPMorganbondIndices.

Following the merger of the Bond Exchange of South Africa and the Johannesburg Stock Exchange inJune2009,theCompositeInflationLinkedIndexwasthesecondcompositeindextobeaddedtotheIndexSeries,launchinginSeptember2010.Thisalsomarkedthefirstinclusionofinflation-linkedbonds to the IndexSeries,with contributionsmade to themethodologybymarketparticipants ingeneral,andtheActuarialSocietyofSouthAfricainparticular.

August2014sawtheintroductionofseveralnewcompositestotheIndexSeries, includingarangeofCreditIndiceswhichexcludednoteswithagovernmentguarantee.Thismarkedthefirstinclusionof floating-rate notes to the Index Series. In addition, the Market Representation Methodologywas introduced to provide complementary benchmarks to those produced by the existing DualRanking Methodology.

1.2 Credits

1.2.1 Actuarial Society of South Africa

TheActuarialSocietyofSouthAfricaistheprofessionalbodyofactuariesinSouthAfrica.Actuariesplay an important role in safeguarding the financial position of South African pension funds andinsurers.Accuratemeasurementof theperformanceof these institutions’assets isessential.ASSAhashadalongandsuccessfulassociationwithBESAandtheJSE,withsignificantinputandongoinginvolvement in indices for the local bond and equity markets.

Tel:+27215095242 Email: assa@assa.org.za

4

2 Governance

2.1 Role of the JSETheJSEistheownerandBenchmarkAdministratoroftheJSEFixedIncomeIndexSeries.TheJSEisresponsibleforalloperationalactivitiesrelatingtotheindices,including:

> Collectionandverificationofinputdata; > Calculationandpublicationofindexandconstituentvalues; > Production,applicationandpublicationofReconstitutionsandReweightings; > MaintenanceandpublicationoftheIndexSeriesGroundRules.

Inaddition,theJSEwillmaintainanddeveloptheIndexSeriesthroughtherefinementofexistingindexrules,introductionofnewrulesanddevelopmentofnewindices.

2.2 RoleoftheAdvisoryCommitteeTheJSEFixed Income IndexCommitteedraws itsmembers fromthe index investmentcommunity.MembersareselectedbytheJSEfortheirknowledgeandexperienceinthefieldandaredrawntorepresentindustryexperts,tradingbanks,assetmanagersandindustrybodiessuchastheActuarialSociety of South Africa.

ThemandateoftheIndexCommitteeistooverseetheaccurateapplicationoftheindexrules.TheIndexCommitteemeetsquarterly to ratify the resultsof theReconstitution. Inaddition, the IndexCommitteewilladvisetheJSEonanyconcernswith,orproposeddevelopmentsto,theIndexSeries.AsummaryofkeydiscussionitemsispublishedtotheJSEwebsiteshortlyaftereachmeeting.

5

3 IndexValuation

3.1 IndexSeriesFunctionThe JSE Fixed Income Index Series is an independently calculated tool for investment managersoperatinginthedebtsecurityarena.Someofthekeyusesinclude:

3.1.1 A barometer for daily movements in the bond market

Thevariouscompositeindicesincorporateawiderangeofmaturitiesandcoupontypes,andprovidea usefulmeasure of the dailymovement of the broader bondmarket. This is a bettermetric forperformancethanasinglebond’syieldorpricemovement.Individualbondsbearveryspecificsupplyanddemand,credit,termandliquiditycharacteristicswhichmaybedifferenttothemarketasawhole.

3.1.2 Abenchmarkformeasuringportfolioperformance

Investors can measure the performance of their own portfolios against the performance of anappropriate index in the Index Series. Comparison allows the investor to measure their own performancerelativetoanindependentmarketbenchmark.Ananalysisaccordingtoterm-splitsmayalsoprovidetheanalystwithinsightintowhichsectionsoftheyieldcurveareresponsibleforexcessor under-performance.

3.1.3 Analysing sub-sectors of the market

Awiderangeofcomposite indices isprovided. Inaddition,sub-indicesprovideamorepartitionedanalysisbyeitherIssuerClassorTerm.Thesedivisionsensurethataportfoliobenchmarkedagainstthesesub-indices isnotdisadvantagedbydifferences in thetermstructureorcreditspreadof thecomposite indices.

3.1.4 Passive index tracking

A number of the composite indices are determined using a Dual Ranking methodology which includes liquidityintheselectioncriteria.Thisleadstotheseindicesincludingthelargestandmostliquidissuesandthuspotentiallyfacilitatingthecreationofpassiveindexproducts.

3.2 Published Index ValuesSeveral indexmetrics are published across the range of composite indices and their sub-indices,including:

> TotalReturnIndex:thisheadlineindexvalueassumesthatcouponsarereinvestedacrosstheentireportfolio;

> CleanPriceIndexandAll-in-PriceIndex:arepresentationofthecapitalvalueofthebondportfoliowithoutregardforcouponspaid.Theseshouldbesimilartotheperformanceofabondportfoliothatdoesnotreinvestitscouponsbutratherpaysthemouttotheinvestor;

> CouponYield:anestimateoftherunningyieldofthebondportfolio; > AverageYield:anestimateofthemeanyieldtomaturityofthebondportfolio; > DurationandConvexity.

IndexvaluesarepublisheddailyafterthecompletionoftheJSEmark-to-marketvaluationprocess.

6

3.3 Performance MeasurementTheJSEFixedIncomeIndicescanbeusedtomeasureperformancebetweentwodates.IftheindexonthefirstdateisI0 and on the second date it is I1,thenthereturnbetweenthesedatesisgivenbythe following formula:

Thismeasureofperformanceisgivenasadecimal,andisnotannualised.Thisistheconventionforperiodsoflessthanoneyear.Iftheperiodisgreaterthanoneyear,itisconventiontoannualisethefigureforreturn.

Intheformulabelow,lett0bethefirstdate,andlett1 betheseconddate,bothmeasuredindaysfromthesamebasedatesuchthatthenumberofdaysbetweenthemcanbefoundbysubtraction.Theformula for annualised performance of an index between two dates is given as follows:

Thismeasureof performance is also adecimal and is statedasnominal annual and compoundedannually(NACA).Theseunitsallowdirectcomparisonwithperformancefiguresforotherindicesandother markets.

Sometimes it is preferable to state the performance measurement in terms of nominal annualcompoundedsemi-annually(NACS)units.Thisisusefulforthoseinvestorswantingtocompareindexperformance directly to bond yields which are quoted in terms of nominal annual compounded semi-annuallyunitsaswell.Thismeasureisgivenasfollows:

7

4 Index Family

4.1 CompositeIndexCategorisationThevariouscompositeindicesaredefinedaccordingtobroadcategories.Thesecategoriesareusedtodefinethecross-sectionofthebondmarketbeingcapturedbyeachcompositeaswellasthebroadpurposeofeachindex.Thecategoriesusedare:

4.1.1 Coupon Type

Bondswithfundamentallydifferingcoupontypesarenotincludedinthesameindex.Eachindexwilltherefore capture a single coupon type from the following:

> FixedRate:Thebondpaysasemi-annualcouponatafixed,pre-definedrate(maybezero); > FloatingRate:Thebondpaysaquarterly,non-amortisingcouponwithafixed,pre-definedspreadoverJIBAR;

> Inflation-LinkedRate:Thebondpaysasemi-annualcouponatafixed,pre-definedrate.However,theprincipal(andthuscouponamount)isinflatedbyalaggedCPIadjustment.

4.1.2 Guarantee Type

Bondswithanexplicitgovernmentguaranteehavedifferent riskcharacteristics to those issuedbycorporates,parastatalsor localauthorities.Each indexwill captureoneof the followingguaranteetypes:

> AnyGuarantee:Thebondmay,ormaynot,haveanexplicitgovernmentguarantee; > Credit:ThebonddoesnothaveanexplicitRSAgovernmentguarantee.Indicesinthiscategoryarereferredtoas“CreditIndices”.Notethatbondsissuedbystate-ownedentitiesandmunicipalitiesdonotnecessarilyincorporateanexplicitRSAgovernmentguarantee,althoughthiscanbethe case.

4.1.3 Replicability

Thelevelofreplicabilityofanindexfallsintooneofthefollowingbroadcategories:

> ReplicableIndices:Theseindicesaredesignedtobeasreplicableaspossible,giventheparticularunderlyinguniverseofbonds.Theygenerallyhaveafixednumberofbondsasconstituents.TheconstituentsareselectedusingaDualRankingmethodologywhichincorporatesthetotalvaluetraded of each bond as well as its issue size. Bonds which are very illiquid are thus unlikely to be included in the index. Some replicable indices have a 15% cap applied on individual issuer weight aswellasahardlimitonthemaximumnumberofbondspermittedperissuer;

> RepresentativeIndices:Theseindicesaredesignedtobeasrepresentativeaspossibleoftheunderlyinguniverseofbonds.Aliquiditytermisnotutilisedwhenselectingconstituents,andthusindividualbondsincludedintheindexcouldbeextremelyilliquid.TheseindicesaredesignedtocaptureaportionoftheparticularmarketsegmentbasedonaMarketRepresentationPercentage(MRP)of95%.Assuch,thelargest95%ofallIssuerswillbeincludedintheindex,basedoncleanmarketcapitalisation.

Detailed information on the implementation of Dual Ranking and the Market RepresentationPercentageisincludedinSection5.

8

4.2 Composite IndicesCompositeindicesaredefinedaccordingtothethreecategorieslaidoutabove.TherearecurrentlysevencompositeindicesintheIndexSeries,asfollows:

Categorisation Coupon Type

Fixed Floating Inflation-Linked

Replicable Indices

Any Guarantee ALBI20* CILI15*

Credit CFIX30 CFLO30

RepresentativeIndices

Any Guarantee ALBI95

Credit CFIX95 CFLO95

*ALBI20andCILI15aredefinedas“TradableIndices”sincetheyhaveJSE-listedderivativeproductsbasedonthemwithlistedderivativesproducts

TheoriginaltwocompositeindicesintheIndexSeries,namelytheALBIandCILI,havebeenrenamedtotheALBI20andCILI15respectively.Theoriginalindexnamesarestillhowevervalid,andALBIcanbeusedtorefertotheALBI20,andCILItotheCILI15.

AcompletelistingoftheCompositeIndicesisprovidedbelow:

Code Name Coupon Guarantee Selection Issuer Cap Bond Cap

ALBI20 All Bond Index (ALBI) Fixed Any Top20DR

ALBI95 All Bond Market Index Fixed Any 95% MRP

CILI15 CompositeInflation-LinkedIndex(CILI) Inflation Any TOP15DR

CFIX30 CreditFixedTop30Index Fixed Credit TOP30DR 15% 6

CFIX95 Credit Fixed Market Index Fixed Credit 95% MRP

CFLO30 CreditFloatingTop30Index Floating Credit TOP30DR 15% 6

CFLO95 CreditFloatingMarketIndex Floating Credit 95% MRP

DetailedinformationontheimplementationofDualRanking,theMarketRepresentationPercentageand the Issuer and Bond Caps is included in Paragraph 5.

4.3 Sub-IndicesEachcompositeindexwillbefurtherpartitionedintoarangeofsub-indices.Thecategoriesusedforthispartitioningare:

4.3.1 Term to Maturity

Each bond in the composite index is allocated into one of four term buckets based on the outstanding termtomaturity.ForFixed-ratenotesandInflation-linkednotes:

> 1-3:Thebond’stermtomaturityisgreaterthanorequaltooneyear,butlessthanthree; > 3-7:Thebond’stermtomaturityisgreaterthanorequaltothreeyears,butlessthanseven; > 7-12:Thebond’stermtomaturityisgreaterthanorequaltosevenyears,butlessthantwelve; > 12+:Thebond’stermtomaturityisgreaterthanorequalto12years.

9

ForFloating-ratenotes:

> 1-2:Thebond’stermtomaturityisgreaterthanorequaltooneyear,butlessthantwo; > 2-3:Thebond’stermtomaturityisgreaterthanorequaltotwoyears,butlessthanthree; > 3-4:Thebond’stermtomaturityisgreaterthanorequaltothreeyears,butlessthanfour; > 4+:Thebond’stermtomaturityisgreaterthanorequaltofouryears.

Eachcompositeindexwillhaveexactlyfourterm-splitsub-indicessuchthateveryconstituentofthecompositeindexisalsoaconstituentofexactlyoneterm-splitsub-index.

Anindividualinstrumentcanmovefromoneterm-splittothenextatanypointintimebasedonitsremainingtermtomaturity.Thiswillbeeffectiveonthedatethattheinstrumentchangesterm-split,withk-factorchangesoccurringonthelasttradingdaybeforeeffectivedate,ratherthanatthenextquarterlyReconstitution.

4.3.2 Issuer Class

Each bond in the composite index is allocated into a single sub-index based on the broad category of issuer.Theexactcategorisationapplieddependsonthespecificcompositeindexasfollows:

> ALBI20 is split into two Issuer class sub-indices: > ALBI20G(“GOVI”)containsALBI20constituentsranked1-10atthequarterlyReconstitutionthatareissuedbytheGovernmentofSouthAfrica;

> ALBI20O(“OTHI”)containsallALBI20constituentsthatarenotintheGOVI. > ALBI95issplitintotwoIssuerClasssub-indices,namelyGovernmentIssuersandOtherIssuers; > CILI15issplitintothreeIssuerClasssub-indices,namelyGovernmentIssuers(G),StateOwnedEnterpriseIssuers(S)andCorporateIssues(C);

> CFIX30,CFIX95,CFLO30,CFLO95aresplitintofourIssuerClasssub-indices,namely: > Corporate – Financial (F) > Corporate - Non-Financial (N) > State-OwnedEnterprises-includingbothParastatalsaswellasMunicipalities(S) > Asset-BackedSecurities-refertoSpecial-PurposeVehicles(A)

Eachcompositeindexwillhavetwo,threeorfourissuerclasssub-indicessuchthateveryconstituentofthecompositeindexisalsoaconstituentofexactlyoneissuerclasssub-index.

4.4 IndexListingThecompletelistofthe58indicesintheIndexSeriesisasfollows:

Code TermBucketsub-indices IssuerClasssub-indices

ALBI20 ALBI201,ALBI203,ALBI207,ALBI2012 ALBI20G(GOVI),ALBI20O(OTHI)

ALBI95 ALBI951,ALBI953,ALBI957,ALBI9512 ALBI95G,ALBI95O

CILI15 CILI151,CILI153,CILI157,CILI1512 CILI15G(IGOV),CILI15S(ISOE),CILI15C(ICOR)

CFIX30 CFIX301,CFIX303,CFIX307,CFIX3012 CFIX30F,CFIX30N,CFIX30S,CFIX30A

CFIX95 CFIX951,CFIX953,CFIX957,CFIX9512 CFIX95F,CFIX95N,CFIX95S,CFIX95A

CFLO30 CFLO301,CFLO302,CFLO303,CFLO304 CFLO30F,CFLO30N,CFLO30S,CFLO30A

CFLO95 CFLO951,CFLO952,CFLO953,CFLO954 CFLO95F,CFLO95N,CFLO95S,CFLO95A

10

5

5.1 Overview and occur quarterly at a are

updated monthly at a

The basic process applied at each is applied separately for each index, as follows:

1. Apply Core Eligibility criteria to all listed debt to obtain an eligible universe of bonds.2. Select the of the composite index from this universe, using either a Dual Ranking

Methodology or a Market Methodology.3. If necessary, calculate an Issuer Capping Factor for each Issuer in the composite index.4. Allocate each selected of the composite index into the relevant Term-Split

sub-index.5. Allocate each selected of the composite index into the relevant Issuer Class

sub-index.

There are no or due to a However, the factors for all are updated, where their nominal amount in issue has changed, as well as their capping factors where relevant.

5.2 and Timelines

5.2.1

A is performed quarterly for all indices in the Index Series, in February, May, August and November. At a the of each index are re-evaluated in line with these rules using either a Dual Ranking Methodology or a Market Percentage Methodology, and set for the subsequent quarter. In the and capping factors are updated to

current bond data. are close of business on the Thursday of month. All changes made at each are published in advance by no later

than the 15th day of the previous calendar month, subject to approval by the Index

As in 4.2, ALBI20 and CILI15 are Tradable Indices with listed products. As such their are at 12 noon on the Thursday of the month instead of close of business.

dates are scheduled to coincide with bond and future expiry dates to minimise the chances of changes in the near contract.

5.2.2

A is performed monthly in months, for all indices in the Index Series. It takes places in January, March, April, June, July, September, October and December. At a only the factors of are adjusted to any updates to their nominal amounts in issue. Capping factors are recalculated where relevant. are on the day

the Thursday of the month. All factor changes are made available to subscribers by no later than the 15th day of the previous calendar month.

5.2.3 Non-trading Days

11

Where the first Thursday of the Reconstitution or the Reweighting month falls on a non-trading day,then the second Thursday of that month will be used to determine the effective date. Where thesecond Thursday is itself a non-trading day, the previous trading day in that week will be used.

5.2.4 Cut Date

The Cut Date is the last trading day of the month, two months prior to the Reconstitution orReweightingmonth.Forexample,theCutDatefortheJanuaryReweightingisthelasttradingdayofthepreviousNovember,andtheCutDatefortheFebruaryReconstitutionisthelasttradingdayoftheprevious December.

5.2.5 Averaging Period

TheAveragingPeriodisdefinedforeachReconstitutionasthetwelvemonthperiodendingontheCutDate.Inthecaseofnewissues,theaveragingperiodforthatbondiscalculatedoverthemonthsforwhichishasbeenissued,excludingthefirstmonthoflisting.NotethattheAveragingPeriodisnotusedforaReweighting.

5.3 Core Eligibility

5.3.1 Index Series Eligibility Criteria

TobeeligibleforselectionfortheJSEFixedIncomeIndexseries,abondmust:

> BelistedontheJSEandsettledelectronically; > Beavanillafixedrate,floatingrateorinflation-linkedbond.Thisexcludescredit-linkednotes,ETF’s,commercialpaper,perpetuities,customisedinstrumentsandamortisinginstruments;

> Havearemainingtermtomaturityofatleastoneyearovertheentirequarterlyperiodforwhichtheselectionismade.Asaresult,therewillneverbeanindexconstituentwitharemainingtermtomaturitythatislessthanayear;

> HaveacleanmarketcapitalisationinexcessofR100million,measuredovertheaveragingperiod; > HaveEITHERasingleredemptiondate;OR,inthecaseofbondswithmultipleredemptiondates,bepricedinthemarketaccordingtothe“mid-redemption”convention;andaredemptiondate(ormid-redemptiondate)whichcoincideswithacoupondate;

> Be listed for at least 2 months on the Cut Date.

5.3.2 IndexSpecificEligibilityCriteria

Depending on the Coupon Type of the bond, itmust satisfy the following eligibility criteria to beeligibleforselection:

> ForindiceswithFixedRatecoupons,thebondmustpayasemi-annualcouponatafixed,pre-definedrate(maybezero);

> ForindiceswithInflation-Linkedcoupons,thebondmustbeaconventionalCPIinstrumentwhichhasafixed(orzero)semi-annualcouponinflatedbythefour-monthlaggedheadlineConsumerPriceIndexforallurbanareas.Thisisinlinewithcurrentmarketpracticeforinflation-linkedbondsandspecificationslaidoutbytheInternationalSwapsandDerivativesAssociations;

> ForindiceswithFloatingRatecoupons,thebondmustpayaquarterly,non-amortisingcouponatafixed,pre-definedspreadoverJIBAR.

Any bond with an explicit guarantee by the Government of the Republic of South Africa will not be eligibleforinclusiontothecreditindices,namelyCFIX30,CFIX95,CFLO30andCFLO95.

5.4 ReconstitutionofCompositeIndicesComposite Indices are reconstituted quarterly according to one of twomethodologies. ReplicableindicesutilisetheDualRankingmethodologyandconsistofafixednumberofbonds.RepresentativeindicesutiliseaMarketRepresentationPercentagemethodologyandconsistofavariablenumberofbonds.EachmethodologyisappliedfromfirstprinciplesateachReconstitutiontodeterminethenewconstituentsoftheparticularindex.Thiscanthenbecomparedtotheexistingindexconstituentstodetermineifthereareanyconstituentadditionsordeletionstobeappliedatthatquarter.

12

5.4.1 Dual Ranking Methodology

TheDualRankingMethodology is appliedatReconstitution separately foreach indexas required,according to the following steps:

1. UsingbonddataaspublishedontheCutDate,theCoreEligibilitycriteriaareappliedtodetermineauniverseofeligiblebondsfortheparticularindex.

2. TheMarketCapitalisationofeacheligiblebondiscalculatedastheproductofnominalamountinissueandcleanprice.ThisisdoneasattheendofeachmonthintheAveragingPeriod,andthenfinallyaveragedtogetanAverageMarketCapitalisationperbond.

3. EligiblebondsarerankedindescendingorderbyAverageMarketCapitalisationandassignedaMarketCapitalisationRank.Tiesarebrokenalphabeticallybybondcode.

4. TheLiquidityofeacheligiblebondrepresentsitssecondarymarketturnover.Thisisgivenbythecleanconsiderationofeachtrade.Tradesincludedareoutrightpurchasesandsalesofstandardandoddlots,forsettlementonthestandardsettlementday(“t+3”),oronanynon-standardday.Bothlegsofcarries(alsoknownasbuy/sell-backs),reposandoptionexercisesare excluded. Liquidity is calculated as the median of the monthly traded values over the AveragingPeriodtogetaMedianMonthlyTurnoverperbond.

5. EligiblebondsarerankedindescendingorderbyMedianMonthlyTurnoverandassignedaLiquidityRank.Tiesarebrokenalphabetically-in-reversebybondcode.

6. TheDualRankofabondisthegreaterofitsMarketCapitalisationRankanditsLiquidityRank.TiesofDualRankarelikely,evencommon,andarebrokenbyMarketCapitalisationRank.Thiscanbesimplyachievedbyadding0.5totheMarketCapitalisationRankofanybondwhoseMarketCapitalisationRankisgreaterthanorequaltoitsLiquidityRank.TheDualRankisthenthegreaterofthisAdjustedMarketCapitalisationRankandtheLiquidityRank.

7. EligiblebondsaresortedbyDualRankandthefirstNbondssolistedareselected.Nwilldependonthefixednumberofconstituentsdefinedfortheparticularindex.

5.4.2 MarketRepresentationPercentageMethodology

TheMarketRepresentationMethodology is appliedatReconstitution separately for each indexasrequired,accordingtothefollowingsteps:

1. UsingbonddataaspublishedontheCutDate,theCoreEligibilitycriteriaareappliedtodetermineauniverseofeligiblebondsfortheparticularindex.

2. TheMarketCapitalisationofeacheligiblebondiscalculatedastheproductofnominalamountinissueandcleanprice.ThisisdoneasattheendofeachmonthintheAveragingPeriod,andthenfinallyaveragedtogetanAverageMarketCapitalisationperbond.

3. AnIssuerMarketCapitalisationiscalculatedforeachIssuerasthetotaloftheMarketCapitalisationforeachbondissuedbythatissuer.

4. AMarketRepresentationPercentageiscalculatedforeachIssuerastheproportionofIssuerMarketCapitalisationofthetotaleligibleMarketCapitalisation.

5. IssuersaresortedindescendingorderbyMarketRepresentationPercentage.ThefirstNissuersarethenselectedsuchthattheircombinedMarketRepresentationPercentageisinexcessof95%.Justunder5%ofissuerswiththesmallestMarketRepresentationPercentageswill thus be excluded from the index.

NotethatselectionoccursatanIssuerlevelandnotatabondlevel.IfaparticularIssuerfallswithinthe95%requirementthenallitseligiblebondswillbeincludedintheparticularIndex.

5.5 Capping of Issuer WeightAcappingfactorisappliedincertainindices,asdefinedinSection4.2.Thiscappingfactordeterminesthemaximumweight of a single Issuer in the particular Composite Index. It is calculated at eachReconstitutionandupdatedateachreweighting.

13

Inpractice,thecappingfactorisusedtodecreasetheweightingfactor(i.e. nominal amount in issue) usedinthe indexcalculation.Assuch,an individualbondmayenduphavingadifferentweightingfactor in two separate indices – one capped and one uncapped.

A single factor is calculated for each Issuer in each Index and then applied to all bonds issued by that Issuer. In other words the weight of each bond from that Issuer will be decreased by the same scale in that index.

5.6 Capping of Number of BondsAlimitonthenumberofbondsperissuerisappliedincertainreplicableindicesasdefinedinSection4.2.This isapplied inorder topreventcrowdingoutof smaller issuersby those issuerswho issuemany bonds.

Uponranking,anissuerisincludedinanindexsubjecttoamaximumofNbonds.ThisreferstotheNlargest bonds issued by a single issuer based on Dual Ranking.

5.7 ReconstitutionofSub-IndicesAnychange to theconstituentsofa composite indexataReconstitutionwill automaticallyhaveaknock-onimpactonallsub-indicesbasedonthatparticularcompositeindex.Changestosub-indiceswillbeappliedusingthesamevaluesandtimelinesappliedinthecompositeindex.

5.8 ReweightingTheweightingfactorsof individualbondsarebasedonthenominalamount in issueof thatbond.Whilethisamountinissuecanchangefromday-to-day,anysuchchangewillnotbeappliedintheindices immediately. Instead, all changeswill be rolledupandapplied at thenextReweightingorReconstitution. At each Reweighting, theweighting factor of each bond is updated to reflect thenominalamountinissueofthatbondontheCutDate.Thecappingfactorwillalsobeupdated.

NotethatallweightingfactorsarealsoupdatedateachReconstitution,andassuch,aReconstitutioncanbeseentoincludeafullReweighting.

14

6 Special Events

Incertaincircumstancesitmightbenecessarytoconsiderthere-selectionofconstituentsduringaquarterlyperiod.Thesecircumstancescouldinclude(butarenotlimitedto):

1. Theearlyredemptionorrepurchasebytheissuerofalargeproportionofabond’soutstanding issue.

2. Theissueofanewbondwhichistoolargeorimportanttohavetowaitforthenextquarterlyre-selection.Thisisbasedonthepresumptionthatthebondwillremainintheindex.

3. Theunbundlingofabond,wherebyindividualholdingsaresplitintomultipleseparatebondswithdifferentexpirydates.

Intheseandotherextraordinarycases,theIndexCommitteewillbeconvenedtodecideonacourseofaction.Thedecisionstobetakenwillinclude,amongothers:

> Thenewconstituentsofthesectors(whichcouldhoweverremainthesame); > Theirnewweightings(whichcouldalsobeunchanged); > Theeffectivedateforthechange(ifany); > Theamountofnoticerequired(ifapplicable).

AnychangessointroducedwillbeeffectiveonlyuntilthenextquarterlyReconstitution,atwhichpointthestandardruleswillagainapply.Inmakingthesedecisions,theIndexCommitteewillfollowtheseguidelines:

> Theoverridingprincipleoftheindicesisthattheytrackaportfoliooftheconstituentbondsintheirgivenproportions.Henceanychangesmustbereplicablebyfundmanagersasfaraspracticallypossible.

> Liquidityisanissue.Itmaysometimesbeunreasonabletoexpectfundmanagerstobeabletomovelargeamountsofstock.Ontheotherhand,theveryrequirementtodosomaycreateitsown liquidity.

> TheIndexCommitteewillrecognisethatthesespecificationsareunabletoforeseeallcircumstances,andhenceitsdiscretionwillbeneededfromtimetotime.However,theseactionswillformprecedents,whichwillinformtheIndexCommittee’ssubsequentdeliberations.

> TheIndexCommitteewillcommunicateitsdecisionsassoonaspossibleontheJSEwebsite.

15

7 CalculationGuide

7.1 OverviewThespecificationsthatfollowusea“ReferencePortfolio”ratherthana“basicconstant,k”whichisoftenusedinspecifyingindices.Thetwoapproachesare,however,mathematicallyequivalent.

TheReferencePortfoliocontainstwoclassesofasset:bonds,and(fromtimetotime)therightstoreceivecoupons.Thisrightstemsfrombondsthatarecurrentlyintheirex-couponperiod,butwereconstituentsoftheindexatthetimethattheyenteredtheex-couponperiod.TheweightsofthebondsintheReferencePortfolioareproportionaltotheirtotalnominalamountsinissue,andareupdatedmonthly.Thisistheso-called“nominalweightingscheme”.Couponsvestonholdingsofbondsonthedaystheygoex-coupon.Theyarereceivedsometime(usually10days)laterandre-investedacrosstheentireportfolio.

TheBondPortionof theportfolio is valuedat all-inprices,using theappropriatemarket yields tomaturityforthevaluationdate,forsettlementonthestandardsettlementdate(“t+3”).Couponsarevaluedbydiscountingthemfromreceiptdatetostandardsettlementdate,attheyieldstomaturityof their parent bonds.

Bondandcouponvaluesforthesettlementdatearethenfurtherdiscounted,attheyieldstomaturityoftheirrespectivebonds,tothevaluationdate.

7.2 Re-basingChangesintheholdingsofbondsintheReferencePortfolioarereferredtoasRe-basings.ARe-basingisaneventthattriggersaneedfortheindextrackertoadjusttheirportfolio.Thisisaneventwhichresultsinak-factorchange(seeSection7.3.13)andcanoccurforthefollowingreasons:

1. Re-investment of coupons received.2. AdditionsorDeletionsofconstituentsintheindex.ThiscanbeduetoaReconstitution,Term-

split sub-index change or Special Event.3. Changetotheweightingofconstituentstoreflectchangesinthenominalamountofbondsin

issue.ThiscanbedoneataReconstitution,ReweightingorduetoaSpecialEvent.

Re-basingsareassumedtohappeninstantaneouslyatafixedtimeonthelasttradingdaybeforethechangeiseffective(“re-basingtime”).TheytakeplaceattheyieldtomaturitydeterminedbytheJSEtoholdatthattime(“re-basingyield”).Thiswouldordinarilybeat16:30eachday,usingthemark-to-marketyieldstomaturitydeterminedbytheJSEatthattime.Itmayhoweverbenecessarytousedifferenttimesondayswhenfuturescontractsexpire,iftheyhaveadifferentexpirytime.The12:00mark-to-marketiscurrentlyusedforReconstitutionsoftradableindices(aspersection4.2).

Index trackers are required to rebase their portfolios at the re-basing yield in order to avoidtracking error.

7.3 Total Return Index

7.3.1 Preface

Thedescriptionwhichfollowsisdesignedforprogrammerswritingtothesespecifications,ratherthanfortheimmediateedificationofthereader.Thereforesomeprefatoryexplanationmaybeinorder.

Sections 7.3.2 to 7.3.7 define basic concepts, from the time structure (valuation and settlementdates),throughthenomenclatureforbondsandtheirweights,andontotheinitialisationofanindexatitsinception.Thelastofthesesectionsdefinesthediscountfactorstobeusedbetweensettlementandvaluationdate.

16

Section7.3.8 describesthebondportionoftheportfolio,intermsoftheweightsofeachbond,andspecifieshowtovalueit.

Sections7.3.9to7.3.12 dealwithex-coupons.Firsttheex-periodisdefinedandthenthequantificationandvaluationofex-couponsportionsduring thisperiodarespecified.Lastly, thevalueofcouponsbeing re-invested on any day is given.

Sections7.3.13and7.3.14 givethecentralresult:thecalculationoftheNominalFactoronanyday,toreflectcouponsbeingre-investedandanychangeinweights.Thesameformulacanbeusedevenifthere are no re-investments or weight changes.

“IndexValue”inthissectionistakentomeantheTotalReturnIndexValue.

7.3.2 Time Structure

Considerthecalculationoftheindexvalueatacertaintimeonacertaindate,the“ValuationDate”,t1.TheValuationDatemaybeanydayoftheweek,notnecessarilyatradingday.Thecalculationtimeisnotparameterised,butisstatedexplicitlywhereitisnotobviousfromthecontext.Foranydate,t,defineitssettlementdate, s,asfollows:

> If tisatradingday, sisthedateofitssettlementdayaccordingtothethenprevailingJSEpractice.Currentlybondssettleon“t+3”usingthefollowinggoodbusinessdayconvention;

> If tisanon-tradingday, sisdeemedtobethesettlementdayofthefirstprecedingtradingday.Forexample,iftisaSaturday, smustbethesettlementdateforFridayi.e. the next Wednesday (assuming no public holidays).

However,itisimportanttobearinmindthatinthevaluationoffloatingratenotes,theyarevaluedt+0,i.e. t=s.

Yieldstomaturityapplicabletoanycalculation,unlessexplicitlystated,willbethoseprevailingatthetime.Forcalculationsonnon-tradingdaysthemark-to-marketyieldstomaturityofthefirstprecedingtrading day will be used2.Nominalyieldswillbeusedforfixedandfloatingbondsandrealyieldsforinflation-linkedbonds.

7.3.3 Bonds

Theconstituentbondsoftheindexbeingcalculatedarereferredtobythesubscripti,oras“bondi”,where i ranges from 1 to N,thenumberofconstituentbonds.Allsummations(Σ)areoveri=1 to N. N obviouslydiffersbetweenindicesorevenbetweenvaluationdatesforthesameindex,andhencethedescriptionbelowistobetakenasreferringtothecalculationforonlyasingleindexorsub-indexonavaluationdate.

7.3.4 WeightingFactor

Theweightingfactorsofthebondsintheindexaregivenby:

Wi,t

Where the subscript i refers to bond i and the subscript t indicates the date.

wi,t is the nominal amount in issue of each bondmeasured in RandMilllions, decreased in someinstancesbyanIssuercappingfactor.ThisnumberissetandpublishedmonthlyateachReconstitutionorReweighting,andremainsfixedforthesubsequentmonth.

1 Dates such as tareexpressedasthenumberofdaysfromafixedbaseddatesothatsimplearithmeticcanbeperformedonthem

2 Yieldsareassumedtobegivenaspercentages,sothatayieldof16.52%isthenumber16.52.Divisionby100,wherenecessary,isexplicitinthecalculations.

17

OndayswhenaReweighting,Reconstitutionortermsub-sectorchangestakeplace,weightsforsomebondscouldbezeroeitherbeforeorafterthechange.Thespecificationsbelowallowforthis.Infact,anynumberofextrabondscanbeincludedintheNbonds,andaslongastheirweightsarezero,theywillnotaffecttheresultsoftheBondPortionoftheportfolio.

7.3.5 InflationFactor

An inflation indexratio isneededtoadjustcertainvalueswhencalculating inflation-linked indices.It is important to note that the all-in prices for bonds published by the JSE are already adjusted for inflation,howeveraninflationindexratioisrequiredinordertocreateanominaldiscountfactorfromarealdiscountfactor,aswellastocalculatetheactualcash-flowofanex-coupon.

TheinflationindexratiousestheCPIindex,whichistheheadlineCPIforallurbanareas.ThisindexispublishedmonthlybyStatisticsSouthAfricaindocumentP01413.

CPI(j)orthevalueoftheCPIindexratioatagiventimej is calculated as follows:

Where:j isthedateforwhichtheCPIindexratioisneededd is the calendar day corresponding to jm is the number of days in the calendar month MM is the calendar month corresponding to jCPIX isthepublishedCPIindexvaluethatappliestothefirstdayofthecalendarmonthXBase CPIi is the CPI index value for the base date of bond i;thisisusuallytheissuedateofthe

bond but may also be based on a reference bond.

7.3.6 Initialisation

An index is created as at the end of day on date t0withinitialvalueIt0.TheRandvalueoftheReferencePortfolioatthesametimeisZt0. Indicesareusuallylaunchedwithaninitialvalueof100,althoughthereisnoreasonwhyanyothervaluescannotbeused.ThevalueoftheReferencePortfolio“cancelsout”inthecalculations,andthereforeitsinitialvaluecanbealmostanything.AconvenientvalueisR100m,sothattheportfoliovalue(inRmillions)andtheindexvalue(ifinitially100)arealwaysthesame number.

ThebasedatefortheALBI20anditssub-indicesis1July2000,and1February2007fortheCILI15.Allthesub-indicesoftheCILI15haveabasedateof1February2010withaninitialindexvalueof100,exceptfortheCILI15G(IGOV),whichwasbebackdatedto5February2010.Thisensuresthattheindexlevelsaresomewhatcomparableastheirlevelsareidenticalon1February2010.Thebasedateforallother indices in the Index Series is 1 April 2012.

7.3.7 ValuationDateDiscountFactors

ThecalculationsfordaytstartwiththepricingoftheconstituentbondsintheReferencePortfolioforsettlementon s. Similarly if there are any ex-coupons they will be discounted from their receipt date to give a value on s.

Thesevalues for s will then be further discounted from s to thevaluationdate t. Thediscountingof each value (i.e.bondpriceorex-couponbelonging to thebond)willbeateachbond’syield tomaturity,includinganinflationadjustmentforinflation-linkedbonds.

3 ThisindexissubjecttochangeandrebasingbyStatisticsSouthAfrica.Iftheaforementionedindexisnotavailable,therelevantappropriatesubstituteindexwillbeused

18

Theeffectofthisfurtherdiscountingwilloftenbethesameasifthebonditselfhadbeenvaluedforsettlementont and not ons,using the same yield to maturity4. In order to make this statement as trueaspossible,thediscountingmethodappliedfrom s to t must be consistent with the Bond Pricing Formula5.Thespecificationsbelowdescribethecalculationofdiscountfactors,Di,t,forbondi on day t,whichfulfilthiscondition.

Theinputsare:t isvaluationdates issettlementdatefort (see 7.3.2)ci,t isthefirstcouponpaymentdateforbondiwhichisonoraftertc -i,t is the previous coupon payment date for bond iwhichisbeforeci,tc +i,t isthefirstcouponpaymentdateforbondiwhichisafterci,tYi,t is the yield to maturity of bond iapplicabletothevaluation.Thisfigurewillbethe

nominalyieldtomaturityforvanillabondsandtherealyieldtomaturityforinflation-linked bonds

Thefirststepistodeterminetheexactsizeoftheperiod,Hi,t, overwhichdiscountingisperformedforbond i on day t.Thisismeasuredinthesameunitsasthecouponfrequencyofthebond,namelyhalf-yearsforthefixedrateandinflation-linkedindices,andinquarter-yearsforthefloatingrateindices.Thisperiodsizewillcorrespondtotheperiodbetweenthepreviousandthenextcoupondatesandcan vary in its actual number of days.

Theperiodfrom s to t is then measuredasafractionofahalf-yearorafractionofaquarter,ratherthanafixednumberofdays.Hi,tisusedinconjunctionwiththebond’syieldtomaturitytodeterminea discount factor applicable from s to t.

If the period between s and tdoesnotcontainacouponpaymentdate,thenHi,tis simply the number of days from t to sdividedbythenumberofdaysinthecurrentcouponperiod.However,ifacouponpayment date does fall before the settlement date, we have to allow for two coupon periods ofdifferentlengths.Thesetwocasesareillustratedbelow:

a. No Coupon Between s and t (i.e ci,t≥s):

t

t

s

s

C -i,t

C -i,t

C +i,t

C +i,t

Ci,t

Ci,t

Numerator 1 Numerator 2

Numerator

Denominator 1 Denominator 2

Denominator

b. Coupon Between s and t (i.e t≤ci,t <s):

t

t

s

s

C -i,t

C -i,t

C +i,t

C +i,t

Ci,t

Ci,t

Numerator 1 Numerator 2

Numerator

Denominator 1 Denominator 2

Denominator

4 Resultswilldifferonlywherevaluationfortiscum,whilethatfor s is ex.5 SpecificationsfortheBondPricingFormulaareavailablefromtheJSEinadocumentofthatname,asahardcopyorontheir

website.

19

Hencefromtheabove,theformulaeforHi,t is as follows:

Given Hi,tabove,thediscountfactorDi,t applicable from s to s is:

For Fixed Coupon Bonds:

ForInflation-LinkedBonds:

ForFloatingRateBonds:Di,t=1;Thediscountfactordoesnotapplybecausefloatingratenotesarevalued t+0,i.e. t=s.

7.3.8 TheBondPortionofthePortfolio

The reference portfolio is valued in two separate portions: the Bond Portion and the Ex-CouponPortion.Thissectiondealswiththeformer.

TheBondPortionofthePortfolioisaportfolioofbondsi held in nominal amounts Ni,t on day t.Thenominal amount of Bond i on day tisproportionaltothatbond’sweightingfactoronthesameday:

Kt representstheproportionalityconstantor“k-factor”.Thisactsasarebasingfactorforthe indexvalue,andissetatanindexlevel.Itissubjecttochangefromtimetotimewhenare-basingeventoccurs(seeSection7.3.13),howeveritsinitialvalueisgivenbytherequirementthattheportfolio’sinitialvalueisZt0:

In the above formula,Pi,t0 is the all-in price of bond i at its re-basing yield for day t0, forsettlementon s,andwi,t0 are the weights applicable to t0. BondpricesasdefinedintheBondPricingFormulaarequotedperR100nominal,andmustbedividedby100beforebeingusedhere.Forinflation-linkedindices,theall-in-pricesprovidedbytheJSEwillalreadyincludetheCPIindexratioadjustment.

ThevalueoftheBondPortionforasinglebond,Bi,t,atanytimeondayt is then given by:

20

Where Pi,t is the all-in price of bond iperR1nominal,forsettlementonday s at the prevailing yield tomaturity.ThetotalvalueoftheBondPortionoftheReferencePortfolio isthesumofBi,t across all bonds:

7.3.9 The Ex-Period

TheEx-Periodofabondistheperiodwhichoccursdirectlybeforeeachofitscouponpaymentdateswhenitistradingforsettlementex-coupon.Thetraderwhopurchasesthebondinitsex-periodisnotentitledtoreceivethenextcouponpayable.

TheEx-Periodbeginsonthefirstdayonwhichabondistradingforex-settlementi.e.thefirsttradingdaywhosesettlementdateisonorafterthebond’sbooks-closeddate.

TheEx-Periodendsonthedayonwhichthecoupon(havingbeenreceived)canbere-investedi.e. the firsttradingdaywhosesettlementisonorafterthebond’scouponpaymentdate.OnthisdaytheEx-Periodendsatthere-basingtimefortheday.

7.3.10 The Ex-Coupon of an individual bond

TheEx-Couponportionoftheportfolioonvaluationdatet is the value of coupons which have vested intheportfolio(basedonholdingsinthebondsatthestartoftheirEx-periods)buthavenotyetbeenreceived and re-invested.

TheEx-Coupon,Xi,t,relatingtobondi on day tcanbedefinedasfollows:

For Bonds not in their Ex-period: Xi,t = 0

For Fixed Coupon Bonds:

ForInflation-LinkedBonds:

ForFloatingRateBonds:

Where:N’i,t isthenominalamountofthebondintheportfolioonthefirstday,t’,ofitsEx-Period

(and before any Re-basing for that day)6.ThisvalueremainsconstantthroughouttheEx-Period

gi is the coupon rate of bond i,expressedasapercentage.Thiswillbeanominalcouponrateforfixedandfloatingratebondsandarealcouponrateforinflation-linkedbonds

CPI(ci,t) istheCPIindexratioforthecouponpaymentdateci,t asdefinedinSection7.3.5

Note: It is possible for aparticular bond tobe included in theex-couponportionbutno longer aconstituentoftheBondPortionoftheportfolio,ifitwasdeletedfromtheindexduringitsex-period.

6 Notethat,atthelaunchofanewindex,thefactthatabondmaybeinitsEx-periodisignoredsothat all Ex-Coupons are zero.

21

7.3.11 TheValueoftheEx-CouponPortion

Thevalueofeachbond’sex-coupon,Vi,t,onanydayt in itsEx-Period, is thepresentvalueof thatcouponpaymentdiscountedintwoparts:firstfromcouponpaymentdateto s and then from s to t. In the event where the coupon payment date falls between t and s,thereisonlyasinglelevelofdiscounting:fromcouponpaymentdatetot.

For Fixed Coupon Bonds:

ForInflation-LinkedBonds:

For FloatingRateBonds, the ex-couponportion is discountedusing the zero-rate plus the tradingspread in order to bring it to trade date:

Where:Zt isthezero-rateofftheJSELinearSwapCurveTSi,t is the trading spread for instrument i on day t

ThetotalvalueoftheEx-CouponportionoftheReferencePortfolioisthesumofVi,t across all bonds:

7.3.12 Re-investment of Coupons

TheEx-CouponXi,t isreceivedonitspaymentdateandre-investedatthefirstopportunitythereafter,i.e.onthefirsttradingdatewhosesettlementdateisonorafterreceiptdate,orthelastdayoftheEx-Period.

Itisimportanttonotethatduetothelagbetweentradeandsettlement,thedealstore-investthecouponstakeplacebeforetheactualreceiptdate.Re-investmentoccursattheRe-basingtimeandatRe-basingyieldsfortheday.Untilthishappens,itisstillpartoftheEx-Couponportion,Ct.AftertheRe-basing,itfallsoutofthisportion.

ThevalueoftheEx-Couponportionthatistobere-investedonsettlementdate sisdefinedasRi,t,andwillthusonlyhaveavalueonthelastdayoftheEx-period,being0elsewhere:

Ri,t = Vi,t if t is the last day of the Ex-period

Ri,t = 0 otherwise

Thetotalvalueofthecouponsbeingre-investedacrosstheReferencePortfoliois:

22

7.3.13 RecalculationoftheNominalFactor,Kt

TherecalculationofKttakesplacewheneverthereisaRe-basingevent(Section7.2),attheRe-basingtime.Thenewk-factor,Kt’willholdthereafter

7.

Kt’iscalculatedsuchthatthevalueoftheReferencePortfolioimmediatelybeforeandaftertheRe-basingisthesame.Thek-factoristhususedtomaintainacontinuousindexvalue.

Thek-factoriscalculatedasfollows:

PortfolioafterRe-BasingChanges=PortfoliobeforeRe-BasingChanges

Where:Kt’ is the new k-factorwi,t’ isthenewweightapplicableaftertheRe-basingevent

7.3.14 Total Return Index Value

TheTotalReturnIndexvalueoftheReferencePortfolioatanytimeondayt is given as follows:

Zt = Bt+Ct

7.4 Clean Price IndexThepriceindexisarepresentationofthecapitalvalueofthebondportfoliowithoutregardfortheinterestaccruedorcouponspaid.Thisindexis“clean”andiscalculatedasfollows:

WhereIt isthevalueoftheCleanPriceIndexattimetPi,t isthecleanpriceperR100nominalvalueofconstituentiattimet,pricedforsameday

settlement(i.e t=s)Kt is the constant chosen tobase the index at thepublished starting value as on the

starting date of the index. This “k-factor” changeswhenever index constituents orweightingschangetothattheindexleveliscontinuous.Thus,thenewconstantk’iscalculatedsuchthatI’t=It.Notethateachindexhasadistinctk-factorandthattheKt used in the Clean Price Index is not the same as the KtusedintheTotalReturnIndex

7 Generally,thiswouldbefromthenexttradingday.But,ifreal-timeindicesaretobecalculatedaftertheRebasingonthesameday,thenewvalueK´tmustbeused.Inthiscasetoo,thevalueof the coupons which have been re-invested must not be included in the total value of the ex-coupons.

23

7.5 All in Price IndexTheallinpriceindexisidenticaltothecleanpriceindex,saveforthefactthattheallinpriceisused.Thisshouldreflectperformancesimilartothatofabondportfoliowhichdoesnotreinvestitscouponsbut rather pays them out to the investor.

WhereIt isthevalueoftheCleanPriceIndexattimetPi,t isthecleanpriceperR100nominalvalueofconstituentiattimet,pricedforsameday

settlement(i.e t=s)K is the constant chosen tobase the index at thepublished starting value as on the

starting date of the index. This “k-factor” changeswhenever index constituents orweightingschangetothattheindexleveliscontinuous.Thus,thenewconstantk’iscalculatedsuchthatI’t=It.Notethateachindexhasadistinctk-factorandthattheKusedintheCleanPriceIndexisnotthesameastheKusedintheTotalReturnIndex

7.6 Coupon Yield IndexThecouponyieldindexprovidesarunningyieldestimateandisdefinedastheannualinterestyieldonthepriceindex,i.e.theinterestreceivableoverafullyeardividedbythemarketcapitalisation.

Forfixed-rateandfloating-rateindices:

Forinflation-linkedindices:

Wheregi is the coupon rate of bond i,expressedasapercentage.Thiswillbeanominalcoupon

rateforfixedandfloatingratebondsandarealcouponrateforinflation-linkedbondsPi,t isthecleanpriceperR100nominalvalueofconstituentiattimet,pricedforsameday

settlement(i.e t=s)

7.7 DurationandConvexityThe calculationof thefirst and seconddifferential of thebondor portfolio value,with respect toyieldtomaturity,isrequiredforDurationandConvexity.Giventhesomewhatcomplexanddetaileddefinitionsofthisvalueprovidedabove,thesedifferentialscouldbequitelengthy.However,whereasanexactvaluationiscrucialtotheindicesproperapplication,thisisnotthecasewithdurationandconvexity.Thesemeasures,whichareusuallyquotedwithonly2or3significantdigits,areusedmoretogiveanimpressionisticviewofaportfoliothantodescribeitprecisely.

Furthermore,itisbecomingwidelyacceptedthatthesemeasureshavesomeseriouslimitationsforsomeapplications.Bothhavetheall-in-priceofabond inthedenominatoroftheir formulae.Asabondgoesex-coupon,therefore,anditsall-in-pricedrops,sododurationandconvexityshowsudden

24

increases.Therearesomeportfoliomanagerswhofeelthattobegivenatargetforsuchanerraticmeasureisnonsensical.Apossiblesolutionistousea“clean”duration,wherethecleanpricereplacesthe all-in price in the denominator.

However,thecleandurationitselfhaslimitations.Historically,itwascustomarytouseduration(andconvexity) to estimate quickly a portfolio’s sensitivity to parallel shifts in the yield curve, via theapplicationofTaylor’sTheoremtothetotalportfoliovalue.Onecannotapplythecleanmeasuresinthesameway:theymustbeappliedtoacleanvalue,whichisnotgenerallyavailable.

Even though this usage is now rare (with almost unlimited computer power it is simpler and more accuratetojustre-valuetheportfolio),theappealoftheconventionalmeasureliveson.Therefore,thedurationandconvexitymeasuresoftheindiceswillbetheconventional,all-inones.

Inthelightoftheabove,somesimplificationswillbetakenintheircalculation.Theassumptionwillbemade,inthecalculationofdurationandconvexityaccordingtothespecificationsoftheBondPricingFormula, thatbondsdonotgoex-coupon,andhencearevaluedatall-inpricesuntil theircouponpaymentday.Thecalculationswillbemadeforthestandardsettlementday,withanadjustmenttothevaluationdate.Theywillbeperformeddailyontheportfolioafteranyre-basingsfortheday.

Thevirtueof theseassumptions is that theportfolio canbe treatedas consistingonlyof itsbondportion,andtheex-couponportioncanbesafelyignored.Resultswillbeexactaslongastherearenore-basingsbetweentherealex-coupondateandthecouponpaymentdate;wheretherearere-basings,thepercentageerrorwillbenegligible.

7.7.1 ModifiedDuration

Theappropriatemeasure isthemodifiedduration.Specificationscanbefound intheBondPricingFormula.Asmentionedabove,thecalculationmustassumethatbondsdonotgoex-coupon,andbeforsettlementonthestandardsettlementdate.

Modifieddurationisgivenasfollows:

WheredModi,t isthemodifieddurationofbondi for day sN´i,t is the nominal amount of bond iintheportfolio,effectiveonorbeforethenexttrading

day (i.e.afteranyRe-basingondayt has been applied)

RemainingVariablesareasdefinedabove.

7.7.2 Convexity

Theconvexityofthereferenceportfoliofollowsdirectly:

WhereConvi,t is the convexity of bond i calculated for t’ssettlementdate, s,assumingitdoesnotgo

ex

Remainingvariablesareasdefinedabove.

25

7.7.3 Application

ModifiedDurationandConvexitycanbeusedtoestimatethechangeinvalueoftheindexforagivensmallparallelshiftintheyieldcurve.FromTaylor’stheorem,weget:

Where∆I IstheestimatedchangeintheindexI Is the current index value∆y Istheshiftinyieldexpressedasadecimal(100basispointsis0.01)

7.8 Precision and RoundingAllvaluesarecalculatedandheldtoIEEEdoubleprecision(15significantdigits).

All-in and clean prices are rounded to 5 decimal places in accordance with the Bond Pricing Formulaspecifications.

Indexvalueswillbepublishedroundedtothreedecimalplaces.Thiswillallowcalculationofreturnsto2 decimal places (when expressed as percentages). A one basis point change in all yields to maturity will causeachangeofabout.05intheindex;thesamechangeappliedtothelowestmarketcapitalisationconstituentwillnotbeobservableinthethirddecimalplace.

Durationswillbepublishedtotwodecimalplaces,andconvexitiestoone.

Foradditionalinformationcontact:JSEIndices

+27115207000indices@jse.co.zawww.jse.co.za

DISCLAIMER:ThisdocumentisintendedtoprovidegeneralinformationregardingtheJSELimitedanditsaffiliatesandsubsidiaries(“JSE”)anditsproductsandservices,andisnotintendedto,nordoesit,constituteinvestmentorotherprofessionaladvice.Itisprudenttoconsultprofessionaladvisersbeforemakinganyinvestmentdecisionortakinganyactionwhichmightaffectyourpersonalfinancesorbusiness.TheJSEdoesnot,whetherexpressly,tacitlyorimplicitly,represent,warrantorinanywayguaranteetheaccuracyorreliabilityofanyadvice,opinion,statement,orotherdataandinformationcontainedin,displayedon,linkedtoordistributedthroughthisdocument.All informationassetoutinthisdocumentisprovidedforinformationpurposesonlyandnoresponsibilityor liabilityofanykindornature,howsoeverarising(includinginnegligence),willbeacceptedbytheJSE, itsofficers,employeesandagentsforanyerrorscontainedin,orforanylossarisingfromuseof,orrelianceonthisdocument.Exceptasisotherwiseindicated,theJSEistheownerof thecopyright inall the information featured in thisdocumentandofall related intellectualproperty rights, includingbutnot limited toalltrademarks.Nopartof thisdocumentmaybecopied, reproduced,amendedor transmitted inanywaywithout thepriorwrittenconsentof theJSE. ©2014 Compiled: August 2014.

26