Agenda Opening & welcome Discussion Paper walkthrough <IR> Framework Pilot Programme Q&A Closing

Discussion Paper – context for Integrated Reporting

Discussion Paper Overview Available from 12th September 2011 Public comment until 14th December 2011 Ten specific questions Other comments respondents would like to make Rationale behind Integrated Reporting Outline of an International Integrated Reporting Framework Central themes: business model and value creation Guiding Principles Content Elements Benefits and challenges along the reporting supply chain Future directions

The percentage of market value represented by physical and financial assets versus intangible factors, some of which are explained within financial statements, but many of which are not.

The world has changed – reporting must too The world population is increasingly urban Global population by type of area and by region: 1950-2050 Global economic power is shifting Top 10 economies by GDP in 2050 The global middle class is rapidly expanding Population in low- and middle-income countries earning $4,000-$17,000 per capita (purchasing power parity) Growth Source: Goldman Sachs, BRICs and Beyond, 2007 Source: World Bank, Global Economic Prospects, 2007 Source: UN Population Division, World Population Prospects: The 2008 Revision, 2008 Greenhouse gas emissions keep rising GHG emissions by regions Environmental degradation jeopardises people’s quality of life People living in areas of water stress by level of stress The world could be running out of some resources Global supply forecasts according to the implied ultimate recoverable resources of conventional oil, date of peak production and the post-peak aggregate decline rate Degradation Source: UN Population Division, World Population Prospects: The 2008 Revision, 2008 Source: Goldman Sachs, BRICs and Beyond, 2007 Source: World Bank, Global Economic Prospects, 2007 Source – WBCSD Vision 2050 6 6

Reports: Increasing length and complexity Prudential annual report pages 1850-2008 Key point: …even though it is trying (quantity over quality) Undue focus and commitment of effort on financial aspects of model Lacking in strategic focus (wood for trees) Increasing length, complexity and clutter in reports (haphazard evolution) External reporting increasingly separate from internal management information Governance reporting (last place to look) Sustainability reporting - often a stand alone silo Uncertainty on what's audited Source: Investis research - PwC

The evolution of Reporting…

…Integrated Reporting – the Future

Coordinated, International Action Needed Now Reporting has a fundamental impact on decision-making Critical interdependencies need to be made clear A clear, concise picture of performance, impacts and interdependencies, to: drive innovation be focused on communication and not just on compliance support resource allocation decisions consistent with sustained value creation and with long term economic stability Build on the many positive developments to date Bring together divergent strands of reporting

Aims of the Framework Support the development of reporting over the coming decades Reporting organizations – consistency of content and approach Policy makers and regulators – consistent reporting regimes within and across jurisdictions Standard-setters – focal point for harmonization Initial proposals in Discussion Paper – interim guidance to be on the IIRC website Initial focus – larger companies and the needs of their investors

What Will it Mean for Me? Benefits and challenges

Future Direction Continue developing the International Integrated Reporting Framework draw on Pilot Programme experiences Exposure Draft in 2012 Work with others on measurement and reporting relevant to Integrated Reporting Explore with regulators etc opportunities to harmonize reporting requirements within and across jurisdictions Conduct regional roundtables and other engagement and communications activities Public consultation regarding ongoing governance of Integrated Reporting

International Integrated Reporting Framework - overview

How is Integrated Reporting Different? Thinking: Disconnected  Integrated Stewardship: Financial capital All forms of capital Focus: Past, financial Past and future, connected, strategic Timeframe: Short term Short, medium and long term Trust: Narrow disclosures Greater transparency Adaptive: Rule bound Responsive to individual circumstances Concise: Long and complex Concise and material Technology enabled: Paper based Technology enabled

Central themes Business model & value creation

Resources and relationships or “capitals” Financial capital: The pool of funds available to the organization. Manufactured capital: Manufactured physical objects, as distinct from natural physical objects. Human capital: People’s skills and experience, and their motivations to innovate. Intellectual capital: Intangibles that provide competitive advantage. Natural capital: Includes water, land, minerals, and forests; and biodiversity and eco-system health. Social capital: The institutions and relationships established within and between each community, group of stakeholders and other networks to enhance individual and collective well-being. Includes an organization’s social license to operate.

Guiding Principles Strategic focus: An Integrated Report provides insight into the organization’s strategic objectives, and how those objectives relate to its ability to create and sustain value over time and the resources and relationships on which the organization depends. Connectivity of information: An Integrated Report shows the connections between the different components of the organization’s business model, external factors that affect the organization, and the various resources and relationships on which the organization and its overall performance depend. Future orientation: An Integrated Report includes management’s expectations about the future, as well as other information to help report users understand and assess the organization’s prospects and the uncertainties it faces. Responsiveness and stakeholder inclusiveness: An Integrated Report provides insight into the organization’s relationships with its key stakeholders and how and to what extent the organization understands, takes into account and responds to their needs. Conciseness, reliability and materiality: An Integrated Report provides concise, reliable information that is material to assessing the organization’s ability to create and sustain value in the short, medium and long term.

Content Elements Organizational overview and business model: What does the organization do and how does it create and sustain value in the short, medium and long term? Operating context, including risks and opportunities: What are the circumstances under which the organization operates, including the key resources and relationships on which it depends and the key risks and opportunities that it faces? Strategic objectives and strategies to achieve those objectives: Where does the organization want to go and how is it going to get there? Governance and remuneration: What is the organization’s governance structure, and how does governance support the strategic objectives of the organization and relate to the organization’s approach to remuneration? Performance: How has the organization performed against its strategic objectives and related strategies? Future outlook: What opportunities, challenges and uncertainties is the organization likely to encounter in achieving its strategic objectives and what are the resulting implications for its strategies and future performance?

Pilot Programme

What is the Pilot Programme? A two year programme: Trying and testing IIRC’s proposed principles for Integrated Reporting In support of the development of an International Integrated Reporting Framework Asking leading companies and investors to develop and exchange good practice 22

Programme Milestones Expression of Interest September 2011 – Dry Run Conducted Dry Run (Phase 1) 17-18 October 2011- Pilot Programme Kick-off Meeting (Rotterdam, the Netherlands) Pilot Cycle 1 (Phase 2) September 2012 - Mid-Programme Conference Pilot Cycle 2 (Phase 3) November 2013 – Closing Conference 23

Questions?