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11 Dec 2017

Steinhoff Allocation In Foord Investor Portfolios

The resignation of Markus Jooste as CEO of Steinhoff, disclosure of potential accounting irregularities and delay in the publication of Steinhoff's audited financial year-end results caused a calamitous fall in the Steinhoff share price. At this stage details are vague. Foord’s exposure to Steinhoff was mandate dependent, in keeping with Foord’s investment approach to match investment risk to the investment objective and to own assets that suit the investor’s profile and time horizon.

Unlike almost all leading SA general equity funds, which hold up to 25% of their portfolios offshore, the Foord Equity Fund maintains no direct foreign exposure to mitigate the significant prevailing SA-specific risks. Its mandate permits investment only in JSE-listed companies. Accordingly, Foord’s exposure to Steinhoff, a significant non-resource rand-hedge counter, was predominantly in SA-only equity funds (5 – 6% of fund).

Global balanced funds, suitable for retirement fund portfolios, had a lower allocation (2 – 2.5%). More conservative mandates, including the Foord Conservative Fund and Nedgroup Investments Stable Fund had negligible positions. Given its substantial allocation to direct offshore assets, Foord’s best investment view portfolio, the Foord Flexible Fund of Funds, maintained a very limited exposure to Steinhoff of 0.8%.

Until we have more information related to the issues raised by the auditors and subsequent investigations, we are exercising extreme caution with regards to the company and any related entities.

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