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AFB
AFB
Alexander Forbes Limited - Cautionary Announcement
Alexander Forbes Limited
Registration number: 1958/001974/06
ISIN: ZAE000018230
JSE Code: AFB
("Alexander Forbes")
CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the attached media statement, which provides
details concerning income derived by the South African business of Alexander
Forbes Financial Services up to September 2004 in relation to the bulking of
clients" bank accounts. As explained in the press release, we will be
contacting all clients included within these banking arrangements to brief them
fully and ensure that this matter is dealt with to their satisfaction.
Until a further announcement is made, including details of any financial impact
on the company, shareholders are advised to exercise caution when trading in
their Alexander Forbes shares.
Sandton
20 March 2006
Sponsor
J.P. Morgan Equities Limited
ATTACHMENT: ALEXANDER FORBES" MEDIA STATEMENT
Following an article in a weekly newspaper this past weekend (18th March) that
covered two unrelated issues Alexander Forbes would like to provide further
detail on both.
FSB Investigation - Alexander Forbes is not the subject matter of this
investigation
Since 2000, the Financial Services Board has been conducting an investigation
relating to alleged illegal accessing of pension fund surpluses during the mid
1990"s reportedly amounting to some R213 million. This has culminated in the
arrest this past week of several individuals including, regrettably, two former
Alexander Forbes employees.
Alexander Forbes wishes to place on record:
Alexander Forbes is not the subject matter of the FSB investigation as suggested
by the article.
Alexander Forbes has co-operated fully with the FSB"s investigators and will
continue to do so if and when we are asked;
Alexander Forbes received absolutely no compensation in excess of administration
and consulting fees in line with industry norms;
The company is not aware of any impending arrest of any current or other former
Alexander Forbes employees;
Bulking of banking accounts
The second issue raised in the article, and unrelated to the FSB investigation,
relates to an arrangement with banks referred to as `bulking". The following
information is relevant:
Bulking of bank accounts is highly beneficial to our retirement fund clients and
their members in that it enables Alexander Forbes" clients to secure higher
interest rates on current accounts than would otherwise have been paid by the
banks. As compensation for the arrangement, Alexander Forbes received income
from the banks;
Following receipt of legal advice we started rolling-out new Service Level
Agreements more than two years ago, which disclose the nature of the bulking
arrangements and the fact that we received payment. Virtually all our clients
have received new Service Level Agreements and agreed to this arrangement;
After careful review of further legal advice, and considering the complexities
of complying with new FAIS requirements, in September 2004 Alexander Forbes
stopped receiving payment but ensured that the bulking arrangements continued
for the full benefit of our clients.
On reflection Alexander Forbes recognises that in relation to this matter it has
not, in the past, met the disclosure standards it aspires to. We are serious
about governance and integrity and in the interest of open communications and
continuing to maintain good relationships we will be contacting all funds
impacted by this to brief them fully and ensure that this matter is dealt with
to our clients" satisfaction.
Additional information about Bulking is attached.
Contact:
Peter Moyo
Managing Director
Alexander Forbes (Africa)
011-269 1500
Background on bulking
Alexander Forbes negotiates with banks to treat each individual retirement fund
current account as part of a large group solely for the purpose of setting the
interest rate that the bank will pay. The bank pays a higher interest rate
based on the "bulk" of all accounts in the group than they would on the
individual accounts, thus securing a better interest rate for each of our
clients. It is noteworthy that there is absolutely no change to the individual
nature and flexibility of these current accounts that are used to facilitate the
transactional (as opposed to investment) needs of the fund.
Without bulking, individual retirement fund cheque accounts on their own attract
nil or very little interest. The higher interest rates we negotiate are
beneficial for all our clients, but are of particular benefit for our smaller
clients, whose cash amounts would normally only attract significantly lower
interest rates or none at all.
We continue to negotiate with banks to treat individual accounts as part of a
group to secure the highest interest rates for the benefit of our clients whose
funds we administer.
Date: 20/03/2006 08:59:23 AM Produced by the JSE SENS Department
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