Brexit update - Forester Life Stakeholder Funds Jun 27, 2016 Friday’s “Leave” result has surprised markets, which were rallying only prior to the result as opinion polls and betting markets’ odds emboldened investors. At the time of writing markets are retracing from their initial knee-jerk reaction, but we expect volatility to continue in the near term as markets contemplate the domestic and global ramifications of Brexit. Given the binary nature of the outcome and the difficulty of forecasting it, we avoided trying to position the portfolio for either result. Instead, we concentrated on maintaining our current cautious stance. It is important to note that throughout the referendum campaign we have not implemented any positions purely on a Brexit view. In the run-up to the referendum the portfolio was cautiously positioned, reflecting our view that global markets face a range of risks The “obvious” hedge throughout the referendum campaign has been to be underweight sterling, and we had sold sterling accordingly. In the run-up to the referendum we also reduced our exposure to the Euro, as we thought the currency could also be vulnerable to a Brexit vote. We have maintained an underweight position in European equities whilst on the bond side we have maintained a significant exposure to government bonds, as we favoured their defensive characteristics. Given the outcome, we believe that our cautious positioning will turn out to have benefited the portfolio, helping to protect it from the substantial volatility that is currently affecting markets. The task now turns to assessing the medium-term impact, with the Leave vote likely to result in some political, economic, legal and financial instability. However our view is that the portfolio is well positioned for this environment. In terms of adjustments to the portfolio, the position should become clearer next week. On the one hand the direct global impact of the Brexit vote should be limited, but we will be carefully monitoring the indirect effects such as the possibility of wider European instability.