STEINHOFF Reinkarnation

Hello Steinhoff friends: I have this letter send to the CEO , sorry in English: It's a bit long so I will post it in parts:

Dear Mr. Du Preez,

I refer to your document received yesterday the 9th of May 2023: 'WHOA RESTRUCTURING PLAN: FREQUENTLY ASKED QUESTIONS'. www.steinhoffinternational.com/downloads/...eral%2520FAQs.pdf

First of all, sorry for the English translation, but more important: many thanks for the information in this document. It is much appreciated.

Secondly, your response to B. Riley Farber's brief report (page 9,10 and 11) left me with some very urgent questions.I hope you, or Mr. de Klerk, would be so kind as to answer these questions urgently.T his is because I have grave concerns about the quality of the underlying documents for the WHOA proposal, and that prevents me from voting correctly and in a balanced manner.

It's about the documents that support the value of the assets and have been verified and analyzed by your accounting firm Mazars and the advisor EY. As of tomorrow 11 May 2023, stakeholders will be able to vote on the WHOA proposal.I very much hope that you will be prepared to answer these urgent questions today, because the answer is important in order to be able to vote correctly before or against the WHOA proposal. Without your information, it is not possible for me to assess the financial basis of the WHOA proposal.
The main reasons why a full assessment of the WHOA documents is not possible for me:
Steinhoff has used various financial experts in drawing up the financial basis for the WHOA proposal.
The most important ones are the Steinhoff auditor/ accountant Mazars and EY. Unfortunatly both the auditor Mazars and the financial advisor EY, have been disqualified by the authorities.

Due to this facts, effective December the 15th , 2022, there are well-founded reasons to doubt the proper policy, or conduct of business within Steinhoff International NV.
The reasons have been explicitly disclosed to you by various shareholders, where under the SDK. This concerns a presumption of mismanagement, the withholding of important information such as on the actual financial situation at Steinhoff and the presumption of deception of the current shareholders as of February 2023. More precisely there is/are:

More precisely there is/are:

• An impasse in decision-making in the board and/or general assembly;

• Conflicts of interest by directors, supervisory directors and/or shareholders/members, f.e. Mrs

  Alexandra Watson who ordered for the draft 'Fairness Opinion” to EY, the company who was at that time involved in a forensic investigation, the Wirecard scandal, but in the meantime Mrs Watson is working for EY since years. Mr. Hugo Nelson, who's working for a Hedgefund; Werksman's lawyers and Linklaters: The assignment to PWC (involved in forensic investigation themselves) for the investigation of fraud within the company, while Werksmans also has PWC as client and also one of Steinhoff's larger creditors, hedgefund Silverpoint.

• Breach of duty of care to minority shareholders as we could see clearly at 15th December 2022;

• Conflict between directors and shareholders/members;

• Failure of the board to provide information properly.

These doubts resulted in a motion of censure at the shareholders' meeting on 22 March 2023.
All items on the agenda were rejected by the shareholders. The proposal to expropriate shareholders was rejected. In addition, the Board and the Supervisory Board have not been given a discharge and shareholders have asked to appoint a NEW accountant instead of Mazars. It was an expression of strong disapproval and harsh criticism.

Besides of this we are waiting for an 'enqueteonderzoek' (enquiry) at the 'Ondernemerskamer' Amsterdam. Most of the shareholders can't wait to get started.
In the meantime, with all these doubts, shareholders have to vote as of tomorrow, the 11th of May 2023.
As I said earlier, it is nearly impossible to vote properly, now that we need to question the quality of the underlying financial records.

I'm very concerned about the auditwork of Mazars and the in Germany banned EY. Back to Mazars:
As you know, the Authority has opened an inquiry into Mazars. The reason is, the report of the FRC in which the quality of the audit work of Mazars is found completely unacceptable. www.thisismoney.co.uk/money/markets/...-criticised-regulator- unacceptable-audits.html

BDO and Mazars have been called out for the 'unacceptable' quality of their work by Britain's accounting watchdog.

'It follows Financial Reporting Council spot checks on audits from EY, PwC, Deloitte, KPMG - known as the Big Four - and BDO, Mazars and Grant Thornton.The FRC found the results of the inspections of BDO and Mazars audits 'remain concerning'.Only half of Mazars’ eight audits were deemed of an acceptable quality'. 'Mazars said it was very disappointed with the findings and it was committed to addressing the issues
identified, and would continue to invest in and focus on applying the highest quality standards.The FRC said in its report today: 'The FRC highlighted concerns at both of these firms in the 2021 reports and these firms must therefore take further actions to improve audit quality as a matter of urgency.' The FRC said there had been 'some improvement' across the auditing sector following heavy scrutiny of failings linked to the major collapses of firms like Carillion. Sir John Thompson, the FRC's boss, said its latest report highlighted that 'consistent, long-term improvement' was still needed across the industry'.
www.frc.org.uk/getattachment/...79cf8f/FRC-Mazars-LLP-Public- Report_July-2022.pdf

You will find the full report FRC about Mazars in the link above. I will now turn to my questions arising from your 'Frequently Asked Questions' document. I shall compare your response with the report findings of the FRC. Please find my questions in red.

Question 4: Are shareholders in the money? What is your view on the statement by SdK Schutzgemeinschaft der Kapitalanleger e.V. (“SdK”) that “shareholders are in the money”?

Answer Steinhoff:

• Based on the “fair value” of the Company’s assets, the Company has reported a substantially negative net equity value of EUR 3.5 billion at 30 September 2022 (and EUR 3.4 billion negative net equity at February 2023). The Boards consider that there is no realistic prospect of reversing this negative net equity position to positive value in the short or medium term, nor by the maturity date of 30 June 2023. Question 1: Do you mean 'the fair' value based on the documents of Mazars and the 'Fairness Opinion' prepared from EY?

• As reported in the Restructuring Plan, financial experts have estimated that the value of the Company in the event that the Restructuring Plan is implemented (the Reorganisation Value) and the available proceeds in the event that the Company enters into bankruptcy proceedings (the Liquidation Value) are each significantly below the amount of the consolidated external debt. Both valuation reports include a significant level of detail in respect of the multiple methodologies under which individual assets have been valued. Question 2: who are these financial experts? Which methodologies are used regarding the value assessment? This is important because this opinion from the FRC, regarding great concerns about Mazars:

  Page 15 Key findings : www.frc.org.uk/getattachment/8cf33c61-24fd-4842-b85a- e8432279cf8f/FRC-Mazars-LLP-Public-Report_July-2022.pdf

  'We reviewed the audit of revenue on all trading audits inspected in this cycle and we continued to identify a range of issues associated with the audit of revenue. In five of the eight audits inspected, issues were identified in relation to the audit work over the occurrence, accuracy, and completeness of revenue, including three audits assessed as requiring more than limited improvements. Findings included:•On two audits, insufficient audit evidence was obtained to conclude on the appropriateness of revenue recognised. On one of these audits, this included the appropriateness of revenue recognised. On the other audit, there was insufficient evidence that recorded inventory movements reflected physical movements across revenue types including sales dispatched directly by suppliers.•On another audit, the operating effectiveness of relevant controls was not tested throughout the year, nor were transactions tested through to cash receipts or underlying source evidence beyond system generated information to confirm the occurrence and accuracy of revenue recognised. On this audit the testing of unbilled revenue was also insufficient, particularly the challenge and corroboration of the judgements made by management'.

  Page 16 : 'Improve the audit of inputs and estimates in concluding on the sufficiency of provisions for expected credit losses': www.frc.org.uk/getattachment/8cf33c61-24fd-4842-b85a- e8432279cf8f/FRC-Mazars-LLP-Public-Report_July-2022.pdf

  'We identified significant concerns with the audit’s team procedures and audit evidence in the following areas: data input testing; assessment of ECL methodology; ECL model review; significant increase in credit risk; and multiple economic scenarios'.

  Question 3: Can you confirm the significant concerns with the Mazars audit’s team procedures and audit evidence do not apply to the WHOA documents, in other words, can you guarantee that the very serious shortcomings of the accountant Mazars (and in addition EY) in this case, the creation and verification of the WHOA documents, do NOT apply?

• Answer Steinhoff: As a result, there is no value in the Company available to shareholders after repayment of the external debt. The Company therefore does not consider the shareholders to be “in the money”.

PAGE 17 : www.frc.org.uk/getattachment/...d-4842-b85a-e8432279cf8f/FRC- Mazars-LLP-Public-Report_July-2022.pdf
'Findings included:•Insufficient procedures and challenge performed over the accuracy and completeness of management’s impairment assessment. •On an audit where a material uncertainty was included in the audit report, the audit team did not appropriately review or challenge management’s going concern cash flow forecasts to ensure these were reasonable to support the going concern assumption. As the audit of significant estimates and assumptions has been an area of recurring finding, the firm must, as a priority, update its audit quality plan to address our concerns in this area'.
Question 4: Can you guarantee these shortcomings are NOT the case with the proceedings of the WHOA documents, so Stakeholders can rely on 'everything is in place'?
•

Answer Steinhoff: The Company is not aware of any granular valuation analysis which supports any suggestion that the shareholders are “in the money”. The Company received an executive summary analysis drafted by B. Riley Farber and commissioned by SdK. The Company has reviewed this report and considers that it is speculative, unsubstantiated and does not provide any evidence or analysis to support the statement that shareholders are “in the money”.
Question 5: Can you guarantee the documents WHOA Steinhoff proceeded do not contain any speculative element and are manufactured with high-quality components, ensuring reliable observation and judgement?
Question 6: Can you guarantee that ALL Steinhoff stakeholders, including shareholders, can rely on financial documentation with adequate professional audit quality?
Question 7: Can you also make sure that Steinhoff did everything in his power with respect to the WHO documents, to achieve transparency and the greatest possible financial and objective integrity?

• Answer Steinhoff: The executive summary prepared by B. Riley Farber incorrectly assumes that the Company’s investments can be sold together in private regular M&A processes within an orderly wind- down or insolvency timeline at values well above their current market values (in respect of those Steinhoff investments which are publicly listed).
Question 8: On what basis do you consider this statement by B. Riley to be' incorrect'? What sort of analyses are underpinning this? Did you try to get a higher value without success? If so, how did you try this?

• Answers Steinhoff: The notion that these investments could be sold quickly and at an aggregate price in excess of the EUR 10.4 billion external debt (i.e. resulting in the existing shareholders being “in the money”) is simply not feasible.

• The Company does not have direct ownership of the key investments and the Group does not have full ownership in its three largest investments (and any divestments would in any event be subject to related investments agreements). The Company holds a complex Group with different levels of subsidiary governance and different creditors groups having different disposal and security rights. Therefore, the Company cannot unilaterally determine a disposal strategy without having regard to its own rights and other ownership interests and rights of its subsidiaries and third parties.

• Furthermore, there are regulatory issues (e.g. antitrust, foreign exchange control regulations, mandatory offer requirements) associated with any private M&A transactions which would have a significant impact on valuations and timing of any sales.
• Both the Reorganisation Value and the Liquidation Value reported in the Restructuring Plan already include upper estimates for the Group’s listed investments at a significant premium to current share prices. Those upper estimates still fall (significantly) below the EUR 10.4 billion
• external debt. In the event of an insolvency of the Company, the Company would be considered a forced seller of its investments which would have a significant adverse impact on valuations.

• The executive summary of B. Riley Farber, which draws on publicly available information, still implies values for the Company’s publicly quoted investments that are significantly higher than valuations currently applied by the public markets and equity analysts. It is unclear what these higher valuations are based on.

Question 9 : Do you have other available information, information not disclosed to the public or the shareholders? What is the difference between these publicy quoted investments and other information? What's the reason you withhold information for some stakeholders, like shareholders?

PAGE 18 : www.frc.org.uk/getattachment/...d-4842-b85a-e8432279cf8f/FRC- Mazars-LLP-Public-Report_July-2022.pdf

'As the audit of significant estimates and assumptions has been an area of recurring finding, the firm must, as a priority, update its audit quality plan to address our concerns in this area.
We continue to identify key findings across the audits we have inspected and on three individual audits there were multiple key findings. The firm’s review procedures, including those undertaken by the audit partner and Engagement Quality Control Reviewer,failed to identify these issues and, as a result, the quality control procedures were not sufficiently robust to prevent or detect potential material misstatements. Specifically, there were several areas where there was:•Inadequate testing of account balances across significant risk areas;•Failure to explain why the team concluded on a range of issues; and•Lack of evidence to support the audit team’s conclusions.The firm must take robust action to ensure that its quality control and engagement quality control procedures, including review by senior members of the audit engagement team and the Engagement Quality Control Reviewer, are effective'. Etc.

Question 10: Can you confirm, that the above shortcomings do not apply to the WHOA documents, in other words, can you guarantee that the very serious shortcomings of the accountant Mazars in this case, the creation and verification of the WHOA documents, do NOT apply?

'Implement measures to improve audit quality in response to other issues driving lower audit quality assessments:
On one audit, the deficiencies in testing led to a material error not being identified in the total of operating expenditure although it did not impact net assets. This was identified by the auditor after the audit report had been signed and communicated to those charged with governance. Appropriate professional scepticism was not demonstrated in relation to this material increase in operating expenditure.'

Page 23

www.frc.org.uk/getattachment/...-e8432279cf8f/FRC-Mazars-LLP-

Public-Report_July-2022.pdf

'We identified the following key findings where the firm needs to:•Improve thefirm’sguidance on how to more consistently consider the perspective of an Objective Reasonable and Informed Third Party when taking decisions relating to ethics and independence, and in particular,that of non- practitioners, such as informed investors, shareholders or other stakeholders.•Enhance its policies and procedures to maintain complete and up-to-date corporate trees, especially for international groups with complex structures, to inform decisions on independence matters.Given the effective date of the Revised Standard, the majority of the audits inspected in the current year were performed under the previous Ethical Standard'.

Question 11: Can you guarantee, that ALL Steinhoff stakeholders, including shareholders, can rely on financial documentation with adequate professional audit quality?. Can you also make sure that Steinhoff did everything in its power, with respect to the WHO documents, to achieve transparency and the greatest possible financial and objective integrity? Can you guarantee the quality of an Objective Reasonable and Informed Third Party (like EY f.i.) when taking decisions relating to ethics and independence regarding the WHOA documents?

Question 12: Can you guarantee you did not breach the Dutch Government Code regarding the WHOA proposal en the managing- proces, the preparing of the documents?

• In conclusion, the Company takes the view that SdK’s statement that “shareholders are in the money” is speculative, unsubstantiated and potentially harmful because it may cause investors to base their investment and voting decisions on incorrect information.

Question 13: Can you explain what kind of elements in the SdK statements are speculative, unsubstantiated and potentially harmful? Can you garantee that in the Steinhoff documents there are NO such statements?

Question 5: What is your view on the B. Riley Farber analysis commissioned by SdK and its statement that “the Restructuring Plan is prejudicial to shareholders”?

Answer Steinhoff: As stated in response to the prior question, the Company has received an executive summary analysis drafted by B. Riley Farber commissioned by SdK. The Company has reviewed this executive summary analysis and considers that it is speculative, unsubstantiated and does not provide any evidence or analysis to support the statement that “the Restructuring Plan is prejudicial to shareholders”. On the contrary, the Company considers the Restructuring Plan to be beneficial, rather than prejudicial, to the shareholders.

• In a scenario where the Restructuring Plan is not implemented, the Company would likely face a default and possible bankruptcy and enforcement processes. Under those circumstances, shareholders are not expected to receive any distribution at any point in time. Under the terms of the Restructuring Plan, however, shareholders are offered a 20% economic interest through the CVRs in any potential upside value in the restructured Group after repayment of the external debt and accrued interest (see question 3 of Part 2 above).

Question 14: How does Steinhoff explain, that a very large number of experts and stakeholders, firmly reject the proposal, when you consider the proposal to be the best possible option for shareholders?

Question 15 : Can you ensure that ALL stakeholders have the same amount of information on the WHO proposal and that a proper and balanced evaluation of the documents is therefore possible for everyone? Could it be that you did not provide sufficient information to the shareholders about the benefits of the proposal?

Question 16: What did make Steinhoff happy to present the proposal on 15 December 2022?

PAGE 30 FRC Report:

'Current inspection results:Despite the actions taken by the firm this year, its inspection results have remained poor with a number of findings recurring from one year to the next. Mazars must take stock and reconsider whether the actions it has taken have been fully completed and were effective and, whether in hindsight, these were all the right actions. For example, financial service methodology, actions to address poor first year audits and initiatives to improve quality control need further consideration'.

PAGE 36
'Insufficient challenge of management judgement. The specific areas where deficiencies were identified varies from year to year. In 2020/21, deficiencies were identified in areas including asset valuations, goodwill, expected credit losses, and provisions'.

The following theme was identified in the 2020/21 iQM programme which was not identified in the prior year:•Insufficient challenge of management judgement in going concern assessments, in particular in relation to the audit of judgements and assumptions applied by management in forecasts.

Last but not least:
Question 17: What is your opinion on the conclusions of the FRC report on Mazars?
Question 18: Can you guarantee the quality of Mazars regarding the WHOA proposal? Can you guarantee the professional quality of EY, even though EY was the subject of forensic research during the drafting of the Fairness Opinion that led recently to the ban for 2 years, a very heavypunishment?
Question 19: Can you guarantee that ALL Steinhoff stakeholders, including shareholders, can rely on financial documentation with adequate professional audit quality. Can you also make sure that Steinhoff did everything in his power with respect to the WHO documents, to achieve transparency and the greatest possible financial and objective integrity?
Question 20: In the interest of sufficient information, do you consider it acceptable that Steinhoff ignores the decision of the South Africa Court in May 2022 to publish the full PWC report of the fraud investigation and thereby obstruct the course of justice?
What are the considerations that make you feel above the law and do not need to inform stakeholders about possible internal fraud or other negative issues?

I look forward to your response, many thanks.

Kind regards, J. Peer