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Unit Trust Newsletter, 26 Sept 2013
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How is your investment doing in KMB (Kanaan Met Balanced Fund Of Fund) and KMF (Kanaan Met Flexible Fund Of Fund)

26 September 2013,

1. Your investment in our KMB FoF returned 1.24% and KMF FoF 1.79% for July and -0.1% for August. Over the past 10 days the fund has grown 1.15%. According to the attached factsheet (Pg1+2) we have done -3.7% (KMB) and -4.23% (KMF) for June 2013, but we switched out of Bond funds timeousely, which prevented a further negative month for July. As mentioned previously, Bond Funds, (which can give you two times better growth than the money market and is much safer and less volatile than the growth market) gave us a healthy 13% for 2012, as you can see on the factsheets (see Pg.3+4 for the long term performance of the predecessor wrap funds of KMB and KMF FoF).

2. I wouldn’t say the whole world economy is on the up. Emerging markets like South Africa, Brussels, India etc., are slowing down at the moment, because of outflows to the first world markets. Even the growth we are seeing in first world markets, like those of America and Europe is still very weak, but we believe that is where the better growth will be for the next few years. Unit Trust funds where your investment is at the moment are only allowed to switch 25% offshore, but we also switched to an underlying Unit Trust Fund, that has already switched 25% of their funds offshore, which accumulatively gives our KMB and KMF FoF +/-40% offshore exposure.

3. We did a lot of research on offshore funds regulated in South Africa and those with the best long and short term performance records have been purchased in equal shares, namely 8.33% to Old Mutual Global equity, 8.33% to Alan Grey Orbis, 8.33% to Global Equity Feeder and 8.33% to DB-X-Tracker MSCI US Index ETF, which makes up the 25% we are allowed.

4. Attached here to see the fund factsheet of 36One (Pg.5), which is a “protected” South African growth fund, which means the fund is allowed to do hedging to a limited extent. According to our research 36One is the best in this category over the short and the long term and you will see according to the attached fund factsheet that though the fund did -31% during 2008, when the Credit Crash Crunch caught most fund managers off guard, that the fund did not grow negatively during 2010 when most funds grew negatively with more than 15%. The fund also only fell by -2.4% during June, whereas the JSE fell by more than -13% and the fund has now already returned 13.6% by the end of July. We don’t expect fireworks here, as the emerging markets are slowing down, however, we as well as 36One switched 25% offshore.

5. You will notice that according to the attached Alan Grey Orbis Global Fund (Pg6) that the fund grew 34.2% last year, the Old Mutual Global Equity fund (Pg7) grew 62.9% over the past 12 months and the DB-X-Tracker Fund (Pg8) grew 42.43%. Please take note that these funds are dollar denominated and part of the growth came from Rand depreciation. We do not believe that the Rand will appreciate substantially over the next few years. Fluctuations in the Rand will cause KMB to fluctuate over the short term, but over the medium term you should see growth even in the face of Rand appreciation as these funds have shown the potential to grow much stronger in USD, than the Rands potential for appreciation.

6. Attached hereto also see a graphic analyses of the four funds compared to the JSE, since 2011(Pg9), 2012 (Pg10) and January 2013(Pg11) in Rand terms.

7. You can clearly see how they are outperforming the JSE, as well as 36One, al- though 36One is at least outperforming the JSE.

8. These funds are huge, which will mean we will have no problem to switch out quickly if things go wrong in the US or Europe.

Friendly Greetings

Andre Delport

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