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25 Aug 2016

Our Contingency Plan

The shocking actions of Jacob Zuma and his supporters may be a blessing in disguise as it is busy destroying the ANC which has been far too powerful and arrogant for a long time.

As far as our contingency plan is concerned: We have been keeping 25% in the case of our Kanaan Bci Balanced FoF and Kanaan Bci Flexible FoF in offshore funds even though the Rand has been strengthening over the past few months. That has caused our two funds to underperform as the Rand has strengthened, but we thought that there is still a great danger of political turmoil and even without political turmoil economists felt that the Rand would depreciate again before the end of the year.

In the case of our Kanaan Bci Balanced FoF and Kanaan Bci Flexible FoF we can switch within 24 hours to cash as all our funds under management are less than R500 million, but that will not be a wise thing to do as political instability can cause hyperinflation which eventually can make the Rand worth less than the paper it is written on, as what happened in Zimbabwe.

We have therefore decided to keep 25% in offshore funds, 20% in quality property unit trust funds which are doing well at the moment and the balance in flexible funds which are not doing very well at the moment because they believe as we do and they are investing cautiously and not in the high-fly commodity and resources funds which can quickly crash in the face of political instability and labour unrest. Our underlying Flexible funds are also making use of their 25% offshore content, which gives us an overall exposure of more than 25% but which has been working against us over the past few months because of the strengthening of the Rand.

The underlying hedge fund managers of our Kanaan Hedge FoF are also following cautious strategies because of which they underperform at the moment but they should also start to do very well when the Rand starts to depreciate.

Friendly greetings

Andre Delport

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