Competitive Advantage

The primary competitive advantage of the Xhilarator suite of funds is its forward-looking risk module. This is unique within the fund industry. Whereas a competitor relies principally on historic performance risk-based principal models, Kanaan have supplemented this by developing an innovative, quantitative risk-based model in conjunction with their stock picking model. This has afforded them to switch timeously and totally to the money market, before the 1987 crash, literally weeks before the August 1998 crash and also before the March 2000 technology crash.

Kanaan did not switch out timeously before the 2008 Credit Crunch Crash because it was ring-fenced by the underlying fund managers, even though they gave Kanaan written confirmation that they would not do so. Once bitten, twice shy, Kanaan will be very cautious in future not to hold more than 5% in an underlying fund. The JSE reached a high of more than 34 000 during October 2007 and Kanaan eventually switched out during 2008, when the JSE dropped to 28 000. That was nevertheless not too bad, as the JSE eventually dropped right down to 17 800 during March 2009. Kanaan has thus retained its rankings of first place over fourteen, thirteen, twelve and eleven years, even after the crash (see XMF and XMB fund factsheets). See also the graphical analysis of the Xhilarator funds compared to the JSE.

Market Niche

This portfolio is ideal for an investor who wishes to gain exposure to the stock, bond and money markets, but is not confident in his ability to time his entry or exit from the stock market as a whole or specific market sectors. The portfolio manager makes these decisions on behalf of the investors in the portfolio.

Greed and fear are often the driving emotions behind a belief that markets can be timed by the man in the street. This unfortunately often results in investors getting it horribly wrong. Over the long term, equity markets have been the most appropriate asset class to outstrip the ravages of inflation and provide the investor with a real, after tax return.

Via the various stock exchanges there are literally thousands of different unit trusts available to investors. In some countries there are even more unit trusts than shares. In South Africa, there are more than 800 unit trusts, many of them highly specialized.

It has therefore become a highly technical task for a broker and his clients to select suitable funds relating to the investors' risk profiles, needs and objectives and to continue managing the investment portfolios within the terms of the investors' profiles.

It is unfortunately, not possible to apply this personalized individual fund management for people you do not know. Individual fund management by top asset managers is available only to high net worth individuals. Access to an investment expert is reserved for those who are able to invest in excess of R20 million.

This means that, up to now, individual, personalized service has not been available for the middle income category. The good news is: KANAAN has evolved specifically to offer this service to investors!

KANAAN caters for brokers and their clients with lump sum investments from as little as R10 000 and/or a minimum monthly contribution of R500, giving an investor compounded returns in excess of 20.0% per annum, net of costs!

Consistent, absolute returns are crucial!

How can you benefit from investing with KANAAN?

You will be investing with an organization managed by a team of investment professionals who provide the intellectual capital that drives our ability to build an investment process that is both consistent and sustainable. The team consists of independent, qualified, experienced investment managers, from diverse backgrounds – all with recognized track records!

When you prepare an immediate capital requirement analysis in terms of financial security, with specific reference to life , disability and trauma cover for your client, the calculation requires a splitting of the realized assets in the case of death or disability, usually between pension and voluntary contribution capital. Pension projections in excess of 9.0% would not be permissible, as good pension funds have generally grown by not much more than 7.0% per annum in recent years.

Therefore, a conventional constitutional voluntary investment illustration may not be projected at more than 9.0% per annum, compounded, which is the highest the LOA allows you to project on their product.

However, if you place your client's investment within one of our Xhilarator funds, you will be able to illustrate at between 12% and 15% per annum, which is acceptable due to the fact that the two longest running funds, namely:

• XHILARATOR MULTI-SA FLEXIBLE FUND with a history of 8 years and a CAR (Compound annualized net of cost return) of 15.83% per annum from 1 October 1996 up to 1 August 2009.

• XHILARATOR MULTI-SA BALANCED FUND with a history of 9 years and a CAR (Compound annualized net of cost return) of 16.97% per annum from August 1995 up to 1 August 2009.

This will make a huge difference in calculating values.

If you market the Xhilarator funds, not only will you need to offer far less cover to the client, but as a result of the lower cost to ensure this life cover, you will be able to allocate more contributions towards investments.

Without the advantage of Kanaan, a client will have to:

1. Pay a far higher premium to secure a substantially larger amount of life cover and disability protection and

2. As a result of this, the value of the client's retirement package will be considerably less, probably by millions, than would have been the case had there been more money to invest for retirement.

(The actual future value of Kanaan investments will most likely be much better than the mentioned projections of between 12% and 15% per annum).

Advantages to your client:

1. All the products of KANAAN are managed actively.

2. This approach has produced results which exceeded the average returns achieved by the JSE All Share Index and the consumer Price Index (see factsheets).

3. South African Asset Managers are not allowed to receive investment money for management into their private or business accounts. They are regularly audited by the FSB to check if the money from an investor was paid into the private company account. Application forms of unit trust investments refer clients to the banking details of nominees who are mostly controlled by the big South African banks.

4. Kanaan Trust is an approved category II asset manager (FSP licence number: 528).

5. Provided the investment is placed with KANAAN, you will be able to calculate immediate capital requirements (life and disability cover) by means of our proven investment track record. In other words, when you assist in doing the necessary data capturing with the intent of doing the abovementioned calculation for your client, you will be able to make use of between 15% - 18% per annum rate of return instead of the conventional 6% - 9% rate of return which will obviously calculate much less life cover requirements. This will give you a competitive edge over your competitors.

6. In other words, if you make use of a programme to do the calculation, the programme will ask you at a stage, what is the projected growth rate of the client's investments until retirement, in which case you will be able to answer with 12% - 15% instead of 6% - 9%. The result will be far less life cover and disability cover required, which will give you a competitive edge over your competitors. You will be able to sell less life cover, affording your client to contribute more toward investment.

Performance, not profits, is what ultimately drives us.

1. Proud of what we are doing:

We aim to bring talented people together and to harness their skills and expertise. Thereby it will be enable us to create something meaningful in other people's lives and make them feel proud about it.

2. To enjoy what we are doing:

Richard Branson of Virgin said: "Because starting a business is a huge amount of hard work, requiring a great deal of time, you had better enjoy it. When I started Virgin from a basement flat in West London, I did not set out to build a business empire. I set out to create something I enjoyed that would pay the bills. There was no great plan or strategy".

3. To be innovative:

Our aim is to create something altogether new in the corporate world. We continually aim to be imaginative and innovative.

4. To make a difference in the lives of employees:

Our firm belief is that people who work for us are our biggest asset. Unity is strength and therefore we aim towards a united force where each one feels they belong to a large family and feel proud and secure in that partnership.

5. To be a good leader:

Building competent leadership qualities is high on our list of priorities. Outstanding leaders in any field have always been those who can listen well – not those who speak too much and thereby tend to impose their views on their personnel and also on outsiders. When they do speak, their words are always sharp and meaningful, to be able to engage the opposition in healthy debate.

6. Integrity:

We are always transparent. We will always answer all our clients' questions and tell them like it is. There is no investment black box that the client does not understand.

7. Aligning Interests:

Kanaan is managed by its main shareholders. Also, most of the personnel have invested their own funds in the same portfolios that are offered to their clients in general.

8. Passion:

We feel passionate about our company and its investments. We eat, sleep and dream investments. We are intellectually curious and therefore also widely read.

9. Flexibility:

We manage our business flexibly. In other words, we adapt to changing circumstances continually in the same manner as we manage our funds. Kanaan will close any fund under management if there is a possibility that the fund may become too big or inflexible in the foreseeable future.

10. Temperament:

The personnel management of Kanaan, when recruiting asset managers or analysts, is more interested in the right temperament for investments. The right temperament is one that allows a good manager to think differently and not to be influenced by the crowd. Having the ability to think differently also means that our managers can withstand the stress of underperforming and stick to our investment philosophy. A study of 163 large cap equity managers in the US whose annual returns over a ten year period, placed them among the top 25% of managers in that category, shows that during that period, 97% of them had at least one three-year period where their returns placed them among the bottom 50% and 77% of them had at least one three-year period during which their returns placed them among the bottom 25% of managers.

11. Flexible conviction:

We tend to have a high level of conviction and this is usually reflected in a low number of funds in our portfolios. We take bigger bets on fewer funds. While we are independent and often contrarian thinkers, we can also change our views if the evidence changes. We are looking for resilience, not stubbornness.

12. Long term focus:

We tend to have a long term focus and do not speculate on the short term. We understand the need to have patience and wait for the value of a sector or a fund to be unlocked. Doing less often results in earning more.

13. Stewardship:

We launch and manage only a few funds. We have never launched funds that target the latest fad and we do not focus on short term returns. We are stewards of our funds and are opposite of salesperson, who are simply selling products. Performance, not profits, is what ultimately drives us.

14. Ethics:

At Kanaan Trust, we have implemented the Code of Ethics as underlined by the CFA (Charted Financial Analyst) Institute. We aim to maintain high standards of education, integrity and professional excellence. For in depth information regarding this high standard, please either download our Code of Ethics or contact us to send it to you.

1. History and Performance Track Record:

XMB (Xhilarator Multi-SA Balanced wrap fund) opened as a wrap fund on 1 August 1995 with the first investment of a certain Mr. JJ Meyer from Welkom.

2. The Name Change:

During May 2003 there was a restructuring of the company that resulted in a name change to Xhilarator Investment Managers. As a result Andre Delport Multi-SA Pension fund became Xhilarator Multi-SA Balanced (XMB). It was thus a mere name change but the mandate and investment approach remained the same.

3. From Wrap Fund to Fund of Fund:

Many brokers who support the Xhilarator funds requested Xhilarator to change the suite of Xhilarator wrap funds to fund of funds because of the income tax and other advantages associated with fund of funds.

Xhilarator then registered the XMB (Xhilarator Multi-SA Balanced wrap fund - which is a PIGS compliant fund) on 1 February 2005. Since 1 March 2005 the daily unit price of the fund of funds made its appearance in the daily newspapers together with all the other unit trust funds.

Though some of the XMB wrap fund clients preferred to stay in the wrap fund, more than 90% of the clients were transferred to the new XMB FoF. However it is still managed by the same fund manager using exactly the same investment approach. The new fund of fund thus has its own price movement, as reflected in the newspapers, which is almost parallel to the old XMB wrap fund's daily price movement, except for the fact that the fund of fund should perform better, being more cost efficient. Otherwise both should perform with the same results.

The same was the case with the Allan Gray suite of funds, which only became unit trusts during 1998 but with a previous record of its privately managed funds of twenty years, it has a total track record now of more than twenty-seven years. Similarly we can say Xhilarator Multi-SA Balanced FoF which was launched August 1995 has a track record of more than ten years.

The fund of funds being a unit trust in itself and listed in the daily newspapers is picked up by rating companies like Micro pal, Money Mate, JP Morgan and others where its track record can be tracked and compared to other unit trusts and fund of funds.

XMB wrap fund not being a fund of fund unit trust in itself and not being priced in the daily newspapers, is thus of course not included on the platforms of the abovementioned companies with the exception of Money Mate to whom we pay a fee to be monitored. It might cost us more than R50,000 per month to be monitored by all the existing rating companies world-wide. Wrap fund managers usually pick one of these companies which they believe is popular amongst their supporting brokers.

4. The proof of the pudding is in the eating:

Mr. K Moxham invested R992,409 on 1 September 2002 when it was still known as Andre Delport Multi-SA Pension wrap fund but the name has since changed from 1 February 2005 to Xhilarator Multi-SA Balanced FoF. The original amount has grown to R1,579,253 on 1 September 2005. This represents an annualized performance, net of cost of 17.45% over the three-year period.