Money market securities saw significant spread widening over the quarter as concerns over Eurozone peripherals escalated which caused a widespread sell off in risk assets across all markets. This particularly impacted the spreads of European financials on concerns their holdings of these Eurozone peripherals' government debt, particularly Greek, would need to be written down further leading to losses. The JP Morgan short term FRN index of financials credit spreads, which reflects a large portion of underlying holdings in the funds, moved from +61 basis points to +150 basis points over the quarter. This spread widening had a dampening effect on the return of the funds over the quarter.

In the cash markets Europe was again the mover with the anticipated ECB interest rate hike occurring in July when the ECB raised rates 25 basis points to 1.50%. Both the Fed and the Bank of England left their official rates at historic lows of 0.25% and 0.50%, respectively. In the three-month LIBOR markets the euro was broadly flat and both the US dollar and sterling was up 13 basis points. In the 12-month LIBOR markets the euro was down 10 basis points, the US dollar was up 13 basis points and the sterling was up 14 basis points.

The main driver of performance in the funds this quarter was the exchange rate movements with the rand depreciating significantly against the euro, US dollar and sterling on the back of the flight to safety trades driven by the Eurozone peripherals concerns. This resulted in the rand depreciating 9.42% against the euro, 16.41% against the US dollar and 13.80% against the sterling which flowed through to strong performance in the funds.

Portfolio activity and positioning
During the third quarter of 2011 we continued to invest the maturing bonds and cash into high grade, short-dated securities. Some companies we purchased were Rabobank, Citigroup, JP Morgan, KFW, Royal Bank of Scotland and SBAB Bank. We also invested in government-backed securities such as UK, Dutch, French, Danish and Belgium government bills. Residual cash is invested into sterling, euro and US dollar cash deposits. The regional split remains broadly neutral in terms of currency positioning.

In rand terms the Momentum International Income Fund returned 14.55% in the third quarter 2011 versus the benchmark return of 15.40%.

Metropolitan International Specialist Income Fund of Funds has closed and merged into Momentum International Income Fund.

Momentum Euro Income Fund has closed and merged into Momentum International Income Fund.

Economic overview
The geopolitical tensions that flared in the first quarter rolled over into the next as civil unrest continued in the broader Middle East region and infighting continued in Libya. In Japan the after effects of the natural disaster and nuclear crisis continued to weigh on the economy. The second quarter of 2011 turned out to be a story of very different risks as risk appetite and market behaviour was led by political risk much closer to home. Eurozone peripheral woes echoed 2010 and the European sovereign bond market fragmented further. In the US, data releases showed an increasingly fragile recovery with muted job creation and a weaker manufacturing outlook. In Japan the double dip was confirmed as growth contracted for the second consecutive quarter with the magnitude of contraction far worse than anticipated by the market. The Asia ex-Japan region went into the quarter tooled up to fight creeping inflation fuelled by increasing commodity prices. Select central banks in the region hiked base interest rates and China again increased bank reserve ratio requirements. Then in the first week of May we saw the biggest weekly decline in commodity prices since the fourth quarter of 2008. The market was led by hawkish rhetoric from commodity consuming Asia, weakness in manufacturing data and a turn in risk sentiment as the spotlight again fell on Greece and other peripheral European countries. Sovereign solvency issues have been dominating the financial headlines for most of the quarter as speculation mounted that Greece would be forced into some kind of debt restructuring. Crucial votes were passed at the end of June which allowed the fifth tranche payment to be made to keep Greece solvent and July should bring further resolution on any proposed rollover and private sector involvement. Spreads to German government bonds moved wider across most other European sovereigns with Portugal leading the charge. Despite the poor sovereign backdrop, corporate fundamentals remained intact and helped equity and credit indexes return flat to positive returns both globally and within Europe. Sovereign concerns are likely to continue to dominate headlines in coming months as lawyers and politicians on one side try to mask a default that the ratings agencies are increasingly inclined to recognise in one form or another. The systemic risk that comes with that would undoubtedly create another financial crisis of at least European proportion, but having thrown so much money at the problem the leading political figures will do their utmost to prevent this from happening. As the technicalities of a soft default are argued in Europe we may see headlines from the other side of the Atlantic as the US approaches its debt ceiling and the ratings agencies make noise there. At a high level, the economic recovery and growth in developed markets require easy monetary conditions for some time yet. The upward pressure on bond yields from inflation and an increasingly important credit component risks derailing one of the weakest recoveries seen since the end of World War II. However, our base case as we move into the second half of the year is for a slow improvement in the fundamentals that should lead to positive total returns in most risk asset classes, but perhaps with greater volatility.

Market overview
Money market securities saw slight spread widening over the quarter as concerns over Eurozone peripherals impacted spreads on European financials, and soft economic data out of the US and UK impacted spreads on corporates. This spread widening had a dampening effect on the return from these securities contributing to the underperformance this quarter in the income funds. In the cash markets Europe was again the mover with the anticipated European Central Bank (ECB) rate hike occurring in April. The ECB raised rates 25 basis points and signalled further tightening to come, with the market anticipating a further hike in July. Over the quarter the threemonth euro LIBOR rate was up 31 basis points and the 12- month euro LIBOR rate was up 19 basis points. In the US the Federal Reserve left the target interest rate at historic lows and expectations of rate hikes have been pushed back to mid next year on the back of softening economic data raising concerns about the economic recovery. Over the quarter the three-month US dollar LIBOR rate was down 5 basis points and the 12-month US dollar LIBOR was also down 5 basis points. In the UK the Bank of England again left the official rate at historic lows on the back of economic concerns. Market expectations of rate hikes have now been pushed back to mid next year. Over the quarter the three-month sterling LIBOR rate was up 1 basis point and the 12-month sterling LIBOR was down 2 basis points. The increased interest rate differentials on the back of the ECB hike buoyed the euro against the US dollar, sterling and rand, but to a lesser extent than the previous quarter as Eurozone peripheral woes weighed on its gains. Against the rand, the euro appreciated 2.3%. The US dollar and the sterling both underperformed against the majors over the quarter as expectations of interest rates hikes were pushed back further for these two regions. Against the rand there was very little movement with the US dollar declining 0.07% and the sterling increasing 0.08%.

Portfolio activity and positioning
During the second quarter of 2011 we continued to invest the maturing bonds and cash into high grade, short dated securities with particular emphasis on diversifying away from the financial sector. Some companies we purchased were Hewlett Packard, Vodafone, Shell International, Total Capital, Philip Morris, Toyota, Volkswagen, Westpac, Morgan Stanley, Wells Fargo and ABN Amro. We also invested in government backed securities such as UK and Dutch government bills and the Development Bank of Japan. Residual cash is invested into sterling, euro and US dollar cash deposits. The regional split remains broadly neutral in terms of currency. In rand terms the RMB International Income Fund returned +0.10% in the second quarter 2011 versus the benchmark return of +0.95%, underperforming by 85 basis points.

The RMB International Income Fund will change it's name to Momentum International Income Fund, effective from 01 August 2011

Economic overview
The first quarter of 2011 started encouragingly as risk assets, and commodities in particular, continued to deliver strong returns. These positive returns could not have been foreseen as a series of geopolitical events and the shocking natural disasters in New Zealand and Japan dampened risk appetite as the quarter progressed. The civil unrest in Tunisia, sparked ultimately by spiralling food costs and a populist uprising against the government, soon spread to other countries within the Middle East and North Africa region making the "MENA" acronym common reading for many investors. Violence and demonstrations flared in Egypt leading to the resignation of Hosni Mubarak and inspiring further unrest in countries including Bahrain, Qatar, Yemen and of course Libya. The latter now finds itself subject to North Atlantic Treaty Organisation (NATO) co-ordinated air strikes, no-fly zones and the Libyan government fighting against a rebel backlash seeking to overthrow the Gaddafi regime. Then, just weeks after a 6.3 magnitude earthquake hit Christchurch in New Zealand, Japan was struck by a magnitude 9 earthquake off the coast of Sendai in the Miyagi region. This unleashed a devastating tsunami killing thousands, flattening swathes of infrastructure and crippling the nuclear reactor at Fukushima which remains unstable. The ensuing market turmoil saw the Japanese yen surge to a post-war high against the US dollar before a coordinated G10 intervention saw it stabilise and retreat. This negative background of increasing inflation, reemergent Eurozone sovereign risks and the resultant devastation in Japan and threats to its export industry could have conspired to create a toxic risk-off cocktail. However, despite these headwinds, risk assets remained remarkably resilient. Global equities recovered most of their mid March losses to end the quarter up 4.8% in US dollar terms, global high yield bonds returned over 4%, and the Goldman Sachs Commodity index returned over 11%. Even developed market global government bonds returned a positive total return which all in seems to indicate that liquidity conditions are still very accommodative for risk assets. Data remains somewhat mixed, but in the US unemployment continues to fall and private sector hiring is gathering pace.

Inflation continued to pose risks as central banks in some emerging economies tightened monetary conditions and investors moved to discount higher rates in the markets worst affected by inflationary pressures. Timely action on interest rates will give investors confidence that these risks can be contained and in itself can be supportive of the local bond markets, particularly at the longer end. Even with the bias to further tightening, local emerging market bonds still returned a positive 2.8% in the first quarter. In developed markets the UK remains the outlier with Consumer Price index (CPI) inflation reaching 4.4% year-on-year, well above target and posing a difficult decision for the Monetary Policy Committee (MPC). In Europe the path seems clearer given the European Central Bank's (ECB) primary motivation to manage inflation risks. This has in turn supported the common currency which returned over 6% against the US dollar during the quarter. This strength was despite the focus falling on sovereign bonds, this time centred on Portugal which saw its 10-year benchmark yield surge to 8.4% at the end of the quarter. Both developed and emerging market equity indices produced solid US dollar returns of 4.80% and 2.05%, respectively during the quarter. While not as strong as in the last quarter of 2010, investors should be satisfied with these returns given market events. Global bonds scored a marginally positive return of 0.54% (measured in US dollars) as risk events played out and countered the growing threat posed to bond investors by inflation and expectations thereof. With the end of US Federal Reserve (Fed) bond purchases on the horizon we will have to wait and see if the market can absorb the extra supply at current yields. But with inflation picking up it looks as if the bias will be to the upside in yields. Jobs data continued to improve in the US with unemployment falling back further and private sector job growth still firmly in positive territory. In Europe sovereign concerns resurfaced in the guise of Portugal which saw the resignation tendered of Prime Minister Jose Socrates after the parliament rejected the austerity budget. At the end of the quarter the financing cost for 10-year Portuguese debt was a full 505 basis points higher than Germany's, rising from 364 basis points at the end of 2010. Yields at those levels are unsustainable for Portugal and it now seems inevitable that there will be a bailout or restructuring of their debt.

Market overview
Money market securities saw little in the way of the spread tightening, but still produced positive returns. In the cash markets Europe was the mover this quarter as the market moved to price in ECB action in response to creeping inflation. Three month Euribor was up 24 basis points on the quarter to end March at 1.24%. In the US three-month rates were unchanged over the quarter while UK rates edged marginally higher. The re-pricing of interest rate risk buoyed the euro against the majors during the first quarter. Against the rand it rallied harder still, returning over 9%. This all occurred as Portuguese yields spiralled higher and it was clear that the market had already priced this in and was confident that the European facility could provide financing should Portugal request financial help. Sterling also had a positive quarter rising a little over 3% against the US dollar during the quarter and 5.9% against the rand. Despite short end rates remaining relatively stable, investors were pricing in an increasing inflation risk in the longer end of the yield curve and this supported the currency. On the flip side, benign inflation numbers in the US were unlikely to filter through into any decisive action near term from the Fed and this led the US dollar index lower over the quarter against the major currencies.

Portfolio activity and positioning
During the first quarter of 2011 we continued to invest the maturing bonds and cash into high grade, short dated issues including Yorkshire Building Society, HBOS, Asian Development Bank, ANZ, France Telecom, GE, Citigroup, Credit Agricole, Dexia Group, European Investment Bank and Bank of America. We also invested additional cash into US, German, French and Italian government bills. Residual cash is invested into sterling, euro and US dollar cash deposits. The regional split remains broadly neutral in terms of currency. In rand terms the portfolio returned 6.29% in the quarter to 31 March 2011 versus the benchmark return of 6.39%.

Economic overview

The fourth quarter of 2010 showed a clear rebound in sentiment as risk markets rallied and bonds sold off. Markets were buoyed in the US by a second round of quantitative easing (QE2) which added further stimulus to the US economy. The extension of the Bush tax cuts further added to the improvement in the markets which ultimately fed through into some stronger data releases. This positive tone went some way to masking the issues in the Eurozone which had turned so ugly just a few months earlier. Spreads on the wider peripheral economies, including Spain and Italy, continued to edge higher through the quarter, peaking at the end of November before falling back in December. What is clear however, is that the problems persist and these countries, Portugal in particular, cannot afford to pay such high rates on an ongoing basis. January 2011 will prove a testing time as these countries come to the market with new issues and we expect Eurozone sovereign issues and funding vehicles to remain a theme throughout 2011. Equities, spread product and risk currencies enjoyed a strong quarter without which 2010 returns would have been modest. As it was, global equities (measured in US dollars) returned nearly 9% in the fourth quarter, after surging 13.8% in the third quarter, to offset a weak second quarter. All this risk upside came at the expense of bond markets which sold off sharply despite the US Federal Reserve's (Fed) pledge to buy an additional $75bn of treasuries per month through June 2011, plus reinvestment of principal payments from agency debt and mortgage backed securities which could total another $250-300bn. With hindsight it was perhaps clear that much of this was priced in and the market took the same view; additional stimulus always risked turning sentiment against the treasury market in the absence of any obvious systemic risk. Certainly the jobs and industrial production data looked to be improving both in the US and the stronger European economies such as Germany, which received an additional boost from a weaker euro. Inflation remained low in the US and Japan, but in Europe and the emerging markets it remained above target in a number of countries. Increasing food and commodity prices could see this extend well into 2011 and it is these inflation expectations that ultimately pushed yields higher.

Portfolio overview
Money market securities had a positive quarter with some marginal spread tightening in corporate bonds. In the cash markets there was a mild bias to the upside in three-month LIBOR funding, with the biggest rise in Europe. US threemonth rates were just 1bp higher over the quarter while UK and European rates rose 2bp and 11bp, respectively - Europe seeing all of the gain and more in October - before falling back towards the end of the year. This again was due to investors' demands for a higher risk premium for holding euros, or more specifically euro-denominated assets. Over the quarter, the euro was down 1.7% against the US dollar and down 4.1% against the rand as commodity currencies and risk assets rallied whilst funding tensions lingered in the Eurozone. It was a similar theme for sterling but to a lesser degree. Certainly with inflation remaining stubbornly high in the UK and creeping up in the Eurozone, the central banks will need to monitor the situation carefully whilst trying to manage inflation expectations. This will ultimately lead to further volatility in foreign exchange markets until expectations have settled and realised inflation is reined in. Strong commodity prices and market-specific changes, such as the Value Added Tax (VAT) increase in the UK, are unlikely to settle these concerns any time soon. Emerging markets will feel these pressures even more.

Portfolio activity and positioning
During the fourth quarter of 2010 we continued to invest the maturing bonds and cash into high grade, short-dated issues. We continue to buy spread in financial names (including HBOS, ANZ, Credit Agricole, ING, Morgan Stanley and Nationwide) and also bought into the auto sector (Toyota, Volkswagen and BMW) and oil services (BP). Residual cash is invested in UK, European, US bills and cash deposits. The regional split remains broadly neutral but has moved from a small overweight to euro (+1.5%) at end the third quarter to a neutral euro and 1% overweight sterling position at the end of the year.

In rand terms the portfolio returned -6.44% in fourth quarter versus the benchmark return of -6.21%. For the full year to December 2010 the RMB International Income Fund returned -13.52% as the euro, US dollar and sterling fell against the rand. The benchmark returned -12.68%.