The Sanlam International Balanced Fund of Funds will change it's name to Sanlam International Moderate Fund of Funds, effective from 03 October 2011.

The second quarter of 2011, although unable to match the extent and diversity of events during the first quarter, was nonetheless an interesting quarter in its own right. From a global perspective it was the renewed focus on the European sovereign debt crisis which was most noticeable. Ireland and other peripheral countries had further issues to address, but it was Greece, once again, that has been hit hardest. The situation in Greece and potential for default, led to concerns throughout the European banking system, which in turn led to the global equity market selling-off heavily during June, only to bounce back strongly towards the end of the month - once the Greek government had successfully passed the required measures.

For the quarter as a whole, global equity markets, as measured by the MSCI World Index, managed to post a positive return of 0.47% (in US dollar terms). This however disguises the nature of the quarter, which saw markets rise by over 4% in April, only to sell off in May and the majority of June, before sparking a significant rebound. However, the rally was not enough to produce a positive return in June, when markets fell by nearly -1.6%. From a regional standpoint deviations were not as large as in recent previous quarters: Europe led the way rising 2.4%, while Japan just delivered a positive return, and the Pacific excluding Japan and North America regions both declined very slightly, but both by less than -0.5%. For the quarter Emerging Markets underperformed the Developed World with a decline of -1.15%. Looking over the first half of 2011 Emerging Markets have only delivered nearly 1%, while Developed Markets have risen over 5%.

With the economic recovery faltering somewhat over the second quarter, fixed income markets delivered a healthy return over the period. Global fixed income markets, as measured by the Barclays Capital Global Aggregate Index, produced a US dollar return of 3.10% in the quarter. This was a superior return compared to global equities for the quarter, and means that global fixed income markets have produced a return of 4.38% for the first half of 2011.

All performance figures are quoted in US dollar terms unless stated otherwise.

The first quarter of 2011 has been one of the most eventful quarters of recent times. The extent and diversity of news that the market has had to digest has been substantial. Any one of these events mentioned earlier would have been significant in isolation, but to have all of them in one quarter is indeed remarkable, and this is to say nothing of the traditional considerations that impact equity markets, inflation, GDP growth, corporate earnings, etc. And then finally, there is the rise in the oil price during the quarter.

Despite all this news flow, global equity markets have managed to post a health return over the period. For the quarter, the World (Developed Markets) Index rose by 4.80%. While the absolute level of return may not be impressive, and is easily overshadowed, even just by the last quarter of 2010, what is impressive is that the market has continued to rise in spite of all these events. The persistence of the market to push higher has been seen throughout the quarter. January and February both saw markets close higher, while March did see global markets decline slightly, but this was primarily due to the falls seen in the Japanese market over the month - those in turn being a direct consequence of the Japanese earthquake, tsunami and nuclear events. At a regional level therefore it is no surprise that Japan was the weakest market over the period, declining nearly 5%. However, the other major regional markets all posted positive returns, with North America rising nearly 6% and Europe rising nearly 6.5%. Emerging Markets also delivered positive returns, but under-performed Developed Markets, with a return of only just over 2% for the period. Global fixed income markets, much like global equities, were surprisingly resilient during the first quarter of 2011. The rise in global bond yields marked a small pause, but yields are on the rise again and credit markets have performed remarkably well. Now, with inflationary pressures rising everywhere and developed economies still in intensive care, the market is very apprehensive about the policy response from G7 central banks. All performance figures are quoted in US dollar terms unless stated otherwise.

The fourth quarter of 2010 saw the continuation of the market rally that started back in July. For the quarter, the MSCI World (Developed Markets) Index rose by 8.95%. While this did not match the double-digit return achieved in the third quarter, the strength of the market recovery has clearly been evident over these past two quarters, despite markets retracing most of the second quarter losses during the third quarter. As measured by the MSCI World Index, equity markets rose 11.76% during 2010 as a whole. Portfolio Manager's Comment (31/12/10)

This return was achieved notwithstanding the market's risk-on risk off alternating sentiment during 2010. While equity markets did not deliver the same high returns experienced during 2009 last year or the falls of 2008, its performance was similar to the 9% delivered in 2007. This recovery thus occurred in spite of the ongoing concerns and events related to the credit crisis, as witnessed in Greece's woes, which spread to other peripheral countries in the euro-zone and ending in Ireland's bailout in late November. These issues have not yet been fully resolved, but policymakers have stepped up to the plate during 2010 to address the issues facing them. This calmed markets, even if it be only temporarily, before renewed concerns emerged elsewhere and investor confidence was once against tested.

Global government bond yields jumped in the fourth quarter, led by the intermediate sector, in response to better economic data and fiscal stimulus in the US and a large unwind of long positions. As anticipated, the Federal Open Market Committee (FOMC) announced additional quantitative easing (QE2) amounting to $600 billion. Sentiment was mixed about the efficacy of this measure, with the Fed's policy particularly coming into question as several key economic indicators seemed to improve, which caused interest rates to adjust higher, not lower as initially anticipated. The 10-year US Treasury yield rose 78 basis points (bps) to 3.29%. As intended, the Fed's Treasury purchases also supported risk assets during the quarter, with the Barclays US High Yield Index gaining 3.2% and the S&P 500 rising 10.8%. Core inflation remained muted between 0.6% and 0.8% year-over-year. All performance figures are quoted in US dollar terms unless stated otherwise.