SKAGEN Tellus Status Report December 2016

Key numbers as of 30 December 2016 EUR, net of fees

SKAGEN Tellus JPM Broad GBI Unhedged ** Excess return

December Q4 0,1% -0,1% 0,2%

2016 1,8% -2,4% 4,1%

1 years 5,7% 4,4% 1,3%

3 years 5,7% 4,4% 1,3%

*Inception date: 29/09/2006 **Benchmark index before 01/01/2013 was Barclay's Capital Global Treasury Index 3-5 years Unless otherwise stated, all performance data in this report relates to class A units, measured in EUR and is net of fees.

2

5 years 6,2% 9,0% -2,8%

5,2% 3,3% 1,9%

Since inception* 5,4% 5,0% 0,4%

After the storm comes calm • After a steep rise in long-term interests rates following Trump’s victory in November, interest rate markets calmed down in December. • As expected, the Federal Reserve increased the policy rate by 25 basis points at its meeting in December. The market viewed the Fed as more hawkish than expected, as the central bank signalled 3 rate hikes in 2017. • In general the key macro numbers were strong in December, which points to a good start for the global economy in 2017. This supports our view of stable or somewhat higher long-term rates in the US and central Europe. • The duration of Tellus is currently 3.7 years, which is substantially lower than the index duration of 7.6 years. At the current stage of the business cycle, we only take interest rate risk where we see there is still is a solid case for a fall in the interest rate going forward or the yield is very attractive. We have longer duration in selected countries where we expect the credit premium to fall (such as Greece, Portugal and Croatia), or where there is a high interest rate (Peru and Chile). We have very low duration in advanced economies such as the US, UK and Norway. In the latter, the investment is based on an expectation of an appreciation of the currency. • Our investments in Chile, Spain, the US and Croatia contributed most positively to the return in December. Greece, on the other hand, was a laggard. The interest rate on our Greek bond increased by 50 basis points after the Greek government decided to give pensioners a Christmas bonus. This was not approved by the creditors, and hence led to uncertainty about the future of the debt relief measures. By the end of the month the creditors agreed to go forward with the measures after Greece confirmed its continued commitment to the terms of the agreement. Rates in Greece then fell.

3

Accumulated returns since inception in EUR 70% 64%

60% 50% 40%

39%

30% 20% 15% 10%

10% 0% -10% -20% 2006

2007

2008

Fund total As of 30 December 2016

4

2009

2010

Currency

2011

2012

Bond price changes

2013

Coupons

2014

2015

2016

Accumulated returns year to date in EUR 7,0 % 6,31%

6,0 % 5,0 % 4,0 % 3,0 %

3,05%

2,0 %

1,87% 1,39%

1,0 % 0,0 % -1,0 % -2,0 %

Fund total

As of 30 December 2016

5

Currency

Bond price changes

Coupons

Top 5 best and worst contributors 2016 1,00%

0,80%

0,60%

0,40%

0,20%

0,00%

-0,20%

-0,40% Absolute return

Peru

USA

Chile

Croatia

Greece

Mexico

Portugal

Germany

0,86%

0,84%

0,81%

0,80%

0,77%

-0,32%

-0,29%

0,00%

Contributing factors are interest coupons, bond price changes and currency fluctuations As of 30 December 2016

6

Great Britain 0,02%

France 0,06%

Portfolio as of 30 December 2016 Holding Name

Currency

Holding

Percent

Maturity Date

Coupon

US Government

USD

10800

8.655

30.06.2017

0.6

US Government

USD

10000

8.001

31.03.2017

0.5

Norwegian Government

NOK

80000

7.807

19.05.2017

4.3

Croatia Government International Bond

EUR

8300

7.668

30.05.2022

3.9

Peruvian Government

PEN

25000

6.125

12.08.2037

6.9

Portugese Government

EUR

7000

5.646

15.10.2025

2.9

Chilean Government

CLP

4410000

5.56

05.08.2020

5.5

Hellenic Republic Government

EUR

9000

5.385

24.02.2035

3.0

New Zealand Government

NZD

8000

5.29

17.04.2023

5.5

Spanish Government

EUR

6000

5.221

30.04.2025

1.6

UK Government

GBP

5000

5.017

07.09.2017

1.0

UK Government

GBP

5000

5.013

23.01.2017

1.8

Mexican Government

MXN

120000

4.822

15.12.2016

7.3

Canadian Government

CAD

8000

4.815

01.03.2018

1.3

Slovenia Government

EUR

3500

4.152

30.03.2026

5.1

Dominican Republic

DOP

150000

2.737

10.05.2024

11.5

European Bank Recon & Dev

INR

200000

2.426

19.03.2018

5.8

Lithuanian Government

USD

2000

1.903

01.02.2022

6.6

7

Interest rate risk exposure PERU 0,65

GREECE 0,63

EBRD* 0,02

MEXICO 0,02 NORWAY 0,03 BRITAIN 0,04 CANADA 0,06 UNITED STATES 0,06 LITHUANIA 0,08

PORTUGAL 0,44

DOMINICAN REPB. 0,13 CHILE 0,18

SPAIN 0,42 NEW ZEALAND 0,28

SLOVENIA 0,33

CROATIA 0,38

EBRD* : European Bank of Reconstruction & Development

As of 30 December 2016

8

Interest rate exposure relative to benchmark 3,00

2,50

SOUTH AFRICA SINGAPORE SOUTH KOREA SWEDEN FINLAND BELGIUM ISRAEL HUNGARY HONG KONG AUSTRIA AUSTRALIA CZECH IRELAND DENMARK ITALY POLAND NETHERLANDS FRANCE JAPAN GERMANY EBRD* MEXICO NORWAY BRITAIN CANADA UNITED STATES LITHUANIA DOMINICAN REPB. CHILE NEW ZEALAND SLOVENIA CROATIA SPAIN PORTUGAL GREECE PERU As of 30 December 2016

9

Benchmark SKAGEN Tellus 2,00

1,50

1,00

0,50

-

10

sep. 16

apr. 16

nov. 15

jun. 15

jan. 15

aug. 14

mar. 14

okt. 13

mai. 13

des. 12

jul. 12

feb. 12

sep. 11

5,0

apr. 11

nov. 10

8,0

jun. 10

jan. 10

aug. 09

mar. 09

okt. 08

mai. 08

des. 07

jul. 07

feb. 07

sep. 06

Interest duration since the fund’s inception 10,0 10,0

9,0 9,0

Duration 8,0

7,0 7,0

6,0

Average duration = 4.31 6,0

5,0

4,0 4,0

3,0 3,0

2,0 2,0

1,0 1,0

0,0 0,0

Currency exposure INR 2,5 % DOP 2,8 %

EUR 28,8 %

MXN 4,8 %

NZD 5,3 %

CLP 5,8 %

CAD 6,2 %

USD 19,1 %

PEN 6,3 %

NOK 8,0 %

As of 30 December 2016

11

GBP 10,2 %

Currency exposure relative to benchmark 45% 40%

SKAGEN Tellus

Benchmark

35% 30% 25% 20%

15% 10% 5% 0% EUR USD GBP NOK PEN CAD CLP NZD MXN DOP INR DKK SEK TRY JPY BRL CNY AUD RUB PLN ZAR CZK HKD HUF ILS KRW CHN SGD CNH PHP As of 30 December 2016

12

Moody’s rating on Tellus’ portfolio relative to benchmark 60 %

50 %

SKAGEN Tellus

Benchmark

40 %

30 %

20 %

10 %

0%

Aaa

Aa1

As of 30 December 2016

13

Aa2

Aa3

A1

A2

A3

Baa1 Baa2 Baa3

Ba1

Ba2

Ba3

B1

B2

B3

Caa1 Caa2 Caa3

For more information please see: SKAGEN Tellus A on our web pages SKAGEN’s Market report Unless otherwise stated, all performance data in this report relates to class A units and is net of fees. Historical returns are no guarantee for future returns. Future returns will depend, inter alia, on market developments, the fund manager’s skill, the fund’s risk profile and subscription and management fees. The return may become negative as a result of negative price developments. SKAGEN seeks to the best of its ability to ensure that all information given in this report is correct, however, makes reservations regarding possible errors and omissions. statements in the report reflect the portfolio managers’ viewpoint at a given time, and this viewpoint may be changed without notice. The report should not be perceived as an offer or recommendation to buy or sell financial instruments. SKAGEN does not assume responsibility for direct or indirect loss or expenses incurred through use or understanding of the report. Employees of SKAGEN AS may be owners of securities issued by companies or governments that are either referred to in this report or are part of the fund's portfolio.