Jyske Invest Turkish Equities

Market Comments, Q4 2011

A difficult year

Review

The fund generated a return of -13.28% for the fourth quarter of the year against a benchmark return of -12.77%. For 2011, the fund generated a return of -34.04%; the benchmark return was -34.06%. We performed in line with the market due to the fund’s sector-neutral approach.

The year 2011 was a difficult one for the Turkish equity market. The downturn in the equity market started in the autumn of 2010 when the Turkish central bank lowered its interest rate to depreciate the currency. Among other things, to improve the country’s competitiveness and current account. In addition, banks’ reserve requirements were lifted to put a damper on lending growth to avoid an overheating of the Turkish economy.

Since then, the central bank has implemented several unorthodox monetary-policy initiatives which have lowered market confidence in the central bank. Moreover, several macroeconomic events

• The European debt crisis
• ”The Arab Spring”
• The nuclear accident in Japan

have influenced the market. Particularly uncertainty about the European ability and willingness to solve the debt crisis was considerable. Owing to the events in 2011, investors sold their most risky equities, which severely affected Turkish equities, although most problems derive from other places in the world.

Outlook

In early 2012, the global economy is still facing a number of large challenges which may have considerable implications on the market returns in the coming year. Much depends on political measures, which means that 2012 may be unpredictable for investors. When expectations are low, there may be room for positive surprises – but it is a condition that we will see a turn in the global economy as well as market psychology.

We assess that Turkish equities have attractive valuations seen in relation to the present anticipated earnings in the corporate sector. The valuation is low in relation to its own history as well as the global equity markets. Still, the country is highly dependent on the sentiment in the financial markets. If we see an improvement or a solution to the debt situation in Europe, investors will probably become more risk tolerant which will typically be positive news for the Turkish equity market.

Following two years with excellent GDP growth rates (9% in 2010 and estimated 8% in 2011) we anticipate that economic growth will decline to 2%-3% in 2012. Economic growth will be affected by the challenges in Europe. Moreover, Turkey is battling with an inflation rate of approx. 10% and a current-account deficit of the same size. Both figures are expected to fall in 2012, but this will affect the growth rate.

Please note

Past performance is not a reliable indicator of future results. The value of and return on your investment may fall, and you may not get back the full amount invested. Investment in small and emerging markets may prove more volatile than investment in other markets. An initial charge is usually made when you purchase and sell units. The fund may invest in instruments denominated in various currencies. You should be aware that changes in exchange rates may have an adverse effect on your investment. This may also be the case if EUR is not your base currency.

Information in this text should not be regarded as investment advice, and investors should consult their own investment and tax advisers before buying or selling.