Best execution policy

This policy provides an overview of how SKAGEN implements a decision to trade on behalf of the securities funds in the best interests of the funds. SKAGEN has an active approach to trading and to ensuring that each trade is implemented in the best possible way. The framework for evaluations is laid down in the Norwegian Securities Fund Regulation Chap. 2 VIII, the Securities Trading Act section 10-19 and Storebrand Asset Management's guidelines for best execution.

Policy statement

When executing orders, SKAGEN will take all reasonable steps to obtain the best possible result for the unit holders.

Definitions

Best execution

Best possible result taking into account price, costs, speed, likelihood of execution and settlement, size, nature or any other consideration relevant to the execution of an order.

Execution venue

Execution venue means a regulated market, a multi-lateral trading facility (MTF), a systematic internaliser, or a market maker or other liquidity provider or an entity that performs a similar function in a third country to the functions performed by any of the foregoing.

Best execution

The requirement to achieve the best results consists of two elements: 1) how the trade should be implemented, and 2) when the trade should be implemented. Under the first point an assessment is made whether the trade is to be entered in an electronic trading system or whether it should be performed via a physical broker. Once the order form has been selected, a decision will be made as to which broker, trading system, trading platform etc. will be used to ensure the trade provides the best result for the fund.

Assessment of best result through the investment decisions

The portfolio managers are responsible for the day-to-day management of the funds. Whenever the portfolio managers execute a transaction on behalf of the fund, they will try to achieve the best result on the trade. For this they will take into account price, costs, speed, probability of completion and settlement, size, nature and other relevant trade issues.

When deciding which of these aspects requires the most attention, portfolio managers will take into account the objectives of the fund, the investment strategy, the risk profile and type of order and the characteristics of the financial instruments and the execution venue.

The assessment will be multi-faceted and vary according to the situation. Generally speaking, SKAGEN will give most weight to:

• Price
• Costs
• Characteristics of the execution venue
• Characteristics of the financial instrument
• Likelihood that the trade will be completed within a reasonable timeframe

Price

All of the SKAGEN funds aim to provide clients with best possible risk-adjusted returns. The price that can be achieved by buying and selling securities is therefore all-important. In accordance with its investment policy, when assessing the best result SKAGEN will attach great importance to the price achievable for the financial instrument being bought or sold.

Costs

In addition to the price achievable for the actual security, transaction costs will have a bearing on the return of the fund. In assessing the best result, the transaction costs will normally be accorded high weight.

Characteristics of the market place

The SKAGEN funds have broad mandates and most funds also have a global mandate, which means that they invest in securities markets throughout the world. Some of these markets may have a less developed infrastructure, making it harder to be able to trade or be certain about the execution of the transaction. When comparing cost levels it is sensible to consider these specific market conditions and the situation of the individual security. A nominally higher cost could still give the best overall result for the security, if, for example, it provides access to knowledge, contacts and placing power for executing the trade.

Characteristics of the individual financial instrument

Funds may also invest in less liquid securities, both in developed and less developed markets. In such cases, access to a market of buyers and sellers is not easy and the manager may need to select a more expensive execution venue to secure the best result for the fund.

Likelihood of completing the trade within a reasonable time

Regardless of the characteristics of the financial instrument, a manager may face challenges when buying or selling larger holdings. In such cases it may be in the unit holders' interests that higher costs or less favourable prices are accepted in order complete the transaction.

Checks to assess the best result from the investment decisions

Monthly random checks are performed by Storebrand Asset Management – Investment Control and Analytics, which assesses how well the portfolio manager has taken into account the best result when executing transactions on behalf of a fund.

If the check reveals a deviation from this policy, Compliance will confer with the Investment Director as to whether further steps need to be taken.

Assessment of best result from placement of orders with third parties

Once SKAGEN has decided to make an investment on behalf of a fund, the order then needs to be executed. This is done through brokers, either physically or by use of electronic trading platforms. SKAGEN will act in the best interests of the fund when selecting a broker and will seek to achieve the best possible result for the funds.

Choice of broker

SKAGEN manages funds with global investment mandates and invests in large parts of the world where there is a functioning market. The funds have differing investment mandates and thus differing needs for broker connections, both in respect of global and national brokers. To secure the correct settlement of transactions and the best result, SKAGEN will exercise caution in the choice of brokers. The portfolio managers may therefore only deal with brokers who have been approved by the Investment Director.

Selection of brokers for approval will be done on the basis of the following assessments:

• Effective execution of transactions
• Credit rating
• Ability and willingness to pay
• Correct and ethical behaviour
• Conditions of contract with broker
• Price

When a trade is to be performed, the portfolio manager will select a broker from the approved list. For each trade the portfolio manager will strive to maintain the best interests of the fund and thus of the unit holders. In addition to the above criteria, the portfolio manager will take into account the probability of effective execution and the size and nature of the order.

Extra caution will be exercised in selecting brokers in markets which custodians consider to have a higher execution and counterparty risk.

Checks on quality of order implementation by selected brokers

Storebrand Asset Management, Investment administration monitors brokers on a daily basis. Furthermore, the most commonly used brokers are assessed semi-annually based on the assessment criteria above. In extraordinary market situations, the Investment Director may initiate further monitoring.

If the portfolio manager considers that a broker does not meet the expectations for best results, he or she may ask for the broker to be disapproved and removed from the broker list.

The policy is subject to Board approval.