Sparinvest SICAV Annual Report 2009 R.C.S. Luxembourg B 83.976

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Sparinvest SICAV Report of the Board of Directors The Chairman’s Report 2009 proved to be another remarkable year which will go down in investment history as being the year in which the trough of the subprime crisis was reached (on March 9th), after which it became the year of ‘the great rebound’ as markets, in unison, staged one of their steepest, and virtually unbroken climbs, lasting right up until the year end. It was also – quite remarkably – a year in which world credit markets outperformed world equity markets. As a result of these events, we are able to counter last year’s gloomy report with much more positive news about the performance of the funds in Sparinvest SICAV during 2009. Our Investment Manager’s report gives the detailed picture, but here are the ‘broad brushstrokes’: Our bond funds have performed exceptionally well over the year. Our Fixed-Income team in Denmark received a prestigious Morningstar award in recognition of consistent long-term performance and our High Yield Value Bonds fund was consistently placed throughout the year amongst the top-performing funds in Europe in what proved to be the year’s top-performing asset class. As a result, we are pleased to report that the vast majority of our bond fund investors should now find themselves back in positive territory. For our Value Equities team, performance since the tide turned in March has been very encouraging and all funds end the year between 20 to 30 percent up on 2009. Some markets have been quicker to rebound than others; Japan and the US have been the ‘Value laggards’ and thus our European Value Fund was Sparinvest’s top-performing equity fund over the year. More importantly for the year(s) ahead, we find that valuations remain extremely attractive, with market prices still at significant discounts to intrinsic value. We believe this can fuel significant performance in the years to come. Our Strategic Asset Allocation funds have performed well – particularly in respect of their exposure to credit bonds. The three style factors that are emphasised within our equities exposure – Value, Small Cap, and Momentum are those that we expect to generate significant outperformance as economic recovery takes hold. In general, we at Sparinvest are very upbeat about the year ahead. We are not in the business of calling market bottoms and yet we are convinced that financial disaster has been averted and that markets will continue to function as normal whether the dreaded ‘double dip’ occurs or not. We are also convinced that provided markets function as normal, our evidence-based investment strategies will ultimately lead to long-term out-performance. In December 2009, the Board of Directors took the decision to sign the United Nations Principles for Responsible Investment (UN PRI), meaning that we have formally declared our intention to increase our focus on social responsibility in the investment process. Our Press Release on this subject is available to view on our websites. Finally, the Board would like to take this opportunity to thank all the staff involved in the management of Sparinvest SICAV for their committed efforts during 2009. The Board looks forward to continuing to provide investors with the highest possible degree of satisfaction in the future. 22 January 2010 Per Noesgaard Chairman of the Board 6
Sparinvest SICAV Report of the Investment Manager Economic Background In early 2009, it became apparent that global governments – and in particular those of the G20 industrialised nations - would have to take extraordinary measures to re-liquify the markets. Over the course of 2009 they did this with direct stimulus measures valued at around 3% of global GDP. By reducing interest rates and printing money, funded by the large-scale issuance of treasuries and bonds, governments have effectively removed the toxicity from the private sector but brought it into the government sector. This has created huge deficits in some nations (notably the US and UK), thereby limiting the scope for ‘last resort’ intervention by these governments in any future crises. The question for the future is whether the markets are now strong enough to survive without further stimulus and whether other economies of the world will decouple from the US to fuel the next round of recovery. In any event, the argument both for global diversification and for asset class diversification remains strong. Market Background Kick-started by government money, 2009 will be remembered as a year of historic market movements across many asset classes. Beginning in early March and continuing to the year-end, global equity and credit markets have picked up significantly. Credit bonds in particular have had a spectacular year, recovering from a near total collapse in prices in 2008 to outperform the majority of world equity markets over the course of 2009. As it became apparent that corporate default levels were not going to be anywhere near as catastrophic as anticipated, the Merrill Lynch Global High Yield (EUR Hedged) Index advanced 60.7%. In the equity markets, the rebound has been strongest for the segments that suffered most during 2008 - among them Far East and European Small-caps. The MSCI World equity index ended the year up by 25.9%. Index End 2008 End 2009 Year rise/fall FTSE 100 4,434 5,413 Dow Jones 8,776 10,428 18.8% Nikkei 225 8,860 10,546 19% Dax 4,810 5,957 23.8% CAC 40 3,212 3,936 22.5% MSCI World 25.9% (Euro return) Merrill Lynch Global High Yield 60.7% (Return hedged for Euro) Data from the fund markets revealed a mass exodus from equities during 2008. Many investors will therefore have begun 2009 congratulating themselves on having got out of the markets before they reached their troughs in March. However, the same investors will then have spent the majority of this past year witnessing a strong rally from the sidelines, wondering all the while whether it was safe to reinvest. As a result, many will have missed out on some spectacular returns which would have gone a long way towards recouping previous losses. Sparinvest has always argued that some of the best periods of stock market performance follow closely on from the steepest downturns. This is why we believe that continuous investment is a more reliable long-term strategy than trying to time the markets. 7
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Sparinvest SICAV SPARINVEST - INVES
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Sparinvest SICAV SPARINVEST - LONG
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Sparinvest SICAV Notes to the Finan
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Sparinvest SICAV Annual Report 2009 R.C.S. Luxembourg B 83.976

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