Informe Skagenfunds

Hope in a
cast line
The EU summit in June gave hope that a long-term solution may
be found to the debt problems in Southern Europe. A very good risk
premium in global stock markets relative to supposedly secure fixed
income investments is a good starting point for renewed faith in
equities.

READ THE PORTFOLIO MANAGERS REPORT FROM PAGE 16
T HE ART OF COMMON SE NSE
6
Over the rainbow
Why its not all doom and
gloom for equities
8
Fighting back
against excessive
executive pay
Shareholders are
entitled to dividends
and moderation, says
Kristoffer Stensrud
10
Global real estate
opportunities
Real estate companies
are relatively easy to
evaluate, can pay high
dividends and are often
mispriced
12
Value investing
in Asia
The factors driving
long-term share price
performance are similar
in Asia to elsewhere in
the world
A winning formula:
Understanding
structural change
5
Torkell T. Eide
Half Year Report
J ULY 2012 4 SK AGE NF UNDS. COM
2
SK AGEN F UNDS HAL F YE AR REPORT 4 J ULY 2012
Hope in a
cast line
The EUsummit in June gave hope that a long-termsolution may
be found to the debt problems in Southern Europe. A very good risk
premiumin global stock markets relative to supposedly secure fixed
income investments is a good starting point for renewed faith in
equities.

READTHE PORTFOLIOMANAGERS REPORT FROMPAGE 16
T HE ART OF COMMON SE NSE
6
Over the rainbow
Why its not all doomand
gloomfor equities
8
Fighting back
against excessive
executive pay
Shareholders are
entitled to dividends
and moderation, says
Kristoffer Stensrud
10
Global real estate
opportunities
Real estate companies
are relatively easy to
evaluate, can pay high
dividends and are often
mispriced
12
Value investing
in Asia
The factors driving
long-termshare price
performance are similar
in Asia to elsewhere in
the world
A winning formula:
understanding
structural change
5
Torkell T. Eide
Half Year Report
J ULY 2012 4 SK AGE NF UNDS. COM
Photo: iStockphoto
SKAGEN FUNDS
HALF YEAR REPORT 2012
Contents
3
SKAGEN Funds Returns
4
Leader and Comment
5
A winning formula
6
Over the rainbow
8
Fighting back against executive pay
10
Global real estate opportunities
12
Value investing in Asia
14
Notices
15
Journeying in the kingdom of Lesotho
16
Portfolio managers report
29
Fixed income commentary
31

Risk and return measurements
32
Portfolios
39
Half year accounts
CONTENTS
SKAGEN Funds invests in Under valued,
Under-researched and Unpopular compa-
nies all over the world. SKAGEN AS was
established in Stavanger in 1993 and is one of
Norways leading fund managers.
Postal address:
SKAGEN AS
Postbox 160
4001 Stavanger, Norway
www.skagenfunds.com
Telephone no.:
+47 51 21 38 58
Editorial team:
Parisa Lemaire, news editor
Tore Bang, technical editor
Nick Henderson, journalist
Trygve Meyer, journalist
SKAGEN seeks to the best of its ability to ensure
that all information given in this report is cor-
rect, however, makes reservations regarding
possible errors and omissions. Statements in
the report reflect the portfolio managers view-
point 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 instru-
ments. SKAGEN does not assume responsibility
for direct or indirect loss or expenses incurred
through use or understanding of the report.
SKAGEN recommends that anyone wishing to
invest in our funds contacts a qualified custo-
mer adviser by telephone on +47 51 21 38 58 or
by email at contact@skagenfunds.com.
Mispriced: Real estate stocks are often mispriced, which
suits us as value investors.
Doubled: SKAGEN Kon-Tiki doubled its position in Danish AP Mller-Maersk on the back of markup possibilities.
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After the rain comes the sun: Predictions that investors have
turned their backs on equities for good are exaggerated.
26
10 6
3
SKAGEN Funds -
Returns
The following tables show the returns for SKAGENs
funds versus their respective benchmarks in euro.
The figures are updated as of 30 June 2012.
EQUITY FUND SKAGEN KON-TIKI
EQUITY FUND SKAGEN GLOBAL EQUITY FUND SKAGEN VEKST
BOND FUND SKAGEN TELLUS
Portfolio manager: Kristoffer Stensrud Start: 5 April 2002
Portfolio manager: Kristian Falnes Start: 7 August 1997 Portfolio managers: Ole Seberg and Geir Tjetland Start: 1 December 1993
Portfolio manager: Torgeir Hien Start: 29 September 2006
SKAGEN Vekst OSEBX/MSCI AC (50/50)
Return past 12 months Average annual return since start
-10
-5
0
5
10
15
20
-10
-5
0
5
10
15
20
-6,1 %
3,2 %
15,1 %
9,3 %
SKAGEN Kon-Tiki MSCI Emerging Markets Index (Daily Traded Net Total Return)
-6,1 %
-3,8 %
-20
-10
0
10
20
-20
-10
0
10
20
17,1 %
8,7%
-10
-5
0
5
10
15
20
SKAGEN Global MSCI World Linked Index
-0,2 %
6,8%
15,2%
1,7%
-10
-5
0
5
10
15
20
SKAGEN Tellus Barclays Capital Global Treasury Index 3 - 5 years (euro)
Return past 12 months
6,25 %
11,91 %
Average annual return since start
6,42 %
-20
-10
0
10
20
-20
-10
0
10
20
14,48 %
OUR F UNDS

Unless otherwise stated all figures quoted in this report are in euro, except for the half year financial statement, which is in Norwegian kroner.

SKAGEN Funds only has authorisation to market its money market funds SKAGEN Hyrente and SKAGEN Hyrente Institusjon in Norway and SKAGEN
Krona in Sweden. SKAGEN Avkastning has a limited market area. Information regarding these funds is included in the official accounts but is
excluded elsewhere.

The half year financial statement was originally prepared in Norwegian. The translated version is published with reservations regarding possible
errors and omissions as well as erroneous translation. In case of conflict between the Norwegian accounts and the English translation, the former
shall prevail. The Norwegian version of the half year financial statement is available at www.skagenfondene.no
4
LE ADER
...is their periodic tendency to reflect the
human condition. Preferring sentiment - fear
and greed - to the wiser counsel of observable
fact and honest valuation. Right now, global
risk appetites drive returns over the short-
term; not, sadly, underlying company activity.
Once more we find ourselves amidst a
miasma of ever-worsening economic pre-
dictions. Correlations between stocks
approach record levels driven largely by
deep pessimism due to the poor economy,
high estimations of risk, and low valuations.
Nations are burdened not just by excessive
debt, but by an absence of effective and far-
sighted political leadership.
And their financial sectors seek to outdo
each other by the scope, and severity, of their
own sharp-practice and moral failings. This
is nothing new. The past three decades have
seen risk appetites drive a wide range of real
world events, and scandals, as the graph
below notes.
The European Condition
What then about Europe, the current cause
clbre? SKAGEN conference alumni Roger
Bootle, and his team at Capital Economics,
have taken the 250k Wolfson Prize awar-
ded for the best plan for dealing with states
leaving the eurozone. In a typically infor-
med treatise, Bootle lays out a considered
analysis of the challenge facing Europe, and
the monetary union in particular. He posits
a reconfiguration of the euro through the
departure of the weaker members, one by
one. This would result in a renewed eurozone
built around the Northern core, with a set
of independent floating currencies for the
periphery. I do not know if he is right. I do
know that it is important that the European
leaders get busy doing something...and soo-
ner rather than later.
The value of good corporate governance
Bankers seem set to join politicians, lawyers
and parking inspectors in the tally of dama-
ged professions. And certainly, the latest
round of allegations around LIBOR rate-fixing
undermines public confidence in the moral
compass of the financial sector. Not to men-
tion revealing, yet again, the political prefe-
rence for delving into the short-term tactical,
and courting public praise. Taking necessarily
tough, and strategic, decisions for the longer
term seems to lay beyond the wit of many of
our leaders currently.
In SKAGEN, good corporate governance,
or the avowed intent to deliver good corpo-
rate governance, is an important flag in our
analysis of companies, and in our fiduciary
responsibility towards our investors. Chris-
tian Jessen writes on excessive executive pay
awards and on SKAGENs aversion to them,
from page 8. And while were on the moral
compass, the interesting article on page
15 Journeying in the Kingdom of Lesotho
reports on one of SKAGENs charitable dona-
tions - in this instance to Mdecins Sans Fron-
tires.
A tough second quarter
The poor macro-overlay, an excess of market
sentiment, and consequently high correla-
tions, continue to suppress active long-only
equity returns and favour fixed-income in the
second quarter.
And SKAGEN is no different. All our equity
funds have fallen behind their benchmarks;
while our bond and money market funds are
pulling ahead of theirs. SKAGEN Global, SKA-
GEN Kon-Tiki and SKAGEN Vekst were respec-
tively 5.1, 1.5 and 1.2 percentage points
behind their benchmark indexes during the
quarter. We are unsatisfied with this perfor-
mance but it does not undermine our confi-
dence both in our investment philosophy and
in the value of the companies that we own. In
contrast to this our bond fund, SKAGEN Tel-
lus, ended the half significantly ahead of its
benchmark index having gained 6.6 percent,
versus a benchmark return of 2.1 percent.
Read the portfolio reports from page 16.
Why stay invested?
Why then, should investors hold their nerve
over the medium-term? Two reasons really:
timing, and valuation. The former is the more
difficult to assess, clearly. Many purport to
have an insight; few deliver. In SKAGEN we
have never claimed any particular advantage
over timing. We do know, however, the cost
of missing the party. Recent research by LPL
Financial Research, extract below, sets out
the case quite starkly. Being out of the mar-
ket, for even a week or so, can cost dearly.
On valuation the facts are much clearer:
current multiples envisage some 20 years of
negative real earnings growth. This clearly
is absurd. Nick Henderson CFA lays out the
case for equities from page 6. Suffice it to say,
valuations in the SKAGEN portfolios are as
low as they have ever been - and that, make
no mistake, is the best possible reason for
staying invested over almost any term.
The trouble with markets
LEADER
Timothy Warrington,
Head of International,
SKAGEN Funds
tcsw skagenf unds.com
11.54
7.85
7.32
5.32
6.21
Average Annual Total Returns (%)
0 2 4 6 8 10 12 14
Source: FactSet, LPL Financial Research
Index performance is provided as a benchmark and is not illustrative of any particular
investment. An investment cannot be made in an index.
Stayed Invested
Missed 10 Best Days
Missed 20 Best Days
Missed 30 Best Days
Missed 40 Best Days
MISSING THE BEST DAYS IN THE
S&P 500: 1988 -2011
Source: Credit Suisse
10
8
6
4
2
0
-2
-4
-6
-8
81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
Oil plummets,
equitiesrally
Continental
Illinoisrun
1981
recession
Mexico
defaults
Fall of
BerlinWall
Nikkei
peaks
Saddam
invades
Kuwait
BlackMonday
Loose
iquidity
Mexican
crisis
Operation
DesertStorm
ERMcrisis,
European
recession
Asian
financial
crisis
Tech
bubblebursts
Russia
defaults,
LTCMfails
9/11,
Enron,
WorldCom
EMeuphoria
UShousing
bubble
Socite
Gnrale
Bear
Steams
1stGreek
downgrade
JacksonHole,
QE2
Japan
earthquake
Oil
Peaks
Debtceiling,
S&Pdowngrade
Surprise
italian
downgrade
Lehman
default
GLOBAL RISK APPETITE WITH NOTABLE EVENTS MARKED
5
COMMENT
A value investor is by definition a bottom-up
investor. In practice it is exclusively compa-
nies underlying values that form the basis of
their analysis. Since the fundamental value
of a company is determined by future cash
flow, however, a bottom-up investor must
also have an opinion as to what may hap-
pen in the future. Although necessary, it is
notoriously difficult to predict the future as
the world in which companies operate is in
a continuous state of flux.
When, as a result of internal or external
events, the market adjusts a companys pro-
spects downwards, the share price falls. A
long-term value investor may then go against
the market and conclude that the situation is
merely a transient one and that everything will
eventually return to normal. In other words,
this may be a good purchase opportunity. If
the stock market assumes an aluminium price
of USD 1200 on the pricing of Norsk Hydro,
investors who believe that prices will come
back up to a more normal level of around USD
2000 in the long term will be well rewarded.
Provided that this is what happens.
The problem, however, is that a number of
the forces affecting companies are not trans-
ient, but rather structural in nature. When one
gets the back-to-normal hypothesis wrong,
the outcome is often catastrophic. Just ask
investors in companies such as Ericsson,
Norske Skog, Kodak and Vestas. If, on the
other hand, you have understood these struc-
tural changes early on, the outcome can be
just as spectacular, but in a positive sense.
Many of SKAGENs investments in emer-
ging markets in the 2000s built on the hypo-
thesis that companies in these countries were
not just cheap, but could also benefit from an
improvement of structural conditions.
Although most of the changes companies
are exposed to are one-offs, there are some
major shifts occurring that one should keep a
particularly keen eye on to avoid value traps
and secure ones investments. Here are three
of them:
1) Some must save, while more get rich
It is reasonable to assume that for the foresee-
able future western authorities in debt-laden
countries must concentrate on offloading their
debt. Companies exposed to public spending,
such as the health sector and the defence
industry, have an uncertain future ahead of
them. The exception is companies that are
able to help authorities save money.
On the other side of the equation, there are
over four billion people in emerging markets
who are gradually becoming richer and whose
level of consumption increases by the day.
That is why we like companies such as Unile-
ver, Naspers and Great Wall Motor, which we
believe have better earnings prospects than
the stock market currently prices in.
2) The world is a market place
The fact that the world is a large market place
is nothing new. Trade from Asia has posed
both an opportunity and a challenge to the
western world for the past couple of millen-
nia. Today all major countries are members
of the WTO, which adds to both scope and
complexity, which is positive for companies
specializing in everything from logistics to
testing. All goods, be they training shoes or
cars, are produced where it is cheapest with
certain quality requirements. The result is
that companies whose infrastructure is old
and expensive are quickly outmanoeuvred by
their cost-efficient competitors. Korean com-
panies such as Hyundai Motor and Samsung
Electronics have as a result stolen considera-
ble market share from their US and Japanese
competitors over the past few years.
Within the field of outsourcing the trend
is the same. Cheap drugs and IT services are
produced in India, and on the whole, electro-
nics is contracted to China. This is a structural
change that we will increasingly see in the
near future and which will influence compa-
nies competitiveness and profitability.
3) The internet kills
The effect of the internet has long been a
central theme. While in the Noughties people
were most concerned with the internet win-
ners, such as Google and Amazon, it is now
increasingly clear which companies will lose
in the innovative revolution the internet has
created. The law of the web is simple; inter-
mediaries purveyors of news are being
replaced by databases and web pages, to
the delight of consumers.
Manufacturers of paper and paper pro-
ducts such as telephone catalogues were
the most obvious victims. Now one sees eve-
rything from travel agents to retail chains
wavering on the edge of the same abyss. And
as was the case when the horse and carriage
disappeared with the advent of the motorcar,
an increasing number of these companies are
ending up in the graveyard of capitalism. It is
of little help that they are seemingly attracti-
vely priced on the stock exchange.
As a value investor based in a small
windswept town on the west coast of Nor-
way, we have good experience of resisting
the storms in the financial market. We like
to set off on long excursions when the wind
blows its hardest. Nevertheless, we have
experienced that whether in the stock market
or at sea it is often better to have the wind at
your back rather than heading directly into it.
A winning formula:
Understanding structural change
A good value investor must be able to understand a companys current
underlying values as well as foresee what may happen in the future, writes Torkell Eide,
portfolio manager of SKAGEN Global.
Torkell Tveitevoll Eide, portfolio manager of SKAGEN Global
6
THEME
Following a very lacklustre ten years for global
stock markets, much has been written on the
end of investors love affair with equities, or
at least a severe cooling in the relationship.
Those penning the Dear John letters point
to structural changes, or perhaps irreconci-
lable differences, as to why things can never
be the same. On the demand side, appetite
for stock ownership has been eroded by two
market crashes, demographic and regulatory
changes, and on the supply side, companies
are making greater use of more sophisticated
and accessible debt capital markets.
But following a sustained period of asset
re-allocation by investors is the cult of equity
finally dead, and what implications are there for
an equity-focused fund manager like SKAGEN?
Historical outperformance (until recently)
A brief history lesson illustrates that despite
weak recent returns, equities have histori-
cally delivered much higher returns than
other asset classes. According to research by
Credit Suisse
1)
, from 1900-2011 US equities
have delivered annualised real i.e. inflation-
adjusted returns of 5.4%, comfortably ahead
of housing (+1.9%), bonds (+1.7%) and gold
(+1.0%) over the same period.
More tellingly, when we look at returns
over 10-year holding periods it becomes clear
that equities have consistently delivered posi-
tive and often significant real returns - buy-
ing the S&P 500 index and holding it for a
decade in each of the years from 1900 would
have delivered losses only 17% of the time.
Equally telling is the dire performance over
the past decade, where relative to both his-
torical gains and the performance of bonds,
US equities have delivered the worst returns
in over a century.
Torkell Eide, a portfolio manager in the
SKAGEN Global team, explains, Weak ten
year equity returns have historically had two
explanations; either high inflation, which was
the case in the 1910s and 1970s or valuation,
which was the case in the 1930s with the
Great Crash and the bursting of the techno-
logy bubble at the turn of the millennium.
Where are we now?
If, as some believe, the past can be used to
predict the future then what could this mean
for the next ten years? According to Eide,
High inflation could cause negative real
returns but bonds will perform much worse
if that happens. Valuation is unlikely to be a
cause; on almost every metric, equities are
currently at the cheapest levels they have
been for several decades, particularly relative
to bonds.
In terms of both earnings and book value
multiples, and from an income perspective
the dividend yield on equities recently rose
above the yield on long-term bonds for the
Over the rainbow:
why its not all doom and gloom for equities
Historical performance, current valuations and future expectations all suggest that now is
a good time to be long equities, both in terms of investment strategy and holding period.
Source: Goldman Sachs Research -5,00
-
5,00
10,00
15,00
20,00
1910 1930 1950 1970 1990 2010

Inflation Inflation
Valuation Valuation
10-YEAR ROLLING REAL RETURNS (BASED ON YEAR SOLD) OF S&P 500 OVER THE LAST CENTURY
Weak ten year equity returns have historically had two explanations: either high ination or valuation.
7
THEME
first time in over half a century equities have
de-rated and low valuations tend to be fol-
lowed by periods of high returns. According
to research from Goldman Sachs
2)
, the P/E
range where we are currently has been fol-
lowed by average returns of 49% over the
subsequent five-year period.
Eide explains: The P/E of the MSCI All
countries index has collapsed 63% since
2002 and current multiples imply that the
market expects negative real earnings growth
for the next 20 years, which is clearly absurd.
Although governments and consumers are
deleveraging, companies debt levels have
already come down and they are increasingly
able to tap higher growth markets overseas if
they need to. Current expectations are gene-
rally too low and that usually means higher
returns.
After the rain comes the sun
Looking again at the 10-year figures opposite,
buying equities at the end of any of the 14
loss-producing decades before the turn of
the century would have delivered solid 5-year
real returns in the subsequent period on all
but one occasion, with average annualised
inflation-adjusted gains of 8.8%.
So what does all this mean? Clearly pre-
dictions that investors have turned their back
on equities forever are exaggerated global
stock markets are still capitalised at over $50
trillion and while inflation needs to be hedged
and pension liabilities need to be met there
will remain a need for investors to hold equi-
ties. Historical figures clearly show long-run
outperformance and provide comfort that
when markets turn, investors particularly
those with long-term holding periods like
SKAGEN tend to do well.
Finally, and perhaps most importantly,
valuation is a key driver of investment returns
and for a value-focused manager like SKA-
GEN with portfolios trading at discounts to
the market, which is itself trading at trough
levels, the long-term future for our clients
should be bright. And whilst we cant predict
exactly when the rain will stop, hopefully the
worst of the storm clouds will soon pass and
we are not too far away from the beginning
of the rainbow.
1)
Global Investment Returns Yearbook 2012,
12 February 2012
2)
AsiaPac Valuation: What works, and when,
12 March 2012
Source: MSCI and Bloomberg
20,7
13,4
9,8
0
5
10
15
20
MSCI World AC
historic average
MSCI World AC
30 June 2012
SKAGEN Global
30 June 2012
Price/Earnings
2,5
1,7
0,9
0,0
0,5
1,0
1,5
2,0
2,5
3,0
MSCI World AC
historic average
MSCI World AC
30 June 2012
SKAGEN Global
30 June 2012
Price/Book
SKAGEN Global currently trades at a discount to the market, which is itself well below average valuation levels
After the rain comes the sun: Historical gures clearly show long-run equity outperformance and provide comfort that when markets turn, investors tend to do well.
Nick Henderson
nhe skagenf unds.com
P.S. Kryers rst studio in Skagen in
Brndums old garden, 1890.
By Thorvald Niss, one of the Skagen painters.
The picture belongs to the Skagens museum
8
THEME
In the middle of June a minor story circulated
in financial newspapers the world over. It was
the result of shareholder voting in the listed
global advertising giant WPP.
The long-standing and successful CEO
and founder of WPP, Sir Martin Sorrell, had
together with the top management decided
that his wage package should be increased
by 60 percent, at an annual cost of GBP 6.8
million.
The proposal was voted down, however.
The shareholders in the company in spite
of their large number and wide geographical
dispersion had managed to organize them-
selves in such a way that the proposal was
broadly defeated.
Martin Sorrell took the defeat in his stride
at least publicly.
Its a democracy. The shareholders have
spoken, he noted laconically when the pro-
posal was buried.
SKAGEN does not own any shares in WPP,
so we had no involvement in this case. But
the WPP case is a typical one and becoming
more common.
One year ago any kind of successful sha-
reholder resistance was a rarity and made
front page news in the Anglo Saxon press
each time; today we are seeing a case prac-
tically every day.
Institutional investors have armed them-
selves and, using partners specialising in
voting, they are systematically working to
monitor executives wages, to organise resis-
tance and vote against extreme pay packages.
Value belongs to shareholders
SKAGEN is prepared to vote against share-
holder-hostile proposals when necessary.
This year we have done so at the gene-
ral meeting of Weatherford amongst others,
where we were against the executives pay
packages. We have also voted against a num-
ber of proposals in Chinese companies such
as Great Wall Motor and China Shineway.
This is a global shareholder rebellion.
Value creation in companies must be trans-
ferred to shareholders. We are enthusiastic
in voting against exaggerated pay packages
and against various forms of financial hocus-
pocus in companies, whenever we see it,
says portfolio manager of SKAGEN Kon-Tiki,
Kristoffer Stensrud.
The 2008 financial crisis has left its mark.
At the start the discussions were loudest in
the many banks in the UK and the US that
were saved by the state and taxpayers but
whose employees continued to receive relati-
vely high wages. In the UK the state is a share-
holder in the Royal Bank of Scotland amongst
others, whose chief executive Stephen Hester
had to humbly decline an annual bonus of just
under GBP one million in 2012. Since then the
resistance has spread to private companies
also, such as the above mentioned, WPP.
Shareholder confidence in managers is
not what it used to be. Consequently we see
that investors want to get as much of their
money back as quickly as possible, without
this impacting on the companies growth. In
SKAGEN we would prefer to have money in
our pockets in the form of dividends rather
than have the companies buy back their own
shares in immense share buyback program-
mes, says Knut Harald Nilsson, portfolio
manager of SKAGEN Kon-Tiki.
In SKAGEN we continuously strive to see
opportunities where other analysts and inves-
tors may get hung up on market pessimism
and specific problems without being able to
see the possibilities. So what are the opportu-
nities to be found in shareholder resistance?
For portfolio managers of equity funds
there is no doubt that greater shareholder
focus will allow value to be released in a large
number of companies. A greater determina-
tion to pay dividends would increase trust
and help lift valuations from their currently
very low levels.
A country such as Russia does not imme-
diately strike one as a model of good cor-
porate governance, but in fact the Russian
finance ministry has submitted a proposal
that wholly or partially state-owned compa-
nies pay out at least 25 percent of profits.
Fighting back against
excessive executive pay
Companies should think about their shareholders when it comes to salaries and bonuses for top
managers. SKAGEN is prepared to vote against pay packages which are not in the interests of share-
holders. Shareholders are entitled both to receive dividends and to expect moderate behaviour from
companies, stress portfolio managers Kristoffer Stensrud and Knut Harald Nilsson.
General meetings here in Deutsche Bank (which we do not own) are formally the place where shareholders and company
executives meet to make binding decisions. The meetings are civilised, but according to SKAGENs portfolio managers, in-
stitutional investors are placing greater demands on the companies management.
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THEME
Energy giant Gazprom has become more sha-
reholder friendly.
Shareholder resistance is a great source
of higher valuations. Our aim is to safeguard
our interests as shareholders. Previously it
has been quite tough to fight this battle, but
now shareholders are properly equipped,
says Kristoffer Stensrud.
He puts this conflict into a wider per-
spective, and believes that the new humility
among business management is here to stay.
The companies that will do best going forward
will be those that understand their sharehol-
ders new agenda.
A new kind of shareholder friendliness
However, isnt it true that bonus payments,
option packages and widespread share buy-
backs were introduced precisely to benefit
shareholders?
In the good old days, when one didnt have
access to these tools to align the interests
of management with those of shareholders,
a common complaint was that directors of
the largest companies would rather build up
large, but not very profitable business empi-
res than do their utmost to work for the share-
holders through providing the best possible
return on equity.
Financial analysts and economists are cur-
rently fighting their way through a mountain
of material on the so-called agent-principal
theory, which maintains that the owners of
companies have to ensure that the manage-
ment have the same goals as themselves by
assigning the right incentives in the form of
share options and other goodies. One also
has to accept that executives will earn as
much as the owners because they manage
the firms so much better when they them-
selves have a hand in the pot.
SKAGENs portfolio managers are fami-
liar with the story and do not refute it. They
do believe, however, that the pendulum has
swung too far and that there is no longer a
commercial need which justifies a proportion
of shareholder value automatically being allo-
cated to the management. Or for shareholders
to find themselves invested in overcapitalized
companies providing low returns just because
the management wants to be its own bank.
It has particularly been the case that in
a large number of corporations, the execu-
tives have become too strong in relation to
shareholders. This has happened in a diver-
sified and uncoordinated manner. That is why
wages are not linked to results and have been
pushed up to unnecessarily high levels.
What is particularly striking is that no
notable adjustments have been made in spite
of the five-year financial crisis. We expect
that strong engagement on the part of sha-
reholders and a greater willingness to chal-
lenge managers will be value-creating going
forward, says Knut Harald Nilsson.
Enthusiastic support
Some readers may then ask, what about SKA-
GEN itself? The equity funds are run by the
private, partner-owned company, SKAGEN
AS. Both the company and investors in the
funds have done well for themselves and in
successful years, the stock markets have
created profits that have attracted attention.
In SKAGEN there is no conflict of interest
between investors interests and those of
the management company. Our fee model
ensures that good results must be delivered
before the management company can achieve
high earnings. And both the management and
the employees are bound by regulations that
ensure that they work on behalf of investors
and shareholders interests, says Harald
Espedal, investment director and CEO of
SKAGEN.
Harald Espedal enthusiastically supports
the portfolio managers wish to get involved
in companies in the companies we own. This
is perceived as one of the tools that must be
used to break the present deadlock in the
stock markets.
Note: You may follow SKAGENs voting activities on
the Corporate Governance page on our website: www.
skagenfunds.com/About-us/Ethics-and-corporate-
governance/Corporate-Governance.
Christian Jessen
cje skagenfondene.dk
Revolt against the gild-plated terms and conditions in some nancial institutions started with the Occupy Wall Street movement, here at a demonstration in San Francisco. The activists
rarely have direct inuence on the companies, but have had a considerable impact on the public debate.
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Property in attractive locations has long been
considered a good way to safeguard financial
assets. And real estate has historically offe-
red good protection against inflation. Real
estate has lower expected risk and returns
than equity in general. Instead, the sector
often sees stable returns more characteristic
of bonds. Moreover, in the medium term real
estate exhibits low correlation with assets
such as shares and bonds. One way to take
part in the growth within the real estate seg-
ment is to invest in listed real estate com-
panies.
Local markets often mispriced
While many other sectors in recent deca-
des have globalized, the real estate market
remains local. Real estate mirrors local mar-
ket conditions, and developments in other
real estate markets typically only affect local
rental market developments marginally.
Globally, there are about 2,000 listed real
estate companies with a total market capi-
talization of around EUR 2 trillion. The num-
ber of companies is growing rapidly and it
is particularly the urbanisation taking place
in emerging markets that has enabled more
real estate companies to reach the stock mar-
ket. One way in which real estate companies
can be categorised is to distinguish between
companies that hold and manage properties
and companies that primarily develop and
sell them. In many countries, management
companies enjoy a favourable tax status and
are known as REITs (Real Estate Investment
Trusts).
Strong recovery after nancial crisis
Over the past twelve years, global real estate
shares have generated somewhat higher
returns overall than the global stock mar-
ket. The return profile looks completely dif-
ferent, however. During the critical phase of
the financial crisis 2007-2009, global real
estate shares declined at a steeper rate than
the overall market after having experienced
higher growth in the years preceding the
Global real estate
opportunities
From time to time we train the spotlight on individual companies in our equity funds. Here we take a closer
look at a number of interesting real estate companies with completely dissimilar characteristics: Norwegian
property development company, Olav Thon, German real-estate company, GSW, and Asian shopping mall
developer, CapitaMalls Asia.
CapitaMalls Asia, the largest publicly traded shopping mall
player in Asia with operations in Singapore, China, Malay-
sia, Japan and India, has been part of the SKAGEN Global
portfolio since the beginning of 2012.
Morgan Stanleys broad global real estate index is domi-
nated by mature markets and the high property values as-
sociated with metropolitan areas. It is interesting to note
that several major emerging markets are missing from the
top as is the industrial nation of Germany. Combined, the
Nordic countries represent about one percent.
Rest of the world 10,6 %
France 2,7 %
Great Britain
3,5 %
Singapore 3,8 %
Canada 3,7 %
Australia 6,7 % Japan 9,7 %
USA 44,7 %
Hong Kong
10,5 %
China 4,2 %
Source: MSCI April 2012. MSCI ACWI IMI Real
Estate covers around 600 companies in both
mature and emerging markets.
REAL ESTATE INDEX BY
GEOGRAPHICAL LOCATION
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financial crisis. Since the bottom of the glo-
bal stock market was reached in late February
2009, global real estate shares have deve-
loped at a marginally higher rate than the
global index.
SKAGEN and the real estate markets
It is relatively easy to value real estate com-
panies: they have predictable cash flows
and often pay high dividends. In spite of
this, listed real estate companies are often
significantly mispriced as a result of the stock
markets traditional focus on the short term.
This means that there is scope for bargain
hunting for a value-based manager such as
SKAGEN, which focuses on finding inexpen-
sive shares in both the worlds mature mar-
kets and in emerging markets that are still
undergoing urbanisation.
The three listed real estate companies
outlined below are located in various parts
of the world where SKAGENs equity funds
have made investments.
The entrepreneur-led real estate company
Olav Thon in Norway
Olav Thon is a real estate company that pri-
marily develops and manages shopping malls
in Norway and on the Norwegian-Swedish
border. As a shareholder in Olav Thon, you
earn both solid rental income and growth
through property development. The rental
income depends in part on retail outlet sales.
Most shopping malls are conveniently located
in areas that are fully developed. As Ame-
rican author Mark Twain noted as early as
the 1800s: buy land, theyre not making it
any more.
The 89 year-old entrepreneurial legend
Olav Thon is chairman of the board of the
Olav Thon Group. He controls the majority
of the companys shares which means that
the proportion of unrestricted shares is low.
The stock is among the less liquid on the Oslo
Stock Exchange and only a few analysts fol-
low the company in spite of its being one of
Norways largest real estate companies.
SKAGEN Vekst has held shares in Olav
Thon since 2001. Originally, the shares were
bought at 187 Norwegian kroner (NOK). At the
time of writing, the share stands at NOK 860,
providing an annual average return in excess
of 30 percent. It is the funds eleventh largest
portfolio holding and constitutes 2.1 percent
of its total value.
German real estate company, GSW, in Ber-
lin, Europes newest capital
After its reunification in 1989, Germany
experienced a long period of weak growth
in housing prices while many other European
countries saw price increases. Meanwhile,
the German economy has become one of the
strongest in Europe and unemployment is
low. One company that has managed to capi-
talise on this is German real estate company,
GSW, which owns and manages rental pro-
perties in Berlin. GSW owns a total of 53,000
apartments in the less expensive segment
and the vacancy rate is low as the number
of households in Berlin is growing rapidly.
Average monthly rent for housing in Berlin
stands at EUR 5.2/m2 which is only half as
high as in Munich.
GSW went public in April 2011 at a share
price of EUR 19 and has been part of the SKA-
GEN Global portfolio since January 2012. The
holding represents 0.45 percent of the funds
value. At a price of EUR 27 in late June 2012,
growth has been excellentespecially taking
into account the prevailing harsh stock mar-
ket climate.
Although the share cannot be considered
particularly inexpensive, there are several
triggers for further price increases: Property
prices are expected to rise as are rental levels
in Berlin and the company is a candidate for
acquisition. The market value of GSWs pro-
perties is at just half their new production
costs. Risks include fears of higher taxes on
real estate transactions and financing chal-
lenges if the European crisis were to escalate.
Asian shopping mall developer, Capita-
Malls Asia
CapitaMalls Asia is the largest listed Pan-
Asian shopping mall player. The companys
business model is to startor acquire poorly
runshopping malls, to operate them and to
sell them once they have matured. In Sep-
tember 2011, the company had completed
70 shopping malls and had an additional
26 under construction. The company has
operations in 49 cities in Singapore, China,
Malaysia, Japan and India.
The share price has fallen dramatically
since the initial public offering in 2009. Areas
of concern have included worries regarding
developments in China and the fact that the
first shopping malls that were completed fai-
led to meet expectations. In January 2012 that
created an opening to buy shares at an att-
ractive price, well below the replacement cost
of the companys existing shopping malls. In
June the holding accounted for 0.36 percent
of SKAGEN Globals portfolio and the share
value has increased substantially since the
first shares were bought.
Provided that the companys aggressive
plans to expand shopping malls over the next
three years succeed, the company stands to
benefit from continued growth in consump-
tion in Asia. Catalysts for a company reva-
luation are that the expansion in China goes
well, that REITs can be registered and that the
company will be appreciated as a consumer
company. On the risk side, there is the poten-
tial of slowing growth in China and that the
companys aggressive and ambitious strategy
fails, which might in turn result in financing
challenges.
Jonas A Eriksson
jae skagenf unds.com
During the credit drought of the nancial crisis 2007-2009, real estate shares fell precipitously as a result of the link bet-
ween real estate and lending in society. Once the fear dissipated, real estate shares broadly recovered.
0
50
100
150
200
250
MSCI Global Index
1998 2000 2002 2004 2006 2008 2010 2012
Source: Bloomberg, 28 June 2012. MSCI World Real Estate. This real estate index is narrower than the index mentioned
above; it includes only developed countries but has a longer historical outlook and is therefore used in the chart.
MSCI Global Real Estate Index
REAL ESTATE INDEX COMPARED TO THE GLOBAL INDEX 1998-2012
DETAILS RELATING TO THE
REAL ESTATE SHARES
PRICE* SIZE (%)
P/E
2012 P/B
TARGET
PRICE
Olav Thon 860 2.1 11.5 0.9 1,200
GSW 26.9 0.5 14 0.8 36
CapitaMalls
Asia
1.49 0.33 18 0.8 2.1
* June 26, 2012
The target share prices for the three real estate companies
show an upward potential in the range of 35-40 percent
from todays levels.
12
THEME
Invest in value creators
Looking at the 100 largest companies in Asia
over the 10-year period from 2000 to 2010, it
is clear that those delivering the worst returns
(bottom quintile) also consistently destroyed
value over the period having a return on
invested capital below their cost of capital.
Thus, when investing for the long term you
want to own companies that create value.
Estimating when the stock markets will reflect
the true underlying value of the companies
we own is obviously extremely difficult. By
holding companies that create value, time
works in our favour. While waiting for the
stock market to price the shares correctly, the
underlying fundamental value is rising and,
if the share price doesnt move, the upside
will increase.
Investing in stocks that do not create value
has the opposite effect. While waiting for the
stock to rerate towards fair value, the funda-
mental value of the company declines (on a
risk-adjusted basis). Furthermore, it is very
unlikely that a company that consistently
destroys value will be revalued.
Buy cheap value creators
Simply buying companies with the highest value creation is by no means a magic formula
for creating good returns. The price you pay
for this value creation obviously matters.
Again looking at Asian companies from
2000 to 2010 there is a very clear relationship
between the starting valuation in the year
2000 and the return over the ensuing decade.
As illustrated in figure 2, the 20% best-
performing shares (top quintile) had the
lowest starting valuation. This group of stocks
includes a number of commodity-related com-
panies. In the year 2000 commodity compa-
nies were extremely unpopular after a long
period of weak operating performance, resul-
ting in those companies having a low return
on invested capital at that time. The situa-
tion changed with the rise of China and other
emerging markets, creating strong demand
Value investing in Asia
Given the strong macroeconomic growth and even stronger earnings growth many investors
think they need to focus on different factors when investing in Asia. In SKAGEN we believe the
factors driving long-term share price performance are similar whether you are investing in fast-
growing emerging markets or low-growth mature economies.
Source: Bloomberg , CLSA Asia-Pacific Markets
0
5
10
15
20
25
30
Top quintile 2nd quintile 3rd quintile 4th quintile Bottom quintile
(%)
RETURN ON INVESTED CAPITAL PROFILE OF ASIAN STOCKS BY 10 YEAR TOTAL
SHAREHOLDER RETURN QUINTILES
Figure 1: Over the 10-year period from 2000 to 2010, the bottom quintile Asian companies delivering the worst returns also
consistently destroyed value over the period.
TRAILING VALUATION IN JUNE 2000
BY TOTAL SHARE RETURN QUINTILES
TOTAL
RETURN
TRAILING
EARNINGS YIELD
TRAILING
FCF YIELD
Top quintile 575% 13% 16%
2nd quintile 166% 6% 3%
3 d 3rd i quintil tile 73% 73% 1% 1% 2% 2%
4th quintile -9% 4% 0%
Bottom quintile -77% 3% -2%
Figure 2
13
13 13
THEME
for commodities. This increased earnings,
return on invested capital and thus share-
holder focus on these companies.
In contrast, the table also shows the pitfall
of investing in popular and expensive com-
panies. The worst 20% performers (bottom
quintile) over the 10 years are characterised
by a high starting valuation followed by a
decade of weak operating results, see figure
1, leading to a dreadful share price perfor-
mance of minus 77% for the period.
The latter group of companies includes
a number of Taiwanese IT hardware com-
panies, priced for outstanding growth and
value creation going into 2000. As it turned
out, most IT hardware products were in fact
commodities, giving companies no pricing
power. Combined with a high requirement
for ongoing capital investments due to fast-
evolving production technology, this drove
returns on capital to very low levels and
also resulted in numerous capital raisings,
diluting existing shareholders.
Even the fourth quintile companies pro-
ved a painful experience for shareholders,
despite delivering good operating results with
a high return on invested capital. The reason
was simply a too high starting valuation, thus
already discounting the future value creation.
Buy cheap value creators that pay dividends
Since the year 2000, reinvested dividends
in Asia have constituted more than 40% of
total shareholder return. So even in an envi-
ronment with high earnings growth, a focus
on dividends has been vital when picking
stocks in Asia.
Another important aspect of dividends is
that companies with a disciplined approach
to dividends also tend to have a disciplined
approach to allocating their capital to the
areas that create the best return.
A prime example in Asia is Japan, where
management has been extremely reluctant
to pay out dividends, despite having few att-
ractive investment opportunities. This has
led to increasingly overcapitalised balance
sheets and a major drag on return on invested
capital, thereby pushing down valuation mul-
tiples in Japan.
It is equally important to allocate your
capital in a high growth environment, as we
have seen with a number of Chinese com-
panies. They have witnessed their share
price slide despite delivering strong ear-
nings growth mainly a result of aggressive
investments at low marginal returns, driving
valuation multiples towards ever new lows.
Paying the earnings out as dividends and
growing more slowly would clearly have been
a much better option.
Investing in Asia is no different from any-
where else
Buying cheap unpopular companies that went
on to create value over the ensuing years has
clearly been the recipe for success in Asia over
the past 10 years. Over longer time periods
this has also held true in every other region in
the world. The same may not be the case over
shorter time periods but staying the course
is the key to delivering strong long-term per-
formance. SKAGENs long-term approach to
investing has therefore remained unchanged
since the first fund was launched in 1993.
By Sren Milo Christensen
Figure 3: Since 2000, reinvested dividends in Asia have constituted more than 40% of total shareholder return.
-50
0
50
100
150
200
250
300
Dec. 00 Dec. 02 Dec. 04 Dec. 06 Dec. 08 Dec. 10
PE
EPS
Dividend
Currency
MSCI ASIA EX. JAPAN DIVIDENDS HAVE CONTRIBUTED 40% OF TOTAL RETURN SINCE
DECEMBER 2000
Sren Milo Christensen,
portfolio manager of SKAGEN Global
In SKAGEN we believe the factors driving long-term share price performance are similar whether you are investing in Asia
or elsewhere in the world.
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On 14 June, a unit holder meeting was held
to consider the Boards proposal to change
the funds benchmark index in the articles
of association.
In total 513 178 units were represented
at the meeting, accounting for 11.6% of the
funds total units.
All of the units represented at the unit hol-
der meeting voted in favour of changing the
funds articles of association 3
From:
The funds benchmark is the Barclays
Capital Global Treasury Index 3-5 years mea-
sured in NOK.
To:
The funds benchmark is J. P. Morgan GBI
Broad Unhedged measured in NOK.
The articles of association have been sent
to the Norwegian Financial Supervisory Aut-
hority for final approval. The change will take
place at the earliest on 1 January 2013. The
exact date will be announced on our web
pages.
NEWS
14
Torgeir Hien, portfolio manager of SKAGEN Tellus
Since August 2011, SKAGEN has provided
all our clients with unique monthly reports
of their holdings.
As of 2012, SKAGEN is obliged by law to
provide all clients with semi-annual reports.
We would therefore like to inform you of where
you may find the reports, both the report for
the month of June (which is the semi-annual
report) and the other monthly reports. You
may find the reports under the Reports sec-
tion of the My Page internet portal which can
be accessed from our website.
To log on to the My Page portal, your user-
name is your email address registered with
SKAGEN. The first time you log on, you will
order a one-time password which you will
subsequently be able to change.
If you require help, further information or
would like to have the semi-annual report
sent to you please contact Customer Servi-
ces by sending an email to contact@skagen-
funds.com
We have implemented a new interactive map
on our website to give you a quick overview
of where SKAGENs equity funds are invested
around the world.
Our new geographical portfolio map ena-
bles you to select a fund, click on a specific
country and find information about:
Fcw many and whlch ccmpanles the funds
are invested in
whlch sectcr a ccmpany cperates ln
The market value cf the ccmpany
An lnvestment's percentage share cf a fund
You can find the interactive map on the
Funds and Prices page of our website:
www.skagenfunds.com/Funds-and-prices/
Follow the value development of your units
Unit holder meeting in SKAGEN Tellus
New
interactive
map
15
NEWS
The landlocked country, which is entirely
surrounded by South Africa, is one of the
poorest in the world. More than 23 per-
cent of the population in this sparse
mountainous country suffers from HIV/
AIDS. Nevertheless, what we remember
best from our visit is the beautiful lands-
cape, the horsemen, shepherds, womens
singing and the commitment of the Mde-
cins Sans Frontires (MSF) employees.
Accompanied by the general secretary Anne-
Cecilie Kaltenborn and marketing and collec-
tion manager Grete-Lise Christensen from
Mdecins Sans Frontires, Norway, four
SKAGEN employees went on a field trip to
Lesotho in March this year. We spent three
days visiting one of the projects we have been
sponsoring for the six years we have been one
of their main partners.
A local health community worker made a
lasting impression on us when, at a meeting
in a remote village, he candidly demonstrated
how to use a condom with the help of a woo-
den device. With a twinkle in his eye, and a
dozen condoms fastened to his sunglasses,
bracelets and in his pockets, he discussed this
taboo subject with the 60 or so people present,
explaining why, and how, condoms are used.
The talk on birth control and health education
was organised by MSF and drew people from
several villages. The aim was to keep everyone
seated long enough so that as many people as
possible would go over to one of the tents set
up for the occasion and take a 15-minute HIV
test. Of the 52 people tested, four were positive.
The long-term goal is zero new HIV infections.
The goal of Mdecins Sans Frontires with
the Lesotho project is to support the authori-
ties and demonstrate how a health district can
be organised. They instruct health workers to
ensure that a minimum standard is maintained
at the nine health clinics which attend to the
HIV/AIDS and mother/child issues in the Roma
region with 200,000 inhabitants.
Lesotho is a spartan, agricultural society
and only one in four live in towns. Part of the
reason why HIV/AIDS is so widespread is that
men often migrate to neighbouring South Africa
to work, often for 3-9 months at a time. Poly-
gamy is forbidden, but it is not unusual for men
to have several sexual partners. Women stay
home in the villages to tend their little patches
of land and take care of the family.
Public education and more knowledge is the
first step on the road to getting more people to
seek out health services, post-natal care and
get tested for HIV/AIDS in order to receive the
correct treatment. The state covers the expen-
ses for HIV/AIDS medication.
Each year more than 20,000 people die of
AIDS-related diseases and almost 100,000
children are left orphaned. Around one in four
is HIV positive and this is the third most pre-
valent infection in the world. HIV/AIDS related
diseases are still the most common cause of
death (60%) closely followed by childhood
diseases and women who die at home during
childbirth without medical help. Information,
rapid and correct medication and better health
services could turn this trend.
SKAGEN is proud to support MSF in its
important work.
ge K. Westb, Anne-Cecilie Kaltenborn, Silje Natland, Tone Willoch Rettedal, Margrethe Vika, Grete-Lise Christiansen
and Marleen Dermaut, project leader, all wrapped in traditional wool blankets.
At the meeting, men and women sit apart. Shepherding is
a mans job. They are often out travelling for several weeks
at a time. at a time.
An MSF employee at the meeting,or Pitso as it is called
in Lesotho, encourages everyone to take an HIV test. The
goal is zero new HIV infections.
Proud horse people. In the villages we visited there were
more horses than cars. Several villages do not have roads,
so horses are the best means of transport.
Margrethe Vika
MV skagenfondene.no
Journeying in the
kingdom of Lesotho
FACTS ABOUT LESOTHO
The country does not have a coastline and is sur-
rounded by South Africa.
Lesotho is 30 000 km and has just over 2 million
inhabitants, of whom only 25% live in towns.
The capital Maseru is the largest city.
The district of Roma (200 000 inhabitants) that we
visited is mountainous and has several mountain
plateaus.
Two thirds of the countrys GDP is from the agri-
culture industry.
Around 40 % of the population live below the
poverty level (USD 1.25 / day). The country is ran-
ked 160 out of 187 in UNDPs Human Development
Index.
SKAGEN and Mdecins Sans Frontires (MSF)
Mdecins Sans Frontires (MSF) is a neutral and
independent medical humanitarian organisation
that saves lives and alleviates need. They help
those who need it most regardless of who, where
or why.
SKAGEN is a main partner for MSF in Norway and
Denmark
Would you like to support MSF and become a regu-
lar donor? http://www.msf.org/msf/donations/
donations_home.cfm
16
PORTFOLI O MANAGERS REPORT
` The improved risk appetite we saw
among equity investors at the start
of 2012 reversed in the second
quarter and the macro focus once
again dominated.
` Disappointing key economic figures,
renewed debt fears in Europe and
weaker growth figures from China
had many people reaching for the
sell button.
` Once again investors fled to
so-called safe havens in the West.
` Bond yields in the US and Germany
reached an all time low, and risk
premiums in the stock market an all
time high.
` Falling commodity prices have made
it possible for most countries in
emerging markets to pursue a
stimulatory economic policy.
` Signals came from the EU summit at
the end of the quarter that work is
being done to possibly find a long-
term solution to the debt problems
in Europe.
` All our equity funds performed
poorly in the quarter, in both
absolute and relative terms, but
pricing is now at historically low
levels.
` Less stringent regulations for life
insurance companies and pension
funds, which will allow them to
increase their currently low stock
holdings, may be a trigger for stocks
as an asset class to make a sorely
needed comeback.
Hope in a cast line
The death of equities: BusinessWeek announced the death of equities on its front page in 1979. A couple of years later saw
the start of the longest consecutive upturn in the global stock markets ever. At the end of May 2012 the Financial Times had
the same message on its front page, though followed by a question mark. Will history repeat itself?
Handshake for union: German chancellor Angela Merkel and Italian premier Mario Monti decided at the EU summit at the
end of June together with the other EU leaders to work towards political union, at the same time as undercapitalised banks
would have easier direct access to fresh capital.
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Seeing the light: At the end of the quarter global stock markets were priced at historically low levels relative to companies
earnings. New regulations for life insurance companies and pension funds, which would enable them to increase their rela-
tively low stock holdings, could kick start the stock market and be the start of a new era for equities as an asset class.
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After a strong first quarter of increased risk
appetite among equity investors, the second
quarter was dominated by new concerns and
risk aversion. Disappointing key economic
figures, renewed debt fears in Europe and
weaker growth figures from China had many
people reaching for the sell button. Grexit
and Spainout became increasingly popular
expressions among investors.
The capital markets have been longing
for a credible solution to the debt problems
in Southern Europe, with or without Greece
and Spain. It is well known that uncertainty
is an equity investors worst enemy. The EU
summit at the end of the quarter gave signals
that something is happening at least.
The EU bailout fund, the European Stabi-
lity Mechanism (ESM), will now inject capital
directly into undercapitalised banks, instead
of the money going to the respective govern-
ments. This is a step in the direction of unified
credit supervision, and a certain coordination
of fiscal policy. The next step may be poli-
tical union. Eurozone problems have in no
way been resolved, however, and countries
in the region will continue to struggle with
debt, recession and low growth for several
years to come, although the uncertainty will
be reduced.
The global economy will also meet new
headwinds, and volatility in the capital mar-
kets is something we must be prepared to
live with for some time to come.
With the US election set to take place in
the autumn, investors eyes will once again
be on the large deficits in the fiscal budget of
the worlds largest economy. The dramatics
we witnessed last summer whether the US
debt ceiling would be raised or not, when
everyone knew there was no other option
may be about to enter a second act.
The comfort for those who still believe in
equities as an asset class, and in our equity
funds, is that they provide a very good risk
premium relative to supposedly secure bond
investments. The pricing, both in terms of cur-
rent earnings and book equity, is at historically
low levels. Pending better times, sharehol-
ders and unit holders in our funds can enjoy
dividends from companies which exceed the
yield on 10-year government bonds in the safe
havens of the US and Germany.
Time will tell whether the reactions to the
EU summit at the end of the quarter were just
transitory or whether the risk appetite of glo-
bal investors is on the rise. A trigger for better
times in the stock markets may be new regu-
lations for life insurance companies and pen-
sion funds in terms of capital coverage, which
could lead to the latter once again increasing
their share of equities.
Weak quarter for equity funds
The second quarter was less than pleasant
for our equity funds. Having lost 6.0, 5.7, and
3.7 percent respectively, SKAGEN Global,
SKAGEN Kon-Tiki and SKAGEN Vekst were
respectively 5.1, 1.5 and 1.2 percentage
points behind their benchmark indexes.
Our bond fund, SKAGEN Tellus, ended the
quarter up 3.9 percent, versus 5.2 percent for
the benchmark index. Year to date, SKAGEN
Tellus is significantly ahead of its benchmark
index having gained 6.6 percent, versus a
return of 2.1 percent for the benchmark index.
Russia and Brazil pulled down
Some of the reason for the weak returns of
our equity funds can be attributed to the
downturn in the Brazilian and Russian stock
markets of 19 and 11 percent respectively,
measured in euro. Stocks and currencies alike
in these countries were unpopular among
investors.
All the equity funds have relatively large
positions in Brazilian Eletrobras and Pet-
robras as well as in Russian Gazprom, all
three of which ended up among the losers
for the quarter. The US was again perceived
to be the safest stock haven, and the broad
equity index, the S&P 500, ended the quarter
in positive territory measured in euros. Other
markets that were relative winners were the
UK, Hong Kong, Singapore and Turkey, while
the Oslo Stock Exchange felt the full effect of
the oil price drop and lost four percent.
From its top quoted price in March, at its
lowest point the oil price was down around
30 percent. The oil price drop is a welcome
Lost on Russia and Gazprom: The Russian stock market was extremely weak in the second quarter, and all the equity funds felt the effects of the substantial drop in the share price of
Gazprom. The CEO of Gazprom, Alexei Miller, is pictured here showing Vladimir Putin a model of the companys gas pipe to Europe.
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relief in most Asian countries. Of the countries
in the region, only Vietnam and Malaysia are
net exporters of oil. Korea, Taiwan and Thai-
land are the largest importers, relative to the
countries economic size. For India the oil
price drop means significant reductions in
state subsidies.
The Iranian oil embargo and a happier
mood among investors gave the oil price a
lift at the end of the quarter. This continued
going into July. Based on developments in the
real economy globally, and the fact that there is
strong growth in unconventional oil extraction,
particularly in the US, people are no longer
talking about peak oil. Now it is more popular
to discuss how low the oil price can go.
How cheap?
Investors focus on bad times in large parts of
the western world and emerging markets which
are no longer growing as quickly as previously
(though from an increasingly higher level) has
brought down the pricing of stocks significantly.
In Europe you can now buy the index at 12
times the years expected earnings. Emerging
markets are priced at 10 times, while the P/E
level for the world index is below 14. This cor-
responds to a return for shareholders of eight,
ten and seven percent (E/P).
In other words, earnings estimates have
taken into account the difficult times around
the world.
Price relative to companies book equity
for the respective regions is at 1.5, 1.6 and 1.3
respectively (see graph).
Although several Southern European
countries are in recession, and growth in the
US does not look as healthy as earlier this year,
the wheels of emerging markets continue to turn
(see graph). In other words, everything points to
growth in companies earnings in 2013.
If the stock market is right, current risk pre-
miums indicate that companies earnings will
fall going forward. It will come as no surprise
that as active equity managers, we think that
the stock market is wrong, again.
Wont China save the world after all?
Fifty years ago China set itself the target
of producing more steel than the US. The
nations Great Helmsman, Mao Zedong, was
convinced that steel production was the most
important factor for industrial development.
It is therefore no coincidence that China is
currently the worlds largest manufacturer
of steel by far, with around 45 percent of the
worlds production.
Being the worlds largest steel produ-
cer does not necessarily mean that econo-
mic growth will continue unabated, howe-
ver. Worse times globally have a particular
impact on demand for steel. The building
and construction industry is quick to put on
the brakes. Building activity in China, which
many people believe has been artificially
high in order to stimulate growth, has also
experienced a shot across the bow. Together
with infrastructure, building and construction
constitutes around 55 percent of the Chinese
demand for steel.
The price of iron ore, the central input fac-
tor in steel production, has fallen from USD
200 per ton at the start of 2011 to around
USD 135 per ton. Steel producers in China,
which have enjoyed a double-digit growth
rate in demand for more than a decade, must
now make do with a growth rate of around
four percent.
The recent improvement in the leading
economic indicators from China signals that
the fall in the growth rate may be in the pro-
cess of flattening out. If that is the case then
global companies with substantial exposure
to emerging markets could be about to expe-
rience better days ahead. The fact that the
Source: Capital Economics
16
14
12
10
8
6
4
2
0
-2
-4
16
14
12
10
8
6
4
2
0
-2
-4
2000 2002 2004 2006 2008 2010 2012
Households Private sector
Non-financial corporations
MFI lending to the Private Sector (% y/7)
EURO COUNTRIES BORROW LESS
Cold summer in Europe: Although the European Central Bank continues to pour capital into distressed banks, there are few
signs of increased lending activity in the private sector. Uncertainty about future economic developments means that the
brakes are still on.
Source: The Economist
16
14
12
10
8
6
4
2
0
1791 1810 20 30 40 50 60 70 80 90 1900 10 20 30 40 50 60 70 80 90 2000 2012
British 2.5% perpetual bond
US ten-year bond
An all-time low
Government bond yields, %
RECORD LOW LONG YIELDS
Lowest since the 1700s: Fear and risk aversion among investors have pulled down the yields on government bonds in the
UK and the US towards and below the levels we saw during the Great Depression in the 1930s.
5
4
3
2
1
+
0
-
1
2
3
World GDP* Rich countries
Source: The Economist *Estimates based on 52 countries representing 90%of world GDP. Weighted by GDP at purchasing-power parity.
BRICs Other emerging countries
2007 08 09 10 11 12
% change on year earlier Total
SLOWDOWN IN GLOBAL GROWTH
A falling curve: Growth in the world economy has been falling since the end of 2009, including in emerging markets. Is it
starting to atten out?
19
copper price which often warns of danger in
the stock market also seems to be flattening
out, may also presage better times ahead.
New regulations may kick start stock markets
As a result of the tightening and regulation
that has taken place in the banking and insu-
rance sector (Basel III and Solvency II) over
the last decade, assets have flown out of
equities and into government bonds. This has
pushed down yields on government bonds to
new lows, with the exception of the periphe-
ral, debt laden part of the eurozone.
An increasingly lower return on bond port-
folios has slowly but surely drained the life
out of the returns of life insurance compa-
nies and pension funds. The result is an ever
greater imbalance between the development
of assets and the liabilities associated with
future pension payments.
Recently we have seen several proposals
for regulatory changes from a number of
countries, including Sweden and Denmark.
The proposals broadly aim to get authorities
to put a floor under the discount rates that
life insurance companies and pension funds
use to calculate their future liabilities. This
will enable them to loosen the straitjacket
that has led to the stockpiling of government
bonds and the sale of equities.
If the regulatory changes become wides-
pread, we would first see a reduction in the
forced sale of stocks. In the second round
the above mentioned pension players would
gradually start to increase their equity hol-
dings again.
This may be just what is needed to kick
start the stock markets, after a protracted and
miserable period for global equity investors.
Source: Bloomberg
4.5x
4.0x
3.5x
3.0x
2.5x
2.0x
1.5x
1.0x
0.5x
0.0x
-0.5x
J
a
n
-
9
2
J
a
n
-
9
3
J
a
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-
9
4
J
a
n
-
9
5
J
a
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-
9
6
J
a
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-
9
7
J
a
n
-
9
8
J
a
n
-
9
9
J
a
n
-
0
0
J
a
n
-
0
1
J
a
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-
0
2
J
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-
0
3
J
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-
0
4
J
a
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-
0
5
J
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-
0
6
J
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-
0
7
J
a
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-
0
8
J
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-
0
9
J
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-
1
0
J
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-
1
1
J
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-
1
2
1.64x
1.46x
Trailing PBV
MSCI EM MSCI World
CHEAP BOOK VALUE GLOBALLY
Down in the dumps: Fear and distrust of equities as an asset class has meant that the price you pay for companies book
equity is almost down to the trough levels of 2008/09.
Source: FactSet, MSCI, IBFS. data as of Jun 22.2012
39.0x
34.0x
29.0x
24.0x
19.0x
14.0x
9.0x
4.0x
J
a
n
-
9
2
J
a
n
-
9
3
J
a
n
-
9
4
J
a
n
-
9
5
J
a
n
-
9
6
J
a
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-
9
7
J
a
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-
9
8
J
a
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-
9
9
J
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-
0
0
J
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-
0
1
J
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-
0
2
J
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-
0
3
J
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-
0
4
J
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-
0
5
J
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-
0
6
J
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-
0
7
J
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-
0
8
J
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0
9
J
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-
1
0
J
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-
1
1
J
a
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-
1
2
+1 SD
-1 SD
Average
10.2x
MSCI EM Trailing PBV
LOW EXPECTATIONS OF FUTURE EARNINGS
Historically cheap in emerging markets: Emerging markets are now priced at only ten times current earnings from compa-
nies. We have seen equally low prices twice earlier in the past twenty years: in the spring of 1992 and late autumn of 2008.
Geir Tjetland
gt skagenfondene.no
May kick start the stock market: Regulatory changes for life insurance companies and pension funds which make it possible
to increase stock holdings may kick start the stock market after a long and lamentable period for global equity investors.
Mao Zedong counted on copper: Fifty years ago, Chinas
Great Helmsman, Mao Zedong, set himself the goal of
producing more steel than the US. He succeeded. China is
currently the worlds largest steel producer with around
45 percent of the global market.
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Powerful changes taking place
Investors risk appetite waned again during
the second quarter, which ended weakly for
SKAGEN Vekst, both in absolute terms and
relative to the benchmark index.
The southern part of the euro-area has
been mired in the widely known problems
of too much debt due to generous welfare
programs and high, but insufficient tax pro-
ceeds. Politicians have been squabbling for
a long time and harsh decisions on reforms
in the labour market, pension systems and
welfare systems need to be taken and imple-
mented as soon as possible.
The economic indicators for China, Bra-
zil and Russia amongst others also pointed
downwards, which didnt help the mood.
Prices for raw materials such as oil and alu-
minium have declined 10-30% in the second
quarter, reflecting the economic uncertainty.
It is hard to know when the outlook will
begin to improve but at the risk of sounding
nave there are actually some very forceful
changes taking place, which will change glo-
bal history and which current stock prices
seem to ignore.
1. The one billion affluent people living in
the traditional OECD area are daily being
joined by several hundred thousand new
middle class consumers in Asia, Africa
and Latin America. In ten years time there
will be one billion more middle class
consumers in need of cars, houses,
vacations, smart phones and nice
clothes.
2. Technology changes and productivity
improvements are currently faster than
they were just ten years ago. It seems
like much longer, but Apples iPad is only
two years old.
3. Governments with too much debt can look
forward to playing a smaller role in the
future society and the geo-political power
spectrum will change.

Each of the three themes above will change
the world as we know it today and SKAGEN
Vekst is working to achieve the best returns
for its unit holders from these changes.
Cornerstones disappointed
SKAGEN Veksts weak(er) share price deve-
lopment in the second quarter can partly
be explained by the fact that several of the
cornerstones of the portfolio disappointed,
particularly our Brazilian holdings in Petro-
bras and Eletrobras (see table).
News from Eletrobras actually shows
improved earnings from operations, though
this has not been rewarded by the stock mar-
ket. As their hydro power expansion program
comes to an end in 2015 then electricity will
generate good cash flow for shareholders
(see SKAGEN Kon-Tiki comment). Petrobras
on the other hand guided lower production
volumes in future and higher capex due to
more expensive rental terms for rigs, supply
boats and higher wages.
But beyond all the company-specific
news, the big news for the development of
the Brazil stock market was the Argentinean
privatization of YPF - the Repsol controlled
oil-company. The nationalisation risk spread
to other countries in the region. We believe
the nationalisation risk in Brazil is close to
zero.
Eight kroner for aluminium
Norsk Hydro was one of the funds most
negative contributor in the quarter due to
the 13% decline in aluminium prices since
the end of March 2012. With the aluminium
SKAGEN Vekst
PERFORMANCE (EUR) APRIL JUNE 2012* YEAR TO DATE*
SKAGEN Vekst -3.68% 8.2%
MSCI/OSEBX Index
-2.43% 8.3%
*As of 29 June 2012
SKAGEN Vekst team
Portfolio managers Ole Seberg ,
Geir Tjetland and Beate Bredesen
SKAGEN VEKST KEY FIGURES FOR THE LARGEST HOLDINGS
CONTRIBUTORS SECOND QUARTER
Largest positive contributors
Company MNOK
Marine Accurate Well +45
KongsbergGruppen +30
Gjensidige Forsikring +15
Origio +15
TGS-Nopec +13
Cermaq +12
TTS Group +12
Telekomunikasi Indonesia +11
Hannover Re +11
Austevoll Seafood +8
Largest negative contributors
Company MNOK
Petrobras -45
Sevan Drilling -40
S l Solst d tad Off Offshhore 38 -38
DOF -37
Eletrobras -34
Chiquita -23
Norsk Hydro -21
LG Electronics -19
EMGS -18
Dockwise -18
LARGEST PURCHASES/SALES
APRIL-JUNE
LARGEST PURCHASES LARGEST SALES
EMGS Eltek
Norsk Hydro Evry Evry
Continental F i Fairstar HHea T vy Transport
SAP Gjensidige Forsikring
Baker Hughes Carnival
Gazprom TGS-Nopec
Royal Caribbean Cruises TTranseuro
RSA Insurance Group Kyocera
Samsung Electronics pref. Samsung Electronics ord.
Company Size of holding Price P/E 12E P/B last Target price
Samsung Electronics 5,3 % 749 000 5,2 1,1 1 150 000
Kongsberg Gruppen 4,9 % 113 10,2 2,3 150
Royal Caribbean Cruises 3,0 % 26,0 12,1 0,7 40
Wilh Wilhelmsen Holding 2,6 % 145,0 4,3 0,8 200
Teva Pharmaceutical 2,3 % 39,4 7,9 1,7 60
Solstad Offshore 2,3 % 85,0 5,3 0,7 175
DOF 2,3 % 30,0 7,3 0,8 60
Norsk Hydro 2,3 % 26,7 23,8 0,7 38
Eletrobras 2,2 % 19,5 7,1 0,3 45
Norwegian Air Shuttle 2,2 % 108,0 9,0 1,9 175
Olav Thon Eindom 2,1 % 860,0 11,5 0,9 1 200
Ganger Rolf 1,9 % 110,0 12,9 0,8 150
Top 12 weighted average 33,0 % 7,6 0,9 59 %
MSCI 12,1 1,7
Oslo benchmark index 10,4 1,4
21
Hit by the aluminium price drop: Due to the fall in aluminium prices, Norsk Hydro is one of the worst contributors to SKAGEN Vekst year to date. Adjusted for the value of the companys po-
wer rights, you now get the companys aluminium activity at spot prices.
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price at USD 1,850/ton it is not profitable
for most producers to produce.
Norsk Hydro trades at NOK 26, which
means that you get the aluminium business
for a song. The companys hydro power acti-
vities are worth NOK 18 per share, so the
remaining NOK 8 is basically the current
perception of the future cash flow stream
from the aluminium business. That is NOK
16bn or EUR 2bn for one of the worlds lar-
gest aluminium producers just ahead of a
period in which one billion new middle class
consumers will be buying cars and houses
and needing infrastructure, whereby alumi-
nium is a large part of the demand.
A falling oil price is partly to blame for the
weak share price development of our Nor-
wegian investments within the supply sec-
tor, Solstad Offshore and District Offshore.
Norwegian supply companies are generally
extremely cheap, based both on earnings
and book equity. The rates are rising too
much, and hopefully we wont see too many
new ship contracts in future which could tip
the market balance.
Samsung down on good gures
During the second quarter Samsung Electro-
nics gave up almost its entire 22% perfor-
mance seen in the first quarter, despite the
operating performance being very strong.
Samsung mobile became the worlds lar-
gest mobile phone company in units and is
number two in revenue share after Apple.
The Galaxy III mobile phone was launched
during the second quarter and has been well
received.
The memory chip business was slightly
weaker as a bankrupt competitor in Japan
apparently had a fire sale of their invento-
ries, so pricing was down. The balance in the
memory chip market is, however, moving in
the right direction.
In the TV business, Samsung Electronics
is the world leader with a 26% market share
driven by SmartTVs and 40 plus screen
sizes. Interest in TV producer stocks gene-
rally was lacklustre after slightly disap-
pointing sales up to the European Football
Championship.
SKAGEN Vekst holds the preference sha-
res in Samsung Electronics, which get their
share of added value in the company, but
with no voting rights. The preference sha-
res now trade at a record discount to ordi-
nary shares with an earnings yield of 19%
for 2012.
New major contract for Kongsberg
Kongsberg Gruppen, the Norwegian defence
and marine contractor, made a moderate
positive contribution to the fund in the
second quarter. In June the company repor-
ted a NOK 20-25bn multi-year defence
order for the F-35 aircraft program, which
is obviously a huge lift to Kongsberg Grup-
pen whose 2012 revenues are expected
to be NOK 15-16bn. In addition to the F-35
news flow there is a higher likelihood that
Kongsbergs naval missiles program will get
orders.
The strong order book in the marine busi-
ness and the coming order flow in defence
more than outweigh the lack of new large
orders in the remote weapon system division
in our view. Kongsberg Gruppen trades at an
earnings yield of 10%, but going a few years
out it will be trading at a 13-15% earnings
yield (based on the current price).
Large premium for fertility
Origio, the Norwegian-listed and Danish-
based human fertility service provider, recei-
ved an attractive acquisition offer from Cana-
dian Cooper Companies at a 72% premium.
Growth prospects are good for fertility
services, but the financial results over the
past few years have been unimpressive. The
new Canadian owner will therefore be able
to harvest synergies and utilize production
22
facilities better than Origio on a stand-alone
basis. At NOK 28 (the take-out price) Origio
is valued at an earnings yield of 3.9%, which
we believe is an attractive exit level.
Other positive contributors worth mentio-
ning in the second quarter are our insurance
investments, Gjensidige, Royal Sun and
Hannover Rueckversicherung. All of these
contributed nicely in a period in which the
development for the banking sector in gene-
ral has been extremely weak.
Unlocking hidden values
The SKAGEN Vekst portfolio comprises
companies with attractive valuations and
with assets of high value in other owner-
ship structures. SKAGEN Vekst focuses on
unlocking these values and hence bringing
prosperity to the funds unit holders.
The Origio takeout serves as a good
example of how value can be unlocked.
Other cases from the recent past are Kver-
neland, Winn Dixie Supermarkets and a
partial change in ownership in Hurtigruten.
SKAGEN Vekst ended the second quar-
ter at a share price of EUR 159. Based on
the proportionate share of earnings in the
companies Vekst owns the estimated EPS
for 2012 is EUR 21 and EUR 26 for 2013.
The book value per Vekst unit is EUR 185,
so Vekst has an 11.4 % return on equity.
Since the beginning of the year 2012 EPS
is up 8 percent and 2013 EPS is up 11 per-
cent. The higher earnings are mostly due
to portfolio changes.
During the quarter we reduced the Nor-
wegian exposure ot the portfolio, and at the
halfway point this constituted 57 percent.
For information on specific changes in
the portfolio, please refer to our monthly
status reports at www.skagenfunds.com
Read more about the fund on page 32
SKAGENFUNDS.COM/SKAGEN-VEKST
Many more will have iPhones: Although many people have an iPhone, or Samsung Galaxy, already, there are several hundred million people in emerging markets which will cross the thres-
hold to become middle class and buy their rst smart phone, rst home and rst car.
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Major contract: Kongsberg Gruppen got a major contract with the US army in June to deliver equipment for their F-35 ghter
jets. They also recently extended their CROWS II contract for NOK 500 million (picture).
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To safety
As has happened many times before in times
of turmoil, global investors fled to the per-
ceived safety of government bonds, and in
particular the US and Japan in the second
quarter. Their currencies also strengthened,
in particular the Japanese yen, and interest
rates fell to record lows. In Germany, the
interest rate on two-year bonds declined to
negative levels.
The US stock market had a relatively strong
quarter, while several of the most prominent
emerging markets such as Brazil and Russia
experienced considerable declines. Typically
also in times of turmoil, the emerging market
currencies took a beating, particularly those
of the two above-mentioned countries and
India which is experiencing higher inflation
and lower economic growth. The country is
also struggling with political unrest and large
trade and budget deficits.
In short, the forces at play in the second
quarter were many of the same that affected
the markets in the second half of last year and
in 2008. With this as the backdrop, SKAGEN
Global has had a period of relative and abso-
lute weak development.
We still (deliberately) hold a higher pro-
portion of emerging market stocks than our
benchmark, the MSCI All Country World Index.
At the start of the quarter, the fund had 30
percent of the portfolio in emerging markets
compared with 12 percent for the benchmark.
SKAGEN Global also has a considerable num-
ber of US and European companies with emer-
ging markets exposure in the portfolio.
Pulled plug on hospital deal
We started investing in the German hospital
operator Rhoen Klinikum in the second half of
2011 following a period of weak share price
development. Many shareholders had lost
patience waiting for the company to purchase
new hospitals and had given up on their
investment.
In addition to a low valuation, the main
reason for our interest in the company was
its open shareholder structure that bodes
well for a potential takeover. We did not have
to wait for long for a suitor to come knocking.
At the end of April Rhoen Klinikums main
competitor, Fresenius, made a bid for the
company at a 50 percent premium to the
market price. The offer was conditional on a
90 percent acceptance rate. When the offer
period ended, 84 percent of the shareholders
had accepted. Fresenius consequently pul-
led its offer and the Rhoen Klinikum shares
declined substantially. Still, the potential for
a merger remains.
The list of positive contributors to the fund
is not very long and is dominated by com-
panies that are perceived as safe havens in
turbulent times. Among these are US cable
company, Comcast, pharmaceutical company,
Pfizer, and insurance companies, Hannover
Re and Gjensidige.
Many losers
The list of negative contributors in the quarter
is long, however. Heading the list is Citigroup
(see table) The US bank was one of the best
contributors in the preceding quarter. In addi-
tion to shying away from risk, the surprising
announcement of large losses in JPMorgan
made many investors flee banking shares.
Despite the miserable share price deve-
lopment, our return on the investment in
Citigroup was still in positive territory at the
end of the second quarter. The first quarter
numbers were better than expected and the
bank has not toned down its guidance for the
coming quarters.
At the current pricing one can buy the
SKAGEN Global
Portfolio managers Kristian Falnes, Torkell Eide,
Sren Milo Christensen and Chris-Tommy Simonsen.
PERFORMANCE (EUR) APRIL-JUNE 2012* YEAR TO DATE*
SKAGEN Global -6.04% 3.9%
MSCI AC -0.91% 7.9%
*As of 29 June 2012
SKAGEN Global team
SKAGEN GLOBAL KEY FIGURES FOR THE LARGEST HOLDINGS
Company MNOK
Comcast +86
Oracle +61
Gjensidige Forsikring +51
China Mobile +48
Hannover RE +45
Pzer +44
Rhoen-Klinikum +36
Vivendi +25
Hyundai Motor +20
Television Broadcast +14
Company MNOK
Citigroup -331
Eletrobras -205
Vimpelcom -185
Cliffs Natural Resources -169
Banrisul -169
Petrobras -166
Gazprom -140
Golman Sachs -104
Akzo Nobel -96
Renault -81
APRIL-JUNE
Lundin Mining (New) Pfizer
Weatherford Tyco y International
Afren China Mobile
Cliffs Natural Resources Goldman Sachs
Citigroup Osaka Securities
Sist Sistema ema (New (New)) Yaho Yahoo (O o (Out) ut)
Teva Time Warner Cable (Out)
RSA Insurance Group (New) Orascom Telecom Media (Out)
GGoogl ( le (N ) New)
Company Size of holding Price P/E 12E P/B last Price target
SAMSUNG ELECTRONICS-PREF 8,0 % 749 000 5,1 0,9 1 000 000
TYCO INTERNATIONAL LTD 6,0 % 52,9 14,4 1,7 70
CITIGROUP INC 4,2 % 27,4 7,1 0,4 75
ORA ORACLE CLE CORP CORP 3 6 3,6 %% 29 29,77 11 11,22 3 3 3,3 45 45
CENTRAIS ELETRICAS BRAS-PR B 3,0 % 19,5 7,3 0,3 50
GAZPROM OAO-SPON ADR 2,5 % 9,4 3,0 0,5 20
COMCAST CORP-CLASS A 2,3 % 32,0 16,8 1,8 40
KYOCERA CORP 2,2 % 6 830 13,9 0,9 9 000
CHINA MOBILE LTD 2,1 % 84,8 10,8 2,1 95
SVENSKA CELLULOSA AB-B SHS 2,1 % 103,5 12,5 1,2 130
Weighted top 10 36,0 % - 7,5 0,8 65 %
MSCI AC Index - - 11,9 1,7 -
24
tangible book at an almost 50 percent dis-
count. In other words, you get 1 euro for 50
cents. We still believe that Citigroup will yield
good returns and is currently highly under-
valued.
A common theme for many of the negative
contributors in the quarter is that they are
either associated with emerging markets or
have international businesses that are depen-
dent on global economic growth rates.
Dividend block in Russia
In terms of earnings, most of the companies
in the portfolio have done quite well. Among
the larger holdings, Eletrobras, Citigroup,
Gazprom, China Mobile, Kyocera and Vim-
pelcom all posted numbers that were better
than we had expected.
With regard to Vimpelcom there are unfor-
tunately other company-specific issues that
overshadow the earnings development and
have weighed on the stock. After Norways
Telenor increased its stake in Vimpelcom to
39.6 percent there were reactions that this
was against Russian law concerning stra-
tegic companies. A Moscow court blocked
Vimpelcom from paying dividends from its
Russian unit and the company has had to
cancel its planned dividend. For now.
The latest developments should be viewed
in light of the enduring battle between oli-
garch Mikael Friedman (Altimo) and Telenor.
Our hope is that the current struggle over
who is in control does not impact the positive
developments in the company.
The earnings in SCA, Siemens, Bunge,
Toyota Industries, Baker Hughes, Banrisul
and Petrobras were weaker than expected,
but none of the companies disappointed too
much.
Stocks have mostly been influenced by
macroeconomic developments and fear about
future earnings in the quarter. The earnings
posted therefore had little impact on share
prices in the second quarter.
Half price mine
Swedens Lundin Mining is new in the port-
folio. After an attempted takeover in 2011,
the stock price halved. We believe that the
company is grossly undervalued compared
to the real value of the assets in Sweden,
Portugal and the Congo.
The jewel among the assets is the 24 per-
cent stake in the Congo copper mine Tenke
Fungurume. This mine is fast becoming one
of the five largest copper mines in the world.
Lundin Mining also has a solid balance sheet
and should be a tempting takeover candidate
for larger global mining companies looking to
increase their activities within copper and zinc.
Fight for Rhoen Klinikum: The bid for the hospital operator, Rhoen Klinikum, from their main competitor, Fresenius, did not
get the required 90 percent approval and was withdrawn. But the ght for Rhoen Klinikum is not over yet.
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Vimpelcom hit by dividend halt: The fact that a court in Moscow forbade Vimpelcom from transferring the dividend from its
Russian subsidiary must be seen in light of the long-term shareholder conict between the oligarch Mikhail Fridman (right)
and Telenors Jon Fredrik Baksaas (left). Pictured here is Vimpelcoms head ofce in Moscow.
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British insurance and Norwegian bank
Russian investment company and conglome-
rate Sistema is also new to the portfolio. The
company has been a relatively large holding
in SKAGEN Kon-Tiki since 2009. After a recent
decline in share price the discount to the
intrinsic value has increased considerably.
We have also invested in British insurer
RSA. The company has sizeable activities
in Canada, Scandinavia (Danish Codan) and
in emerging markets. We believe that inves-
tors in general place too much emphasis on
the activities in the British Isles and that the
potential is mostly in the other markets.
The fund took part when SR-Bank sold
new shares. This regional bank is the market
leader in southwest Norway and the shares
were sold at a 30 percent discount to the book
value of the equity.
The above-mentioned newcomers each
constitute between 0.3 and 0.5 percent of
the fund. Their future size in the portfolio
will depend, as always, on how attractive
the pricing is compared to other potential
investments.
In the quarter we also increased our stakes
in Weatherford, Afren, Cliffs Natural Resour-
ces, Citigroup and Teva Pharmaceutical. All
have had a period of weak share price deve-
lopment that cannot be explained by poor
operations or worsening outlook. This there-
fore made them more attractive investments
in our view.
Almost out of Time Warner
We have almost entirely sold out of Time War-
ner Cable after a period of good share price
development. Despite the fact that the price
earnings multiple is a little higher we put our
money in the competitor Comcast. The price
difference between the two is more than com-
pensated by the Comcast growth outlook.
We also reduced our holding in China
Mobile after a good share price development
following good earnings numbers in the first
quarter. The Chinese mobile phone company
is not expensive, but there are other com-
panies that appear more attractive, such as
Vimpelcom.
As the triggers for revaluation have come
in and the conglomerate discount has star-
ted to be reduced in the split-up process, we
have also started reducing our stake in Tyco
International. The same holds true for Pfizer
and Osaka Securities Exchange. The stake in
Goldman Sachs was also trimmed. The pro-
ceeds were used to increase the holding in
Citigroup, which we view as more attractive
based on both share price potential and risk.
Among the internet companies we swit-
ched our investment from Yahoo to Google,
where the pricing and outlook seem more
attractive.
Summer sale
After a very weak second quarter in the global
stock markets, the pricing of the companies
now appears very attractive. Implicitly, the
current pricing means that the companies
earnings will decline for a long time. We are
not ignoring the fact that the world is facing
macroeconomic challenges but at current
levels these challenges, and then some, seem
to be priced into the stock market.
After a decade of meagre returns for the
global stock investor, the current valuation is
now so low that it bodes well for the returns
in the coming decade.
The SKAGEN Global portfolio is priced at
a considerable discount to the benchmark
index. The 10 largest holdings in the fund
comprise 36 percent of the total and are pri-
ced at about 7 times expected earnings and
well below book value.
We believe that with hindsight the summer
of 2012 will be seen as one of the best sum-
mer sales in global stock markets.
SKAGENFUNDS.COM/SKAGEN-GLOBAL
Betting on Comcast: After a period of good share price development, SKAGEN Global sold all of its shares in Time Warner Cable and increased further in Comcast, which seems to have the
best growth prospects.
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SKAGEN Kon-Tiki
Cant blame the market
The second quarter of the year was weak in
both absolute and relative terms for SKAGEN
Kon-Tiki. The fund has now delivered poorer
returns than the emerging markets index in
three of the last four quarters. This is of course
not good enough, even though our investment
philosophy maintains that the funds returns
may sail wide of the index in periods, in both
a positive and negative sense.
We have therefore started a process to find
out where the poorer returns are coming from,
and addressing these one by one. It is no use
just blaming the stock market.
The developments we have seen over the
past few years have not been entirely unex-
pected. By having a strong weighting of large
companies with solid equity, good earnings
and dividend payment, we believed oursel-
ves to be well positioned for any eventua-
lity. In other words, the significant discount
the companies in the portfolio were priced
at relative to the general emerging markets
was our safety net.
Currency and a two-tier market
Generally speaking, we note that in the
second quarter several of the stock markets
that developed weakly, measured in Nor-
wegian kroner, have experienced substan-
tially weakening currency rates. Brazil, India
and Russia in particular have impacted us
negatively. Our experience is that since we
invest in real values, these currency losses
are regained quickly, as we saw in the last
few days of June.
We have also seen a significant decoup-
ling of the stock market. Companies with pro-
ven business models and stable earnings
commonly referred to as the emerging
consumer have been the winners. These
are now trading at prices which, in our view
and according to our value-based calculator,
will struggle to provide good returns in the
future. Companies which are associated with
issues, usually time-dependent ones, have
been slaughtered. Meanwhile, those that
have neither a sustainable business model
nor short-term results have been chopped.
Losers with common characteristics
We also note common characteristics among
our consistent losers both for the second
quarter and for the past 12 months. The losers
had low valuations at the start of the period,
some of them were state owned, there was
uncertainty around their shareholder policies
and investors questioned the companies
role. In this category we find Brazilian Eletro-
bras, Petrobras and Banrisul, as well as Rus-
sian VTB Bank and Gazprom.
In some cases unexpected structural
shifts in the market, and in part economic
trends, have caused growth in earnings to
be pushed out a couple of quarters in time.
Four companies in particular spring to mind:
ABB, Hon Hai Precision Industry, Baker Hug-
hes and Archer.
When it comes to Indian Bharti Airtel and
Korean LG Electronics, the business models
and competitive advantages appear to have
changed. The reason is a combination of
regulatory changes and the companies own
(mis)behaviour. In cases where we see lasting
changes in the business model and fram-
ework conditions, we re-evaluate the invest-
ment. If the issues are transitory, we take
PERFORMANCE (EUR) APRIL-JUNE* YEAR TO DATE*
SKAGEN Kon-Tiki -5.7% 3.6%
MSCI Emerging Markets Index -4.2% 6.4%
*As of 29 June 2012
SKAGEN Kon-Tiki team
Portfolio managers Kristoffer Stensrud, Knut Harald
Nilsson, Cathrine Gether and Ross Porter
Company MNOK
Hyundai Motor +138
Great Wall Motor +107
Kulim Malaysia +72
China Mobile +66
Baker Hughes +47
Shoprite Holdings +44
Haci Omer Sabanci +43
Hanmi Pharm +32
Aberdeen Asset Management +28
Bangkok Bank +24
Company MNOK
Banrisul -411
Eletrobras -377
Hon Hon Hai Hai Prec Precisio isionn -29 -2944
Petrobras -279
Gazprom -230
VTB Bank -151
ABB -143
Eurasian Natural Resources -140
LG Electronics -132
Vale -114
APRIL-JUNE
Hon Hai Precision China Mobile
Afren Softbank
Hein Heineken eken Shop Shoprite rite Hol Holding dingss
A P A P Moll Moller er - Mae Maersk rsk BB Yapi Yapi Ve Ve Kred Kredi Ba i Bankas nkasii
Eurasian Natural Resources Gjensidige Forsikring
Orascom Construction
Industries
Seadrill
Dryships Gome Electrical
Appliances Holding
Vale KGI Securities
Park Elektrik Uretim Madenci Sasol
VTB Bank Great Wall Motor
SKAGEN KON-TIKI KEY FIGURES FOR THE LARGEST HOLDINGS
Company Size of holding Price P/E 12E P/B last Upside
Samsung Electronics 7,4 % 749 000 4,7 1,1 47 %
Hyundai Motor 5,9 % 66 300 1,8 0,4 66 %
Eletrobras 4,1 % 19 4,8 0,3 261 %
Baker Hughes 3,9 % 41 10,8 1,1 106 %
Hon Hai Precision Industry 3,6 % 89 8,1 1,6 57 %
Gazprom 3,0 % 9 2,7 0,5 133 %
Sistema 3,0 % 19 4,7 1,0 71 %
Sabanci Holding 3,0 % 8 6,9 1,1 32 %
Vale 2,9 % 39 5,6 1,3 66 %
Great Wall Motor 2,8 % 15 8,6 2,1 11 %
Richter Gedeon 2,2 % 37 250 12,4 1,4 34 %
China Mobile 2,1 % 85 10,9 2,1 18 %
Emerging Markets Index 9,9 1,5
27
advantage of the low share price to increase
our holding in the company. All in accordance
with our established investment philosophy.
Well-proven philosophy
Our investment philosophy is long-term, tried
and tested and has proved to yield results.
The weak second quarter of the year does not
change this fact. After five poor years in the
stock markets, globally and regionally, we
must remain focused and reduce the down-
side as much as we can. At the same time it is
important to have companies in the portfolio
that have a significant potential in the form
of future results that the stock market is not
currently willing to appreciate.
Moreover, the world has not changed sig-
nificantly in the past three months. Explicit
and implicit state guarantees, which favour
large financial conglomerates, mean that the
banking system temporarily appears secure
and well-functioning. The risk, in other words,
has moved over to national states, which was
confirmed by the rounds of crisis packages
from the EU over the past few months.
The problem of bottomless debt in the
developed countries has, in other words,
not been resolved, even if developments in
the euro area have spread the risk somewhat
at the same time as growth appetites have
increased slightly.
Global economic activity is improving
slightly, with weak consumer figures from
Europe and, given the conditions, fair demand
from the US where the real estate market
finally seems to be stabilising.
Stimuli across the board
Falling commodity prices have made it pos-
sible for most emerging markets to pursue
a stimulatory economic policy. All countries
are on the whole in a similar mode. The situa-
tion is very similar to what we saw in 2009
and 2002.
Economic developments within global
emerging markets vary extremely widely.
Needless to say, traditional commodity-
dependent markets such as Russia and Bra-
zil are not happy about recent price develop-
ments. Both countries are also experiencing
internal conflicts, but distinguish themselves
by having strong local economies. The same
can partly be said of China.
2012 has so far been characterised by a
political vacuum, set in motion by elections,
regime changes and possibly a more hostile
attitude towards foreign investors. This has
resulted in increased risk for some of our com-
panies. Nonetheless, catalysts such as the
Egyptian presidential election demonstrate
that most of the bad news is thoroughly dis-
counted in the stock market. Countries that
have their house in order even through unt-
raditional means show gratifyingly positive
signs. Turkey and large parts of Africa are
good examples of this.
Never before seen discounts
The results in our companies have on the
whole developed as expected, perhaps even
slightly more positively. Year to date we have
seen few downgrades on the earnings side.
The portfolios are therefore priced at record-
low multiples. In SKAGEN Kon-Tikis ten year
history we have not seen anything like such
low company valuations.
As an illustration, the fact that the fund
price was EUR 65.77 per share at quarter end
indicates a level whereby the stock value of
the companies in the portfolio was lower than
the book equity. Companies earnings over
the past twelve months equate to around
EUR 8. Over the next 12 months we calculate
that this will rise to about EUR12. This means
that companies earnings pay for almost 20
percent of the stock market value. By way of
comparison, so-called secure investments
in government debt provide well under two
percent, around half of what the companies in
the portfolio provide in current dividend yield.
Another important point is that much of
our companies earnings is structural, and is
therefore not as dependent on good or poor
economic cycles.
Based on the above, and the fact that the
cheapest companies will gain the most when
the mood in the stock market turns, we have
continued to trim down in companies that are
relatively high priced. We have increased our
holding in companies that are stigmatized by
being cyclical in nature, and where there is
the potential for revaluation.
In other words, we work continuously to
keep the companies key ratios as low as
possible.
More than ever we are listening to what the
figures tell us, and not letting ourselves be
led into temptation by the fact that the global
stock markets are macro-driven in periods, or
be swayed by the fact that particular themes
or sectors are popular among investors. With
the historically low pricing of companies in
SKAGEN Kon-Tikis portfolio, both in absolute
and relative terms, we do not think it will take
much of a mood change among investors for
them to see that too.
CENTRAL CHANGES IN THE PORTFOLIO IN
THE SECOND QUARTER
Holding the nders
In the quarters losing sector, energy, we care-
fully trimmed down our position in Seadrill,
Petrobras and South African Sasol, while we
added slightly to our holdings in Baker Hughes,
Gazprom and Tullow Oil. As a result of a very
exciting drilling program, we added substan-
tially to our holding in Afren. We still believe
that companies that find resources are more
exciting than those that produce them.
Oil services, other than Seadrill, have been
a great disappointment this cycle. Company
values have therefore been uncommonly
low relative both to earnings and underly-
ing values. The energy market is currently
probably undergoing its biggest shake-up
since 1973, while we still prefer to sell spades
rather than dig for gold.
Within commodities we continued to
increase in companies where structural ear-
nings are good, almost irrespective of cycli-
cal developments. The results have so far
been discouraging, but short-term triggers
and fundamental ratios imply a substantial
price potential.
We added to our positions in Vale, Exxaro
Resources and Eurasian Natural Resources.
The problems that the latter had with cor-
porate governance appear to be a thing of
the past, and the resolve to show value has
strengthened at the same time as the share
price has fallen over the past few months.
Danish doubling
As a result of the general pessimism about the
state of the market going forward, low valua-
tions and a possible paradigm shift whereby
the best in class will be rewarded with a
Expensive consumers: Companies with tried and tested
business models and stable earnings, popularly named
the emerging consumer, have been the recent share
price winners. We believe these are now priced at levels
which will struggle to provide good returns in future.
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28
markup, we doubled our position in Danish AP
Mller-Maersk. Our holdings in Orascom Con-
struction, Dryship and Yingli Green were also
increased by 100 percent. After a wonderful
journey with the successful provider of cheap
airline tickets in South East Asia, AirAsia, we
reduced our exposure somewhat.
We also trimmed down our position
slightly in a company that has been the funds
biggest contributor over the past five years,
namely Chinese car manufacturer, Great Wall
Motors. Following a bid for Proton Motor we
sold all our shares in the company. We also
exited Chinese Renhe, which has been a big
disappointment. After a re-evaluation of the
business model, we reduced our position in
electronics seller Gome.
Most analysts are preoccupied by the wea-
ther in North-western European when pricing
Dutch Heineken. This means the companys
substantial activity in emerging markets can
be bought at rock bottom prices. We took
the opportunity to double our holding in the
company. After a fantastic safari in Africa, we
halved our positions in East African Breweries
and Shoprite.
One thing is certain; investors adven-
turousness is inversely proportional to the
companies key figures, whether it is a matter
of the dotcom or Africa boom.
Difcult future for high nance
Within finance we sold out of Standard Char-
tered, Gjensidige Forsikring, and Turkish Yapi
Kredi Bank. A newcomer was Turkiye Sinai
Kalkinma Bank, a Turkish infrastructure bank
with secured deposits and low loss risk. Tai-
wanese KGI was sold out in connection with
an acquisition and partially swapped for sha-
res in China Development Financial Holding.
With the new regulatory demands and
massive overcapacity, the future for global
high finance will be painful and difficult.
We are focusing on local players with stable
deposit bases, which deliver services that
customers need and that are very likely to
lead to increased returns on the institutions
equity.
Given our view on the future of banking
and finance, it is hardly a surprise that SKA-
GEN Kon-Tiki has the greatest underweight
relative to the emerging markets index in this
sector.
Dislike Softbanks solar energy
We disposed of all of our Softbank shares. We
dont like the companys changing strategy,
whereby they down-prioritise their internet
focus, both in China and globally, in favour of
Japanese solar energy. Although their short-
term results were weak, we added further to
our position in Taiwanese Hon Hai Precision
Industry. The companys business model
appears to be working, and we expect bet-
ter earnings margins going forward.
After a period of good price development,
we sold half our shares in China Mobile. An
increasing number of investors are paying
attention to and expressing an interest in the
high dividend yield from the Chinese mobile
giant.
Everlasting Benjamin
Our everlasting Benjamin over the past few
years major Brazilian electric utilities,
Eletrobras announced encouraging results
both in 2011 and for the first quarter of the
year. Although the share price development
has been lamentable recently, the story is
in our opinion still intact. The company has
made considerable investments over the past
few years, which will improve return on capital
going forward. With a more optimal capital
structure (more debt), return on equity should
also increase from its current low level.
The largest risk factor is still the Brazilian
politicians steering the Eletrobras ship. Many
power concessions will expire in 2015, with
the opportunities this will bring to enter into
new contracts with better terms. We rein-
vested the dividend which gave shareholders
a direct yield of almost ten percent.
SKAGENFUNDS.COM/SKAGEN-KON-TIKI
Down in Petrobras: State-dominated Petrobras, with Jos Sergio Gabrielli at the helm, is in the category of companies
whose shareholder policies have been mired in uncertainty.
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Doubled in AP Mller-Maersk: Given the general pessimism about economic developments, low valuations and a possible
paradigm shift whereby the best in class will be rewarded with a markup, SKAGEN Kon-Tiki decided to double its holding in
Danish AP Mller-Maersk.
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Is deation on the horizon?
Another reason for low nominal interest rates
may be that some investors anticipate defla-
tion. With deflation a low nominal interest
rate may imply a decent real interest rate i.e.
you are paid back in money that is worth more
than when you lent it out.
So is deflation on the horizon in the US,
the UK and the eurozone? The most compel-
ling argument that it is centres on Japan. In
Japan the price level spiked in the autumn
of 1998. Since then Japan has on average
had 0.5 percent annual deflation. Over most
of this period the policy interest rate has
been close to zero. What might have hap-
pened is this: A central bank cannot control
real interest rates in the long run, it can only
steer nominal interest rates. The difference
between nominal and real interest rates is
expected inflation. And these expectations
might start to drift if the central bank doesnt
remain alert and keep the nominal policy rate
pegged at zero.
It usually takes an exogenous event to
push inflation expectations significantly in
one direction or another though. Such an
event might be a fall in commodity prices
and a drop in measured headline inflation.
Lately we have seen a rather sharp drop in
most commodity prices and the CPI fell in
the US, the eurozone and the UK from May
to June. Economists prefer to look at core
inflation, which typically excludes food and
energy prices. But retail shoppers are proba-
bly more focused on the price tags that they
actually face on the high street. Hence there is
the probability that households and firms are
now starting to expect, if not outright defla-
tion, then at least more rapid disinflation, i.e.
a falling rate of inflation. If such expectations
become widespread, they would become self-
fulfilling.
Since policy makers seem reluctant to cut
their policy rate below zero, and the effect of
so-called quantitative easing is very modest,
there might be very little authorities could do
to raise peoples inflation expectations by
monetary policy means. So, yes, there is the
possibility that the US, the eurozone and the
UK are heading for Japanese-style deflation.
Contrary to what is widely believed though,
this would not be the end of the world. Over
the last 12 years Japan has had solid growth
in GDP per person of working age.
The main argument against such a defla-
tionary scenario is that a falling CPI raises the
real value of public debt. Since public debt
levels are so high in most advanced econo-
mies, it is unlikely that markets will appre-
ciate the real value of public debt. In fact, the
opposite might be the case at some point. If
politicians do not deliver credible promises to
cut public expenditure or raise tax revenues,
investors might start to treat nominal public
debt and central bank money, which is a
kind of public debt as hot potatoes. In nomi-
nal terms markets cannot get rid of public
debt, but its real value would be diluted by a
spike in the CPIs.
The counter argument is again Japan,
which has had deflation in spite of a growing
public debt load. But Japan is different from
the US, the eurozone and the UK in the sense
that the economic and political potential for
a significant hike in tax revenues is much
higher in the land of the rising sun than in
the sun-setting advanced economies. What
matters for the real value of public debt is
anticipation of future public behaviour, not
past fiscal sins.
To conclude, while there is definitely the
chance that we may enter a period of subdued
inflation and even outright deflation, I think
that investors who buy long-term bonds at
their current appreciated levels are set for a
nasty surprise when high inflation suddenly
descends upon them.
FIXED INCOME
Torgeir Hien
Portfolio manager
SKAGEN Tellus
th skagenfunds.com
2012
3,5
3,0
2,5
2,0
1,5
1,0
0,5
0,0
3,5
3,0
2,5
2,0
1,5
1,0
0,5
0,0
P
e
r
c
e
n
t
P
e
r
c
e
n
t
Break-even rate
Cleveland Fed
Inflation swaps
2011 2010 2009 2008 2007
j a j o j a j o j a j o j a j o j a j o j a j
Source: Macrobond
MEASURES OF EXPECTED INFLATION PER YEAR NEXT 10 YEARS IN THE US
Currently long-term interest rates on sovereign debt in most advanced economies are
extremely low. The proximate cause of this is expectations of low policy interest rates for
many years to come.
30
Another good quarter
SKAGEN Tellus, the global sovereign bond
fund, had a solid second quarter and gained
3.9 percent as measured in euro. So far this
year the fund is up 6.6 percent, versus 2.1
percent for the reference index.
We saw yields on most of our emerging debt
holdings fall, implying appreciating bond pri-
ces. The fund also benefited from the fact
that it has little exposure to the euro. And
the euro-denominated bonds that we have
held performed well.
For some time now we have had a posi-
tion in Irish sovereign debt. Late in the quar-
ter we bought some Portuguese sovereign
debt, when that became available at what
we considered to be overly distressed prices.
Just before the last EU summit, and in anti-
cipation of some genuine action towards a
more perfect economic and monetary union,
we invested about 3.5 percent of the fund in
Spanish sovereign debt. Combined, these
investments currently amount to 11.1 percent
of the fund.
With eurozone leaders now set to untangle
bank and sovereign debt by injecting new
capital directly into banks from the European
Stability Mechanism (ESM), the burden of
public debt in the periphery is set to shrink.
Hence we expect further gains on our periphe-
ral eurozone holdings.
We are not bullish on the euro, however,
and the funds euro exposure constitutes only
8.4 percent. That is about one third of the
euro contained in the reference index. We
expect the European Central Bank to cut is
policy rate further from its current 1 percent
level, and we expect that mutualisation of
sovereign debt will turn interest rate risk into
inflation and depreciation risk.
We also continue to be underweight in
advanced economy long-term bonds. What
are perceived as safe havens will, we think,
eventually turn out to be very risky ports.
There is a risk that the final leg of the fiscal
crisis that erupted in 2007 will be significantly
higher inflation in some of the advanced eco-
nomies. Not due to too low policy rates, but
rather to too much public debt.
30
SKAGEN Tellus
SKAGEN Tellus 3.93% 6.63%
Barclays Capital Index 5.19% 2.11%
*As of 29 June 2012
SKAGEN Tellus
Portfolio manager Torgeir Hien
PERFORMANCE (EUR) APRIL-JUNE* YEAR TO DATE*
2011
j f m a m j j a s o n d j f m a m j
2012
17
16
15
14
13
12
11
10
9
8
7
6
5
4
17
16
15
14
13
12
11
10
9
8
7
6
5
4
Source: Macrobond
Portugal
P
e
r
c
e
n
t
P
e
r
c
e
n
t
Spain
Ireland
IRISH, PORTUGUESE AND SPANISH 10-YEAR INTEREST RATES
31
Return and risk
measurements
NOTICE
Returns in euro*
as of 30-06-2012 Year to
date
1 year 2 year 3 year 5 year 10 year Since
start
SKAGEN Vekst 8,2 % -6,1 % 4,0 % 12,8 % -3,6 % 11,8 % 15,1 %
Oslo Brs Benchmark Index (OSEBX) linked OSEBX/MSCI
AC Total Return Index 8,3 % 3,2 % 11,4 % 20,7 % -2,9 % 10,6 % 9,3 %
SKAGEN Global 3,9 % -0,2 % 7,4 % 15,0 % -0,6 % 11,3 % 15,2 %
MSCI World Linked Index (DM through AC Total Return) 7,9 % 6,8 % 8,4 % 14,0 % -2,1 % 2,5 % 1,7 %
SKAGEN Kon-Tiki 3,6 % -6,1 % 3,5 % 15,7 % 3,8 % 19,5 % 17,1 %
MSCI Emerging Markets Index (Daily Traded Net Total Return) 6,4 % -3,8 % 2,0 % 13,4 % 1,2 % 11,3 % 8,7 %
SKAGEN Tellus (Euro) 6,63 % 11,91 % 2,90 % 9,94 % 5,89 % 6,25 %
Barclays Capital Global Treasury Index 3 - 5 years (Euro) 2,11 % 14,48 % 3,67 % 8,31 % 8,33 % 6,42 %
RIGHT OF CANCELLATION
When you buy fund units, according to the Right of Cancellation Act (Act no. 105 of 2001-12-12, ref. 22b, litra a), clients have no right
of cancellation. However, when subscriptions are sent to us by mail/fax or are carried out via the Investor client at VPS (My Account),
you are entitled to information about the fund and the management company immediately after the purchase. The information is avail-
able in the funds product sheet (simplied prospectus) and the general commercial terms. Statutory information is sent to unit holders
in the welcome letter immediately after the rst subscription. Subsequently, unit holders can nd all information on our website www.
skagenfunds.com as well as in the annual report.
as of 30-06-2012 SKAGEN Vekst SKAGEN Global SKAGEN Kon-Tiki SKAGEN Tellus
MEAN VARIANCE ANALYSIS LAST 5 YEARS
Standard deviation, fund 25,8 % 20,2 % 25,0 % 7,63 %
Standard deviation, benchmark index 31,5 % 16,0 % 23,9 % 9,28 %
Sharpe-ratio, fund -0,23 -0,13 0,07 0,47
Sharpe-ratio, benhmark index -0,16 -0,26 -0,04 0,64
Relative volatility/tracking error 10,6 % 8,1 % 5,4 % 10,64 %
Information ratio -0,07 0,19 0,48 -0,21
Correlation 0,95 0,93 0,98 0,22
Alpha -1,4 % 1,9 % 2,6 %
Beta 0,78 1,17 1,02
R2 90 % 86 % 95 %
GAIN LOSS ANALYSIS LAST 5 YEARS
Relative gain 84 % 122 % 106 % 81 %
Relative loss 88 % 112 % 98 % 95 %
Relative gain/loss ratio 0,96 1,09 1,08 0,84
Positive index divergence 12,57 10,80 8,79 11,20
Negative index divergence 13,31 9,23 6,32 13,65
Index divergence ratio 0,94 1,17 1,39 0,82
Percentage positive index divergence 49 % 54 % 58 % 45 %
Percentage positive index divergence when market is up 23 % 67 % 57 % 14 %
Percentage positive index divergence when market is down 78 % 42 % 59 % 83 %
Percentage of number of positive index divergence 40 % 53 % 55 % 53 %
Percentage of number of positive index divergence when market is up 25 % 65 % 56 % 33 %
Percentage of number of positive index divergence when market is down 57 % 41 % 54 % 78 %
VALUE AT RISK LAST 5 YEARS; 2.5 % CONFIDENCE
Value at risk: observed, NAV -20,4 % -15,0 % -19,0 % -5,0 %
Value at risk: observed, Benchmark -26,9 % -10,0 % -16,8 % -3,7 %
Relative Value at Risk, observed -5,5 % -6,4 % -4,2 % -9,5 %
GAIN/LOSS ANALYSIS SINCE INCEPTION
Relative gain 96 % 159 % 122 % 86 %
Relative loss 78 % 105 % 100 % 84 %
Relative gain/loss ratio 1,23 1,52 1,22 1,02
Positive index divergence 15,00 20,60 13,11 11,64
Negative index divergence 9,83 8,59 5,83 12,05
Index divergence ratio 1,53 2,40 2,25 0,97
Risk and performance measurements
Historical returns are no guarantee for future
returns. Future returns will depend, inter alia,
on market developments, the fund managers
skill, the funds risk profile and subscription
and management fees. The return may become
negative as a result of negative price develop-
ments. Investments in foreign currencies are
normally not hedged.
SKAGEN Vekst has a fixed management fee
of 1% pro anno. Returns exceeding 6 % p.a.
are shared 90/10 between the unitholders
and the management company.
SKAGEN Global has a fixed management fee
of 1% pro anno. Better value development
measured in percent in the funds net asset
value compared with the MSCI AC World
Index (in NOK) is shared 90/10 between
the unitholders and the management com-
pany.
SKAGEN Kon-Tiki has a fixed management
fee of 2% pro anno. Better value develop-
ment measured in percent in the funds net
asset value compared with the MSCI Emer-
ging Markets Index (in NOK) is shared 90/10
between the unit holders and the manage-
ment company. However, the total annual
management fee charged may not exceed 4
% of the funds average annual asset value.
If the funds net asset value shows a poorer
development measured in percent than the
MSCI Emerging Markets Index, 10 % of the
poorer value development is deducted from
the fixed management fee. However, the total
annual management fee charged may not be
lower than 1 % of the funds average annual
asset value.
SKAGEN Global and SKAGEN Kon-Tiki may
be charged a variable management fee
even if the funds return has been negative,
as long as the fund has outperformed the
benchmark. Conversely, the fund may have
a positive return without being charged a
variable management fee, as long as there is
no outperformance of the benchmark.
The fixed management fees are calculated
daily and charged quarterly. The variable
management fees are calculated daily and
charged annually.
The annual management fee is 0.8% for
SKAGEN Tellus. The management fee is cal-
culated daily and charged quarterly.
Please refer to the product sheets and pro-
spectuses for a detailed description of the
cost, etc. They are available upon request
from SKAGEN Funds or at
www.skagenfunds.com
* All return figures beyond 12 months are annualised.
RETURN AND RI SK ME ASUREMENTS
32
HISTORICAL PRICE DEVELOPMENT SKAGEN VEKST (EUR)
A minimum of 50 percent of the
assets of the SKAGEN Vekst equity
fund will at all times be invested in
Norway. The rest will be invested
in the global equity market.
SKAGEN Vekst is suitable for
investors who want an equity fund
with a good balance between
Norwegian and global companies.
The fund has a broad mandate
which gives it the freedom to
invest in a number of companies,
industries and regions.
SKAGEN VEKST
Handpicked for you*
SECURI TI ES PORTFOLI O SKAGEN VEKST AS OF 29- 06-2012
Risk
Standard & Poors
qualitative rating
Mornings g tar quan q titative
rating
++ ++++ ++
Fund start date 1 December 1993
Return since start 1268.3%
Average annual return 15.1%
Assets under
management
EUR 971 million
Number of unitholders 90 861
Subscription fee 0%
Redemption fee 0%
Management fee 1.0% per year + 10%
of return exceeding 6%
per year
Minimum subscription
amount
One-time subscription
EUR 150
Authorised for
marketing in
Norway, Sweden,
Denmark, Finland,
Netherlands, Luxem-
bourg, Iceland, UK and
Switzerland
Benchmark index OSEBX/MSCI AC
(50/50)
UCITs Yes
Portfolio managers Ole Seberg
Geir Geir Tje Tjetlan tlandd
Beate Bredesen
Security Number
Acquistion
value NOK *
Market
price
Cur-
rency
Market-
value NOK*
Unrealised
gain/loss *
Share of
fund
Stock-
exchange
ENERGY
DOF ASA 5 702 213 108 660 30,00 NOK 171 066 62 407 2,33 % Oslo Brs
Solstad Offshore ASA 1 938 650 95 344 85,00 NOK 164 785 69 441 2,25 % Oslo Brs
Ganger Rolf ASA 1 273 817 130 405 107,00 NOK 136 298 5 894 1,86 % Oslo Brs
Bonheur ASA 1 192 594 88 117 110,50 NOK 131 782 43 664 1,80 % Oslo Brs
Petroleo Brasileiro Pref ADR 1 159 165 119 582 17,96 USD 124 038 4 457 1,69 % New York
Baker Hughes Inc 487 000 118 735 41,24 USD 119 661 926 1,63 % New York
Gazprom Oao ADR 1 754 000 111 556 9,43 USD 98 547 -13 009 1,34 % London Int
Sevan Drilling ASA 17 599 671 140 651 5,29 NOK 93 102 -47 548 1,27 % Oslo Brs
Transocean Ltd 313 900 138 551 44,42 USD 83 076 -55 475 1,13 % New York
Siem Offshore Inc 8 036 317 68 365 9,45 NOK 75 943 7 578 1,04 % Oslo Brs
Marine Accurate Well ASA 67 652 076 51 259 1,00 NOK 67 652 16 393 0,92 % Unotert
Electromagnetic Geoservices AS 5 029 207 68 319 13,10 NOK 65 883 -2 437 0,90 % Oslo Brs
Eidesvik Offshore ASA 1 682 641 64 221 34,80 NOK 58 556 -5 665 0,80 % Oslo Brs
TGS Nopec Geophysical Co ASA 264 016 19 889 159,60 NOK 42 137 22 248 0,57 % Oslo Brs
BP Plc ADR 175 224 55 139 39,74 USD 41 488 -13 651 0,57 % New York
Subsea 7 SA 324 800 37 875 117,10 NOK 38 034 160 0,52 % Oslo Brs
Northern Offshore Ltd 2 750 000 26 552 9,05 NOK 24 888 -1 664 0,34 % Oslo Brs
Norwegian Energy Co ASA 5 127 513 78 354 4,69 NOK 24 048 -54 306 0,33 % Oslo Brs
BP Plc 559 989 35 303 4,22 GBP 22 076 -13 227 0,30 % London
Fred Olsen Production ASA 3 000 000 18 735 7,10 NOK 21 300 2 565 0,29 % Oslo Brs
Seabird Exploratio Plc 11/15 6,00% Call 5 172 592 30 716 65,00 USD 20 083 -10 633 0,27 % Unotert
Spectrum ASA 750 393 13 140 26,30 NOK 19 735 6 596 0,27 % Oslo Axess
Minor items 88 942 39 609 -49 333 0,54 %
Total Energy 1 708 407 1 683 788 -24 619 22,97 %
RAW MATERIALS
Norsk Hydro ASA 6 302 679 161 138 26,70 NOK 168 282 7 144 2,30 % Oslo Brs
Koza Altin Isletmeleri AS 643 750 46 209 35,00 TRY 74 263 28 054 1,01 % Istanbul
Akzo Nobel NV 228 734 61 345 37,04 EUR 63 941 2 596 0,87 % Amsterdam
Agrinos AS 897 378 25 330 45,50 NOK 40 831 15 501 0,56 % Unotert
Hindalco Industries Ltd 1 950 673 46 052 119,90 INR 25 106 -20 946 0,34 % Nat. India
Norske Skogindustrier ASA 5 970 000 345 541 4,09 NOK 24 417 -321 123 0,33 % Oslo Brs
Rottneros AB 11 452 911 56 457 2,25 SEK 22 203 -34 254 0,30 % Stockholm
Minor items 38 992 42 009 3 017 0,57 %
Total Raw Materials 781 064 461 052 -320 012 6,29 %
INDUSTRIALS
Kongsberg Gruppen ASA 3 157 767 131 158 112,50 NOK 355 249 224 090 4,85 % Oslo Brs
Wilh. Wilhelmsen Holding ASA 1 315 811 93 970 145,00 NOK 190 793 96 823 2,60 % Oslo Brs
Norwegian Air Shuttle ASA 1 504 738 83 483 108,00 NOK 162 512 79 029 2,22 % Oslo Brs
Dockwise Ltd 1 032 808 173 152 98,50 NOK 101 732 -71 420 1,39 % Oslo Brs
Stolt-Nielsen Ltd 926 602 114 905 100,00 NOK 92 660 -22 245 1,26 % Oslo Brs
Aveng Ltd 2 575 700 75 193 35,80 ZAR 67 161 -8 032 0,92 % Johannesburg
LG Corp 233 756 48 434 55 000,00 KRW 67 037 18 604 0,91 % Seoul
Glamox ASA 5 944 034 5 852 10,50 NOK 62 412 56 560 0,85 % Unotert
TTS Group ASA 3 222 553 45 757 17,90 NOK 57 684 11 926 0,79 % Oslo Brs
Odfjell SE-A 1 664 725 74 526 32,00 NOK 53 271 -21 255 0,73 % Oslo Brs
Golar LNG Ltd. 182 956 29 714 226,00 NOK 41 348 11 635 0,56 % Oslo Brs
I.M. Skaugen SE 1 339 151 16 790 25,80 NOK 34 550 17 760 0,47 % Oslo Brs
Goodtech ASA 2 116 842 48 135 14,80 NOK 31 329 -16 806 0,43 % Oslo Brs
Norwegian Car Carriers ASA 12 360 250 37 823 1,92 NOK 23 732 -14 092 0,32 % Oslo Brs
LG Corp Pref 224 482 25 796 19 350,00 KRW 22 649 -3 147 0,31 % Seoul
Minor items 193 872 51 947 -141 925 0,71 %
Total Industrials 1 198 560 1 416 067 217 506 19,32 %
CONSUMER DISCRETIONARY
Royal Caribbean Cruises Ltd 1 415 021 203 423 25,76 USD 217 177 13 753 2,96 % New York
Continental AG 206 000 91 577 65,62 EUR 102 020 10 443 1,39 % Xetra
Dixons Retail Plc 50 635 041 249 742 0,18 GBP 86 669 -163 073 1,18 % London
Hurtigruten ASA 22 671 503 81 526 3,70 NOK 83 885 2 358 1,14 % Oslo Brs
LG Electronics Inc Pref 600 000 144 988 17 450,00 KRW 54 593 -90 394 0,74 % Seoul
Mahindra & Mahindra Ltd GDR 591 300 10 523 12,10 USD 42 628 32 106 0,58 % London Int.
Fjord Line AS 2 850 000 28 500 14,00 NOK 39 900 11 400 0,54 % Unotert
NHST Media Group ASA 60 000 31 447 550,00 NOK 33 000 1 553 0,45 % Unotert
Renault SA 79 000 23 888 31,44 EUR 18 745 -5 143 0,26 % Paris
Minor items 27 962 3 230 -24 732 0,04 %
Total Consumer Discretionary 893 576 681 847 -211 729 9,30 %
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
10
20
40
80
160
320
480
10 11 12
N
A
V

S
K
A
G
E
N

V
e
k
s
t
SKAGEN Vekst
Benchmark Index (EUR)
20 % annual return

4 2 1 3 5 6 7
33
IT 9,5%
Energy
23,0%
Industrials 19,3%
Finance 13,2%
Raw
Materials
6,3%
Health 5,6%
Consumer
Discretionary 9,3%
Telecom 4,0%
Cash 1,6%
Consumer
Staples 6,0%
Utilities 2,2%
SECTOR DISTRIBUTION
GEOGRAPHICAL DISTRIBUTION
10 LARGEST HOLDINGS
* Children and young women picking flowers
in a field north of Skagen, 1887. Detail.
By Michael Ancher, one of the Skagen painters.
The picture is owned by the Skagens Museum.
SKAGEN VEKST
Handpicked for you*
SECURI TI ES PORTFOLI O SKAGEN VEKST AS OF 29- 06-2012
South-America 4,2% Cash 1,6% Asia ex
Japan 10,1%
Japan 0,2%
EMEA 6,0%

Eurozone
7,5%
North
America 6,5% Norway 57,0%
Peripheral EU 6,7%
Oceania 0,2%
Security Number
Acquistion
value NOK *
Market
price
Cur-
rency
Market-
value NOK*
Unrealised
gain/loss *
Share of
fund
Stock-
exchange
CONSUMER STAPLES
Cermaq ASA 1 559 045 65 773 78,25 NOK 121 995 56 223 1,66 % Oslo Brs
Morpol ASA 8 407 150 175 896 8,30 NOK 69 779 -106 116 0,95 % Oslo Brs
Kesko Oyj B 374 811 97 876 20,59 EUR 58 244 -39 632 0,79 % Helsinki
Royal Unibrew A/S 135 865 38 746 371,50 DKK 51 244 12 497 0,70 % Kbenhavn
Austevoll Seafood ASA 1 972 716 62 173 25,00 NOK 49 318 -12 855 0,67 % Oslo Brs
Chiquita Brands Intl 1 119 523 91 964 5,02 USD 33 490 -58 474 0,46 % New York
Yazicilar Holding AS 750 000 25 622 12,05 TRY 29 788 4 165 0,41 % Istanbul
Minor items 77 824 22 134 -55 690 0,30 %
Total Consumer Staples 635 874 435 992 -199 882 5,95 %
HEALTH CARE
Teva Pharmaceutical-Sp ADR 719 787 217 973 39,30 USD 168 526 -49 447 2,30 % NASDAQ
Clavis Pharma ASA 943 918 31 160 52,00 NOK 49 084 17 924 0,67 % Oslo Brs
Algeta ASA 256 000 25 537 170,00 NOK 43 520 17 983 0,59 % Oslo Brs
Origio A/S 1 550 000 24 276 27,90 NOK 43 245 18 969 0,59 % Oslo Brs
Photocure ASA 1 109 401 44 688 36,70 NOK 40 715 -3 973 0,56 % Oslo Brs
Medi-Stim ASA 1 542 125 19 269 19,00 NOK 29 300 10 031 0,40 % Oslo Brs
Karolinska Development AB 1 234 600 43 031 19,50 SEK 20 743 -22 288 0,28 % Stockholm
Minor items 43 818 18 181 -25 637 0,25 %
Total Health Care 449 753 413 314 -36 439 5,64 %
FINANCIALS
Olav Thon Eiendomsselskap ASA 180 025 33 834 860,00 NOK 154 822 120 987 2,11 % Oslo Brs
Hannover Rueckversicherung AG 367 500 74 061 46,89 EUR 130 052 55 992 1,77 % Frankfurt
Gjensidige Forsikring ASA 1 818 872 107 208 69,15 NOK 125 775 18 567 1,72 % Oslo Brs
RSA Insurance Group Plc 11 714 361 114 633 1,08 GBP 118 313 3 680 1,61 % London
Northern Logistic Property ASA 2 728 689 82 502 23,00 NOK 62 760 -19 742 0,86 % Oslo Brs
Danske Bank A/S 741 784 83 171 81,40 DKK 61 302 -21 869 0,84 % Kbenhavn
Hitecvision AS 762 746 5 183 75,00 NOK 57 206 52 022 0,78 % Unotert
Norwegian Finans Holding ASA 12 712 000 24 925 3,60 NOK 45 763 20 838 0,62 % Unotert
Sparebanken st 1 460 000 25 877 30,00 NOK 43 800 17 923 0,60 % Oslo Brs
Korean Reinsurance Co 716 135 8 500 11 150,00 KRW 41 635 33 135 0,57 % Seoul
Haci Omer Sabanci Holding AS 1 501 444 23 339 7,60 TRY 37 611 14 271 0,51 % Istanbul
Sparebanken Vest 995 506 45 056 28,00 NOK 27 874 -17 182 0,38 % Oslo Brs
Minor items 85 764 58 103 -27 661 0,79 %
Total Financials 714 054 965 016 250 962 13,17 %
INFORMATION TECHNOLOGY
Samsung Electronics Co Ltd Pref GDR 152 650 161 027 326,00 USD 296 496 135 468 4,04 % London Int.
Samsung Electronics Co Ltd GDR 28 488 11 231 531,50 USD 90 213 78 982 1,23 % London Int.
Corning Inc 909 450 78 893 12,94 USD 70 116 -8 777 0,96 % New York
Q-Free ASA 3 182 604 44 688 21,50 NOK 68 426 23 738 0,93 % Oslo Brs
SAP AG 172 000 62 662 46,54 EUR 60 420 -2 242 0,82 % Xetra
Proact IT Group AB 458 101 15 214 125,00 SEK 49 339 34 125 0,67 % Stockholm
Minor items 92 686 59 871 -32 815 0,82 %
Total Information Technology 466 402 694 881 228 479 9,48 %
TELECOM
France Telecom SA 1 111 904 142 131 10,37 EUR 87 063 -55 067 1,19 % Paris
Mobile Telesystems ADR 645 000 41 051 17,15 USD 65 906 24 856 0,90 % New York
Sistema Jsfc GDR 573 709 19 190 18,66 USD 63 783 44 594 0,87 % London Int.
Telekomunikasi Indonesia Tbk ADR 265 000 14 762 34,80 USD 54 945 40 184 0,75 % New York
Indosat Tbk PT ADR 159 666 26 556 23,34 USD 22 203 -4 353 0,30 % New York
Minor items 7 842 1 727 -6 116 0,02 %
Total Telecom 251 531 295 628 44 097 4,03 %
UTILITIES
Centrais Eletricas Brasileiras SA Pref 2 610 818 126 051 19,43 BRL 149 597 23 546 2,04 % Sao Paulo
Minor items 29 055 14 901 -14 154 0,20 %
Total Telecom 155 107 164 498 9 392 2,24 %
Total equity portfolio* 7 254 329 7 212 084 -42 245 98,39 %
Disposable liquidity 118 064 1,61 %
Total share capital 7 330 148 100,00 %
Base price as of 29.06.2012 1 236,2143
* Figures in 1000 NOK
The market value as of 29.06.2012 is the last quoted price from the stock exchange. The average cost method is used for the calculation of sales gain.
Samsung Electronics Co Ltd 5.3%
Kongsberg Gruppen AS 4.9%
Royal Caribbean Cruises Ltd 3.0%
Wilh Wilhelmsen Holding ASA 2.6%
DOF ASA 2.3%
Teva Pharmaceutical Industries 2.3%
Norsk Hydro ASA 2.3%
Solstad Offshore ASA 2.3%
Eletrobras SA 2.2%
Norwegian Air Shuttle AS 2.2%
TOTAL 10 LARGEST HOLDINGS (%) 29.3%
34
1998 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1999
10
20
40
80
160
240 SKAGEN Global
World Index
20 % annual return
N
A
V

S
K
A
G
E
N

G
l
o
b
a
l
HISTORICAL PRICE DEVELOPMENT SKAGEN GLOBAL (EUR)
The SKAGEN Global equity fund
invests in stocks worldwide.
The fund seeks to maintain a
balanced industry exposure.
SKAGEN Global is suitable for
investors who want an equity
fund which invests over the
whole world and is therefore
diversified both geographically
and by industry. The fund is
also suitable for those who
already have exposure towards
the Norwegian equity market,
but who wish to strengthen
their portfolio and reduce risk.
SKAGEN GLOBAL
A world of opportunities*
SECURI TI ES PORTFOLI O SKAGEN GLOBAL AS OF 29- 06-2012
Standard & Poors
qualitative rating
Morningstar quantitative
rating
Wassum
Lipper
Europe 2012 Best Fund
10 Years Equity Global
Fund start date 7 August 1997
Assets under
management
EUR 4 169 million
Subscription fee 0%
Rede Redempti mption f on fee ee 00%%
Management fee 1.0% per years + 10%
of return exceeding the
benchmark index
amount
EUR 150
Authorised for
marketing in
Norway, Sweden,
Denmark, Finland,
Netherlands, Luxem-
Switzerland
Benchmark index MSCI AC
UCITs Yes
Portfolio managers Kristian Falnes
Torkell Eide
Sren Christensen
Chris Tommy Simonsen
++++
Security Number
Acquistion
value NOK *
Market
price
Cur-
rency
Market-
value NOK*
Unrealised
gain/loss *
Share of
fund
Stock-
exchange
ENERGY
Gazprom Oao ADR 13 955 912 1 016 074 9,43 USD 783 078 -232 996 2,49 %
London Inter-
national
Baker Hughes Inc 2 339 804 609 833 41,18 USD 573 325 -36 508 1,82 % New York
Weatherford Intl Ltd 6 926 377 580 074 12,56 USD 517 644 -62 430 1,65 % New York
Ensco Plc Class A 1 411 142 404 289 46,69 USD 392 039 -12 249 1,25 % New York
OMV AG 2 064 000 445 062 24,10 EUR 375 374 -69 688 1,19 % Wien
Kazmunaigas Exploration GDR 3 672 918 462 990 16,90 USD 369 346 -93 644 1,17 % London Int.
Petroleo Brasileiro Pref ADR 3 396 473 606 992 17,97 USD 363 171 -243 821 1,15 % New York
Nabors Industries Ltd 3 722 233 497 730 14,36 USD 318 048 -179 682 1,01 % New York
Afren Plc 19 163 691 188 953 1,04 GBP 185 451 -3 501 0,59 % London
BP Plc 4 452 350 226 072 4,24 GBP 176 002 -50 070 0,56 % London
BP Plc ADR 595 549 181 475 39,89 USD 141 357 -40 118 0,45 % New York
Petroleo Brasileiro SA 2 065 412 146 770 18,17 BRL 110 597 -36 173 0,35 % Sao Paulo
Electromagnetic Geoservices AS 7 016 280 108 261 13,15 NOK 92 264 -15 997 0,29 % Oslo Brs
Noble Corp 459 593 101 567 32,42 USD 88 659 -12 909 0,28 % New York
Total Energy 5 576 142 4 486 356 -1 089 786 14,26 %
RAW MATERIALS
Cliffs Natural Resources Inc 1 911 858 541 090 47,95 USD 545 481 4 391 1,73 % New York
Akzo Nobel NV 1 940 494 585 724 36,80 EUR 538 849 -46 875 1,71 % Amsterdam
Ternium SA ADR 3 008 882 468 540 19,52 USD 349 478 -119 062 1,11 % New York
Heidelbergcement AG 1 170 781 367 883 37,66 EUR 332 662 -35 220 1,06 % Xetra
Norsk Hydro ASA 9 611 378 284 004 26,51 NOK 254 798 -29 206 0,81 % Oslo Brs
Mayr-Melnhof Karton AG 450 627 203 444 72,46 EUR 246 356 42 912 0,78 % Wien
Lundin Mining Corp SDR 7 029 417 174 207 28,16 SEK 170 439 -3 767 0,54 % Stockholm
UPM-Kymmene Oyj 1 467 477 97 177 8,86 EUR 98 152 975 0,31 % Helsinki
Minor items 35 291 20 672 -14 619 0,07 %
Total Raw Materials 2 757 360 2 556 887 -200 473 8,13 %
INDUSTRIALS
Tyco International Ltd 6 052 110 1 250 883 52,67 USD 1 896 729 645 847 6,03 % New York
Bunge Ltd 1 736 846 566 372 62,55 USD 646 433 80 062 2,06 % New York
LG Corp 1 946 017 501 982 55 000,00 KRW 556 727 54 745 1,77 % Seoul
Siemens AG 896 819 525 541 65,93 EUR 446 103 -79 437 1,42 % Frankfurt
TE Connectivity Ltd 2 062 386 329 663 31,93 USD 391 836 62 172 1,25 % New York
Randstad Holding NV 1 433 320 354 861 23,13 EUR 250 184 -104 677 0,80 % Amsterdam
Stolt-Nielsen Ltd 2 021 814 349 864 100,00 NOK 202 181 -147 682 0,64 % Oslo Brs
BayWa AG 744 577 222 363 28,74 EUR 161 480 -60 883 0,51 % Frankfurt
Minor items 346 753 137 926 -208 827 0,44 %
Total Industrials 4 448 281 4 689 601 241 320 14,91 %
Comcast Corp 3 927 789 386 573 31,43 USD 734 561 347 987 2,34 % NASDAQ
Toyota Industries Corp 2 997 921 498 984 2 262,00 JPY 505 651 6 667 1,61 % Tokyo
Renault SA 1 586 952 401 190 31,18 EUR 373 385 -27 804 1,19 % Paris
Hyundai Motor Pref (2pb) 562 937 157 824 74 500,00 KRW 218 147 60 322 0,69 % Seoul
Television Broadcasts Ltd 3 367 862 81 527 53,75 HKD 138 826 57 299 0,44 % Hong Kong
Dixons Retail Plc 78 684 888 109 156 0,18 GBP 135 108 25 952 0,43 % London
Yamaha Motor Co Ltd 1 953 411 159 122 755,00 JPY 109 971 -49 151 0,35 % Tokyo
LG Electronics Inc Pref 1 036 948 270 944 17 450,00 KRW 94 121 -176 824 0,30 % Seoul
Minor items 179 416 199 086 19 670 0,63 %
Total Consumer Discretionary 2 244 737 2 508 856 264 118 7,98 %
Risk

4 2 1 3 5 6 7
35
IT 15,7%
Energy
14,3%

Industrials 14,9%
Finance 17,5%
Raw
Materials
8,1%
Health 5,1%
Consumer
Discretionary 8,0%
Telecom 5,8%
Consumer
Staples 6,2%
Utilities
3,0%
Cash
1,5%
SECTOR DISTRIBUTION
South America 6,9%
Cash 1,5%
Asia ex
Japan 17,0%
Japan 4,8%
EMEA 7,3%

Eurozone 14,6%
North America
33,3%
Norway 3,9%
Peripheral EU 10,1%
West Africa0,1%
North-Africa
0,6%
10 LARGEST HOLDINGS
* From the moor north of Skagen, 1885. Detail.
By P.S. Kryer, one of the Skagen painters.
SKAGEN GLOBAL
A world of opportunities*
SECURI TI ES PORTFOLI O SKAGEN GLOBAL AS OF 29- 06-2012
Security Number
Acquistion
value NOK *
Market
price
Cur-
rency
Market-
value NOK*
Unrealised
gain/loss *
Share of
fund
Stock-
exchange
CONSUMER STAPLES
Svenska Cellulosa AB-B 7 398 731 585 638 103,10 SEK 656 801 71 164 2,09 % Stockholm
Unilever NV-Cva 2 270 250 394 626 26,40 EUR 452 195 57 568 1,44 % Amsterdam
Tesco Plc 12 312 340 445 999 3,11 GBP 357 333 -88 666 1,14 % London
Yazicilar Holding AS 4 021 961 97 412 12,05 TRY 159 417 62 005 0,51 % Istanbul
United Intl Enterprises 154 171 22 774 819,00 DKK 128 110 105 336 0,41 % Kbenhavn
Minor items 186 065 113 096 -72 969 0,36 %
Total Consumer Staples 1 794 325 1 962 396 168 071 6,24 %
HEALTH CARE
Pzer Inc 3 862 487 451 698 22,88 USD 525 846 74 147 1,67 % New York
Teva Pharmaceutical-Sp ADR 2 067 215 446 692 39,27 USD 483 039 36 346 1,54 % NASDAQ
Roche Holding AG-Genusschein 461 983 402 234 163,60 CHF 474 740 72 506 1,51 % Zrich
Rhoen-Klinikum AG New 930 565 102 408 17,50 EUR 122 866 20 458 0,39 % Xetra
Minor items 29 944 576 -29 367 0,00 %
Total Health Care 1 432 976 1 607 066 174 090 5,11 %
FINANCIALS
Citigroup Inc 8 141 582 1 833 543 27,12 USD 1 313 813 -519 729 4,18 % New York
Hannover Rueckversicherung AG 1 480 448 312 740 46,84 EUR 523 188 210 448 1,66 % Frankfurt
Gjensidige Forsikring ASA 7 371 386 435 895 68,90 NOK 507 888 71 994 1,61 % Oslo Brs
Haci Omer Sabanci Holding AS 13 394 775 259 522 7,60 TRY 334 856 75 334 1,06 % Istanbul
Banco Do Estado Rio Grande Do Sul Pref 8 211 327 171 463 13,34 BRL 322 812 151 349 1,03 % Sao Paulo
Goldman Sachs Group Inc 487 483 353 594 94,75 USD 274 836 -78 758 0,87 % New York
Cheung Kong Holdings Ltd 3 780 674 283 780 94,60 HKD 274 283 -9 496 0,87 % Hong Kong
Aberdeen Asset Management Plc 10 120 489 89 590 2,60 GBP 245 176 155 586 0,78 % London
Kinnevik Investment AB-B 2 039 277 100 415 138,60 SEK 243 365 142 949 0,77 % Stockholm
Asya Katilim Bankasi AS 24 282 168 239 524 1,81 TRY 144 569 -94 955 0,46 % Istanbul
TAG Immobilien AG 2 597 067 136 815 7,32 EUR 143 509 6 694 0,46 % Frankfurt
RSA Insurance Group Plc 14 080 558 135 408 1,08 GBP 142 174 6 766 0,45 % London
GSW Immobilien AG 693 556 117 309 26,88 EUR 140 656 23 348 0,45 % Xetra
Industrial Bank of Korea 1 973 755 144 101 12 750,00 KRW 130 899 -13 202 0,42 % Seoul
Japan Securities Finance Co 4 069 475 234 986 405,00 JPY 122 894 -112 092 0,39 % Tokyo
Albaraka Turk Katilim Bankasi AS 31 824 601 213 096 1,11 TRY 116 197 -96 899 0,37 % Istanbul
Capitamalls Asia Ltd 15 585 550 98 722 1,56 SGD 114 547 15 825 0,36 % Singapore
EFG-Hermes Holding SAE 10 956 636 206 143 10,29 EGP 110 647 -95 497 0,35 % Cairo
Sparebank 1 SR-Bank ASA 3 284 235 91 410 31,70 NOK 104 110 12 700 0,33 % Oslo Brs
Osaka Securities Exchange Co 2 526 50 053 450 000,00 JPY 84 759 34 705 0,27 % Tokyo
Minor items 177 313 110 167 -67 146 0,35 %
Total Financials 5 685 422 5 505 345 -180 077 17,50 %
Samsung Electronics Co Ltd Pref 574 368 1 323 607 749 000,00 KRW 2 237 715 914 108 7,11 % Seoul
Oracle Corp 6 472 904 1 043 048 29,40 USD 1 132 364 89 316 3,60 % NASDAQ
Kyocera Corp 1 270 268 668 721 6 830,00 JPY 646 925 -21 796 2,06 % Tokyo
Microsoft Corp 2 199 798 325 540 30,47 USD 398 832 73 292 1,27 % NASDAQ
Google Inc 58 615 199 849 575,40 USD 200 685 835 0,64 % NASDAQ
Minor items 42 374 37 759 -4 614 0,12 %
Total Information Technology 3 744 366 4 925 443 1 181 076 15,66 %
TELECOM
Vimpelcom Ltd-Spon ADR 12 342 183 958 984 8,10 USD 594 864 -364 120 1,89 % New York
China Mobile Ltd ADR 1 175 802 322 242 54,40 USD 380 600 58 358 1,21 % New York
China Mobile Ltd 4 443 947 257 585 84,75 HKD 288 833 31 248 0,92 % Hong Kong
Vivendi SA 1 668 149 186 689 14,54 EUR 183 061 -3 628 0,58 % Paris
Indosat Tbk PT ADR 921 819 137 600 23,24 USD 127 473 -10 128 0,41 % New York
Sistema Jsfc GDR 898 157 86 284 18,66 USD 99 724 13 439 0,32 % London int.
Minor items 112 219 134 427 22 207 0,43 %
Total Telecom 2 061 604 1 808 981 -252 622 5,75 %
UTILITIES
Centrais Eletricas Brasileiras SA Pref 11 295 481 698 456 19,38 BRL 645 117 -53 339 2,05 % Sao Paulo
Centrais Eletricas Brasileiras SA 7 122 805 594 014 14,14 BRL 296 811 -297 203 0,94 % Sao Paulo
Total Utilities 1 292 471 941 929 -350 542 2,99 %
Total equity portfolio* 31 037 684 30 992 860 -44 825 98,53 %
Disposable liquidity 463 562 1,47 %
Total share capital 31 456 422 100,00 %
Base price as of 29.06.2012 767,0997
Tyco International Ltd 6.0%
Citigroup Inc 4.2%
Oracle Corp 3.6%
Eletrobras SA 3.0%
Gazprom OAO 2.5%
Comcast Corp 2.3%
Kyocera Corp 2.1%
China Mobile Ltd 2.1%
Svenska Cellulosa AB 2.1%
36
2004 2005 2006 2007 2008 2009 2010 2011 2012 2003
20
10
40
80
120
SKAGEN Kon-Tiki
Emerging Markets Index
20 % annual return
N
A
V

S
K
A
G
E
N

K
o
n
-
T
i
k
i
HISTORICAL PRICE DEVELOPMENT SKAGEN KON-TIKI (EUR)
SKAGEN KON-TIKI
Leading the way in new waters*
The SKAGEN Kon-Tiki equity fund
will invest at least 50 percent of its
assets in emerging markets. These
are markets that are not included in
the MSCI World Index. Neverthe-
less, following on from our require-
ment to have a reasonable industry
balance, 50 percent of the funds
assets may be invested in markets
that are included in the MSCI World
Index. SKAGEN Kon-Tiki is suitable
for an investor who wants to benefit
from the value creation taking place
in the worlds emerging markets.
The fund offers the opportunity of
extraordinary returns, but at a
higher risk than with a global/
Norwegian equity fund.
SECURI TI ES PORTFOLI O SKAGEN KON-TI KI AS OF 29- 06-2012
Standard & Poors
qualitative rating
Morningstar quantitative
rating
Wassum
Lipper
Europe 2012, Best Fund 5 years
Equity Emerging markets
Fund start date 5 April 2002
Assets under
management
EUR 5 633 million
Subscription fee 0%
Redemption fee 0%
Management fee 2 % per year plus/
minus variable
management fee
amount
EUR 150
Authorised for
marketing in
Norway, Sweden,
Denmark, Finland,
Netherlands, Luxem-
Switzerland
Benchmark index MSCI Emerging
Markets Index (NOK)
UCIT UCITss Yes Yes
Portfolio managers J. Kristoffer Stensrud
Knut Harald Nilsson
Cathrine Gether
Ross Porter
+++++
Security Number
Acquistion
value NOK *
Market
price
Cur-
rency
Market-
value NOK*
Unrealised
gain/loss *
Share of
fund
Stock-
exchange
ENERGY
Baker Hughes Inc 6 824 935 1 909 851 41,18 USD 1 672 323 -237 528 3,93 % New York
Gazprom Oao ADR 22 585 821 1 553 333 9,43 USD 1 267 310 -286 023 2,98 % London int.
Petroleo Brasileiro Pref ADR 5 454 878 941 829 17,97 USD 583 268 -358 560 1,37 % New York
Tullow Oil Plc 3 804 688 332 305 14,77 GBP 524 411 192 106 1,23 % London
Seadrill Ltd 2 353 453 218 109 210,80 NOK 496 108 277 999 1,17 % Oslo Brs
Sasol Ltd 1 399 949 409 322 342,40 ZAR 348 410 -60 912 0,82 % Johannesburg
Afren Plc 25 227 562 313 174 1,04 GBP 244 133 -69 041 0,57 % London
Pacic Drilling SA 3 991 922 242 800 8,49 USD 201 662 -41 137 0,47 % New York
Petroleo Brasileiro SA 3 200 000 245 877 18,17 BRL 171 350 -74 526 0,40 % Sao Paulo
Archer Ltd 13 276 071 320 208 10,60 NOK 140 726 -179 481 0,33 % Oslo Brs
Deep Sea Supply Plc 12 229 431 125 766 10,35 NOK 126 575 809 0,30 % Oslo Brs
Minor items 192 708 136 309 -56 399 0,32 %
Total Energy 6 805 280 5 912 586 -892 694 13,91 %
RAW MATERIALS
Vale Sa Spons ADR 9 472 805 1 013 789 19,35 USD 1 090 674 76 884 2,57 % New York
Exxaro Resources Ltd 5 286 445 675 167 190,07 ZAR 730 335 55 168 1,72 % Johannesburg
Eurasian Natural Resources 10 091 661 573 255 4,16 GBP 391 673 -181 582 0,92 % London
Drdgold Ltd ADR 3 724 701 206 450 6,45 USD 142 951 -63 499 0,34 % NASDAQ
Vale SA-Pref A 1 231 900 210 807 39,16 BRL 142 167 -68 640 0,33 % Sao Paulo
Asia Cement China Holdings 50 706 000 186 391 3,43 HKD 133 380 -53 011 0,31 % Hong Kong
Minor items 168 302 195 135 26 832 0,46 %
Total Raw Materials 3 034 162 2 826 315 -207 847 6,65 %
INDUSTRIALS
ABB Ltd 8 957 636 928 140 112,40 SEK 866 918 -61 222 2,04 % Stockholm
Aveng Ltd 21 017 094 617 358 35,80 ZAR 546 891 -70 467 1,29 % Johannesburg
A P Moller - Maersk B 12 701 496 037 38 440,00 DKK 495 355 -683 1,17 % Kbenhavn
Empresas ICA S.A.B 42 542 700 621 197 23,36 MXN 439 954 -181 243 1,04 % Mexico
Bidvest Group Ltd 2 878 881 335 297 182,00 ZAR 380 838 45 541 0,90 % Johannesburg
Harbin Electric Company Ltd 68 000 000 614 366 6,23 HKD 324 890 -289 477 0,76 % Hong Kong
AirAsia Bhd 46 576 800 108 852 3,57 MYR 313 411 204 559 0,74 % Kuala Lumpur
Golar LNG Ltd. 1 274 141 230 093 224,30 NOK 285 790 55 696 0,67 % Oslo Brs
Orascom Construction Industries GDR 977 842 218 053 40,50 USD 235 645 17 592 0,55 % Cairo
Tekfen Holding AS 8 158 907 123 013 6,62 TRY 177 664 54 651 0,42 % Istanbul
Norwegian Air Shuttle ASA 1 628 768 119 886 108,00 NOK 175 907 56 021 0,41 % Oslo Brs
Frontline 2012 Ltd 6 912 000 128 435 24,50 NOK 169 344 40 909 0,40 % Unotert
Enka Insaat Ve Sanayi AS 9 426 663 105 720 4,85 TRY 150 386 44 666 0,35 % Istanbul
Dryships Inc 10 633 245 195 821 2,13 USD 134 772 -61 049 0,32 % NASDAQ
Minor items 364 481 279 929 -84 552 0,66 %
Total Industrials 5 206 752 4 977 694 -229 059 11,71 %
Hyundai Motor Pref (2pb) 3 574 100 570 644 74 500,00 KRW 1 385 019 814 375 3,26 % Seoul
Great Wall Motor Co Ltd 99 312 500 180 148 15,38 HKD 1 171 383 991 235 2,76 % Hong Kong
Hyundai Motor Pref (1p) 3 259 810 521 108 66 300,00 KRW 1 124 187 603 079 2,64 % Seoul
Mahindra & Mahindra Ltd GDR 7 859 799 156 887 12,10 USD 565 890 409 003 1,33 % London Int,
LG Electronics Inc Pref 3 150 000 850 969 17 450,00 KRW 285 916 -565 053 0,67 % Seoul
DRB-Hicom Bhd 54 368 600 205 041 2,52 MYR 258 241 53 200 0,61 % Kuala Lumpur
Hengdeli Holdings Ltd 97 320 000 177 408 2,44 HKD 182 109 4 701 0,43 % Hong Kong
Mahindra & Mahindra Ltd 1 482 013 115 856 707,25 INR 112 268 -3 588 0,26 % Nat. India
Minor items 263 414 222 222 -41 193 0,52 %
Total Consumer Discretionary 3 041 476 5 307 235 2 265 759 12,49 %
Risk

4 2 1 3 5 6 7
37
IT 11,8%
Energy
13,9%
Industrials 11,7%

Finance 15,5%
Raw
Materials
6,7%
Health 5,3%
Consumer
Discretionary 12,5%
Telecom 7,9%
Consumer
Staples 8,2%
Utilities
4,1%
Cash
2,5%
SECTOR DISTRIBUTION
Cash 2,5%
Asia ex
Japan 38,4%
East
Africa
0,2%
EMEA 24,3%
South America
13,0%
Eurozone 2,7%
North
America 4,7%
Norway 3,9%
Peripheral EU
7,3%
North
Africa 1,0%
West Africa 2,1%
10 LARGEST HOLDINGS
* Skagen reefs lightship, 1892. Detail.
By Carl Locher, one of the Skagen painters.
SKAGEN KON-TIKI
Leading the way in new waters*
SECURI TI ES PORTFOLI O SKAGEN KON-TI KI AS OF 29- 06-2012
Security Number
Acquistion
value NOK *
Market
price
Cur-
rency
Market-
value NOK*
Unrealised
gain/loss *
Share of
fund
Stock-
exchange
CONSUMER STAPLES
Cosan Ltd 8 525 000 433 663 12,33 USD 625 450 191 787 1,47 % New York
Heineken NV 1 890 768 562 252 41,16 EUR 587 238 24 986 1,38 % Amsterdam
Kulim Malaysia BHD 63 977 300 201 962 4,70 MYR 566 762 364 800 1,33 % Kuala Lumpur
Shoprite Holdings Ltd 4 436 169 211 609 150,67 ZAR 485 825 274 216 1,14 % Johannesburg
Yazicilar Holding AS 9 654 470 239 354 12,05 TRY 382 670 143 316 0,90 % Istanbul
PZ Cussons Plc 7 625 746 127 931 3,18 GBP 226 014 98 083 0,53 % London
Tata Global Beverages Ltd 14 126 721 188 252 115,95 INR 175 445 -12 806 0,41 % Nat. India
Minor items 304 306 258 601 -45 704 0,61 %
Total Consumer Staples 2 351 536 3 492 607 1 141 071 8,22 %
HEALTH CARE
Richter Gedeon Nyrt 968 258 1 070 376 37 250,00 HUF 952 005 -118 371 2,24 % Budapest
Stada Arzneimittel AG 2 597 658 383 691 24,07 EUR 471 743 88 052 1,11 % Frankfurt
Hanmi Pharm Co Ltd 760 725 315 456 66 400,00 KRW 262 741 -52 715 0,62 % Seoul
China Shineway Pharmaceutical 22 497 000 162 815 11,14 HKD 192 198 29 383 0,45 % Hong Kong
Eis Eczacibasi Ilac Ve Sanayi 21 418 365 146 800 1,89 TRY 133 155 -13 645 0,31 % Istanbul
Supermax Corp BHD 29 573 600 114 137 2,07 MYR 115 386 1 248 0,27 % Kuala Lumpur
Minor items 184 050 113 639 -70 411 0,27 %
Total Health Care 2 377 325 2 240 867 -136 458 5,27 %
FINANCIALS
Haci Omer Sabanci Holding AS 50 107 500 989 063 7,60 TRY 1 252 637 263 573 2,95 % Istanbul
VTB Bank Ojsc GDR 39 379 370 1 233 820 3,53 USD 827 139 -406 680 1,95 % London Int.
Banco Do Estado Rio Grande Do Sul Pref 19 292 229 435 229 13,34 BRL 758 435 323 206 1,78 % Sao Paulo
State Bank of India 2 305 149 662 042 2 159,00 INR 533 067 -128 975 1,25 % Nat. India
Aberdeen Asset Management Plc 21 603 336 340 012 2,60 GBP 523 357 183 345 1,23 % London
JSE Ltd 6 464 519 249 899 74,99 ZAR 352 358 102 459 0,83 % Johannesburg
Bangkok Bank Public Co-Nvdr 9 410 500 240 648 191,50 THB 339 518 98 870 0,80 % Bangkok
Kiwoom Securities Co Ltd 1 046 824 191 309 61 000,00 KRW 332 152 140 843 0,78 % Seoul
Korean Reinsurance Co 4 765 065 181 997 11 150,00 KRW 276 361 94 364 0,65 % Seoul
Standard Chartered Plc 1 404 661 163 830 13,94 GBP 182 794 18 964 0,43 % London
EFG-Hermes Holding SAE 14 949 381 353 507 10,29 EGP 150 968 -202 539 0,36 % Cairo
Kiatnakin Bank Pcl-Nvdr 19 238 700 142 186 36,00 THB 130 485 -11 702 0,31 % Bangkok
Nordnet AB 7 007 907 97 310 20,30 SEK 122 491 25 180 0,29 % Stockholm
Kiatnakin Bank Pcl 16 543 300 108 175 36,00 THB 112 203 4 028 0,26 % Bangkok
Minor items 745 765 677 371 -68 394 1,59 %
Total Financials 6 134 792 6 571 334 436 542 15,46 %
Samsung Electronics Co Ltd Pref 550 547 1 360 170 749 000,00 KRW 2 144 910 784 740 5,05 % Seoul
Hon Hai Precision Industry 85 000 000 1 778 201 89,40 TWD 1 516 380 -261 820 3,57 % Taipei
Naspers Ltd 988 091 236 708 434,99 ZAR 312 407 75 700 0,73 % Johannesburg
Minor items 224 066 58 831 -165 234 0,14 %
Total Information Technology 4 095 545 5 012 836 917 290 11,79 %
TELECOM
Sistema Jsfc GDR 11 303 681 901 767 18,66 USD 1 255 067 353 299 2,95 % London Int.
China Mobile Ltd ADR 2 800 612 831 872 54,40 USD 906 540 74 669 2,13 % New York
Bharti Airtel Ltd 19 324 305 885 064 305,05 INR 631 400 -253 663 1,49 % National India
Indosat Tbk PT 105 000 000 326 495 4 325,00 IDR 287 234 -39 261 0,68 % Indonesia
Indosat Tbk PT ADR 2 054 595 350 229 23,24 USD 284 117 -66 112 0,67 % New York
Total Telecom 3 295 427 3 364 358 68 931 7,92 %
UTILITIES
Centrais Eletricas Brasileiras SA Pref 27 892 363 2 065 242 19,38 BRL 1 593 013 -472 229 3,75 % Sao Paulo
Minor items 246 260 133 845 -112 414 0,31 %
Total Utilities 2 311 502 1 726 858 -584 644 4,06 %
Total equity portfolio* 38 653 797 41432688 2 778 891 97,48 %
Disposable liquidity 1 071 894 2,52 %
Total share capital 42504582 100,00 %
Base price as of 29.06.2012 496,2328
Hyundai Motor Co 5.9%
Eletrobras SA 4.1%
Baker Hughes Inc 3.9%
Hon Hai Precision Industry Co 3.6%
Gazprom OAO 3.0%
Sistema JSFC 3.0%
Haci Omer Sabanci Holding AS 3.0%
Vale SA 2.9%
Great Wall Motor Co Ltd 2.8%
38
SKAGEN Tellus is an actively
managed global bond fund
investing in bonds issued by
governments, regional autho-
rities and financial institutions
all over the world. SKAGEN
Tellus is a good option for
investors who wish to invest
in global bonds and who have
an investment horizon of at
least 12 months. Investors
must be tolerant of exchange
rate fluctuations.
* Interior. Brndums annex, ca. 1920. Detail.
By Anna Ancher, one of the Skagen painters.
SKAGEN TELLUS
A doorway to global interest rates*
Morningstar
Fund start date 29 September 2006
Assets under
management
EUR 65 million
Number of unitholders 1930
Subscription fee 0 %
Redemption fee 0 %
Management fee 0,8 % per year
amount
EUR 150
Authorised for
marketing in
Norway, Sweden,
Denmark, Finland,
Netherlands, Luxem-
bourg, I g, celand, , UK and
Switzerland
Benchmark index Barclays Capital
Global Treasury Index
3-5 years
UCITs Yes
Portfolio managers Torgeir Hien
++++
Security M
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GOVERNMENT BONDS
Australian Government 15.11.2012 4,75 4 000 24 223 612,38 141 24 495 24 636 272 5,05 %
Brazilian Government 10.01.2028 10,25 6 000 21 788 366,76 847 22 005 22 853 218 4,69 %
Canadian Government 01.08.2013 2,00 5 000 28 695 589,76 239 29 488 29 727 794 6,10 %
Chilean Government 05.08.2020 5,50 800 000 10 006 1,27 208 10 128 10 336 121 2,12 %
European Bank Recon & Dev 17.06.2015 0,50 20 000 18 273 89,91 3 17 982 17 985 -291 3,69 %
Colombian Government 14.04.2021 7,75 5 000 000 17 419 0,41 269 20 533 20 802 3 114 4,27 %
Irish Government 18.10.2020 5,00 2 000 13 419 691,30 525 13 826 14 351 407 2,94 %
Portugese Government 15.04.2021 3,85 5 000 22 919 492,43 298 24 622 24 920 1 703 5,11 %
Spanish Government 31.01.2022 5,85 2 000 14 392 723,79 361 14 476 14 837 84 3,04 %
European Bank Recon & Dev 06.06.2014 5,25 130 000 14 998 10,51 46 13 669 13 715 -1 328 2,81 %
Mexican Government 20.11.2036 10,00 40 000 21 226 61,76 35 24 704 24 739 3 478 5,07 %
New Zealand Government 15.04.2015 6,00 2 000 10 596 521,95 117 10 439 10 556 -158 2,16 %
Peruan Government 12.08.2037 6,90 6 000 15 574 260,37 350 15 622 15 972 49 3,28 %
Polish Government 25.10.2021 5,46 15 000 26 434 185,71 988 27 856 28 843 1 422 5,91 %
Russian Government 10.03.2018 7,85 50 000 9 956 19,31 218 9 657 9 875 -299 2,02 %
Swedish Government 08.10.2012 5,50 30 000 26 094 87,03 1 029 26 108 27 137 14 5,56 %
Lithuanian Government 11.02.2020 7,37 2 000 13 770 705,36 336 14 107 14 443 337 2,96 %
Slovak Government 21.05.2022 4,37 3 000 17 305 584,66 82 17 540 17 622 235 3,61 %
US Government 31.08.2013 0,12 7 000 40 672 593,34 17 41 534 41 551 862 8,52 %
US Government 15.12.2012 1,12 7 000 42 212 596,92 18 41 784 41 802 -428 8,57 %
South African Government 31.03.2036 6,25 50 000 29 714 55,96 559 27 978 28 537 -1 736 5,85 %
UK Government 06.08.2012 0,00 3 000 28 443 932,57 0 27 977 27 977 -465 5,74 %
Total Bond Portfolio 468 129 6 687 476 530 483 218 8 402 99,09 %
Disposable liquidity 4 425 0 4 437 4 437 11 0,91 %
TOTAL 472 554 6 688 480 967 487 655 8 413 100,00 %
Portfolio Key Figures
Effective underlying return 4,01 %
Effective yield to clients* 3,21 %
Duration** 4,45
* Effective underlying return adjusted for managment fee.
** Duration is a simplied expression of how much the price of the security will change if the interest rate changes by one percentage point.
*** Figures in 1000 NOK
Effective interest is the average annual return of an interest bearing security until maturity.
Securities are valued at market price as of 29.06.2012.
Bonds and notes for which there are no market maker prices are at all times valued against the applicable yield curve.
Unit price as of 29.06.2012 108,5633
Risk

4 2 1 3 5 6 7
SECURI TI ES PORTFOLI O SKAGEN TELLUS AS OF 29- 06-2012
39
Financial statement
AS OF 30.06.2012
Income Statement
(all gures in NOK 1000)
SKAGEN Vekst
1st half 2012
SKAGEN Global
1st half 2012
SKAGEN Kon-Tiki
1st half 2012
SKAGEN Balanse
60/40***
1st half 2012
SKAGEN
Avkastning
1st half 2012
SKAGEN Hyrente
1st half 2012
SKAGEN Hyrente
Institusjon
1st half 2012
SKAGEN Tellus
1st half 2012
SKAGEN Krona**
1st half 2012
PORTFOLIO REVENUE AND COSTS
Interest income and costs -2 124 -1 588 2 510 175 19 000 70 453 25 070 8 429 8 370
Dividends 158 942 636 857 732 096 - - - - - -
Realised capital gain/loss 95 636 197 069 222 976 - 2 526 1 512 -1 208 9 031 -
Change unrealised capital gain/loss 210 847 -205 945 -288 331 -1 889 10 379 4 216 2 105 1 719 657
Broker's fee -3 133 -9 297 -20 160 - -6 -56 -43 -12 -61
Currency gain/loss 2 586 11 235 -31 064 - 5 606 - - -1 072 -
PORTFOLIO RESULT 462 754 628 332 618 026 -1 714 37 505 76 124 25 924 18 095 8 966
MANAGEMENT REVENUE AND COSTS
Management fee - xed -38 699 -164 432 -446 032 - -2 545 -4 998 -1 121 -1 970 -449
Management fee - variable* -19 020 - 134 375 - - - - - -
ASSET MANAGEMENT RESULT -57 720 -164 432 -311 657 - -2 545 -4 998 -1 121 -1 970 -449
RESULT BEFORE TAX 405 035 463 900 306 370 -1 714 34 960 71 126 24 803 16 125 8 517
Tax cost -9 216 -66 490 -78 614 -49 - - - - -
NET INCOME FOR THE PERIOD 395 819 397 410 227 755 -1 763 34 960 71 126 24 803 16 125 8 517
Balance Sheet SKAGEN Vekst
30.06.2012
SKAGEN Global
30.06.2012
SKAGEN KonTiki
30.06.2012
SKAGEN Balanse
60/40
30.06.2012
SKAGEN
Avkastning
30.06.2012
SKAGEN Hyrente
30.06.2012
SKAGEN Hyrente
Institusjon
30.06.2012
SKAGEN Tellus
30.06.2012
SKAGEN Krona
30.06.2012
ASSETS
Norwegian securities at cost price 3 759 785 965 080 1 387 339 68 657 700 279 3 012 440 842 190 - -
Foreign securities at cost price 3 494 544 30 053 135 37 266 458 - 117 237 - - 468 129 529 147
Unrealised capital gains -42 230 -25 348 2 778 891 -1 889 2 297 -905 1 074 8 402 483
Accrued interest securities - - - 306 4 562 14 187 6 131 6 744 2 630
TOTAL SECURITIES PORTFOLIO 7 212 098 30 992 866 41 432 688 67 074 824 375 3 025 723 849 395 483 275 532 259
Dividend receivable 20 022 141 745 154 861 - - - - - -
Accrued interest bank - - - - - - - - -
TOTAL ACCRUED INCOME 20 022 141 745 154 861 - - - - - -
Accounts receivable - brokers 14 500 358 274 706 833 - - - 20 089 - 34 119
Accounts receivable - management company 1 2 5 - - - - 1 -
Tax receivable on dividends 5 404 35 841 5 253 - - - - 877 -
Other receivables - - - - 83 - - - -
TOTAL OTHER RECEIVABLES 19 905 394 117 712 092 - 83 - 20 089 879 34 119
Bank deposits 150 968 149 166 473 759 933 181 232 907 013 531 779 3 677 16 696
TOTAL ASSETS 7 402 993 31 677 894 42 773 401 68 007 1 005 690 3 932 736 1 401 263 487 830 583 074
EQUITY CAPITAL
Unit capital at par value 593 736 4 077 310 8 531 559 69 840 735 594 3 808 585 1 381 391 447 716 522 154
Premium -1 194 630 17 058 240 22 290 420 -121 257 623 33 290 -4 531 46 874 4 608
TOTAL PAID-IN EQUITY CAPITAL -600 894 21 135 550 30 821 978 69 719 993 217 3 841 875 1 376 860 494 590 526 762
Retained earnings 7 940 634 10 207 015 11 606 399 -1 763 11 217 66 172 23 870 -7 858 9 551
TOTAL EQUITY CAPITAL 7 339 740 31 342 565 42 428 378 67 956 1 004 434 3 908 047 1 400 729 486 733 536 313
DEBT
Accounts payable - brokers 20 664 31 307 14 979 - - - - - 30 027
Accounts payable - management company 37 874 80 840 85 849 - 1 256 2 425 534 943 253
Other debt 4 716 223 182 244 196 51 - 22 263 - 155 16 481
TOTAL OTHER DEBT 63 254 335 329 345 023 51 1 256 24 688 534 1 097 46 761
TOTAL DEBT AND EQUITY CAPITAL 7 402 993 31 677 894 42 773 401 68 007 1 005 690 3 932 736 1 401 263 487 830 583 074
Number of units issued 5 937 358,27 40 773 104,73 85 315 585,30 698 397,18 7 355 939,07 38 085 849,21 13 813 906,45 4 477 160,04 5 221 541,47
Base price per unit 29.06.2012 1236,2143 767,0997 496,2328 97,2724 136,5426 102,5986 101,3932 108,5633 102,6932
Note: Divergence in price relative to the portfolios is due to accruals divergence as of 30.06.2012.
* Calculated variable management fee as of 30.06.12: pursuant to the regulations, the denitive statement shall take place as of 31.12.2012 based on value developments during the rest of the year.
** Figures in SEK 1000
***Fund established on 29 February 2012
FI NANCI AL STATEMENT
PHONE: +47 51 21 38 58 * EMAI L: CONTACT@SKAGENF UNDS. COM
Countries highlighted in dark blue are a home market.
Countries highlighted in light blue are those in which SKAGEN has an ofce.
Countries highlighted in green are those in which SKAGEN has marketing permission.

SKAGENs International department has over the past few years grown to meet increasing interest and demand
from outside the home market in the Nordic region.

The department now handles inquiries and clients from countries as diverse as the Netherlands, Luxembourg,
Finland, Iceland, the UK and Switzerland. SKAGENs international department has grown alongside the
international expansion and is based between Stavanger, Norway, London, UK and Amsterdam, the Netherlands.
SKAGEN continues
to expand in Europe Ofces:
Head office
SKAGEN Funds
Postbox 160
4001 Stavanger,
Norway
or
Skagen 3, Torgterrassen
Stavanger, Norway
Tel.: +47 51 21 38 58
Fax: +47 51 86 37 00
Email: contact@skagenfunds.com
www.skagenfunds.com
London
Albemarle House
1 Albemarle Street
London W1S 4HA
UK
Amsterdam
Museumplein 5 D
1071 DJ Amsterdam
The Netherlands
Contact Customer Services
Customer Services is open from
Monday to Friday from 9 a.m. to
5 p.m. (CET)
Either visit us at our office, send
an email or call us and we will do
our utmost to assist you.

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