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SKAGEN Kon-Tiki

heads for new shores


The focus is not on past performance, but rather on the future, says
manager Kristoffer Stensrud about ten years of SKAGEN Kon-Tiki.
Read more about the anniversary on pages 12-13 and the portfolio
managers report from page 19.
T HE ART OF COMMON SE NSE
6
The value of
short-termism
The short-term view can
work to the benefit of long-
term investors
8
Set to release
its triggers
How did Oracle become
one of the largest hol-
dings in SKAGEN Global?
14
Quality at a
discount
The commodity sector is
a good place to look for
undervalued companies
these days.
A new and better world
5
Kristoffer Stensrud
Market Report
NUMBE R 1 4 A P R I L 2012 4 SK AGE NF UNDS. COM
2
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
SKAGEN Kon-Tiki
heads for new shores
The focus is not on past performance, but rather on future returns, says
manager Kristoffer Stensrud about ten years of SKAGEN Kon-Tiki.
READ MORE ABOUT THE ANNIVERSARY ON PAGES 12-13 AND IN THE
PORTFOLIO MANAGERS REPORT FROM PAGE 19.
Market Report
T HE ART OF COMMON SE NSE
NUMBE R 1 4 A P R I L 2012 4 SK AGE NF UNDS. COM
6
The value of
short-termism
The short-termviewcan
work to the benefit of long-
terminvestors
8
Set to release
its triggers
How did Oracle become
one of the largest hol-
dings in SKAGEN Global?
14
Quality at a
discount
The commodity sector is
a good place to look for
undervalued companies
these days.
A newand better world
5
Kristoffer Stensrud
Photo: Carl Christian Raabe / Nordisk Film
Distribusjon AS
SKAGEN FUNDS
MARKET REPORT NO. 1 2012
Contents
3
SKAGEN Funds Returns
4
Leader and Comment
5
A new and better world
6
The value of short-termism
8
Oracle all set to release its triggers
10
The Long Good Buy
12
Ten years on the raft
14
Quality at a discount
16
Coming home to roost
17
Keep up to date
18
New information document
19
Portfolio managers report
32
Fixed income commentary
34

Portfolios
41
Quarterly accounts
42
Risk and return measurements
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
Mark Houben, 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.
Oil not paper: As a large or small shareholder in Heine-
ken, you dont just own a security, you have ownership in
a company.
New holding in SKAGEN Kon-Tiki, Eurasian Natural Resources, is a Kazakh mining company which produces
ferrochrome amongst other things
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Samsung Electronics, a holding in all three equity funds,
is now more frequently compared to Apple, rather than to
components suppliers.
6
29
26
3
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
SKAGEN Funds -
Returns
The following tables show the returns for SKAGENs
funds versus their respective benchmarks in euro.
The figures are updated as of 31 March 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 manager: Beate Bredesen 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
-9,3 %
2,2 %
15,6 %
9,6 %
SKAGEN Kon-Tiki MSCI Emerging Markets Index (Daily Traded Net Total Return)
Return past 12 months Average annual return since start
-4,5 %
-2,9 %
-20
-10
0
10
20
-20
-10
0
10
20
18,2 %
9,4 %
-10
-5
0
5
10
15
20
SKAGEN Global MSCI World Linked Index
Return past 12 months Average annual return since start
2,1 %
5,3 %
16,0%
1,8%
-10
-5
0
5
10
15
20
-10
-5
0
5
10
SKAGEN Tellus Barclays Capital Global Treasury Index 3 - 5 years (euro)
Return past 12 months
-10
-5
0
5
10
5,80 %
6,58 %
Average annual return since start
5,74 %
9,80 %
OUR F UNDS

Unless otherwise stated all figures quoted in this report are in euro, except for the quarterly 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 quarterly 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 quarterly financial statement is available at www.skagenfondene.no.
4
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
LE ADER
At the risk of repeating myself, I must record
that the year thus far has seen initial opti-
mism give way to another bout of risk off. The
shadow of Eurozone mismanagement looms
large over the financial markets once more,
and stocks are temporarily in retreat. Here in
the Nordics one could be forgiven for thinking
that this was all someone elses problem. In
Norway, in particular, the economy moves from
strength to strength. Net public debt at the
end of 2011 was about 160% of GDP that is
minus 160% of GDP. And the public surplus is
forecast to be about 9% of GDP in 2012. And
of course the whole endeavour is underwritten
by an active and well-regulated oil sector mani-
fest in the form of one of the worlds largest
sovereign wealth funds.
This is not just the result of good luck and
geography. The Nordic region suffered its ban-
king crisis in the early 1990s. In the aftermath
many countries adopted reforms to make the
labour market more flexible, and to place the
banking sector on a sounder footing. The net
result here in Norway has been an increasingly
efficient economy that remains somewhat
untouched by recent events.
Safe havens and their (unforeseen) benets
What then are the benefits to our investors of
SKAGENs domicile in this Nordic safe haven?
Aside from the opportunity in the local capital
markets best accessed through our equity
fund SKAGEN Vekst, the reforms of 20 years
ago have led to a focus on sound governance,
transparency, and a lack of corruption. Our
funds, and our operations, are therefore
subject to uncommon levels of scrutiny,
and transparency. After all, this is a country
where personal tax details are a matter of
open public record.
The co-investor risk, or rather lack of it,
is a positive factor also. SKAGEN still draws
a little less than half its investor base from
Norway alone. A prosperous and well run
export-based economy, that rails against
complacency and inefficiency, continues
to ensure that our local investors can plan
and invest for the long-term. And as a recent
survey by investment bank Goldman Sachs
demonstrates (repeated on page 8), there is
distinct advantage in investing for the long
term, as SKAGEN does.
Good absolute performance
Despite recent corrections, the markets have
largely started the year well, the S&P 500 retur-
ning 18% as at the end of the first quarter. Year
to date, absolute return in our equity funds
is encouraging 12.4% for SKAGEN Vekst,
10.6% for SKAGEN Global, and 9.8% for
SKAGEN Kon-Tiki, measured in euro. And our
global bond fund SKAGEN Tellus has returned
2.60%, some 5.53% clear of its benchmark.
Read the portfolio manager reports from page 19.
Hip hip hurrah
Finally a note of celebration. This month
marks a banner year for our emerging market
fund SKAGEN Kon-Tiki with its 10 years anni-
versary. This wonderful balsa raft has sailed
through generally choppy waters to deliver
performance in excess of its benchmark every
single calendar year, to an accumulated total
of 433.4% for the 10 years since inception.
The founding portfolio manager, Kristoffer
Stensrud, writes of his 10 years overleaf. Its
a great story.
Safe havens and champagne
LEADER
Timothy Warrington,
Head of International,
SKAGEN Funds
tcsw skagenf unds.com
In our last market report published in Octo-
ber a few months after a substantial price
drop in the stock markets we wrote about
the benefits of maintaining a long-term per-
spective.
As the global stock markets had not mana-
ged to generate any returns in 12 years, many
people were starting to question whether there
was any point owning shares at all. Regardless
of how long-sighted one is.
Although our actively managed funds have
generated satisfactory returns over a 12-year
period, the past five have not given us much
to write home about.
Nevertheless, as we have pointed out
before, it is all about prices. At the turn of the
millennium the price of the global stock market
had reached a record high. Even though share
prices in general have not gone up since then,
companies have been earning money. In some
cases a lot of money. The price tag for these
earnings has fallen and they have done so
significantly for the most popular companies;
from P/E levels of 40 and 50, they have come
down to around a quarter of that figure today.
Thanks to the good earnings, companies
bank accounts have swelled and debt levels
dropped. It is estimated that US and Euro-
pean companies now have a combined cash
holding of a formidable USD 4000 billion
(see portfolio managers report).
When bank accounts are too thick, com-
panies have historically had an unfortunate
tendency to buy back their own shares at
near peak prices. It is, after all, when times
are good that earnings and share prices are
at their highest and cash reserves at their
fullest. The last time we saw this phenome-
non was in 2007/08. Share buybacks have
a dilutive effect on shareholders.
Given the lack of competitive investment
opportunities or risk aversion compa-
nies have been smarter this time. Some
of the cash holdings were used during the
turbulence last year to buy back shares, at
attractive prices, and this had a concen-
trating effect on shareholders. Many have
also increased dividend payments which for
many companies provide shareholders with
a direct yield that is well over what investors
get in the (government) bond market.
The fact that the stock market turned just
after the previous market report came out
was not something we could have predicted.
We merely pointed out that the pricing in
our equity funds was not far off the trough
levels of 2008/09.
Once again we have witnessed that when
the stock market turns back up after a period
dominated by fear, the upturn is both good
and strong.
As equity investors with eternity as
our investment horizon, we are forced to
remain in the stock market in both good
times and bad. Much of our excess return
has been generated in bad times, when
investors behave irrationally and unpopu-
lar and undervalued companies abound.
This will (hopefully) continue to hold true
in the future.
Smart stock purchase
COMMENT
Tore Bang
Technical editor,
tb skagenfunds.com
5
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
COMMENT
Our humble starting point was not to make
predictions about the greatest change in the
worlds economic structure since 1914. Our
focus was on the exceedingly good selec-
tion of undervalued, unpopular and under-
researched companies in the worlds emer-
ging markets. Companies that despite the glo-
bal recession, collapse in technology stocks
and suspension of payments in Argentina,
were operating healthy, good and profitable
businesses.
What has happened since is history.
Our presence in these markets has, to put
it modestly, provided a nice contribution to
unit holders assets this decade.
Just prior to the launch of SKAGEN Kon-Tiki,
China became a member of the World Trade
Organisation. Goldman Sachs Jim ONeill had
coined the term BRIC, which later became
synonymous with the new economic world
order. From the crisis in the autumn 2008,
we got the term G20, which includes many
of the worlds emerging markets countries.
These are expected to take over the role of
industrialised countries (G7) shortly.
The emerging markets share of the worlds
stock value has increased from 5-6 to almost
25 percent. China has gone from being the
worlds eighth largest economy to the second
largest. It is the signals from the countrys
various economic indicators that cause the
stock exchange dog to wag its tail or not,
as the case may be.
The relative size of emerging markets in
world trade has more than tripled. What is
most edifying is that this growth has lifted
hundreds of millions of people out of poverty.
Life expectancy has risen while child morta-
lity has fallen substantially.
In other words, the world has become a
considerably better place to live in. The very
fact of witnessing such furious development,
and in such a short time, has been a privilege
in itself.
The world has perhaps changed even more
for active value based investors such as our-
selves. By way of example there are currently
32 analysts following US Citibank, while 61
follow State Bank of India! In 2002 no one
was interested in Grupo Mexico. Today the
company is the worlds third largest copper
producer and is followed by 20 analysts.
Ten years ago you could find markets and
companies that led their own independent
lives. The belief that financial markets could
continue to live such a decoupled life died
away with the financial crisis. Despite the
fact that the fundamental decoupling is extre-
mely present, an absurd logic among market
participants has resulted in global emerging
markets fluctuating more than developed
markets, during upturns and downturns alike.
The big question is what will happen in
future. The largest companies will most likely
continue to be highly dependent on the gene-
ral mood among participants in the global
financial markets. Among the medium-sized
companies we are however starting to see
a trend that analysts are increasingly con-
centrating their efforts on companies that
are slightly off the radar. The development of
local institutions, which were in short supply
a decade ago, is also generating local interest
in stocks.
Looking at the big picture, the marginal
demand for securities, and likewise price fluc-
tuations, have been driven by global money. It
appears that the effects are now starting to be
diluted, as is the case in Norway. But perhaps
the most important thing for investors like us
is the flourishing of genuine, value-oriented
investors. They will help improve the pricing
of good companies, as well as reduce the
focus on momentum and trend fluctuations.
Many people ask us whether we see as
many investment opportunities in emerging
markets now as we did at the beginning of
this millennium. The planets of mars and
the moon are closed to investors for the time
being, but there is something called frontier
markets. A number of people have already
cast their eyes over these markets, us inclu-
ded. With the possible exception of the Afri-
can continent, where investable listed compa-
nies are unfortunately in short supply, we still
do not see anything resembling the paradigm
shift we have seen in the past decade.
This article first appeared as a guest commen-
tary by Kristoffer Stensrud in the Norwegian
financial daily, Dagens Nringsliv.
A new and better world
The emerging markets fund SKAGEN Kon-Tiki has just celebrated its tenth anniversary.
The birthday-fund is in good shape, and like its portfolio managers, grows lovelier by the
day. With EUR 6 billion under management, the fund has grown to quite a size. But that is
peanuts in light of the changes that have taken place in the world these past years. Kristoffer Stensrud, portfolio manager of SKAGEN Kon-Tiki
6
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
THEME
The survey by Goldman Sachs underlines a
trend that has long been apparent in global
stock markets; investors hold their selected
companies for increasingly shorter periods
of time. The reasons for this are manifold.
The collapse of IT stocks at the turn of the
millennium is the key starting point. It repre-
sents the beginning of the end of the theory
that long-term savings in stocks is a sure path
to riches. The 1990s an extremely good
decade for equity investors were the heyday
for this theory (see graph).
Creative nance industry
As the 2000s became less and less share-
holder friendly, the large investment banks
rapidly started to turn to other more lucrative
savings alternatives. Property, bonds and
commodities were marketed as the best long-
term investments.
Equities were reclassified as a savings
class only suitable for tactical and sector-
specific allocations. A range of instruments
adapted to this short-term approach were
created. One good example is exchange-
traded funds (ETFs), which are funds traded
on a stock exchange, and thus impacted by
investors mood swings.
The investors hunt for alternatives to
stocks also led to renewed growth for hedge
funds. When two of the biggest personalities
in the industry, Julian Robertson and George
Soros, decided to restructure their funds in
2000, many people predicted that the golden
age in the industry was over. That was not
how things panned out. Growth took off and
an increasing number of new participants
entered the arena.
High frequency equity trading dominates
The new participants were possibly more
aggressive and more short sighted than their
predecessors. Quantitative hedge funds,
which are characterised by extremely high
frequency trading using computer-based
models, sprang up as a new power in global
finance.
The hedge fund industry currently has
around USD 2000 billion under management.
In addition there is a not insignificant level
of loan financing. High frequency stock tra-
ding, which is on the whole driven by hedge
funds, constitutes around 50 percent of the
volumes in the US stock market. It is thought
that the larger hedge funds, such as Citadel,
D.E. Shaw and SAC Capital Advisors, each
represent as much as a couple of percent of
the daily global stock trading.
The vast trading volumes of hedge funds
have made them one of the most important
contributors to equity analysts and brokers
pay checks. Consequently the products offe-
red by brokers are increasingly short term in
nature. Analysts focus on quarterly earnings
now overshadows a comprehensive valua-
tion of the long term value creation that takes
place in companies. This can be substantia-
ted by hard facts.
A recent analysis by Goldman Sachs
demonstrates that while analysts ability to
predict a companys earnings development
over the next 12 months improved conside-
rably in the period between 2006 and 2010,
their ability to predict changes in earnings
three years hence has taken a turn for the
worse. In other words Pavlovs broker dog
increasingly wags its short-term tail, thanks
to commissions from hedge funds.
More joy than fear
From our office in Stavanger we observe the
increased short-termism in the stock markets
with cautious delight.
The caution is due to the fact that the inex-
plicable volatility at times causes significant
short-term fluctuations in the pricing of indi-
vidual stocks that can cause feelings of dis-
comfort. The delight is down to the fact that
the increased short termism is most likely one
of the main drivers behind investors having
become increasingly irrational, and stock
markets increasingly less efficient, over the
past few years.
On the whole our delight far outweighs
our caution. In other words, the more robot
The value of short-termism
A survey by investment bank Goldman Sachs demonstrates that on average a US equity
fund holds a stock for a period of ten months only. That is a good starting point for long
term investors like SKAGEN to create good returns for unit holders.
Source: Bloomberg
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MSCI World
NO RETURNS SINCE THE START OF THE MILLENIUM
Blown up by IT: The 1990s were good for investors in the global stock market (index). Share prices were blown up to
historic proportions, aided by the IT sector. The necessary price corrections subsequently resulted in a historically weak
decade for stocks. Many lost the belief that the long-term view pays off and the stock market has become increasingly
short-sighted since.
7
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
THEME
traders and quantitative based funds there
are, the greater the opportunities for active
value based investors such as ourselves to
find cheap, wrongly priced companies.

The stock market uctuates more than the
values
Why is it that we still have such an unshakea-
ble faith in our own long-term perspective in
a world which increasingly gravitates towards
the short term?
First and foremost because we focus
on a companys ability to earn money over
time. When we buy stocks we do not become
owners of paper, but own a stake in a com-
pany. Most people follow this logic when
they own 50 or 100 percent of a privately
owned company, such as a local restaurant
or brewery. For some reason, one loses this
perspective when it is a question of owning
just a small part of McDonalds or Heineken,
through listed stocks.
The underlying values can be found in and
are managed in the companies, not on the
stock markets. The values crystallize and are
created over years, not in the course of a few
minutes or quarters. A brewery owner would
hardly say that his brewery had lost ten per-
cent in value even though a cold spring meant
lower sales of beer for a couple of months.
The stock market on the other hand is more
than willing to draw such a conclusion.
Not done overnight
When, as part of our analysis, we go down
to a companys engine room to see how the
values are created, we see assets, strate-
gies, processes and products that it has taken
decades to create. We also see that compa-
nies are continuously sowing new seeds of
value creation, and it will take years before
they will (eventually) bloom.
The Swiss company Roche will not earn
money on the drugs it is researching today
for several years (and hopefully then). It will
take three years for the full effects of the new
products that the US company Tyco Interna-
tional is rolling out within home alarms today
to be felt. That is because it takes years, not
days, to crystallize values in a company and
our conclusion is that an investor also ought
to have a corresponding time horizon for his
holdings.
The empirical data and our own experience
support our long-term perspective on equities
and value creation. Estimates from Goldman
Sachs show that if one owns shares for 12
months, around 45 percent of the value deve-
lopment can be explained by changes in the
expected value creation. The rest is owing
to changes in the multiples the company is
priced at. The fact that these are coloured by
investors mood swings means that they are
extremely difficult to predict.
If on the other hand one owns stocks with
a four-year perspective, around 70 percent of
the price development is calculated to be based
on change in the expected value creation.
Chimes with our experience
Our own experience fully supports the empi-
rical data. A good example is our largest and
most long-term investment, Samsung Elec-
tronics. Our hypothesis when we bought our
first large bulk of shares in the autumn of 1998
was twofold. First, we considered the price we
paid relative to earnings to be unreasonably
low compared with similar companies in the
US and Europe. Second, we believed Samsung
Electronics capacity for future growth and
value creation to be undervalued.
Twelve years later it turns out we were only
half right. The stock market has not been wil-
ling to increase the price on earnings (EV/
EBITDA), which is about as low today as it was
in 1998. On the other hand, we did better than
we had reason to hope or believe when it came
to the companys capacity to grow and create
value. The strong earnings growth alone has
given us an annual return on shares of over 20
percent since that time.

Opportunities from short-termism
A long-term focus on values and value creation
in notoriously short-term focused markets gives
us the opportunity to invest in regions, sectors
and companies others wish to sell out of. We see
the same disappointments and challenges that
companies are exposed to in the short term,
but we process the information through our
long-term lenses.
Our first question is always whether we are
dealing with short-term disruption or whether
the fundamental value creation in the company
over a five-year perspective has changed. When
the UK supermarket chain Tesco states that they
have structural problems in their core market,
the announcement may also have a negative
impact on the long-term value creation. That is
when we choose to sell down in the company
along with many others.
When the Goldman Sachs share price drops
several percent in one day as a result of a dis-
gruntled employee handing in his notice in the
form of a letter to the editor in the New York
Times, we shake our heads. Derivatives trader
and ping pong player Greg Smith will be forgot-
ten in five years time.
When the Akzo Nobel share price is pushed
down ten percent as a result of short term fluc-
tuations in commodity prices, we buy.
In an ever more short-term market, at times
characterised by irrational, fearful and short-
term participants, it has become increasingly
important for us to use more common sense, be
a little bit braver and take the longer term view.
Thanks to the support from an investor base in
our funds who understand the importance of
this, we should have a good basis for creating
good long-term returns in future also.
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Patience is a virtue: Drugs that Swiss Roche is researching today may not yield results for several years.
Torkell Eide
PORTFOLIO MANAGER
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
8
THEME
The HP board just made the worst personnel
decision since the idiots on the Apple board
fired Steve Jobs many years ago, said Oracle
chief executive Larry Ellison shortly after the
sacking of Hewlett-Packards chairman Mark
Hurd in August 2010.
Those who have followed Ellison over the
past two decades were not surprised by the
Americans tough talk. Ellison, who founded
software company Oracle in 1977, is not
exactly known for his diplomacy.
Ellison brought IT veteran Hurd to the Ora-
cle board in September 2010 after the latter
was axed by HP in a sexual harassment and
expenses scandal. Since then Ellison, Hurd
and Chief Financial Officer Safra Catz have
been the driving force behind Oracle, the mar-
ket leader in database management systems.
Almost every organisation of any size has
an Oracle database. Companies place high
demands on this sort of software, which often
lies at the heart of key corporate processes.
Banks and insurance companies, large online
retailers and industrial companies all use
databases for processes such as customer
control and delivery. It is a little known fact
that Google, for example, uses Oracle data-
base software.
The fact that this type of software is essen-
tial gives companies like Oracle attractive ear-
nings potential. In addition to annual licence
fees, programmes need maintenance requi-
ring maintenance contracts all of which is
a source of steady repeat income with high
margins. Customer loyalty is high. Whoever
chooses Oracle as database supplier is not
going to risk changing to another company.
Once a customer has been hooked, they are
in for good. Oracle, which listed on the stock
exchange in 1986, has always had a strong
cash flow and obvious earnings potential.
Ellison may not be much of a diplomat,
but he is a good strategist. Now 67, he thinks
like a chess player, whose pawns are com-
petitors and takeover targets. He has a nose
for future software developments. Over the
past seven years, Oracle has made 79 acqui-
sitions, transforming the company, which
has a workforce of 108,000, from a pure
database system supplier to an all-round IT
company. And with that, Oracle the name
stems from the database Ellison developed
for the CIA when he worked for a software
company many years ago has manoeuvred
Oracle all set
to release its triggers
Software company Oracle has been a top 10 holding in SKAGEN Global since September
last year. The company has been followed by the portfolio managers for some time and
after initially buying a relatively small number of shares it is now one of the funds most
important holdings. Why did SKAGEN Global choose Oracle?
Source: Bloomberg
0
5
10
15
20
25
30
35
Oracle reached its highest
stock price at the height of
the internet boom.
On 1 September 2000
it topped at USD 46.3.
In September 2010 SKAGEN Global
bought its initial stake in Oracle.
In 2005 Oracle buys two big software companies:
Peoplesoft and Siebel. This signals its transformation
from pure database supplier to all-round software company.
40
45
50
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ORACLE, ON ITS WAY BACK UP TO PEAK LEVELS?
9
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
THEME
itself into the same sphere as the global IT
players; IBM, SAP and Microsofts database
SQL are its main rivals.
Yet despite its profitability, strong balance
sheet, good market position and string of
acquisitions, Oracles fundamental value has
remained below that of the IT sector aver-
age for years. The sectors historical price
earnings ratio is around 24 while Oracles is
around 12 the relatively high sector valua-
tion is due to the internet boom around the
turn of the century.
This low valuation had placed Oracle firmly
on the radar of the portfolio team at SKAGEN
Global for some time. Close monitoring and
analysis later determined that the company
was indeed undervalued. Oracle has clear
growth perspectives, in particular due to the
position it has built up in emerging markets. It
does not have any serious rivals in the region
there are no Chinese or Japanese players
of any significance. Oracles profitability is
largely anchored in the high margin on its
maintenance contracts and new licences. The
company has built up a strong track record in
terms of acquisitions to keep its innovative
processes on the up thereby acknowledging
its weaknesses in time to make changes.
As undervalued is a part of SKAGENs
three Us philosophy undervalued, unpo-
pular and under-researched it is interesting
to see how Oracle measures up against the
other two Us.
Oracle is not very popular among investors
just like the whole IT sector. Investors are
worried about the outlook of these types of
companies because the economic slowdown
is hurting software spending. Also, there is
uncertainty about how cloud computing
the new big thing in computer land - will
develop and influence the sector. However,
Oracle has proven over the last decade to
be in tune with when innovations will take
off by acquisitions or by its own research
& development.
At first sight it does not look as though
Oracle is under- researched, the final U. The
company claims it is currently followed by
some 46 analysts in line with the average
for a large cap company. But the vast majo-
rity of those analysts are short sighted in
the eyes of Torkell Eide, portfolio manager of
SKAGEN Global: Those analysts are focused
on the coming quarters. Oracle is a story for
the coming years, when the triggers will be
released.
Eide believes there are sufficient trig-
gers to realise Oracles fundamental value
through an increase in the share price. There
is enough financial scope to increase the divi-
dend - the yield is currently around 1 percent.
The company can also buy back shares to
increase earnings per share. In addition, the
development pipeline is well-filled with soft-
ware innovations to ensure substantial impro-
vements over the next two years. Further-
more, the digital revolution called Big Data
is not yet over and companies will continue
to gather an enormous amount of information
for database analysis, allowing them to follow
and predict customer movements.
In short, there are enough arguments to
make Oracle an attractive investment. In Sep-
tember 2010, SKAGEN Global first bought a
small number of shares some 0.3% of the
total portfolio. At that time, the share price
was around $25. It was very clear to us that
the share price was not one which would
double in price within a short space of time,
said portfolio manager Eide, large caps dont
have such triggers. But we were convinced
there was enough value in the shares for an
attractive return.
Over the six months that followed, the
share price rose to just over $30, without
really drawing on the potential triggers to
release hidden value. In July 2011, SKAGEN
Global decided to buy a bigger stake. This was
based mainly on Oracles attractive enterprise
value to EBITDA multiple of 6.9. You are not
paying for growth but you are getting it for
free, says Eide. The purchase was financed
by stepping out of IT service provider Accen-
ture, which in the eyes of the portfolio team
had reached its share price target. Oracle
then became one of SKAGEN Globals 10 big-
gest investments, accounting for just over 3
percent of the fund total. A share price target
of $45 was set.
At first it appeared to be an unhappy move.
Oracle came out with disappointing second
quarter figures in December of that year. Reve-
nue growth in particular was below expec-
tations. That month, the share price fell by
18 percent. There is no reason for panic,
said SKAGEN Globals Eide at the time. The
management team is strong and disciplined.
We are convinced this was a one-off incident
but if that turns out not to be the case, then it
will be time to discuss our position. The third
quarter figures, awaited with some trepida-
tion, surpassed all expectations. Neverthe-
less, the $45 target is still a way off.
SKAGEN Global has the time to wait.
Oracle has been part of the portfolio for 18
months and the investment horizon is at least
three years. Chief executive Larry Ellison is
still bursting with ambition for Oracle. The
billionaire told the Financial Times recently:
I love my job. I dont need the money.
Mark Houben
mho skagenf unds.com
Larry Ellison, founder of software company Oracle, thinks
like a chess player whose pawns are competitors and
takeover targets.
ORACLE AT A GLANCE
Uracle ls actlve ln buslness scftware
Feadquarters ln kedwccd Clty,
California
Fcunded ln 1977, llsted cn
NASDAQ in 1986
kevenue (2011) uSu 35.6 bllllcn,
workforce of 108,000
Fcunder and CFU ls Larry Flllscn,
67 years old
Maln ccmpetltcrs: l8M, SAP,
partly Microsoft
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SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
Together with other institutional investors and
selected media, in March this year we recei-
ved our copy of the Goldman Sachs report
The Long Good Buy; the Case for Equities,
written by strategists Peter Oppenheimer and
Matthieu Walterspiler with assistance from
an army of analysts.
Thankfully our own investment director
Harald Espedal had managed to accurately
communicate our strong faith in equities for
the coming decade in this feature beforehand,
otherwise people might have thought that we
had plagiarised the Goldman analysts.
The Long Good Buy; the Case for Equi-
ties is a dry, 40-page theoretical and empi-
rical review of the historically low pricing of
equities. The title is a twist on a Raymond
Chandler novel. Its relevance is not comple-
tely clear, but that is often the way with finan-
cial headlines: You try to inject a bit of life
into something which is matter-of-fact and
technical to interest your readers.
The message is that equities are histori-
cally cheap, especially for patient investors.
In relation to earnings in the companies and
in relation to the interest on bonds, buying
equities has hardly ever been more attractive.
At least thats how it looks from a historical
perspective if you analyse the figures for the
past few decades.
However, since 1999 equities have been
in decline. They were priced too highly, and
since then reality checks have knocked the
stock markets again and again, culminating
in the financial crisis in 2008. But at some
point the situation has to change.
If you are a long-term investor in SKAGEN,
you may not have discovered this trend, but,
put simply, the growth in the value of your
assets is due to greater returns from the funds
rather than general increases in the stock
markets.
Frightened of losses
The investment guru Warren E. Buffet takes
the same positive attitude to equities com-
pared with bonds and gold. In this years
newsletter to the Berkshire Hathaway sha-
reholders, Buffett and his team explain that
equities are, basically, the most productive
The Long Good Buy
Even though we make a virtue of going against the flow and taking an independent
approach at SKAGEN Funds, far removed from the worlds financial centres in Stavanger in
Norway, every so often it is nice to feel that some people agree with us on a qualified basis.
On a P/E basis, stock prices are close to their lowest in modern times
Source: MSCI, Morgan Stanley Research. Data as of 30 December 2011
10x
5x
15x
20x
25x
30x
35x
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
MSCI World MSCI EM
HISTORY HAS SHOWN THAT STOCK MARKETS FLUCTUATE
11
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
asset you can invest in. Gold on the other
hand has limited uses, while government
bonds depend on other peoples determina-
tion to keep inflation down.
Buffetts newsletter has led to interesting
debates in the media and on the Internet.
However, while Buffett is treated respect-
fully by the media, the same is not true for
the investment bank Goldman Sachs. Google
the title The Long Good Buy; the Case for
Equities, and you will discover that the
net is awash with analyses and comments,
many of them rather critical. If you search
long enough, you will undoubtedly also find
a copy of the report which we do not have the
rights to distribute.
Warren E. Buffett emphasises a fact
which cannot be repeated often enough: In
the short-term, risk can be measured by the
expected price fluctuations which are bigger
for equities than for bonds. In the long-term
however which is what is relevant for most
of us the risk is the fear of losing purcha-
sing power, if your investment doesnt create
value. And in the long-term it is especially
important that you carry out your stock invest-
ments when the markets are priced low and
fear is prevalent in the markets.
However, equities have been cheap for
some time, and if it is so obviously wrong,
why dont the financial markets correct it?
Irrelevant in the short-term
One of the main explanations is, quite simply,
that it is easy to find many arguments that the
developed countries will limp along for many
years to come, burdened by debt and unem-
ployment, especially southern Europe. This
will continue to drag down the stock markets,
while the process of paying off the debt will
take decades. We do not necessarily agree,
but it influences the markets.
Another explanation is that so many pri-
vate investors and institutions have had
their fingers burned by the stock markets
since 2000/2001. Each time they have risked
their necks and increased their equity invest-
ments, they have lost money. Now, they can-
not take any more, and dare not believe that
the biggest potential is actually in the stock
market rather than in gold, bonds, commo-
dities, property and all the other investment
vehicles.
A third explanation is that pricing equities
is meaningless in the short, six-month term,
as shown by calculations from the Goldman
analysts. Over the short-term, there is no clear
correlation between pricing and returns. High
multiple equities continue to be high multi-
ple, while cheap stocks remain cheap. For
the short-term speculative investors who
dominate the market and who strongly influ-
ence the financial analysts it is the marginal
changes that create value. Better than expec-
ted financial statements, a movement in the
relative prices between companies etc. or a
negative management change.
For SKAGEN it means, among other things,
that even in an era of abundant information,
we can find incorrectly priced businesses
because so many other investors think and
act short-term. We continue to believe that
real values will win in the long-term, and that
the next ten years will be better for the stock
markets than the past decade.
Christian Jessen
cje skagenf unds.com
A Long Good Buy: are we about to see a sustained period of positive equity returns?
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SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
THEME
The emerging markets equity fund SKAGEN
Kon-Tiki celebrated its ten year anniversary on
5 April 2012. Exactly ten years later, the fund
has returned 18.2 percent annually, while
the benchmark index has increased by 9.4
percent in the same period, measured in euro.
The objective focuses on future performance,
however, rather than historical returns.
When SKAGEN Kon-Tiki was launched,
global emerging markets were a neglected
investment area. The crisis in the 1990s and
the subsequent IT bubble had curbed interest
in emerging markets and generated risk aver-
sion. Our investment experience in these
areas, through SKAGEN Vekst and SKAGEN
Global, was nonetheless positive. We the-
refore believed the time was right to launch
SKAGEN Kon-Tiki as a fund focused on, but
not limited to, global emerging markets, says
portfolio manager Kristoffer Stensrud.
The scant interest in emerging markets
had led to generally underpriced emer-
ging market shares. Good crisis awareness
had also increased the robustness of the
countries economies after the crisis hand-
ling measures in the 1990s. SKAGEN Kon-Tiki
was thus launched with what was considered
to be excellent timing.
Tough maiden voyage
Unfortunately, the funds first voyage was
anything but successful. After 13 trading days
the fund units began to fall below the initial
price of NOK 100. SKAGEN Kon-Tiki bottomed
out at NOK 62 on 30 September 2002 a drop
of 38 percent. Patient investors then had to
wait until 14 August 2003 before the price
regained its starting price of NOK 100. During
this stressful period Kristoffer Stensrud made
a bet that gave him a ponytail. Im not going
to cut my hair until SKAGEN Kon-Tiki is back
at NOK 100, I said, and when we flew past
100 I thought how the ponytail was a source
of strength. Since then, things have progres-
sed so well that I couldnt risk cutting it off,
says Stensrud.
Named after a balsa raft
The SKAGEN Kon-Tiki fund is named after the
raft made of balsa logs that the Norwegian
explorer Thor Heyerdahl sailed on from Peru
to the Raroia atoll in Polynesia in April 1947.
When asked why he named the fund after
the famous raft Kristoffer Stensrud explains
that he saw the SKAGEN Kon-Tiki voyage as
a journey into the unknown. Initially, it felt as
though the fund was also at the mercy of the
elements. Sailing a balsa raft in a headwind
was almost as difficult as managing SKAGEN
Kon-Tiki in the autumn of 2008. Yet it is also
possible to influence the journey by plan-
ning, staying alert and going about things
the right way.
Despite the storms it has encountered,
over time SKAGEN Kon-Tikis voyage has been
a unique success. The fund has been awarded
a number of prizes in the Nordic region and in
Europe, and has achieved the highest rating
from fund analysts such as Morningstar and
Standard & Poors.
Recipe for success
Chinas joining the WTO in 2001 was in many
ways a catalyst for the subsequent develop-
ments. Emerging markets now account for
around 80 percent of global economic growth
and have become the clear leaders in the
accelerating globalisation race.
SKAGENs market report from March 2002,
before SKAGEN Kon-Tiki was launched, refer-
red to the democratisation processes and
improved economic conditions among other
things via clear inflation targets and counter-
inflationary measures as factors that were
considered to be positive for investments in
emerging markets. These processes have not
lost their momentum during the past decade.
Above all, SKAGENs portfolio managers
focus on the key elements of SKAGENs
investment philosophy undervalued, unpo-
pular, and under-researched companies. The
unique aspect that sets us apart from our
competitors is that we focus on companies,
and not, like others, on macroeconomic con-
ditions. This is probably the main reason for
the very sound risk-adjusted results we have
achieved, says Stensrud.
Few limitations
When SKAGEN Kon-Tiki was launched there
was a well-developed understanding of
both the risks and return potential in these
markets, thanks to experience gained mana-
ging the SKAGEN Vekst and SKAGEN Global
funds. Emerging markets did not hit the
radar screens of many investors until long
after us, and we therefore had a first mover
advantage, says Stensrud.
The number of emerging markets funds
has increased and the so-called BRIC funds
(Brazil, Russia, India and China funds) have
become more and more common. But as
these markets have become more popular it
is also harder to find obviously undervalued
companies in these countries.
SKAGEN Kon-Tiki, on the other hand, is a
global emerging markets fund with a broad
mandate. When the Russian share market
increased tenfold in the 2000s, for example, it
became more and more difficult to find under-
valued Russian shares. Instead, it became
easier to find investments in countries such
as Korea, Turkey and Hungary. After the stock
exchange plummeted between June 2008 and
January 2009, when approximately 80 percent
of the value of the Russian RTX index was
Ten years on the raft
It began as a journey into the unknown, says portfolio manager
Kristoffer Stensrud. Ten years later, there is plenty to celebrate.
13
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
13 13
THEME
wiped out, it was once again possible to find
inexpensive Russian shares. The Russian tele-
com-oriented conglomerate, Sistema, and the
energy company, Gazprom, are now among
the ten largest Kon-Tiki holdings.
SKAGEN Kon-Tikis broader mandate has
overall provided opportunities that would not
exist if the fund was limited to investing in a
more geographically contained area, or in a
particular industry. In a world that is sub-
ject to the need to categorise investments by
industry and geography we generalists have
few limitations, says Stensrud.
A broad mandate means that SKAGEN Kon-
Tiki does not have to make all of its invest-
ments directly in emerging markets. The fund
may also invest in companies in more mature
markets that profit indirectly from develop-
ments in emerging markets. If SKAGEN finds
companies in Norway, Sweden, or the US,
for example, that benefit from trading with
countries like China, the fund may invest in
them.
Solid team
Besides the funds mandate and investment
philosophy coupled with the political chan-
ges in several emerging markets, contribu-
ting to globalisation and global growth a
skilled crew is also needed to navigate the
right course. Today the fund has four portfolio
managers.
Kristoffer Stensrud steered the vessel as
lone captain until Knut Harald Nilsson came
onboard in November 2006. Cathrine Gether
joined as portfolio manager of the fund in
October 2009. Ross Porter had been part of
SKAGENs portfolio team since 2000 and joi-
ned the SKAGEN Kon-Tiki team in 2011. Ross
has actually been part of the team from the
start. He took care of the fund when I was
on the road, so SKAGEN Kon-Tiki is close to
Rosss heart. Overall, we have a sound team
with a good mix of skilled analysts and deci-
sion-makers, as someone has to do the deci-
ding sometimes, Kristoffer Stensrud laughs.
What is the latest investment decision you
have taken?
In a Chinese company that manufactures
solar energy products.
Five years ago, when SKAGEN Kon-Tiki
celebrated its fifth anniversary, you stated
that the focus was on the next five-year
period, rather than the historical results. Now
five years have passed and the funds mana-
ged capital has more than doubled. Does the
funds size make it harder to steer?
The fund has grown to a substantial size.
But considering how the stock market value of
emerging markets overall has increased expo-
nentially, the fund is quite small by compari-
son. When SKAGEN Kon-Tiki was launched,
the emerging markets ratio of the worlds
total stock market value was approximately
five percent. Today, this is closer to 25 per-
cent, a figure that is likely to increase far into
the future, as SKAGEN Kon-Tiki continues its
voyage, says Kristoffer Stensrud.
Michael Met zler
mm skagenfonder.se
SKAGEN Kon-Tiki
Emerging markets Index
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SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
The commodity sector is a good place to
look for undervalued companies these days;
valuations are low and the market does not
distinguish sufficiently between high-risk
and sound players.
This is the opinion of the portfolio mana-
gers of SKAGENs equity funds, who have
made several new investments in recent
months.
We give prominence to companies with
low debt and high equity, which means that
they can weather major shifts in commodity
prices without struggling for survival. These
commodity companies will normally be priced
higher than the more risk-prone players in
the sector, but currently many companies are
cheap, says Ross Porter, portfolio manager
of SKAGEN Kon-Tiki.
This gives growth-oriented investors like
us the opportunity to invest in assets of high
quality at a good price, he adds.
Equity investments in the commodity sec-
tor notoriously entail a higher risk. Commo-
dity prices fluctuate from year to year, and the
bottom line of any heavily indebted company
is more susceptible to price changes.
Earnings are extremely sensitive to fluc-
tuating commodity prices, and there is also
a tendency for the companies valuations to
fluctuate even more. In good times, the com-
panies are often priced too highly, and when
the outlook is bleaker they are under-priced.
This gives opportunities for investors like us,
but we need to take a prudent approach and
do our homework before we invest, says
Chris-Tommy Simonsen, portfolio manager
and trader for SKAGEN Global.
Often companies in the commodities sec-
tor have to invest in new exploration over
many years before funds start flowing back
to shareholders, so both lenders and share-
holders need to take a long-term approach.
Once exploration and extraction are success-
ful, however, this can be highly lucrative for
shareholders.
Emerging markets dominated by commodities
Traditionally, emerging markets have been
dominated by many commodity companies
that have been part of the traditional econo-
mic world order. The less developed countries
extracted and exported commodities for pro-
duction companies in the developed econo-
mies in the US, Europe and Japan.
This world order has changed completely
over the past ten years. China is now the lar-
gest global purchaser of commodities such as
steel, aluminium and copper. The Chinese use
these metals in their manufacturing industry
and in their own fast-paced infrastructure
investments.
No less than 15 percent of the emerging
market index comprises commodity compa-
nies. This is more than twice the ratio for the
ordinary global index.
For many years, the SKAGEN Kon-Tiki
equity fund has included a portfolio of com-
modity companies that are priced far below
the index. Portfolio managers have selected
companies in less cyclically sensitive sectors
and to a greater extent invested in emerging
markets that would develop in the future;
economies with expanding private consump-
tion and extensive trade links.
Despite the relatively low ratio of commo-
dity companies, the portfolio managers are
currently finding new, under-valued compa-
nies, just as the existing companies in the
equity funds have performed well this year.
Good quality iron ore
Cliffs Natural Resources, previously Cleve-
land Cliffs, has been part of SKAGEN Global
since the summer of 2006 and has trebled in
value during that time. There have been price
fluctuations along the way, and the portfolio
managers have adjusted the position with
some success.
The company is often compared with
state-controlled Vale in Brazil, which is the
largest position in the commodity sector in
SKAGEN Kon-Tiki. Both companies produce
iron ore and are priced at five to six times their
Commodity companies
Quality at a discount
Eurasian Natural Resources is a newcomer in the SKAGEN Kon-Tiki portfolio. Open mining is well suited to the landscape in Kazakhstan.
NEWS
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SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
NEWS
current earnings. Vales shares are cheaper
and it has lower production costs than Cliffs
but it also has more debt, which increases
the fluctuations to which equity investors
are exposed.
Cliffs has extremely sound core resour-
ces. Mining companies are currently cheap
but there are concerns regarding activities
in China and the price of iron ore. We do not
think these concerns are justified. There has
not been much investment in the sector since
2008 and there will be a capacity shortfall,
which will support prices, says Chris Tommy
Simonsen.
The market feared that Cliffs would make
acquisitions that would erode its value. It has
financial clout and has grown over the last ten
years, including through acquisitions most
recently in 2011 when it bought Thompson
Consolidated in Canada for USD 5 billion.
Cliffs presentation of its accounts in mid-
March put paid to these fears, however, as it
announced a solid dividend, which the market
rewarded with a higher share price.
Besides its other merits, the company is
a candidate for acquisition at a premium by a
major player in the industry. All of its assets
are also held in developed, politically stable
countries, which clearly reduces the risk of
assets being confiscated in an unclear poli-
tical process, says Chris-Tommy Simonsen.
Some investments have been less suc-
cessful. One example is Apex Silver Mines,
in which we invested substantial amounts
in 2006. The company was searching for sil-
ver and zinc and suspended its payments in
2009. The court in Delaware was persuaded
to approve a dubious manoeuvre whereby the
company reappeared in a new incarnation ins-
tead of filing for bankruptcy and the original
shareholders were left with empty pockets.
South African coal
In 2011 a number of changes were made to
the SKAGEN Kon-Tiki equity funds commodity
sector investments, as described in the 2011
Annual Report. Vale of Brazil remains by far
the largest investment in this sector with the
South African coal producer Exxaro Resources
now an undisputed second. Several other
companies are on their way into the portfo-
lio, including Eurasian Natural Resources of
Kazakhstan.
There is a shortage of power in South
Africa and the country wants to build coal-
fired power stations. Exxaro supplies this
coal. It is a low-priced, recession-resilient
company. Its production also shows good
potential, says Ross Porter.
Exxaros second major business area is
the extraction of mineral sands. This activity
currently only makes a minor contribution
to earnings but within a few years this will
be a major revenue source for the company.
Titanium dioxide, used as a pigment in paint,
is produced from mineral sands. This com-
modity is in short supply all over the world,
even though the Chinese may have a need to
paint a lot more new buildings.
We expect adjustments to the corporate
structure which will generate value and incre-
asing dividends when the company has paid
off its debt in the short-term. The company
includes a lot of the elements we typically
want to see in an undervalued, under-resear-
ched SKAGEN company in an unpopular indu-
stry, says Ross Porter.
Christian Jessen
cje skagenf unds.com
VALUATION OF MINING COMPANIES
Some experienced investors dub mining
companies a big black hole with a liar on
the top. There is a certain element of truth
in this as it is obvious that the companys
resources should represent signicant value
but it is hard to pinpoint the potential. The
answer is not known until the holes have
been quarried and the ore extracted.
Investors may deem the companies liars
because at different stages management
teams tend to both exaggerate and play
down a mines potential.
First, the land has to be acquired and
permits gained from the authorities. If
the potential is exaggerated, the start-up
costs will be excessive. Then the initial
investors must be brought on board, which
is when the potential has to be promoted.
Yet the returns from a mine should not
be too lavish, since there is then a risk of
taxation. The simplest policy is to adhere
strictly to the truth from start to nish, but
this is not always the course taken. Finally,
there is naturally the risk of being wiped out
completely by investing in worthless shares.
Mining companies are also difcult to
price because investors are forced to form
an opinion on the expected value of the
commodities 10, 20 and 30 years into
the future, and this is obviously a tough
proposition.
SKAGENs portfolio managers nonetheless
believe they have found a few areas
where the markets pricing of commodity
companies may be inaccurate.
Projects are often under-priced. For the
reasons stated above, investors often
want to see tangible results before pricing
accelerates.
Last year, SKAGEN Kon-Tiki sold its shares
in Equinox of Canada because the company
was acquired at a substantial premium even
after its share price rose signicantly. Equinox
developed and operated the Lumwana mine
in Zambia, a world-class copper mine that the
giant Barrick Gold paid a high price to acquire.
It took ten years to develop the mine, to the
tune of USD 1 billion, and mostly according to
plan, yet the share price stagnated for many
years. Prices do not start to rise until the late
stages of a project.
The costs of developing new mining facilities
are also higher than 10-20 years ago,
because society makes higher demands,
even in less developed countries. This
increases the relative value of existing
mines, but is not always reected in the
valuation of mining companies.
16
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
If you think that there is something fami-
liar about Geir Tjetland (47) you have pro-
bably been following SKAGEN for several
years. His interest in stocks can be traced
right back to the mid-1980s, and in 1986
he joined the brokerage house, Stavanger
Fondsmeglerforretning. After a few years of
studying and working in Oslo, he returned
to Stavanger and helped found SKAGEN in
1993. Most people who are familiar with the
SKAGEN story will remember Geir Tjetland.
Three years after SKAGEN was founded,
Geir moved back to Oslo with his partner.
There he embarked on a long career as a
stockbroker in Handelsbanken and ABG
Sundal Collier. Now he is back in Stavanger
and back with SKAGEN, with all the expe-
rience the past 19 years have afforded.
What is the most important lesson so many
years in the stock market has taught you?
I think that the main thing I have learnt is
that as an investor, one should be extremely
careful with financial leverage, or gearing.
Over the years I have also learnt to focus on
balance sheets, cash flow, business models
and levels of ambition. My understanding
and assessment of these will contribute to
all aspects of SKAGEN Vekst.
What do you bring with you from your pre-
vious position as stockbroker?
I have acquired pretty broad experience
from the Nor wegian and Scandinavian
stock markets over the past 19 years, which
means Ive gained a good insight into a
broad group of companies in the region.
This will hopefully contribute positively to
the processes and investment choices in
SKAGEN Vekst.
Even though you have long experience
from the stock market, you are not an ex-
perienced portfolio manager?
That is correct. But Im lucky enough to be
surrounded by a number of people with long
experience managing portfolios which gives
me the opportunity to turn my stock market
experience into portfolio experience. They
are also good discussion partners, enabling
me to sound out some of my perceptions.
What drew you back to SKAGEN as portfo-
lio manager, so many years after you hel-
ped found the company? Was it deance?
Not at all. It was without a doubt the oppor-
tunity to work alongside Kristoffer Stensrud
and the other portfolio managers in SKAGEN.
Even though Ive been living in Oslo, I have
always stayed in touch with my old friends in
Stavanger. You could say Ive been attending
the school of Kristoffer all these years, even
though I wasnt working at SKAGEN. When the
opportunity arose, and the timing was right,
I wont hide the fact that I was very pleased
to have the chance to work in SKAGEN again.
Having worked here a few months, what
are your rst impressions?
I was familiar with the system and knew a
number of the people working here from
before. What has impressed me are the pro-
cesses and information flow/sharing in the
portfolio department. The team is also very
good at maintaining its focus.
Coming home to roost
Geir Tjetland is the newest member of the portfolio team that manages the equity fund SKAGEN
Vekst. But he is by no means a newcomer either to the world of stocks, or to SKAGEN.
Geir Tjetland is the newest member of the team managing SKAGEN Vekst.
Trygve Meyer
tm skagenfondene.no
17
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
SKAGEN TV: ASK THE PORTFOLIO MANAGERS
W
hat were the highlights and lowlights of
the previous quarter? Which companies
contributed the most and which detracted from
the funds? How is the mood in the economy
affecting the performance of the funds?
The portfolio managers of SKAGEN Global and
SKAGEN Kon-Tiki are available to answer these
questions and any others you may have
in live broadcasts at the end of each quarter.
The next quarterly update with the portfolio
managers will take place on Friday 4 May. You
may send in questions to the portfolio either
before or during the broadcast.
Date: Friday 4 May
Time: 10:30 for SKAGEN Global
13:00 for SKAGEN Kon-Tiki
Place: www.skagenfunds.com
Our objective is to provide our unit holders
with world class communication. But in a
world where information flows increasingly
quickly and the endless stream of more or
less qualified commentary can seem over-
whelming, it is even more important to set
out information in an accessible and easily
understandable way.
In the new News & Analysis section you can
find an overview of all the news articles,
opinion pieces and publications we create.
The aim is to allow unit holders and others
to quickly find the information of interest to
them.
Keep up to date
We have recently created a new area on our web pages to provide a better overview of the
array of news, reports, video clips and publications produced by SKAGEN.
Perspectives
Portfolio managers and others in SKAGEN
write blog-type entries about the topics that
they are passionate about everything from
companies in the portfolios to the state of the
world economy. Readers may comment on the
entries.
SKAGEN TV
This is where you can find all the video
interviews made with portfolio managers,
including quarterly updates on the funds given
by various members of the equity team (see
below).
News
This section provides you with news about
SKAGEN. Common topics include new
additions to the portfolio management team,
instances where SKAGEN has been involved in
corporate governance and awards won by the
company or the funds.
Reports
This is where you can find all the market and
annual reports ever published by SKAGEN. You
can also download monthly status reports on
our funds here.
SKAGEN in the media
This section includes links to external media
where SKAGEN, our funds or portfolio
managers are referred to.
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
18
NEWS
The objective of the new information docu-
ments is to provide standardised information
about all funds and fund types, irrespective of
management company. This makes it easier
for investors to make direct comparisons
between funds from different management
companies.
The KIID is a two-page document which
replaces the simplified prospectus and sets
out the essential characteristics of a fund
including objectives and investment philo-
sophy, synthetic risk and reward profile, past
performance, fees, etc.
The KIID is a UCITS standardised docu-
ment. For the EEA and EU countries which do
not make the deadline there is a transition
period until 30 June 2012 during which time
these countries will be able to make use of
the existing Simplified Prospectus. Since the
KIID is a standardised document in all Euro-
pean countries, it provides investors with the
opportunity to compare key information for
one fund with that of a competing fund across
country borders in Europe.
New risk scale for the funds
The KIID provides a different risk scale to one
that was used in the simplified prospectus.
SKAGEN rates risk in the KIID in accor-
dance with UCITS IV and the guidelines set
out by CESR (Committee of European Securi-
ties Regulators). The new KIID risk scale dif-
fers from the risk scale previously used on our
web pages and in the simplified prospectus.
The KIID risk scale gives clients a European
standardised snapshot of the risk level in a
fund based on historic volatility. This makes
it easier to compare funds across borders.
The risk scale ranges from 1 to 7 based on
rolling weekly data over the past five years,
or by linking the reference index or a model
portfolio to the funds history if this is shorter
than 5 years. Funds may therefore move up
or down the scale over time.
You can find the KIIDs for all our funds on
our website: www.skagenfunds.com/kiid
New information document for investors
As of 29 February SKAGEN phased out the Simplified Prospectus for all our funds.
This has been replaced by the Key Investor Information Document (KIID).
Since the Key Investor Information Docu-
ment (KIID) which replaced the Simplified
Prospectus in February is predominantly
a legal document, and does not contain
the same marketing content as could be
found in the Simplified Prospectus, we
saw a need to provide clients with additio-
nal information about our funds. The fact
sheets were developed with this in mind.
The fact sheets provide information on:
Fund cb|ectlve and strategy
The pcrtfcllc team
Fund facts
katlngs and awards
Perfcrmance
Annual return fcr the past ten years
and to date
Ccuntry and sectcr allccatlcn
Fcw tc buy
Pcrtfcllc statlstlcs
Tcp ten ccmpanles
The fact sheets may be found on each fund
page, in the Facts about the Fund box (see
illustration).
Fact sheets for SKAGENs equity funds
were published for the first time on 13
March. Fact sheets for the fixed income
funds are in the final production stages and
we hope to have them ready shortly.
New fact sheets for our funds
SKAGEN has developed a new two-page fund fact sheet to provide clients with
in-depth information about our funds.
The cb|ectlve cf the Kllu ls tc prcvlde clear, slmple lnvestment lnfcrmatlcn tc lnvestcrs.
The two-page document sets out the essential characteristics of a fund enabling
investors to understand the nature and risks of the fund and to make informed
investment decisions.
The Kllu wlll prcvlde the lnvestcr wlth preclse lnfcrmatlcn abcut the fund's cb|ectlves
and investment philosophy, synthetic risk and reward profile, past performance,
charges and practical information.
The Kllu wlll be updated cn a yearly basls, cr when there ls a materlal change ln
the fund.
KIID IN A NUTSHELL
FACTS ABOUT THE FUND
*Updated at the turn of the month.
Key Investor Document (pdf)
Fact Sheet (pdf)
Key Investor Document (UK) (pdf)
Prospectus (pdf)
General Commercial Terms (pdf)
Standard & Poors Rating (pdf)
Morningstar qualitative rating (pdf)
19
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
PORTFOLI O MANAGERS REPORT
` The global stock markets increased
more than ten percent in the first
quarter this year measured in USD.
This has occurred only six times
since 1970. In the past, the market
has generally continued to climb the
rest of the year, and the average
annual return has been 25 percent.
2012 may well be a good year for
stocks.
` In 2011, a bad year for equities,
companies managed to grow
revenue and operating earnings by
around 7 percent. They are expected
to continue to grow at the same rate
in 2012, and this provides solid
support for stock markets going
forward.
` Central banks in the US and Europe
understand that a continued supply
of liquidity is necessary to bolster
distressed public finances and
reduce debt without halting
economic growth.
` Bonds no longer offer risk-free yields
as an alternative to returns. The long
yields in leading companies are so
low that bonds now offer return-free
risk. Corrections are to be expected.
` The low yields in the bond and
money markets are forcing investors
to turn their attention to stock
markets.
` When things seem at their bleakest,
consumers and businesses often
find a way out of an economic crisis.
We have not given up on Southern
Europe.
Good rst quarter = Good 2012?
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Bull market in the rst quarter: The worlds stock markets increased by more than ten percent in the rst quarter. This has
only occurred six times since 1970. Winning stocks in SKAGEN equity portfolios include US banks Citigroup and Goldman
Sachs, both of which are headquartered on Wall Street in New York.
Continued central bank support: Like the other major central banks, the European Central Bank (ECB) in Frankfurt has con-
tinued to supply the banking system with liquidity. Corporate bond yields in many western countries are now so low that
you can talk about return-free risk instead of risk-free returns which could have capital returning to the stock markets.
Europe may recover: Many businesses are doing well. Norwegian airline company, Norwegian, which is a holding in two of
the equity funds is in good shape and was one of the share price winners in the rst quarter. We believe that Europe, even
distressed Southern Europe, could start growing again if structural reforms are implemented.
20
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
PORTFOLI O MANAGERS REPORT
The first quarter of this year was one of the
best first quarters for global equity markets
in the past forty years. What were the drivers
behind the 10.9% increase and what does it
tell us for the remainder of 2012?
A very strong first quarter with double digit
returns is a rare event in the equity markets.
Only six times since 1970 have the global
stock markets achieved double digit returns
in the first quarter measured in US dollars
the other years were 1975, 1986, 1987, 1988
and 1998. On all previous occasions, bar-
ring the dismal 1987, the market continued to
climb for the rest of the year and the average
annual return was 25%.
Although the year has started well, inves-
tors are still mindful of the 8% decline for the
MSCI All Country index in 2011, also mea-
sured in US dollars. The drop last year was
fuelled by worries about the European debt
crisis, fiscal troubles in the US and Japan,
inflation fears at the start of the year and slo-
wing growth in some of the worlds important
economies like China and Brazil.
In developed markets, we are now into
the sixth consecutive year with cautious con-
sumers and businesses holding back their
investments. Both economic growth and
general sentiment have been subdued.
Could 2012 be a great year for equities?
So will 2012 be a great year for stocks? To ana-
lyse this, one should look at the concept of
animal spirits, which is a term coined by the
economist and investor John Maynard Keynes
in his 1936 classic The General Theory of
Employment, Interest and Money, and later
revived by George Akerlof and Robert J. Shil-
ler in their book Animal Spirits from 2009.
Animal spirits describes the emotions that
influence all kinds of important human eco-
nomic behaviour. It has a very broad mea-
ning but can to some extent be measured in
terms of confidence. At present it is decidedly
difficult to judge if global animal spirits are
improving. Yet a regional breakdown provides
more information and clarifies the picture
somewhat.
The first quarter has shown improving
growth in the US, fuelled by the hard-pressed
US consumer. As the average employed Ame-
rican already spends all his earned income,
the big drivers behind improved consumer
spending are the 800,000 jobs created since
sentiment lows in September 2011 and impro-
ved sentiment among the top 20% of earners,
who account for half of all US consumption;
getting the rich to spend is the key to impro-
ving US economic growth.
The average consumer in Asia and Latin
America becomes more affluent by the day
and their global economic impact is simi-
larly improving. This also holds true for other
important regions such as Eastern Europe,
the Middle East and parts of Africa.
German statistics also show a similarly
positive pattern; consumers are getting more
confident and the ZEW Indicator of Econo-
mic Sentiment has increased at a rate pre-
viously only seen in 1993 and 2003 - both
were years when the stock market bottomed
out. Even the rest of Europe seemed to get its
act together in the first quarter.
Animal spirits and labour market reforms
Still, the consumer in Southern Europe
is very far from feeling confident about the
future. Unemployment is running high and
the risk of creating a generation of disillusio-
ned youths is very real and must be avoided.
Europe has seen similar situations before
such as in the late 1970s and early 1980s. The
despair was everywhere and though the lyrics
from the punk rock group The Sex Pistols
were probably extreme, they nevertheless
gave a good sense of the atmosphere preva-
lent at the time. What resolved the problems
thirty years ago was the same cure needed to
sort out the problems now: reform. Reforming
the labour market and other parts of the eco-
nomy could motivate employers to increase
hiring and generate confidence in the future.
Animal spirits, and confidence, have an
inexplicable tendency to improve when things
look to be at their darkest. For this very reason
we are not writing off Southern Europe, even
though some rounds of heavy belt tighte-
ning and prudent government policies are
still needed to balance government income
and spending.
What are the risks?
In the first quarter stock markets were, to
some extent, fuelled by better liquidity and
a perception of lower risk after the Long Term
Refinancing Operation (LTRO) by the Euro-
pean Central Bank. Some negative pundits
have been quick to point out that liquidity-dri-
ven markets will sooner or later run aground
and the liquidity will vanish. Hence, these
pundits prefer to advise investors to get out
before it is too late.
We are not blind to the fact that risks exist.
Governments net debt levels and spending
commitments for an ageing population are
still there. There are good arguments for beli-
eving that the large government debt and
spending levels will create an economic drag
on growth rates.
On the other hand, we can also envisage
a situation where consumers will unleash
their shopping beast after years of restraint.
As mentioned before, the top earners in the
US and other developed markets have been
cautious and saving cash for a rainy day
since 2007-08. Bank accounts and coffers are
full and providing little or no returns. Keep in
mind that money markets are yielding relati-
vely low returns too.
Europe has experienced desperate periods previously, such as at the end of the 1970s and beginning of the 1980s. The lyrics of
the punk group The Sex Pistols were extreme examples of the mood of the day. What was needed then as now were reforms.
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SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
PORTFOLI O MANAGERS REPORT
Putting cash to work
Corporations have horded cash and it is now
estimated that the stockpiles in European and
US companies amount to about USD 4,000
billion. To put some of this cash to work, the
UK for example is changing its tax regime to
motivate more investment.
When observing discretionary consump-
tion patterns it is interesting to note that cash
gets put to work very quickly when there are
good offers on discretionary consumer goods
like cruise vacations, clothing or cosmetic sur-
gery. Private consumption therefore could be
ripe for a surge based solely on a change in
confidence among the top earners. More con-
sumption would then fuel economic activity,
which in turn would offset modest govern-
ment spending.
If governments hold back and continue
to reform the labour markets and pensions
systems at the same time as individuals and
corporations expand, then we can easily be
confident about the future. But let us look at
some of the risks in this scenario.
Could Southern Europe take work from China?
Mediterranean unemployment is frighteningly
high, especially among young people. The
region has millions of inhabitants without
steady income at a time when governme-
nts are unable to provide proper support.
However, things are changing all over the
world and in some regions of China labour
costs are now getting close to making Europe
competitive again. Remember, it was only
20 years ago when shoes, shirts and other
daily items came from Portugal, Spain and
Italy. The manufacturing facilities and skills
are probably still there to a large extent. With
labour reforms and competitive labour market
conditions, the flow could start to reverse and
hence provide better activity in that region.
Ination to be an issue?
As mentioned earlier, corporate cash piles
are huge and this, to some extent, reflects
the fact that many corporations have been
holding back on new investments in capacity.
Obviously there have been investments in
growth regions and maintenance investments
in developed markets with low growth, but
technology and production efficiency change
over time and 5-6 years is a long time for many
production facilities.
While corporate cash piles are high, inven-
tory levels are low, which could inadvertently
produce inflation merely from a pick-up in
demand. There are no signs of this yet, but
we monitor developments closely because
any change could impact inflation expecta-
tions and equity returns some companies
could face windfall profits today, that are not
recognized in current share prices.
Implication of higher oil prices
In the first quarter, crude oil prices rose to
record levels, measured in euro. Oil also rose
to near record levels in US dollars as Brent hit
USD 125 per barrel. The global demand and
supply balance is stable, but jitters about
potential hostility and embargoes on Iran
-10%
-5%
0%
5%
10%
15%
20%
2009 1999 1989 1979 1969 1959 1949 1939 1929 1919 1909
10-YEAR AVERAGE ROLLING RETURNS
Drought in the stock market: Even if you disregard short term cyclical movements and measure the ten-year average re-
turns in the US, there are large discrepancies in returns. The most recent ten-year returns measured are weighed down by
nancial crises. Periods of loss are, however, few and slight. Source: Bloomberg.
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
Whole year 1st quarter
2009 2005 2001 1997 1993 1989 1985 1981 1977 1973
WORLD INDEX SINCE 1970
Good start: Only six times since 1970 has the rst quarter yielded returns of more than 10%. A good start to the year has
often meant a good year for stocks. Will 2012 repeat the pattern? Source: Bloomberg
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Animal spirits: Professor Robert J. Shiller, speaker at SKAGENs New Years Conference, has together with George Akerlof develo-
ped on John M. Keynes classics from the 1936 which explore the idea of animal spirits inuencing human economic behaviour.
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SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
PORTFOLI O MANAGERS REPORT
did create fear of oil shortages in the shor-
ter-term. It is hard to judge what will happen
with Iran in the longer-term, but it is not in
anyones interest to have a military conflict
with the associated pains, political upheaval,
and regional turbulence and oil/gas supply
disturbances.
The world has plenty of energy sources,
ranging from natural gas and solar to hydro
and oil. Still, it is not easy to switch between
these various sources. Longer-term resource
planning points us towards a future with a
broader mix of energy supplies from various
regions and differing types of energy. The
dependence on a single country is likely to
decline.
However, for the next couple of years the
political balances in the Middle East will
continue to dominate our animal spirits and
confidence in the oil industry will indirectly
impact consumers watching the meter when
filling up their cars.
Long-term interest rates increased in 1Q 2012
When 10-year bond yields in US and Germany
fell below 2% in 2011 it was a sign of money
flowing into so-called safe haven assets.
Using common sense and a bit of knowledge
of history, anyone could have foreseen that
this situation would not be sustainable for a
very long time. Warren Buffett to great effect
recently quoted another famous investor:
Bonds promoted as offering risk-free returns
are now priced to deliver return-free risk.
Inflation expectations are currently
modest. Coupled with long-term average real
interest rates, a 10-year bond yield higher and
closer to 3% seems more realistic.
The long-term bond yield is used for equity
valuations, but having said that, the link bet-
ween the long-term bond yield and earnings
yield of equities has been disconnected for a
few years. By the end of 1Q 2012 the earnings
yield for the MSCI World index was 8.7%. It is
still pretty attractive compared with the 2.2%
yield on German or US 10-year government
bonds. In both absolute and relative terms,
equities can rise significantly in 2012 without
going beyond past a sensible valuation.
If 2012 is a year of 25% returns, or more,
then earnings yields will go below 8%, equi-
valent to P/E ratios at 12.5x or more; a level
that still makes stocks attractive. However,
corporates will have to grow their earnings to
support valuations with reasonable growth
expectations. The speed of the earnings
growth depends on many things, but as the
animal spirit of consumers improves in most
regions, it can be seen as a good basis for
further advances.
A final perspective in 2011 (the bad
year for equities) revenues and operating
earnings grew 7% measured by MSCI World
numbers. For 2012 the current estimates are
another 7-8% more revenues and earnings,
and this provides solid support for rising
equity markets going forward.
By Ole Seberg
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2
2
0
0
0
1
9
9
8
1
9
9
6
1
9
9
4
1
9
9
2
1
9
9
0
1
9
8
8
1
9
8
6
1
9
8
4
1
9
8
2
1
9
8
0
1
9
7
8
1
9
7
6
1
9
7
4
1
9
7
2
1
9
7
0
Global growth in real GDP
Morgan
Stanley
forecast
DM Conribution EM Conribution
EM EXPECTED TO CREATE 80% OF GLOBAL GROWTH IN 2011 AND 2012
Source: IMF, Haver, Morgan Stanley. Periods shaded blue are recessions.
1,5 %
1,3 %
1,7 %
-0,9 %
4,7 %
4,3 %
5,8 %
7,0 %
9,2 %
-0,4 %
1,2 %
2,2 %
1,7 %
2,8 %
3,6 %
5,0 %
6,5 %
8,4 %
-3 % -1 % 1 % 3 % 5 % 7 % 9 % 11 %
Eurozone
Developed economies
USA
Japan
Europe ex. EU
Latin America
Emerging Markets
Asia ex. Japan
China
Regional GDP growth
2012e 2011
RISING COMMODITY PRICES IN 2012
Source: JPMorgan Markets, 30 March 2012
1,5 %
1,3 %
1,7 %
-0,9 %
4,7 %
4,3 %
5,8 %
7,0 %
9,2 %
-0,4 %
1,2 %
2,2 %
1,7 %
2,8 %
3,6 %
5,0 %
6,5 %
8,4 %
-3 % -1 % 1 % 3 % 5 % 7 % 9 % 11 %
Eurozone
Developed economies
USA
Japan
Europe ex. EU
Latin America
Emerging Markets
Asia ex. Japan
China
Regional GDP growth
2012e 2011
STABLE GROWTH EXPECTATIONS WITH EM LEADING THE WAY
Source: Bache Commodity Index, rolling contracts, as of 30 March 2012
23
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
PORTFOLI O MANAGERS REPORT
Energy-fuelled recovery
Several of last years losers have turned out
to be winning investments so far this year.
The first quarter reversed some of what we
experienced last year. Risk appetites have
increased from a low level, at the same time
as prospects have brightened. Combined with
low valuation, this was the catalyst needed
for recovery.
The first quarter was a good one for SKA-
GEN Vekst in both absolute and relative
terms. The fund gained 12.4 percent, while
the benchmark index was up 11.0 percent
measured in euro. A strong oil price gave the
energy-heavy Oslo Stock Exchange a lift of
13.0 percent. In the same period the world
index gained 8.9 percent.
The earnings season has so far not given
rise to any big surprises or upwards adjust-
ments. The mood has improved but compa-
nies have been muted in their statements
about prospects for 2012. The valuation of
shares has risen since the new year, but is still
at a moderate level relative to historic pricing.
We are excited to see whether the earnings
season we are now entering will confirm the
dawning optimism that the stock market now
appears to have priced in.
Lift for supply shipping
The energy sector, which is the funds lar-
gest with around 25 percent of the invested
assets, represented over 40 percent of the
value creation in the quarter. A notable con-
tribution came from our investments in supply
shipping companies, which account for six
percent of the fund in total. The winning sha-
res in the sector were DOF and Solstad Off-
shore. This was a reversal on last year when
the former was the funds largest negative
contributor. Seasonally, spring is a good time
to own supply shares, when contracts for the
busiest summer months are typically being
entered into. The season got off to a good
start this year and the rates have on the whole
been at a higher level than previously. We
expect the investment climate for supply sha-
res to remain good and still see high activity
within the rig and subsea market. There will
be moderate delivery of new builds over the
next few years, particularly within the disci-
plines of Anchor Handling Tug Supply (AHTS)
vessels and Construction Subsea Vessels
(CSVs); disciplines in which both DOF and
Solstad Offshore are well positioned. Despite
a share price increase of between 22 and 70
percent for the funds supply investments
year to date, the shares are still trading at a
considerable discount to underlying values.
We believe that this is a good starting point
for further repricing.
Our rig investments have also contributed
positively in the period. Both Sevan Drilling
and Transocean have gained 50 and 42 per-
cent respectively in the first quarter.
At the other end of the spectrum is our
investment in Marine Accurate Well, a pro-
ject company which is currently developing
a semi-submersible rig. The rig is 95 percent
complete and is expected to be delivered
from the shipyard this summer. The company
is working with several tenders at present and
in todays tight rig market, should be able to
sign a contract in the not too distant future.
The company is not listed and is rarely sold in
the unlisted market. In March, some shares
were sold at a low price, and we therefore
adjusted the value of our investment to reflect
this price level. At the end of the month, the
investment accounted for 0.3 percent of the
funds assets.
Within the energy sector, during the quar-
ter we added to our position in EMGS, a glo-
bal leader in electromagnetic seismology
with patented technology. We anticipate an
increase in orders and contracts and multi-
client sales now that there is greater accep-
tance of the technology from renowned major
clients. In addition the ownership structure
is open, meaning that the company is a clear
takeover candidate.
To set off this investment, we have trim-
med our positions in our two other seismo-
logy companies, TGS Nopec and Spectrum.
SKAGEN Vekst
PERFORMANCE (EUR) JANUARY-MARCH 2012* 2011
SKAGEN Vekst 12.4 % -19.3 %
MSCI/OSEBX Index
11.0 % -8.2 %
*As of 31 March 2012
SKAGEN Vekst team
Portfolio managers Beate Bredesen,
Ole Seberg and Geir Tjetland
CONTRIBUTORS FIRST QUARTER
LARGEST PURCHASES/SALES
JANUARY-MARCH
SKAGEN VEKST KEY FIGURES FOR THE LARGEST HOLDINGS
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
24
PORTFOLI O MANAGERS REPORT
We added to our positions in Subsea 7 and
Russian Gazprom in the quarter. At the tail
end of the quarter we invested in the unpo-
pular Baker Hughes, an investment that can
also be found in SKAGEN Kon-Tiki and SKA-
GEN Global.
Cruise with long-term potential
Another sector that contributed positively to
the funds return in the quarter was consumer
discretionary. Our cruise investments, in par-
ticular Royal Caribbean Cruises, got off to a
good start this year. Nonetheless, the Costa
Concordia accident in mid-January created
uncertainty around earnings developments
again, not just for Carnival, but for the sec-
tor as a whole. We believe the uncertainty
to be transient. Although the price outlook
for cruise tickets in the near future is weak,
ticket prices slightly ahead in time show signs
of improvement. We have therefore chosen
to maintain our investments in the sector as
the valuation and prospects are currently
extremely low.
The principle owner of the Norwegian pas-
senger and freight line, Hurtigruten, increased
his position to almost 33 percent ownership.
Combined with finance-improving measures
on the companys side, this provided fertile
conditions for a price upturn. We took advan-
tage of a higher share price to sell off some
of our holding in order to free up assets from
the less liquid part of the portfolio.
Quarter winner: Norwegian oil services company, DOF, performed the best of all the companies in SKAGEN Veksts portfolio.
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Cruise ship operators on choppy waters: Following the tragic accident with Costa Concordia, which is owned by our portfo-
lio company Carnival, the unrest spread to the entire cruise industry. We believe the sector will recover, however, and have
maintained our investments.
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SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
25
PORTFOLI O MANAGERS REPORT
Dixons Retail almost doubled
A nice contributor in the sector, which has
almost doubled so far this year, is consumer
electronics retailer, Dixons Retail. The com-
pany is market leader in the UK, Ireland and
Scandinavia. We believe that the companys
Nordic elements alone justify the valuation
of the entire company. Earnings prospects
have continued to improve along with the
less depressed mood among consumers in
the UK and parts of Europe. Optimism linked
to the sale of new models of tablets as well as
OLED TV sales associated with the upcoming
Olympics in London are priced into the share
price only to a moderate degree we believe.
We are also satisfied with the contribution
from the technology sector in the quarter,
particularly Samsung Electronics (see the
comments under the SKAGEN Global and
SKAGEN Kon-Tiki sections). In this sector we
exited Japanese Kyocera in the quarter, which
constituted a minor position in the fund.
There were both positive and negative con-
tributions to the funds overall return from
the industrials sector. Kongsberg Gruppen,
the funds second largest investment, made
a new announcement about the outlook for
its Protech Systems division. Previously there
were expectations that developments would
be flat compared to last year. Now the com-
pany believes that the uncertainty is grea-
ter and activity in the division may be lower
this year than it was last. Although analysts
already had negative growth prospects for
the division, the companys comment was not
particularly well received in the stock market.
The share price was down almost eight per-
cent in the quarter. Nevertheless analysts
expectations of earnings in this division are
now back to the same level as at the end of
last year, when the share price was higher. As
expectations are extremely low, we believe
the likelihood of positive earnings surprises
from the division is greater.
Lifted by larger aircraft eet
Norwegian Air Shuttle almost doubled in
value in the first quarter. The company
announced one of the biggest orders of new
aircraft in recent times. Via its new build pro-
gram, Norwegian will expand its fleet from
62 aircraft today to 222 in 2025. In the same
period, the global aircraft fleet is expected to
double. We believe that the low cost company
will grow at the expense of the less profitable
part of the airline industry over the next few
years. Throughout the quarter, we have recei-
ved confirmation that ticket prices are on their
way up and think that Norwegian is well posi-
tioned in an attractive Nordic airline market.
Norwegians aircraft fleet uses 25-40 percent
less fuel than its Scandinavian competitors.
The company continues to cut its unit costs
and in combination with increased capacity
utilization (load factor), this is a good starting
point for improved earnings.
The biggest change in this sector in the
quarter was that we sold the final part of our
position in Kverneland to the Japanese bid-
der Kuboto.
The funds worst investment in the quarter,
and the only investment within the utilities
sector, was Brazilian energy company, Eletro-
bras. Delays in the licence awarding round
and reporting, as well as renewed uncertainty
about the use of the companys capital, did
nothing to increase investors confidence in
the company. The valuation is extremely low,
however, relative to the assets owned by the
company.
Concentrated portfolio
We continued to reduce the number of invest-
ments in the quarter in order to concentrate
the portfolio around fewer and hopefully
better investments, thereby improving the
quality of the portfolio. Twelve positions in
total were disposed of, of which the above-
mentioned Kverneland and US supermarket
chain Winn-Dixie are the largest.
Our top 12 positions are now valued at 8.9
times expected earnings this year, a discount
of over 20 percent relative to the comparative
ratio in the funds benchmark index. Similarly
the price/book value of the top 12 positions
is almost 30 percent. The fund is therefore
well positioned for a further repricing of its
shares in future.
Read more about the fund on page 34
SKAGENFUNDS.COM/SKAGEN-VEKST
Cheap electronics: The UK home electronics chain Dixons Retail was a good contributor to returns in SKAGEN Vekst after the share price almost doubled as a result of the lift in mood among
Northern European consumers.
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26
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
A normalisation
It was a good start to the year for SKAGEN
Global, both in absolute terms and relative
to the world index (MSCI AC). The trend of
rising risk premiums that we saw last year
has reversed. A number of last years losers
have therefore turned out to be winners so
far this year, and vice versa.
The US dollar, government bonds and
other safe havens have performed weakly.
In addition to shares, emerging market cur-
rencies and corporate bonds have provided
investors with good returns.
We have, in other words, seen a normali-
sation of capital markets after extreme risk
aversion last autumn. The developments are
in many ways reminiscent of what we saw
in 2009.
Samsung Electronics in new clothing
As has been the case for the general stock
market, the winners in SKAGEN Global in the
first quarter were on the whole the losers last
year, with a couple of major exceptions; our
two largest investments, Samsung Electro-
nics and Tyco International, performed well
last year and the upturn has continued going
into 2012. The share prices of the companies
are up around 20 percent after the first three
months of the year.
Viewed through (other) investors eyes,
Samsung Electronics has gone through a
major transformation. From being seen as
a supplier of components with cyclical ear-
nings, the company is now perceived as one
of the worlds most respected brands within
the global electronics industry. Now it is
Apple that investors compare the company to,
rather than companies like Hynix, Micron and
Intel. Fuelled by the impressive growth in the
sales of tablets and smart phones, Samsung
Electronics net result this year is expected to
increase by more than 50 percent.
Tyco up on split
The US industrial conglomerate Tyco Inter-
national (Tyco) is currently in the process
of being split into three separate units, all
of which will be listed. Despite a very good
share price development recently, we expect
that the combined price of the three new
companies will be higher than Tycos current
price on the stock exchange.
Tyco recently announced that its Flow Con-
trol division, which produces valves amongst
other things, will merge with US company
Pentair. The operations of the two companies
complement each other well. As a sharehol-
der in Tyco we will get direct ownership of
the merged company. This transaction is the
latest in a long line of shareholder-friendly
decisions made by Tycos management.
US banks hit back
The biggest negative contributor last year,
Citigroup, is up 40 percent this year, making it
the funds second best contributor. The share
price of another of last years losers, Goldman
Sachs, has also experienced a similar lift.
Several of our emerging market companies
which were affected by investors flight to
safety last year have also performed well
in the period.
Disappointing Tesco
We lost the most on our stake in British gro-
cery retailer, Tesco, in the first quarter. The
shares fell heavily on the companys announ-
cement early in the year of poor Christmas
sales and reduced earnings expectations for
this year. Price cuts and higher store opera-
ting costs are not a recipe for success.
In the aftermath of this disappointing
announcement we spent a lot of time looking
into precisely how serious the situation is. As
we are not convinced that Tesco has good
enough control over margin developments,
we have reduced our position by 40 percent
for the time being.
Even with growth expectations adjusted
downwards, Tesco is valued at less than ten
times expected earnings for the year. But
given developments in other large grocery
companies that have lost control of margins,
PORTFOLI O MANAGERS REPORT
SKAGEN Global
Portfolio managers Kristian Falnes, Torkell Eide,
Sren Milo Christensen and Chris-Tommy Simonsen.
PERFORMANCE (EUR) JANUARY-MARCH 2012* 2011
SKAGEN Global 10.6 % -6.0 %
MSCI AC 8.9 % -4.3 %
*As of 31 March 2012
SKAGEN Global team
SKAGEN GLOBAL KEY FIGURES FOR THE LARGEST HOLDINGS
CONTRIBUTORS FIRST QUARTER
LARGEST PURCHASES/SALES
JANUARY-MARCH
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
27
PORTFOLI O MANAGERS REPORT
we are exercising caution. The operational
risk has undoubtedly increased so we can
no longer justify Tescos position among the
funds top ten investments.
Doubled after prot warning
The US oil services company Baker Hughes
recently announced that the companys
expectations must be adjusted downwards.
Higher costs, low gas prices in the US and
weaker profit margins within Pressure Pum-
ping are the main reasons for the profit war-
ning. Baker Hughes share price has been
weak, and the company was one of the funds
biggest negative contributors.
As is the case with Tesco, a new CEO has
recently been appointed at Baker Hughes.
He will no doubt want to carry out a clean-up
operation to lay a better foundation for future
earnings developments. The ratio between
the share price and sales for Baker Hughes
is now the same as at its lowest point during
the financial crisis when the oil price was
below USD 40 a barrel. You can buy the years
expected earnings for a P/E of ten times.
With a strong likelihood of continued
growth internationally, as well as the hope
of better margins over the next few years,
the valuation of Baker Hughes is particularly
attractive. We used the opportunity to dou-
ble our holding in the company. We bought
the lions share of the stake at a low price
following the profit warning. Some of the
purchase amount was financed by the sale
of our remaining shares in Transocean.
Up in German property
Following the purchase of shares in GSW
Immobilien, a newcomer to the portfolio, as
well as our participation in a capital increase
in TAG Immobilien, German property now
accounts for 0.8 percent of SKAGEN Global.
While German property prices have gene-
rally been at a standstill since the mid-1990s,
we are now seeing clear signs that the market
is picking up. This is particularly true in cities
with net population growth, such as Berlin.
The upturn is also coming from low levels;
the average square metre price of apartments
owned by GSW Immobilien in Berlin is around
EUR 800.
Both GSW Immobilien and TAG Immobi-
lien are trading at a significant discount to
the assumed market value of the underlying
properties.
When investment fund Warburg Pincus
sold all of its shares in EMGS early this year,
we decided to buy into the Norwegian oil ser-
vices company. EMGS is a world leader in
the use of electromagnetic surveying in oil
exploration. The technology is being adopted
Valued split: The US industrial conglomerate Tyco International is in a process whereby one listed company may turn into
three. The stock market appreciates this and has rewarded the company with a strong upturn in the rst quarter of 2012.
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Bank delivers: The US bank, Citigroup, one of the worlds most international banks, has put the nancial crisis behind it
and is healthier than it has been in a long time. The banks exposure to emerging markets is also appreciated by the stock
market.
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SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
by a growing number of major oil companies.
EMGS, and the companys technology, is still
in an early growth phase. Given its signifi-
cant potential, the price tag of 14 times this
years expected earnings must be viewed
as moderate. EMGS is also one of the most
obvious takeover candidates on the Oslo
Stock Exchange.
Russian discount
We increased our holdings in Gazprom,
Vimpelcom and Oracle in the quarter. The
two former are still priced low relative to the
underlying values, primarily as a result of
poor corporate governance.
In Vimpelcom the situation regarding the
ownership of the Algerian mobile phone ope-
rator, Djezzy, has still not been clarified. The
parties will hopefully come to an agreement
during the spring. The most likely outcome is
that the Algerian state takes over the majority
of the shares which will reduce Vimpelcoms
slightly too high debt ratio.
We decided to increase our holding in US
software company, Oracle, when it reported
disappointing figures for the fourth quarter
last year. Oracle recently released figures
for the first quarter this year (as of February,
divergent financial year) which surprised the
stock market. It was particularly gratifying to
see the seven percent growth in new licences.
Although Oracles share price is up 15 per-
cent this year, we still believe the company to
be undervalued. A price tag of 12 times this
years earnings is cheap for a company with
a solid balance sheet (net cash constitutes
around ten percent of the market value), good
cash flow and good potential for future ear-
nings growth.
Continued reductions in Pzer and Unilever
We have continued to reduce our positions
in Pfizer and Unilever. After good share price
performance last year, most of our catalysts
for revaluation have now taken place. In other
words, the distance to our fundamental valua-
tion of the companies has now been substan-
tially reduced.
Pfizers share price is now in excess of our
target price of USD 22, which admittedly does
not take into account values in the companys
new drug research portfolio. Pfizer has pro-
ven that it is in a position to develop ground-
breaking drugs, but we find it difficult to make
a qualified guess as to how much this portfo-
lio is worth. We therefore maintain our con-
servative valuation of the company.
As the difference between the mar-
ket price and the tender amount from the
Tokyo Stock Exchange for Osaka Securities
Exchange has gradually lessened, we have
reduced our position in the latter.
Mixed earnings season
The earnings season in the fourth quarter last
year was mixed for our companies, and clearly
worse than the previous quarter. In addition
to the above-mentioned Baker Hughes and
Tesco, our other holdings Citigroup, Siemens,
TE Connectivity, Kyocera, Akzo Nobel, Indo-
sat, Unilever and Petrobras also reported
figures below our expectations. On the other
hand, Tyco International, Microsoft, Goldman
Sachs, SCA, Time Warner Cable, Comcast,
Pfizer, Oracle, Ensco and Cheung Kong sur-
prised positively.
At the end of the quarter the funds cash
position was 2.0 percent, down from 2.3 per-
cent at the turn of the year. The ten largest
investments constituted 36 percent of the
portfolio, the same as at the start of 2012.
Shift in mood
In our annual report for 2011 we pointed out
that a shift in mood from fear to greater opti-
mism and faith in the future could result in a
substantial price increase in the stock mar-
kets. The credit for the positive share price
development in the first quarter mainly goes
to this shift in mood, which took place gra-
dually at the end of last year.
We think it is likely that the upwards valua-
tion of stocks in general, and our portfolio
companies in particular, will continue albeit
with natural corrections along the way.
The prices of companies in the portfolio
are still very low relative to the value crea-
tion. The ten largest holdings are priced at
an average of 8.3 times expected earnings
this year and 1.0 times book equity. Even
if one has extremely conservative growth
expectations, these are not ratios to cause
alarm to existing or potential unit holders.
28
PORTFOLI O MANAGERS REPORT
Read more about the fund on page 36
SKAGENFUNDS.COM/SKAGEN-GLOBAL
Grocery giant idles: The British grocery retailer, Tesco, had a tough quarter. Weak Christmas sales and higher costs in stores were punished by the market, and the share price fell substantially.
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SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
PORTFOLI O MANAGERS REPORT
SKAGEN Kon-Tiki
Cash ow back to emerging markets
The positive developments in the worlds
emerging markets continued from the end
of last year into the first quarter this year.
Risk aversion among investors is on the wane
and record cash flow is returning to emerging
markets out of the safe havens in the parts
of the world experiencing low growth.
SKAGEN Kon-Tiki performed somewhat
more weakly than the emerging markets
index. This can partly be explained by the
fact that our investments outside the emer-
ging markets did not do as well.
Over the past five years we have main-
tained a relatively low risk profile which has
provided good results in both absolute and
relative terms in a tough climate for equities;
SKAGEN Kon-Tiki has provided unit holders
with an average annual return of 8.8 percent,
versus a return of 4.7 percent for the emerging
markets index, measured in euro.
Company choices pay off
We were early movers when it came to weighing
up in consumer companies within emerging
markets. There are four billion people in the
area whose purchasing power is gradually
increasing, regardless of the debt crisis in
the US and Europe. Korean car manufacturer
Hyundai Motor is a good example of this. We
started buying shares in the midst of the win-
ter depression of 2009, and the share price
has multiplied since.
In the period we have maintained a rela-
tively low profile within cyclical commodity
companies, which has also paid off.
We did not, however, benefit from the
generally low valuation of companies in the
portfolio at the start of the year in the first
quarter. On the other hand, our geographi-
cal weighting, which is a result of company
choices, has yielded results. China, in which
we are significantly underweight, was the
weakest of the larger emerging markets. Sec-
tor-wise, we profited most from technology,
in particular from our long participation in
Samsung Electronics.
Local concerns
Although global investors once again dared
to take greater risk which in this case mani-
fested itself in them taking the opportunity
to buy cheap shares the effects were not
equally positive in all local stock markets. In
some markets, China in particular, develop-
ments were marred slightly by concerns of a
national nature.
There was a general expectation that aut-
horities in China would speed up the economy
using stronger stimuli. We saw little of this.
Nor did the stock market in the oil and gas
nation of Russia get the lift that was antici-
pated and that has previously been the case
in times of record high oil prices. Indian sha-
res continued to be stigmatized by a lack of
political drive and accusations of corruption.
The increased willingness to purchase
shares in emerging markets can mainly be
attributed to global investors greater risk
tolerance. When the mood among domestic
investors lightens, the market may experience
a renewed lift.
Weaker earnings
On the whole the results from companies
in global emerging markets have been
somewhat weaker than expected. Sales are
increasing but cost pressures have eaten
into margins. Lower inflation and somewhat
better growth indicators from more develo-
ped countries could quickly turn this picture
around.
We are already seeing a trend of rising
earnings expectations for several compa-
nies, including our electronics giants Hon
PERFORMANCE (EUR) JANUARY-MARCH 2012* 2011
SKAGEN Kon-Tiki 9.8% -13.3%
MSCI Emerging Markets Index 11.1% -15.7%
*As of 31 March 2012
SKAGEN Kon-Tiki team
Portfolio managers Kristoffer Stensrud, Knut Harald
Nilsson, Cathrine Gether and Ross Porter
CONTRIBUTORS FIRST QUARTER
LARGEST PURCHASES/SALES
JANUARY-MARCH
SKAGEN KON-TIKI KEY FIGURES FOR THE LARGEST HOLDINGS
SK AGEN F uNdS MArKE t rEport Number 1 apri l 2012
30
portfoli o managers report
Hai Precision Industry (Hon Hai) and Sams-
ung Electronics. As margins are returning to a
more normal level, this trend will most likely
continue throughout 2012.
The combination of low earnings expec-
tations among investors and historically low
valuations is a good starting point for plea-
sant times ahead for equity markets.
High oil price did not pay off
A high and rising oil price was not favourable
for the funds energy companies. Our largest
energy holding, oil services company Baker
Hughes, was the biggest loser in the quarter.
Low gas prices led to a substantial drop in gas
drilling activity, to the benefit of oil. Having
reduced our position in Baker Hughes at the
end of last year, we increased our stake at the
end of the quarter following a profit warning
from the company.
Baker Hughes is now trading at the lowest
levels we have seen in a decade, relative to
both sales and book equity. The opening of
several new oil provinces over the past year
means that activities within oil services are
set to take off shortly.
We substantially added to our position in
Russian Gazprom. The companys results for
2011 were considerably better than expected.
It seems as though the company is also pro-
posing a more shareholder-friendly dividend
policy. After a fantastic journey we reduced
our holding in Seadrill somewhat and used
the capital to buy shares in Pacific Drilling and
DryShips. We also bought into South African
coal and oil company, Sasol, whose unique
technology for transforming gas and coal into
oil may trigger a revaluation of the company.
Cheap Kazakh mining company
In spite of generally rising commodity prices,
it was a relatively weak quarter for our com-
modity companies. The fear of lower growth
in China combined with upward pressure on
costs did nothing to lift investors spirits.
We took advantage of the sombre mood
to buy into a new company, Eurasian Natu-
ral Resources Corporation, a Kazakh mining
company listed in London. The company
which produces ferrochrome, iron ore and
aluminium has previously struggled with poor
corporate governance. This is in the process
of being improved and current activities
generate a good cash flow and dividend. The
stock market does not appear to appreciate
the giant Congolese copper project Kolwezi,
which the company took over from our pre-
vious holding, First Quantum.
Another new investment is Ipeke Dogal,
the main owner of Turkish gold producer Koza
Altin. Ipeke Dogal will use the considerable
value from gold production to look for oil and
other minerals. We get dual exposure at half
the price with this investment.
We exited Indah Kiat Pulp & Paper, a mar-
ginal holding in the portfolio, at a slight loss.
Despite high pulp prices the company did
not manage to increase earnings in 2011.
There have been no signs of improvement in
corporate governance either.
The best sector contributor in the quarter
was newcomer, Exxaro.
Comeback for our mexican companies
The industrials sector provided a good con-
tribution, primarily thanks to the excellent
performance of Mexican construction com-
pany, Empresas ICA. After a dismal 2011, the
company was revalued in the quarter. In the
same sector we sold out of Barloworld and
Nordic American Tankers.
The most important driver behind the
share price development of our new invest-
ment, DryShips, had previously been its majo-
rity holding in Ocean Rig. The upside for the
DryShips stake in todays hot rig market lies
primarily in the companys not insubstantial
fleet of drybulk carriers and tankers. Times
are very hard for ships like these and this
is reflected in the companys share price.
We believe that the valuable Ocean Rig hol-
ding will provide DryShips with the strength
needed to implement an aggressive new-
build program at the bottom of the market.
Egyptian Orascom Construction Indu-
stries, which is a leading construction com-
pany in the Middle East and a significant
fertilizer manufacturer, is a newcomer in the
portfolio. A generally good economy in the
region and reconstruction requirements as a
result of the Arab revolution should contribute
to the order book in future. The company can
also boast a good track record the pyramids
sub-supplier strikes back: Taiwanese electronics com-
pany Hon Hai Precision Industry, which is a major Apple
supplier, has increased its proft forecast. The share price
shot up after performing poorly last year.
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Cheaper oil services: The US oil services company Baker Hughes was badly affected by falling gas prices, which caused a
slowdown in gas drilling activity and a drop in share price. We added to our holding in the company since we believe future
prospects to be good.
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SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
are still standing. During the course of the
year the company will be split into two, with
one construction and one fertilizer unit. We
expect to see a repricing of the company as
a result.
Tentative step into solar energy
With our purchase of a small holding in inte-
grated Chinese solar energy producer, Yingli
Green Energy, we took our first cautious step
into alternative energy. The company is one of
the leading suppliers of solar energy solutions
in China. An 80 percent fall in prices means
that solar energy solutions are now profita-
ble, even without subsidies. The focus for
participants in the solar industry will be new
markets, rather than the previously subsidy-
driven industrialized markets.
Yingli Green Energy has a new, modern
and competitive capacity of 2.5 TW finan-
ced by cheap Chinese government loans. In
a sector that has been exposed to disasters
over the past few years, Yingli Green Energy
appears to be a survivor in a market which
may be set to explode.
In consumer goods, Chinese Great Wall
Motors and Brazilian Cosan continued their
positive developments. We bought into Chi-
nese electronics chain, Gome, which is in the
process of being revalued after a poor year
last year. The world leader in tea, Indian Tata
Global Beverages, was also to our liking and
fell within our purchase price range. We are
excited by the companys expansion into the
embryonic coffee market in India.
After a period of good price development,
we halved our holding in Shangri-La Hotels.
At the same time we doubled our position in
Heineken.
Good Hungarian medicine
The health sector made a good contribution
to the funds return, led by Hungarian Gedeon
Richter, which was given approval for its most
interesting Central Nervous System (CNS)
project. The worst contributor in the sector
was Hanmi Pharma.
Financials was also a positive sector, with
Turkish Sabanci and Russian VTB-Bank con-
tributing the most; after a dismal 2011 the
upturn was welcome for both. The liquidity
packages from the European Central Bank
(ECB) to banks did a lot to improve the mood
among investors after a depressing second
half in 2011. We are still cautious in this sec-
tor, and look for secular growth situations.
We sold our stake in Asya Katilim Bankasi
and reduced our position in Standard Char-
tered, while substantially increasing that in
Turkish Yapi Kredi Bank.
Mobile data is the way forward
Technology provided a particularly satisfy-
ing contribution. Primarily as a result of the
above-mentioned revaluation of Samsung
Electronics, but also thanks to the turnaround
operation in Hon Hai, which has paid off. Inde-
pendent analysts have assessed labour con-
ditions at Hon Hai and we believe that the
results of this will strengthen the companys
competitiveness. The cooperation with Apple
and the paradigm shift towards mobile data
processing mean that our position in Hon Hai
should yield good results in future.
Telecommunications provided a marginal
contribution, as was also the case for the
emerging markets index. Investors are con-
cerned that the increase in data traffic will
result in new investments at the same time as
the earnings model is in many cases dubious.
In global emerging markets mobile data is the
only realistic way to proceed, which is why we
are also selectively increasing our analytical
focus within this sector.
Brazilian energy company Eletrobras is
still our only investment within the regulated
utilities sector. As the authorities have again
postponed dealing with existing power con-
cessions, the Eletrobras share price suffered
yet again. The extreme divergence between
the price of the companys assets and the
market price is still unparalleled.
Time to be more aggressive?
Over the past five years we have, as we
have said, followed a conservative invest-
ment strategy. 2012 may be the year when
a more aggressive strategy could give good
future results. We have therefore increased
our efforts in more cyclical sectors.
As a result of European angst and Chinese
doubt, the pricing of cyclical sectors does not
currently reflect the re-purchase value of the
resources. At the same time many consumer
companies in emerging markets have been
given a high price tag.
31
PORTFOLI O MANAGERS REPORT
Read more about the fund on page 38
SKAGENFUNDS.COM/SKAGEN-KON-TIKI
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New alternative in China: With a small investment in Yingli Green Energy, a Chinese solar energy producer, we took our rst
tentative step into the alternative energy sector. The company is a leading supplier of solar energy solutions in China.
32
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
The balance sheets of most major central
banks have increased significantly since
2008. While some claim that central bank
lending and asset purchases stimulate the
economy, the effect of balance sheet policies
depends crucially on how central banks inter-
vene. The effect of quantitative easing (QE) is
most likely negligible. Credit easing (CE), on
the other hand, can alleviate stress in credit
markets and help the economy. But neither
QE nor CE is monetary policy. Monetary policy
is interest rate policy.
Quantitative teasing
The origins of quantitative easing can be tra-
ced back to the Bank of Japan a decade ago.
The central bank bought government bonds
on the assumption that more central bank
money would incite private spending. That
did not happen. Recently the Federal Reserve
(Fed) and the Bank of England have purcha-
sed Treasuries and issued more central bank
deposits. The idea is to push investors into
risky assets and stimulate private spending
on capital goods. I believe the effect is slight.
Although the US recovery seems to have
become more robust of late, this probably
has little to do with the Feds balance sheet.
QE basically consists of swapping one
form of public debt, central bank depo-
sits (reserves), for another, government
bonds. Since central banks are owned by
their governments, QE has no effect on the
amount of consolidated public debt. What QE
does is to cut the duration of privately-held
public debt. But this means that the public
sector takes on more interest rate risk; the
public sectors interest expenses will rise
more rapidly if interest rates spike. The pri-
vate sector, which finances the public sector,
is likely to hedge the potential increase in
future taxes by holding less long-term public
debt and more short-term public debt. Hence
QE leads to less private demand for Treasury
debt and more private demand for central
bank deposits. Thus there is no lasting effect
on government bond prices, and QE does not
fulfil its intended function of pushing private
investors into more risky assets and stimula-
ting private spending.
Credit policies
The Feds first round of balance sheet policies
was different from its current QE measures.
In the aftermath of the Lehman bankruptcy
credit flows largely came to a standstill. The
Fed acted as a lender of last resort, inter-
mediating credit between markets that had
become dysfunctional. The Fed took more risk
on its balance sheet, but since credit markets
were segmented, the private sector could
not take compensatory action. Therefore, the
first round of balance sheet policies, correctly
named credit easing (CE) by the Fed, did have
a positive effect on financial markets.
Since the financial crisis erupted the
European Central Bank (ECB) has been a
very reluctant quantitative easer. The ECB
has lent a great deal of money to European
banks that have problems accessing funds in
private markets, however. The ECBs policies
were expanded by massive 3-year loans in
December and March. Since this can be seen
as CE rather than QE the ECB has named its
operations enhanced credit support the
ECBs balance sheet policies should have a
positive effect on financial markets and the
broader economy.
Dont follow the money
Some argue that swollen central bank balance
sheets are potentially highly inflationary; I
believe that to be a misunderstanding.
First, since QE probably has a negligible
effect on the economy, it could be reversed
swiftly without any significant detrimental
effects. Second, whether the central banks
balance sheets have grown because of QE or
CE, it is unnecessary to shrink them in order
to tighten monetary policy. Monetary policy
is not about steering the amount of central
bank money but about interest rate control.
Hence, regardless of the size of their balance
sheets, central banks can hike short-term
interest rates by raising the interest rate they
pay on central bank deposits.
In fact, central banks can tighten monetary
policy and simultaneously intervene aggres-
sively in credit markets. Higher inflation, or
increased inflation expectations, can force
central banks to raise their policy rates. At the
same time lingering dysfunctionality in credit
markets could prompt some of them, most
probably the ECB, to expand their balance
sheets further.
The point is that credit policy is different
from monetary policy; investors should not
assume that a massive amount of central
bank money precludes monetary tightening.
I expect policy rates to approach normaliza-
tion before the balance sheets have shrunk
back to pre-2008 levels.
PORTFOLI O MANAGERS REPORT
Balancing act
FIXED INCOME
Torgeir Hien
Portfolio manager
SKAGEN Tellus
th skagenfunds.com
Eurozone Japan US UK
P
e
r
c
e
n
t
P
e
r
c
e
n
t
Source: Marcobond
2011 2010 2009 2008 2007
35
30
25
20
15
10
5
35
30
25
20
15
10
5
CENTRAL BANK BALANCE SHEETS AS A PERCENT OF GDP
33
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
PORTFOLI O MANAGERS REPORT
Gaining traction
SKAGEN Tellus, the global sovereign bond
fund, gained a solid 2.6 percent as measured
in EUR during the first quarter of 2012. The
fund did much better than the benchmark
index, which fell 2.9 percent last quarter. After
a dire 2011, we hope that our unit holders
welcome the outperformance. Since incep-
tion in September 2006, SKAGEN Tellus has
delivered an average annual return of 5.8
percent, slightly better than the index. To
be ahead again of the index was one of our
main objectives as 2011 expired.
Relative to the index we have benefitted
from having very short duration in safe haven
bonds. We believed, and still believe, that
long term nominal yields in these markets are
extremely low, and that they are set to rise
further as the recovery gathers momentum
and markets alter their expectations regar-
ding future policy rates. The fund also gained
in relative terms by not being invested in yen-
denominated papers. Japan is not Greece;
the land of the rising sun has its own cur-
rency. But financing around 50 percent of
state expenditure with borrowing when the
governmental debt is above 230 percent of
GDP is a recipe for a fiscal sunset. The small
depreciation we saw in the first quarter is
nothing compared to what might be in store.
In absolute terms SKAGEN Tellus gained by
being invested in long-term emerging market
bonds. These investments are unhedged,
and with few exceptions we had positive
contributions both from falling yields and
stronger currencies versus the EUR. We also
saw some currency gains on short-term non
EUR denominated papers. So far our convic-
tion that the USD will appreciate versus the
EUR has not been validated, however. Accor-
ding to our calculations the dollar is under-
valued by about 20 percent relative to the
euro. And with divergent growth rates, the
Federal Reserve will probably tighten faster
than the European Central Bank. This should
be bullish for the dollar.
SKAGEN Tellus
SKAGEN Tellus 2.60% -0.67%
Barclays Capital Index -2.93% 7.83%
*As of 31 March 2012
SKAGEN Tellus
Portfolio manager Torgeir Hien
PERFORMANCE (EUR) JANUARY-MARCH* 2011
2007 1991 1993 1995 1997 1999 2001 2003 2005 2009
110
100
90
80
70
60
50
40
110
100
90
80
70
60
50
40
Source: Marcobond
Public expenditures
T
r
i
l
l
i
o
n

J
P
Y
T
r
i
l
l
i
o
n

J
P
Y
Public revenues
JAPANESE PUBLIC FINANCES
34
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
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.
SECURI TI ES PORTFOLI O SKAGEN VEKST AS OF 31- 03-2012
Risk
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 36,50 NOK 208 131 99 471 2,62 % Oslo Brs
Solstad Offshore ASA 1 938 650 95 344 106,00 NOK 205 497 110 153 2,59 % Oslo Brs
Petroleo Brasileiro Pref ADR 1 159 165 119 582 25,40 USD 168 036 48 454 2,12 % New York
Bonheur ASA 1 192 594 88 117 129,50 NOK 154 441 66 324 1,95 % Oslo Brs
Ganger Rolf ASA 1 273 817 130 405 120,50 NOK 153 495 23 090 1,93 % Oslo Brs
TGS Nopec Geophysical Co ASA 975 867 73 516 156,10 NOK 152 333 78 817 1,92 % Oslo Brs
Sevan Drilling ASA 17 599 671 140 651 7,59 NOK 133 582 -7 069 1,68 % Oslo Brs
Gazprom Oao ADR 1 564 000 100 976 12,20 USD 108 898 7 922 1,37 % London Int.
Transocean Ltd 313 900 138 551 54,40 USD 97 457 -41 094 1,23 % New York
Siem Offshore Inc 8 036 317 68 365 10,95 NOK 87 998 19 633 1,11 % Oslo Brs
Electromagnetic Geoservices AS 4 206 079 55 162 16,80 NOK 70 662 15 500 0,89 % Oslo Brs
Eidesvik Offshore ASA 1 682 641 64 221 33,80 NOK 56 873 -7 347 0,72 % Oslo Brs
Subsea 7 SA 324 800 37 875 150,80 NOK 48 980 11 105 0,62 % Oslo Brs
BP Plc ADR 171 381 54 168 44,54 USD 43 565 -10 603 0,55 % New York
Norwegian Energy Co ASA 5 127 513 78 354 7,81 NOK 40 046 -38 308 0,50 % Oslo Brs
Northern Offshore Ltd 2 750 000 26 552 12,35 NOK 33 963 7 411 0,43 % Oslo Brs
Marine Accurate Well ASA 67 652 076 51 259 0,35 NOK 23 678 -27 580 0,30 % Unotert
Fred Olsen Production ASA 3 000 000 18 735 7,80 NOK 23 400 4 665 0,29 % Oslo Brs
BP Plc 553 263 35 035 4,63 GBP 23 349 -11 686 0,29 % London
Seabird Exploratio Plc 11/15 6,00% Call 5 172 592 30 716 69,00 USD 20 864 -9 852 0,26 % Unotert
Baker Hughes Inc 85 300 19 949 41,15 USD 20 033 83 0,25 % New York
Spectrum ASA 730 000 6 407 27,40 NOK 20 002 13 595 0,25 % Oslo Axess
Minor items 108 799 77 716 -31 083 0,98 %
Total Energy 1 651 395 1 972 998 321 603 24,87 %
RAW MATERIALS
Norsk Hydro ASA 5 969 510 152 178 31,01 NOK 185 115 32 936 2,33 % Oslo Brs
Akzo Nobel NV 222 000 59 466 44,27 EUR 74 737 15 271 0,94 % Amsterdam
Koza Altin Isletmeleri AS 643 750 46 209 33,80 TRY 69 607 23 398 0,88 % Istanbul
Agrinos AS 897 378 25 330 40,50 NOK 36 344 11 014 0,46 % Unotert
Norske Skogindustrier ASA 5 970 000 345 541 5,70 NOK 34 029 -311 512 0,43 % Oslo Brs
Rottneros AB 12 204 585 60 163 2,71 SEK 28 477 -31 686 0,36 % Stockholm
Hindalco Industries Ltd 1 950 673 46 052 129,40 INR 28 269 -17 783 0,36 % Nat. India
Minor items 39 047 39 569 521 0,50 %
Total Raw Materials 773 986 496 146 -277 840 6,25 %
INDUSTRIALS
Kongsberg Gruppen ASA 3 275 767 136 060 107,00 NOK 350 507 214 448 4,42 % Oslo Brs
Wilh. Wilhelmsen Holding ASA 1 315 811 93 970 150,00 NOK 197 372 103 402 2,49 % Oslo Brs
Norwegian Air Shuttle ASA 1 504 738 83 483 108,00 NOK 162 512 79 029 2,05 % Oslo Brs
Dockwise Ltd 1 032 808 173 152 117,50 NOK 121 355 -51 797 1,53 % Oslo Brs
Stolt-Nielsen Ltd 926 602 114 905 108,00 NOK 100 073 -14 832 1,26 % Oslo Brs
LG Corp 233 756 48 434 65 000,00 KRW 76 554 28 120 0,96 % Seoul
Aveng Ltd 2 575 700 75 193 39,09 ZAR 74 919 -274 0,94 % Johannesburg
Odfjell SE-A 1 664 725 74 526 38,00 NOK 63 260 -11 267 0,80 % Oslo Brs
Glamox ASA 5 944 034 5 852 10,00 NOK 59 440 53 588 0,75 % Unotert
Golar LNG Ltd. 186 611 30 307 217,60 NOK 40 607 10 299 0,51 % Oslo Brs
I.M. Skaugen SE 1 339 151 16 790 27,30 NOK 36 559 19 769 0,46 % Oslo Brs
Fairstar Heavy Transport NV 4 414 585 46 670 7,99 NOK 35 273 -11 397 0,44 % Oslo Brs
Goodtech ASA 21 168 416 48 135 1,57 NOK 33 234 -14 901 0,42 % Oslo Brs
TTS Group ASA Konv. 8 % 01/16 19 000 000 18 620 148,00 NOK 28 424 9 804 0,36 % Oslo Brs
LG Corp Pref 224 482 25 796 22 500,00 KRW 25 448 -348 0,32 % Seoul
Minor items 286 449 121 965 -164 484 1,54 %
Total Industrials 1 278 342 1 527 501 249 159 19,25 %
CONSUMER DISCRETIONARY
Royal Caribbean Cruises Ltd 902 048 124 547 29,18 USD 150 213 25 667 1,89 % New York
Dixons Retail Plc 57 626 905 284 228 0,19 GBP 98 112 -186 116 1,24 % London
Carnival Corp 485 865 120 531 32,09 USD 88 983 -31 548 1,12 % New York
Hurtigruten ASA 22 671 503 81 526 3,86 NOK 87 512 5 986 1,10 % Oslo Brs
LG Electronics Inc Pref 600 000 144 988 24 500,00 KRW 74 064 -70 923 0,93 % Seoul
Continental AG 121 000 50 302 70,77 EUR 65 119 14 817 0,82 % Xetra
Mahindra & Mahindra Ltd GDR 591 300 10 523 13,75 USD 46 402 35 879 0,58 % London Int.
Fjord Line AS 2 850 000 28 500 15,00 NOK 42 750 14 250 0,54 % Unotert
NHST Media Group ASA 60 000 31 447 600,00 NOK 36 000 4 553 0,45 % Unotert
Renault SA 79 000 23 888 39,52 EUR 23 745 -143 0,30 % Paris
Minor items 27 962 3 529 -24 433 0,04 %
Total Consumer Discretionary 928 441 716 430 -212 011 9,03 %
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
35
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
IT 9,7%
Energy
24,6%
Industrials 19,3%
Finance 11,5%
Raw
Materials
6,3% Health 5,6%
Consumer
Discretionary 9,0%
Telecom 3,9%
Cash 1,8%
Consumer
Staples 5,9%
Utilities 2,7%
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.
SECURI TI ES PORTFOLI O SKAGEN VEKST AS OF 31- 03-2012
South-America 5,2% Cash 1,8% Asia ex
Japan 10,2%
Japan 0,2%
EMEA 5,7%

Eurozone
6,1%
North
America 6,3% Norway 59,0%
Peripheral EU 5,3%
Oceania 0,2%
* Figures in 1000 NOK
The market value as of 31.03.2012 is the last quoted price from the stock exchange. The average cost method is used for the calculation of sales gain.
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 75,00 NOK 116 928 51 156 1,47 % Oslo Brs
Morpol ASA 8 407 150 175 896 9,00 NOK 75 664 -100 231 0,95 % Oslo Brs
Kesko Oyj B 374 811 97 876 24,33 EUR 69 347 -28 529 0,87 % Helsinki
Chiquita Brands Intl 1 119 523 91 964 8,86 USD 56 610 -35 354 0,71 % New York
Royal Unibrew A/S 135 865 38 746 388,00 DKK 53 881 15 134 0,68 % Kbenhavn
Austevoll Seafood ASA 1 972 716 62 173 21,80 NOK 43 005 -19 168 0,54 % Oslo Brs
Yazicilar Holding AS 750 000 25 622 12,40 TRY 29 751 4 129 0,37 % Istanbul
Minor items 102 684 23 638 -79 045 0,30 %
Total Consumer Staples 660 734 468 825 -191 909 5,91 %
HEALTH CARE
Teva Pharmaceutical-Sp ADR 719 787 217 973 44,79 USD 183 996 -33 977 2,32 % NASDAQ
Clavis Pharma ASA 943 918 31 160 68,50 NOK 64 658 33 499 0,81 % Oslo Brs
Photocure ASA 1 109 401 44 688 44,70 NOK 49 590 4 902 0,63 % Oslo Brs
Algeta ASA 256 000 25 537 143,70 NOK 36 787 11 250 0,46 % Oslo Brs
Medi-Stim ASA 1 611 000 20 130 20,20 NOK 32 542 12 413 0,41 % Oslo Brs
Origio A/S 1 550 000 24 276 18,30 NOK 28 365 4 089 0,36 % Oslo Brs
Karolinska Development AB 1 234 600 43 031 24,40 SEK 25 937 -17 095 0,33 % Stockholm
Minor items 45 211 19 670 -25 540 0,25 %
Total Health Care 452 006 441 546 -10 460 5,57 %
FINANCIALS
Olav Thon Eiendomsselskap ASA 180 025 33 834 888,00 NOK 159 862 126 028 2,01 % Oslo Brs
Gjensidige Forsikring ASA 2 298 872 135 501 67,25 NOK 154 599 19 099 1,95 % Oslo Brs
Hannover Rueckversicherung AG 367 500 74 061 44,54 EUR 124 475 50 414 1,57 % Frankfurt
Danske Bank A/S 741 784 83 171 94,50 DKK 71 648 -11 523 0,90 % Kbenhavn
Northern Logistic Property ASA 2 728 689 82 502 24,50 NOK 66 853 -15 649 0,84 % Oslo Brs
Hitecvision AS 762 746 5 183 65,00 NOK 49 578 44 395 0,62 % Unotert
Korean Reinsurance Co 716 135 8 469 13 650,00 KRW 49 252 40 783 0,62 % Seoul
Sparebanken st 1 460 000 25 877 31,30 NOK 45 698 19 821 0,58 % Oslo Brs
Norwegian Finans Holding ASA 12 712 000 24 925 3,50 NOK 44 492 19 567 0,56 % Unotert
Haci Omer Sabanci Holding AS 1 501 444 23 339 7,66 TRY 36 792 13 453 0,46 % Istanbul
Sparebanken Vest 995 506 45 056 33,20 NOK 33 051 -12 005 0,42 % Oslo Brs
Irsa Sa ADR 397 502 31 351 10,18 USD 23 095 -8 257 0,29 % New York
Minor items 55 990 49 033 -6 957 0,62 %
Total Financials 629 260 908 428 279 168 11,45 %
INFORMATION TECHNOLOGY
Samsung Electronics Co Ltd Pref GDR 116 936 92 728 346,30 USD 231 113 138 385 2,91 % London Int.
Samsung Electronics Co Ltd GDR 50 000 19 712 565,50 USD 161 371 141 659 2,03 % London Int.
Q-Free ASA 3 182 604 44 688 23,20 NOK 73 836 29 149 0,93 % Oslo Brs
Corning Inc 909 450 78 893 14,00 USD 72 692 -6 202 0,92 % New York
Eltek ASA 17 038 235 91 536 4,14 NOK 70 538 -20 997 0,89 % Oslo Brs
Proact IT Group AB 458 101 15 214 144,50 SEK 56 994 41 780 0,72 % Stockholm
Samsung SDI Co Ltd 40 000 16 815 137 000,00 KRW 27 610 10 796 0,35 % Seoul
EDB Ergogroup ASA 1 907 740 23 212 13,20 NOK 25 182 1 970 0,32 % Oslo Brs
Minor items 89 226 47 479 -41 748 0,60 %
Total Information Technology 472 024 766 816 294 792 9,67 %
TELECOM
France Telecom SA 1 111 904 142 131 11,10 EUR 93 899 -48 232 1,18 % Paris
Mobile Telesystems ADR 645 000 41 051 18,28 USD 67 291 26 241 0,85 % New York
Sistema Jsfc GDR 573 709 19 190 19,69 USD 64 470 45 281 0,81 % London Int.
Telekomunikasi Indonesia Tbk ADR 265 000 14 762 30,61 USD 46 295 31 533 0,58 % New York
Indosat Tbk PT ADR 193 488 32 182 28,00 USD 30 920 -1 262 0,39 % New York
Minor items 7 842 1 550 -6 292 0,02 %
Total Telecom 257 156 304 425 47 269 3,84 %
UTILITIES
Centrais Eletricas Brasileiras SA Pref 2 610 818 126 051 23,51 BRL 191 998 65 946 2,42 % Sao Paulo
Minor items 29 055 19 014 -10 042 0,24 %
Total Telecom 155 107 211 011 55 905 2,66 %
Total equity portfolio* 7 258 450 7 814 125 555 675 98,49 %
Disposable liquidity 119 810 1,51 %
Total share capital 7 933 935 100,00 %
Base price as of 31.03.2012 1 293,1778
36
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
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.
SECURI TI ES PORTFOLI O SKAGEN GLOBAL AS OF 31- 03-2012
+++++
Security Number
Acquistion
value NOK *
Market
price
Cur-
rency
Market-
value NOK*
Unrealised
gain/loss *
Share of
fund
Stock-
exchange
ENERGY
Gazprom Oao ADR 13 151 412 966 520 12,20 USD 914 710 -51 811 2,67 % London Int.
Baker Hughes Inc 2 133 086 560 665 41,44 USD 503 940 -56 725 1,47 % New York
Petroleo Brasileiro Pref ADR 3 396 473 606 992 25,36 USD 491 053 -115 939 1,43 % New York
Weatherford Intl Ltd 5 666 310 482 081 14,94 USD 482 616 535 1,41 % New York
Kazmunaigas Exploration GDR 3 671 058 464 232 20,28 USD 424 434 -39 798 1,24 % London Int.
OMV AG 2 064 000 445 062 26,46 EUR 415 029 -30 034 1,21 % Wien
Ensco Plc - ADR 1 291 844 369 790 52,63 USD 387 610 17 820 1,13 % New York
Nabors Industries Ltd 3 340 496 464 608 17,21 USD 327 845 -136 763 0,96 % New York
BP Plc 4 612 282 234 832 4,62 GBP 194 190 -40 642 0,57 % London
BP Plc ADR 617 696 188 955 44,43 USD 156 460 -32 495 0,46 % New York
Petroleo Brasileiro SA 2 065 412 146 770 23,15 BRL 149 491 2 722 0,44 % Sao Paulo
Electromagnetic Geoservices AS 6 981 000 107 661 16,90 NOK 117 979 10 317 0,34 % Oslo Brs
Afren Plc 8 877 951 68 970 1,33 GBP 107 720 38 750 0,31 % London
Noble Corp 504 593 111 915 37,20 USD 107 020 -4 895 0,31 % New York
Total Energy 5 219 055 4 780 097 -438 958 13,93 %
RAW MATERIALS
Akzo Nobel NV 1 912 478 578 591 43,87 EUR 637 471 58 880 1,86 % Amsterdam
Cliffs Natural Resources Inc 1 391 917 371 502 69,65 USD 552 695 181 193 1,61 % New York
Heidelbergcement AG 1 170 781 367 883 45,20 EUR 402 078 34 195 1,17 % Xetra
Ternium SA ADR 2 858 382 450 212 23,62 USD 384 903 -65 309 1,12 % New York
Norsk Hydro ASA 9 761 378 288 436 30,90 NOK 301 627 13 190 0,88 % Oslo Brs
Mayr-Melnhof Karton AG 450 627 203 444 75,40 EUR 258 158 54 714 0,75 % Wien
UPM-Kymmene Oyj 1 467 477 97 177 10,15 EUR 113 171 15 994 0,33 % Helsinki
Minor items 117 929 86 409 -31 520 0,25 %
Total Raw Materials 2 475 174 2 736 511 261 336 7,97 %
INDUSTRIALS
Tyco International Ltd 6 332 310 1 308 796 55,85 USD 2 016 213 707 417 5,88 % New York
Bunge Ltd 1 731 468 564 425 67,89 USD 670 149 105 723 1,95 % New York
LG Corp 1 973 017 508 947 65 000,00 KRW 645 604 136 657 1,88 % Seoul
Siemens AG 923 819 541 363 75,31 EUR 528 611 -12 752 1,54 % Frankfurt
Randstad Holding NV 1 884 477 466 558 28,30 EUR 405 204 -61 354 1,18 % Amsterdam
TE Connectivity Ltd 1 845 719 288 767 36,63 USD 385 437 96 670 1,12 % New York
Stolt-Nielsen Ltd 1 893 500 336 914 107,50 NOK 203 551 -133 363 0,59 % Oslo Brs
BayWa AG 744 577 222 363 28,56 EUR 161 571 -60 792 0,47 % Frankfurt
Minor items 338 591 154 725 -183 867 0,45 %
Total Industrials 4 576 725 5 171 065 594 340 15,07 %
CONSUMER DISCRETIONARY
Comcast Corp 4 236 789 416 985 29,39 USD 709 884 292 899 2,07 % NASDAQ
Toyota Industries Corp 3 019 921 502 646 2 496,00 JPY 521 614 18 969 1,52 % Tokyo
Renault SA 1 424 602 362 154 39,17 EUR 423 978 61 824 1,24 % Paris
Hyundai Motor Pref (2pb) 562 937 157 824 70 100,00 KRW 198 655 40 831 0,58 % Seoul
Time Warner Cable Inc 406 427 109 532 80,76 USD 187 124 77 592 0,55 % New York
Television Broadcasts Ltd 4 565 862 110 528 52,35 HKD 175 514 64 987 0,51 % Hong Kong
Yamaha Motor Co Ltd 1 953 411 159 122 1 109,00 JPY 149 911 -9 211 0,44 % Tokyo
Dixons Retail Plc 78 684 888 109 156 0,19 GBP 134 822 25 666 0,39 % London
LG Electronics Inc Pref 1 036 948 270 944 24 500,00 KRW 127 892 -143 052 0,37 % Seoul
Minor items 44 138 74 516 30 378 0,22 %
Total Consumer Discretionary 2 243 030 2 703 912 460 882 7,88 %
Risk

4 2 1 3 5 6 7
37
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
IT 14,4%
Energy
13,9%

Industrials 15,1%
Finance 17,5%
Raw
Materials
8,0%
Health 5,4%
Consumer
Discretionary 7,9%
Telecom 6,2%
Consumer
Staples 6,1%
Utilities
3,5%
Cash
2,0%
SECTOR DISTRIBUTION
South America 8,3%
Cash 2,0%
Asia ex
Japan 17,0%
Japan 4,9%
EMEA 7,1%

Eurozone 14,8%
North America
32,9%
Norway 3,5%
Peripheral EU 8,8%
North-Africa
0,9%
GEOGRAPHICAL DISTRIBUTION
10 LARGEST HOLDINGS
* From the moor north of Skagen, 1885. Detail.
By P.S. Kryer, one of the Skagen painters.
The picture is owned by the Skagens Museum.
SECURI TI ES PORTFOLI O SKAGEN GLOBAL AS OF 31- 03-2012
* Figures in 1000 NOK
The market value as of 31.03.2012 is the last quoted price from the stock exchange. The average cost method is used for the calculation of sales gain.
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 7 497 731 593 474 114,80 SEK 739 880 146 406 2,16 % Stockholm
Unilever NV-Cva 2 296 346 398 892 25,57 EUR 446 133 47 241 1,30 % Amsterdam
Tesco Plc 12 597 340 456 323 3,30 GBP 378 222 -78 102 1,10 % London
Yazicilar Holding AS 4 021 961 97 412 12,40 TRY 159 494 62 082 0,46 % Istanbul
United Intl Enterprises 154 171 22 774 815,00 DKK 128 319 105 546 0,37 % Kbenhavn
Royal Unibrew A/S 253 219 61 811 388,00 DKK 100 337 38 526 0,29 % Kbenhavn
Minor items 186 065 148 093 -37 971 0,43 %
Total Consumer Staples 1 816 751 2 100 478 283 728 6,12 %
HEALTH CARE
Pzer Inc 6 152 893 719 550 22,69 USD 795 803 76 253 2,32 % New York
Roche Holding AG-Genusschein 461 983 402 234 157,00 CHF 457 814 55 580 1,33 % Zrich
Teva Pharmaceutical-Sp ADR 1 801 502 383 411 44,25 USD 454 464 71 052 1,32 % NASDAQ
Rhoen-Klinikum AG 1 257 091 138 342 15,09 EUR 144 129 5 788 0,42 % Xetra
Minor items 29 944 1 824 -28 120 0,01 %
Total Health Care 1 673 480 1 854 034 180 554 5,40 %
FINANCIALS
Citigroup Inc 6 679 820 1 577 639 36,42 USD 1 386 934 -190 705 4,04 % New York
Goldman Sachs Group Inc 883 683 640 977 123,70 USD 623 185 -17 792 1,82 % New York
Gjensidige Forsikring ASA 8 317 774 491 858 67,35 NOK 560 202 68 344 1,63 % Oslo Brs
Hannover Rueckversicherung AG 1 563 931 330 375 44,25 EUR 525 808 195 433 1,53 % Frankfurt
Banco Do Estado Rio Grande Do Sul Pref 7 842 527 155 483 20,16 BRL 494 316 338 834 1,44 % Sao Paulo
Cheung Kong Holdings Ltd 3 780 674 283 780 100,30 HKD 278 448 -5 332 0,81 % Hong Kong
Haci Omer Sabanci Holding AS 11 319 870 213 856 7,66 TRY 277 303 63 447 0,81 % Istanbul
Kinnevik Investment AB-B 2 039 277 100 415 153,40 SEK 268 900 168 485 0,78 % Stockholm
Aberdeen Asset Management Plc 10 859 589 96 133 2,57 GBP 254 032 157 899 0,74 % London
Asya Katilim Bankasi AS 29 208 168 288 115 1,96 TRY 183 081 -105 034 0,53 % Istanbul
TAG Immobilien AG 2 921 133 153 887 6,95 EUR 154 364 476 0,45 % Frankfurt
Osaka Securities Exchange Co 4 723 93 588 459 500,00 JPY 150 180 56 593 0,44 % Tokyo
EFG-Hermes Holding SAE 10 956 636 206 143 13,58 EGP 140 436 -65 707 0,41 % Cairo
Industrial Bank of Korea 1 973 755 144 101 13 750,00 KRW 136 621 -7 480 0,40 % Seoul
Japan Securities Finance Co 4 006 975 233 138 479,00 JPY 132 819 -100 319 0,39 % Tokyo
Albaraka Turk Katilim Bankasi AS 19 059 400 213 096 2,03 TRY 123 734 -89 362 0,36 % Istanbul
GSW Immobilien AG 599 179 102 445 25,92 EUR 118 024 15 579 0,34 % Xetra
Irsa Sa ADR 1 815 671 151 638 10,20 USD 105 582 -46 057 0,31 % New York
Minor items 79 162 99 871 20 709 0,29 %
Total Financials 5 555 830 6 013 842 458 012 17,53 %
INFORMATION TECHNOLOGY
Samsung Electronics Co Ltd Pref 578 868 1 333 977 795 000,00 KRW 2 316 693 982 716 6,75 % Seoul
Oracle Corp 6 252 604 1 007 985 29,19 USD 1 040 510 32 524 3,03 % NASDAQ
Kyocera Corp 1 300 268 684 514 7 580,00 JPY 682 042 -2 472 1,99 % Tokyo
Microsoft Corp 2 199 798 325 540 32,15 USD 403 257 77 717 1,18 % NASDAQ
Samsung Electronics Co Ltd Pref GDR 140 891 142 339 346,30 USD 278 155 135 816 0,81 %
London In-
ternational
Yahoo! Inc 2 109 702 179 617 15,24 USD 183 298 3 681 0,53 % NASDAQ
Minor items 42 374 40 299 -2 075 0,12 %
Total Information Technology 3 716 346 4 944 254 1 227 908 14,41 %
TELECOM
Vimpelcom Ltd-Spon ADR 11 907 183 935 874 11,12 USD 754 857 -181 017 2,20 % New York
China Mobile Ltd 7 150 200 414 448 85,45 HKD 448 646 34 198 1,31 % Hong Kong
China Mobile Ltd ADR 1 386 102 379 877 55,00 USD 434 619 54 743 1,27 % New York
Indosat Tbk PT ADR 921 819 137 600 28,00 USD 147 148 9 548 0,43 % New York
Vivendi SA 1 267 811 152 961 13,75 EUR 132 451 -20 511 0,39 % Paris
Minor items 159 637 208 749 49 112 0,61 %
Total Telecom 2 180 398 2 126 470 -53 928 6,20 %
UTILITIES
Centrais Eletricas Brasileiras SA Pref 11 295 481 698 456 23,50 BRL 829 910 131 454 2,42 % Sao Paulo
Centrais Eletricas Brasileiras SA 7 122 805 594 014 16,99 BRL 378 358 -215 657 1,10 % Sao Paulo
Total Utilities 1 292 471 1 208 268 -84 203 3,52 %
Total equity portfolio* 30 749 259 33 638 929 2 889 671 98,03 %
Disposable liquidity 675 046 1,97 %
Total share capital 34 313 975 100,00 %
Base price as of 31.03.2012 822,1424
38
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
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)
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 31- 03-2012
+++++
Security Number
Acquistion
value NOK * Market price
Cur-
rency
Market-
value NOK*
Unrealised
gain/loss *
Share of
fund
Stock-
exchange
ENERGY
Baker Hughes Inc 6 624 935 1 861 319 41,44 USD 1 565 137 -296 182 3,38 % New York
Gazprom Oao ADR 22 085 821 1 524 370 12,20 USD 1 536 117 11 747 3,32 % London Int.
Petroleo Brasileiro Pref ADR 5 943 178 1 026 138 25,36 USD 859 249 -166 889 1,86 % New York
Seadrill Ltd 2 873 932 266 345 212,50 NOK 610 711 344 366 1,32 % Oslo Brs
Tullow Oil Plc 3 554 688 299 448 15,26 GBP 494 124 194 677 1,07 % London
Sasol Ltd 1 699 949 497 038 370,50 ZAR 467 713 -29 325 1,01 % Johannesburg
Petroleo Brasileiro SA 3 200 000 245 877 23,15 BRL 231 611 -14 265 0,50 % Sao Paulo
Pacic Drilling SA 3 741 922 230 070 10,19 USD 217 487 -12 583 0,47 % New York
Archer Ltd 13 276 071 320 208 14,15 NOK 187 856 -132 351 0,41 % Oslo Brs
Deep Sea Supply Plc 12 229 431 125 766 12,80 NOK 156 537 30 771 0,34 % Oslo Brs
Siem Offshore Inc 10 977 629 94 336 10,90 NOK 119 656 25 320 0,26 % Oslo Brs
Minor items 96 272 48 259 -48 013 0,10 %
Total Energy 6 587 185 6 494 458 -92 727 14,03 %
RAW MATERIALS
Vale Sa Spons ADR 8 522 364 900 179 22,53 USD 1 094 885 194 707 2,37 % New York
Exxaro Resources Ltd 4 683 604 591 283 198,13 ZAR 689 105 97 822 1,49 % Johannesburg
Eurasian Natural Resources 7 267 473 433 990 5,92 GBP 392 240 -41 750 0,85 % London
Vale SA-Pref A 1 231 900 210 807 41,16 BRL 158 529 -52 278 0,34 % Sao Paulo
Drdgold Ltd ADR 3 724 701 206 450 7,29 USD 154 800 -51 650 0,33 % NASDAQ
Asia Cement China Holdings 50 706 000 186 391 3,90 HKD 145 210 -41 181 0,31 % Hong Kong
Minor items 59 153 70 782 11 629 0,15 %
Total Raw Materials 2 588 252 2 705 552 117 299 5,85 %
INDUSTRIALS
ABB Ltd 8 957 636 964 815 135,30 SEK 1 041 792 76 976 2,25 % Stockholm
Aveng Ltd 21 017 094 617 358 39,09 ZAR 610 089 -7 269 1,32 % Johannesburg
Empresas ICA S.A.B 42 542 700 621 197 24,25 MXN 459 502 -161 695 0,99 % Mexico
Harbin Electric Company Ltd 68 000 000 614 366 8,14 HKD 406 450 -207 917 0,88 % Hong Kong
Bidvest Group Ltd 2 878 881 335 297 179,75 ZAR 384 280 48 983 0,83 % Johannesburg
AirAsia Bhd 47 375 200 110 718 3,45 MYR 304 146 193 427 0,66 % Kuala Lumpur
A P Moller - Maersk B 6 500 247 249 43 080,00 DKK 285 970 38 722 0,62 % Kbenhavn
Golar LNG Ltd. 1 274 141 230 093 216,80 NOK 276 234 46 140 0,60 % OsloBrs
Norwegian Air Shuttle ASA 1 628 768 119 886 107,50 NOK 175 093 55 206 0,38 % Oslo Brs
Tekfen Holding AS 8 158 907 123 013 6,18 TRY 161 252 38 239 0,35 % Istanbul
Enka Insaat Ve Sanayi AS 8 416 664 105 720 5,68 TRY 152 888 47 167 0,33 % Istanbul
Frontline 2012 Ltd 4 912 000 83 435 24,00 NOK 117 888 34 453 0,25 % Unotert
Minor items 510 630 493 246 -17 384 1,07 %
Total Industrials 4 683 780 4 868 828 185 048 10,52 %
CONSUMER DISCRETIONARY
Hyundai Motor Pref (2pb) 3 574 100 570 644 70 100,00 KRW 1 261 266 690 621 2,73 % Seoul
Great Wall Motor Co Ltd 105 000 000 190 465 15,10 HKD 1 164 233 973 768 2,52 % Hong Kong
Hyundai Motor Pref (1p) 3 259 810 521 108 67 800,00 KRW 1 112 612 591 504 2,40 % Seoul
Mahindra & Mahindra Ltd GDR 7 628 837 140 559 13,75 USD 598 015 457 456 1,29 % London Int.
LG Electronics Inc Pref 3 150 000 850 969 24 500,00 KRW 388 507 -462 463 0,84 % Seoul
DRB-Hicom Bhd 54 368 600 205 041 2,52 MYR 254 953 49 912 0,55 % Kuala Lumpur
Gome Electrical Appliances Holding Ltd 160 266 000 237 151 1,61 HKD 189 470 -47 681 0,41 % Hong Kong
Hengdeli Holdings Ltd 64 928 000 122 661 3,28 HKD 156 379 33 718 0,34 % Hong Kong
LG Electronics Inc 297 269 79 295 82 800,00 KRW 123 909 44 613 0,27 % Seoul
Mahindra & Mahindra Ltd 1 482 013 115 856 700,20 INR 116 008 152 0,25 % Nat. India
Minor items 29 196 000 326 925 223 742 -103 183 0,48 %
Total Consumer Discretionary 3 360 676 5 589 093 2 228 416 12,08 %
Risk

4 2 1 3 5 6 7
39
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
IT 11,6%
Energy
14,0%
Industrials 10,5%

Finance 17,0%
Raw
Materials
5,8%
Health 4,7%
Consumer
Discretionary 12,1%
Telecom 9,2%
Consumer
Staples 7,5%
Utilities
4,7%
Cash
3,0%
SECTOR DISTRIBUTION
Cash 3,0%
Asia ex
Japan 38,8%
East
Africa
0,2%
EMEA 23,7%
Japan 0,7%
South America
14,9%
Eurozone 1,9%
North
America 4,0%
Norway 4,4%
Peripheral EU
6,0%
North
Africa 0,7%
West Africa 1,8%
GEOGRAPHICAL DISTRIBUTION
10 LARGEST HOLDINGS
* Skagen reefs lightship, 1892. Detail.
By Carl Locher, one of the Skagen painters.
The picture is owned by the Skagens Museum.
SECURI TI ES PORTFOLI O SKAGEN KON-TI KI AS OF 31- 03-2012
* Figures in 1000 NOK
The market value as of 31.03.2012 is the last quoted price from the stock exchange. The average cost method is used for the calculation of sales gain.
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 14,65 USD 712 005 278 342 1,54 % New York
Shoprite Holdings Ltd 6 722 590 320 674 137,30 ZAR 685 428 364 755 1,48 % Johannesburg
Kulim Malaysia BHD 67 500 400 213 083 4,18 MYR 525 042 311 959 1,13 % Kuala Lumpur
Yazicilar Holding AS 9 654 470 239 354 12,40 TRY 382 855 143 501 0,83 % Istanbul
Heineken NV 918 707 268 693 41,65 EUR 290 729 22 036 0,63 % Amsterdam
PZ Cussons Plc 7 800 000 130 854 3,00 GBP 213 155 82 301 0,46 % London
Royal Unibrew A/S 489 758 82 208 388,00 DKK 194 064 111 856 0,42 % Kbenhavn
Tata Global Beverages Ltd 13 626 721 182 536 112,35 INR 171 150 -11 386 0,37 % Nat. India
Minor items 317 890 278 245 -39 645 0,60 %
Total Consumer Staples 2 188 954 3 452 673 1 263 719 7,46 %
HEALTH CARE
Richter Gedeon Nyrt 968 258 1 070 376 37 600,00 HUF 937 285 -133 091 2,03 % Budapest
Stada Arznemittel AG 2 597 658 383 691 24,66 EUR 486 711 103 020 1,05 % Frankfurt
Hanmi Pharm Co Ltd 760 725 315 456 60 300,00 KRW 230 923 -84 533 0,50 % Seoul
China Shineway Pharmaceutical 22 497 000 162 815 11,76 HKD 194 270 31 455 0,42 % Hong Kong
Eis Eczacibasi Ilac Ve Sanayi 21 418 365 146 800 2,09 TRY 143 158 -3 641 0,31 % Istanbul
Minor items 298 187 200 668 -97 519 0,43 %
Total Health Care 2 377 325 2 193 016 -184 309 4,74 %
FINANCIALS
Banco Do Estado Rio Grande Do Sul Pref 19 274 229 434 278 20,16 BRL 1 214 859 780 582 2,63 % Sao Paulo
Haci Omer Sabanci Holding AS 49 058 140 964 828 7,66 TRY 1 201 777 236 949 2,60 % Istanbul
VTB Bank Ojsc GDR 34 393 253 1 127 989 4,51 USD 884 302 -243 687 1,91 % London Int.
State Bank of India 2 305 149 662 042 2 096,35 INR 540 226 -121 816 1,17 % Nat. India
Standard Chartered Plc 3 658 731 426 729 15,56 GBP 518 752 92 024 1,12 % London
Aberdeen Asset Management Plc 21 603 336 340 012 2,57 GBP 505 354 165 343 1,09 % London
JSE Ltd 6 464 519 249 899 79,40 ZAR 381 164 131 264 0,82 % Johannesburg
Kiwoom Securities Co Ltd 1 065 984 194 810 71 000,00 KRW 381 005 186 195 0,82 % Seoul
Korean Reinsurance Co 4 765 066 181 791 13 650,00 KRW 327 434 145 643 0,71 % Seoul
Bangkok Bank Public Co-Nvdr 9 410 500 240 648 185,00 THB 321 813 81 165 0,70 % Bangkok
Yapi Ve Kredi Bankasi AS 25 265 176 292 767 3,60 TRY 290 877 -1 890 0,63 % Istanbul
Gjensidige Forsikring ASA 3 867 692 228 194 67,35 NOK 260 489 32 295 0,56 % Oslo Brs
EFG-Hermes Holding SAE 14 949 381 353 507 13,37 EGP 188 650 -164 856 0,41 % Cairo
Nordnet AB 7 007 907 97 310 23,30 SEK 140 357 43 047 0,30 % Stockholm
Kiatnakin Bank Pcl-Nvdr 19 238 700 142 186 37,00 THB 131 582 -10 604 0,28 % Bangkok
Minor items 632 213 566 181 -66 032 1,22 %
Total Financials 6 569 201 7 854 822 1 285 621 16,97 %
INFORMATION TECHNOLOGY
Samsung Electronics Co Ltd Pref 550 547 1 360 170 795 000,00 KRW 2 203 349 843 180 4,76 % Seoul
Hon Hai Precision Industry 65 100 000 1 405 300 114,50 TWD 1 439 358 34 058 3,11 % Taipei
Samsung Electronics Co Ltd Pref GDR 505 370 496 402 346,30 USD 997 730 501 328 2,16 % London Int.
Softbank Corp 2 000 000 443 593 2 447,00 JPY 338 667 -104 925 0,73 % Tokyo
Naspers Ltd 988 091 236 708 431,00 ZAR 316 249 79 541 0,68 % Johannesburg
Minor items 224 066 65 746 -158 319 0,14 %
Total Information Technology 4 166 237 5 361 100 1 194 862 11,59 %
TELECOM
China Mobile Ltd ADR 5 096 446 1 513 808 55,00 USD 1 598 016 84 208 3,45 % New York
Sistema Jsfc GDR 11 303 681 901 767 19,69 USD 1 268 869 367 101 2,74 % London Int.
Bharti Airtel Ltd 19 324 305 885 064 337,90 INR 729 969 -155 095 1,58 % Nat. India
Indosat Tbk PT 105 000 000 326 495 5 050,00 IDR 329 816 3 320 0,71 % Indonesia
Indosat Tbk PT ADR 2 054 595 350 229 28,00 USD 327 971 -22 259 0,71 % New York
Total Telecom 3 977 364 4 254 640 277 277 9,19 %
UTILITIES
Centrais Eletricas Brasileiras SA Pref 27 410 963 2 036 002 23,50 BRL 2 013 959 -22 044 4,35 % Sao Paulo
Centrais Eletricas Brasileiras SA 2 452 151 187 633 16,99 BRL 130 256 -57 377 0,28 % Sao Paulo
Minor items 58 627 40 870 -17 756 0,09 %
Total Utilities 2 282 262 2 185 086 -97 176 4,72 %
Total equity portfolio* 38 781 237 44959266 6 178 029 97,15 %
Disposable liquidity 1 316 653 2,85 %
Total share capital 46275919 100,00 %
Base price as of 31.03.2012 529,7418
40
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
SECURI TI ES PORTFOLI O SKAGEN TELLUS AS OF 31- 03-2012
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.
The picture is owned by the Skagens Museum.
++++
Security M
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F
a
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v
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*
*
*
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a
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GOVERNMENT BONDS
Australian Government 15.04.2012 5,75 4 000 23 388 590,13 619 23 605 24 224 218 5,25 %
Brazilian Government 10.01.2028 10,25 6 000 21 788 372,64 425 22 358 22 784 570 4,93 %
Canadian Government 01.08.2013 2,00 5 000 28 695 577,22 91 28 861 28 952 167 6,27 %
Chilean Government 05.08.2020 5,50 800 000 10 006 1,22 78 9 750 9 828 -256 2,13 %
European Bank Recon & Dev 17.06.2015 0,50 20 000 18 273 87,59 71 17 518 17 589 -755 3,81 %
Colombian Government 14.04.2021 7,75 5 000 000 17 419 0,38 1 181 19 003 20 185 1 584 4,37 %
Czech Republic 16.09.2013 2,80 40 000 12 240 31,17 184 12 469 12 653 229 2,74 %
Irish Government 18.10.2020 5,00 2 000 13 419 674,58 340 13 492 13 832 72 3,00 %
European Bank Recon & Dev 06.06.2014 5,25 130 000 14 998 10,99 620 14 289 14 909 -709 3,23 %
Mexican Government 20.11.2036 10,00 40 000 21 226 56,69 489 22 674 23 163 1 448 5,02 %
New Zealand Government 15.04.2015 6,00 2 000 10 596 507,01 256 10 140 10 396 -456 2,25 %
Polish Government 25.10.2021 5,46 15 000 26 434 185,65 641 27 848 28 489 1 414 6,17 %
Russian Government 10.03.2018 7,85 50 000 9 956 20,19 42 10 097 10 139 141 2,20 %
US Government 31.08.2013 0,12 7 000 40 672 567,96 4 39 757 39 761 -915 8,61 %
South African Government 31.03.2036 6,25 50 000 29 714 55,19 1 154 27 594 28 749 -2 120 6,23 %
UK Government 14.05.2012 0,00 3 000 26 971 910,21 0 27 306 27 306 335 5,91 %
Norwegian Government 20.06.2012 0,00 25 000 24 910 99,68 0 24 920 24 920 10 5,40 %
US Government 31.05.2012 0,75 7 000 39 294 569,76 99 39 883 39 982 589 8,66 %
Total Bond Portfolio 390 000 6 296 391 566 397 862 1 566 86,15 %
Disposable liquidity 63 876 0 63 954 63 954 78 13,85 %
TOTAL 453 876 6 296 455 520 461 816 1 644 100,00 %
Portfolio Key Figures
Effective underlying return 3,17 %
Effective yield to clients* 2,37 %
Duration** 3,16
* 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 31.03.2012.
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 31.03.2012 105,1926
Risk

4 2 1 3 5 6 7
41
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
FI NANCI AL STATEMENT
Financial statement
AS OF 31.03.2012
Income Statement
(all gures in NOK 1000)
SKAGEN Vekst
01.01.2012 -
31.03.2012
SKAGEN Global
01.01.2012 -
31.03.2012
SKAGEN Kon-Tiki
01.01.2012 -
31.03.2012
SKAGEN Avkastning
01.01.2012 -
31.03.2012
SKAGEN Hyrente
01.01.2012 -
31.03.2012
SKAGEN Hyrente
Institusjon
01.01.2012 -
31.03.2012
SKAGEN Tellus
01.01.2012 -
31.03.2012
SKAGEN Krona**
01.01.2012 -
31.03.2012
PORTFOLIO REVENUE AND COSTS
Interest income and costs -2 292 -1 655 2 215 10 286 37 326 13 773 4 258 3 884
Dividends 13 755 126 300 84 565 - - - - -
Realised capital gain/loss 40 378 -9 541 98 741 28 516 -1 064 3 573 -
Change unrealised gain/loss 808 752 2 729 414 3 110 807 9 509 8 587 2 791 -5 116 458
Broker's fee -628 -2 585 -10 006 -3 -34 -16 -7 -25
Currency gain/loss -20 410 -47 816 -11 935 2 347 - - -1 144 -
Portfolio result 839 556 2 794 117 3 274 387 22 167 46 395 15 484 1 564 4 317
MANAGEMENT REVENUE AND COSTS
Management fee - xed -19 845 -83 590 -225 808 -1 289 -2 572 -587 -1 027 -196
Management fee - variable* -70 411 -57 139 55 520 - - - - -
Asset management result -90 256 -140 728 -170 287 -1 289 -2 572 -587 -1 027 -196
Result before tax 749 300 2 653 388 3 104 100 20 878 43 823 14 896 537 4 121
Tax cost -517 -10 686 -5 576 - - - - -
NET INCOME FOR THE PERIOD 748 783 2 642 702 3 098 523 20 878 43 823 14 896 537 4 121
Balance Sheet SKAGEN Vekst
31.03. 2012
SKAGEN Global
31.03. 2012
SKAGEN KonTiki
31.03. 2012
SKAGEN Avkastning
31.03. 2012
SKAGEN Hyrente
31.03. 2012
SKAGEN Hyrente
Institusjon
31.03. 2012
SKAGEN Tellus
31.03. 2012
SKAGEN Krona
31.03. 2012
ASSETS
Norwegian securities at cost price 4 045 665 931 460 1 560 763 699 118 3 139 740 1 011 730 24 910 -
Foreign securities at cost price 3 212 785 29 797 459 37 220 474 103 433 - - 365 090 414 371
Unrealised capital gains 555 675 2 910 011 6 178 029 1 426 3 466 1 759 1 566 283
Accrued interest securities - - - 3 955 16 264 8 276 5 204 2 462
Total securities portfolio 7 814 125 33 638 929 44 959 266 807 932 3 159 470 1 021 765 396 770 417 117
Dividend receivable 20 433 163 168 178 134 - - - - -
Accrued interest bank - - - - - - - -
Total accrued income 20 433 163 168 178 134 - - - - -
Accounts receivable - brokers 48 995 34 699 26 242 - 15 256 - - -
Accounts receivable - management company 1 2 3 - - - 1 -
Tax receivable on dividends 3 100 25 070 2 519 - - - 883 -
Other receivables - - - - - - - -
Total other receivables 52 096 59 771 28 764 - 15 256 - 884 -
Bank deposits 161 063 817 934 1 471 642 103 313 739 617 432 669 65 528 36 011
TOTAL ASSETS 8 047 717 34 679 803 46 637 806 911 245 3 914 344 1 454 434 463 183 453 128
EQUITY CAPITAL
Unit capital at par value 613 646 4 182 501 8 739 935 675 615 3 788 414 1 433 756 438 984 424 798
Premium -971 896 17 750 554 23 078 590 236 991 32 932 -3 945 46 333 2 551
Total paid-in equity capital -358 249 21 933 055 31 818 524 912 606 3 821 346 1 429 811 485 317 427 348
Retained earnings 8 293 597 12 452 307 14 477 167 -2 865 38 862 13 963 -23 447 5 155
TOTAL EQUITY CAPITAL 7 935 348 34 385 362 46 295 691 909 741 3 860 208 1 443 774 461 871 432 504
DEBT
Accounts payable - brokers 20 036 126 282 136 542 - 32 273 10 072 - 19 809
Accounts payable - management company 90 256 140 728 170 287 1 289 2 572 587 1 027 196
Other debt 2 076 27 430 35 285 215 19 291 - 285 619
Total other debt 112 368 294 441 342 114 1 504 54 136 10 660 1 312 20 624
TOTAL DEBT AND EQUITY CAPITAL 8 047 717 34 679 803 46 637 806 911 245 3 914 344 1 454 434 463 183 453 128
Number of units issued 6 136 463,58 41 825 008,42 87 399 345,55 6 756 149,86 37 884 144,48 14 337 561,21 4 389 840,45 4 247 976,32
Base price per unit 1293,1778 822,1424 529,7418 134,6540 101,8939 100,6893 105,1926 101,8137
Note: Divergence in price relative to the portfolios is due to accruals divergence as of 31.03.2012.
* Calculated variable management fee as of 31.03.12: 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
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
42
Return and risk
measurements
NOTICE
Returns in euro*
as of 31-03-2012 Year to
date
1 year 2 year 3 year 5 year 10 year Since
start
SKAGEN Vekst 12,4 % -9,3 % 0,2 % 23,2 % -0,5 % 11,3 % 15,6 %
Oslo Brs Benchmark Index (OSEBX) linked OSEBX/MSCI
AC Total Return Index 11,0 % 2,2 % 8,1 % 30,6 % -0,2 % 9,3 % 9,6 %
SKAGEN Global 10,6 % 2,1 % 8,5 % 25,7 % 3,0 % 10,7 % 16,0 %
MSCI World Linked Index (DM trough AC Total Return) 8,9 % 5,3 % 7,1 % 19,7 % -0,9 % 0,3 % 1,8 %
SKAGEN Kon-Tiki 9,8 % -4,5 % 5,4 % 30,1 % 8,8 % 18,2 % 18,2 %
MSCI Emerging Markets Index (Daily Traded Net Total Return) 11,1 % -2,9 % 4,6 % 24,9 % 4,7 % 9,4 % 9,4 %
SKAGEN Tellus (Euro) 2,60 % 6,58 % 5,27 % 10,37 % 5,55 % 5,8 %
Barclays Capital Global Treasury Index 3 - 5 years (Euro) -2,93 % 9,80 % 6,10 % 5,86 % 6,70 % 5,7 %
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 31-03-2012 SKAGEN Vekst SKAGEN Global SKAGEN Kon-Tiki SKAGEN Tellus
MEAN VARIANCE ANALYSIS LAST 5 YEARS
Standard deviation, fund 25,8 % 20,2 % 25,3 % 7,63 %
Standard deviation, benchmark index 31,5 % 16,1 % 24,0 % 9,00 %
Sharpe-ratio, fund -0,11 0,03 0,25 0,41
Sharpe-ratio, benchmark index -0,08 -0,20 0,10 0,47
Relative volatility/tracking error 10,6 % 8,0 % 5,7 % 10,40 %
Information ratio -0,03 0,48 0,69 -0,10
Correlation 0,95 0,93 0,97 0,23
Alpha -0,4 % 4,0 % 3,8 %
Beta 0,78 1,17 1,03
R2 90 % 86 % 95 %
GAIN LOSS ANALYSIS LAST 5 YEARS
Relative gain 86 % 126 % 108 % 87 %
Relative loss 87 % 107 % 96 % 90 %
Relative gain/loss ratio 0,98 1,17 1,12 0,96
Positive index divergence 12,83 12,09 9,92 11,86
Negative index divergence 13,20 8,08 6,01 12,71
Index divergence ratio 0,97 1,50 1,65 0,93
Percentage positive index divergence 49 % 60 % 62 % 48 %
Percentage positive index divergence when market is up 25 % 72 % 62 % 15 %
Percentage positive index divergence when market is down 78 % 47 % 62 % 84 %
Percentage of number of positive index divergence 40 % 58 % 57 % 57 %
Percentage of number of positive index divergence when market is up 29 % 69 % 56 % 35 %
Percentage of number of positive index divergence when market is down 54 % 46 % 58 % 79 %
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 % 89 %
Relative loss 78 % 103 % 99 % 85 %
Relative gain/loss ratio 1,24 1,55 1,23 1,05
Positive index divergence 15,17 20,95 13,41 11,79
Negative index divergence 9,90 8,34 5,77 11,74
Index divergence ratio 1,53 2,51 2,32 1,00
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
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 1 4 APRI L 2012
43
I NVESTMENT PHI LOSOPHY
Portfolio management is a team sport in
SKAGEN. All portfolio managers share a
strong belief in SKAGENs applied value
orientation, a contrarian and common sense
based investment style that requires patience,
dedication and thorough analysis.
Our experienced portfolio managers are
generalists, good analysts and strong decision
makers. The teams operate on a flat structure
and everyone is required to contribute their own
investment ideas. Each team does, however,
have one lead portfolio manager with ultimate
responsibility for the fund and thereby the right
to veto any potential investments which are
not supportive of our investment philosophy,
or which breach our ethical or corporate gover-
nance guidelines.

Shared ideas, individual decisions
Interaction within the portfolio team is mostly
informal. The teams are all located around one
desk in Stavanger and share ideas and com-
municate in a continuous and ad-hoc manner
across the table.
Although there is a common research plat-
form, individual managers are responsible for
taking independent decisions for their fund.
Portfolio managers are rewarded not only based
on the excess returns and performance of the
funds but also according to other criteria, such
as commitment to the firm and their ability to
share investment ideas. Many portfolio mana-
gers invest a considerable share of their perso-
nal wealth in their funds, thereby aligning their
interests closely with those of the clients.
Our portfolio managers share a strong belief
in SKAGENs contrarian investment style a
long term approach that requires patience,
dedication and thorough research.
SKAGENS
Portfolio Team
Sren Milo Christensen Chris-Tommy Simonsen Torkell Eide Kristian Falnes
SKAGEN Global
Ole Seberg Geir Tjetland
(New in 2012)
Beate Bredesen
SKAGEN Vekst
Ross Porter Cathrine Gether
(On leave)
Knut Harald Nilsson Kristoffer Stensrud
SKAGEN Kon-Tiki
Tomas N. Middelthon
(New in 2012)
Elisabeth A. Gausel
(On leave)
Ola Sjstrand
SKAGEN Hyrente & SKAGEN Hyrente Institusjon
Jane Sirevg Tvedt
SKAGEN Avkastning
Torgeir Hien
SKAGEN Tellus
Harald Espedal
Investment director
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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