Skagen Funds Market Report October 2012

T HE ART OF COMMON SE NSE
6
Back from oblivion
US IT companies once
again appear in the
portfolios.
10
New twist
SAP reshapes
companies use of
customer data.
29
Aiming the bazooka
The European Central
Bank has decided it will
do whatever it takes.
Interest rate therapy
5 Kristoffer Stensrud
Market Report
NUMBE R 3 4 OC T OBE R 2012 4 SK AGE NF UNDS. COM
Room for more
Increasing urbanisation and a sound local knowledge are the most important drivers
for creating good long term returns in SKAGENs new property fund. SKAGEN m
focuses on mispriced, listed property companies from around the world.

READ MORE ABOUT THE ACTIVELY MANAGED PROPERTY FUND ON PAGES 11-13
2
SK AGEN F UNDS MARKE T REPORT 4 NUMBER 3 4 OCTOBER 2012
T HE ART OF COMMON SE NSE
6
Back from oblivion
USIT companies once
again appear in the
portfolios.
10
New twist
SAP reshapes
companies use of
customer data.
29
Aiming the bazooka
The European Central
Bank has decided it will
do whatever it takes.
5 Kristoffer Stensrud
Market Report
NUMBE R 3 4 OC T OBE R 2012 4 SK AGE NF UNDS. COM
Room for more
Increasing urbanisation and a sound local knowledge are the most important drivers
for creating good long termreturns in SKAGENs newproperty fund. SKAGENm
focuses on mispriced, listed property companies fromaround the world.

READMORE ABOUT THE ACTIVELY MANAGEDPROPERTY FUNDONPAGES 11-13
Photo: iStockphoto
SKAGEN FUNDS
MARKET REPORT NO. 3 2012
Contents
3
SKAGEN Funds Returns
4
Leader
5
6
SKAGEN Globals entry onto the
NASDAQ stock exchange
10
SAP overhauls its vast systems
11
SKAGEN launches new equity fund
12
SKAGEN on m
2
14
Notices
15
Ethical guidelines
16
Portfolio managers report
29
Fixed income commentary
31

Risk and return measurements
32
Portfolios
39
Quarterly financial statement
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
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.
Portfolio management team behind SKAGENs new global
property fund, SKAGEN m.
Long-awaited upturn: Money printing from the Fed and ECB lifted stock markets, particularly European companies.
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New Windows: Steve Ballmer and Microsoft have high ho-
pes for their new operating system. SKAGEN has invested
in the software giant and a number of other IT companies.
29
11 6
3
SKAGEN Funds -
Returns
The following tables show the returns for SKAGENs
funds versus their respective benchmarks in euro.
The figures are updated as of 28 September 2012.
EQUITY FUND SKAGEN KON-TIKI
EQUITY FUND SKAGEN GLOBAL EQUITY FUND SKAGEN VEKST
BOND FUND SKAGEN TELLUS
Portfolio manager: Kristoffer Stensrud Start: 5 April 2002
Portfolio manager: Kristian Falnes Start: 7 August 1997 Portfolio managers: Ole Seberg and Geir Tjetland Start: 1 December 1993
Portfolio manager: Torgeir Hien Start: 29 September 2006
SKAGEN Vekst OSEBX/MSCI AC (50/50)
Return past 12 months Average annual return since start
0
5
10
15
20
25
30
20,6 %
30,9%
15,1 %
9,7%
0
5
10
15
20
25
30
SKAGEN Kon-Tiki MSCI Emerging Markets Index (Daily Traded Net Total Return)
21,4 %
22,1 %
-10
0 0
10
20
30
17,3 %
9,1%
-10
20
30
10
0
5
10
15
20
25
30
SKAGEN Global MSCI World Linked Index
26,3 %
25,8%
15,6%
2,1%
0
5
10
15
20
25
30
SKAGEN Tellus Barclays Capital Global Treasury Index 3 - 5 years (euro)
Return past 12 months
6,64 %
13,56 %
Average annual return since start
6,36 %
-20
-10
0
10
20
-20
-10
0
10
20
6,73 %
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
LE ADER
It is always a regret to discover that financial
sector participants have feet of clay. Never
more so than the recent revelation that LIBOR
rates have been fixed for some considerable
period. This comes atop Lehman, Madoff, and
an ever-lengthening list of those who have
failed in their fiduciary responsibility. The
damage to trust is incalculable.
Strengthened risk management
Here in SKAGEN fiduciary responsibility lies
at the heart of the trust that we seek to forge
and temper with our investors. Transparency
and honesty are vital. We are aided in this
by the update of the Norwegian securities
fund act which came into force this year.
Besides transposing UCITS IV regulations,
the new legislation also explicitly requires
increased accountability through unit holder
plebiscite, and strengthens the risk function
in SKAGEN. The latter sees an independent
risk team reporting directly to the SKAGEN
Board outside the normal chain of command.
There has been some reorganisation as a
result, and personnel have been added to our
business support and compliance team. This
will not compensate for the LIBOR scandal.
We do hope it will offer some reassurance to
our unit holders that we take these matters
seriously indeed.
New fund - SKAGEN m
2
We are pleased to announce the inception
of a new fund. The first equity fund for some
ten years. SKAGEN
m
2
is an actively managed
global property fund that will invest in mispri-
ced listed property companies the world over.
The fund will implement the same tried and
tested investment philosophy and process as
our other equity funds. And it will draw from
the pool of talent that comprises SKAGENs
investment platform. We see property as a
long-term value proposition with stable cash
flow, a built-in inflation hedge, and good liqui-
dity when the instruments are listed. This is
not a sector fund. It is evident, however, that
listed property behaves differently over the
longer-term to other equities. It is this and
the underlying yield that we wish to access
for our investors. Articles are from page 11.
New faces
We have also added new personnel to the
International team in both the Netherlands
and Stavanger. Andr van Muijlwijk joins our
Amsterdam team and Petter Sandtorv joins
the Stavanger team. Both men are seasoned
client advisors and look forward to supporting
our non-Scandinavian investors.
A mixed third quarter
SKAGEN Global recovered nicely in the third
quarter and ended the period up 9 percent,
versus 5.6 percent for the benchmark index,
measured in euro. SKAGEN Kon-Tiki ended
the quarter marginally ahead of its bench-
mark with a gain of 6.2 percent versus 6.1
percent for the benchmark. The discrepancy
between large liquid companies on the Oslo
Stock Exchange and the small companies
in the SKAGEN Vekst portfolio continues to
increase. So although the funds absolute
performance of 3.27 percent in the third
quarter is acceptable, its 5.55 percentage
point lag behind its benchmark index is far
from satisfactory. Historically the small and
medium-sized companies, which are now far
cheaper based on central key figures, have
made a strong comeback when the stock
market has risen again. We saw this both in
1992/93 as well as in 2002/03 and believe
we will see it again. Meanwhile, our global
bond fund SKAGEN Tellus continued to do
well in the period and ended the quarter up
3.80 percent, versus 1.23 percent for the
benchmark index.
While we sit in a relatively low return envi-
ronment, high liquidity and the growing appe-
tite for further stimulus might generate the
required equity revaluation.
A matter of trust;
and a matter for celebration
Strengthened risk management: Here in SKAGEN duciary responsibility lies at the heart of the trust that we seek to forge
and temper with our investors. Source: iStockphoto
LEADER
Timothy Warrington,
Head of International,
SKAGEN Funds
tcsw skagenf unds.com
5
COMMENT
For equity investors, the lamentable sum-
mer weather was partially compensated by
elevated temperatures in most stock markets.
The message from the European Central Bank
chief, Mario Draghi, that all means necessary
would be used to save the eurozone, meant
that European stocks experienced the stron-
gest lift. The global emerging markets and
Japan fared the worst this summer.
No news is good news
To what may we attribute the optimism we
experienced in the summer? Following a bad
month of May with the heightened uncerta-
inty around the global economy and future of
the eurozone, expectations about the future
were at rock bottom. The lack of bad news in
the summer may therefore have been enough
to cause share prices to once again converge
towards the value creation taking place in
companies.
But there has been no general upturn in
share prices. Investors have flocked to pre-
dictable companies, preferably with stable
dividend policies. This is of course due to
the fact that the fixed income market is now
enticing people with its negative risk-free
interest rates. It is precisely the lower interest
rates or lack thereof that has given rise
to a degree of optimism detectable in the
stock markets over the past year. The major
macroeconomic challenges, and regulations
which force long-term investors into low inte-
rest rate investments, admittedly weigh hea-
vily on the other side of the scales.
In the short term, the stock markets look
slightly vulnerable. The price upturn we expe-
rienced in the summer was, as mentioned
above, selective. Sales have also been low
on a global basis.
Consumer confidence indicators from all
four corners of the world have been in part
inconclusive, in part negative particularly
in China. We note that local Chinese stocks,
which are not subject to global market con-
sensus, developed consistently weakly.
We are now entering a two-month period
which has, historically speaking, not been
favourable for equity investors. When dark-
ness falls, and bright expectations are repla-
ced by gloomier realities, this tends to deal
a blow to the general mood and the stock
market. Equity investors can, however, take
heart from the fact that good returns can be
obtained from companies earnings. Premi-
ums relative to so-called risk-free interest
rates are still at a historically high level, and
the risk of inflation is still some way off.
Equity investors can draw comfort from
the fact that expectations about companies
earnings and the global economic activity are
low. There are in fact several bright spots to
be found on the autumn horizon. The appetite
for economic stimulus is on the rise across
the globe.
9dl`gm_àlakkladdmf[d]Yjo`Ylhgdala[Yd
and organisational form the future euro-
zone will take, the ECBs categorical
defence of its existence appears to have
removed a great deal of the uncertainty.
9dglg^h]ghd]Yj]kladdYoYalaf_l`]`]jYd\]\
stimulus packages from China. Given the
current political vacuum, however, it looks
like we may be in for a longer wait.
9dl`gm_`l`]MK][gfgeqYhh]YjklgZ]
improving, the imminent presidential
election is creating uncertainty.
It would appear, therefore, that in the short
term stimulus will have to continue to come
from the central banks. This was partially con-
firmed by chairman of the Federal Reserve,
Ben Bernanke, at his speech at Jackson Hole.
In my opinion, therefore, there is an upside
risk to be found in the autumns stimulus
packages which balances out any downside
risk which may come from negative impulses
influencing the world economy.
Global liquidity is extremely high, and the
pressure to achieve (higher) returns is increa-
sing. This may eventually result in a revalua-
tion of equities as an asset class.
It is interesting to note that companies
with predictable and stable earnings have
become increasingly popular over the past
couple of years following ten years of weak
returns. These types of companies were sig-
nificantly overvalued following the equity
boom in the 1990s. And it was precisely these
companies consistent value creation over
many years that contributed to the revalua-
tion of stocks as an investment object in the
1980s and 90s.
History, as it is often remarked, tends to
repeat itself.
This article originally appeared in the
Norwegian financial daily, Dagens Nringsliv.
Low interest rates can help combat autumn blues.
Kristoffer Stensrud
6
THEME
Microsoft, Oracle, Yahoo and Google. These
are shares that evoke uneasy memories of
the dotcom bubble and the many billions of
dollars that went up in smoke at the turn of
the millennium. Over the past couple of years,
however, these stocks have found their way
into the value-based portfolio of SKAGEN
Global.
And in some cases their contribution
to the funds result has been very good.
Only the price is right
Justifying the purchase of a stock is all to do
with the price, that is, how much you have to
pay for the companys future earnings and/or
equity. During the course of the decade follo-
wing the turn of the millennium, the price tags
of the most overvalued tech shares fell by
70-80 percent. From being extremely popular
and overvalued, they have become extremely
unpopular and undervalued.
As portfolio manager of SKAGEN Global,
Torkell Eide, puts it: As earnings from large
IT companies are currently priced at around
a fifth of peak levels, the risk of negative
surprises is substantially reduced. Unlike
previously, the stock market no longer sets
great store by future growth in earnings for IT
companies; quite the reverse in fact. That is
a good starting point for value-based inves-
tors.
Windows was not dead
Two years ago unit holders in SKAGEN Glo-
bal were made acquainted with the IT pride
of the 1990s, Microsoft, which was at that
time the most valuable company in the world.
Concern that the death of the PC, and with it,
that of the companys cash cow, Windows,
was imminent, meant that Microsoft was very
unpopular among investors.
When SKAGEN Global first bought Micro-
soft, the price for expected earnings for 2011
had come down to a single-digit level and
that got SKAGENs value calculator flashing.
Since then the share price has risen by around
20 percent. A good deal of the short-term
potential has been taken out, but the launch
of Windows 8 could cause both the earnings
SKAGEN Globals entry onto
the NASDAQ stock exchange
Who would have believed a decade ago that SKAGEN Global would today be invested in several stocks
listed on the technology stock exchange NASDAQ, and that the proportion of US stocks would be almost
35 percent, versus five percent at that time.
When the bubble burst: Nervous stockbrokers at the New York Stock Exchange after the dotcom bubble burst. The photo
was taken in June 2001, three months after the stock exchange had reached its highest peak ever.
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7
THEME
and share price to gather speed again.
That a lot of value can be found in Win-
dows 8 is substantiated by feedback from our
biggest holding in the equity funds, Samsung
Electronics.
At a technology trade fair in Berlin in
August, the Korean technology giant pre-
sented several Windows 8 products, under
the name Ativ. These include a smart phone,
tablet, two notebooks and an ultrabook. The
two notebooks function both as tablet and
laptop with detachable keyboards. The tablet
and two hybrids have the same capacity as
moderately powerful laptops.
Torkell Eide believes that Microsoft is
strong on two fronts. First, its position in
the corporate market is extremely solid and
products like Word, Excel, PowerPoint and
Outlook continue to dominate. Second, within
operating systems for PCs, Microsoft is leader
and the company is as well positioned as
Google and Apple in the tablet storm currently
raging, according to Eide.
Mobile, web and cloud
The risk associated with Microsofts deve-
lopment going forward is twofold according
to Eide. In the retail market the company will
face a significant challenge gaining market
share within the mobile and tablet segments.
The companys initiatives came somewhat
late, so the Windows family has had tough
competition from Apple and Google.
In order to maintain its dominance on the
corporate side, as key suppliers of servers
and software, the company must succeed
with its cloud strategy. So far things look
fit for purpose, but the high innovation rate
means that they need to keep their eye on
the ball which is moving increasingly quickly.
At the end of September the Microsoft
position constituted around 1.1 percent of
SKAGEN Global.
FANTASTIC JOURNEY IN COMCAST
SKAGEN Globals second largest IT hol-
ding is Comcast. Comcast is no typical IT
company in the traditional sense of the
term. That is why the company is regis-
tered under the Consumer Discretionary
sector rather than Information Techno-
logy in the funds portfolio.
Comcast is world leader within media
and entertainment, via cable TV and is,
amongst other things, a majority owner
in NBC Universal (51%, with the option
to buy the rest of the company). The
Comcast share has experienced a fan-
tastic journey in the four years in which
SKAGEN Global has been a shareholder.
The funds position has doubled in value
and over the past year the share price
is up almost 60 percent, measured in
US dollars.
Despite Comcasts strong share
price development, Torkell Eide does
not believe that the share is expensive.
The company has managed to combine
high and predictable cash flows with
an attractive growth profile. Based on
current earnings the share may appear
cheap, but the price tag is falling at the
same time as growth in the cash flow is
being used to buy back their own shares.
That being said we continuously assess
the pricing and size of the position in
the fund against other alternatives. We
therefore reduced our position in Com-
cast somewhat in September and the
holding now constitutes 1.8 percent of
the portfolio, says Eide.
The biggest challenge for Comcast
going forward will be to ensure that cli-
ents are still willing to pay for television
services. The threat is new innovative
services such as Apple TV.
ORACLE IS BIGGEST
SKAGEN Globals largest holding among US IT companies is software maker Oracle,
which constituted 3.5 percent of the fund at the end of the quarter. The market
value of the stockholding was NOK 1.2 billion.
Oracle is currently priced at 12 times this years expected earnings, which is
still historically low. Portfolio manager Torkell Eide has a price target for the stock
which is 40 percent higher. As he puts it, The company has a solid position in a
market with good growth. The cash flow is strong and the balance sheet likewise,
with net cash more than ten percent of the market value.
For Oracle the biggest challenge going forward will be the changes that are now
taking place in the way data is stored. Products such as the integrated database,
HANA, from main competitor SAP is one such example.
For more information about Oracle, read the article in Market Report 1/2012.
Proted from Comcast: Comcast is the best contributor absolutely and relatively speaking among the Nasdaq
companies in the SKAGEN Global portfolio.
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Samsung bets on Windows 8: During the technology trade
fair in Berlin, Samsung Electronics launched a portfolio of
products adapted to Windows, including a smart phone
and tablet.
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8
THEME
Yahoo out Google in
After a long period of considerable pressure
on the share price, SKAGEN Global bought into
the falling internet star Yahoo last autumn.
Taking as our basis a moderate valuation of
the companys stockholdings in Yahoo Japan
and the Chinese Alibaba Group, at the time we
believed that we had bought the companys
core operations extremely cheaply.
When expectations about what the above-
mentioned stockholdings could achieve if sold
were not fulfilled, SKAGEN Global exited Yahoo
this spring. The investment never accounted
for more than half a percent of the fund. The
assets resulting from the sale were invested
in Google shares.
During internets infancy in the 1990s, it
was the Yahoo search engine that dominated.
Google indisputably reigns supreme now, howe-
ver. The fact that a new verb to google has
officially entered the English language says it
all. Googles operating system within mobile
telephony, Android, is also a world leader.
According to a global survey carried out
by consulting company, Universum, Google is
also the company that most engineering and
economy students want to work for. Microsoft
comes out well too, taking third and fourth place
among the above-mentioned student groups
respectively.
A successful swap
The switch from Yahoo to Google has so far
proved successful. In the course of just a few
months the Google share price is up almost 30
percent. The company is priced at 14.5 times
this years expected earnings, adjusted for
the cash position. Google was first listed in
2004, and so did not take part in the crazy IT
upturn at the end of the 1990s, or the ensuing
downturn
According to Torkell Eide the investment
case for Google lies in the fact that the com-
pany can demonstrate good growth within
search and media (YouTube), and is well pro-
tected through brand and technology. In addi-
tion the company has been clever at using its
technological advantage to innovate within
fields from operating systems to mapping
services. This provides Google with several
sources of increased earnings.
The fact that Apple has now developed
its own mapping service, and no longer uses
Googles, is not something that Eide believes
will have a noticeably negative effect. Apple
is a hardware company while Google is a soft-
ware company. The fact that the most common
complaint about Apples new iPhone 5 has
been its poor mapping function also weighs
in Googles favour.
Threatened by social web forums
The fear of increased competition from
Facebook as an advertising platform did
put the Google share under some pressure
for a period. For the time being the fear has
been exaggerated, however. That is not to
say that social web forums are not a threat
to the how advertising money will be spent
going forward.
Given its size, Google will have to accept
that the authorities will increasingly want to
understand, and, in some extreme cases,
restrict the companys market power within
certain areas.
The Google holding constitutes 0.8 per-
cent of the SKAGEN Global portfolio.
History repeats itself
Although the good old IT shares from the
1990s have come down to appetising levels,
including for value managers such as ours-
elves, there are still plenty of unpalatable
companies on the Nasdaq stock exchange.
Bought Motorola: Google, represented here by Chairman of the Board Eric Schmidt, has bought up mobile producer Motorola. It was particularly the large number of patents the company
owns that attracted Googles interest.
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9
THEME
Because, yes, history always repeats itself. It
is well known that equity investors memories
are short; some dont have any at all.
That is why it is still possible for IT compa-
nies with revolutionary products and ideas
to sell faith, hope and love at a high price.
The clich that this time is different is still
alive and well. Two good examples of such
are the listing of deal-of-the-day company
Groupon and Facebook.
The business idea behind companies that
can offer their products and services on the
Groupon website at discounted prices was
priced at 90 billion dollars at the time of lis-
ting last autumn. One year later shareholders
have lost over 80 percent of their money. The
company had to book a loss of over USD 350
million in 2011. Although the second quarter
of the year ended just in the black, the top line
growth did not give much cause for celebra-
tion and the share price fell a full 27 percent
on the day the figures were presented.
Facebook admittedly earns money, but
a listing price of 38 dollars per share in May
represented a P/E multiple of 80 for this years
expected earnings. Expectations about the
future were in other words sky high.
A halving of the share price in the course
of just a few months, aided by the fact that
earnings expectations have been adjusted
downwards, is not enough to tempt SKAGEN
Global into Facebook.
Fortune halved: Facebook founder, Mark Zuckerberg, and the other Facebook shareholders saw their Facebook assets halved in the course of just a few weeks.
Tore Bang
tb skagenf unds.com
10
Major companies rarely change the rules of
the game. Yet when they do, their size and
market position can transform how things
are done. For example, Apples iPad is only
two and a half years old and has already had
a major impact on many peoples daily lives.
The German software giant SAP is cur-
rently reshaping companies day-to-day use
of customer and process data. This will create
considerable value for companies, customers
and SAP itself as a software and service provi-
der. Nonetheless, the share price is relatively
low compared to previous highs. Therefore,
SAP is now included in SKAGEN Vekst, where
it has already been one of the quarters best
performers, says portfolio manager Ole
Seberg.
SAP is currently transforming business
efficiency and decision-making speed
although the shares are priced at the same
level as in the early 1990s, just after the IT
bubble burst. On the face of it, a P/E multi-
ple of 15 times expected 2013 earnings is
not inexpensive, but compared to its market
strength, the new services potential and the
historical pricing of this particular company,
the valuation is low.
The end customers of a fashion store, tra-
vel agency or supermarket will not be aware of
how SAP is transforming their daily lives, yet
this is happening. By opening up the systems,
databases can be analysed faster; in a matter
of seconds, rather than days. This will make
it possible to optimise the goods stocked
on supermarket shelves and how customer
databases are organised, and to customise
offers to customers when they book flights or
hotels online. SAP calls its new system HANA
and claims possibly rather simplistically
that the analysis is 3,600 times faster than
a traditional database analysis.
All large companies aim to use their
resources as efficiently as possible. The
systems have come into their own during
the financial crisis, when companies have
been able to protect their revenue by rapidly
adapting to the change in demand. Once the
systems have been implemented and are up
and running, companies need only spend a
little time on administration and other non-
core activities. In other areas, SAP has made
it easier for sales staff to use the systems
during flights and on the road. SAP has also
not lost any time in creating cloud solutions
that companies can use online, instead of
investing in their own hardware.

Stable customer base
Although a few companies are common to
all of SKAGENs equity funds, most are uni-
que to each fund. The SKAGEN investment
philosophy also allows for healthy disagre-
ement on companies and sectors between the
equity funds. Some managers thus believe
in a future for American banks and financial
services companies, while others are more
reluctant to let the villains of the financial
crisis make a comeback in their portfolios.
This freedom to disagree is particularly
apparent when you look at how SKAGEN Glo-
bal portfolio managers have chosen to have
a major investment in the American company
Oracle, while SKAGEN Vekst focuses on SAP.
Oracle and SAP are arch rivals, almost to the
same extent as Coca-Cola and Pepsi. Both are
providers of IT systems for accounting, pro-
duction management and resource planning.
Oracles strong points were described in
Market Report no. 1/2012 by portfolio mana-
ger Torkell Eide and journalist Mark Houben.
SAP has similar qualities to Oracle, including
a very stable customer base. SAP is priced
higher, but according to Ole Seberg also has
a clear opportunity to generate more value.
As always, investing in a company entails
risks. These include slow customer adaption
to new software and competitors adapting
and catching up faster than anticipated. SAP
state that they have a 1-2 year lead, which
means that value and long-term customer
relations will be built up on the SAP platform
before its competitors have seriously joined
the fray.
German Chancellor Angela Merkel checks out a new microscope with SAP software at the Cebit tradefair this year.
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SAP overhauls its vast systems
The software giant SAP has kept up with the times and now has excellent opportunities to
increase its market share by transforming how companies use customer data. SKAGEN
Veksts portfolio team believe SAP is a compelling business with an attractive valuation.
cje skagenfondene.dk
oso skagenfondene.dk
SAP has around 190,000 companies as its custo-
mers. They pay an annual fee to use the software,
as well as ad hoc charges for assistance and other
services. Overall, this generates an annual reve-
nue of around EUR 15 billion. This is a lucrative
business, and many customers are tied to SAP by
long-term contracts. Operating income accounts
for approximately one third of total revenue, which
means that the margins are favourable, and SAP is
a debt-free company with ample liquidity.
11
SKAGEN m is an actively managed global
property fund that will invest in mispriced
listed property companies around the world.
Listed property companies are rela-
tively easy to value and have predictable
cash flows. Despite this, such companies
are frequently mispriced. We believe that by
applying our proven investment philosophy,
experience and investment process we will
be able to create good returns for our unit
holders, says Peter Almstrm, lead portfolio
manager of the SKAGEN m team.
The global market for listed property
companies consists of approximately 2000
companies. They carry out various property-
related operations, such as the management
and development of shopping malls, offices,
storage facilities and apartments. The market
is growing rapidly, driven by the urbanisation
of emerging markets, for example.
A characteristic of the global property mar-
ket is that it is local, compared to other sec-
tors which have over the past decades increa-
singly been priced on a global level. This often
leads to mispricing. For a fund manager like
SKAGEN, that seeks to find companies that
are undervalued, under-researched and unpo-
pular with potential to increase in value, this
mispricing raises interesting opportunities.
Since SKAGEN was founded in 1993 we
have only launched three equity funds. All
three have performed better than their bench-
mark indices in the long term.
We only start funds in which we oursel-
ves would invest and where we can apply our
investment philosophy. Since we only rarely
launch new funds, this launch is very excit-
ing for us, says Harald Espedal, Investment
Director and Managing Director.
The portfolio team
SKAGEN m will be managed by Peter Alm-
strm, Michael Gobitschek and Harald
Hauks. They have complementary skills and
competence from property investing, corpo-
rate finance and global financial markets, and
in-depth knowledge of SKAGENs investment
philosophy and process.
SKAGEN launches
new global equity fund
For the first time in ten years SKAGEN will be launching a new
equity fund the global property fund SKAGEN m.
- aiIy traded gIebaI equity Iund that dees
not pay dividend
- Launch date: 31 0cteber 20112
- enchmark index: M5CI ACwI keaI state Net
Return IMI
- Minimum singIe subscriptien ameunt: bk 150
- kead mere abeut the Iund at
www.skagenfunds.com/m2
FACTS ABOUT SKAGEN m
2
Michael Gobitschek has worked in SKAGEN since 2005,
and has direct experience of SKAGENs investment phi-
losophy and process through his work with institutional
clients and analytical responsibilities in the portfolio
team. Michael has an MSc in nancial economics from the
University of Stockholm.
Peter Almstrm has over 25 years of experience working
with property, fund management and nance. He has
an MSc in surveying and economics and was portfolio
manager of the Carnegie Global Real Estate Fund before
joining SKAGEN.
Harald Hauks has worked in SKAGEN since 2006, both
as an analyst and more recently as portfolio manager of
SKAGENs combination fund, SKAGEN Balanse 60/40.
Harald has a PhD in mathematical statistics and has pre-
viously worked with risk analysis.
12
THEME
Stensrud on SKAGEN m
2
Kristoffer Stensrud shares his thoughts around the launch of SKAGENs first equity
fund in more than ten years the global property fund SKAGEN m
2
.
Large cities like Mumbai, Singapore and Hong Kong suffer from an almost chronic shortage of space, and have since the 1960s undergone phenomenal development. Pictured here is the
Central District in Hong Kong, where the average rental costs have risen in seven of the past eight years.
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Given the debt problems in Southern Europe,
the recession in the UK, weaker growth in
China and generally slower growth in the
world, the autumn of 2012 seems to be an
excellent time to start a new fund. It is now
that we are seeing mispricing in the market
and this presents us with good opportunities,
according to SKAGEN portfolio manager and
founder, Kristoffer Stensrud.
It was in November 2011 that Peter Alm-
strm, who over 25 years experience from
property and finance, made the phone call.
At that time, Kristoffer Stensrud had not con-
sidered starting a property fund, yet his inte-
rest was stirred when he heard Peters idea
namely, applying SKAGENs investment phi-
losophy to global property shares. The result
is SKAGEN m, the first equity fund SKAGEN
has launched in over ten years. The fund will
invest in listed securities with property-rela-
ted operations.
Property traditionally stands for long-term
value. It usually generates predictable cash
flow and is a good hedge against inflation.
Listed property is good for investors since
it is both liquid and offers transparent pri-
cing. Combining this with SKAGENs com-
pany-focused investment philosophy was
something Kristoffer Stensrud immediately
found very interesting.
SKAGENs global approach combined
with property companies and local markets
is a good starting point for generating excess
value. That is something that a typical sector
fund does not have. There is a world of unde-
tected opportunities out there.
Common sense
The investment philosophy that SKAGEN and
Kristoffer Stensrud have had such success
with is value based; that is it differentiates
between the price of an asset and the intrinsic
value. SKAGENs portfolio managers seek
individual companies that guarantee qua-
lity in the long term, but which due to the
stock markets short-termism can currently
be bought at a low price. These companies
should be characterised by being under-
valued, under-researched and unpopular.
Common sense and simplicity understan-
ding the companies one invests in are key
factors.
The view is that it is in companies and
not in sectors or regions that the value crea-
tion takes place. It is impossible to predict
when stock exchanges will peak or bottom
out, but companies should be competitive,
have a fundamental growth potential or a
unique resource base. These well-managed
and profitable companies are occasionally
misunderstood by the market which thereby
creates the discrepancy between price and
value. Kristoffer Stensrud reiterates that the
focus is to find companies that are wrongly
priced in the markets.
It is therefore important to follow each
13
company thoroughly and still retain a dis-
tance from the market as a whole. The very
fact of being located in Stavanger, far from
the worlds financial centres has previously
been a success factor.
Will SKAGEN m
2
s managers just stay in
Stavanger?
Property is slightly different from other
companies. I believe that managers need to
be on site from time to time to visit investment
objects and kick the tires as it were. Or at
least use Google street view, jokes Stensrud.
We dont want to end up buying ghost towns.
A lot of those have been sold over the years!
Explosive urbanisation
Big cities like Mumbai, Singapore and
Hong Kong suffer from an almost chronic
shortage of land. From the 1960s onwards,
these have undergone a phenomenal deve-
lopment and in cities which could almost
be called peripheral, property prices have
increased a thousand-fold.
It is not inconceivable that we see the
same type of development in other cities and
countries, says Kristoffer Stensrud in his
usual laconic fashion.
And when opportunities arise, you need in
part to be able to evaluate and in part to have
someone onsite locally to be able to take care
of things. The pricing of property is influenced
by local factors rather than by macroeconomic
events, unlike oil, for example, which is priced
in a global market.
Working with local businesses is an
advantage they have contacts and know-
ledge that is often what determines whether
the company will succeed in generating added
value, elaborates Stensrud.
There is a widespread perception that lis-
ted property shares behave more like other
listed stocks than like a direct ownership in
property. In the short term, this is true, but
over a three to five year period, it is gene-
rally the underlying propertys cash flow that
determines the price of the property share.
For the long-term investor, property shares
therefore function well as an investment.
They open up attractive long-term returns at
a moderate risk.
Uncertain climate often favourable
In many places, including in Stensruds
native Norway, house prices have continued
to rise. That they will fall here too, there is no
doubt, he says. That has always been the
case in the past.
And despite or perhaps because of the
turmoil in the financial markets, debt pro-
blems in Southern Europe, the recession in
the UK, weaker growth in China and gene-
rally slower global growth, autumn 2012 is an
excellent time to start a new fund, according
to Kristoffer Stensrud.
Crashes and crises are par for the course,
and being a first mover is never a good thing.
It is better to wait and see what others have
done. After crashes is when you can find
gems in all the rubble. When the dotcom
bubble burst in 2002, confidence in shares
was low and the emerging markets underva-
lued. That is when we launched SKAGEN Kon-
Tiki, and it was not a bad time at all to invest
in technology shares, for example.
Kristoffer Stensrud says he is not paying
attention to other fund management com-
panies currently closing down their property
funds. SKAGENs portfolio managers are free
to go against the tide in turbulent times and
are able to invest in select companies when
others are forced to sell. At the same time, he
stresses that SKAGEN m does not resemble
a lot of the funds that have become so notori-
ous recently. Unlike SKAGEN m, these funds
have built on customers capital invested in
directly owned properties. When customers
wanted to withdraw their money, the funds
have experienced problems with liquidity
since the property market is sluggish, and
being forced to sell property in a short space
of time can easily create a downward spi-
ral. They were in fact unlisted companies,
he says.
SKAGEN m
2
consists of listed shares, so
investors can quickly trade in the fund. There
is a match between liquid assets and liquid
finances. This is an important difference.
You have over the years launched all of
SKAGENs equity funds. How does it feel
not to be launching this one?
Its quite all right, he laughs. Its time-
consuming enough taking care of SKAGEN
Kon-Tiki. And I cant always be involved in
everything, can I?
13 13
THEME
Crashes and crises are par for the course,
and being a first mover is never a good thing.
Anna S. Marcus
asm skagenfondene.se
Andr van Muijlwijk (41) will join SKAGENs
Dutch office on 15 October 2012 as a client
relationship manager. Andr has been active
in the fund industry for fifteen years, of which
eight were spent at MeesPierson (now ABN
Amro MeesPierson), three at Rabobank and
four at the Dutch branch of the Swiss private
bank and asset manager, Lombard Odier. At
the latter position he set up fund distribu-
tion for the Investment Management unit.
Together with his team he was responsible
for building the brand and developing the
sales and marketing strategy.
Andr holds the title of VBA, which is
the Dutch equivalent of Chartered Financial
Analyst. He has a degree from the Business
School for Economic Studies in Rotterdam.
The SKAGEN office in Amsterdam, which
was opened in September last year, is cen-
trally located on the Museumplein overlooked
by the Van Gogh museum and the illustrious
Rijksmuseum, and is headed up by Michiel
Krauss. Mark Houben is responsible for com-
munications and client relations.
It is common sense to try to view the world
from a different perspective, says ge
Westb about why SKAGEN is the main part-
ner of the Nuart festival.
The international art festival, Nuart, was
established in Stavanger in 2001. Street art
and urban art are the main focus of the annual
festival which brings together some of the
worlds leading artists in the genre. SKAGEN
has entered into an agreement with the fes-
tival in order to try to gain new insights. We
must keep reminding ourselves that it is com-
mon sense to see the world from different
perspectives. Street art is just such a remin-
der, says SKAGEN-founder, ge K. Westb.
Street art is a growing phenomenon which
attracts a whole range of creative artists and
their fans, particularly younger ones. Street
art aims to challenge the prevailing view by
defining and reflecting alternative move-
ments and future directions within urban
culture and contemporary art. For SKAGEN it
is important to communicate with the younger
generation to learn about and understand the
challenges they face.
The festival opened on 29 September and
runs until 18 November.
SKAGENs Nuart page:
www.skagenfondene.no/nuart
Festival homepage: www.nuart.no
NEWS
14
Andr van Muijlwijk
Petter Sandtorv joined the Stavanger-based
international team on 1 October. His tasks will
include client services and partner relations
for the international market as well as inter-
national business development.
Petter is educated as a bank economist
and stockbroker. He is also an authorised
financial advisor in Norway. He has more than
28 years experience from the banking and
finance industry.
Petter joined SKAGEN in 2005 and before
joining the International team he was based
in Bergen, working as a wealth manager advi-
sing Norwegian institutional and high net
worth clients. Prior to joining SKAGEN, he
spent 15 years working as a stockbroker.
New man in Amsterdam
SKAGEN and street art
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Writing on the wall: Stavanger is becoming a display window for some of the worlds best street artists.
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Strengthening the International team
15
SKAGEN has chosen to implement its own
ethical guidelines as we believe this best pro-
tects our unit holders interests. Our goal is
to draw our own conclusions on the basis
of objective, ascertainable facts and not on
the basis of sentiments, rumors or interest
groups.
SKAGEN will not knowingly invest in:
;gehYfa]koà[`\]daZ]jYl]dqYf\kqkl]-
matically break basic human rights, inclu-
ding torture, deprivation of liberty, forced
labour and the worst forms of child labour
and other exploitation of children.
;gehYfa]k oà[` \]daZ]jYl]dq \YeY_]
the local population or the elected form of
government in their home country or in the
countries they operate.
;gehYfa]kl`Yll`jgm_`YkmZklYflaYdhYjl
of their activities may incur significant and
uncalculated liabilities related to health
related claims or environmental abuse.
;gehYfa]kl`Yl`Yn]YkmZklYflaYdhYjlg^
their business within activities that society
increasingly wishes to protect itself against,
such as tobacco, pornography, gaming and
lottery companies.
;gehYfa]kl`YlZYk]l`]ajY[lanala]kgf[gj-
ruption and bribes.
;gehYfa]kl`Ylhjg\m[]gjk]ddo]Yhgfkg^
mass destruction, land mines and cluster
bombs as part of their business.
To achieve the best possible risk adjusted
return for our unit holders, SKAGEN seeks to
reduce unnecessary economic risk by eva-
luating investments against the above men-
tioned points. Some investments demand
careful consideration as at times we find that
potential gains are not always proportionate
to the risks. Such companies can typically
have strong earnings, but are subject to ope-
rational risk and could face more stringent
future statutory regulations. We emphasize
issues that may have significant implications
on a companys value, whether directly or
indirectly, for instance through weaker repu-
tation.
Our guidelines form an integral part of our
analysis, both prior to and after we invest in
a security; we believe that each case should
be considered individually and based on
its unique characteristics. In our opinion, a
companys intentions and current actions
count more than their record.
SKAGEN is working with several external
providers as part of the investment process
to gain a broad knowledge base within envi-
ronmental, social, and corporate governance
(ESG) issues. If it becomes apparent that
SKAGEN has invested in companies that, in
spite of intentions and declared purpose,
break our ethical guidelines, the funds hol-
dings will be sold. Any such disposal shall be
carried out in a manner that does not forfeit
values for our unit holders.
UNPRI
In 2012, SKAGEN signed the UNs Princip-
les for Responsible Investment (UNPRI). Our
goal is to improve our understanding and
management of complex issues, risks and
value drivers related to responsible investing.
Access to UNPRIs comprehensive knowledge
base and support network will undoubtedly
contribute toward these aims. Additionally,
we believe that UNPRI can provide a fram-
ework for our ethical guidelines relating to
environmental, social, and corporate gover-
nance (ESG).
Negative screening and blacklists
SKAGEN does not manage index or index-like
funds; accordingly, we do not screen invest-
ment universes or indexes. We do not at any
time operate with blacklists, negative filtra-
tion or exclusion.
Important information
SKAGEN cannot guarantee that we are familiar
with all issues of substantial importance to
a companys ethical behaviour. New ethical
issues and facts will be continuously evalua-
ted, in the same way as other information that
comprises our investment process.
NEWS
Ethical Guidelines
SKAGEN is a value based fund manager which actively selects securities using our
proprietary investment process. An integrated part of this process is consideration of
whether an investment is compatible with our ethical principles.
16
PORTFOLI O MANAGERS REPORT
` Key figures from the global economy
in the third quarter made for
disappointing reading on the whole,
particularly from the growth engine,
China. And in Southern Europe social
unrest poses a threat to much-
needed reforms.
` In order to stimulate greater risk
appetite among investors, the
central bank heads Ben Bernanke of
the Fed and Mario Draghi of the ECB
signaled that they will print as much
money as required going forward, in
the form of bond purchases.
` The stock markets saw a long-
awaited upturn with the hard-
pressed European companies in the
drivers seat.
` On the reporting front, SKAGEN
Global has never before experienced
so many positive surprises in the
second quarter of the year.
` The price that investors are willing to
pay for liquidity has resulted in a
record gap in valuation between
large and smaller companies on the
Oslo Stock Exchange. We expect the
small unpopular companies to
experience a renaissance in the next
phase of the stock market upturn.
` There will still be uncertain times
ahead. This will provide long term
investors such as ourselves with
good opportunities.
` Our equity funds are still priced at a
large discount to their respective
benchmark indexes.
Money printing lifts stock markets
US cars into SKAGEN Global: After US carmaker General Motors (GM) was saved by the state mid-nancial crisis in the au-
tumn of 2008, the company rebounded on the stock market in 2010. Although GM is now protable, the company remains
unpopular. The fact that it is undervalued too means that it is a good t in the SKAGEN Global portfolio.
Offensive central bank heads: Both Ben Bernanke (Fed) and his European counterpart Mario Draghi (ECB) have indicated
that they are willing to buy mortgage bonds and bonds in debt laden countries such as Italy and Spain in large quantities
should the need arise.
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Downturn for luxury in Asia: British luxury goods maker Burberry (not in our portfolios) shocked the market with a substan-
tial reduction in sales in Asia, and warned of tougher times for those relying on rich Asians.
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17
Central bank heads Mario Draghi of the ECB
and Ben Bernanke of the Fed delivered stimu-
lus packages that have reduced risk aversion
in the financial markets. Stocks are still priced
cheaply and are rising in value despite social
unrest in southern European countries.
Stocks are cheap. We have said this repea-
tedly over the past year and will keep repea-
ting the message as long as it holds true.
Due to low pricing, stocks are an attrac-
tive investment opportunity in spite of the
obvious uncertainties in the global economy.
The best proof of this is the return this
year. The global stock index has given a return
of 13.9 percent in the past nine months,
despite recurring signs of panic about the
debt situation in a number of European
countries and their governments difficulty
handling the situation. The worlds biggest
economic engine, China, also experienced
disappointing economic development over
the summer. Nonetheless, stocks have risen.
The reason for this is quite simple. Stocks
are fundamentally cheap and companies are
able to create value despite uncertainty and
difficult conditions. The average return on
equity for companies in the global market
index is 11.9 percent. Regardless of the valua-
tion method used, stocks are being traded at
historically low multiples in our view.
Growth in buybacks
This becomes even clearer when one compa-
res stocks with the extremely popular bond
market, where yields have been traded down
to very low levels. Thus, investors earn more
in dividends from their stocks than interest
from their bond investments, which is a his-
torical rarity.
Companies have strong balance sheets,
helped by record-high profit margins and a
cautious approach to major new investments.
Another thing investors can take note of is
the strong growth in companies share buy-
backs. This also demonstrates that they con-
sider their own shares to be cheap.
Looking at the individual regions and sec-
tors in the stock market, European companies
are currently priced cheaply. China was pre-
viously priced at a significant premium, but
this has now transformed into a discount. On
a sector basis, investors are generally willing
to pay much more for companies with stable
cash flows due to the economic uncertainty.
However, we do not share this willingness,
so we only have small amounts invested in
medicine and consumer staples.
History tells us that it has been best to
invest at times of obvious great uncertainty
and concern with a resultant low pricing of
stocks. We do not believe it will be any diffe-
rent this time, which will benefit patient and
long-term equity investors.
Fed-Ben and ECB-Mario chart a course for
the stock market
During the third quarter, the stock market con-
tinued its positive development from the start
of the year, following a weak period in the
second quarter. The global market index rose
by 5.0 percent measured in euro over the past
three months, while the Emerging Markets
and the Oslo Stock Exchanges main index
rose by 6.0 and 12.0 percent, respectively.
The primary focus was again on the cen-
tral banks and they delivered exactly what
investors had hoped for. The European and
US central banks both launched new initiati-
ves to stimulate economic growth and reduce
risk premiums in the capital market.
Thus stock prices rose despite slowing
growth in China, renewed social unrest in
southern Europe and disappointing key eco-
nomic figures.
All of our equity funds made gains in the
third quarter, while SKAGEN Global and SKA-
GEN Kon-Tiki beat their benchmark indexes
and the fixed income funds all performed
well. The development of the individual funds
is described from page 20 onwards.
Buying back their own shares: Microsoft founder and chairman, Bill Gates, has been a frequent buyer of his own cheap shares on behalf of the company. Shown here playing with his good
friend Warren Buffett at Berkshire Hathaways annual shareholder gathering in Omaha, Nebraska. Like SKAGEN Global, Warren Buffett also sees Microsoft as an attractive company. But
given his close friendship with Bill Gates, and for fear that people will think that he knows more than he does, Buffett has not taken the risk of buying Microsoft shares.
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18
Southern European problems
Rising yields throughout the summer on Ita-
lian and Spanish national debt once again
sparked a political process in Europe.
After a great deal of speculation and signs
of internal disagreement in the European
Central Bank, Mario Draghi introduced yet
another initiative to curb market concerns
about the southern European countries abi-
lity to manage their national debt.
Judging from the decrease in yields on
Spanish national debt and the accompanying
increases in the worlds stock markets, the
initiative worked. It bought time and reduced
panic and risk premiums in the capital mar-
kets. However, the ultimate solution to the
European problem will be found in structural
reforms. As is clearly illustrated by virtually
every news report, politicians in the southern
European countries face a challenge in con-
vincing themselves and their countrymen that
painful reforms are the right way forward. This
task is complicated by the period of high but
unsustainable growth in these countries that
followed the introduction of the euro, after
which they have been subject to unexpected
and drastic cutbacks.
Federal Reserve Chairman Ben Bernanke
also introduced new measures in an attempt
to stimulate economic growth and increase
inflation expectations in the worlds largest
economy. The somewhat limited price reac-
tion by the stock market following the announ-
cement is not a reflection of disappointment
in the market. The plan was already priced
into stocks, as it was foreshadowed in pre-
vious statements by Bernanke.
Just as in Europe, American politicians are
facing the challenge of high national debt,
which sooner or later must be addressed,
despite the increasingly difficult framework
in which the political system and Congress
operate.
As a stock investor, one can hope that the
two political parties in the United States can
finally agree to begin this process after the
upcoming presidential election.
When you meet American companies, the
recurring message is that new investments
are hindered by the high level of uncertainty
about the future framework of the economy.
The latest quarterly economic indicators pro-
vided some bright spots, such as the appa-
rent turnaround in the housing market, which
is essential to lasting improvement in the US
economy.
Paralysed politicians
It is difficult to explain to outsiders that bad
economic news can be good news for prices in
the financial markets. However, bad economic
news often increases the markets expecta-
tion of an imminent intervention by the central
banks. We have seen this mechanism have a
strong impact in the past quarter.
Fundamentally speaking, there is
obviously nothing positive about the weak
data we have seen in Europe over the past
quarter. Unfortunately, however, politici-
ans have been seemingly unable to make
the necessary but unpopular decisions until
they are absolutely forced to do so. Undou-
btedly, politicians fear for their re-election,
but the crisis has also revealed the difficultly
of intergovernmental decisions within the
euro framework, as a number of traditional
tools for eliminating economic tensions are
eliminated by the single currency.
In the past three years we have seen a pat-
tern in which the lack of necessary measures
to improve the situation in Europe has led
Source: JPMorgan Markets 28 sept 2012
China
Asia excl. Japan
Emerging markets
Latin America
Japan
USA
Developed countries
Euro area
-7 -5 -3 -1 1 3 5 7 9 11
Regional GDP growth percent 2011 2012e
7,6
9,3
6,1
7,4
4,7
5,8
2,9
4,2
2,0
-0,7
2,1
1,8
1,2
1,3
-0,5
1,5
SLOWING GROWTH IN THE WORLD ECONOMY
Economic growth in the euro area is expected to be negative this year while the growth rate in the emerging markets is cle-
arly falling, in particular in China. The US and Japan can both boast of higher growth (2011 was particularly weak for Japan
due to the earthquake outside Tokyo).
Source: Bloomberg, Goldman Sachs Global ECS Research
Share buybacks Number
01 02 03 04 05 06 07 08 09 10 11 12
900
800
700
600
500
400
300
200
100
0
EUROPEAN COMPANIES BULK BUYING THEIR OWN SHARES
Having reached their lowest level in 2009-10, share buybacks among European companies are back up to old highs.
Source: Bloomberg
2-year interest rates, 2012 Percent
Jan Feb Mars April May June July Aug Sep
6,5
5,5
4,5
3,5
2,5
1,5
7,0
Italy
Spain
INTEREST RATES IN CRISIS COUNTRIES SPAIN AND ITALY FALLING
After the head of the European Central Bank, Mario Draghi put his foot down and promised to do what it takes to save the
euro, Spanish and Italian interest rates have declined substantially.
19
to mistrust in the capital markets. The sub-
sequent stress in the markets and high risk
premiums have forced the central banks to
act to relieve the immediate negative conse-
quences. Germans know that they are being
pulled in the direction of having to guaran-
tee the debt of weaker nations, but balk at
this solution. Meanwhile, the countries are
also being pulled in the direction of a fiscal
policy union.
Growth in China disappoints
The economic development in China also att-
racted attention during the period. We recei-
ved a steady stream of data confirming that
growth in China is slowing. For example, the
annual growth rate for imports and exports
is currently hovering around zero.
Through our business visits to Asia in the
past quarter, we have also confirmed a clear
picture of slowing growth in the Chinese eco-
nomy. This is particularly evident in the larger
cities such as Shanghai and Beijing, where
economic development has already reached
a level where continued strong growth seems
unrealistic. The problem for a number of com-
panies is that the supply of goods and ser-
vices has not been adjusted in line with the
lower growth in demand.
This has resulted in unpleasant surpri-
ses for consumer-related companies that sell
expensive branded products in China. We
have not invested in this sector, however, as
a result of high company valuations.
The Chinese governments typical answer
for weak economic data has been invest-
ments in infrastructure and encouraging
increased investments in the private sector,
for example through changes in regulation of
the property market and orders to the state-
owned banks to increase lending growth.
Things have been very quiet this time
around. The Chinese government seems to
be content with lower economic growth than
it has previously accepted. The Chinese also
appear to have decided to stay the course
towards a stronger role for private consump-
tion and service in the nations economy, at
the expense of major capital investments.
The big test of this will come if the continued
economic lull leads to massive redundan-
cies, as was the case during the 2008-09
financial crisis.
The lack of activity in Chinas capital-
intensive industries has had a significant
impact outside of the country. Most visible
is the continued drop in prices for a number
of raw materials, and thus for the companies
involved in these sectors, as outlined in the
reports on our equity funds. Oil is doing bet-
ter than raw materials; the reason for this is
somewhat unclear to most, but an expecta-
tion of unrest in the Middle East could be a
factor.
The slower growth in China is also evident
in the domestic stock exchange where few
foreigners are permitted to invest which
once again this year looks to end among the
worst performing in the world. The time when
Chinese stocks were traded at a high premium
to the rest of the world is a thing of the past.
Most Chinese companies are traded today
with a China discount. The reason for this
is usually a fear of bad corporate governance,
while the state-dominated companies have
proven to value the realisation of political
goals above value creation for shareholders.
1 600
1 400
1 200
1 000
800
600
800
700
600
500
400
300
S&P GSCI (right)
S&P500 (left)
2009 2010 2011 2012
Source: Capital Economics
QE 1
QE 2
QE 3
QUANTITATIVE EASING STIMULATES THE STOCK MARKET
A move by the Federal Reserve to buy government bonds (QE) has pushed up prices of US shares (S&P in red) and commo-
dities (blue). The effect of quantitative easing on the stock market appears to be waning.
Source: Morgan Stanley Research, MSCI, 4 okt 2012
35
30
25
20
15
10
5
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
P/E-number Times
13,5
11,3
P/E NUMBERS ARE MOVING TOWARDS THEIR HISTORIC AVERAGE
Share prices have risen more than companies earnings over the past year so that the price you pay for the latter has risen
(P/E). The discount that companies in emerging markets are priced at relative to those in the developed market has also
increased.
Source: Morgan Stanley Research, MSCI, 4 okt 2012
18
16
14
12
10
8
6
4
92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
MSCI World
MSCI EM
Return Percent
13,6
11,9
THE RETURN ON COMPANIES EQUITY HAS PEAKED
The efciency gains that companies attained after the nancial crisis struck in the autumn of 2008 have been taken out
and return on equity is on its way down, though from a high level. It will be increasingly important to achieve top line
growth going forward, without costs going through the roof.
20
The price of liquidity
Low turnover and investor preference for liquid
stocks has impacted performance on the Oslo
Stock Exchange and many other stock markets
around the world over the past few years (see
graph). Investors have avoided putting money
into stocks of high quality companies, where
the price of both earnings and book value is
low, but where liquidity in the shares is poor.
Given the extremely uncertain times in the
world economy, with risk on/risk off being the
theme tune of the stock market, investors have
paid a relatively high premium for liquid sha-
res. Rather than being guided by the value
development and results from companies,
investors have hopped back and forth, dancing
to the tune of central bank chiefs, whether they
be Ben Bernanke or Mario Draghi.
Is alpha dead?
Some people maintain that alpha is dead
(measured by risk adjusted excess return);
that it is not possible for active managers to
attain results beyond what is achieved by
the market, taking risk into account. Informa-
tion about companies is increasingly easy to
access. Anyone can access the web and track
down all kinds of financial data about various
companies listed on stock exchanges the world
over. Not to mention competitor analysis, deve-
lopment in market shares you name it all
free of charge.
If alpha is dead, this indicates that the stock
market is converging towards becoming effi-
cient. That is, that all available information at
all times is baked into share prices, so that the
stock market is always right when it comes to
the pricing of companies.
How then to explain the increased volatility
in the stock markets? Over the past five years
fluctuations on the worlds most liquid and
thoroughly analysed stock exchange the US
one have been substantially higher than has
been the case historically.
For example, the number of days when the
stock market has moved up or down by more
than two percent has risen dramatically. We
are talking here about daily share price fluc-
tuations that are higher than the total annual
return you would get from lending money to the
US government for ten years. In 2011 equity
investors experienced correspondingly high
price fluctuations almost every third market
day (on average).
Expensive to trade
Another problem that arises for us equity
investors when volumes dry up, is the price
we have to pay to trade. In the less liquid sha-
res on the Oslo Stock Exchange the cost of
switching around a portfolio can be significant,
due to the major difference between the buy
and sell prices (spread).
For investors of a certain size, large spreads
can have an inhibitory effect on the desired
allocation and optimization of the portfolio.
Not being able to carry out trades at the right
price means that you can end up holding onto
shares you wish to sell but not at any price.
Likewise, investment ideas die because the
cost of replacing an existing investment with
a new one is too high.
Not appreciated
SKAGEN Vekst has an equity portfolio with
a clear overweight of small and medium-
sized companies, primarily on the Oslo Stock
Exchange. It is within this segment of Norwe-
gian stocks that we find the most attractively
priced companies. Developments over the past
year have caused the relative gap to large com-
panies to grow ever greater.
The OBX index, for example, which repre-
sents the 25 most traded companies on the
Oslo Stock Exchange, has provided over 40
percent better returns since the start of 2010
than the index for small and medium-sized
CONTRIBUTORS THIRD QUARTER
LARGEST PURCHASES/SALES
JULY-SEPTEMBER
g g
SKAGEN Vekst
PERFORMANCE (EUR) JULY-SEPT 2012* YEAR TO DATE*
SKAGEN Vekst 3.3% 11.8%
MSCI/OSEBX Index
8.8% 17.8%
*As of 28 September 2012
SKAGEN Vekst team
Portfolio managers Ole Seberg ,
Geir Tjetland and Beate Bredesen
SKAGEN VEKST KEY FIGURES FOR THE LARGEST HOLDINGS
21
companies, OSESX.
General information about companies has
admittedly become public property, but infor-
mation must still be analysed, interpreted and
processed before a decision can be made. We
still believe in the philosophy of buying one
euro for fifty cents.
It is curious that the strong share price
development of the subsidiary of the Fred
Olsen companies Bonheur and Ganger Rolf,
Fred Olsen Energy (52%), has not been reflec-
ted in the share prices of the parent compa-
nies. Likewise, Wilhelmsen Holding has not
taken part in the upturn of the share price of
its subsidiary Wilhelm Wilhelmsen ASA (73%).
This phenomenon is well illustrated by the
graphs.
Although in the case of several of our
investments in the portfolio it may seem as
though alpha has been unwell for several
years, we believe that the rumours about the
death of alpha are wildly exaggerated.
Much of the gap between how the stock
market prices a company today and what we
believe is the right price can be attributed to
liquidity, or more precisely the lack of it. The
wealth tax which is very specific to Norway
also plays a role in dissuading family-control-
led companies from seeking to optimize valua-
tion in their listed instruments.
Given these conditions our clear view is that
the high discount for several of our medium-
sized and small companies on the Oslo Stock
Exchange cannot last forever. So although we
have lost ground against the benchmark index
for a time, we expect to be paid slightly further
down the road when investors are less con-
cerned with liquidity and set greater store by
being able to get one euro for 50 cents. Equity
investing is not solely about identifying the
next Apple or Samsung.
Cannot blame the market
We cannot of course blame the market for
SKAGEN Veksts poor results in the third quar-
ter, but merely note that the larger companies
on the Oslo Stock Exchange attained on aver-
age 12 percent better returns than the small
and medium-sized companies.
When it comes to the largest negative con-
tributors to the funds result in the quarter,
there is no way of avoiding our Norwegian
exposure within the supply sector. Siem Off-
shore and DOF in particular detracted as their
share prices fell 14 and 12 percent respecti-
vely. The rate development throughout the
summer never got the lift that is usual for this
time of year and disappointed investors redu-
ced their stakes.
In our opinion DOF is a misunderstood com-
pany on the Oslo Stock Exchange. It is percei-
ved as a supply company by investors, on a par
with companies such as Farstad Shipping and
Siem Offshore. Over the past few years DOF
has focused increasingly on activities within
subsea, and this is where the lions share of the
earnings now comes from. We believe that the
stock market will also come to understand this
gradually and price the company substantially
higher than it is today.
The funds largest investment, Kongsberg
Gruppen, experienced a slight decline in the
period despite positive news flow with the
announcement of several new contracts. The
stock markets do not seem to be willing to
price the good news into the stock as many of
the orders will only be visible in the financial
statements from 2015 onwards.
Odfjell, one of the funds smaller invest-
ments, had a dismal performance and ended
the quarter down 31 percent. This is due to
the unfortunate combination of an accident
which impacted the partially owned terminal
in Rotterdam (51%), with the ensuing increased
costs, as well as the weaker than expected
development of their chemical tanks.
The Brazilian electricity producer, Eletro-
bras, also performed weakly. For a more in-
depth description, please read the SKAGEN
Kon-Tiki report on page 26.
Up substantially in cruise
Of the positive contributors we would first of all
like to draw attention to Royal Caribbean Cru-
ise Line (RCL). We substantially added to our
position throughout the summer and at the end
of the quarter, RCL was the funds third largest
investment (4.5%). The RCL share is trading at
a 25 percent discount relative to book equity
Source: Oslo Stock Exchange
Turnover and number In thousands (000)
2000 2002 2004 2006 2008 2010 2012 (YTD)
100
90
80
70
60
50
40
30
20
10
0
14
12
10
8
6
4
2
0
Number/day (left)
2,4
10,1
2,3
10,3
1,8
9,4
2,2
9,7
3,6
13,5
6,0
21,7
10,3
35,2
9,9
66,9
6,1
62,7
7,2
75,8
6,0
90,0
4,3
89,0
12,9
48,6
Turnover/day, NOK bill. (right)
SHARE TRADING PLUMMETS ON THE OSLO STOCK EXCHANGE
Total Return
Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12
120
100
80
60
40
20
0
-20
Wilh. Wilhelmsen HoldingB
Wilh. Wilhelmsen ASA
Wilh. Wilhelmsen HoldingA
Source: Bloomberg
AND THE PRICE OF WWL ASA HAS DEPARTED FROM THAT OF WWL HOLDING
Source: Bloomberg
Total Return
2007 2008 2009 2010 2011 2012
40
20
0
-20
-40
-60
Bonheur ASA
Ganger Rolf ASA
Fred Olsen Energy ASA
GANGER ROLF AND BONHEUR LAG FAR BEHIND SUBSIDIARY FRED OLSEN ENERGY
22
and at 13 times this years expected earnings.
The outlook for the cruise sector in general
and RCL in particular seems to be extremely
good. There are historically few orders of new
cruise ships for delivery over the next few
years. The most important market for RCL, the
US, appears to be improving while the poten-
tial in Europe is good when the crisis mood
abates. We anticipate a significant improve-
ment in return on equity in RCL going forward.
Petrobras was also a good contributor
through the quarter (see SKAGEN Kon-Tiki
page 26).
Despite the legal noise around competitors
and business connections between Apple and
Samsung Electronics, the latter performed
extremely well (see SKAGEN Kon-Tiki, page 26)
Our investments in the Fred Olsen compa-
nies Bonheur and Ganger Rolf also contributed
nicely, but as mentioned above, the discount
to the underlying values is high. This should
vouch for a continued share price develop-
ment for the Fred Olsen twins.
Full speed ahead with SAP and Continental
Last but not least we must highlight two relati-
vely new investments in SKAGEN Vekst; the Ger-
man software company SAP (see article on page
10) and German tyre maker Continental. Both
contributed significantly to the funds result.
Continental was up over 16 percent. At the
end of September its largest shareholder, the
privately owned Schaeffler Group, sold 10 per-
cent of the outstanding shares, thus reducing its
stake in Continental to 49.9 percent. We used
the opportunity to increase our exposure in Con-
tinental, which we believe to be a high quality
company with a still low price tag.
Schaeffler, somewhat unluckily, bought the
Continental shares in an offer that expired two
days after Lehman collapsed in 2008 and hence
got more shares than they intended, given the
price and market conditions. With the recent
sale the overhang in Continental is gone.
We continue our work to concentrate the
SKAGEN Vekst portfolio. During the third quarter
we bid farewell to 18 companies. At the same
time we increased the concentration of the 12
largest investments from 33 to 36 percent.
Read more about the fund on page 32
SKAGENFUNDS.COM/SKAGEN-VEKST
Good contribution from cruise: The best contribution to SKAGEN Vekst in the third quarter came from Royal Caribbean Cru-
ise Line, which now constitutes 4.5 percent of the portfolio.
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Discount growing: The signicant increase in the share price of Fred Olsen Energy (FOE) has not been reected in the share prices of Bonheur and Ganger Rolf, which own 51 percent of the
shares in the rig company. The wind mill operations of the two Fred Olsen companies have not yet taken off.
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Surprisingly strong
SKAGEN Global performed well in Q3, both in
absolute terms and relative to its benchmark
index. Generally speaking, we were helped
by the quarterly figures from our portfolio
companies, which were much better than we
or the market expected.
With a price increase of 43 percent, Vim-
pelcom was Q3s best contributor (see table).
The company reported very strong operatio-
nal improvement; increased data use and a
general improvement in margins were the
main reasons that cash flow (EBITDA) reached
12 percent. The flat performance in Italy
should also be viewed positively, conside-
ring the prevailing conditions in that country.
The decrease in margins in the Ukraine was
higher than expected, however.
Both of the major shareholders in Vimpel-
com, the feuding rivals Telenor and Altimo,
increased their ownership interests in the
company. The dispute between the two, and
the related legal injunction from a Russian
court against the payment of dividends from
the Russian subsidiary, continues to put a
damper on the share price. A solution to the
dividend problem may give a further boost
to the Vimpelcom share price.
Citigroup hits back
After a disappointing Q1, the market was
surprised positively by Citigroups results
for Q2, and by the end of the quarter the
American banks shares had increased by
20 percent. Citi Holding has continued to
make divestments (all assets that are not
part of the banks core activities are gathered
in Citi Holding) such that the bad bank now
accounts for just 10 percent of Citigroups
balance sheet.
A price tag of eight times this years expec-
ted earnings and 0.5 times book equity
should indicate sustained sound price deve-
lopment for Citigroup.
SCA transformation
Swedish SCA returned an operating profit
for Q2 that exceeded both expectations and
the equivalent period last year; the shares
increased 19 percent as a result.
The sale of its packaging companies and
the acquisition of Georgia Pacifics European
personal care activities mean that the mar-
ket no longer perceives SCA as a cyclical,
commodities-based company. SCA now ranks
as one of the worlds leading companies for
personal care products.
As a result of this transformation, we have
changed SCAs sector classification in the
portfolio from Commodities to Consumer
Staples. If the company leverages the added
value represented by the Swedish forest esta-
tes (2.6 million hectares), the shares could
make some more ground. Today, the forest
areas represent a small share of revenue, but
may be worth as much as SEK 50 per share.
Weak power and mining
Q3s weakest contributor was the Brazilian
electricity company Eletrobras. The ordinary
shares fell by 14 percent, while the preference
shares were down 4 percent. The price drop
was a consequence of a proposal from the
Brazilian government in relation to the terms
for power concessions that expire in 2015-
2017 (see further comment under SKAGEN
Kon-Tiki, page 26).
Cliff Natural Resources, the American coal
and iron ore mining company, was no gold-
mine for the fund either. Operational develop-
ment in Q2 was weak, while iron ore prices
plummeted by 25 percent. Increased supply
and lower demand from China are a bad com-
bination and the share price ended down 19
SKAGEN Global
Portfolio managers Kristian Falnes, Torkell Eide,
Sren Milo Christensen and Chris-Tommy Simonsen.
PERFORMANCE (EUR) JULY-SEPT 2012* YEAR TO DATE*
SKAGEN Global 8.98% 13.3%
MSCI AC 5.64% 13.9%
SKAGEN Global team
SKAGEN GLOBAL KEY FIGURES FOR THE LARGEST HOLDINGS
JULY-SEPTEMBER
24
percent. In view of the poorer earnings out-
look, we halved our stake in the company.
With a moderate price drop of 2 per-
cent in US dollar terms, Microsoft came in
third on the list of Q3s poorest performers.
Microsofts results were satisfactory and the
shares are still cheap at ten times this years
expected earnings. How future product laun-
ches, headed by Windows 8, are received
will determine the valuation going forward.
The fact that Microsoft, with its relatively
stable share price performance, is among the
funds poorest performers in Q3, illustrates
the valuation upswing that has taken place
across the board. In other words, the majority
of our portfolio companies have demonstra-
ted positive price movements.
American insurance and capital management
A new company in the portfolio is the Ameri-
can insurance group American International
Group (AIG). In the wake of the financial crisis,
which saw AIG make heavy losses on deriva-
tives, the company had to accept a bail-out
from the Federal Reserve Bank to survive.
Recently, the US Treasury has significantly
reduced its stake in AIG, and is now down to
a position of around 15 percent. We bought
shares in AIG both prior to and in conjunction
with the last major Treasury divestment.
AIG is one of the worlds largest insurance
corporations for both general (Chartis) and
life insurance (Sun America). A chequered
history, public ownership, and a return on
equity as low as 6 percent mean that AIGs
shares are priced at a considerable discount
to book equity. We believe that in the course
of two to three years, this company should
be able to achieve a double-digit return on
equity and a price target equivalent to book
equity of 60 dollars per share does not seem
unrealistic. The share price at the turn of the
quarter was 33 dollars.
Another new but far smaller American
financial services company in the portfolio
is the capital management company, Fortress
Investment Group. The companys share price
solely reflects the value of the current fixed
fees. With several funds delivering good rela-
tive yields, the outlook for variable, results-
based fees is bright. We therefore consider
this company to be significantly undervalued.
Government Motors
General Motors (GM) popularly called
Government Motors is a new entrant to the
portfolio. Like AIG, GM also had to be bailed
out by American taxpayers in the autumn
of 2008. High debt and bad management
were a losing combination in the throes of
the financial crisis, when its capital dried
out completely. Today, GM is run on a much
better footing, and the company has delive-
red sound profitability for ten consecutive
quarters. The balance sheet is strong with
net cash reserves.
GM has two main challenges that, together
with public ownership (32 percent), have led
to negative share price development since the
company was re-listed two years ago.
Firstly, the companys European activities,
with Opel playing a key role, are producing
high losses and there is great concern about
GMs ability to prevent this haemorrhaging.
Secondly, the company has considerable
uncovered pension obligations, carried at 25
billion dollars on its balance sheet. However,
todays cash reserves are more than enough
to pick up this tab.
With a market share of around 12 per-
cent, the company, which is a joint venture
(50/50% ownership with Chinese partner), is
a leader in China, operating at good profitabi-
Cultivating hygiene: Swedish SCA is no longer viewed by investors as a cyclical commodity company, but rather as one of
the worlds leading companies in hygiene products.
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No gold mine: Weak operational developments and iron ore prices which have fallen 25 percent resulted in a 19 percent
drop in share price for US iron ore company Cliff Natural Resources in the quarter. We halved our position in the company
on the back of the weaker earnings outlook.
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lity. The North American market, representing
around 60 percent of total revenue, is still the
most important to GMs future. Operations in
this market are also satisfactory. After GM
lost domestic market share over a sustained
period, it now seems to be stabilising at just
below 20 percent.
A steady flow of new model launches in
the next few years should bolster both pro-
fitability and market position. The USAs car
fleet now has an average age of 11 years and
car sales have a long way to go to reach the
levels seen before the onset of the financial
crisis.
We consider a price tag for GM equivalent
to seven times this years expected earnings,
including high losses in Europe, to be att-
ractive. Earnings growth, government share
divestment and the introduction of dividend
payments are natural triggers for a re-rating
of GMs shares.
We have also bought into an American
automotive component manufacturer, TRW
Automotive Holdings. Roughly 60 percent
of this companys revenue is from the gro-
wing automotive safety segment. The share
is underpriced in relation to current earnings,
while a strong balance sheet gives scope for
increased buy-back of own shares and/or
distribution of higher dividends to sharehol-
ders.
Chinese mobile switch
In recent months we have reduced our holding
in China Mobile, in favour of its competitor,
China Unicom. This year the former achieved
40 percent better share price performance
than its competitor. Even though China
Mobile is by no means priced highly, China
Unicom has a network position that makes it
better equipped to increase its share of the
growing Chinese 3G market.
After strong share price performance we
have reduced our holdings in Unilever, Pfi-
zer, Hannover Re, Gjensidige, Comcast and
Aberdeen Asset Management. All of these
companies have approached our fundamen-
tal price targets. Raisio and Osaka Securities
Exchange were sold completely from the port-
folio. Most of the shares in the latter were
sold in conjunction with a bid from the Tokyo
Stock Exchange.
Even after Q3s strong price develop-
ment, the portfolio is still priced attracti-
vely, in terms of both current earnings and
book equity. SKAGEN Globals unit price is
now approaching the all time high of NOK
864 on 13 July 2007 but in the last five years
the companies have generated considerable
value and are currently priced significantly
lower than in 2007. If todays portfolio were
priced at the 2007 P/E of 12.3x, SKAGEN
Globals unit price would be around NOK
1,400.
SKAGENFUNDS.COM/SKAGEN-GLOBAL
Switched Chinese mobile: After a relatively stronger share price development for China Mobile we have gradually reduced our position in the share and instead bought into China Unicom,
which is better positioned in the growing Chinese 3G market.
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SKAGEN Kon-Tiki
Acceptable
In a third quarter characterised by further
stress in the Eurozone and continued doubts
about economic growth in China, SKAGEN
Kon-Tiki achieved acceptable results.
We were punished for our underweight
position in commodities and overweighting
of pharmaceuticals which were the quarters
respective losing and winning sectors. Geo-
graphically, the Chinese equity market conti-
nued its weak growth, led by domestic equi-
ties (A-shares), which are not available to
overseas investors. Egypt, India and South
Korea produced positive surprises. Previous
loss-making markets this year, such as Rus-
sia and Brazil, also delivered good returns.
Crucial to development in emerging mar-
kets in future will be the action taken by seve-
ral countries to stimulate the economy and
improve the structure.
Investors are a little more selective
We saw a trend towards greater differentiated
pricing of individual companies and equity
markets than we have witnessed during the
last couple of years, where there has been a
great deal of synchronisation.
As always, irrespective of the market,
we are focusing on creating future value by
investing in companies which give us the best
return for our money. This year we have also
found that state-dominated companies with
clear social agendas are not the favourites
of investors. Experience from previous deca-
des has shown that predictable corporate
governance and good value creation pay off
over time.
Concession blow for Eletrobras
The greatest negative surprise of the quarter
came from the Brazilian state, which in Sep-
tember proposed new procedures for rene-
wing concessions in the Brazilian electricity
sector. This has hit our investment in state-
dominated Eletrobras (3.4% of the fund).
In previous concession renewals, Eletro-
bras paid the government a price which allo-
wed the company to achieve an eight to 10
percent return on invested capital. The pro-
posal which the Brazilian government has
now put forward, which applies to both the
network and power generation means that all
concessions renewed in the years until 2017
will either be withdrawn or renewed at prices
which only cover direct costs.
Eletrobras has not decided what it will
do. Should concessions be withdrawn, com-
panies will be compensated for the residual
book value of the power plants. But one can
also question whether the real book value
is in line with the governments perception
of fair value. Concessions granted after the
power reform of 2004 will continue unchan-
ged. All measures taken are in accordance
with laws and regulations, even though there
is considerable disagreement about inter-
pretation.
Nevertheless, we assess that Eletrobras
will have to pay considerable restructuring
costs. In a meeting recently held with the
company in Stavanger, they claimed that a
return of the current concessions would result
in them having greater financial power. This
is correct in the short term, but these assets
must be reinvested in new concessions.
While several considerably higher-valued
companies within the Brazilian energy sector
suffered significant share price losses when
PERFORMANCE (EUR) JULY-SEPT* YEAR TO DATE*
SKAGEN Kon-Tiki 6.2% 10.1%
MSCI Emerging Markets Index 6.1% 12.9%
SKAGEN Kon-Tiki team
Portfolio managers Kristoffer Stensrud, Knut Harald
Nilsson, Cathrine Gether and Ross Porter
JULY-SEPTEMBER
SKAGEN KON-TIKI KEY FIGURES FOR THE LARGEST HOLDINGS
27
the news about concessions was published,
Eletrobras prices declined relatively moderately.
Approximately 25 of the 58 Brazilian Reals
which today constitute the book value of
each Eletrobras share are exposed to risk if
the governments concession proposals are
approved. The Eletrobras share price was
just over 18 Reals at the end of the quarter.
Due to uncertainty about the renewal of
concessions we have considerably reduced
our expectations of Eletrobras future ear-
nings and our share price target as a result.
Our ordinary shares have been sold, but we
have kept the preference shares. These give
us a running return on investment of approx-
imately nine percent per annum.
From 2015 onwards, we estimate that
operating income will improve considera-
bly and therefore also the return on equity.
Based on book equity of at least 30 Reals for
every Eletrobras share, contracts entered into
should pay a return on capital of 8-10 percent.
The positive aspect of the governments
proposed new concession rules is that Eletro-
bras framework conditions will be predicta-
ble in the coming years. Terms and conditions
will be decided definitively during October.
Eletrobras has time until 4 December to make
up its mind whether it will hand back current
concessions, effective from February 2013.
Except for Eletrobras, there were no other
surprises among the funds other major
investments. The companys earnings in the
second quarter were in line with or somewhat
better than expectations.
Hard-pressed gas market in the USA
The second quarter figures for the US oil ser-
vice company Baker Hughes were better than
most people had been expecting. High oil
prices and investment willingness among
the oil companies continue to provide a good
backdrop for the historically cheap Baker Hug-
hes shares. The same can be said of Archer,
which would benefit greatly by putting the
operations of the company in order.
Continued strong competition and pres-
sure on prices in the US are contributing to
general scepticism about the sector among
investors. Despite this, we see considerable
upside to the global hunt for unconventional
hydrocarbons.
The major risk of even lower gas prices
in the US resulted in us selling completely
South African Sasol, which is strong within
the gas processing sector. The combination
of a slightly more liberal pricing policy for the
sale of oil and petrol in Brazil and promises of
increased future oil production resulted in a
welcome share price increase for Petrobras.
Commodities were forced down
Weak indicators from the Chinese economy
and a creeping suspicion that the world is
not in the process of running out of resources
after all, led to commodity stocks having a
tough time during the quarter. Therefore, the
Brazilian iron ore company Vale was one of
the funds greatest losers. We exploited the
poor growth in commodity shares to buy up
ENRC and Exxarro. The companies can point
to good cash flows, which provide a compe-
titive earnings base for the future.
Due to scepticism about the global econo-
mic climate, we are still comfortable with the
low commodity weighting in the portfolio. As
a general rule we do not speculate in commo-
dity prices, but value the companies based
on their internal dynamics, which should be
positive.
Misunderstood tractors and combine
harvesters
CNH Holding, the worlds third largest produc-
tion company for farming machines such as
tractors and combine harvesters, is a newco-
mer to the portfolio. The company is priced
in line with its book equity and issues ear-
nings forecasts eight times a year. During the
autumn, CNH Holding will merge with its main
owner Fiat Industrial, which above all produ-
ces IVECO lorries. The merger will improve the
liquidity of the shares.
Traditionally, the farming machinery sec-
tor is cyclical. Five years of constant price
rises for farming products indicate to us that
the sector is underinvested. Even without a
revaluation of the sector, the chances are
good for CNH Holding to deliver a return on
capital which should guarantee good share
price growth in the future.
We also purchased shares in the Spanish
company Abengoa, an engineering company
which constructs and builds solar power sta-
tions, water purification plants and transmis-
sion lines. In the course of the next couple of
years, the company will also have concession
activities up and running which will contribute
to stable earnings. Although only 27 percent
of revenues currently come from the domestic
market, Abengoas share price is subject to a
Spanish discount. A planned stock exchange
launch in the USA could contribute to the
revaluation of the company.
After a good flight, some of our holding in
AirAsia was sold. We bought into Egyptian
Orascom Industries, where a splitting up of
the company could result in the revaluation
of both the companys fertilizer and construc-
tion sections.
Cautious moves into the solar section
Through the purchase of shares in REC and a
small increase in the holding of Yingli Green
Energy shares, we move cautiously further
into the solar energy market. The solar cell
market is still disastrous, with declining pri-
ces and major overcapacity as well as cus-
toms barriers being raised. However, as prices
of components fall, profitability for the solar
panel market will rise and the political will
Concession blow: The Brazilian state proposed new procedures for renewing concessions in the Brazilian electricity sector
in September, which impacted our holding in the state-dominated Eletrobras (3.4%).
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to invest in renewable energy will move from
developed countries to the emerging markets.
Both REC and Yingli Green Energy look like
being candidates for survival in an extremely
difficult sector and company valuations are
gradually becoming more level-headed.
The cruise sector looks like it is sailing
towards better times. Ticket prices are rising,
whilst costs are heading in the opposite direc-
tion. Moreover, order books are historically
thin. For a relatively low price tag compared
with competitors we took a position in Royal
Caribbean Cruise Line.
After a long period of poor growth with
few bright spots on the horizon the rest of the
ordinary shares in LG Electronics were sold.
We still hold the preference shares, which
have good dividend returns and trade at a
discount to the underlying assets. As the
business model of the Chinese distributor
of electrical equipment Gome showed signs
of failing, we sold our stake in the company.
Strong contributors during the period were
Indian Mahindra & Mahindra and Chinese
Great Wall Motors. The two companies con-
tinue to impress, both in terms of their busi-
ness models and their development abilities.
Heineken captures Tiger
Our position in the Dutch Heineken brewery
was increased. The company was strong in
Emerging Markets, and has put in a bid for
the whole of Asia Pacific Breweries (APB), of
which they have long been the largest sha-
reholder. APB owns several strong brand
names, of which Tiger is the most valuable.
As the takeover offers opportunities for
increased sales for the number two in beer
in Thailand, Thai Beverages, and possible
coordination gains with soft drinks and foods
in the previous owner of APB, Fraser & Neave,
we also bought into this company.
After a fantastic journey, we completely
sold our position in the South African retail
chain Shoprite. The company is still delivering
and it has commendable ambitions, but the
pricing of the shares now leaves only a small
margin for error.
Good pharmaceuticals and banks
Within the pharmaceutical sector, our two
main holdings in Hungarian Gedeon Richter
and Korean Hanmi Pharma, contributed well
during the period. Fundamentally, both are
developing well, while investors assess the
sector to be an increasingly safe haven in
unsettled times. After having found doubtful
figures in the accounts, we decided to sell the
shares in Arzneimittel.
Within the finance sector several compa-
nies were exited: the Thai consumer finan-
cing company Tisco, our old friend Standard
Chartered Bank, Turkish Yapi Kredi Bank, and
Taiwanese China Financial Development Hol-
ding. The latter was inherited from our holding
in KGI Securities. After a positive revaluation,
the shares in Gjensidige Forsikring were also
divested.
Purchased the Chinese Samsung
The major supplier to Apple, Hon Hai Indu-
stries, delivered a better margin than expec-
ted in the second quarter. Samsung Electro-
nics sailed through up-and-down lawsuits
against Apple and remains a winner in its
superb product development.
We bought into Chinese Lenovo, which
in 2006 acquired IBMs PC department. The
company is growing rapidly in new markets
and is developing its activities towards ser-
vers, distributed data processing (i.e. smart
phones) and software. Shares were acquired
in Chinese Skyworth Digital, which appears
to be the Chinese response to Samsung Elec-
tronics.
Our selling-off of China Mobile continued. The
company has been a good contributor in a
difficult market. The sale proceeds were used
to increase the holding in Bharti Airtel, which
has been through a couple of difficult years
of tough competition and pricing pressure.
New regulations in the sector and a major
defection by competitors has considerably
improved the earning picture for the future.
Conditions for Bharti Airtels African business
model also seem to be improving.
Unprecedented upside
In recent years we have been searching for
deeply value-anchored companies which are
basically growing well, and where we see that
shareholders receive a more than proportio-
nal share of dividends.
Several of the companies in this category
are state-dominated with social agendas and
are therefore priced at a considerable dis-
count. Harder times are causing these com-
panies to also focus on greater cost-effecti-
veness, and on delivering the best possible
results to shareholders. This is not unlike the
development we saw ten years ago which
resulted in major revaluations over the sub-
sequent five years.
The fact that for a long time investors
have been jumping on and off the equity
train based on rapid changes in sentiment
(risk on/off), has enabled us to increase hol-
dings in unpopular companies with good ear-
nings and considerable underlying assets at
modest prices.
Global emerging markets have only had
limited benefits from the aggressive mone-
tary policies of heavily indebted developed
countries, which in forthcoming years will
result in reduced capital costs and also return
on investment requirements. This has led
us to see an upside for the SKAGEN Kon-Tiki
portfolio which is without precedent in the
almost 20 years we have been dedicated to
equity management.
SKAGENFUNDS.COM/SKAGEN-KON-TIKI
Cautious moves in solar energy: Through the purchase of shares in Norewgian REC and a slight increase in Chinese Yingli
Green Energy we continue to move cautiously into the solar energy market. The two companies appear to be candidates for
survival in an extremely difcult sector.
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In September the European Central Bank
(ECB) decided to do whatever it takes to save
the Eurozone. Given fiscal conditionality the
central bank stands ready to buy an unli-
mited amount of sovereign debt to keep a
lid on interest rate spreads in the common
currency area. This is the long sought-after
big bazooka which could solve the sovereign
debt crisis.
An unruly scal union
It is a radical step, however, because the ECB
is pre-empting a political discussion on an
explicit fiscal union and its necessary com-
panion a political union. But it is a logical
step, since when the Economic and Monetary
Union (EMU) was inaugurated, Europeans in
fact created an unruly fiscal union.
The Eurozone is more than just a mone-
tary union because central bank money is
sovereign debt. And the money issued in
the form of euros or central bank deposits by
the ECB, which is owned by all the treasuries
in the Eurozone, is Eurozone-guaranteed
debt. Thus, when German chancellor Ang-
ela Merkel told German parliamentarians in
June that there would be no eurobonds for
as long as I live she probably already had
eurobonds in her purse.
Via the ECB the euro countries fiscal
destinies are irrevocably linked. Add multi-
ple centres of fiscal sovereignty, and youve
got the recipe for a perfect sovereign debt
storm. Germany, which adopted the euro
without first securing a political union, is like
an early Mormon who took many wives and
then found himself constrained by Catholic
divorce laws.

Monetisation is not inationary
Absent an immediate morphing of Antonis
Samaras, prime minister of Greece, and
other Club Med leaders into libertarian Iron
Ladies, there are two ways out of the fiscal
morass: a series of sovereign defaults, or an
orderly fiscal union. The first would lead to a
new financial crisis; the latter presupposes
an eventual political union, with Eurozone
parliamentarians ruling the roost and natio-
nal parliaments fiscally shrunk to the role of
city councils. It is the latter process that the
ECB now is pre-empting.
The new policies now pursued by the
ECB might end up monetising most of the
peripheral sovereign debt. Monetarists
would abhor it. But since monetisation is a
swap of sovereign debt for ECB debt, which
leaves the consolidated Treasury and central
bank debt unaltered, it is, contrary to Bun-
desbank claims, not inflationary. High infla-
tion is due to too much public debt, not the
mixture of Treasury and central bank debt.
Also, the ECB can issue long-term debt
instead of overnight debt. In fact, if the
Eurozone is meant to last for eternity, why
not just swap most of the ECBs overnight
debt for central bank perpetuities? Locking
in currently attainable long-term yields on
jointly and severally guaranteed Eurozone
debt would lower the probability of a fiscally
induced price level spike.
The United States of the Eurozone
Neither voters nor politicians understood
the fiscal and federal implications of the
EMU. The tough part going forward, there-
fore, is convincing the public that mutualisa-
tion of sovereign debt via the ECB is feasible
and follows logically from the idea of a com-
mon currency.
In order to survive in the long run the
monetary union needs an orderly fiscal
union and a full-scale political union. Since
most voters thought they could get away
with a common currency without a joint fis-
cal policy, the political fight is going to get
nasty. But if cool heads prevail and the costs
and benefits are spelled out, it is likely that
we will end up within an orderly fiscal union.
Instead of the burial of the euro, we would
then witness the birth of a United States of
the Eurozone.
Aiming the bazooka
FIXED INCOME
Torgeir Hien
Portfolio manager
SKAGEN Tellus
th skagenfunds.com
Absent an immediate morphing of Antonis Samaras,
prime minister of Greece, and other Club Med leaders into
libertarian Iron Ladies, there are two ways out of the pre-
sent scal morass: a series of sovereign defaults, or an
orderly scal union.
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Further up in the third quarter
The global bond fund SKAGEN Tellus had a
very strong third quarter and rose 3.8 percent
measured in euro. So far this year the fund is
up 10.7 percent; 7.3 percentage points more
than the benchmark index.
As was the case in the second quarter, we
saw yields on our emerging market bonds fall,
implying appreciating bond prices. There is
still more to be gained here. For while many
bonds issued in the developed economies
provide a negative real return, there is still a
significant real return to be gained on bonds
issued in emerging markets. And what is
paradoxical is that while many developed
countries are drowning in debt, a fair number
of emerging market countries are managing
to keep their central government finances
in order.
We also benefited from falling yields in
the three Eurozone countries in which the
fund is invested. For some time now we have
had a position in Irish sovereign debt; in the
middle of the second quarter we bought some
Portuguese sovereign debt and at the end of
July we bought a Spanish bond. Combined,
these investments which are all in bonds
with around ten years to maturity amount
to 13.7 percent of the fund. We do not have
any other euro-denominated bonds in the
portfolio and are therefore underweight the
euro relative to the benchmark index.
The motivation for our investments in the
Eurozone periphery is a belief that the leading
politicians and institutions there will do what
it takes to narrow interest rate spreads bet-
ween the core and the periphery. The most
concrete step taken so far is the European
Central Bank program for unlimited interven-
tion in the bond market where governments
request help from the European rescue funds
and at the same time approve fiscal policy
tightening. We believe that Spain will be inclu-
ded in this program in the autumn while Ire-
land already qualifies and Portugal is not far
off. A requirement will also be made that the
countries must be able to issue bonds in the
market, something that Portugal will probably
first be able to do in mid-2013.
SKAGEN Tellus
SKAGEN Tellus 3.80% 10.67%
Barclays Capital Index 1.23% 3.36%
SKAGEN Tellus
Portfolio manager Torgeir Hien
PERFORMANCE (EUR) JULY-SEPT* YEAR TO DATE*
2012
25,0
22,5
20,0
17,5
15,0
12,5
10,0
7,5
5,0
2,5
0,0
-2,5
2011 2010
j f m a m j j a s o n d j f m a m j j a s o n d j f m a m j j a s
Source: Macrobond
25,0
22,5
20,0
17,5
15,0
12,5
10,0
7,5
5,0
2,5
0,0
-2,5
P
e
r
c
e
n
t
P
e
r
c
e
n
t
Germany
Ireland
Portugal
2-YEAR INTEREST RATES IN PORTUGAL, IRELAND AND GERMANY
31
Return and risk
measurements
NOTICE
Returns in euro*
as of 30-09-2012 Year to
date
1 year 2 year 3 year 5 year 10 year Since
start
SKAGEN Vekst 11,8 % 20,6 % 2,8 % 7,1 % -2,8 % 15,0 % 15,1 %
Oslo Brs Benchmark Index (OSEBX) linked OSEBX/MSCI
AC Total Return Index 17,8 % 30,9 % 11,2 % 16,1 % -1,5 % 14,8 % 9,7 %
SKAGEN Global 13,3 % 26,3 % 9,5 % 12,5 % 1,1 % 14,8 % 15,6 %
MSCI World Linked Index (DM through AC Total Return) 13,9 % 25,8 % 9,6 % 11,7 % -0,4 % 5,1 % 2,1 %
SKAGEN Kon-Tiki 10,1 % 21,4 % 2,6 % 11,4 % 3,9 % 23,4 % 17,3 %
MSCI Emerging Markets Index (Daily Traded Net Total Return) 12,9 % 22,1 % 1,8 % 10,1 % 0,7 % 13,9 % 9,1 %
SKAGEN Tellus (Euro) 10,67 % 13,56 % 5,37 % 9,32 % 6,57 % 6,64 %
Barclays Capital Global Treasury Index 3 - 5 years (Euro) 3,36 % 6,73 % 6,31 % 8,18 % 8,26 % 6,36 %
RIGHT OF CANCELLATION
When you buy fund units, according to the Right of Cancellation Act (Act no. 105 of 2001-12-12, ref. 22b, litra a), clients have no right
of cancellation. However, when subscriptions are sent to us by mail/fax or are carried out via the Investor client at VPS (My Account),
you are entitled to information about the fund and the management company immediately after the purchase. The information is avail-
able in the funds product sheet (simplied prospectus) and the general commercial terms. Statutory information is sent to unit holders
in the welcome letter immediately after the rst subscription. Subsequently, unit holders can nd all information on our website www.
skagenfunds.com as well as in the annual report.
as of 30-09-2012 SKAGEN Vekst SKAGEN Global SKAGEN Kon-Tiki SKAGEN Tellus
MEAN VARIANCE ANALYSIS LAST 5 YEARS
Standard deviation, fund 25,8 % 20,4 % 25,1 % 7,85 %
Standard deviation, benchmark index 31,4 % 16,1 % 23,9 % 9,36 %
Sharpe-ratio, fund -0,18 -0,04 0,23 0,57
Sharpe-ratio, benchmark index -0,11 -0,14 0,11 0,65
Relative volatility/tracking error 10,3 % 7,8 % 5,4 % 10,49 %
Information ratio -0,13 0,20 0,57 -0,15
Correlation 0,95 0,94 0,98 0,27
Alpha -1,7 % 1,6 % 3,1 %
Beta 0,78 1,19 1,03
R2 91 % 87 % 95 %
GAIN LOSS ANALYSIS LAST 5 YEARS
Relative gain 85 % 121 % 106 % 87 %
Relative loss 89 % 111 % 97 % 93 %
Relative gain/loss ratio 0,95 1,08 1,10 0,94
Positive index divergence 11,72 10,54 9,08 11,42
Negative index divergence 13,24 8,67 5,80 12,68
Index divergence ratio 0,89 1,22 1,56 0,90
Percentage positive index divergence 47 % 55 % 61 % 47 %
Percentage positive index divergence when market is up 23 % 70 % 60 % 18 %
Percentage positive index divergence when market is down 76 % 40 % 62 % 82 %
Percentage of number of positive index divergence 37 % 55 % 57 % 57 %
Percentage of number of positive index divergence when market is up 24 % 68 % 59 % 38 %
Percentage of number of positive index divergence when market is down 54 % 41 % 54 % 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 -5,0 % -6,4 % -4,2 % -9,5 %
GAIN/LOSS ANALYSIS SINCE INCEPTION
Relative gain 95 % 158 % 121 % 90 %
Relative loss 78 % 104 % 100 % 83 %
Relative gain/loss ratio 1,22 1,52 1,21 1,08
Positive index divergence 14,80 20,51 12,94 11,77
Negative index divergence 10,00 8,45 5,75 11,54
Index divergence ratio 1,48 2,43 2,25 1,02
Risk and performance measurements
Historical returns are no guarantee for future
returns. Future returns will depend, inter alia,
on market developments, the fund managers
skill, the funds risk profile and subscription
and management fees. The return may become
negative as a result of negative price develop-
ments. Investments in foreign currencies are
normally not hedged.
SKAGEN Vekst has a fixed management fee
of 1% pro anno. Returns exceeding 6 % p.a.
are shared 90/10 between the unitholders
and the management company.
SKAGEN Global has a fixed management fee
of 1% pro anno. Better value development
measured in percent in the funds net asset
value compared with the MSCI AC World
Index (in NOK) is shared 90/10 between
the unitholders and the management com-
pany.
SKAGEN Kon-Tiki has a fixed management
fee of 2% pro anno. Better value develop-
ment measured in percent in the funds net
asset value compared with the MSCI Emer-
ging Markets Index (in NOK) is shared 90/10
between the unit holders and the manage-
ment company. However, the total annual
management fee charged may not exceed 4
% of the funds average annual asset value.
If the funds net asset value shows a poorer
development measured in percent than the
MSCI Emerging Markets Index, 10 % of the
poorer value development is deducted from
the fixed management fee. However, the total
annual management fee charged may not be
lower than 1 % of the funds average annual
asset value.
SKAGEN Global and SKAGEN Kon-Tiki may
be charged a variable management fee
even if the funds return has been negative,
as long as the fund has outperformed the
benchmark. Conversely, the fund may have
a positive return without being charged a
variable management fee, as long as there is
no outperformance of the benchmark.
The fixed management fees are calculated
daily and charged quarterly. The variable
management fees are calculated daily and
charged annually.
The annual management fee is 0.8% for
SKAGEN Tellus. The management fee is cal-
culated daily and charged quarterly.
Please refer to the product sheets and pro-
spectuses for a detailed description of the
cost, etc. They are available upon request
from SKAGEN Funds or at
www.skagenfunds.com
* All return figures beyond 12 months are annualised.
RETURN AND RI SK ME ASUREMENTS
32
HISTORICAL PRICE DEVELOPMENT SKAGEN VEKST (EUR)
A minimum of 50 percent of the
assets of the SKAGEN Vekst equity
fund will at all times be invested in
Norway. The rest will be invested
in the global equity market.
SKAGEN Vekst is suitable for
investors who want an equity fund
with a good balance between
Norwegian and global companies.
The fund has a broad mandate
which gives it the freedom to
invest in a number of companies,
industries and regions.
SECURI TI ES PORTFOLI O SKAGEN VEKST AS OF 28- 09-2012
Risk
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
Security Number
Acquistion
value NOK *
Market
price
Cur-
rency
Market-
value NOK*
Unrealised
gain/loss *
Share of
fund
Stock-
exchange
ENERGY
Petroleo Brasileiro Pref ADR 1 468 265 154 991 22,12 USD 186 167 31 177 2,61 % New York
Solstad Offshore ASA 1 938 650 95 344 86,50 NOK 167 693 72 349 2,35 % Oslo Brs
Ganger Rolf ASA 1 273 817 130 405 118,50 NOK 150 947 20 543 2,12 % Oslo Brs
DOF ASA 5 702 213 108 660 26,30 NOK 149 968 41 309 2,10 % Oslo Brs
Baker Hughes Inc 552 000 136 205 44,96 USD 142 259 6 054 1,99 % New York
Bonheur ASA 1 192 594 88 117 118,50 NOK 141 322 53 205 1,98 % Oslo Brs
Sevan Drilling ASA 17 599 671 140 651 5,75 NOK 101 198 -39 453 1,42 % Oslo Brs
Gazprom Oao ADR 1 754 000 111 556 10,03 USD 100 843 -10 714 1,41 % London Int.
Statoil ASA 603 335 90 997 147,90 NOK 89 233 -1 764 1,25 % Oslo Brs
Transocean Ltd 313 900 138 551 44,92 USD 80 825 -57 726 1,13 % New York
Electromagnetic Geoservices AS 5 029 207 68 319 14,05 NOK 70 660 2 341 0,99 % Oslo Brs
Siem Offshore Inc 8 036 317 68 365 8,09 NOK 65 014 -3 351 0,91 % Oslo Brs
Eidesvik Offshore ASA 1 587 641 60 595 33,50 NOK 53 186 -7 409 0,75 % Oslo Brs
Marine Accurate Well ASA 67 652 076 51 259 0,61 NOK 41 268 -9 991 0,58 % Unotert
Subsea 7 SA 229 300 26 738 132,20 NOK 30 313 3 575 0,43 % Oslo Brs
Northern Offshore Ltd 2 750 000 26 552 10,30 NOK 28 325 1 773 0,40 % Oslo Brs
Seabird Exploratio Plc 11/15 6,00% Call 5 172 592 30 716 78,00 USD 23 619 -7 097 0,33 % Unotert
Fred Olsen Production ASA 3 000 000 18 735 6,95 NOK 20 850 2 115 0,29 % Oslo Brs
Norwegian Energy Co ASA 5 127 513 78 354 3,70 NOK 18 972 -59 382 0,27 % Oslo Brs
Minor items 76 574 44 947 -31 627 0,63 %
Total Energy 1 701 682 1 707 611 5 929 23,95 %
RAW MATERIALS
Norsk Hydro ASA 6 302 679 161 138 26,84 NOK 169 164 8 026 2,37 % Oslo Brs
Akzo Nobel NV 228 734 61 345 44,21 EUR 74 538 13 193 1,05 % Amsterdam
Koza Altin Isletmeleri AS 553 919 39 761 38,60 TRY 68 163 28 402 0,96 % Istanbul
Agrinos AS 817 242 23 068 45,50 NOK 37 185 14 116 0,52 % Unotert
Norske Skogindustrier ASA 5 970 000 345 541 5,19 NOK 30 984 -314 556 0,43 % Oslo Brs
Minor items 94 004 60 426 -33 578 0,85 %
Total Raw materials 724 857 440 461 -284 397 6,18 %
INDUSTRIALS
Kongsberg Gruppen ASA 3 110 267 129 185 108,50 NOK 337 464 208 279 4,73 % Oslo Brs
Wilh. Wilhelmsen Holding ASA 1 315 811 93 970 139,00 NOK 182 898 88 928 2,56 % Oslo Brs
Norwegian Air Shuttle ASA 1 504 738 83 483 107,50 NOK 161 759 78 277 2,27 % Oslo Brs
Dockwise Ltd 1 032 808 173 152 99,00 NOK 102 248 -70 904 1,43 % Oslo Brs
Stolt-Nielsen Ltd 926 602 114 905 109,50 NOK 101 463 -13 442 1,42 % Oslo Brs
LG Corp 200 000 41 440 62 200,00 KRW 64 073 22 634 0,90 % Seoul
Glamox ASA 5 944 034 5 852 10,50 NOK 62 412 56 560 0,88 % Unotert
Aveng Ltd 2 575 700 75 193 31,14 ZAR 55 668 -19 526 0,78 % Johannesburg
TTS Group ASA 3 222 553 45 757 13,40 NOK 43 182 -2 575 0,61 % Oslo Brs
Golar LNG Ltd 182 956 40 258 38,63 USD 40 512 255 0,57 % NASDAQ
Odfjell SE-A 1 664 725 74 526 21,90 NOK 36 457 -38 069 0,51 % Oslo Brs
NKT Holding A/S 159 823 31 627 201,90 DKK 31 907 280 0,45 % Kbenhavn
I.M. Skaugen SE 1 323 619 16 595 24,00 NOK 31 767 15 172 0,45 % Oslo Brs
Goodtech ASA 2 116 842 48 135 12,75 NOK 26 990 -21 145 0,38 % Oslo Brs
Norwegian Car Carriers ASA 12 360 250 37 823 2,10 NOK 25 957 -11 867 0,36 % Oslo Brs
LG Corp Pref 224 482 25 796 21 500,00 KRW 24 859 -938 0,35 % Seoul
Minor items 154 158 45 200 -108 959 0,63 %
Total Industrials 1 191 856 1 374 816 182 960 19,28 %
CONSUMER DISCRETIONARY
Royal Caribbean Cruises Ltd 1 803 021 269 973 30,13 USD 311 396 41 424 4,37 % New York
Continental AG 269 000 128 675 76,19 EUR 151 070 22 395 2,12 % Xetra
Hurtigruten ASA 22 671 503 81 526 3,29 NOK 74 589 -6 937 1,05 % Oslo Brs
Mahindra & Mahindra Ltd GDR 591 300 10 523 16,05 USD 54 400 43 877 0,76 % London Int.
NHST Media Group ASA 60 000 31 447 550,00 NOK 33 000 1 553 0,46 % Unotert
LG Electronics Inc Pref 230 478 55 694 19 000,00 KRW 22 555 -33 139 0,32 % Seoul
Minor items 38 243 23 930 -14 314 0,34 %
Total Consumer Discretionary 616 081 670 941 54 859 9,41 %
33
IT 9,5%
Energy
24,0%
Industrials 19,3%
Finance 13,8%
Raw
Materials
6,2%
Health 4,5%
Consumer
Discretionary 9,4%
Telecom 3,1%
Cash 2,1%
Consumer
Staples 5,2%
Utilities 3,0%
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 28- 09-2012
South America 4,7% Cash 2,1% Asia ex
Japan 9,5%
Japan 0,1%
EMEA 5,7%

Eurozone
10,2%
North
America 10,0% Norway 52,3%
Peripheral EU 5,2%
Oceania 0,2%
* Figures in 1000 NOK
The market value as of 28.09.2012 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 1 084 045 45 733 75,00 NOK 81 303 35 570 1,14 % Oslo Brs
Morpol ASA 8 407 150 175 896 8,63 NOK 72 554 -103 342 1,02 % Oslo Brs
Kesko Oyj B 370 000 93 965 22,06 EUR 60 164 -33 801 0,84 % Helsinki
Royal Unibrew A/S 116 365 33 185 445,00 DKK 51 202 18 017 0,72 % Kbenhavn
Austevoll Seafood ASA 1 972 716 62 173 25,80 NOK 50 896 -11 277 0,71 % Oslo Brs
Yazicilar Holding AS 750 000 25 622 14,00 TRY 33 474 7 851 0,47 % Istanbul
Minor items 80 045 18 508 -61 537 0,26 %
Total Consumer Staples 516 620 368 101 -148 518 5,16 %
HEALTH CARE
Teva Pharmaceutical-Sp ADR 719 787 217 973 41,49 USD 171 183 -46 790 2,40 % NASDAQ
Clavis Pharma ASA 853 268 28 167 63,50 NOK 54 183 26 015 0,76 % Oslo Brs
Photocure ASA 1 109 401 44 688 37,00 NOK 41 048 -3 640 0,58 % Oslo Brs
Medi-Stim ASA 1 513 625 18 913 18,00 NOK 27 245 8 332 0,38 % Oslo Brs
Minor items 82 632 27 741 -54 890 0,39 %
Total Health Care 392 373 321 400 -70 973 4,51 %
FINANCIALS
Olav Thon Eiendomsselskap ASA 180 025 33 834 862,00 NOK 155 182 121 347 2,18 % Oslo Brs
Hannover Rueckversicherung AG 367 500 74 061 49,73 EUR 134 712 60 651 1,89 % Frankfurt
RSA Insurance Group Plc 11 714 361 114 633 1,11 GBP 119 944 5 311 1,68 % London
Gjensidige Forsikring ASA 1 369 099 80 698 79,45 NOK 108 775 28 077 1,53 % Oslo Brs
Danske Bank A/S 741 784 83 171 104,90 DKK 76 942 -6 229 1,08 % Kbenhavn
Northern Logistic Property ASA 2 728 689 82 502 28,00 NOK 76 403 -6 099 1,07 % Oslo Brs
Korean Reinsurance Co 1 096 291 30 487 11 850,00 KRW 66 912 36 425 0,94 % Seoul
Norwegian Finans Holding ASA 12 047 000 23 621 4,15 NOK 49 995 26 374 0,70 % Unotert
Hitecvision AS 762 746 5 183 65,00 NOK 49 578 44 395 0,70 % Unotert
Sparebanken st 1 413 500 25 053 30,00 NOK 42 405 17 352 0,59 % Oslo Brs
Haci Omer Sabanci Holding AS 1 501 444 23 339 7,88 TRY 37 718 14 379 0,53 % Istanbul
Sparebanken Vest 995 506 45 056 28,30 NOK 28 173 -16 883 0,40 % Oslo Brs
Minor items 60 212 38 590 -21 622 0,54 %
Total Financials 681 851 985 328 303 478 13,82 %
INFORMATION TECHNOLOGY
Samsung Electronics Co Ltd Pref GDR 199 321 257 657 352,00 USD 402 170 144 513 5,64 % London Int.
SAP AG 342 400 131 117 55,47 EUR 139 998 8 881 1,96 % Xetra
Q-Free ASA 3 182 604 44 688 18,50 NOK 58 878 14 191 0,83 % Oslo Brs
Proact IT Group AB 458 101 15 214 91,00 SEK 36 459 21 245 0,51 % Stockholm
Minor items 66 951 38 936 -28 015 0,55 %
Total Information Technology 515 627 676 440 160 814 9,49 %
TELECOM
France Telecom SA 1 111 904 142 131 9,48 EUR 77 738 -64 392 1,09 % Paris
Sistema Jsfc GDR 573 709 19 190 20,36 USD 66 955 47 765 0,94 % London Int.
Mobile Telesystems ADR 453 489 28 862 17,65 USD 45 880 17 018 0,64 % New York
Indosat Tbk PT ADR 154 730 25 735 28,09 USD 24 914 -821 0,35 % New York
Minor items 7 842 2 341 -5 501 0,03 %
Total Telecom 223 760 217 828 -5 932 3,05 %
UTILITIES
Centrais Eletricas Brasileiras SA Pref 2 610 818 126 051 18,60 BRL 137 113 11 061 1,92 % Sao Paulo
Fortum Oyj 755 000 84 612 14,35 EUR 79 860 -4 752 1,12 % Helsinki
Total Utilities 210 663 216 972 6 309 3,04 %
Total equity portfolio* 6 775 369 6 979 898 204 529 97,88 %
Disposable liquidity 150 875 2,12 %
Total share capital 7 130 773 100,00 %
Basiskurs per 28.09.2012 1 246,8126
34
1998 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1999
10
20
40
80
160
240 SKAGEN Global
World Index
20 % annual return
N
A
V

S
K
A
G
E
N

G
l
o
b
a
l
HISTORICAL PRICE DEVELOPMENT SKAGEN GLOBAL (EUR)
The SKAGEN Global equity fund
invests in stocks worldwide.
The fund seeks to maintain a
balanced industry exposure.
SKAGEN Global is suitable for
investors who want an equity
fund which invests over the
whole world and is therefore
diversified both geographically
and by industry. The fund is
also suitable for those who
already have exposure towards
the Norwegian equity market,
but who wish to strengthen
their portfolio and reduce risk.
SECURI TI ES PORTFOLI O SKAGEN GLOBAL AS OF 28- 09-2012
Risk

4 2 1 3 5 6 7
Security Number
Acquistion
value NOK *
Market
price
Cur-
rency
Market-
value NOK*
Unrealised
gain/loss *
Share of
fund
Stock-
exchange
ENERGY
Gazprom Oao ADR 13 955 912 1 016 074 10,03 USD 801 772 -214 302 2,43 % London Int.
Baker Hughes Inc 2 269 804 591 589 44,93 USD 584 139 -7 449 1,77 % New York
Weatherford Intl Ltd 6 926 377 580 074 12,58 USD 499 089 -80 984 1,51 % New York
Ensco Plc Class A 1 411 142 404 289 54,59 USD 441 241 36 952 1,34 % New York
Petroleo Brasileiro Pref ADR 3 396 473 606 992 22,06 USD 429 166 -177 826 1,30 % New York
OMV AG 2 064 000 445 062 27,24 EUR 414 313 -30 750 1,25 % Wien
Kazmunaigas Exploration GDR 3 216 018 405 395 18,45 USD 339 865 -65 530 1,03 % London Int.
Nabors Industries Ltd 3 722 233 497 730 14,06 USD 299 765 -197 966 0,91 % New York
Afren Plc 21 792 001 223 689 1,39 GBP 281 177 57 488 0,85 % London
BP Plc 3 948 350 200 454 4,39 GBP 160 229 -40 225 0,49 % London
Electromagnetic Geoservices AS 9 988 712 155 711 14,05 NOK 140 341 -15 370 0,43 % Oslo Brs
Petroleo Brasileiro SA 2 065 412 146 770 22,40 BRL 130 584 -16 186 0,40 % Sao Paulo
BP Plc ADR 511 549 155 878 42,54 USD 124 633 -31 245 0,38 % New York
Minor items 137 595 132 479 -5 116 0,40 %
Total Energy 5 567 303 4 778 793 -788 510 14,47 %
RAW MATERIALS
Akzo Nobel NV 1 870 494 564 595 44,17 EUR 608 898 44 303 1,84 % Amsterdam
Heidelbergcement AG 1 170 781 367 883 40,80 EUR 352 004 -15 879 1,07 % Xetra
Ternium SA ADR 3 008 882 468 540 19,59 USD 337 622 -130 918 1,02 % New York
Norsk Hydro ASA 9 261 378 273 662 26,84 NOK 248 575 -25 087 0,75 % Oslo Brs
Lundin Mining Corp SDR 8 323 200 208 160 33,65 SEK 244 533 36 373 0,74 % Stockholm
Mayr-Melnhof Karton AG 450 627 203 444 73,11 EUR 242 776 39 332 0,74 % Wien
Cliffs Natural Resources Inc 1 086 723 305 363 38,85 USD 241 825 -63 538 0,73 % New York
UPM-Kymmene Oyj 1 467 477 97 177 8,79 EUR 95 054 -2 123 0,29 % Helsinki
Minor items 61 877 70 121 8 244 0,21 %
Total Raw materials 2 550 700 2 441 408 -109 292 7,39 %
INDUSTRIALS
Tyco International Ltd 5 900 910 1 219 632 56,18 USD 1 898 861 679 229 5,75 % New York
LG Corp 1 883 017 485 731 62 200,00 KRW 602 326 116 595 1,82 % Seoul
Bunge Ltd 1 558 747 510 189 66,70 USD 595 516 85 326 1,80 % New York
Siemens AG 833 819 488 622 78,15 EUR 480 189 -8 433 1,45 % Frankfurt
TE Connectivity Ltd 1 895 712 303 021 34,02 USD 369 401 66 380 1,12 % New York
Stolt-Nielsen Ltd 2 157 534 364 453 109,50 NOK 236 250 -128 203 0,72 % Oslo Brs
Randstad Holding NV 1 095 530 271 231 25,96 EUR 209 616 -61 615 0,63 % Amsterdam
BayWa AG 744 577 222 363 30,66 EUR 168 253 -54 109 0,51 % Frankfurt
TRW Automotive Holdings Corp 490 740 122 417 43,36 USD 121 881 -535 0,37 % New York
Minor items 346 753 150 582 -196 171 0,46 %
Total Industrials 4 334 413 4 832 876 498 462 14,64 %
Comcast Corp 2 973 262 292 629 34,74 USD 591 636 299 007 1,79 % NASDAQ
Toyota Industries Corp 2 946 921 490 495 2 185,00 JPY 474 022 -16 474 1,44 % Tokyo
Renault SA 1 586 952 401 190 36,71 EUR 429 357 28 168 1,30 % Paris
Hyundai Motor Pref (2pb) 562 937 157 824 77 600,00 KRW 224 651 66 827 0,68 % Seoul
General Motors Co 1 478 540 202 725 22,79 USD 192 997 -9 728 0,58 % New York
Dixons Retail Plc 78 684 888 109 156 0,20 GBP 144 974 35 818 0,44 % London
LG Electronics Inc Pref 1 036 948 270 944 19 000,00 KRW 101 321 -169 624 0,31 % Seoul
Yamaha Motor Co Ltd 1 953 411 159 122 682,00 JPY 98 075 -61 048 0,30 % Tokyo
Minor items 280 701 371 240 90 538 1,12 %
Total Consumer Discretionary 2 364 787 2 628 271 263 484 7,96 %
35
IT 15,1%
Energy
14,5%
Industrials 14,6%
Finance 18,5%
Raw
Materials
7,4%
Health 4,2%
Consumer
Discretionary 8,0%
Telecom 5,7%
Consumer
Staples 5,2%
Utilities
2,5%
Cash
4,3%
SECTOR DISTRIBUTION
South America 6,6%
Cash 4,3%
Asia ex
Japan 15,2%
Japan 3,9%
EMEA 7,7%

Eurozone 13,4%
North America
33,6%
Norway 3,7%
Peripheral EU 9,7%
Frontier
Markets 1,8%
10 LARGEST HOLDINGS
* From the moor north of Skagen, 1885. Detail.
By P.S. Kryer, one of the Skagen painters.
SECURI TI ES PORTFOLI O SKAGEN GLOBAL AS OF 28- 09-2012
Security Number
Acquistion
value NOK *
Market
price
Cur-
rency
Market-
value NOK*
Unrealised
gain/loss *
Share of
fund
Stock-
exchange
CONSUMER STAPLES
Svenska Cellulosa AB-B 7 129 659 564 340 122,50 SEK 762 547 198 207 2,31 % Stockholm
Unilever NV-Cva 1 106 562 192 348 27,67 EUR 225 671 33 322 0,68 % Amsterdam
Tesco Plc 6 717 110 241 918 3,33 GBP 207 043 -34 874 0,63 % London
Yazicilar Holding AS 4 021 961 97 412 14,00 TRY 179 488 82 076 0,54 % Istanbul
United Intl Enterprises 154 171 22 774 974,00 DKK 148 443 125 669 0,45 % Kbenhavn
Minor items 143 094 93 159 -49 935 0,28 %
Total Consumer Staples 1 323 697 1 727 744 404 047 5,23 %
HEALTH CARE
Roche Holding AG-Genusschein 461 983 402 234 176,20 CHF 496 247 94 013 1,50 % Zrich
Teva Pharmaceutical-Sp ADR 2 067 215 446 692 41,58 USD 492 335 45 643 1,49 % NASDAQ
Pzer Inc 1 813 495 212 079 24,81 USD 257 712 45 633 0,78 % New York
Rhoen-Klinikum AG 1 108 726 121 721 15,34 EUR 125 332 3 611 0,38 % Xetra
Minor items 29 944 740 -29 204 0,00 %
Total Health Care 1 212 670 1 372 366 159 696 4,16 %
FINANCIALS
Citigroup Inc 8 141 582 1 833 543 32,70 USD 1 525 138 -308 404 4,62 % New York
American International Group 2 732 371 512 660 32,65 USD 510 946 -1 715 1,55 % New York
Hannover Rueckversicherung AG 1 298 960 274 401 49,77 EUR 476 451 202 050 1,44 % Frankfurt
Gjensidige Forsikring ASA 5 719 946 338 240 79,45 NOK 454 450 116 210 1,38 % Oslo Brs
Banco Do Estado Rio Grande Do Sul Pref 8 211 327 171 463 16,80 BRL 389 365 217 902 1,18 % Sao Paulo
Haci Omer Sabanci Holding AS 13 394 775 259 522 7,88 TRY 336 458 76 936 1,02 % Istanbul
Goldman Sachs Group Inc 487 483 353 594 113,87 USD 317 951 -35 643 0,96 % New York
Cheung Kong Holdings Ltd 3 780 674 283 780 113,70 HKD 317 540 33 760 0,96 % Hong Kong
Kinnevik Investment AB-B 2 039 277 100 415 136,40 SEK 242 858 142 443 0,74 % Stockholm
TAG Immobilien AG 2 386 629 125 729 8,35 EUR 146 853 21 124 0,44 % Frankfurt
RSA Insurance Group Plc 14 080 558 135 408 1,11 GBP 144 561 9 154 0,44 % London
Albaraka Turk Katilim Bankasi AS 31 824 600 213 096 1,36 TRY 137 966 -75 130 0,42 % Istanbul
Sparebank 1 SR-Bank ASA 3 611 486 101 986 36,90 NOK 133 264 31 278 0,40 % Oslo Brs
Asya Katilim Bankasi AS 20 782 168 204 999 1,98 TRY 131 167 -73 832 0,40 % Istanbul
Industrial Bank of Korea 1 973 755 144 101 12 250,00 KRW 124 342 -19 760 0,38 % Seoul
EFG-Hermes Holding SAE 10 956 636 206 143 12,04 EGP 123 910 -82 233 0,38 % Cairo
Capitamalls Asia Ltd 15 585 550 98 722 1,65 SGD 120 103 21 381 0,36 % Singapore
GSW Immobilien AG 559 925 94 706 29,04 EUR 119 843 25 137 0,36 % Xetra
Japan Securities Finance Co 4 069 475 234 986 358,00 JPY 107 251 -127 736 0,32 % Tokyo
Minor items 270 140 235 406 -34 733 0,71 %
Total Financials 5 957 634 6 095 823 138 189 18,46 %
Samsung Electronics Co Ltd Pref 560 968 1 292 728 789 000,00 KRW 2 276 156 983 429 6,89 % Seoul
Oracle Corp 6 472 904 1 043 048 31,34 USD 1 161 956 118 908 3,52 % NASDAQ
Kyocera Corp 1 200 268 631 870 6 760,00 JPY 597 314 -34 555 1,81 % Tokyo
Microsoft Corp 2 199 798 325 540 29,89 USD 376 617 51 077 1,14 % NASDAQ
Samsung Electronics Co Ltd Pref GDR 135 491 136 883 352,00 USD 273 177 136 294 0,83 % London Int.
Google Inc 58 615 199 849 754,90 USD 253 449 53 599 0,77 % NASDAQ
Minor items 42 374 33 802 -8 572 0,10 %
Total Information Technology 3 672 293 4 972 472 1 300 180 15,06 %
TELECOM
Vimpelcom Ltd-Spon ADR 11 765 585 908 277 11,61 USD 782 415 -125 862 2,37 % New York
China Mobile Ltd ADR 770 393 211 135 55,09 USD 243 095 31 961 0,74 % New York
China Unicom Hong Kong Ltd 21 748 250 202 629 12,72 HKD 204 352 1 723 0,62 % Hong Kong
Indosat Tbk PT ADR 921 819 137 600 28,09 USD 148 316 10 716 0,45 % New York
Vivendi SA 1 299 149 145 393 15,40 EUR 147 432 2 039 0,45 % Paris
China Unicom Hong Kong Ltd ADR 1 180 403 109 298 16,30 USD 110 207 909 0,33 % New York
Sistema Jsfc GDR 878 692 87 335 20,36 USD 102 472 15 137 0,31 % London Int.
Minor items 111 421 157 650 46 228 0,48 %
Total Telecom 1 913 089 1 895 940 -17 149 5,74 %
UTILITIES
Centrais Eletricas Brasileiras SA Pref 11 295 481 698 456 18,55 BRL 591 402 -107 054 1,79 % Sao Paulo
Centrais Eletricas Brasileiras SA 7 122 805 594 014 12,13 BRL 243 863 -350 152 0,74 % Sao Paulo
Total Utilities 1 292 471 835 265 -457 206 2,53 %
Total equity portfolio* 30 189 056 31 580 958 1 391 902 95,66 %
Disposable liquidity 1 433 696 4,34 %
Total share capital 33 014 653 100,00 %
Basiskurs per 28.09.2012 816,4921
36
2004 2005 2006 2007 2008 2009 2010 2011 2012 2003
20
10
40
80
120
SKAGEN Kon-Tiki
Emerging Markets Index
20 % annual return
N
A
V

S
K
A
G
E
N

K
o
n
-
T
i
k
i
HISTORICAL PRICE DEVELOPMENT SKAGEN KON-TIKI (EUR)
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 28- 09-2012
Risk

4 2 1 3 5 6 7
Security Number
Acquistion
value NOK *
Market
price
Cur-
rency
Market-
value NOK*
Unrealised
gain/loss *
Share of
fund
Stock-
exchange
ENERGY
Baker Hughes Inc 6 612 835 1 850 498 44,93 USD 1 701 828 -148 670 3,95 % New York
Gazprom Oao ADR 22 585 821 1 553 333 10,03 USD 1 297 563 -255 770 3,01 % London Int.
Petroleo Brasileiro Pref ADR 5 655 678 965 220 22,06 USD 714 631 -250 589 1,66 % New York
Seadrill Ltd 2 307 335 213 835 223,70 NOK 516 151 302 316 1,20 % Oslo Brs
Tullow Oil Plc 3 804 688 332 305 13,71 GBP 482 465 150 159 1,12 % London
Afren Plc 25 977 562 322 079 1,39 GBP 335 183 13 103 0,78 % London
Pacic Drilling SA 4 465 777 267 970 9,99 USD 255 537 -12 433 0,59 % New York
Petroleo Brasileiro SA 2 000 000 153 673 22,40 BRL 126 448 -27 225 0,29 % Sao Paulo
Archer Ltd 13 430 829 321 949 8,66 NOK 116 311 -205 638 0,27 % Oslo Brs
Deep Sea Supply Plc 12 229 431 125 766 9,50 NOK 116 180 -9 586 0,27 % Oslo Brs
Minor items 236 058 142 221 -93 837 0,33 %
Total Energy 6 342 686 5 804 517 -538 169 13,48 %
RAW MATERIALS
Vale Sa Spons ADR 9 472 805 1 013 789 17,41 USD 944 646 -69 143 2,19 % New York
Exxaro Resources Ltd 5 669 011 724 160 160,94 ZAR 631 360 -92 799 1,47 % Johannesburg
Eurasian Natural Resources 10 691 761 595 655 3,11 GBP 307 453 -288 201 0,71 % London
Drdgold Ltd ADR 3 724 701 206 450 6,46 USD 137 821 -68 629 0,32 % NASDAQ
Park Elektrik Uretim Madenci 6 389 816 114 735 6,70 TRY 136 469 21 733 0,32 % Istanbul
Ipek Dogal Enerji Kaynaklari Ve Uretim AS 9 525 668 87 534 4,10 TRY 124 494 36 960 0,29 % Istanbul
Vale SA-Pref A 1 231 900 210 807 35,43 BRL 123 191 -87 616 0,29 % Sao Paulo
Asia Cement China Holdings 50 706 000 186 391 3,27 HKD 122 483 -63 908 0,28 % Hong Kong
Total Raw materials 3 139 521 2 527 917 -611 604 5,87 %
INDUSTRIALS
ABB Ltd 8 957 636 928 140 123,80 SEK 968 224 40 084 2,25 % Stockholm
A P Moller - Maersk B 12 701 496 037 41 520,00 DKK 521 307 25 270 1,21 % Kbenhavn
Empresas ICA S.A.B 42 542 700 621 197 25,00 MXN 473 979 -147 218 1,10 % Mexico
Aveng Ltd 21 017 094 617 358 31,29 ZAR 455 076 -162 282 1,06 % Johannesburg
Bidvest Group Ltd 2 878 881 335 297 206,00 ZAR 410 390 75 093 0,95 % Johannesburg
CNH Global N.V. 1 644 161 384 698 39,20 USD 369 166 -15 532 0,86 % New York
Harbin Electric Company Ltd 68 000 000 614 366 5,96 HKD 299 380 -314 986 0,70 % Hong Kong
Golar LNG Ltd 1 274 141 279 985 38,51 USD 281 049 1 065 0,65 % NASDAQ
Orascom Construction Industries GDR 977 842 218 053 46,55 USD 260 723 42 670 0,61 % Cairo
AirAsia Bhd 38 805 500 90 691 3,02 MYR 219 244 128 553 0,51 % KualaLumpur
Tekfen Holding AS 8 933 907 139 944 6,52 TRY 185 677 45 733 0,43 % Istanbul
Norwegian Air Shuttle ASA 1 628 768 119 886 107,50 NOK 175 093 55 206 0,41 % Oslo Brs
Frontline 2012 Ltd 6 912 000 128 435 25,00 NOK 172 800 44 365 0,40 % Unotert
Dryships Inc 12 000 219 215 197 2,36 USD 162 216 -52 981 0,38 % NASDAQ
Orascom Construction Industries 552 118 135 933 287,16 EGP 148 922 12 989 0,35 % Cairo
Enka Insaat Ve Sanayi AS 9 426 663 105 720 4,50 TRY 135 220 29 499 0,31 % Istanbul
Abengoa SA 1 117 057 105 076 13,78 EUR 113 473 8 397 0,26 % Madrid
Minor items 354 192 245 413 -108 779 0,57 %
Total Industrials 5 890 207 5 597 354 -292 853 13,00 %
Hyundai Motor Pref (2pb) 3 574 100 570 644 77 600,00 KRW 1 426 315 855 670 3,31 % Seoul
Great Wall Motor Co Ltd 93 094 500 168 869 20,45 HKD 1 406 324 1 237 455 3,27 % Hong Kong
Hyundai Motor Pref (1p) 3 259 810 521 108 72 000,00 KRW 1 207 012 685 904 2,80 % Seoul
Mahindra & Mahindra Ltd GDR 7 859 799 156 887 16,05 USD 722 567 565 680 1,68 % London Int.
Royal Caribbean Cruises Ltd 2 171 283 384 223 30,10 USD 374 347 -9 876 0,87 % New York
LG Electronics Inc Pref 3 150 000 850 969 19 000,00 KRW 307 788 -543 182 0,71 % Seoul
Hengdeli Holdings Ltd 155 068 000 270 643 2,25 HKD 257 735 -12 908 0,60 % Hong Kong
DRB-Hicom Bhd 54 368 600 205 041 2,33 MYR 236 991 31 950 0,55 % Kuala Lumpur
Mahindra & Mahindra Ltd 1 812 804 140 553 864,70 INR 169 834 29 280 0,39 % Nat. India
Minor items 76 259 43 875 -32 384 0,10 %
Total Consumer Discretionary 3 345 197 6 152 787 2 807 590 14,29 %
37
IT 13,0%
Energy
13,5%
Industrials 13,0%

Finance 15,2%
Raw
Materials
5,9%
Health 4,4%
Consumer
Discretionary14,3%
Telecom 7,4%
Consumer
Staples 8,1%
Utilities
3,5%
Cash
1,7%
SECTOR DISTRIBUTION
Cash 1,7%
Asia ex
Japan 39,6%
EMEA 21,9%
South America
13,3%
Eurozone
2,1%
North
America
6,7%
Norway 3,7%
Peripheral EU
7,3%
Frontier
Markets 3,7%
10 LARGEST HOLDINGS
* Skagen reefs lightship, 1892. Detail.
By Carl Locher, one of the Skagen painters.
SECURI TI ES PORTFOLI O SKAGEN KON-TI KI AS OF 28- 09-2012
Security Number
Acquistion
value NOK *
Market
price
Cur-
rency
Market-
value NOK*
Unrealised
gain/loss *
Share of
fund
Stock-
exchange
CONSUMER STAPLES
Cosan Ltd 10 319 782 577 467 15,68 USD 926 847 349 381 2,15 % New York
Heineken NV 2 044 217 610 709 46,36 EUR 698 364 87 655 1,62 % Amsterdam
Kulim Malaysia BHD 55 651 600 175 679 4,93 MYR 513 277 337 598 1,19 % Kuala Lumpur
Yazicilar Holding AS 9 654 470 239 354 14,00 TRY 430 850 191 496 1,00 % Istanbul
Tata Global Beverages Ltd 14 126 721 188 252 142,85 INR 218 640 30 388 0,51 % London
PZ Cussons Plc 7 625 746 127 931 3,00 GBP 211 881 83 950 0,49 % Nat. India
Minor items 324 199 286 324 -37 874 0,66 %
Total Consumer Staples 2 325 798 3 501 630 1 175 832 8,13 %
HEALTH CARE
Richter Gedeon Nyrt 968 258 1 070 376 38 800,00 HUF 969 829 -100 548 2,25 % Budapest
Hanmi Pharm Co Ltd 760 725 315 456 93 700,00 KRW 366 568 51 112 0,85 % Seoul
China Shineway Pharmaceutical 25 409 000 186 531 11,16 HKD 209 469 22 938 0,49 % Hong Kong
Eis Eczacibasi Ilac Ve Sanayi 21 418 365 146 800 1,86 TRY 126 990 -19 810 0,29 % Istanbul
Supermax Corp BHD 29 573 600 114 137 2,06 MYR 113 972 -165 0,26 % Kuala Lumpur
Minor items 184 050 105 683 -78 367 0,25 %
Total Health Care 2 017 350 1 892 510 -124 839 4,40 %
FINANCIALS
Haci Omer Sabanci Holding AS 50 107 500 989 063 7,88 TRY 1 258 630 269 567 2,92 % Istanbul
Banco Do Estado Rio Grande Do Sul Pref 19 543 329 452 544 16,80 BRL 926 706 474 161 2,15 % Sao Paulo
VTB Bank Ojsc GDR 43 947 983 1 325 224 3,33 USD 838 252 -486 972 1,95 % London Int.
Aberdeen Asset Management Plc 20 695 195 334 715 3,11 GBP 594 730 260 014 1,38 % London
State Bank of India 2 305 149 662 042 2 240,60 INR 559 591 -102 450 1,30 % Nat. India
Kiwoom Securities Co Ltd 1 043 205 190 648 65 400,00 KRW 350 860 160 213 0,81 % Seoul
Bangkok Bank Public Co-Nvdr 9 410 500 240 648 194,00 THB 339 203 98 555 0,79 % Bangkok
JSE Ltd 6 464 519 249 899 68,90 ZAR 308 221 58 321 0,72 % Johannesburg
Korean Reinsurance Co 4 765 065 181 997 11 850,00 KRW 290 385 108 388 0,67 % Seoul
EFG-Hermes Holding SAE 14 949 381 353 507 12,04 EGP 169 065 -184 441 0,39 % Cairo
Turkiye Sinai Kalkinma Bank 26 126 005 154 747 2,00 TRY 166 561 11 813 0,39 % Istanbul
Kiatnakin Bank Pcl-Nvdr 19 238 700 142 186 46,25 THB 165 323 23 137 0,38 % Bangkok
Kiatnakin Bank Pcl 16 543 300 108 175 46,25 THB 142 161 33 985 0,33 % Bangkok
Nordnet AB 7 007 907 97 310 18,70 SEK 114 417 17 107 0,27 % Stockholm
Minor items 423 822 330 995 -92 826 0,77 %
Total Financials 5 906 528 6 555 101 648 573 15,22 %
Samsung Electronics Co Ltd Pref 550 547 1 360 170 789 000,00 KRW 2 233 872 873 703 5,19 % Seoul
Hon Hai Precision Industry 93 500 000 1 791 461 92,00 TWD 1 680 401 -111 060 3,90 % Taipei
Samsung Electronics Co Ltd Pref GDR 505 370 496 402 352,00 USD 1 018 929 522 527 2,37 % London Int.
Naspers Ltd 1 202 865 309 434 514,97 ZAR 428 652 119 218 1,00 % Johannesburg
Lenovo Group Ltd 22 990 000 108 985 6,42 HKD 109 029 44 0,25 % Hong Kong
Minor items 278 564 133 948 -144 616 0,31 %
Total Information Technology 4 345 015 5 604 831 1 259 817 13,02 %
TELECOM
Sistema Jsfc GDR 11 303 681 901 767 20,36 USD 1 318 224 416 457 3,06 % London Int.
Bharti Airtel Ltd 22 993 483 992 479 265,45 INR 661 295 -331 184 1,54 % Nat. India
China Mobile Ltd ADR 1 769 952 526 686 55,09 USD 558 503 31 818 1,30 % New York
Indosat Tbk PT 103 964 000 323 274 5 400,00 IDR 336 001 12 727 0,78 % Indonesia
Indosat Tbk PT ADR 2 054 395 350 195 28,09 USD 330 543 -19 653 0,77 % New York
Total Telecom 3 094 401 3 204 566 110 165 7,44 %
UTILITIES
Centrais Eletricas Brasileiras SA Pref 28 105 663 2 077 528 18,55 BRL 1 471 539 -605 989 3,42 % Sao Paulo
Minor items 51 596 25 491 -26 104 0,06 %
Total Utilities 2 129 124 1 497 030 -632 094 3,48 %
Total equity portfolio* 38 535 825 42338243 3 802 417 98,32 %
Disposable liquidity 721 935 1,68 %
Total share capital 43060177 100,00 %
Basiskurs per 28.09.2012 514,8049
38
SKAGEN Tellus is an actively
managed global bond fund
investing in bonds issued by
governments, regional autho-
rities and financial institutions
all over the world. SKAGEN
Tellus is a good option for
investors who wish to invest
in global bonds and who have
an investment horizon of at
least 12 months. Investors
must be tolerant of exchange
rate fluctuations.
* Interior. Brndums annex, ca. 1920. Detail.
By Anna Ancher, one of the Skagen painters.
++++
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GOVERNMENT BONDS
Australian Government 15.11.2012 4,75 4 000 24 223 596,67 418 23 867 24 285 -357 5,13 %
Brazilian Government 10.01.2028 10,25 6 000 21 788 368,41 376 22 105 22 481 317 4,75 %
Canadian Government 01.08.2013 2,00 5 000 28 695 587,63 92 29 382 29 473 687 6,22 %
Chilean Government 05.08.2020 5,50 800 000 10 006 1,28 78 10 273 10 351 266 2,19 %
Colombian Government 14.04.2021 7,75 5 000 000 17 419 0,39 564 19 692 20 256 2 273 4,28 %
European Bank Recon & Dev 17.06.2015 0,50 20 000 18 273 87,71 26 17 542 17 568 -730 3,71 %
European Bank Recon & Dev 06.06.2014 5,25 130 000 14 998 10,75 231 13 970 14 201 -1 027 3,00 %
Irish Government 18.10.2020 5,00 2 000 13 419 735,36 697 14 707 15 404 1 288 3,25 %
Lithuanian Government 11.02.2020 7,37 2 000 13 770 730,16 110 14 603 14 714 833 3,11 %
Mexican Government 20.11.2036 10,00 40 000 21 226 64,14 485 25 656 26 141 4 429 5,52 %
New Zealand Government 15.04.2015 6,00 2 000 10 596 516,45 259 10 329 10 588 -267 2,24 %
Peruan Government 12.08.2037 6,90 6 000 15 574 265,93 117 15 956 16 072 382 3,39 %
Polish Government 25.10.2021 5,46 15 000 26 434 192,98 1 360 28 947 30 307 2 513 6,40 %
Portugese Government 15.04.2021 3,85 5 000 22 919 523,42 645 26 171 26 816 3 253 5,66 %
Russian Government 10.03.2018 7,85 50 000 9 956 19,69 36 9 844 9 880 -112 2,09 %
Slovak Government 21.05.2022 4,37 3 000 17 305 605,21 265 18 156 18 422 851 3,89 %
South African Government 31.03.2036 6,25 35 000 20 800 55,35 752 19 373 20 124 -1 427 4,25 %
Spanish Government 31.01.2022 5,85 3 000 21 217 733,29 852 21 999 22 850 782 4,83 %
UK Government 07.03.2013 4,50 3 000 28 422 942,40 72 28 272 28 345 -150 5,99 %
US Government 31.08.2013 0,12 7 000 40 672 572,99 4 40 109 40 113 -563 8,47 %
US Government 15.12.2012 1,12 6 000 36 182 574,42 111 34 465 34 576 -1 717 7,30 %
Total Bond Portfolio 433 894 7 551 445 418 452 969 11 524 95,67 %
Disposable liquidity 20 545 0 20 508 20 508 -37 4,33 %
TOTAL 454 439 7 551 465 926 473 476 11 487 100,00 %
Portfolio Key Figures
Effective underlying return 3,80 %
Effective yield to clients* 3,00 %
Duration** 4,51
* Effective underlying return adjusted for managment fee.
** Duration is a simplied expression of how much the price of the security will change if the interest rate changes by one percentage point.
*** Figures in 1000 NOK
Effective interest is the average annual return of an interest bearing security until maturity.
Securities are valued at market price as of 29.06.2012.
Bonds and notes for which there are no market maker prices are at all times valued against the applicable yield curve.
Unit price as of 28.09.2012 110,2017
Risk

4 2 1 3 5 6 7
SECURI TI ES PORTFOLI O SKAGEN TELLUS AS OF 28- 09-2012
39
Financial statement
AS OF 30.09 .2012
Income Statement
(all gures in NOK 1000)
SKAGEN Vekst
Q1 - Q3 2012
SKAGEN Global
Q1 - Q3 2012
SKAGEN Kon-Tiki
Q1 - Q3 2012
SKAGEN Balanse
60/40***
Q1 - Q3 2012
SKAGEN
Avkastning
Q1 - Q3 2012
SKAGEN Hyrente
Q1 - Q3 2012
SKAGEN Hyrente
Institusjon
Q1 - Q3 2012
SKAGEN Tellus
Q1 - Q3 2012
SKAGEN Krona**
Q1 - Q3 2012
PORTFOLIO REVENUE AND COSTS
Interest income and costs -1 780 -4 148 2 308 433 28 106 103 893 36 982 13 258 13 878
Dividends 177 643 707 722 889 103 - - - - - -
Realised capital gain/loss -80 553 691 673 713 142 -28 6 101 1 518 -907 8 841 -
Change unrealised capital gain/loss 456 499 1 210 212 735 195 -28 16 167 13 591 4 536 4 841 1 877
Broker's fee -5 188 -17 063 -33 004 - -8 -97 -63 -15 -76
Currency gain/loss -5 814 -37 789 -65 343 - 9 679 - - -901 -
PORTFOLIO RESULT 540 807 2 550 607 2 241 401 376 60 043 118 904 40 548 26 024 15 679
MANAGEMENT REVENUE AND COSTS
Management fee - xed -57 233 -245 897 -663 305 - -3 852 -7 533 -1 686 -2 930 -730
Management fee - variable* -14 117 - 135 624 - - - - - -
ASSET MANAGEMENT RESULT -71 350 -245 897 -527 681 - -3 852 -7 533 -1 686 -2 930 -730
RESULT BEFORE TAX 469 456 2 304 711 1 713 720 376 56 191 111 371 38 862 23 094 14 948
Tax cost -10 272 -71 560 -92 199 -163 - - - - -
NET INCOME FOR THE PERIOD 459 184 2 233 150 1 621 521 213 56 191 111 371 38 862 23 094 14 948
Balance Sheet SKAGEN Vekst
30.09.2012
SKAGEN Global
30.09.2012
SKAGEN KonTiki
30.09.2012
SKAGEN Balanse
60/40***
30.09.2012
SKAGEN
Avkastning
30.09.2012
SKAGEN Hyrente
30.09.2012
SKAGEN Hyrente
Institusjon
30.09.2012
SKAGEN Tellus
30.09.2012
SKAGEN Krona
30.09.2012
ASSETS
Norwegian securities at cost price 3 619 474 935 595 1 142 074 72 879 744 245 3 101 505 910 551 - -
Foreign securities at cost price 3 155 895 29 253 461 37 393 751 - 117 617 - - 433 894 586 530
Unrealised capital gains 203 421 1 390 808 3 802 417 -28 8 084 8 470 3 504 11 524 1 703
Accrued interest securities 1 136 1 106 - 610 4 695 14 907 7 402 6 899 3 505
TOTAL SECURITIES PORTFOLIO 6 979 926 31 580 970 42 338 243 73 461 874 642 3 124 882 921 457 452 317 591 738
Dividend receivable 9 133 57 981 49 529 - - - - - -
Accrued interest bank - - - - - - - - -
TOTAL ACCRUED INCOME 9 133 57 981 49 529 - - - - - -
Accounts receivable - brokers 55 187 43 125 147 240 - - - - - -
Accounts receivable - management company 1 3 7 - - - - 1 -
Tax receivable on dividends 5 715 34 446 3 249 - - - - 853 -
Other receivables - - 2 441 - 286 2 125 - 362 -
TOTAL OTHER RECEIVABLES 60 904 77 574 152 937 - 286 2 125 - 1 216 -
Bank deposits 143 246 1 480 379 834 404 693 193 750 887 746 534 485 21 610 28 796
TOTAL ASSETS 7 193 209 33 196 904 43 375 112 74 154 1 068 679 4 014 753 1 455 943 475 144 620 534
EQUITY CAPITAL
Unit capital at par value 571 940 4 050 168 8 367 398 73 798 765 751 3 871 243 1 421 867 430 078 584 490
Premium -1 445 135 16 908 675 21 617 270 -19 269 173 34 557 -4 418 44 995 6 782
TOTAL PAID-IN EQUITY CAPITAL -873 195 20 958 843 29 984 669 73 779 1 034 924 3 905 800 1 417 449 475 073 591 272
Retained earnings 8 003 999 12 042 756 13 000 165 213 32 448 106 417 37 929 -889 15 983
TOTAL EQUITY CAPITAL 7 130 804 33 001 599 42 984 833 73 992 1 067 372 4 012 217 1 455 378 474 184 607 255
DEBT
Accounts payable - brokers 27 237 60 707 174 701 - - - - - 12 908
Accounts payable - management company 32 650 81 462 81 649 - 1 307 2 535 565 960 281
Other debt 2 518 53 136 133 930 162 - - - - 89
TOTAL OTHER DEBT 62 405 195 306 390 279 162 1 307 2 535 565 960 13 279
TOTAL DEBT AND EQUITY CAPITAL 7 193 209 33 196 904 43 375 112 74 154 1 068 679 4 014 753 1 455 943 475 144 620 535
Nubmber of units issued 5 719 404,74 40 501 682,83 83 673 983,01 737 983,24 7 657 510,42 38 712 432,11 14 218 668,57 4 300 781,41 5 844 901,73
Base price per unit 28.09.2012 1246,8126 816,4921 514,8049 100,2617 139,3729 103,6281 102,3460 110,2017 103,8848
Note: Divergence in price relative to the portfolios is due to accruals divergence as of 30.09.2012.
* Calculated variable management fee as of 30.09.12: pursuant to the regulations, the denitive statement shall take place as of 31.12.2012 based on value developments during the rest of the year.
** Figures in SEK 1000
***Fund established on 29 February 2012
F I NANCI AL STATEMENT
PHONE: +47 51 21 38 58 * EMAI L: CONTACT@SKAGENF UNDS. COM
Countries highlighted in dark blue are a home market.
Countries highlighted in light blue are those in which SKAGEN has an ofce.
Countries highlighted in green are those in which SKAGEN has marketing permission.

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

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