Skagen reef’s lightship, 1892

By Carl Locher, one of the Skagen painters.

The picture is owned by the Skagens
Museum.

SKAGEN Kon-Tiki
– March 2011 –

- Good recovery for EM equities in

March and still strong earnings
reports -

Leading the way

in new waters report-KAGEN-
Contents

• Highlights in March 2011 3

• Investment results 4
• Portfolio update 15
• Outlook and conclusion 37
• Companies in SKAGEN Kon-Tiki 57

• Investment mandate 63
• Investment philosophy 67
• Global emerging markets (GEM) 72

2
Highlights in March 2011

• SKAGEN Kon-Tiki gained 2.4 percent in EUR in March, which was 0.6 percentage
points behind the benchmark index. For 1Q11, the fund is down 0.2 percent versus an
index decline of 3.6 percent.

• We added no new positions in March and sold out of Qingling Motors. We increased
our positions in a number of companies, notably Equinox Minerals, Vale, Sabanci
Holding and Hon Hai Precision Industry, while we trimmed our positions in some very
strong performers such as Seadrill, Great Wall Motor and Banrisul. We raised our
forecasts for Great Wall Motor and downgraded for Aveng. For our 35 largest holdings,
we foresee a median earnings growth of 22 percent for 2011 (in line with EM at 21
percent). We did not make any changes to target prices.

• The 35 largest holdings, representing 78% of the fund, trade at a weighted P/BV of 1.2x
versus 2.1x for the EM index. The weighted P/E for 2011e is 7.8x, which is also a
significant discount to the benchmark index at 11.5x.

• For the 35 largest holdings, we see a weighted upside of 40%. This would put P/BV at
1.8x and P/E for 2011e at 10.6x, which would still be a significant discount to EM in
general.

3
Investment results
Results in EUR as of 31 March 2011

QTD 2010 Past 3 years Since Inception

SKAGEN Kon-Tiki -0,2 % 29,0 % 15,0 % 21,1 %
MSCI EM Index -3,6 % 27,0 % 8,2 % 10,9 %
Excess return 3,3 % 2,0 % 6,9 % 10,2 %

Start date: April 5 2002

All returns beyond 12 months are annualised (geometric return)

5
SKAGEN Kon-Tiki performance in EUR since inception

6
Strong relative returns every year since inception; in years with
both positive and negative market returns

120 %
103 %
100 %

80 %
63 %
59 %
60 % 50 % 49 % 48 %

40 % 32 %
23 %22 % 23 %21 % 21 %19 %
20 % 14 %

0%
0%
-3 %
-20 %

-30 %
-40 % -34 % -36 %
-40 %

-60 %
2002* 2003 2004 2005 2006 2007 2008 2009 2010 2011

SKAGEN Kon-Tiki MSCI EM index

*) The fund was launched on 5 April 2002. **) Returns in NOK as of 31 March 2011

7
Emerging markets in Q1 2011 in EUR (as of 31 March)
Hungary 13 % Mexico -5 %
Croatia 9% Thailand -6 %
Russia 8% Brazil -6 %
Ukraine 6% Singapore -7 %
Slovakia 6% Pakistan -7 %
Czech Republic 5% Turkey -8 %
Poland 1% South Africa -8 %
SKAGEN KON-TIKI 0% Nigeria -8 %
USA -1 % Philippines -9 %
Ghana -1 % Taiwan -10 %
China (local) -1 % India -10 %
South Korea -1 % Colombia -11 %
China (International) -1 % Peru -11 %
Industrialized markets -1 % Argentina -12 %
Slovenia -2 % Chile -14 %
Malaysia -3 % Vietnam -16 %
MSCI EM Index -4 % Kenya -20 %
Hong Kong -4 % Egypt -30 %
Indonesia -4 %
Emerging markets in March in EUR (as of 31 March)
South Korea 8% Chile 1%
Slovakia 8% Czech Republic 0%
India 8% Mexico 0%
Turkey 6% South Africa 0%
Philippines 5% Taiwan -1 %
Thailand 4% China (local) -2 %
Indonesia 4% Ghana -2 %
China (International) 4% Hong Kong -2 %
MSCI EM Index 3% USA -3 %
Croatia 3% Vietnam -3 %
SKAGEN KON-TIKI 2% Industrialized markets -4 %
Pakistan 2% Colombia -5 %
Poland 2% Ukraine -5 %
Slovenia 2% Argentina -5 %
Hungary 1% Peru -7 %
Malaysia 1% Egypt -8 %
Singapore 1% Nigeria -9 %
Brazil 1% Kenya -11 %
Russia 1%
Healthcare and Industrials big underperformers this year; Energy
the big outperformer

EM index performance by industry 2011 YTD* (NOK)

Energy 6%

MSCI EM index -3 %

Materials -3 %

Utilities -3 %

Consumer discr -4 %

Telecom services -4 %

Financials -5 %

Info. technology -7 %

Consumer staples -7 %

Industrials -8 %

Healthcare -10 %

-15 % -10 % -5 % 0% 5% 10 %

Source: MSCI * as of 31. March, 2011

10
Main contributors in March 2011 (in MNOK)

• Hyundai Motor 289 • Hon Hai Precision Industry - 70

• Sistema 197 • Harbin Power Equipment - 53
• Great Wall Motor 182 • EFG-Hermes Holding - 40
• Banrisul 172 • Vale - 40
• Sabanci Holding 130 • A P Møller Maersk - 39
• Eletrobras 120 • Cosan Ltd. - 38
• Samsung Electronics 112 • China Mobile - 35
• Gazprom 104 • LG Electronics - 33
• Mahindra & Mahindra 88 • Seadrill - 31
• Baker Hughes 75 • PZ Cussons - 26
• Bharti Airtel 65 • Empresas ICA - 25
• Richter Gedeon 63 • JSE Limited - 23
• Asya Bank 55 • Stada Arznemittel - 23
• Shoprite Holdings 51 • ABB - 22

Total value creation in March 2011: NOK 1,706m

11
Main contributors in 1Q 2011 (in MNOK)

• Baker Hughes 491 • Hon Hai Precision Industry - 249

• Great Wall Motor 353 • Harbin Power Equipment - 186
• Eletrobras 308 • EFG-Hermes Holding - 166
• Pride International 294 • Samsung Electronics - 164
• Gazprom 233 • Aveng - 154
• Hyundai Motor 196 • China Mobile - 141
• Sistema 178 • Mahindra & Mahindra - 104
• Banrisul 139 • LG Electronics - 99
• Golar LNG Energy 70 • Empresas ICA - 94
• Gjensidige Forsikring 58 • Vale - 90
• Marine Harvest Group 51 • Standard Chartered Bank - 75
• Stada Arneimittel 45 • Equinox Minerals - 74
• Seadrill 43 • JSE Limited - 70
• Kim Eng Holding 40 • PZ Cussons - 64
• VTB Bank 39 • Cosan Ltd. - 62

Total value creation in 2011: NOK 458m

12
Emerging market currencies in 2011 (versus NOK)

• Hungarian Forint 6% • Philippine Peso -4%

• Czech Koruna 3% • Chinese Renminbi -5%
• Russian Ruble 2% • Indian Rupee -5%
• Croatian Kuna 1% • Turkish Lira -5%
• Slovakia Koruna 1% • US Dollar -5%
• Euro 1% • Hong Kong Dollar -5%
• Polish Zloty -1% • Thai Baht -6%
• Mexican Peso -2% • Taiwanese Dollar -6%
• Indonesian Rupee -2% • Chilean Peso -7%
• Colombian Peso -2% • Ghanaian Cedi -7%
• South Korean Won -3% • Nigerian Naira -7%
• Brazilian Real -3% • South African Rand -7%
• Singapore Dollar -3% • Egyptian Pound -7%
• Malaysian Ringgit -4% • Kenyan Shilling -7%

13
Commodity prices in 2011

Best and worst commodities 2011 YTD

Cotton 39 %
Silver 22 %
Gasoline 21 %
Corn 10 %
Live cattle 9%
Coffee 9%
Lean hogs 9%
Nickel 5%
Aluminum 5%
Gold 1%
Soybeans -1 %
Natural gas -3 %
Copper -3 %
Sugar -6 %
Wheat -6 %

-10 % 0% 10 % 20 % 30 % 40 % 50 %

14
Portfolio update
Sector distribution in Emerging vs. Industrialised markets

Energy

Materials

Industrials

Consumer discr

Consumer staples

Healthcare

Financials

Info technology

Telecom services

Utilities

0% 5% 10 % 15 % 20 % 25 %

Source: MSCI - updated as of 31 March, 2011 MSCI World Developed MSCI EM

16
Sector distribution of SKAGEN Kon-Tiki versus MSCI All
Country Index (includes emerging markets)

Energy

Materials

Industrials

Consumer discr

Consumer staples

Healthcare

Financials

Info technology

Telecom services

Utilities

0% 5% 10 % 15 % 20 % 25 %

Source: MSCI, SKAGEN Funds - updated as of 31 March, 2011 MSCI AC World SKAGEN Kon-Tiki

17
Sector distribution for SKAGEN Kon-Tiki versus MSCI Emerging
Markets Index

Energy

Materials

Industrials

Consumer discr

Consumer staples

Healthcare

Financials

Info technology

Telecom services

Utilities

0% 5% 10 % 15 % 20 % 25 % 30 %

Source: MSCI, SKAGEN Funds - updated as of 31 March, 2011 MSCI EM SKAGEN Kon-Tiki

18
 0%
2%
4%
6%
8%
10 %
12 %
14 %
16 %
18 %
China incl. HK 20 %

Brazil
South-Korea
Taiwan
India
South Africa
Russia
Mexico
Malaysia
Indonesia
Poland

Source: MSCI, SKAGEN Funds - updated as of 31 March, 2011

Thailand
Chile
Turkey
Colombia
Peru
Philippines
MSCI EM

Egypt
Hungary
Czech Republic
19 Morocco
Frontier markets
SKAGEN Kon-Tiki

US
Norway
UK
Other
Country distribution SKAGEN Kon-Tiki vs. MSCI EM Index
Main changes in SKAGEN Kon-Tiki in March 2011

Buy Sell
• Equinox Minerals • Qingling Motors (out)
• Vale • Seadrill
• Empresas ICA • Great Wall Motor
• DRB-Hicom • Aberdeen Asset Management
• Sabanci Holding • Banrisul
• Hon Hai Precision Industry • Polaris Securities

*) Transactions above NOK 25m for existing holdings

20
Why did we buy in and sell out in March?
• Qingling Motors went out of the portfolio as we grew concerned about its intellectual property
and its margin potential amid its close ties to Isuzu Motors.

21
 News from our portfolio companies (1)

• Eletrobras (6.5% weight) announced its CAPEX budget for 2011 of BRL 10.2bn versus a 12m rolling CAPEX of
BRL 7.7bn as of 3Q10, driven by large generation investments as San Antonio and Bel Monte. According to local
press, Folha, Eletrobras is also studying the possibilities of divestments of projects and minority participations in
order to reduce unwarranted risk in the portfolio with minority stakes likely to be the first target.
• Samsung Electronics (5.5% weight) has hired ex BMW design chief, Chris Bangle, as a design advisor. Mr.
Bangle will reportedly be involved in handset- and TV design from day one.
• Hyundai Motor (5.0% weight) revealed March sales figures showing a 2% YoY growth (+9% YoY for 1Q10).
Domestic sales rose 5%, while sales outside of Korea was up 1%. Its domestic market share continued to
recover to 46.5%.
• Sistema (3.7% weight) announced the appointment of Mikhail Shamolin, currently CEO of its subsidiary MTS, as
new CEO, replacing Leonid Melamed, who will remain an active board member. This is positive, amid recent
speculation that the son of its major shareholder, Vladimir Yevtushenkov, would take the top post.
Sistema will sell its 63% stake in Sitronics to RTI (85% owned by Sistema) for USD 110m constituting a 20%
premium to current market levels. This is neutral for Sistema as it is an intra company transaction.

Sistema also announced that the Russian government has finally has acquired a 17.1% stake in its Indian mobile
operations, Sistema Shyam Teleservices, for USD 600m, through a capital increase. The government has a put
option to Sistema for a one year period starting five year after the acquisition at the highest of USD 777m and
market value. Thus, this could seem like a financing deal implying a 5.3 per cent annual interest.

22
 News from our portfolio companies (2)

• Standard Chartered (2.6% weight) reported full year results with pretax profit of USD 6.1bn (+19% YoY) and
EPS of USD 1.96 (+16% YoY), in-line with expectations. Tangible book value per share of USD 12.74 (+20%
HoH) was better than expected. The group’s P&L impairment charge fell to 40bp in 2H10 with 2H10 non
performing loans at 1.9%. The consumer bank NPL declined 15bps HoH in 2H to 1.0%, while Wholesale NPL of
2.6% has a 50% NPL cover. The core Tier 1 ratio of 11.8% was better than expected. CASA now supports 37%
of the group’s funded assets. STAN left guidance for 2011 unchanged, expecting double digit income growth in
2011 “and beyond”, and 2011 income and cost growth to be in-line excluding USD180m in UK bank levy.
• Great Wall Motor (2.3% weight) announced impressively strong 2H10 results. Net profit was RMB 1,839m
versus 859m in 1H10 and 760m in 2H09, lifted by tax credits. Pretax profit was RMB 1,891m versus 1,147m in
1H10 and 616m in 2H10. This was 30% above consensus of RMB 1,455m and our estimate of 1,807m. The
strong result was driven by 1) stronger than expected ASP (up HoH for all 3 categories) and good cost control.
Sales rose 80% YoY in 2H10.
Great Wall Motor also announced that February sales rose 21% YoY driven by a 29% growth in sedan sales with
high-margin SUV sales +17%. This brings year-to-date sales to 47%. Chinese car sales had a weak month with a
growth of 3%, diluted by one less working day and early timing of the Chinese New Year versus February 2010.
• China Mobile (2.3% weight) reported good 2H10 results, with revenues up 7% YoY and 11% HoH to RMB
255bn. Voice was a little weaker than expected, being up 6% HoH, while VAS were up a strong 23% HoH. 2H
operating profit of RMB77bn was in-line, with margins of 30.3% (-160bps HoH). 2H EPS of RMB3.1 (+9% HoH)
beat consensus slightly. A stabilization of ARPU of RMB72/month in 2H was a key positive together with the
statement that they didn’t loose many high-end users. They are leading the 3G subscriber growth challenge with
41% market share of net adds giving them 21m users (3.5% of total users). The reluctance of the company to
increase the dividend payout (43%) and a 35% increase in capex guidance to RMB132bn (+6.5% YoY) were the
negatives from these results.

23
 News from our portfolio companies (3)

• Sabanci Holding (2.2% weight) posted a net profit of TRY 477m for 4Q10 versus TRY 85m in 4Q09m and TRY
278m in 3Q10. This was ahead of consensus at TRY 338m, driven higher operating results and one-off asset
revaluation gains.
• Sabanci also announced that its subsidiary, Exsa Export, will buy 5% of outstanding shares in the next year.
Management commented that it is not happy with the discount to NAV, estimated at 30% pre-announcement,
and will jump-start a share buy-back through a subsidiary ahead of the general share buy-back law which is
expected to be put in place from 2012. Pre-announcement, the buy-back would cost TRY 656m. Financing is not
an issue amid a net cash position both in holding and Exsa Export.
• ABB (2.0% weight) received a USD 900m order from India to deliver a 1728 km transmission network to Power
Grid Corporation of India.
• Equinox Minerals (2.0% weight) reported 4Q10 results largely in-line with expectations. Adjusted EPS of USD
0.15 (+7% QoQ) beat consensus of USD 0.12, but CEPS was USD 0.16 (+36% QoQ) compared to expectations
of USD0.17, due to lower grades and higher diesel costs. As previously released, they produced 34k of copper in
concentrate at a cash cost of USD1.64/lb in 4Q. They kept their 2011 production guidance of 145k copper at a
cash cost of USD1.45/lb. With only 9% of 2011 production hedged, they are set to benefit from the high copper
prices. Construction at Jabal Sayid is now expected to commission 1H12, a slight delay from previous guidance.
The Lumwana expansion study is expected by 2Q11 and the Lundin takeover approach are the next catalysts.
• Seadrill (1.8% weight) announced that its 75% owned subsidiary, North Atlantic Drilling, has entered into a
contract with Jurong shipyard for the construction of a high-spec JU rig for an all-in cost of USD 530m to be
delivered in 3Q 2013. The rig has been contracted by ConocoPhillips for a 5-year period at a rate of USD c360k
per day, which equals a c6 year pay back on new building costs.

24
 News from our portfolio companies (4)

• Mahindra & Mahindra (1.5% weight) reported continuous strong March sales data with auto sales up 19% YoY
(+25% for FY 2010/2011) and tractor sales +23% YoY (+22% for FY 2010/2011).
• Indosat (1.5% weight) reported 4Q10 results highlights, with dull details due on March 24. Revenues of IDR
4953bn (-4% QoQ, -3% YoY) were a little below expectations due to weak mobile revenues on the back of
ongoing price promotions. EBITDA was in-line (-1% QoQ, +2% YoY), with margins improving by 170bp QoQ to
50.4% due to cost management. Net income fell 52% QoQ, and while no details were given we believe this was
due to FX and interest rate hedging derivatives, higher interest rate costs and depreciation expenses. A YoY
improvement in operating cash flow was a positive.
• Cosan (1.2% weight) finally announced the long awaited details of their expectations of the new JV with Shell
(Raizen), with expected synergies of BRL3.4bn, or more than twice the consensus expectation of around
BRL1.5bn. This is split into commercial synergies of BRL1.4bn (product mix/larger scale), financial synergies of
BRL400m and logistics/distribution/trading of BRL1.7bn. They expect the fuel distribution segment to deliver an
EBITDA of BRL950m in FY12 and BRL1220m in FY13. This is obviously very good news, and it should have a
positive impact as Cosan will now go from being a cyclical sugar stock to a diversified agriculture/energy play
with a less cyclical cash flow.
• Aveng (1.2% weight) reported weak 1H 2010/2011 results with an EPS of ZAR 1.07 or down 35% YoY, which
was in the low end of guidance. Excluding non-recurring items, EPS declined 17% driven by FX losses with
underlying EBIT down 9% YoY impacted by two loss-making contracts in Australia which reduced contribution
from its Australian subsidiary with 50%. Net cash declined by ZAR 2bn to 5.6bn HoH owing partly to a negative
net working capital development of ZAR 0.8m. The order book rose by ZAR 1bn HoH to 32bn. The outlook for 2H
2010/2011 looks slightly more positive.

25
 News from our portfolio companies (5)
• Stada Arzneimittel (1.2% weight) released final 4Q10 results, which was in line with preliminary results.
Management repeated its 2011 guidance for an EBITDA of EUR 330-345m. Net debt declined EUR 51m QoQ to
EUR 848m which at 2.7x trailing EBITDA is below management upper target of 3x.
• Empresas ICA (1.1% weight) announced that it has been awarded a contract to construct a toll road in Mexico
City worth MXN 5.4bn adding 15% to its 4Q10 closing backlog. ICA will hold a 30% share in the concession
following completion in 19 months.
ICA also announced news of management rotation, where the current CFO, Alonso Quintana Kawage, will
assume a new position as COO while Victor Bravo, current CEO of OMA (airport operator subsidiary of ICA), will
become ICA’s new CFO. They have created a new executive committee with 4 members, to be chaired by
Alonso Quintana Kawage. They also announced 3 members of the Board has retired and been replaced. We
believe these changes are done to strengthen ICA’s organization.
• Marine Harvest Group (0.8% weight) announced that the board proposed to increase the final dividend for 2010
from NOK 0.6 to 0.8 per share to be approved at the AGM on 23 May.
• Harbin Power Equipment (0.7% weight) reported a net profit of RMB 578m for 2H10 versus 391m for 2H09.
This was well above consensus driven by strong cost control and lower material costs, which improved the gross
margin for 2010 by 1.6pp to 12.8%. Order intake was up 1.7% YoY for 2010 to RMB 36.2bn, which excludes the
10bn Indian order which will be included in the 2011 intake. The order backlog is RMB 85.5bn equal to 3.4 year
of revenues. Nuclear orders, representing 18% of the backlog, are all domestic and approved by NDRC and
therefore not subject to risk amid the recent suspension of new project approvals following the Japan reactor
melt down. Management expects the 2011 gross margin to at least track 2010 while other operating costs should
also decline as per cent of sales.

26
 News from our portfolio companies (6)

• JSE (0.7% weight) revealed 2010 results that were a little disappointing, with fully diluted EPS of ZAR 4.3 (-5%
YoY). This was despite inline revenue growth of 9%, and EBITDA margins expanding to 39%. The
disappointment came from an additional impairment charge (ZAR24m) on top of a higher tax rate. A very
conservative dividend coverage decrease from 2.2x to 2.1x was also disappointing (DPS of 2.1 compared to 1.9
last year), given their strong cash generation and the fact that they are in a strong cash position (ZAR 1bn). The
number of trades in January and February is up 18% YoY, compared to 13% for the full year, with the average
value per trade remaining constant at ZAR126k. The recent turmoil in global markets is positive for exchanges as
trading volumes tend to rise on the back of negative investor sentiment.
• Korean Reinsurance (0.6% weight) said the potential impact from earthquake in Japan: given that their
overseas business portion is less than 20%, and the Japanese portion is less than 1% among the overall
insurance portfolio, hence we expect limited claim costs. Korean Reinsurance is also normally insured by other
global reinsurers to prevent large claim costs from catastrophe events. They have said that the probable
maximum loss is less than KRW 5bn due to the retrocession and the loss amount exceed 5bn will be covered by
other global reinsurers. For comparison, 2011 expected net income is around KRW 220bn.
• Tullow Oil (0.6% weight) announced full year results with fully diluted EPS of USD6.1, less than expected due to
higher than expected exploration write offs (USD155m) and net finance charges. Net debt of USD1.9bn was in-
line, while dividends were kept flat YoY at USD 6 per share. Focus however was on the significant upside
potential from the aggressive development and exploration potential over the next year. According to press
reports (but not confirmed by the company), the re-elected Ugandan government has resolved a tax dispute that
should now allow them to bring Total SA and China National Offshore Oil Company into its oil projects in the East
African country.

27
 News from our portfolio companies (7)

Tullow also said they’ve encountered good quality reservoir sands in the Enyenra 2a well offshore Ghana. They
hit two channels; an upper 21-meter net sand channel and a lower 13-meter lower sand channel, which seems to
be in communication with the reservoirs discovered in the original Owo-1 well, which de-risks this complex field.
They are however keeping the field’s gross resource range unchanged until further analysis is conducted.
Tullow finally signed a memorandum of understanding with the Ugandan Government to resolve the USD400m
capital gains tax dispute. Following this, Tullow announced they have finally signed the farm down of 66% of their
Lake Albert acreage to Total and CNOOC for a cash consideration of USD2.93bn (in-line with expectations), with
an implied value of USD4.5/boe. Some procedural approvals are still required, like approval by the Chinese
government. The tax dispute with the Uganda Government has been resolved (at least temporary) according to
press reports, whereby Tullow will pay USD469m in tax, which includes USD313m for Heritage plus 30% of the
tax bill related to the CNOOC/Total farm down.
• EFG-Hermes Holding (0.5% weight) net profit for 4Q10 was EGP 32m versus EGP 88m in 3Q10 and EGP 85m
in 4Q09. This was slightly lower than expected due to weak commission income both from investment banking (-
45% QoQ), asset management (+60% QoQ) and brokerage (+20% QoQ), while newly acquired Credit Libanais
(65% owned) reported strong results with net profit +52% for 2010, leading to a 17% RoE.
• Provida (0.5% weight) reported an EPS of USD 1.67 in 4Q10 versus USD 2.63 in 3Q10 and RoE was 24%. The
decline is mainly related to lower return on required investments of its equity into the pension funds. With an EPS
of USD 4.3 for 2H10, this bodes well for a high final dividend to be announced in April.
• DRB Hicom (0.5% weight) won the long awaited USD2.5bn contract for the design, development and
manufacturing of 257 armored vehicles from the Malaysia’s Government.

28
 News from our portfolio companies (8)

DRB-Hicom has also been shortlisted together with 2 other firms to buy Khazanah Nasional Bhd’s 32.2% stake in
Pos Malaysia. At current market values a potential acquisition would equal 13% of DRB’s cap (MYR 600m),
which is still less than their net cash position. Pos Malaysia provides postal and related services and trades on
2011 P/E of 14x compared to DRB at 7.5x. It was also reported that they plan to develop their Rebak Island
Resort further through an extension to the hotel, developing private beaches for guests and opening a spa.
• Enka Insaat (0.4% weight) reported a net profit of USD 2+6m for 4Q10 versus 240m in 4Q10. This was in line
with consensus. EBITDA of USD 237m was down markedly on USD 376m in 4Q09 driven by a sharp correction
in contribution from the contracting business. However, higher non-operating income limited the decline in the
bottom line. Net cash increased by USD 86m to USD 1,380m sequentially (now 17% of market cap). The backlog
improved slightly to an estimated USD 5.5bn at year-end 2010 and should now stand at USD c6.2bn after recent
order wins.
• Royal Unibrew (0.4% weight) reported a better than expected net profit for 4Q10 of DKK 68 versus DKK -37m in
4Q09 and consensus of DKK 43m. The beat was mainly related to lower tax charge. FCF was strong and net
debt declined to DKK 770m versus the guided 850m. This allows for higher payback and the company
announced a DPS of DKK 12.5 and an additional DKK 110m in share buy-back (DKK 9.8 per share) bringing
total pay out to 90%. Unibrew guided for sales of DKK 3.4-3.55bn (down from 2010 due to deconsolidation of
Poland and the Caribbean operation) and EBIT before special items of DKK 435-485m (DKK 417m in 2010)
which was in line with consensus.
• Golar LNG Energy (0.4% weight) reported weak 4Q10 results with EBITDA of USD 1m versus 3m in 3Q10. The
company reported that it was pre-qualified for two FSRU projects in 4Q10; one in Indonesia and one in Bahrain.
GOLE has 3 vessels with potential for conversion to FSRU and is also considering new-building.

29
 News from our portfolio companies (9)
• Asia Cement China (0.3% weight) reported a strong 2H10 net profit of RMB 371m versus 287m in 2H09. This
was a strong recovery from 140m in 1H10 driven by higher cement prices. Energy efficiency focus of the
government, which requires a shutdown of less efficient capacity, is leading to improved pricing with current
prices in most of its regions up c20% versus 4Q10.
• Ghana Commercial Bank (0.3% weight) reported further progress in 4Q10 with a net profit of GHS 20.3m
versus 3Q10 of 18.3m. For the full year, EPS of GHS 0.21 was impressive compared to GHS 0.07 in 2009.
Interest income was up 46% YoY, while non-interest income was disappointing down 14%. Operating income
was up 63% YoY despite a 20% increase in operating expenses, leading to a sharp drop in the cost to income
ratio from 70% to 51%. Funding costs were down 23% for the year. Their Tier 1 ratio increased 300bps YoY to
13.7%, and NPLs compared to gross loans decreased 400bp to 15%. RoE increased from 9.2% to 24.7% for FY.
• Aberdeen Asset Management (0.2% weight) released a pre-close trading update for January and February.
Inflows were better than expected, with GBP 0.2bn (GBP 1.0bn for equities), while performance took away GBP
7.3bn (a little weaker than expected), leading to AuM of GBP 176.2bn (-4% since December).
• Aquarius Platinum (0.2% weight) was hit by the announcement of the requirements for the implementation of
the Indigenisation Act for the mining sector by Zimbabwe. This requires a “controlling interest of 51% of the
shares in issue” to be held by indigenous Zimbabweans, with the value to be based on an agreement between
the Minister and the businesses concerned. However, they also noted “it should take into account the State’s
sovereign ownership of the minerals exploited or to be exploited”. Aquarius’ asset Mimosa is a 50:50 JV with
Impala Platinum. Mimosa’s long life and low cost production makes it an important contributor for Aquarius. It is
expected to contribute 35% of their aggregate production until 2035, but with a higher share of EPS. It is
obviously unlikely that they will achieve the fair value in a forced sale.

30
 News from our portfolio companies (10)

• Coal of Africa (0.1% weight) reported disappointing 1H results, with 1H revenues of AUD93m, below
expectations due to weather impacted production, derailments to Matola and legacy contracts at Woestalleen
which are due to expire in 3Q11. EBITDA of AUD -18m and EPS of AUD -0.11 also disappointed due to higher
D&A charges and exceptional of -22m. Cash at the end of the period was AUD 24m, but with a AUD 20m bank
facility due and payable on 24 March. Despite weak results the underlying story remains intact with Makhado’s
feasibility study the next catalyst.

31
The largest companies in SKAGEN Kon-Tiki

Eletrobras is Brazil's largest electricity company with a 39% share of generation. The company has installed a
capacity of 39 TWh where 87% is hydro power, and 59 000 km transmission lines (55% market share). The federal
government owns 66% of the equity and 78% of the voting rights.

Samsung Electronics is one of the world's largest producers of consumer electronics, with 155 000 employees. The
company is global #2 in mobile phones, the world's largest in TV and a global #1 in memory chips. Samsung
also produces appliances, cameras, printers, PC's and airconditioners.

Sistema is a Russian conglomerate with focus on telecom and other consumer related business, in addition to oil.
The majority of the value is linked to a 54% holding in MTS, which is Russia's largest mobile phone company with a
market share of 38% and 102m subscribers. The oligarch Vladimir Evtushenkov owns 64%.

Banrisul is a Brazilian savings bank in the Rio Grande do Sul state with its 11m inhabitants. The company has about 20%
market share in the state and 2.8m customers, with 700 branches/service offices. Good solidity and deposit coverage.
Local authorities own 53%.
Richter Gedeon is Hungary's largest pharmaceutical company and the 10th largest in generics globally. This is
74% of sales, with focus on cardiovascular and central nervous system. Has 10 000 employees. Main markets are EU and
central/eastern Europe. Hungarian government owns 25.1%.

Standard Chartered is a British bank with focus on emerging markets in Asia, Africa and the Middle East (more than 80%
of the balance sheet). Has 75 000 employees in 75 countries/provinces, 1 800 branches. Private lending is 47% and
much of business loans are wholesale. Short loan book duration (54% under 1 yr). Temasek (Singapore) owns 18.4%.

32
The largest companies in SKAGEN Kon-Tiki (cont.)

Hyundai Motor is the world's 4th largest car maker, including their 39% stake in Kia Motor. Sold 3.6m cars in 2010
(+16% YoY) and has approx. 5% global market share. Focus on smaller/less expensive cars. Strong position in several
countries and in emerging markets such as India and China.

Baker Hughes is the third largest oilfield services company in the world with 55 000 employees. Sales is split evenly
between drilling/evaluation and completion/production. Following the merger with BJ Services in April 2010, BHI
also has a leading position within pressure pumping.

Hon Hai Precision Industry is the largest electronics contract manufacturer in the world with 1,000 000 employees. Almost
all production commence in China. Major customers include Apple, Cisco, Dell, HP and Intel. Hon Hai also provides
design engineering and mechanical tooling services.

Vale is the world's largest producer of iron ore with about 35% global market share, which is 54% of sales. They also
produce nickel (#2 globally), copper, aluminium, coal and other products. 62 000 employees. All extraction of iron ore in
Brazil. Vale plans to double its total production from 2009 to 2015. Government controlled Valepar owns 33.3%.

Gazprom is the largest gas producer in the world with representing 9% of global supply and has reserves of 550bn m3
or 10% global reserves. The company also controls a wide pipeline network of 160k km, the largest power utility company
in Russia, the #5 oil producer as well as drillling assets and a bank. Russian federation owns 50.002%.

VTB is the #2 bank in Russia with a 13% market share in commercial lending and 10% in private credits. 84% of loans
comes from corporates. It has 935 branches, including other CIS countries, and 156k corporate clients as well as 5m
retail customers. Russian Federation owns 75.5%.

33
Portfolio composition and changes

• Company focus drives portfolio composition, but we are cautious with sector and
country exposure exceeding 20% in order to balance portfolio risk.
• Our 12 largest holdings now represent 45% of the portfolio value (compared to
42% at the end of 2010 and 46% at the start of 2010). The 35 largest positions
represent 78%, unchanged from last month.
• Our portfolio consists of 97 companies, which is in line with 99 at the end of
2009.
• We added no companies to our portfolio in March and disposed of Proton
Holdings and Qingling Motors.

34
SKAGEN Kon-Tiki: key figures as of 31 March 2011

Holding Price P/E P/E P/BV Price Upside

size 2010e 2011e Last target
Eletrobras 6,5 % 30,8 8,8 8,8 0,4 70 127 %
Samsung Electronics 5,5 % 625 000 6,6 6,8 1,0 780 000 25 %
Baker Hughes 5,3 % 73,7 35,8 14,7 2,0 100 36 %
Hyundai Motor 5,0 % 66 000 3,4 3,1 0,6 100 000 52 %
Sistema 3,7 % 29,1 9,7 7,3 2,1 30 3%
Vale 3,0 % 47,4 8,2 6,3 2,0 65 37 %
Banrisul 2,9 % 20,0 11,1 8,9 2,2 22 10 %
Gazprom 2,8 % 32,4 6,5 5,8 0,9 40 24 %
Standard Chartered 2,6 % 1 639 10,2 8,9 1,7 2 000 22 %
Hon Hai Precision Industry 2,6 % 103 9,5 8,5 2,1 200 94 %
VTB Bank 2,5 % 7,00 17,5 11,7 2,2 9 29 %
Richter Gedeon 2,4 % 39 095 10,8 10,9 1,7 50 000 28 %
Weighted top 12 44,7 % 8,1 7,1 1,0 46 %
Weighted top 35 77,8 % 9,2 7,8 1,2 40 %
Emerging market index 14,0 11,5 2,1

Please note that aggregated valuation and upside are now weighted and calculated
based on the same methodology as the benchmark index.

35
 Valuation of the SKAGEN Kon-Tiki portfolio
• We have raised our 2011 estimates for Great Wall Motor while we downgraded our
forecast for Aveng. We have made no changes to any target prices this month.
• We expect our 35 largest holdings to report a median EPS growth of 22% for 2011e
which is in line with consensus for the EM universe at 21%.
• The 35 largest positions now trade at a weighted P/E of 7.8x for 2011e. This is a
considerable discount to Emerging Markets trading at a P/E of 11.5x for 2011e.
• The weighted trailing P/BV for the 35 largest positions is 1.2x. This is substantially
lower than the P/BV of 2.1x for the emerging markets index.
• We see a weighted average upside of 40% for our 35 largest positions. At this
target, these positions (representing 78% of the portfolio) would trade at a 2011e
P/E of 10.6x and a trailing P/BV of 1.8x. This would still be a meaningful discount to
the current emerging markets’ valuation.

36
Outlook and conclusion
Returns in EM equities have been unmatched in the past decade:
accumulated +113% for EM and -21% for DM . . . .

Performance of EM and Industrialized markets (in NOK)

60 %
50 % 49 % 48 %
50 %
40 %
28 %
30 %
22 % 22 % 21 % 19 %
20 % 14 % 13 %
11 %
8%
10 % 4%
0%
0%
-1 % -3 %
-10 % -5 % -5 %

-20 % -16 %
-30 % -24 % -24 %
-28 %
-40 %
-38 % -40 %
-50 %
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

MSCI Developed World MSCI Emerging Markets

*) As of 31 March 2011

38
Inflation fear has killed the party in EM but we expect
inflation to taper off in 2H11
Annual change in CPI

17,0 Russia 17,0

India (wholesale prices)
14,5 Brazil 14,5
China
Mexico
12,0 12,0
Hungary
South Korea
9,5 9,5

Percent
Percent

7,0 7,0

4,5 4,5

2,0 2,0

-0,5 -0,5
Poland
Taiwan
-3,0 -3,0
jan mar mai jul sep nov jan mar mai jul sep nov jan mar mai jul sep nov jan mar mai jul sep nov jan
2007 2008 2009 2010 2011
Source: Reuters EcoWin

39
Exposure to commodity driven inflation differs widely in the EM universe
with the poor countries being most exposed

• Countries with low GDP per

capita more exposed to food
inflation as food is greater
share of basket.

• In August 2008, CPI in

Philippines rose 12.4% YoY.

• South Korea, a highly

developed emerging country
less exposed.

40
 Purchasing managers’ expectations (PMI) above 50 for all countries

PMI manufacturing
70 70

China
65 65

60 IKKE OPPDATERT Israel

60
India
55 55

Diffusion index
Diffusion index

50 50

45 45
Turkey Mexico
40 40
South Africa Brazil
35 35
South Korea
Russia
30 30
Taiwan
25 25
jan mar mai jul sep nov jan mar mai jul sep nov jan mar mai jul sep nov jan mar mai jul sep nov jan
2007 2008 2009 2010 2011
Sources: Reuters EcoWin and Bloomberg

41
Small downward revisions to 2011 GDP forecasts for all regions,
but particularly for Japan

Regional GDP growth

9,4 %
China 10,3 %
8,7 %
7,5 %
Asia ex. Japan 9,1 %
4,6 %
6,0 %
Emerging economies 7,2 %
1,0 %
4,3 %
Latin-America 6,1 %
-2,9 %
4,1 %
Emerging Europe 4,3 %
-5,0 %
0,9 %
Japan 4,0 %
-5,2 %
2,9 %
US 2,8 %
-2,4 %
2011e
2,3 %
Developed economies 2,5 %
-3,4 % 2010e
2,2 %
Eurozone 1,7 % 2009
-4,0 %

-7 % -5 % -3 % -1 % 1% 3% 5% 7% 9% 11 %

Source: JPMorgan Markets, 31. March, 2011

42
Stable and low volatility and some EM spread compression in March

43
EM spreads to US bonds decreased again in March

44
Volatility spiked in January but has come down in February and March

45
Consensus Emerging Markets earnings growth for 2011 and 2012
stable month-over-month
IBES Consensus EPS growth MSCI EM, 2010-2013

E= IBES aggregate estimate. Source: IBES, FactSet, Morgan Stanley Research

46
A trailing P/E ratio of 13.2x for Emerging Markets is a tad below the 5-year
historical average, and at a discount to Global Markets at 14.1x

IBES trailing P/E MSCI EM versus MSCI World

• From being traded at a

premium measured on
historical earnings at the
start of 2008, emerging
markets are now traded at
a discount compared to
global markets.

Source: MSCI, Morgan Stanley Research. Data as of 31. March, 2011

47
P/BV for emerging markets at 2.1x is at a similar level to the long term
average and at a marginal premium to MSCI World at 1.9x
Historical P/BV 1992-2011: MSCI EM versus MSCI World

48
. . . but this can be explained by higher return on equity despite
stronger balance sheets than in industrialised markets

Historical return on equity for Emerging Markets versus MSCI World

Source: Morgan Stanley research, MSCI.

49
No sign of an emerging market bubble when comparing P/BV valuations
of historical bubbles to current valuations

Source: CIRA, MSCI, Factset

50
Big outflow from EM so far this year, but inflow in recent weeks

51
EM share of MSCI AC World is steadily increasing on back
of strong relative return and high IPO and issue activity

52
Institutional allocation to EM equities is still well below its
share of the global index weighting, capitalization and GDP

53
 Outlook for emerging markets (1)

• The decoupling of the world becomes increasingly clear with Asia in the driver’s seat
when it comes to global economic growth. This development is fuelled by Brazil,
China, India and Indonesia. Convergence in standard of living continues with rapid
increase in real incomes in emerging markets and increased savings rates in the
industrialised countries.

• Domestic consumption and infrastructure investments will continue to be the most

important drivers of growth in the Asian countries.

• Earnings growth was high going into 2010 as a result of comparison effects; signs of
inflation now result in tightening policy in the emerging markets; a huge contrast to
the situation in many industrialised countries.

• The emerging markets proved in 2010 that they were more dependent on intra-EM
trade and less dependent on demand from industrialised countries.

54
Outlook for emerging markets (2)

• Earnings growth for companies in emerging markets continued at a strong pace in

2010. Expectations for 2011 have been stable in recent months at a growth rate of
17%.

• Emerging markets are now priced at a slight P/E and P/BV discount to the historical
average, but the valuation is considerably lower than at historical peaks. It does not
reflect the higher return on equity and higher growth rates of emerging markets
equities.

• Low interest rates globally boost the hunt for good investments and yield.

• Continued globalisation provides larger flow of capital into the emerging markets;
this increases both the depth and the breadth of the market place and available
investment options.

55
 Risk factors for emerging markets
• A thawing of the financial markets has not rubbed off onto borrowers and lenders
in industrialised countries. A potential tightening of the capital requirements in the
global banking sector may further amplify this.
• Inflation may rise on the back of high commodity prices (metals and agriculture).
Idle capacity in industrialised countries will keep inflation down, but growth
surprises in EM may give increased fear of inflation.
• The new world order may cause increased systemic friction. Increased
protectionism and a tendency towards regulating currency markets after a strong
rise in emerging markets currencies in 2009. High unemployment in industrialised
countries and an “undervalued” Chinese currency may lead to protectionism
pressure and measures.
• The valuation of emerging markets becomes prohibitively high both in relative and
absolute terms, just like in the early 1990s.
• Strong EM currencies may yield negative earnings surprises in 2011 for export
oriented companies.

56
Companies in SKAGEN Kon-Tiki
ABB (ABBN VX) CHF 22.0
• ABB is a global leader in equipment to power distribution and automation with
131,000 employees and operations in approx. 100 countries.
Key figures:
– Sales (2010): Power products 30%, Power systems 20%, Process automation
21%, Discrete automation and motion 16%, Low voltage products 13%. Market cap: CHF 51bn
– 60% of power sales to utilities. Balances sector exposure in automation. USD 54bn
NOK 271bn
– Adjusted EBIT margin (2010): Power prod. 14.5%, Power sys. 9.0%, Process
auto. 10.9%, Discrete auto. and motion 18.2%, Low voltage products 20.6%. No. of shares: 2308.8m
– Sales (2010): Europe 43%, Asia 27%, Americas 19%, MEA 11%. P/E (11e): 13.1x
– Strong exposure to EM with approx. 44% of sales and +50% of new orders. P/E (12e): 11.6x
• Closed USD 3bn cost reduction program in 2010 (upped twice) and announced P/BV: 3.4x
another USD 1bn for 2011 (supply chain, productivity, footprint). P/TBV: 4.9x
• Net cash of USD 6.4bn or 1.4x trailing EBITDA. Leverage potential of USD 20- RoE (11e): 25%
25bn through M&A could add CHF 0.6-.7 in EPS. 54% payout ratio for 2010. Div. yield: 2.7%
• EV/Sales of 1.3x versus 1.5x average (2000-2010) and 2008 peak of 2.5x. Average daily trading volume of
• Catalysts: 9.7m shares (CHF and SEK) or
USD 227m.
– Announcement of value-accretive acquisitions, gearing its overfunded BS.
– Increased payout ratio and/or share buy-back. Investor AB owns 7.2% of
shares.
– Cost reduction announcements following Baldor Electronics integration in 1Q11.
Large potential for low cost sourcing versus peers.
– Late cyclical nature of CAPEX cycle and positioned to energy saving lead to
order intake surprises. Book-to-bill at 1.1x for 2010 and positive organic growth.
– Relatively unpopular (32 Buy, 14 Hold, 2 Sell).
• Risks: price pressure (especially power products), FX, GDP/CAPEX cycle.

58
Banrisul (BRSR6 BS) BRL 18.0
• Regional saving bank in Rio Grande do Sul with 11m inhabitants. #1 in the
region and 11th largest bank in Brazil. 9,300 employees. 43% free float.
Key figures:
• 3m customers, 438 branches, 274 banking services stations and 500 ATMs.
Market cap: BRL 6.6bn
About 30% of population banks with Banrisul with c20% state market share.
NOK 22bn
– Loans: consumer 44%, mortgage 8%, industry 20%, trade/service 20%, other
8%. 70% of consumer loans are payroll loans (security in salary). 74% of No. of shares: 409.0m
commercial lending is general loans (working capital).
P/E (11e): 8.7x
– Deposits: demand 12%, time 53%, saving 35%.
P/BV: 1.5x
• Net interest margin of 10.1% and 48% cost/income ratio in 4Q10. P/TBV: 1.6x
• Good NII growth with 25% YoY increase and 11% QoQ in 4Q10. RoE (11e): 21%
• Level 1 corporate governance and a financially oriented majority owner. Div. yield: 4.4%
• NPL (+60 days overdue) of 2.5% with coverage ratio of 264% in 4Q10.
Average daily trading volume of
• Strong balance; loan/deposit 90%, Tier 1 (Basel II) 15.5% (11% min. by local
653k shares or USD 7.1m.
regulator incl. Tier II max. 50% of Tier 1) and A+ rating. Good growth potential.
Rio Grance do Sul state owns
• Payout ratio of 30-40% secures firm dividend yield. 57% through non-listed ordinary
• Catalysts: shares.
– Ongoing sector consolidation; interesting acquisition target for a major bank.
– Further leverage of strong balance sheet improving RoE.
– New cost initiatives from new management further improves efficiency.
– Successfully building merchant acquiring franchise.
– Minimal research coverage (8), low international ownership (except SKAGEN).
• Risk: cost and margin pressure, payroll account portability, NPL formation.

59
 Empresas ICA (ICA* MM), MXN 26.6
• Mexico’s #1 construction and infrastructure company with 26,000
employees (employees own 10% of the shares).
– Construction: Civil (39% of EBITDA) and Industrial (6% of EBITDA) with Key figures:
20% market share. Strong position within energy (ICA Fluor).
Market value: MXN 17bn
– Infrastructure: Airports (18% of EBITDA through 50.7% owned and listed
OMA, 13 airports, 50 year concession from 1998) and other concessions NOK 7.9bn
(28% of EBITDA, 11 motorways (7 operative), and 5 hydro projects (2 No. of shares: 642.9m
operative), lasting to 2020-2056) P/E (11e): 11.3x
– Homebuilding: #8 in Mexico with approx 8000 units/year directed towards P/E (12e): 10.6x
the lower segments. 7% of EBITDA. Large portfolio of land plots amounting to
20 mill. m² (103,000 units), approx. 14 years’ land bank. EV/EBITDA (11e): 8.4x
• MXN 40bn backlog (15 months work equivalent). The addressable P/BV: 0.9x
pipeline over the next 2 years is roughly MXN 400bn (USD33bn). P/TBV: 0.9x
P/S (11e): 0.4x
• Catalysts:
ROE (11e): 8%
– Corredor Sur sale to the state of Panama going through, USD420m.
Dividend yield: 0%
– Civil construction pick-up after 4Q slowdown due to delays in rights of way.
– New contracts from major government infrastructure program of USD 234bn
from 2007-2012 (only 40% completed by 2010). Net debt of MXN 28.1bn or
4.9x EBITDA
– Increased margins as a consequence of larger projects.
– Start up of new infrastructure concessions (4 over the next 12 months)
enhances CF and visibility and reduces refinancing risk.
– Concession division revealed through sale of stake to pension fund / IPO.
– Better segment reporting will reveal values, especially for concessions.

• Risks: cost overruns, project delays, interest rate level, competition,

macro.
60
Korean Re (003690 KS) KRW 12 400 KRW
• #1 reinsurance company in Asia and #11 globally. 69% market share in a
regulated South Korea reinsurance market.
– Premiums: Domestic P&C 23%, Domestic personal 54%, Overseas Key figures:
reinsurance 23% (74% from Asia). Market cap: KRW 1437bn
– Combined ratio: commercial 90%, personal/life 103%, foreign 100%. Total NOK 7.2bn
of 96% with 76% loss ratio and 20% cost ratio. No. of shares: 115.9m
• Growth ambitions focused on China and other EM within maritime and
property where it has solid competence. LT growth target 10% p.a. P/E (03/11e): 7.0x
P/E (03/12e): 6.6x
• Domestic personal market has low margins has low margins with sliding
scale and typically 99% combined ratio. P/BV: 1.6x
P/BV adj: 0.9x
• Solvency ratio 210% (100% required/150% recommended). S&P A rating.
RoE (03/11e): 17%
• Capital returns and premium growth in top league of industry.
Div. yield: 2.5%
• 30-40% payout ratio secures sound yield.
Daily average turnover of 424k
• Catalysts: shares or USD 4.7m.
– Mandatory P&C for SME/SoHo increased domestic potential. Won family owns 22.5%.
– Successful efforts to penetrate domestic government market. Treasury holding 14.6%. Foreign
holding 44.6%.
– Likely rating upgrade will reduce cost of funding.
– Global reinsurance premium hardening after major natural disasters.
– Interest rate hikes (60-70% of investment portfolio in fixed income with
short duration).
– Sale of treasury shares will enhance liquidity (less likely although possible).
• Risks: new local competition, premium decline, natural disasters.

61
Standard Chartered (STAN LN) GB 1589p
• Conservative bank with unique position in Asian growth markets.
– Activities in 75 countries/provinces, 1750 branches, 78k employees Key figures:
– Loans: Consumer 47%, Wholesale/corporate 53% (72% of RWA). Market cap: GBP 37bn
– Loans; Hong Kong/China 19%, Singapore 16%, Korea 14%, MENA 6%, India USD 60bn
4%, Other Asia Pacific 21%, US/Europe 20%. NOK 339bn
– Pretax profit: India 20%, Hong Kong/China 18%, ME 14%, Singapore 12%, No. of shares: 2348.2m
Africa 9%, Korea 6%, other Asia 18%, other 3%.
P/E (11e): 9.9x
– Short loan book amid wholesale lending: 48% <1y, 22% 1-5y, 30% >5y.
P/E (12e): 8.6x
• Major player in FX, export credits and interbank lending. Very strong position P/BV: 1.5x
on syndication and M&A in India with the large corporations.
P/TBV: 1.9x
• Low losses: NPL of 1.9% with 58% coverage ratio. RoE (11e): 15%
• Core Tier 1 of 11.8% (target 7-9%), Total Tier 1 of 14.0%, loan/deposit 78%. Div. yield: 3.0%
• Strong growth potential in both less penetrated and established markets. 10- Combined trading volume of
15% organic loan growth p.a. despite size. 6.4m shares in HK and London
or USD 179m.
• Catalysts:
– Restructuring of South Korean retail operation provides surprises, strong 2H10 Temasek owns 19%.
with 60% HoH profit growth (still only 0.6% pretax RoA 2010).
– Consumer banking transformation; impact of strong franchise expansion now
leads to income growth with abating margin pressure.
– Strong capital position allows for value added retail platform acquisitions which
can leverage franchise further.
– Relatively unpopular given size; 21 Buy, 16 Hold, 1 Sell.
• Risks: RoE pressure, cost pressure, loan losses, competition, MENA unrest.

62
Investment mandate
SKAGEN Kon-Tiki and Global Emerging Markets
• Investment mandate: Minimum 50 percent in GEM, the rest predominantly in
companies with activity largely directed towards emerging market economies.
• What is included under Global Emerging Markets (GEM)?
– Asia ex Japan, Singapore, Hong Kong
– South Africa, Eastern Europe including Turkey (EMEA)
– South America, including Mexico

• High growth, good demographics, cheap companies, higher risk

• Benchmark index: MSCI Emerging Markets (Daily TR Net in NOK)

• Our investment focus: Undervalued, Unpopular, Under-researched companies

• Sensible sector balance – oriented towards companies’ value creation

• Variable, relative, asymmetrical fee structure. Minimum 1% management fee with

relative value drop of 8% or weaker, increasing to maximum 4% with relative
return of 22%. Charged annually. No high watermark.

64
Company exposure versus place of listing

• There is a substantial difference between place of listing and where the

company has its exposure
– Taiwan and South Korea have credit penetration on a level with continental
Europe. Hence, banking penetration is very high and growth options limited.
– Standard Chartered Bank is listed in London (plus Hong Kong and Mumbai)
while more than 95% of the activity is in growth markets in Asia, the Middle
East and Africa. Its largest profit contributors are China and India.

• What company provides best exposure to global emerging markets?

– It is more important to look at the value drivers than the place of listing.

– This is the main reason why SKAGEN Kon-Tiki can invest in equities listed in
both industrialised and global emerging markets.

65
Good results in terms of awards – and good returns for the investors

SKAGEN
Fund rating Kon-Tiki
Standard & Poor's
(AAA = best qualitative rating) AAA
Citywire (5 year performance)
Fund manager rating No. 1 of 79
Lipper Europe 2010: Best Fund 5 years

Fund Awards Equity Emerging Markets Global

Morningstar Quantitative Rating

(5 = best quantitative rating)
Morningstar Qualitatitve Rating

Wassum
(5 = best rating)
Updated as of 28 February 2011.

66
Investment philosophy
 Criteria in selecting companies

• Undervalued
The ideal
investments are • Unpopular
• Under-researched

• Revaluation catalysts
Focus for • Value creation at low price
company selection • Debt and risk
• Simple and proven business model
• Willingness to create shareholder value

68
 An explanation of our three Us with examples

• Undervalued
• A temporarily unprofitable division; is implicitly evaluated at negative value
• The company has a diversified business portfolio; large discount to total value
• The company is out of the spotlight due to the sector to which it belongs
– Examples; Yazicilar Holding
• Unpopular
• Negative historical merits
• Unsatisfactory or hard-to-access information from the company
– Examples; Eletrobras, Harbin Power Equipment, VTB Bank
• Under-researched
• The company has little or no analysis coverage
– Examples; Provida, DRB-Hicom
• Analysts’ perceptions about the company are erroneous; wrongly analysed or
misunderstood
– Examples; Eletrobras, Samsung Electronics

69
Economic growth is not a good indicator of stock market
returns – maybe it is still about valuations?

• Academic work has

found few
correlations between
economic growth
and stock market
performance over
the long run

• Worth noting the

difference between
Sweden/Switzerland
and Spain

70
How do we identify portfolio companies?

• Objective search
• Focused on P/E, P/BV, RoE, solidity/liquidity, cash flow and dividends
• Analysis of total value
• Often based on conglomerates
• Net asset value, value of unprofitable divisions
• Ideas generated through existing ownership
• Competitors, suppliers, customers, parent company
• Geographical imbalance in valuation
• Mispricing due to a lack of understanding about the industry in the market in which
the company is listed
• Macro perspective
• Company value/sector value as compared to the market potential relative to other
markets in relation to the degree of maturity/market penetration
• Review of the most unpopular companies
• Companies where the consensus amongst analysts is predominantly negative;
expectations are often too low

71
Global Emerging Markets
The substantial difference in GDP growth between emerging
markets and developed countries is expected to continue
Difference in GDP growth emerging markets and
developed countries in percentage points

73
Public debt to GDP substantially lower in EM and expected to
decline slightly while DM set to accelerate

Public debt as % of GDP

74
Low level of indebtedness among emerging markets
households compared to developed countries
Household debt compared to GDP (%)

75
Total debt level is significantly lower in BRIC countries
than developed countries

76
The shift from West to East will continue . . . . .

Source: IMF
77
Global emerging markets are undercapitalised relative to
the developed markets

78
There is a long way to go before the BRIC countries reach
the same standard of living as Korea and Japan

79
Six of the world’s largest mobile phone markets are now
in emerging markets, despite relatively low penetration

80
Auto sales in EM have clearly decoupled from industrialised
countries; China is now the world’s biggest car market

Source: CEIC, Haver, UBS estimates

81
China’s growing importance for commodities is apparent
in share of world demand

82
 For more information:

• Please refer to:

– Our latest Market report
– Information about SKAGEN Kon-Tiki on our web pages

• Historical returns are no guarantee for future returns. Future returns will depend, inter alia, on market
developments, the fund manager’s skill, the fund’s risk profile and subscription and management fees. The return
may become negative as a result of negative price developments.
• SKAGEN seeks to the best of its ability to ensure that all information given in this report is correct, however,
makes reservations regarding possible errors and omissions. Statements in the report reflect the portfolio
managers’ viewpoint 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 instruments. SKAGEN does not assume
responsibility for direct or indirect loss or expenses incurred through use or understanding of the report.
Employees of SKAGEN AS may be owners of securities issued by companies that are either referred to in this
report or are part of the fund's portfolio.

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