SKAGEN Fondene MR0311 Engelsk

Market report
N u M B E r 3 o C t o B E r 2 0 11 S K A G E N F U N D S . C O M
domino effect
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tulips in Amsterdam
SKAGEN lands in the Netherlands
reAd the POrtFOliO mANAGerS rePOrt ON PAGe 15
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New upturn?
A very good decade in the stock markets may be just a few years away, asserts ole Seberg
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A job for Super mario
Mario draghi, the new president in the ECB, has a tough task ahead of him
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dizzying volatility
Is extreme volatility the new norm?
Paralysed european politicians now need to come up with a credible solution to the debt crisis. if this involves Greece leaving the european monetary union, it may trigger a chain reaction. uncertainty is the stock markets worst enemy, and has pushed share prices back down to financial crisis levels. read more in torgeir hiens macro comment and the portfolio managers report. Page 15
t he A rt OF cOmmON Se NSe
cO N t e N t S
SK AGeN FuNdS mArKet rePOrt 2011

SK AGeN Funds invests in under valued, under-researched and unpopular companies all over the world. SKAGEN AS was established in Stavanger in 1993 and is one of Norways leading fund managers.
contents 15
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 trygve Meyer, journalist 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. SKAGEN recommends that anyone wishing to invest in our funds contacts a qualified customer adviser by telephone on +47 51 21 38 58 or by email at contact@skagenfunds.com.
Photo: bloomberg
the debt crisis in europe is causing concern and unrest. the situation in Greece is being followed closely by economist, politicians and the countrys inhabitants.
Photo: iStockphoto
Market Report
N U M B E R 3 O C T O B E R 2 0 11 S K A G E N F U N D S . C O M
Domino effect
5
Tulips in Amsterdam
SKAGEN lands in the Netherlands
READ THE PORTFOLIO MANAGERS REPORT. PAGE 15
Are the major fluctuations in the stock market here to stay?
mario draghi faces a tough start to his job as president of the european central bank
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New upturn?
A very good decade in the stock markets may be just a few years away, asserts Ole Seberg
3 SKAGeN Funds returns 4 leader 5 tulips in Amsterdam 6 long period of rising markets ahead
Paralysed European politicians now need to come up with a credible solution to the debt crisis. If this involves Greece leaving the European monetary union, this may trigger a chain reaction. Uncertainty is the stock markets worst enemy, and has pushed share prices back down to financial crisis levels. Read more in Torgeir Hiens macro comment and the portfolio managers report. Page 15
13 Save the date: New years conferences 14 exceeded expectations:

new client reporting portal
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A job for Super Mario
Mario Draghi, the new President in the ECB, has a tough task ahead of him
15 Portfolio managers report 28 Fixed income commentary 30 Portfolios 37 quarterly financial statement 38 risk and return measurements
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Dizzying volatility
Is extreme volatility the new norm?
8 A job for Super mario 10 dizzying volatility: A new normal? 12 As all round: new S&P ratings
T HE A RT OF COMMON SE NSE
Photo: iStockphoto
SK AGEN F uNdS MArKE t rEport Number 3
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Photo: bloomberg
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Our FuNdS
SKAGeN Funds returns

the following tables show the returns for SKAGeNs funds versus their respective benchmarks in euro. the figures are updated as of 30 September 2011.
equit y FuNd SK AGeN veKSt

Portfolio manager: Beate Bredesen Start: 1 december 1993
Return past 12 months 15 10 5 0 -5 -10 -15 -5,5 % -10 Average annual return since start 15 10 5 0 -5 14,8 % 8,6 %
equit y FuNd SK AGeN GlObAl

Portfolio manager: Kristian Falnes Start: 7 August 1997
Return past 12 months 15 10 5 0 -5 -10 -15 SKAGEN Global MSCI World Linked Index -5,0 % -4,4 % Average annual return since start 15 10 5 0,6 % 0 -5 -10 -15 14,9 %
-12,4 %
-15
SKAGEN Vekst OSEBX/MSCI AC (50/50)
equit y FuNd SK AGeN KON-tiKi

Portfolio manager: Kristoffer Stensrud Start: 5 April 2002
Return past 12 months 20 Average annual return since start 20 16,9 % 10 10 7,8 %
bONd FuNd SK AGeN telluS

Portfolio manager: torgeir Hien Start: 29 September 2006
Return past 12 months 10 Average annual return since start 10 5,31 % 5 0 -2,23 % -5,90 % -10 -10 5 6,29 %
-10 -13,3 % -20 -15,2 %
-10 -20
-5
-5
SKAGEN Kon-Tiki MSCI Emerging Markets Index (Daily Traded Net Total Return)
SKAGEN Tellus Barclays Capital Global Treasury Index 3 - 5 years (euro)
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.
S K A G E N F u N d S M A r K E t r E p o r t N u m b e r 3 O c t O b e r 2 0 11
leAder
LEADER
Timothy Warrington, Head of International, SKAGEN F unds tcsw skagenfunds.com
An absence of (political) leadership

iNveStOrS OFteN miSS beNeFitS OF FuNd OwNerShiP
Fund A 10 Year Total Return 15.05% 10 Year Investor return -1.46% Growth $ 10,000 Net inflows
As we enter the fourth quarter of the year, an unimpressive first half has given way to the worst quarter for global equities since 2008. What surprises more is that we seem to be no closer to a definitive solution to the European sovereign debt crisis and its attendant banking troubles. In addition, the Bank of England, the ECB, and the uS Federal reserve are set for further economic rescue missions although the latter is increasingly at the mercy of irresponsible political brinkmanship. It is no understatement that the global economic outlook remains a mostly confusing picture. At the root lies not just a crisis of leadership, but rather an absence of leadership. domestic political concerns have prevented leaders and policymakers far and near from taking the bold and decisive action that is required. until statesmanship prevails, uncertainty and fear will fuel the capital markets, giving rise to the kind of volatility that characterized the third quarter of this year.
Surging correlations
1997
Annual Return (%) Net Assets ($mil)
1998
34.9 9.9
1999
120.1 72.4
2000
-17.1 118.9
2001
-27.8 69.1
2002
-17.7 45.6
2003
43.8 52.2
2004
20.9 51.9
2005
24.4 57.1
2006
8.8 63.2
12.7 5.3
Source: Morningstar
Lacking clear market signals, correlations amongst stocks have surged, resulting in poor performance for our funds. our three equity funds SKAGEN Vekst, SKAGEN Global and SKAGEN Kon-tiki are down 19.5, 13.8 and 17.8 percent respectively for the quarter. All the funds were beaten by their respective benchmark indexes. Year to date, the return figures for the equity funds are minus 25.2, 15.6 and 21.4 percent respectively. only SKAGEN Kon-tiki is ahead of its benchmark index. Since inception in 2002 the fund is, on an annual basis, well ahead of the emerging markets index. read the portfolio managers reports that begin on page 15.
timing matters
does not make us immune to short-term volatility in returns. It is important, therefore, that investors consider their own contribution to best risk adjusted return. Namely the timing of their own transactions. In a recent presentation don phillips, the Managing director of rating agency Morningstar, noted that investor returns too often do not match the returns of the funds in which they invest. Mr phillips offered the graph above as evidence. In this instance, over a 10-year period, the fund returned some 15.05% while a client suffered a -1.46% loss due to the destructive impact of ill-timed transactions. Investors therefore need to consider carefully the manner of their own decision-making. And redemption at the bottom of the market serves only to crystalise losses. Here in SKAGEN we are pleased to observe that, with few exceptions, our investors noted this lesson in 2008/09 and have held to it in 2011 thus far. this helps create the best possible conditions for our portfolio managers to execute their investment process and thereby deliver the best returns to our unit holders.
Now in the Netherlands
many dutch investors and partners. read all about SKAGEN in Holland and the new team on page 5 tulips from Amsterdam.
the long-term view
So, as interesting times give way to turbulent times, investors should take comfort from the fact that our equity portfolios are cheap, very cheap. Indeed the pricing of the companies in our portfolios is now almost down to the financial crisis levels of 2008/09, and the discount to the general stock markets is great. price relative to book equity is below one, while price relative to admittedly uncertain earnings for 2012 is in the range of 5.5 to 8.0 (p/E). Short-term returns may be unpalatable; but the potential for best risk adjusted returns over the longer term is much more encouraging.
What advice then, might one offer to investors in such turbulent times? First, perhaps, to note that such macro issues provide the backdrop to investing. they do not determine investment outcomes for managers with an active, bottom-up, and long-term approach to investing. Managers such as SKAGEN. this
despite a turbulent quarter in the capital markets, SKAGEN has found the time to establish an office in Amsterdam. our initial team of three, supported by the experienced International team from Stavanger, now seeks to raise the bar on our support and service to our
SK AGEN F uNdS mArKEt rEport Number 3
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tulips from Amsterdam

in September SKAGeN opened an office in Amsterdam to further strengthen its presence in the Netherlands and commitment to dutch clients.
meet the team

michiel Krauss, managing director SKAGeN Netherlands Michiel comes to SKAGEN from Wilton Investment Services where he was Managing director. prior to this he worked 18 years for Van Lanschot Bankiers where he held various senior management roles in the Netherlands, Luxembourg and Switzerland within private banking, investment advisory and wealth management. Altogether Michiel has 25 years experience in the industry, including previous positions at robeco Group and IS Nederland. Nienke Abma, client Advisor Nienke has over 15 years experience from the finance industry, both in Europe and the uS. over the years she has worked with equity sales and sales trading, client relationship management and financial communication, for employers including petercam Bank N.V., rabo Securities N.V., Metzler Bank and BBV Securities N.V. Nienke comes to SKAGEN from detac B.V, where she was employed as Senior Executive Search Consultant. mark houben, communications manager Mark has an extensive media background from the financial sector and has worked as a journalist and editor for two of the major dailies in the Netherlands, NrC Handelsblad and Het Financieele dagblad. Mark comes to SKAGEN from Springer Science+Business Media where he was Chief Editor and a member of the management team responsible for the development of the companys digital strategy.
the dutch team from left: mark houben, Nienke Abma and michiel Krauss (md)
the new SKAGEN office in Amsterdam is centrally located on Museumplein overlooked by the Van Gogh museum and the illustrious rijksmuseum, and is headed up by Michiel Krauss, who was appointed Managing director of SKAGEN in the Netherlands in February this year. the dutch team has recently been strengthened by the appointment of Nienke Abma as client advisor and Mark Houben as communications manager. I am confident that we have a team in place that can ensure that our dutch clients receive the excellent level of service and follow up which we aspire to. As a team we will continue to pursue a measured growth of a balanced client base and to strengthen SKAGENs reputation as a well regarded boutique fund manager, comments Michiel Krauss.
market share of one percent
In the Netherlands there are 89 active fund
the dutch office is located in the cultural heart of Amsterdam, on museumplein
companies and the total fund market amounts to 78 billion euro. SKAGEN has around 1 billion euro and accordingly a market share of a little over 1 percent. SKAGENs client base in the Netherlands is made up of a broad mix of retail clients, high net worth individuals and institutions. the new dutch office was launched with both a press conference and client event attended by a number of the founders and senior management of SKAGEN. Michiel Krauss spent time at the events explaining the SKAGEN philosophy and history. SKAGEN is a company that was founded in Stavanger, Norway, a location relatively undisturbed by financial noise. the founders created a fund company that specialized in investing in undervalued, unpopular and under-researched companies from around the globe. transparency and communication were core values and the founders aim was and still is to look their clients in the eye. As a result, SKAGEN has always focused on going where the clients are and the new Amsterdam office is SKAGENs second outside of Scandinavia and its eleventh overall. the strategy has worked well in Norway and has also been the foundation of a successful international expansion to the other Scandinavian countries and the uK. this broad base has led to stability in assets under management. on an aggregate level there has been net inflow of money into the funds every year since inception in 1993.
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SKAGeN portfolio manager:
long period of rising markets ahead

in a few years we will likely experience an extremely good decade in the stock markets; both history and the low valuations of companies indicate this. Stock markets may well fall further, but for the long-term investor, the opportunities are there.
ole Seberg, portfolio manager of SKAGEN Vekst
this may well seem to be an unlikely message after two months of renewed global financial crisis, and the ensuing price drop for SKAGENs three equity funds. We are also currently spending all our energy protecting the values in the funds. But is it not precisely in times of darkness that one should have the courage to look for bright spots? Both the fundamental analyses of the values in our companies and our historical knowledge as investors tell us that we can expect times of prosperity in the stock markets in the next few decades, asserts ole Seberg, portfolio manager of SKAGEN Vekst. Before we get there, however, we have to see a political will to act and a better balance in public expenditure. What is needed is clarification around the widespread uncertainty and fear of a global recession that is currently associated with the euro and the eurozones debt situation as well as the continuous national debt build-up in the uS, adds Seberg. He names improvements in productivity as a result of new technological developments, increasing consumption in the emerging markets and growing optimism among investors as some of the factors that will send stock prices and valuations to new heights.
Genuinely long-term investors
tical drive which will untangle the serious situation that the developed countries have led the world into. According to Seberg, a good decade for stocks is not necessarily many years away despite the challenges we are currently facing. In the graph (next page) we see the development of the dow Jones Industrial Average in the uS after 1920. Short-term fluctuations can even out when such long periods are measured. one can also see that long periods of progress have been interrupted by 12 to 15 years of stagnation and recession. the first long period of stagnation and recession on the graph begins with the crack in 1929. the second spans from 1967 to 1981. And finally we see extremely miserable times for shareholders from 1999 to the present day. (Clients who have been invested in SKAGEN for many years have nevertheless experienced good returns since 1999, but this is largely owing to excess returns in the funds, and not to progress in the market in general). If you look at things from a slightly brighter perspective, you can see that a new bull market begins when a prolonged gloomy period ends. the period from 1981 to 1999 was on the whole a long, uninterrupted positive period for uS companies whereby
reNewAl
values increased hugely for shareholders. Correspondingly things picked up speed during the Second World War and the period of prosperity continued right up to the mid 1960s. the dow Jones reached 1000 for the first time in 1966, but did not convincingly pass this point until 1982.
learning from history
Although according to the model the time will soon be ripe for a new equity upturn, given the current gloom how can we believe that the stock market will turn prosperous and that this will last for several years? At a time when problems for countries economies are so visible and so substantial, and this has significant consequences for economic growth and companies earnings, it would seem unlikely. We can try to learn from history believes the SKAGEN portfolio manager. It is possible for bull markets to get off to an excellent start even when fear, pessimism and perhaps even chaos reign. the first prolonged uS bull market started shortly after Japanese fighter planes bombed the pearl Harbor military base on 7 december 1941. In so doing they immediately got the Americans involved in the war,
there are potentially a few sectors and areas in which there will be considerable recovery and which we will pay attention to when picking stocks, according to portfolio manager ole Seberg. the it revolution is far from over. the communal utilisation of data is only in its infancy. data is entered manually, while voice recognition is under development. public authorities, companies and private individuals have numerous untapped possibilities to be more productive. this will happen and it will free up resources for other tasks. Green energy is a high priority for public authorities. It is still too expensive, but in a few years it will probably become cheaper than many known types of electricity. healthcare: products that we are barely familiar with today will be launched in this field. For example, cancer treatment and remedies that ensure enhanced physical and mental health. the challenge will be to ensure greater private financing of healthcare. Food: development of foodstuffs that yield greater benefits and are less dependent on water will continue at a faster pace. urbanisation: Migration from country to city in the emerging markets continues at an undiminished rate. this requires steel, concrete, aluminium and glass to build Chinese and Indian megalopolises. urbanisation creates dynamics and growth.
Stock markets often react several years before a positive development is visible in the economy, and we will see drastic poli-
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condemning them to three and a half years of inconceivable suffering and loss. What must it have been like to sit in New York fearing a Japanese invasion of California while German submarines lay in wait just outside of town? Nevertheless, stocks began to rise. determined action made the difference, says ole Seberg.
Politicians with the will to act
When the second bull market began in 1981, forty years after pearl Harbor, the situation was better, but not exactly positive. unemployment and inflation were at record highs, economic growth had bottomed out, oilexporting nations had triggered a second oil crisis and western societies were pervaded with pessimism. When the economy took a breather, debates about devastating pollution and the accelerating arms race between east and west filled the agenda. What really helped to turn the mood was that politicians and authorities decided to act. In the uS and Great Britain, the newly elected premiers reagan and thatcher created trust by liberalizing their economies. the spectre of inflation was finally laid to rest by paul Volcker in the uS central bank, and several decades of prosperity followed, not least among service firms, says ole Seberg. under paul Volckers presidency, the Federal reserve raised the federal funds rate from 11.2 percent in 1979 to a record high of 20 percent in June 1981. the inflation rate then fell from 13.5 percent in 1981 to 3.2 percent in 1983. At the time, the increase in the interest rate was extremely controversial. It got to the point that frustrated farmers drove their tractors right into New York to block the Federal reserve building.
valuation
Most people would be surprised to learn that the post-war protracted uS equity upturn started on 7 december 1941 when Japan bombed the uS naval base pearl Harbor. Film illustration
spective, it has often been profitable to invest in stocks when the valuations are at these levels. While governments in the developed part of the world have fallen deeply into debt over the past few years, consumers have tightened their belts and have set in motion debt reduction and consolidation. private danish consumption has, for example, fallen since 2007, in spite of lower interest rates, lower house prices, lower taxes and higher wages. the additional disposable income is used to bring down debt and for savings. Sooner or later increased private consumption is likely again. In a global context, denmark is small,
dOw jONeS iNdex SiNce 1920
Logarithmic scale 16384 8192 4096 2048 1024 512 256 128 64 32
but the same tendency to reduce debt and consolidate can be seen in other countries in the West. In the meantime, companies have bolstered their nest egg and are sitting on a mountain of cash. Companies have the opportunity to carry out investments that increase productivity significantly. this will happen when they feel secure, believes ole Seberg.
cje
Christian Jessen skagenfondene.dk
A feature common to the stock market in 1941, 1981 and 2011 is the low valuation of companies measured against the historic average. In 1941 companies were valued at book value, which corresponded to eleven times earnings. the interest rate at the time was at a record low, just as it is today. In 1981 the valuation of stocks was even lower, at a level that corresponded to 7.5 times earnings, while the interest rate soared as a result of high inflation. Seen from a long-term per-
1920
1930
1940
1950
1960
1970
1980
1990
2000
2010
Since 1920 long periods of relative progress in the uS stock market have been succeeded by three year-long periods of stagnation or recession. the uS stock market has been lost in the wilderness since the peak in 1999.
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Photo: bloomberg
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A job for Super mario

the eurozone is currently facing its worst crisis since the introduction of the single currency in 1999. Greece is on the brink of bankruptcy and the euro countries cannot come to an agreement over a solution sufficient to restore market confidence. in November, mario draghi, who has been the Governor of the bank of italy since 2006, will take over the reins of the european central bank (ecb) from jean-claude trichet.
He is becoming president at a time when the storm is raging at its worst. the question is whether Mario draghi who has been nicknamed Super Mario by the press has the qualities needed to guide the union through the crisis.
tough job awaits mario
the ECBs mandate is to ensure price stability in the euro area. In more concrete terms this means keeping inflation below but close to two percent. By and large, Mario draghis predecessors have so far been successful. Inflation has fluctuated but has on average been two percent since the euro was introduced in 1999. the ECB is an independent central bank. this means that politicians in member countries cannot instruct the bank on what it should do, including when it comes to setting interest rates. price stability is still the primary goal but in the wake of the financial crisis, central banks have had to focus more on macroprudential
supervision. Following the financial crisis, the task of ensuring the functioning of the money market has become more important. Furthermore, the crisis in the peripheral eurozone countries of Greece, Ireland, Italy, Spain and portugal has given the ECB cause for concern. the ECB has bought government bonds in an attempt to stabilize interest rates in the market. this bond buying programme is extremely controversial. the Germans in particular are critical of the ECB buying member countries debt. Axel Weber chose to resign as head of the Bundesbank over this issue, consequently dropping off the list of candidates for the top job in the ECB. Jrgen Stark (member of the Executive Board at the ECB) has also resigned from his position. In other words, the job requires not only a background in economics, central banking and state bureaucracy, but exceptionally good diplomatic skills. draghi will need to be able to create agreement among the 23 members on the ECBs Governing Council. of equal importance is the ability to work with
and confront Europes fragmented politicians.

the right man for the job?
Before Mario draghi was elected, critics voiced their scepticism over having a leader from Italy, especially one with a history at Goldman Sachs. Following the financial crisis Goldman Sachs has become a symbol of the greed within the finance industry. Criticism has already been directed at Goldman Sachs influence in uS politics and society through its alumni network. In more concrete terms, critics have implied that Mario draghi may have been involved in the interest rate swaps Greece carried out through Goldman Sachs to cover its exorbitant national debt. this has, however, been invalidated by the Italian central bank. Criticism of draghi being Italian has to do with a fear that under his leadership the ECB will allow higher inflation. particularly Germany, with its Bundesbank tradition, has warned that Mario draghi will bring Italys legacy of high inflation with him to Frankfurt. With a
iNFlAtiON ANd POlicy rAte iN the eurO zONe, 1999-dAte

5 4 3 %2 1 0 -1 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Kilde: Macrobond
Styringsrente
Inflasjon
5 4 3 2% 1 0 -1
From left: ECBs first president, dutch Wim duisenberg, followed by the Frenchman Jean-Claude trichet and the future president, Mario draghi
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Mario Draghis main task will be the same as that of his predecessors, namely to set the interest rate in such a way that inflation remains low and stable
deputy central bank governor from portugal (Vtor Constncio), there has been concern that the southern member countries will have too much power. despite the initial scepticism, Mario draghi currently enjoys broad support. None of the other potential candidates had such wideranging experience from a central bank, state bureaucracy, and the private sector. Given the significance of Germany in the monetary union, he was given gravitas by being called the most German of all the candidates for the job.
Significance for the fixed income market
What does the ECB change in leadership mean for the fixed income market? the main task for Mario draghi will be the same as for his predecessors, namely to set the interest rate so that inflation remains low and stable.
mAriO drAGhi
* 64 years old * phd in economics from the Massachusetts Institute of technology in the uS * director general of the Italian treasury from 1991-2001 * Managing director of uS investment bank Goldman Sachs * Governor of the Bank of Italy since 2006 * Chairman of the Financial Stability Board (FSB) * designated to succeed Jean-Claude trichet as president of the European Central Bank on 1 November 2011
Most interesting will be to see how he chooses to handle the acute crisis in the euro area and how he decides to manage the ECBs alternative monetary policy tools. this may be of great significance to the bond market. He may for example choose to go out more aggressively and promise the market that the ECB will buy sufficient bonds in the heavily-indebted countries, particularly Italy and Spain, to keep the interest rate below a given level. If the market believes this to be credible, it will have an immediate effect on the interest rates in the countries in question. He may also choose to take a less strict approach to inflation targeting, taking growth more into consideration and keeping the interest rate low and allowing inflation to be over the target for a period in which growth is weak. the Bundesbank tradition of strict inflation targeting has dominated the ECB until now, but it is not certain that Mario draghi will interpret the mandate equally stringently. For the Federal reserve consideration of growth is equally as important as inflation since the mandate dictates that the interest rate shall be set at such a level that ensures both employment and price stability. the ECBs mandate will be fixed, but the way in which the mandate is interpreted may be more akin to the Bank of England for example. the Bank of England has kept the interest rate low since the financial crisis despite the fact that inflation has been significantly above the target. Growth has been low and the Bank of England has chosen to ignore an increase in inflation which is due to temporary effects. they have instead emphasised the fact that weak growth will result in diminishing inflation pressure going forward and that infla-
jane tvedt is fixed income manager in SKAGeN and is responsible for SKAGeN Avkastning. She has previously worked for the Norwegian central bank and the european central bank (ecb)
tion expectations are still anchored at the inflation target. From a bond managers perspective, the best thing that Mario draghi could do in the short term would be to create calm around the euro and the euro area. He must use his diplomatic skills to get the leaders in the euro countries to agree on tools powerful enough to resolve the crisis. After all, the crisis in the euro area is not caused by the ECB, but by reckless spending in the south and procrastination and an inability to act in the north.
The article is written by Jane Tvedt
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dizzying volatility: A new normal?

if you dont like the weather, just wait half an hour, an old saying from the west coast of Norway goes. this seems to hold true for the stock markets lately. if you dont like the direction of the stock market, just wait half an hour and it will surely have changed.
the recent volatility has created intraday swings of more than 2-3 percent. Still, are these swings to be seen as the new normal, as many media pundits now proclaim? Indeed, since the general market direction started its downward slide at the end of the summer, dizzying intraday movements have become increasingly commonplace and its now noteworthy when markets are flat or relatively unchanged from the previous day. Some view the proliferation of shares bought and sold in seconds, or even microseconds, by automated computer programs used by short-term traders, as the root of the heightened volatility, and hence proclaim that the swings represent a new normal phenomenon. they are correct that all data indicates that the average investment horizon has fallen considerably. the mean holding period for stocks has declined from eight years in 1960 to around six months currently, according to the NYSE Factbook. Still, it is hard to see that
this is the root of the volatility as this trend has been around for five decades. the source of the swings is most likely related to market participants minute by minute trying to come to terms with slowing global economic growth, the ongoing sovereign debt crisis in Europe and doubts about a uS reco-
very. It is no easy task trying to make sense of data points that often conflict each other or are frequently revised.
the fear gauge
there is one measure that indicates that the current market swings are tied to fluctua-
5-yeAr vix
80.00 70.00 60.00 40.00 50.00 30.00 20.00 10.00 2007 2008 2009 2010 2011
Source: Chicago Board Options Exchange Volatility S&P 500
typically the VIX has a broadly inverse relationship to the stock market.
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look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it, advises famous investor warren buffett.
tions in hope and fear. this is the Chicago Board options Exchange Volatility Index commonly referred to as the VIX or investors fear gauge. this index is based on the expected price volatility of options on the S&p 500 index over the next 30-day period. the VIX is the generally accepted measure of the markets expectations of volatility over the coming month or implied volatility, with a higher number indicating that investors are nervous and willing to pay more for insurance. on thursday 22 September the index jumped 11 percent to 41, bringing its fourday increase to 33 percent. this is double the gauges average reading of 20.5 over its 21-year history but to put things in context, only half the barometers peak reading of over 80 in october 2008 following the collapse of Lehman Brothers. typically the VIX has a broadly inverse relationship to the stock market. this has intuitive logic as a rising stock market is seen as less risky while a falling stock market is viewed
as involving greater risk, and the higher the perceived risk, the greater the implied volatility. this is borne out by the chart above with the recent exceptional levels of volatility beginning in August as the stock market began to fall. However, exceptional is the key word. Common sense logic is that volatility will eventually return to normal or unexceptional levels and the VIX will demonstrate mean reversion. In other words the next big moves are more likely to be down rather than up. We may have already seen early indications of this. Indeed, the three-month futures price on the VIX is currently below 34, suggesting that the market currently expects volatility to be considerably lower going forward. How then can the heightened volatility be a new normal?
long-term view
as SKAGEN. Warren Buffett once advised investors to look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it. Although it is easy to get caught up in short-term panic driven by the fear of short-term losses if markets fall further or the opportunity cost of sitting on the sidelines and missing out on potential gains if markets suddenly rise it is important to take a long-term view. In volatile times it is more important than ever to block out the short-term noise and look at the bigger picture; some things are more likely than not to return to the old normal.
Nick Henderson nhe skagenfunds.co.uk
Either way, the current market conditions create opportunities for stock pickers such
O c t O b e r 2 0 11
Photo: iStockphoto
12
NewS
As all round
Standard & Poors (S&P) review of equity funds, carried out this summer, again highlighted the strength and consistency of the portfolio management team. though the three funds have differing ratings, they have all received at least one of those elusive As.
AAA rating easily retained
consistency of performance
New A-rating for SKAGeN vekst
In its review of the emerging markets equity fund, SKAGEN Kon-tiki, the rating agency S&p says that it continues to hold the team in very high regard and this, together with the funds excellent long-term track record, means that the AAA rating is easily retained. the fund is ranked number 16 of 607 emerging markets funds worldwide over the past five years. In evaluating the fund, S&p writes that the funds track record is one of the strongest and most consistent in our review and [SKAGEN Kon-tiki] is within the top 5% of the peer group over three and five years. the key to the longer-term success of SKAGEN Kon-tiki lies in its adherence to an approach that is based on absolute valuations and indepth company analysis, according to S&p.
Equity fund SKAGEN Global has retained its AA rating from S&p. the team managing SKAGEN Global have been working together since March 2010, when Kristian Falnes took over the reins of the fund. In its comment on the rating, S&p writes that Fund changes under Falnes have been gradual and minimal, reflecting the consistency and discipline of the investment philosophy and process. the rating agency concludes that the team, all of whom are generalists, has clearly settled well, working closely together with an effective collegial mentality and says that in all SKAGEN Global easily retains its AA rating.
S&p assigned its A rating to equity fund SKAGEN Vekst a little over one year after Beate Bredesen took over as lead manager. She has since been joined by co-manager ole Seberg. our confidence in [Bredesens] stockpicking and portfolio construction skills is sufficient for the fund to achieve an S&p A (New) rating, said S&p in its comment on the rating. An A-rating means that the fund demonstrates the highest standards of quality in its sector based on its investment process, risk awareness and consistency of performance as compared to funds with similar objectives. the Standard & poors reports on all three of SKAGENs equity funds are available on our website: www.skagenfunds.com/About-us/ rating-of-funds/
New house to childrens village

As one of the main sponsors of SoS Childrens Villages, SKAGEN recently contributed to the construction of a new house in pskov, russia. the formal opening took place in September this year. SKAGEN has contributed to building a total of five houses in the childrens village in pskov, south west of St. petersburg. the formal opening took place on 16 September and four employees from SKAGEN took part at the event. Children are extremely vulnerable in russia and it is estimated that around 100,000 children a year lose their families. SoS Childrens Villages aim to provide a safe childhood for these children in new families consisting of mothers and siblings. they remain at the childrens village throughout their childhood and biological siblings remain together.
SKAGeNs jonas A eriksson, tomas Nordb middelthon, midhat Syed and liv berit Oseid at the inauguration of the SOS childrens village in Pskov, russia.
O c t O b e r 2 0 11
NewS
13
Save the date: New years conferences

SKAGeNs New years conference has become an increasingly popular event since it was introduced in Oslo nine years ago. the conference aims to bring together a compelling panel of speakers to deliver their insights on the outlook for the worlds capital and financial markets in the coming year. the event has evolved significantly since its rather humble beginnings in 2002, as has the quality of the guest speakers. Major names on past programs have included Jim rogers, Lawrence Summers, Niall Ferguson and robert Barro, to name but a few. the Conference has also emigrated out of Norway, with similar events being organized for the first time in Stockholm and Copenhagen in 2006 and 2008 respectively.
three opportunities to participate copenhagen
Professor Niall Ferguson speaking at SKAGeNs New years conference 2011
previously our non Scandinavian clients have been invited to join us at the Copenhagen Conference which is held in English. However, with the opening of two new SKAGEN offices in London and Amsterdam we are now pleased to be able to offer clients the opportunity to attend the conferences in these cities as well. We have the pleasure of being able to invite our English-speaking clients to the following two conferences:
thursday January 12 at the tivoli Congress Center Guest speakers: Robert Shiller, American economist, academic, and best-selling author. Currently serving as professor of Economics at Yale university Victor Gao, Chinese international relations expert Hans Rosling, world-famous public speaker on global socio-economic trends Chen Zhao, Managing Editor for Bank Credit Analyst (BCA) in Montreal
london
For our dutch speaking clients we warmly invite you to our event in the Netherlands.
Amsterdam
Monday 16 January at the Amsterdam Hilton hotel Guest speakers: Dr Mathijs Bouman, RTL commentator at the Amsterdam stock exchange and columnist for Het Financieele dagblad and Z24 Dr Sylvester Eijffinger, Professor of economics at the university of tilburg More information regarding the conferences will be made available nearer the time, but please save the time and date in your diary in the meantime. We look forward to seeing you there.
tuesday 17 January at the Mandarin oriental Hyde park hotel Guest speakers: John Micklethwait, Editor-in-Chief of the Economist Alan Rosling OBE, industrialist and ex-political advisor
torgeir hien goes Swiss

there were few empty seats in the room when torgeir hien recently presented his latest macroeconomic outlook to the Norwegian business community in zurich despite a sombre topic, the 3 ds of default, deflation and doubledigit Inf lation, the presentation was well received by the 60 or so attendees, and the question and answer session at the end was both lively and engaging. the event, which was co-hosted by the Nordic Business Community Norgesklubben in Zurich, was SKAGENs first activity in Switzerland since we received approval to market our funds in February of this year. despite very little marketing or communication activities in the Swiss market, it was pleasing to discover that SKAGEN is not completely unknown in the financial centre of Switzerland. the 60 available places at the event were quickly booked up with participants heralding from both Scandinavia and Switzerland.
Safe havens, pegs and currency debasement
the fate of the euro and the eurozone is undeniably a hot topic for the Swiss, and the audience was keen to ask torgeir Hien for his opinion on the pegging of the Swiss franc to the euro and what advice he would give the Swiss Finance Minister. torgeir responded that pegging the currency in the short term was an effective response to counteract
the strengthening of the safe haven Swiss franc. However, in the long run it is not a viable solution, since Switzerland would import whatever inflation that the eurozone produced. With a glint in his eye, he countered that the best way to debase a currency was to live beyond your means! (For more insight into torgeir Hiens views on the eurozone crisis, please read his report on page 28). Feedback from those who attended the evening has been very positive and constructive. We hope to organise similar events on a regular basis to enable us to strengthen our relationships with our existing clients and slowly and carefully build up the awareness of SKAGEN and our funds in the Swiss market.
SK AGEN F uNdS MArKEt rEport
O c t O b e r 2 0 11
14
NewS
exceeded expectations
SKAGeNs internet portal my Page was launched at the end of August. Since then clients have logged in more than 50,000 times. For those of you who are not yet familiar with My page, it is a new web-based service which provides clients with better and more tailored information about their investments in SKAGENs funds. I think the numbers speak for themselves. More than 50,000 logins since launch exceeds all our expectations and demonstrates that clients are requesting this type of information, says project manager Jim Sumpter.
log in improvements reports
You can log in to My page via a button in the top right hand corner of our home page. one of the most significant changes has been experienced by institutional clients. In order to access the portal, they must establish Master users for each client relationship. For retail clients, it is simple to access the web portal. Your username is your email address registered with SKAGEN. the first time you log on to the My page portal, you register as a new user by clicking on the register as a new user link. You will then order a one-time code which will be sent to you immediately by email.
Although we are pleased with the launch, a number of improvements are already in the process of being made to My page. Amongst other things we are working to lengthen the client history shown on the My portfolio page from last year to the past three and five years. In addition we want to show more clearly the largest contributors in the portfolio, explains Jim. there have been a few cases where clients have experienced difficulties logging on to the portal. the error has now been identified and resolved.
this is my Page
this provides you with monthly reports on your holdings. All the figures are based on your portfolio in the funds and the timing of your transactions. the report may be delivered automatically via e-mail and you can select the format, language and currency of your report in the report preferences section. the report contains amongst other things: Your portfolio composition Your holdings Returns for your portfolio Value change in the portfolio
Advantages of my Page
My page is a web portal which provides access to:

my Portfolio
By providing tailored reports and more indepth information about your holdings in SKAGEN Funds, we hope to give you: A better insight into how your portfolio develops relative to the returns for the funds and their respective benchmark indexes. A better awareness of risk conditions and market factors The ability to see how your transactions have affected the return of your investments A tool to help improve the quality of discussions with client advisors Open and easily accessible information about your holdings in SKAGEN Greater knowledge and understanding about how the results in your portfolio are achieved Jim believes that the recent turbulence in the markets is a good argument in favour of using My page. Clients can keep an eye on their units, see how SKAGENs philosophy works in practice and have a healthy overall perspective, he explains.
this provides you with daily updated information about your holdings in SKAGEN Funds.
my Account
under My Account, you can monitor your holdings in SKAGENs funds and get a good overview of all your investments with SKAGEN. You may also switch assets between SKAGEN funds. My Account also provides access to all the functionality and services which you could previously access on the My Account page on our web pages.
If you would like to know more about our portal My page, you can view our information video in the portal. You are of course also welcome to contact us if you need help logging in. Contact customer services by telephone on +47 51 21 38 58 or send an email to contact@skagenfunds.com.
SK AGEN F uNdS MArKE t rEport Number 3
O c t O b e r 2 0 11
POrtFOliO mANAGerS rePOrt
15
trust crisis creates opportunities

in the first act of the financial crisis
(2008-09) the pyramid scheme in the housing market and bankruptcy-imperilled uS banks played major roles. in the second act, over-mortgaged governments, troubled european banks and paralysed politicians dominate.
we believe that capital markets
Greece will likely default on its national

debt, the question is when, and by how much. the time for action. Angela merkels assertion that distressed banks in europe will be recapitalised and saved has placated stock market participants slightly. will be influenced by the dismal situation in the uS and europe, and how companies earnings will be affected is still uncertain. recent figures from the uS have been increasingly positive.
Financial crisis part 1: the bankruptcy of one of the worlds largest investment banks Lehman Brothers in october 2008 triggered a global financial meltdown. Managing director dick Fuld at a hearing in Congress; and the banks previous headquarters in New York.
the time for words is over now is
to what extent the world economy
the wildcard is china. Authorities
toolboxes are full in china and in most em countries. but a few warning shots were fired from the banking and property sector recently. developed markets and risk premiums at historic highs in stock markets. this is in shareholders favour. markets, whereby all stocks have fallen almost in step, we believe and hope for better times for active managers. almost down to pre-financial crisis levels while the fund prices are still between 50 and 100 percent higher than they were at that time.
Financial crisis part 2: debt problems among banks in the west have become a headache for politicians. In Europe the pressure is mounting on governments to help recapitalise banks. German Chancellor Angela Merkel contends the wish for a more common fiscal policy in the Eu, as expressed by president of the European Commission Jose Manuel Barroso amongst others.
bond yields are at historic lows in
ONe OF three lONG StOcK mArKet dOwNturNS Over the PASt 100 yeArS
Logarithmic scale 16384 8192 4096 2048 1024 512 256 128 64 32
After a time of macro-driven stock
the pricing of our equity funds is
1920
1930
1940
1950
1960
1970
1980
1990
2000
2010
towards an upturn?: over the past 100 years, the uS equity market illustrated here by the dow Jones index has experienced three long periods of downturn on the stock market. When the period we are currently in will end no one knows. But with bond yields at record lows and share prices at financial crisis levels, there are grounds to be optimistic about the future
Photo: bloomberg
Photo: bloomberg
react irrationally when they pull money out of emerging markets and place it in so-called safe havens in developed markets. Again we believe the trend will turn when risk aversion wanes.
16
Not a carbon copy
In our last market report published at the beginning of July, we wondered whether we may have been able to look forward to a brighter outlook in the stock markets. At that time 2011 looked as though it would turn out to be a carbon copy of 2010, when the stock market was macro-driven. the focus then, as it is now, was on debt concerns in Europe, most notably Greece, as well as weak leading indicators for the world economy. the stock markets turned upwards in August 2010 when positive results figures came from companies. Investors focus shifted from the macro to the micro level and global stock markets ended the year extremely strongly. At the end of the year, we saw double-digit return figures in both the global stock markets and emerging markets. It does not seem as though this year will end on such a positive note.
A new tune from equities
despite the fact that companies results were on the whole good in the second quarter of this year, an entirely new tune can now be heard. Concerns over the consequences of the debt crisis among countries and banks
in Europe predominate. Authorities are no longer able to put off dealing with the problems. Investors are demanding a credible solution, preferably by tomorrow. Europe and the uS alike will have to resort to extremely unconventional monetary and fiscal policy if there is a new recession. the traditional tool box is empty. unlike their uS counterparts, European banks were not sufficiently recapitalised following the financial crisis in 2008. With their books full of Southern European debt the risk is great, but much of the losses have now been discounted in the share prices. Several major European banks have halved over a short period of time. the fact that German Chancellor Angela Merkel has explicitly said that the loss-imperilled banks will be saved has gone some way to improving the mood. there does not appear to be a way out for Greece other than default and writedowns of national debt, regardless of economic reform, monetary support from the International Monetary Fund or other Eu sponsorship. the question now is how much it will default by. Continued weak consumer confidence indicators and Gdp figures from the global economy have also led investors to adjust
companies future earnings downwards. Analysts are as usual lagging, as they tend to be both during times of upturn and recession. Chinese banks and property companies have recently taken a nosedive on the stock market. this also puts a big question mark over Chinas ability to help the global economy going forward.
circus and inability to act
GlObAl mArKet cONditiONS weAKeN GrOwth FAlliNG FASter iN the weSterN wOrld thAN iN emerGiNG mArKetS
Global GDP - % change on previous year 6 4 2 + 0 2 4
Although there are now grounds to believe that several countries in Southern Europe are following Greece into recession and that the uS may be in the danger zone, a large part of the blame for the stock market drop this autumn must go to pathologically indecisive politicians. the Americans started the ball rolling this summer with a theatrical argument about raising the uS debt ceiling. this was an issue that everyone was actually already in agreement about and which was a virtue of necessity for the further functioning of the united States. the official resolution came at the eleventh hour. European authorities and politicians have followed up by demonstrating a meeting tyranny that is unparalleled, without coming up with a credible solution. A credible solution to the debt problems in Europe will be the most important trigger to get the stock market to start pointing upwards again. Seen from a long-term economic perspective, a solution for the eurozone should involve a more coordinated fiscal policy. the financial requirements that were imposed initially on those countries that were to be part of a good Eu community have been completely disregarded ever since.
Flight to negative return and gold
2007
Developed markets
2008
Emerging markets World, total
2009
2010
2011
Source: The Economist
emerging markets are growing: the economic decline during the financial crisis was worst in western countries. Growth subsides most quickly in this region also.
emerGiNG mArKetS Are NOt imPActed SuSbStANtiAlly by weAKeNed exPOrt tO the weSt
60% 50% 40% 30% 20% 10% 0%
Mexico Poland Nigeria Romania Korea China Venezuela Russia Indonesia South Africa India Egypt Kenya Kazakhstan Argentina Hungary Turkey Ukraine Czech Rep Brazil Export to western countries as share of GDP
Source: IMF, CEIC
less dependency: Among the important emerging markets it is only in the Czech republic and Hungary that the share of exports to western markets exceeds 50 percent. In South American countries such as Argentina and Brazil, the share is lower than 10 percent.
As was the case during the financial crisis in 2008, gold and government bonds in the heavily indebted uS have also become so-called safe havens for investors in the stock market downturn this autumn. At worst bond-owners have accepted annual interest rate payments over the next ten years of well below one percent. In other words, negative real interest rates, before tax. At the end of September, the gold price took a turn for the worse. Several investors had a dire need for cash and redeemed their gold positions. At the same time the dollar experienced an upturn. However, for those who have bet on gold over the past few years, the return has still been good. If the gold price ends the year in positive territory, measured in dollars, it will be the eleventh year in a row that gold investors will have achieved a positive return. In the same 11-year period, global equity (index) investors have been in
17
Succumbed tO GrAvit y
Gasoline Live cattle Gold Corn Lean hogs Sugar Silver Coffee Cotton Aluminium Soybeans Natural gas Copper Nickel Wheat
-9 % 7% -11 % -11 % -28 % -23 % -21 % -13% -13% -16 % -11% -4 % -7% -6 % -3 % 8% 1% 9% 14 % 14 %
19 %
-19 % -27 % -29 % -32 % -24 % -21 % -19 % -20 %
Sept
-11 %
2011 YTD
-40 %
-30 %
-20%
-10%
0%
10%
20%
30%
Source: Bache Commodity Index, rolling contracts, as of 30 September 2011
commodities fell: Having remained high for a surprisingly long time, commodities finally had to succumb to gravity also. the drop was substantial for several of these in September. this is good news for emerging markets where inflation fears are quickly abating.
negative territory. Even if we go right back to 1987, gold has now given better returns than stocks (see graph). once again it is the debt-light countries and companies in emerging markets that will have suffered the most from the investors flight. In several countries, not only stock prices but also currency prices have fallen significantly.
uS on top
It is interesting to see how the global stock markets have developed in the third quarter, measured in euro. In the top spot are the Apple-heavy Nasdaq stock exchange and Japanese stocks where investors have not lost a single euro during the recent months downturn. the broad uS S&p 500 index is down eleven percent while the world index and the emerging markets index are down
FOllOwiNG teN yeArS OF StAGNAtiON, the GOld Price hAS exPlOded SiNce the StArt OF the FiNANciAl criSiS.
Index 1987=100 450
GOLD MSCI AC Index
400 350 346.95 300 250 200 150 100 50

274.19
10 and 16 percent respectively. At the bottom of the return list are the countries that will contribute to the lions share of growth in the world economy going forward, namely the BrIC countries Brazil, russia, India and China. With the exception of India, they have all fallen over 20 percent in the quarter. Year to date, all the BrIC countries are down between 25 and 33 percent. It is now evident, however, that the price of stocks in China (Hong Kong), and especially in India, was high at the start of the year. Currency also plays a considerable role, both at the top and bottom end of the results list. Likewise the fact that the world is becoming increasingly global, so that a companys place of listing is falling in importance.
commodity prices fell in the end
88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11
Source: Bloomberg
New gold rush: Since the financial crisis, the price of gold has exploded. recently, however, the price of gold has started to fall slightly.
GlObAl StOcK mArKetS tO dAte iN 2011 iN eur

uSA (Nasdaq) Indonesia uSA (S&p 500) Japan Switzerland Great Britain Spain MSCI AC World Index China (local) thailand SKAGEN GLoBAL Belgium Canada -4 % -7 % -11 % -11 % -12 % -13 % -13 % -13 % -14 % -15 % -16 % -17 % -18 % Singapore South Korea Germany Netherlands Norway (oSEBX) SKAGEN KoN-tIKI France MSCI EM Index Mexico Sweden denmark taiwan Hong Kong -18 % -19 % -20 % -21 % -21 % -21 % -22 % -22 % -23 % -23 % -23 % -23 % -24 % South Africa turkey SKAGEN VEKSt russia Italy India poland Hungary China (Hong Kong) Finland Austria Brazil -25 % -25 % -25 % -25 % -26 % -27 % -29 % -30 % -30 % -31 % -33 % -33 %
despite the fact that weaker economic growth has been a central theme for investors throughout the third quarter, commodity prices have remained at historically high levels. this may indicate that the underlying economy that of the emerging markets in particular was better than investors feared. At the end of the quarter commodities also had to succumb to gravity however. But so far there has been no mention of a collapse similar to the one in the autumn of 2008. the oil price has remained up at around the 100-dollar point throughout the quarter. three years ago it bottomed out in the low 30s. the drop in commodity prices has, as we anticipated in our previous market report, laid to rest the major fear spectre of inflation in the emerging markets for the time being at least.
Gloomy shipping
uS on top: As was the case during the financial crisis, the stock markets in the perceived safe havens of the uS, Japan and Switzerland have developed the least poorly.
Shipping has been one of the main losing sectors in the third quarter. A great deal of
18
optimism during the cyclical upturn until the financial crisis in 2008 led, as usual, to many new boat contracts and overcapacity. tanker shipping has been particularly hard hit, and ship-owners are suffering major losses at present. the bright spot in shipping is gas freight. Both gas prices and ship rates have risen as a result of the nuclear accident in Japan, the fact that Germany is shutting down nuclear power plants and that several European countries are reducing coal subsidies. one should nevertheless be prudent in a market in which everyone recommends gas. things could easily blow up. With the oil price at over 100 dollars a barrel, rig stocks held up relatively well. New major oil discoveries and a high level of activity, particularly in Brazil, have, together with the entry of new contracts at extremely good rates, created a great deal of optimism. Supply ship-owners are still struggling with too many vessels and poor rates however.
Salmon collapse
growth in the global economy is not a good combination. the fact that salmon in Chile was declared fit after a long sick leave should not have come as a surprise to the market. With salmon prices down at around 2.5 euros a kilo, several fish farms are struggling. this may create opportunities for bargain hunters. As always for sectors with low entry barriers, the lesson is: the longer the good times last, the more there are to fight for the golden calf, and the further there is to fall in the next round. unfortunately stock markets have a tendency to price extremely cyclical industries like these as though neither ceiling nor floor existed.
difficult for active managers
price/Earnings (p/E) and price/Book (p/B) fell to historically low levels. the third quarter was disappointing for all three of our equity funds in both absolute terms and relative to their benchmark indexes. SKAGEN Vekst, SKAGEN Global and SKAGEN Kon-tiki were down 19.5, 13.8 and 17.8 percent respectively. Year to date, the return figures for the equity funds are minus 25.2, 15.6 and 21.4 percent respectively. only SKAGEN Kon-tiki is ahead of its benchmark index. Since inception in 2002 the fund is, on an annual basis, well ahead of the emerging markets index.
cheap stocks and expensive bonds
the salmon price has more than halved during the quarter, and this has caused a landslide for the share price of these previously popular stocks. Increased supply and weaker
2011 has so far been an extremely tough year for active equity managers. the global stock markets have been macro-driven and seldom has the correlation been higher than it is today. the reason for the high correlation in the stock market is higher risk premiums. We saw the same phenomenon in the previous financial crisis. All stocks that could be sold were sold, uncritically, and the pricing of companies based on central key figures such as
direct returN FrOm StOcK mArKetS iS NOw hiGher thAN bONd yieldS.
% 7 000
GT10 Govt - Mid Yield To Convention Index- Net Aggregate Divided Yield
6 000 5 000 4 000 3 000

2 2914
1 8592
2 000 1 000
98
99
00
01
02
03
04
05
06
07
08
09
10
11
Source: Bloomberg
Stocks more attractive: the direct return from stocks has increased lately at the same time as long interest rates have fallen, so direct return is now higher.
FiNANciAl criSiS PriceS

Price/Book 2,0 1,4 0,9 1,5 1,6 14 12 10 0,8 8 6 4 2 0,0 SKAGEN Vekst SKAGEN Global SKAGEN Kon-Tiki 0 SKAGEN Vekst SKAGEN Global SKAGEN Kon-Tiki 5,1 8,3 Price/Earnings (2011 E) 11,0 9,3 9,0
the pricing of the companies in the equity funds is now almost down to financial crisis levels and the discount to the general stock markets is great. price relative to book equity is below one. price relative to admittedly uncertain earnings for 2012 is in the range of 5.5 to 8.0 (p/E). In other words, an expected return after tax of 12.5 18 percent (E/p). With a ten-year bond yield in the uS and solid European countries of around two percent the risk premium is sky high. the yield on government bonds is now also well below the direct yield from companies dividends. this was also the case in the period from November 2008 to the previous stock market trough in March 2009 (developed markets). the last time we saw anything like this was 1958, and before that was the year of the crash in 1929. If we do not enter into a protracted global recession now, there is a high risk in the above-mentioned government bonds. our bond fund SKAGEN tellus has been positioned in respect of this, and holds short government bonds. So far this has not paid off. If earnings from companies should fall more than we had based our views on next year, and long bond yields rise, there will still be a lot to go on for stocks. And as we pointed out earlier, in our opinion there is no safer haven in which to sit and wait than solid, cash-rich companies that provide a good continuous yield from dividends.
10,2
1,5
1,0
0,7
Tore Bang tb skagenfunds.com
0,5
Funds with attractive valuations: SKAGENs three equity funds are trading at a discount to their benchmark indexes, with regard to both expected earnings and book value.
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SKAGeN vekst
PerFOrmANce (eur) july-SePtember yeAr tO dAte*
SKAGeN veKSt Key FiGureS FOr the lArGeSt hOldiNGS (AS OF 30 SePtember 2011)
company Kongsberg Gruppen Samsung Electronics Eletrobras Gjensidige Forsikring Wilh Wilhelmsen Holding Solstad offshore teva pharmaceutical Industries Carnival Corp doF petroleo Brasileiro Norsk Hydro olav thon Eindom top 12 weighted average OSebx mSci Ac index Size of holding, % 4,7 % 3,7 % 2,7 % 2,4 % 2,3 % 2,3 % 2,2 % 2,2 % 2,1 % 2,1 % 2,1 % 2,0 % 30,9 % Price 102,5 571k 21,5 61,1 124,5 84,0 37,2 30,3 27,0 19,1 27,1 810,0 P/e 11e 9,1 6,8 8,3 10,0 8,6 7,3 12,1 6,6 10,0 7,7 9,7 9,4 11,0 9,7 P/e 12e 9,8 5,7 7,2 9,4 6,9 8,4 6,5 10,1 9,6 6,4 9,0 10,8 7,9 P/b last 2,4 0,8 0,4 1,3 0,8 0,7 1,5 1,0 0,6 1,2 0,7 0,9 0,9 1,3 1,5 Price target 165 750k 50 70 200 160 60 60 55 40 60 1200 87 %
SKAGEN Vekst MSCI/oSEBX Index *As of 30 September 2011 SKAGeN vekst team
-19.6% -14.2%
-25.2% -17.3%
Portfolio managers beate bredesen and Ole Seberg
terrible months
Few equity investors will look back on the past two months with pleasure. risk premiums for stocks have increased significantly since the end of July. this can to a large extent be attributed to the debt situation in Europe and the uS, and the danger of lower economic growth. Although the global stock markets were not expensive at the beginning of August, either in absolute terms or relative to bonds, investors sold stocks for fear of what the future might bring. For a more indepth description of developments in the capital markets in the quarter, please read the portfolio managers report on pages 15-18.
Oslo Stock exchange badly affected
While the oslo Stock Exchange was down 17.6 percent in the quarter, the world index was down only 10.4 percent, measured in Norwegian kroner. 58 percent of the fund is invested in Norwegian shares. At the beginning of the year we believed that the potential in the Norwegian stock market was greatest among small and mediumsized companies, as these clearly had lower valuations than large companies. So far this view has not paid off, however. Quite the reverse. When the storm is raging in stock markets, many investors prefer the liquidity in large companies.
belief in philosophy
Axis-Shield a winner
In the third quarter SKAGEN Vekst was affected by the generally rising risk premiums in the stock markets as well as by specific negative incidents in individual companies in the portfolio. the result for the period was therefore far from satisfactory.
lArGeSt PurchASeS/SAleS july-SePtember

lArGeSt PurchASeS
Akzo Nobel (New) Continental (New) New New) Corning (New) New New) doF Gazprom (New) New New) Kesko royal unibrew
lArGeSt SAleS
dtAC Carnival Axis Shield Arealbank Hankook (out) Seagate Kyocera tGS-Nopec odfjell Clavis
despite the macroeconomic headwinds, we have faith in our investment philosophy and continue to focus on company valuations. the expected return from this years earnings for the top 12 companies in our portfolio is 10.3 percent (p/E 9.7). By way of comparison, the yield from Norwegian ten-year government bonds is 2.3 percent. the yield from companies dividends is five percent. As can be seen from the table showing key figures for the largest companies in SKAGEN Vekst, the pricing of the companies is now at a level well below that of the oslo Stock Exchange. It is meagre comfort that the foreign part of SKAGEN Vekst performed somewhat better than the Norwegian part. old SKAGEN faithfuls such as petrobras, Eletrobras and LG Electronics have not done well. Although we were right to exchange cruise ship company royal Caribbean Cruises with Carnival Corporation last year, in relative terms, cruise shares did not exactly top the popularity lists in the quarter. Macroeconomic headwinds, geopolitical unrest and high fuel prices meant that the cruise sector was the funds biggest loser.
the best investment in the period, Norwegian-Scottish biotech company Axis-Shield, was the subject of a hostile takeover bid by American Alere Inc at the beginning of July. When the offer of 460 pence per share was announced, the share price rose to 500 pence. the stock market was expecting a bidding war, in other words, which should have pushed the share price well over the bid from Alere. In the period a competitor company showed interest in putting forward a higher bid for Axis-Shield, but as it became clear that Alere had secured control of the company with over 29.9 percent of Axis-Shield, they chose to desist. Alere has subsequently raised its offer to 470 pence and received the
cONtributOrS third quArter
largest positive contributors
company Axis-Shield total Access Communication Gregoire Mahindra & Mahindra Gdr Agrinos Aska pharmaceutical Co telekomunikasi Indonesia Adr Seagate technology Crew Gold obl Golar LNG mNOK +52 +24 +11 +9 +6 +5 +3 +2 +2 +1
largest negative contributors

company Kongsberg Gruppen doF Norsk Hydro dockwise Morpol Eletrobras Norwegian Air Shuttle Solstad offshore Hurtigruten petrobras mNOK -165 -104 -79 -76 -74 -67 -57 -55 -51 -47
20
winner: We accepted the bid from Alere at 470 pence per share, and are pleased with a good contribution from Axis-Shield in the third quarter.
Boards recommendation. We expect the bid to get full approval. We therefore said thank you for good contributions in the past and made our exit. thai mobile operator dtac has been an extremely good contributor to the return of SKAGEN Vekst. Not just in the third quarter, but throughout the past year. Since we believe that the potential for future returns relative to risk is no longer as good, we sold all our shares in the company. Indian tractor and car producer Mahindra&Mahindra also contributed positively to the results. It has shown an impressive combination of strong growth and good margins. of our smaller investments, Gregoire should be highlighted. the company sold its wine harvesting machines at a good price and distributed the profits to its shareholders.
Kongsberg hit by order reductions
nings going forward. But we do not agree with the markets judgement that a third of the companys value has been lost. Kongsberg Gruppen is now priced at only nine times next years expected earnings, and gives a direct dividend yield of four percent. the companys valuation has not been as low for ten years. In our opinion the companys earnings prospects are not reflected in the current share price.
Foul weather for dOF
runs a fleet of supply ships, stationed primarily in the North Sea and Brazil. doF has an extremely modern fleet which is in the final phases of a targeted expansion. As a result of the expansion, the companys debt has increased markedly in recent years, and is expected to peak in the fourth quarter when two of the companys new builds are delivered. Given the weak market for supply ships and a poor current cash flow relative to the debt situation, doF chose to carry out a share issue in the stock market of 600 million Norwegian kroner. the sum is seemingly modest given that the compnay owns a fleet with an assumed market value of around NoK 25 billion, and net debt in the region of NoK 17 billion. Nevertheless, doF wishes to obtain a necessary buffer, in order to remain within the parameters of the banks lending terms. Collecting new equity capital in a volatile stock market does not do much to inspire trust, however. despite the fact that the share issue was carried out at a large discount to underlying values, the doF share price fell further after the money was secured. SKAGEN Vekst chose to put down its name for about Eur 3 million during the share issue. that is less than our present stake in the company warrants. We believe that doFs financial situation has improved somewhat. When the focus in the stock market shifts, the increased utilisation of the fleet combined with higher rates should get the doF raft to turn around.
heavy lifting
the supply company doF was under pressure in the quarter. the company owns and
Photo: Axis Shield
the dutch company dockwise is a specia-
the funds largest investment, Kongsberg Gruppen, fell dramatically in value in the quarter. At the beginning of September the uS army announced reductions in the investment program Common remotely operated Weapon Station (CroWS III), from an expected 18,000 weapon control systems to 3,000 units. this impacts Kongsberg Gruppens earnings in the protech division, which accounts for around 30 percent of the groups sales. the uS army has stated that the long-term need for the weapon control system remains unchanged. We can also add that in respect of previous purchase agreements, Kongsberg Gruppen has had orders revised upwards. As a result of cuts in the defence budget in general, we understand that investors are concerned about Kongsberg Gruppens ear-
loser: A former winning share, Kongsberg Gruppen, was the weakest contributor in the third quarter. Cuts in the uS defence budget must take the blame for this.
Photo: Kongsberg
21
list in transporting extremely large objects, such as oil rigs, over long distances by sea. dockwise has a strong market position, but utilisation of the fleet has been extremely poor in 2011, and the companys share price has suffered as a result. there will be an increase in the need for the companys services over the next few years however. Many new and existing rigs will be moved to new areas. dockwise is currently building the largest vessel in the sectors history. When the ship is brought into operation in one years time, we will see if it manages to demonstrate its earnings potential. the ship will start by moving a Chevron platform from Korea to the Mexican Gulf. dockwise is priced at 0.3 times the companys book equity, and five times expected earnings in 2012. We believe that the share price does not reflect the significant relocation commissions that the company will be charged with over the next few years. After the end of the quarter the company announced an increase in order reserves of 55 million dollars, of which some of the earnings will already be generated this year. In addition the cash disbursement associated with the above-mentioned new build has been postponed slightly. this improves the companys financial position significantly.
Pressure on Polish salmon
weighty dockwise: the relocation of oil platforms and rigs has not been a gold mine for dockwise, but there will be a greater need for the companys services over the next couple of years.
In the first half of the year, Morpol, the polish salmon processor, suffered from higher salmon prices, margin pressures and lapses in volume. In the third quarter, the situation did a 180 degree turn. the salmon price fell from NoK 43 to 22 per kilo, which should give prospects of improved margins and volume for Morpol. When the company reported its figures for the second quarter, however, it was announced that they had entered into contracts for parts of their expected salmon needs for this year and next at extremely high prices. Morpol will therefore not be able to benefit from the low salmon prices and our faith in the companys ability to hedge the salmon price has been weakened. Morpol was only listed in July 2010, and is therefore in a period in which it should be building trust in the stock market. It is therefore unfortunate that it has made major changes to both the Board and the management team over the past half year. the companys earnings potential is nonetheless good and better communication of its strategy and how this is actually put into practice may change the stock markets focus. Some other losers in the period include Norsk Hydro, which was affected by the falling aluminium price, particularly at the end of the
period. Short-term changes in the aluminium price are difficult to predict and this does not alter the premise for our investment. Sevan Marine continued negotiations with its creditors in order to find a restructuring solution. on the last day of the quarter it was announced that the company is selling three of its platforms to the global participant, teekay. the companies are also entering into a financial and industrial cooperation agreement. We find the fact that an industrial participant is committing to Sevans Marines technology extremely positive. the final transaction details and plan for the remainder of the company are expected to be announced in the near future. Brazilian Eletrobras disappointed in the quarter. For further details, please read the SKAGEN Global report on pages 22-24. Although telecommunication is a sector that does relatively well when there is turbulence in the stock market, France telecom suffered in the quarter. An aggressive competitor, Iliad, will enter the French mobile market as a fourth operator next year. Expectations of substantial price pressures have affected the France telecom share price. Iliad does not have its own 4G network and until it does it will buy capacity from France telecom. Based on experience from other markets, we think that its roaming agreement with Iliad may be a winning formula for France telecom. the number of companies in the portfolio has been reduced in the quarter. We have sold a number of smaller holdings in Korean pharmaceutical companies amongst others.
better safe than sorry
Given our concerns about the European bank sector at the beginning of the quarter, we decided to significantly reduce our position in German Aareal Bank. We also trimmed our exposure to danske Bank somewhat. With hindsight this has proved to be the right decision. Aarel Banks share price halved in the quarter. We have also bid farewell to our Korean tyre producer Hankook tires, at all time high prices. the shares were simply no longer undervalued. New investments were made throughout the third quarter in companies with solid market positions, low prices and with a strong likelihood of delivering an annual return of 20 percent. these are all entry requirements for the SKAGEN Vekst portfolio. New investments in the period include uS technology company Corning, russian gas company Gazprom, dutch coatings manufacturer Akzo Nobel, German tyre and security solutions producer Continental and danish brewery royal unibrew. our new investments are described in detail in our monthly status reports which can be found on our web pages, www.skagenfunds.com.
Read more about the fund on page 30 SKAGeNFuNdS.cOm/SKAGeN-veKSt
Photo: dockwise
22
SKAGeN Global
SKAGeN GlObAl Key FiGureS FOr the lArGeSt hOldiNGS (AS OF 30 SePtember 2011)
company Samsung Electronics tyco International Eletrobras Citigroup oracle pfizer China Mobile tesco unilever Kyocera top 10 weighted average mSci Ac index Size of holding, % 7,3 % 5,3 % 3,8 % 3,3 % 3,0 % 2,9 % 2,8 % 2,7 % 2,5 % 2,2 % 35,6 % n.a. Price 571K 40,8 21,5 25,6 28,7 17,7 77,1 378,0 23,8 6540 P/e 11e 6,9 12,8 8,7 6,6 12,0 7,9 12,5 10,6 15,1 12,0 9,3 11,0 P/e 12e 5,7 11,2 6,8 5,4 10,9 7,7 12,1 9,6 13,8 11,1 8,0 9,7 P/b last Price target 0,9 1,3 0,4 0,4 3,5 1,6 2,5 1,8 4,6 0,8 0,9 1,5 780K 70 50 75 45 22 95 560 28 10K 67 % -
SKAGEN Global MSCI AC
-13.9% -10.4%
-15.6% -13.3%
*As of 30 September 2011 SKAGeN Global team
Portfolio managers Kristian Falnes, torkell eide, Sren milo christensen and chris-tommy Simonsen.
Poor in absolute and relative terms
mechanisms that apply now as in the autumn of 2008, when we also saw a massive flight to what was perceived to be safe havens. then, as now, investors consider the uS, Japan and Switzerland as the safest places for their money. Currencies, bonds and stock markets in these countries have turned out to be relatively strong compared to the rest of the world.
irrational market
developments in the stock markets we saw at the end of 2008 and during 2009, whereby stocks, bonds and currencies in the emerging markets came back into their own.
Asian mobile winners
the third quarter was extremely poor for unit holders in SKAGEN Global, both in absolute terms and relative to the world index. the quarter was characterised by a significant increase in risk premiums for all risk-exposed assets. In the developed part of the world equities and corporate bonds have been hardest hit. Having fallen by 16.4 percent measured in euros, stocks in the emerging markets have dropped more than those in the developed markets. In the emerging markets corporate bonds and currencies have also fallen in value. Currencies such as the russian rouble, the Brazilian real and the Korean won have weakened substantially against the uS dollar. the interest rate spread that emerging markets countries have to pay on their national debt (EMBI-spread) also rose significantly. In other words it is the same market
lArGeSt PurchASeS
Goldman Sachs oracle Yahoo (New) Weatherford Int (New) upM-Kymmene (New) teva pharmaceutical (New) Citigroup Akzo Nobel Cliffs Natural resources
lArGeSt SAleS
Shangri-La Asia (out) Accenture (out) out out) Bharti Airtel (out) out out) total Access telecommunication Calpine (out) out out) pfizer Mizuho Financial(out) Microsoft Baker Hughes
As was the case in the autumn of 2008, during this period of flight to safety SKAGEN Global has performed worse than the world index. We deliberately have greater exposure to emerging market stocks and currencies than the benchmark index. At the start of the quarter, around 32 percent of the fund was invested in companies listed in emerging markets, versus 41 percent three years ago. Several of the funds worst contributors in the quarter came from these markets. But so did two of the best. Nonetheless, the fund has a better geographical balance now than it did in 2008, so the return relative to the benchmark index is also significantly better. over 30 percent of the funds assets are in uS companies, listed in the uS, compared with 17 percent three years ago. As we saw in the autumn of 2008 we believe that the capital markets are reacting in an irrational manner and that there are no good fundamental grounds for the money flows from the emerging markets to so-called safe havens in the developed markets. on the whole countries and companies in emerging markets are in good fundamental and financial health. the perception of the uS and Japan as safe havens is difficult to understand when you compare their debt situations to that of countries such as Brazil and China. When the worst of the fear abates, we believe that there will be a repeat of the
Although our emerging markets companies pulled down the relative result in the quarter, the funds two best contributors came from this region. At the top of this list is thai mobile telephone company total Access Communication (see table). the company once again delivered excellent quarterly results and we expect a further increase in dividends from dtac in the future. It appears as though thailand is at long last starting to auction off its 3G licences, which may mean further growth opportunities for dtac. the companys balance sheet is so
company total Access Communication China Mobile unilever osaka Securities oracle roche Accenture Microsoft teva pharmaceutical Samsung Electronics mNOK +199 +128 +50 +39 +37 +28 +21 +18 +13 +13

company Eletrobras Citigroup Cliffs Natural resources Gazprom LG Corp Siemens Nabors HeidelbergCement Baker Huges petrobras mNOK -403 -391 -204 -200 -199 -192 -157 -154 -150 -147
23
strong that they will have no problems financing either the licence payments or network extension through its operations. In the wake of the substantial share price upturn this year up 76 percent measured in local currency we have chosen to reduce our position in the company. the second best contributor was Chinas leading mobile phone company, China Mobile. Low valuation combined with good growth prospects has proved to be a winning formula for this company also. China Mobile has in excess of 600 million subscribers this year and a well-filled cash balance, corresponding to 25 percent of the companys stock value. We believe that the growth opportunities for broadband and smartphones are far from reflected in the current share price. China Mobile is trading at 12.5 times the expected result this year and the direct yield from dividends is 4.2 percent. Given the current strong balance sheet, expected earnings and investments going forward, in our opinion, China Mobile should increase their dividend payments further.
disappointing from eletrobras
excellent figures: oracle CEo Larry Ellison can pride himself on strong figures, and the share has been a good contributor to the funds results.
Eletrobras was one of the funds worst contributors this quarter also. the company reported disappointing figures for the second quarter, which included both the writedown of power plants and higher costs for a new hydropower project. the imminent expiration of licences has also been a contributing factor to the poor price development of the shares. Eletrobras preference shares are now down 20 percent since the start of the year, while the ordinary share has fallen 27 percent, measured in local currency. We believe that the market has overreacted to the risk associated with licences expiring in the next few years, and that the valuation of the company is very low relative to the value of power resources and future earnings potential.
Keeping faith in citigroup
the second worst contributor in the third quarter was uS bank Citigroup, which is also the portfolio company that has fallen most in value year to date. the share price has almost halved. the price development of banks in the uS and Europe has on the whole been extremely poor. uncertainty regarding how the current national debt crisis will end as well as poorer economic trends should take most of the blame for this. In addition regulatory stipulations make it increasingly difficult for banks to attain a sensible return on equity. Although Citigroup has a significant part of its activity in emerging markets, the bank has not been spared the negative economic deve-
lopments in the uS and Southern Europe. Moreover, Citigroup is developing in line with what we expected when we first added the company to the portfolio in october last year. the bad part of the bank Citi Holdings is rapidly being reduced at the same time as the banks solidity is being substantially reinforced. despite the supposedly poorer economic developments in both the uS and Europe, we still believe that Citigroup will manage to pay back a significant part of the current market value, in the form of dividends and share repurchases over the next five years. At the start of the quarter the shares were trading at seven times the expected result for 2011, and just over 50 percent of book equity, adjusted for intangible assets. provided that no new skeletons emerge from the closet, the pricing of a bank like Citigroup, with considerable market positions in Asia, Latin America, the Middle East and Africa, appears to be very attractive. We have therefore added to our position in the bank. Similarly we have weighted up in Goldman Sachs, at the expense of Japanese bank Mizuho Financial.
leader in generic drugs
focused too much on the loss of this income, which has resulted in a substantial drop in the companys share price. As the patents of a number of drugs are set to expire over the next few years, growth prospects within generic drugs are significant for teva pharmaceutical. In addition the company has an interesting research portfolio within central nervous system and cancer treating drugs. triggers for a revaluation of the company are numerous in the coming years. the current share price corresponds to seven times this years result and we believe it should be at least 50 percent higher.
cheap oil service
Within pharmacy the Israeli teva pharmaceutical is a newcomer to the portfolio. the company is a global leader within generic products, but also has considerable earnings from patent-protected drugs and its extensive research and development business. Almost 40 percent of current earnings come from Copaxone, a patent protected drug to treat multiple sclerosis. the patent expires in 2014, and in our opinion the market has
oilfield services company Weatherford International, which is domiciled in Switzerland and has operations in more than one hundred countries, is another newcomer to the portfolio. the company has struggled with operations over the past few years and has not come close to delivering the results previously targeted. the share price has suffered and is now almost down to the lowest level it reached during the financial crisis in 2008 when the oil price was below 40 dollars a barrel. We believe that Weatherford should have good opportunities to attain the same operating margins they had in the period from 2006 to 2008, of around 20 percent. Versus ten percent today. If the market is willing to value the company at a multiple of ten relative to the operating result (EV/EBIt) a normalisation of the margin picture will lead to a more than doubling of the share price. the most important premise for this happening, apart from the oil price, is the companys ability
Photo: bloomberg
24
to implement planned improved measures.

hidden values in the web and the woods
other large newcomers in the portfolio are the well-known internet company Yahoo and the Finnish pulp, paper and timber manufacturer upM Kymmene. Common to both is the fact that they have hidden values in their balance sheets, outside the core activity. Yahoos weak operational management has resulted in a poor development of the share price and a large discount relative to the value of the companys stockholdings in Alibaba Group and Yahoo Japan amongst others. As a result of a substantial drop in the upM Kymmene share price, one now gets the companys core activity more or less for free. upM Kymmene has significant power and forest resources which alone justify the market value. the ongoing consolidation within the magazine and newspaper industry in Europe, along with the ensuing capacity cutbacks, will increase the pricing power of the remaining producers. After upM Kymmene bought Myllokoski this summer, it is clear that the company is now the dominant player in Europe. A strong balance sheet and high dividend yield are of course important aspects when we invest in a cyclical company, at a time when the general economy is entering a slump.
doubling candidate in coatings
core almost for free: the share price of Finnish paper producer, upM Kymmene, has fallen substantially. Now you get the companys core activity almost for free.
Investing in a countercyclical manner was a principle reason we doubled our position in Akzo Nobel, a manufacturer in coatings. the fear of weaker market conditions has caused the share to fall more than it deserves, in our opinion. the stock market seems to have forgotten the companys attractive positions in the emerging markets, as well as the fact that around 40 percent of the turnover comes from there. As a result of higher commodity prices, Akzo Nobel is experiencing a margin squeeze which is probably a transient problem. the price of the company is low relative to current earnings. In addition, the company has a solid balance sheet and opportunities for solid organic growth over the next few years. A clear doubling candidate in our view.
Oracle into the top ten
We believe that a price of 12 times expected earnings for the present year is too low for a solid growth company. the new oracle shares were partially financed by us reducing our position in Microsoft. the hotel company Shangri-La was sold out of the portfolio during the quarter along with Accenture, Bharti Airtel and Calpine. the fundamental targets we had set for the investments were attained. these companies have been good contributors to the funds results. We required financing for our new ideas, however, and were finding it difficult
to find good enough arguments for the companies being undervalued.

Greater concentration
the funds cash position at the end of the quarter was 1.4 percent, down 0.9 percentage points from the first half of the year. the concentration in the portfolio has increased somewhat throughout the quarter. the funds ten largest investments now account for 35.6 percent, versus 34 percent at the end of June. despite the fact that growth prospects for the world economy have deteriorated during the quarter, we still maintain that our portfolio is extremely attractively valued relative to current earnings and book equity. It is only at the bottom of the financial crisis in 2008/09 that a more attractive valuation can be found. We have no ambitions to pinpoint the bottom of the stock markets development this autumn, but know that when we see a solution to the central governments financial problems in Southern Europe and indications that the market situation is improving, the stock markets will already have risen substantially. Historically it has been profitable to invest in stocks when risk premiums are high. We believe this to be the case this time also. High risk premiums mean high expected future returns.
Photo: bloomberg
the position in the uS software company oracle was increased and the company is now among the funds top ten holdings. oracle recently delivered excellent quarterly results. Strong growth from software and new licences resulted in top line growth of 11 percent compared with the same quarter last year.
into yahoo: Weak operational developments led to a substantial drop in the Yahoo share price. We bought into the company which we think is priced at a large discount and does not reflect underlying values. there have been rumours lately of a potential acquisition.
Read more about the fund on page 32 SKAGeNFuNdS.cOm/SKAGeN-GlObAl
Photo: bloomberg
25
SKAGeN Kon-tiki
SKAGeN KON-tiKi Key FiGureS FOr the lArGeSt hOldiNGS (AS OF 30 SePtember 2011)
company Samsung Electronics Hyundai Motor Eletrobras Baker Hughes China Mobile Vale Gazprom Banrisul Sabanci Holding Sistema petrobras ABB top 12 weighted average top 35 weighted average mSci em index Size of holding, % 6,3 % 6,2 % 5,5 % 4,6 % 4,0 % 3,1 % 2,9 % 2,6 % 2,5 % 2,5 % 2,5 % 2,5 % 45,2 % 79,0 % Price 571K 65K 21,2 46 77,1 39,6 9,7 15,4 7 14 19,24 119 P/e 11e 7,6 2,3 6,1 9,3 10,3 5,3 3,2 6,8 6,5 3,5 6,4 10,6 5,1 6,2 9,0 P/e 12e 6,3 2,2 5,3 7,7 9,9 5,7 2,8 6,2 5,9 3,5 5,8 9,5 4,6 5,5 8,0 P/b last Price target 0,9 0,5 0,4 1,3 2,1 1,6 0,5 1,5 1,0 0,8 0,8 2,7 0,8 0,9 1,6 780K 110K 70 100 100 65 22 22 10 32 40 200 92 % 79 %
SKAGEN Kon-tiki
-17.9%
-21.4% -22.1%
MSCI Emerging Markets Index -16.4% *As of 30 September 2011

SKAGeN Kon-tiki team
Portfolio managers Kristoffer Stensrud, Knut harald Nilsson, cathrine Gether and ross Porter
Fear and risk aversion
Fear and risk aversion characterised the equity markets in the third quarter. the emerging markets have, as in other periods of great uncertainty, been regarded as one of the more risky minefields. So far we are on track to see money flows out of emerging markets in 2011 on a par with the financial crisis year of 2008. Along with falling emerging markets currencies, this has led to emerging markets exceeding the decline of the developed markets by more than six percentage points, measured in euros, in the third quarter. As a result, there is no sign that the stock market believes in decoupling this time either. We, however, believe that 2008/09 history will repeat itself. When European politicians show a willingness to act, and the worst of the fear abates, the rise should be greatest
lArGeSt PurchASeS
petrobras State Bank of India Bidvest Group (New) New New) China Mobile ABB China Shineway pharmaceutical (New) New New) Yapi Ve Kredi Bankasi (New) New New) Heineken Gazprom renhe Commercial Holdings (New) New New)
for stocks in emerging markets yet again (read more in the SKAGEN Global report on pages 22-24). Key economic indicators point in differing directions, but everyone agrees that the global economy will grow at a slower pace than estimates indicated just a few months ago. the International Monetary Funds prognosis at the end of September estimates that Gdp growth in emerging markets will be 6.4% this year. this is four times higher than the corresponding estimate for growth in developed countries. National debt in emerging markets is estimated to account for around 35 percent of Gdp, with an average budget deficit of 2.7 percent. Comparable figures for the developed world are 102 and 6.8 percent respectively. this should support our theory.
expensive oil services
has vast gas resources. We took advantage of the weak price developments to increase our position in the company. russian companies in general have suffered badly in the stock market, particularly at the end of the quarter. this is not abnormal in periods of great uncertainty and falling commodity prices. russia is perceived as a high risk country, also on account of poor corporate governance. Following another disappointing quarter, the share price of Brazilian oil company petrobras continued its weak development. As a result of more stringent maintenance requirements from the state, the company was once
company China Mobile Mahindra & Mahindra total Access Communication Indosat tullow oil Shoprite Holdings Strabag SE drd Gold tisco Financial Samsung Electronics mNOK + 209 + 126 + 81 + 37 + 27 + 23 + 19 + 14 + 13 +9
lArGeSt SAleS
total Access Communication (out) Standard Chartered Marine Harvest (out) A p Moller - Maersk Seadrill Gjensidige Forsikring Nordic American tankers Shangri-La Asia Asya Katilim Bankasi Enka Insaat Ve Sanayi
the energy sector was the biggest negative contributor in the quarter. our position in oil services company Baker Hughes was a costly affair. Following the companys successful restructuring and the well-timed acquisition of the pressure pumping company BJ Services, results over the past few quarters have been extremely good. the reason the share price fell last quarter is primarily due to concern that the market for the companys pressure pumping systems has started to saturate. this would lead to lower prices and margins. A falling oil price also affected the share price. russian gas producer Gazprom is once again a notable loser in the portfolio. the company now trades at well below three times expected earnings this year. one thing is the strong current earnings, but Gazprom also

company Baker Hughes Centrais Eletricas Brasileiras Sistema Hyundai Motor Gazprom VtB Bank ABB petrobras Empresas ICA Banrisul mNOK -729 -693 -615 -465 -358 -292 -283 -282 -252 -250
26
distrust and russian banks
down on fears: Last quarters winner, ABB, fell a full 30 percent this quarter. Fears of a weaker global economy have caused investors to sell. We took advantage of the weak price to add to our holding slightly.
again unable to satisfy on the production side this quarter either. Since we believe it is only a matter of time before we see improvements in petrobras, we took advantage of the fall in the share price to add to our position in the company. one of the best contributors to the funds result was tullow oil. the company announced an important oil find in French Guyana with the potential to transform the area. An expansive exploration program over the next few months leads us to expect more good news from this region.
Abb from winner to loser
the industrial sector was the loser in the emerging markets index and a dismal contributor for us also. one of the winning stocks in the previous quarter, ABB, weighed down in particular. the Swiss-Swedish industrial conglomerate is a leader in power and automation equipment. ABB has a lot of late-cyclical and strong emerging markets exposure. due to concerns over lower global growth, the share price fell as much as 30 percent. We added to our holdings. Empresas ICA, our Mexican construction company, also caught some turbulence in the quarter. Although operational developments have gone well, the stock market has focused on the companys high leverage.
South African food
invest in South Africas Bidvest. Bidvest is an extremely profitable and well-managed conglomerate whose food services division is the largest. there is the potential for significant hidden values to be uncovered if divisions are sold off. Several suitors have come knocking, but nothing has been sold yet. the solid balance sheet may also be used to make attractive acquisitions and/or issue extraordinary dividends to shareholders. As the outlook for the container market has become slightly more uncertain, we trimmed our holding in danish Ap Mller-Maersk. Nordic American tankers was also substantially reduced in the period. the tank market is particularly difficult at present. Weaker growth in the world economy, an excess of tankers on the seven seas and full shipyard order books is not a winning combination.
Avoided large commodities losses
the banking and financial sector was, unsurprisingly, among the biggest negative contributors for both the fund and emerging markets in general. the share price of russias VtB Bank has been weak ever since they invested in Bank of Moscow. In hindsight, the bank purchase can be seen as a statedecreed rescue action. the state is now offering zero interest rate loans as compensation for the fraud orchestrated by the former head of Bank of Moscow. regardless, the acquisition has been a strain both on VtB Bank and the russian governments reputation. We further added to our holding in State Bank of India. two new banks have been brought into the portfolio, an old turkish acquaintance, Yapi Kredi Bank, and the Chinese value-oriented fund company Value partners. In the meantime we took advantage of the strong development in thai tisco Financial Group to sell almost our entire position. We reduced our holding in Standard Chartered by about a quarter. one of our largest investments, electricity company Eletrobras, also ended up among the losers. We are still waiting for a decision on concession renewals. While we are waiting, however, dividends are accruing (read more in SKAGEN Global report).
hyundai hit a road block
Photo: bloomberg
We took advantage of a good price development in Kumho Industrial and Strabag to exit both companies and used the proceeds to
For some time now we have found commodities and commodity stocks to be overpriced, and have therefore maintained a low exposure to this sector. this stance paid off relatively well in the quarter, as commodity prices declined. our only sizeable company in this sector, Brazilian Vale, suffered. our South African gold miner, drd Gold, performed extremely well. Gold is one of the few commodities that is up in the period. In addition, operations are continuously improving at drd Gold.
the discretionary consumer goods sector is not normally one that does particularly well in volatile markets. Hyundai Motors, which has historically performed well in SKAGEN Kon-tiki, was one of the largest negative contributors in the quarter. Quite undeservedly, if you ask us. the company is well positioned for more uncertain times in the world economy, with new model launches, streamlining of production, high capacity utilisation, historically low inventories and not least a weaker currency. thanks to the continued strong development of Indian car and tractor producer, Mahindra & Mahindra, the stock was one of the funds best contributors.
mistrust of small chinese companies
renhe Commercial, Chinas largest developer and operator of underground shopping centres built in bomb shelters, is a newcomer to the portfolio. Small and medium-sized companies became very unpopular on the Hong Kong stock exchange after we started buying and the share price fell substantially. renhe is one of many Chinese companies that investors are wary of at present due to corporate governance. So far there is no justifiable reason for
27
the significant drop in renhes share price. the company has an exciting portfolio of new projects, net cash on its balance sheet, a dividend yield of 12 percent and is trading at a little over three times this years expected earnings.
Out of salmon and into beer
the consumer staples sector was, unsurprisingly, one of the relative winners in the quarter. our South African supermarket chain, Shoprite, delivered once again. the salmon price fell substantially during the quarter. the supply side now seems to be larger than previously assumed. We have a negative view of the sector, and have therefore sold all our shares in Marine Harvest. A newcomer to the portfolio is beer producer Heineken, which has considerable exposure to emerging markets. After disappointing quarterly results, the company is priced at a discount to the rest of the sector. With input prices coming down, the outlook for Heineken seems a little better. In healthcare we once again bought into China Shineway pharmaceutical. the company was previously sold out of the portfolio at a much higher price level and at a significant profit. the sector has been through regulatory price pressure, and the companys valuation of 7.5 times expected earnings is now almost back to the financial crisis level.
Safe haven in chinese mobiles
expensive business: the acquisition of shares in Bank of Moscow has so far proved expensive for our russian VtB Bank.
otherwise unsafe waters. It now looks as though the company might be able to offer the iphone in 2012, at the same time as other smart phones are launched for use on their own network. We added considerably to our position at the start of the quarter. Sistema was also affected by a general flight from russian companies and experienced a weak share price development. thai operator dtac continued to develop strongly and we used the opportunity to exit the company at price levels where we see relatively little upside left.
lower inflation and full toolbox
relatively speaking telecommunications also performed well. For our part China Mobile in particular stood out as a safe haven in
problems in the uS and Europe along with falling energy and food prices mean inflation
in emerging markets is peaking earlier than we anticipated. this gives central banks room to start reversing the interest rate increases they undertook earlier this year, if need be. Ironically enough it was inflation fears and higher interest rates that caused stocks in emerging markets to underperform the developed and problem-filled markets at the beginning of the year. We believe that the next upturn in the stock markets will be bigger for companies in emerging markets as these have taken a disproportionate beating, also during phase two of the financial crisis. the 35 largest holdings in SKAGEN Kontiki, corresponding to 79 percent of the portfolio, now trade at 0.9 times book value. For emerging markets in general the ratio is 1.6. price relative to the last adjusted estimates for next years earnings is historically low at 5.5 while the emerging markets index is priced at 8x. Looking through our long-term micro lenses, we see that the selection of low priced companies is greater than it has been for a long time. Several are priced at financial crisis levels. How much fun will be had by unit holders in SKAGEN Kon-tiki remains to a large extent in the hands of western politicians in the short term. unfortunately. In the longer term, however, we are confident that the strong value creation in the emerging markets will be reflected in the share prices of companies with significant exposure to these markets.
Photo: bloomberg
Safe chinese mobile haven: With the iphone very likely to be on the menu next year, as well as several other smart phones, the future looks bright for China Mobile. We added to our position substantially in what turned out to be a safe Chinese haven this quarter.
Read more about the fund on page 34

SKAGeNFuNdS.cOm/SKAGeN-KON-tiKi
Photo: bloomberg
28
Greece defaults, the eurozone endures

Safe haven interest rates are now at record lows, weighed down by fears of what will happen next in the eurozone. At the recent annual meeting of the International Monetary Fund, the political leadership of the eurozone was told in no uncertain terms that it will have to come up with a viable plan to get the sovereign debt problems under control as soon as possible. According to reports in the press, the International Monetary Fund has decided to not provide Greece with additional funding, beyond what they will receive at the end of october. this means that the Mediterranean country will be on course for a default by the end of this year. the other eurozone countries now have to make sure that the ripple effects on other sovereigns and banks are as small as possible.
Greece must not drop the euro
SK y hiGh iNtereSt rAteS iN Greece
Interest rate spread on 10-year bonds to Germany 22,5 20,0 17,5 Percentage points 15,0 12,5 10,0 7,5 5,0 2,5 0,0 j m m j s 2007 n j m m j s 2008 n j m m j s 2009 n j m m j s 2010 n j m m j 2011 s
Spain Italy Ireland Portugal Greece
22,5 20,0 17,5 Percentage points 15,0 12,5 10,0 7,5 5,0 2,5 0,0
Source: Marcobond
the price of default: Everyone now expects Greece to default on its debt, the question is when and by how much. the interest rate spread to Germany has reached new heights while for the other highly indebted countries in Southern Europe the spread has stabilised somewhat, at a relatively high level.
A two trillion euro rescue package?
the most important item on the to-do list is to make sure that Greece does not relinquish the euro. Such an exit could lead to a mass exodus of deposits from banks in other weak euro countries and would be extremely problematic for the European Central Bank (ECB), which would have to act extremely rapidly and with enormous amounts of liquidity loans. If Greece steps out of the eurozone, it is not inconceivable that a currency curtain will descend over the region. only through capital controls would the weaker member states of the Eurozone be able to lock in euro deposits if Greece were to bid adieu. to prevent Greece from relinquishing the euro, other countries will probably use some of the capital in the rescue fund EFSF, which is in the process of being built, to help the Greeks after they have defaulted on their debt. Greek banks will have to be recapitalised and the authorities in Athens need to borrow more to cover a primary deficit until at least the end of 2012. It probably helps that Greece cannot get rid of the euro without at the same time exiting the European union. this is something the Greeks will likely want to avoid. Exiting the European union would mean losing their annual subsidies. Also, Greece would end up with a relationship to the Eu similar as that of its arch rival turkey.
In addition to aiding Greek banks and authorities, European leaders must also have a plan for helping other euro countries and a banking system that is loaded with government bonds. to achieve all of this, a great deal of money is needed. perhaps as much as two trillion euros. there are various ways a rescue operation could be conducted. Most of the plans boil down to pooling the 440 billion euros from the EFSF with about 1.5 trillion euros from the ECB. the central banks contribution may come in the form of a credit line to the EFSF, which could be given bank status. the money would be used to recapitalize banks after a Greek default and to buy sovereign bonds in the second hand market. the latter is necessary to prevent interest costs from increasing as the sovereign debt is refinanced.
Fiscal union
using the ECB is but a temporary solution. As well as giving the ECB the green light, politicians must therefore also formulate a vision of a political and fiscal union that voters can consider. Many people do not believe that the Germans and other rich northern European countries would want a fiscal union with the southern European nations. Even though a popular revolt cannot be ruled out, I think the electorate will end up voting for more political and economic integration. If political leaders play their cards right, there need not be a financial crisis in the eurozone. And if this turns out to be the case, safe haven interest rates are set to rebound over the coming quarters.
Even for the ECB 1.5 trillion euros is a lot of money, though it is not technically difficult to cough up this amount. And the bank can do so without stepping outside its mandate of keeping inflation at two percent. Still, the ECB cannot offer EFSF a credit without taking a risk. If more countries than Greece default the ECB could end up with massive losses. the central bank will then have to recapitalize itself over time or ask the member nations to pay in more capital. Either way, the ECB will facilitate a fiscal transfer between the euro countries.
Fixed iNcOme
torgeir hien Portfolio manager SKAGEN Tellus th skagenfunds.com
29
SKAGeN tellus
SKAGEN tellus Barclays Capital Index

*As of 30 September 2011
2.29% 8.59%
-3.19% 4.43%
SKAGeN tellus
Portfolio manager torgeir hien
how wrong one can be
In absolute terms SKAGEN tellus performed passably in the third quarter, but we are far from satisfied with our performance relative to the benchmark index. We must acknowledge that the quarter took an unforeseen turn. We did not predict the dramatic drop in the yields for long, secure government bonds. on the contrary, we were positioned for higher uS, German
and British interest rates and had low duration on investments in these markets. that is how wrong one can be. What we did not foresee primarily was the marked weakening of many leading indicators in July and August. According to some economists and many investors, these give warning of a new recession in developed countries. this came on top of the problems faced by central government finances in the eurozone, and scattered signs of a slowdown in growth in certain emerging economies. to sum up, this combination led to record low long rates for government bonds in Germany, the uK and the uS. there is only one scenario that could justify a further drop in interest rates: if the West develops a strong variant of the Japan syndrome with deflation. And if the market expects deflation to last for a long time. We do not believe this will be the case. We believe that authorities would as a last resort would be willing to finance deficits in the government budget with direct borrowing in the central bank, in order to avoid inflation
falling below the target of around two percent. the fact that it is possible for such policy instruments to be adopted and that central government finances are already dysfunctional makes us more worried about the price pressure being too high than the reverse. And that should push up long nominal interest rates in the large countries of the developed world. Long real rates are currently negative. If the unrest in the eurozone does not escalate into a new financial crisis, with an ensuing deep recession (which we do not believe as we outlined on page 28), negative real interest rates cannot be explained by the fundamental conditions. SKAGEN tellus only takes interest rate risk in emerging markets countries at present. there are some countries in this region that enjoy pretty good central government finances, inflation that is under control and an attractive level on the long interest rates. We also take currency risk where we believe the currencies to be undervalued relative to the euro fundamentally speaking.
30
S e c u r i t i e S P O r t F O l i O S K A G e N v e K S t A S O F 3 0 - 0 9 -2 011
hiStOricAl Price develOPmeNt SK AGeN veKSt (eur)

320 1 60 NAV SKAGEN Vekst 80 40 20 10 94 95 96 97 98 99 00 01
Acquistion value NOK *
SKAGEN Vekst Benchmark Index (EUR) 20 % annual return
SKAGeN veKSt
Handpicked for you* 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.
02
03
market price
04
currency
05
06
07
08
unrealised gain/loss *
09
10
Share of fund
11
Stockexchange
Security
Number
marketvalue NOK*
risk
Standard & poors qualitative rating Morningstar quantitative rating Morningstar qualitative rating
eNerGy Solstad offshore ASA doF ASA petroleo Brasileiro pref Adr Bonheur ASA Ganger rolf ASA tGS Nopec Geophysical Co ASA transocean Ltd Sevan drilling ASA Siem offshore Eidesvik offshore ASA Marine Accurate Well ASA Bp plc Adr Gazprom oao Adr Seabird Exploration Ltd 07/12 Frn Call Northern offshore Ltd Fred olsen production ASA Spectrum ASA Norwegian Energy Co ASA North Atlantic drilling Ltd Bp plc Electromagnetic Geoservices Minor items Sum energy rAw mAteriAlS Norsk Hydro ASA Koza Altin Isletmeleri AS Hindalco Industries Ltd rottneros AB Akzo Nobel Agrinos AS Norske Skogindustrier ASA Crew Gold Corp 09/12 7,30 % uSd Minor items total raw materials iNduStriAlS Kongsberg Gruppen ASA_ Wilh. Wilhelmsen Holding ASA A-Aksjer Stolt-Nielsen Limited Norwegian Air Shuttle ASA dockwise Ltd LG Corp Aveng Ltd Glamox ASA odfjell SE-A Kverneland ASA I.M. Skaugen SE Golar Lng Ltd. Fairstar Heavy transport NV Goodtech ASA A p Moller - Maersk A LG Corp pref rederi AB transatlantic Kongsberg Automotive ASA ttS Konv. 8 % 01/16 Fairstar Heavy transport NV 10/13 Minor items total industrials cONSumer diScretiONAry Carnival Corp Hurtigruten ASA LG Electronics Inc pref dixons retail plc Mahindra & Mahindra Ltd Gdr royal Caribbean Cruises Ltd
1 933 850 5 662 873 1 159 165 1 192 594 1 273 817 1 105 867 346 900 17 599 671 8 036 317 1 682 641 68 697 076 169 770 574 000 43 217 388 2 940 000 3 000 000 1 785 000 4 852 074 2 395 000 542 377 1 615 079
94 955 107 649 119 582 88 117 130 405 83 309 153 117 140 651 68 365 64 221 52 050 53 774 33 834 12 067 28 386 18 735 15 666 76 949 23 915 34 566 16 393 212 165 1 628 870
84,00 27,00 21,24 119,00 104,00 110,30 49,03 3,86 8,42 32,80 0,60 36,54 9,69 70,00 9,86 7,97 12,40 4,10 8,20 3,88 11,35
NoK NoK uSd NoK NoK NoK uSd NoK NoK NoK NoK uSd uSd NoK NoK NoK NoK NoK NoK GBp NoK
162 443 152 898 143 783 141 919 132 477 121 977 99 329 67 935 67 666 55 191 41 218 36 228 32 482 30 892 28 988 23 910 22 134 19 894 19 639 19 249 18 331 56 457 1 495 040
67 488 45 249 24 202 53 801 2 072 38 668 -53 788 -72 716 -699 -9 030 -10 832 -17 546 -1 352 18 825 602 5 175 6 468 -57 055 -4 276 -15 317 1 938 -155 708 -133 830
2,28 % 2,14 % 2,01 % 1,99 % 1,86 % 1,71 % 1,39 % 0,95 % 0,95 % 0,77 % 0,58 % 0,51 % 0,46 % 0,43 % 0,41 % 0,34 % 0,31 % 0,28 % 0,28 % 0,27 % 0,26 % 0,79 % 20,95 %
oslo Brs oslo Brs New York oslo Brs oslo Brs oslo Brs New York oslo Brs oslo Brs oslo Brs unotert New York London Int. unotert oslo Brs oslo Brs oslo Axess oslo Brs unotert London oslo Brs
Fund start date return since start Average annual return Assets under management Number of unitholders Subscription fee redemption fee Management fee
1 december 1993 1071.9% 14.8% Eur 908 million
5 526 510 643 750 1 950 673 12 204 585 110 000 708 700 5 970 000 3 447 963
138 879 46 209 46 052 60 163 27 907 17 877 345 541 18 332 44 745 745 704
27,07 22,20 131,45 2,90 33,32 38,00 4,21 98,00
NoK trY INr SEK Eur NoK NoK uSd
149 603 45 002 30 589 30 247 28 812 26 931 25 134 19 733 44 008 400 057
10 724 -1 208 -15 463 -29 916 905 9 054 -320 407 1 401 -737 -345 647
2,10 % oslo Brs 0,63 % Istanbul 0,43 % National India 0,42 % Stockholm 0,40 % Amsterdam 0,38 % unotert 0,35 % oslo Brs 0,28 % oslo Brs 0,62 % 5,61 %
99 211 0% 0% 1.0 % per year + 10 % of return exceeding 6% per year one-time subscription Eur 150 Norway, Sweden, denmark, Finland, Netherlands, Luxembourg, Iceland, uK and Switzerland oSEBX/MSCI AC (50/50) Yes Beate Bredesen ole Seberg
Minimum subscription amount Authorised for marketing in
Benchmark index
uCIts portfolio managers
3 275 767 1 315 811 926 602 1 504 738 1 032 808 233 515 2 575 700 5 944 034 1 664 725 9 892 635 1 485 661 186 611 4 414 585 21 168 416 811 224 482 1 877 633 10 125 644 19 000 000 19 000 000
136 060 93 970 114 905 83 483 173 152 46 418 75 193 5 852 74 526 54 646 18 627 30 307 46 670 48 135 38 033 25 796 44 573 72 716 18 620 19 000 188 293 1 408 975
102,50 124,50 109,00 61,50 74,00 60 400,00 34,51 10,00 34,20 4,60 28,80 193,50 7,50 1,40 31 420,00 23 300,00 15,70 2,46 106,50 100,00
NoK NoK NoK NoK NoK KrW ZAr NoK NoK NoK NoK NoK NoK NoK dKK KrW SEK NoK NoK NoK
335 766 163 818 101 000 92 541 76 428 69 348 64 799 59 440 56 934 45 506 42 787 36 109 33 109 29 636 26 909 25 717 25 192 24 909 20 539 19 275 83 196 1 432 959
199 707 69 849 -13 905 9 059 -96 724 22 930 -10 394 53 588 -17 592 -9 140 24 160 5 802 -13 561 -18 499 -11 124 -79 -19 381 -47 807 1 919 275 -105 098 23 983
4,71 % oslo Brs 2,30 % oslo Brs 1,42 % oslo Brs 1,30 % oslo Brs 1,07 % oslo Brs 0,97 % Seoul 0,91 % Johannesburg 0,83 % unotert oslo Brs 0,80 % 0,64 % oslo Brs 0,60 % oslo Brs 0,51 % oslo Brs 0,46 % oslo Brs 0,42 % oslo Brs 0,38 % Kbenhavn 0,36 % Seoul 0,35 % Stockholm 0,35 % oslo Brs 0,29 % oslo Brs 0,27 % unotert 1,17 % 20,08 %
865 553 30 296 503 600 000 57 626 905 591 300 394 333
214 722 108 946 144 988 284 228 10 523 52 878
31,22 3,20 24 700,00 0,12 16,57 22,11
uSd NoK KrW GBp uSd uSd
157 810 96 949 72 867 60 591 57 219 50 917
-56 912 -11 997 -72 121 -223 636 46 696 -1 962
2,21 % 1,36 % 1,02 % 0,85 % 0,80 % 0,71 %
New York oslo Brs Seoul London London Int. New York
S e c u r i t i e S P O r t F O l i O S K A G e N v e K S t A S O F 3 0 - 0 9 -2 011
Acquistion value NOK * market price currency marketvalue NOK* unrealised gain/loss * Share of fund Stockexchange
31
Security
Number
renault SA NHSt Media Group ASA Fjord Line AS Benetton Group Spa Continental AG Minor items total consumer discretionary
190 000 60 000 2 850 000 799 687 73 000
57 453 31 447 28 500 31 837 30 616 31 214 1 027 351
25,07 620,00 10,00 4,30 43,64
Eur NoK NoK Eur Eur
37 438 37 200 28 500 27 027 25 039 19 945 671 502
-20 015 5 753 0 -4 810 -5 577 -11 269 -355 849
0,52 % 0,52 % 0,40 % 0,38 % 0,35 % 0,28 % 9,41 %
paris unotert unotert BrsaItaliana Xetra
cONSumer StAPleS Morpol ASA Cermaq ASA Winn-dixie Stores Inc Kesko oyj B Chiquita Brands Intl Austevoll Seafood ASA people's Food Holding Ltd Yazicilar Holding AS royal unibrew A/S Minor items total consumer Staples heAlth cAre teva pharmaceutical-Sp Adr Axis-Shield plc GBp Algeta ASA Clavis pharma ASA Axis-Shield plc photocure ASA Medi-Stim ASA Karolinska development AB origio A/S Aska pharmaceutical Co Ltd Minor items total health care FiNANciAlS Gjensidige Forsikring ASA olav thon Eiendomsselskap ASA_ Hannover rueckversicherung AG Northern Logistic property ASA danske Bank A/S Korean reinsurance Co Sparebanken st Hitecvision AS Sparebanken Vest Norwegian Finans Holding ASA Haci omer Sabanci Holding AS Irsa Sa Adr Imarex ASA Minor items total Financials iNFOrmAtiON techNOlOGy Samsung Electronics Co Ltd pref Gdr Samsung Electronics Co Ltd Gdr Eltek ASA proact It Group AB Q-Free ASA Corning Inc EdB Ergogroup ASA Samsung SdI Co Ltd Minor items total information technology telecOm France telecom SA telekomunikasi Indonesia tbk Adr Sistema Jsfc Gdr Mobile telesystems Adr Indosat tbk pt Adr Minor items total telecom utilitieS Centrais Eletricas Brasileiras SA pref Centrais Eletricas Brasileiras SA total utilities
total equity portfolio* disposable liquidity total share capital Base price as of 30.09.2011
8 407 150 1 569 045 2 480 270 399 811 1 119 523 1 602 716 7 876 100 750 000 65 365
175 896 66 195 102 575 104 404 91 964 55 063 20 276 25 622 18 407 161 051 821 453
12,55 63,00 6,14 23,14 8,53 20,50 0,65 9,42 284,00
NoK NoK uSd Eur uSd NoK SGd trY dKK
105 510 98 850 88 936 72 715 55 769 32 856 22 980 22 247 19 603 69 798 589 263
-70 386 32 655 -13 639 -31 689 -36 195 -22 208 2 704 -3 376 1 196 -91 252 -232 190
1,48 % 1,39 % 1,25 % 1,02 % 0,78 % 0,46 % 0,32 % 0,31 % 0,27 % 0,98 % 8,26 %
oslo Brs oslo Brs NASdAQ Helsinki New York oslo Brs Singapore Istanbul Kbenhavn
SKAGeN veKSt
Handpicked for you*
SectOr diStributiON
Utilities 2,7% Cash 1,2% IT 7,8% Telecom 4,3%
Energy 21,0%
719 787 1 614 221 256 000 1 199 727 972 698 1 114 401 1 611 000 1 234 600 1 550 000 428 200
217 973 47 435 25 537 39 604 24 698 44 890 20 130 43 031 24 276 18 063 28 786 534 424
37,70 4,55 174,00 36,00 42,00 36,50 20,40 25,80 13,90 650,00
uSd GBp NoK NoK NoK NoK NoK SEK NoK JpY
158 469 67 168 44 544 43 190 40 853 40 676 32 864 27 221 21 545 21 104 10 230 507 864
-59 504 19 733 19 007 3 586 16 155 -4 214 12 735 -15 810 -2 731 3 041 -18 556 -26 560
2,22 % 0,94 % 0,62 % 0,61 % 0,57 % 0,57 % 0,46 % 0,38 % 0,30 % 0,30 % 0,14 % 7,12 %
NASdAQ London oslo Brs oslo Brs oslo Brs oslo Brs oslo Brs Stockholm oslo Brs tokyo
Finance 12,6%
Raw Materials 5,6%
Health 7,1%
Consumer Staples 8,3% Consumer Discretionary 9,4%
Industrials 20,1%
GeOGr APhicAl diStributiON

Asia ex Japan 10,4% Cash 1,2% South-America 5,2% Peripheral EU 5,3% Oceania 0,2%
2 803 106 180 025 377 500 2 727 689 741 784 839 743 1 500 000 762 746 995 506 14 900 000 1 501 444 397 502 1 026 100
165 215 33 834 76 076 82 480 83 171 10 129 26 586 5 183 45 056 29 215 23 339 31 351 26 717 82 862 721 215
61,10 810,00 34,04 24,90 78,55 13 700,00 33,50 61,00 36,00 2,10 6,50 8,74 18,20
NoK NoK Eur NoK dKK KrW NoK NoK NoK NoK trY uSd NoK
171 270 145 820 100 998 67 919 61 530 56 565 50 250 46 528 35 838 31 290 30 731 20 289 18 675 62 420 900 123
6 055 111 986 24 922 -14 561 -21 641 46 436 23 664 41 344 -9 218 2 075 7 392 -11 062 -8 042 -20 443 178 908
2,40 % 2,04 % 1,42 % 0,95 % 0,86 % 0,79 % 0,70 % 0,65 % 0,50 % 0,44 % 0,43 % 0,28 % 0,26 % 0,87 % 12,61 %
oslo Brs oslo Brs Frankfurt oslo Brs Kbenhavn Seoul oslo Brs unotert oslo Brs unotert Istanbul New York oslo Brs
EMEA 4,1% Japan 0,5% Eurozone 6,7%
North America 8,7%
Norway 57,7%
10 L ArGESt HoLdINGS
Kongsberg Gruppen AS 4.7% 3.7% 2.7% 2.4% 2.3% 2.3% 2.2% 2.2% 2.1% 2.1% 26.8%
116 936 50 000 17 038 235 458 101 2 900 000 450 000 2 544 240 40 000
92 728 239,20 19 712 354,90 91 536 3,09 15 214 129,00 39 742 16,10 40 651 12,63 30 957 8,99 16 815 116 000,00 119 816 467 170
uSd uSd NoK SEK NoK uSd NoK KrW
163 350 103 630 52 648 50 502 46 690 33 191 22 873 22 814 62 743 558 441
70 622 83 918 -38 887 35 288 6 948 -7 459 -8 084 5 999 -57 073 91 271
2,29 % 1,45 % 0,74 % 0,71 % 0,65 % 0,47 % 0,32 % 0,32 % 0,88 % 7,83 %
London Int. London Int. oslo Brs Stockholm oslo Brs New York oslo Brs Seoul
Samsung Electronics Co Ltd Eletrobras SA Gjensidige Forsikring ASA Wilh Wilhelmsen Holding ASA Solstad offshore ASA teva pharmaceutical Industries
1 290 000 265 000 573 709 645 000 200 000
164 896 14 762 19 190 41 051 33 265 7 842 281 005
12,30 33,30 14,00 12,38 28,42
Eur uSd uSd uSd uSd
124 710 51 535 46 906 46 633 33 194 1 553 304 531
-40 186 36 773 27 716 5 582 -70 -6 289 23 526
1,75 % 0,72 % 0,66 % 0,65 % 0,47 % 0,02 % 4,27 %
paris New York London Int. New York New York
Carnival Corp doF ASA petroleo Brasileiro SA totAL 10 LArGESt HoLdINGS
2 610 818 357 348
126 051 29 055 155 107 7 791 274
21,23 15,92
BrL BrL
174 985 17 960 192 945 7 052 726 83 182 7 135 908
48 934 -11 095 37 839 -738 548
2,45 % 0,25 % 2,70 % 98,83 % 1,17 % 100,00 %
Sao paulo Sao paulo
1 102,6237
* 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.
* Figures in 1000 NoK the market value as of 30.09.2011 is the last quoted price from the stock exchange. the average cost method is used for the calculation of sales gain.
32
S e c u r i t i e S P O r t F O l i O S K A G e N G l O b A l A S O F 3 0 - 0 9 -2 011
hiStOricAl Price develOPmeNt SK AGeN GlObAl (eur)

240 160 NAV SKAGEN Global 80
40
SKAGEN Global World Index 20 % annual return
SKAGeN GlObAl
A world of opportunities*
20 10 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
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.
risk
Security
Number
market price
currency
marketvalue NOK*
Share of Stockfund exchange
eNerGy Gazprom oao Adr petroleo Brasileiro pref Adr oMV AG Ensco plc - Adr Baker Hughes Inc Kazmunaigas Exploration Gdr Nabors Industries Ltd transocean Ltd Weatherford Intl Ltd Bp plc Bp plc Adr Noble Corp Minor items total energy rAw mAteriAlS
Svenska Cellulosa AB-B Akzo Nobel Cliffs Natural resources Inc ternium Sa Adr Heidelbergcement AG Norsk Hydro ASA Mayr-Melnhof Karton AG KWS Saat AG Fibria Celulose Sa Adr upM-Kymmene oyj Minor items total raw materials
9 888 228 3 396 473 2 060 500 1 358 901 1 173 577 2 939 017 3 213 981 807 266 2 702 295 4 521 520 611 888 504 593
751 702 606 992 444 471 388 985 326 308 399 749 452 383 384 200 256 458 230 919 187 482 112 718 56 111 4 598 478
9,69 21,05 22,48 40,19 46,27 14,66 12,50 48,81 12,31 3,85 36,10 29,83
uSd uSd Eur uSd uSd uSd uSd uSd uSd GBp uSd uSd
561 808 419 205 364 856 320 222 318 388 252 628 235 559 231 032 195 046 159 066 129 516 88 255 35 737 3 311 318
-189 894 -187 788 -79 615 -68 762 -7 920 -147 121 -216 824 -153 169 -61 412 -71 853 -57 965 -24 463 -20 373 -1 287 159
1,90 % 1,42 % 1,24 % 1,08 % 1,08 % 0,86 % 0,80 % 0,78 % 0,66 % 0,54 % 0,44 % 0,30 % 0,12 % 11,22 %
London Int. New York Wien New York New York London Int. New York New York New York London New York New York
7 868 731 1 826 818 1 374 717 2 784 382 1 269 281 9 761 378 449 032 112 887 1 818 732 1 208 255
622 840 555 599 354 175 442 771 400 541 288 436 202 663 74 042 158 859 81 338 4 565 3 185 829
84,00 33,44 52,11 20,84 27,20 26,92 66,55 140,25 7,81 8,49
SEK Eur uSd uSd Eur NoK Eur Eur uSd Eur
564 886 481 080 420 030 340 230 271 933 262 776 235 332 124 682 83 285 80 831 5 2 865 071
-57 954 -74 518 65 855 -102 541 -128 608 -25 660 32 669 50 640 -75 575 -507 -4 560 -320 759
1,91 % 1,63 % 1,42 % 1,15 % 0,92 % 0,89 % 0,80 % 0,42 % 0,28 % 0,27 % 0,00 % 9,70 %
Stockholm Amsterdam New York New York Xetra oslo Brs Wien Frankfurt New York Helsinki
Standard & poors qualitative rating Morningstar quantitative rating Morningstar qualitative rating Wassum Lipper Europe 2011 Best Fund 10 Years Equity Global Fund start date return since start Average annual return Assets under management Number of unitholders Subscription fee redemption fee Management fee 7 August 1997 614.1% 14.9% Eur 3749 million
103 579 0% 0% 1.0 % per years + 10 % of return exceeding the benchmark index one-time subscription Eur 150 Norway, Sweden, denmark, Finland, Netherlands, Luxembourg, Iceland, uK and Switzerland MSCI AC Yes Kristian Falnes torkell Eide Sren Christensen
iNduStriAlS tyco International Ltd LG Corp Bunge Ltd Siemens AG randstad Holding NV tE Connectivity Ltd Stolt-Nielsen Limited Baywa-Bayerische Warenvermit AG Schneider Electric SA Finnair oyj China railway Construction Minor items total industrials cONSumer diScretiONAry toyota Industries Corp Comcast Corp renault SA Hyundai Motor pref (2pb) time Warner Cable Yamaha Motor Co Ltd television Broadcasts Ltd LG Electronics Inc pref dixons retail plc Minor items total consumer discretionary
6 380 852 1 973 017 1 707 618 923 819 1 979 277 1 836 119 1 833 500 746 155 392 632 4 850 820 29 738 360
1 318 829 508 947 556 474 541 363 493 813 286 987 330 914 222 834 168 471 263 459 133 127 62 629 4 887 846
41,50 60 400,00 58,97 67,25 23,95 28,35 109,00 29,30 40,42 2,91 3,31
uSd KrW uSd Eur Eur uSd NoK Eur Eur Eur HKd
1 552 646 591 811 590 429 489 255 373 309 305 211 199 852 172 168 124 979 111 164 74 136 54 843 4 639 803
233 818 82 864 33 955 -52 108 -120 504 18 223 -131 063 -50 666 -43 492 -152 295 -58 991 -7 786 -248 044
5,26 % 2,00 % 2,00 % 1,66 % 1,26 % 1,03 % 0,68 % 0,58 % 0,42 % 0,38 % 0,25 % 0,19 % 15,72 %
New York Seoul New York Frankfurt Amsterdam New York oslo Brs Frankfurt paris Helsinki Hong Kong
3 030 021 4 236 789 1 182 627 541 808 440 923 1 933 311 4 565 862 981 448 76 917 014
504 327 416 985 334 805 151 335 118 829 157 527 110 528 264 303 107 451 32 863 2 198 953
2 280,00 20,98 24,84 68 300,00 62,95 1 036,00 42,80 24 700,00 0,12
JpY uSd Eur KrW uSd JpY HKd KrW GBp
525 491 521 180 231 389 183 773 162 744 152 351 147 180 120 387 81 237 70 712 2 196 445
21 164 104 195 -103 416 32 438 43 915 -5 176 36 652 -143 916 -26 214 37 849 -2 509
1,78 % 1,77 % 0,78 % 0,62 % 0,55 % 0,52 % 0,50 % 0,41 % 0,28 % 0,24 % 7,44 %
tokyo NASdAQ paris Seoul New York tokyo Hong Kong Seoul London
Benchmark index uCIts portfolio managers
S e c u r i t i e S P O r t F O l i O S K A G e N G l O b A l A S O F 3 0 - 0 9 -2 011
33
currency marketvalue NOK* unrealised gain/loss * Share of Stockfund exchange
Security
Number
market price
cONSumer StAPleS tesco plc unilever NV-Cva Yazicilar Holding AS united Intl Enterprises Chiquita Brands Intl royal unibrew A/S Minor items total consumer Staples heAlth cAre pfizer Inc roche Holding AG-Genusschein teva pharmaceutical-Sp Adr Minor items total health care FiNANciAlS Citigroup Inc Gjensidige Forsikring ASA Goldman Sachs Group Inc Hannover rueckversicherung AG Banco do Estado rio Grande do Sul pref osaka Securities Exchange Co Cheung Kong Holdings Ltd Haci omer Sabanci Holding AS Kinnevik Investment AB-B Asya Katilim Bankasi AS Aberdeen Asset Management plc EFG-Hermes Holding SAE Japan Securities Finance Co Albaraka turk Katilim Bankasi AS Industrial Bank of Korea Irsa Sa Adr Minor items total Financials iNFOrmAtiON techNOlOGy Samsung Electronics Co Ltd pref oracle Corp Kyocera Corp Microsoft Corp Samsung Electronics Co Ltd pref Gdr Yahoo! Inc Samsung Electronics Co Ltd Gdr Minor items total information technology telecOm Vimpelcom Ltd-Spon Adr total Access telecommunication plc_ China Mobile Ltd China Mobile Ltd Adr telecom Italia Spa Indosat tbk pt Adr Minor items total telecom utilitieS Centrais Eletricas Brasileiras SA pref Centrais Eletricas Brasileiras SA total utilities
22 815 830 3 916 911 3 965 257 172 931 1 531 278 253 219
826 588 678 785 95 714 25 545 114 921 61 811 68 781 1 872 146
3,77 23,58 9,42 606,00 8,52 284,00
GBp Eur trY dKK uSd dKK
785 769 727 504 117 761 110 901 76 496 76 103 69 102 1 963 637
-40 819 48 720 22 047 85 356 -38 425 14 292 321 91 491
2,66 % 2,46 % 0,40 % 0,38 % 0,26 % 0,26 % 0,23 % 6,65 %
London Amsterdam Istanbul Kbenhavn New York Kbenhavn
SKAGeN GlObAl
New York Zrich NASdAQ
8 181 129 479 833 1 668 450
956 742 417 775 352 950 29 944 1 757 410
17,83 146,90 37,43
uSd CHF uSd
855 284 455 363 366 128 4 196 1 680 971
-101 457 37 588 13 178 -25 748 -76 439
2,90 % 1,54 % 1,24 % 0,01 % 5,69 %
A world of opportunities*
SectOr diStributiON
Utilities 3,8% Telecom 7,9% IT 14,3%
6 319 820 8 617 774 883 683 1 563 931 8 470 677 10 044 3 780 674 11 319 870 2 020 777 29 208 168 10 859 589 8 765 309 4 207 375 19 059 400 1 449 755 1 815 671
1 523 253 509 598 640 977 330 375
26,21 60,65 96,05 33,86
uSd NoK uSd Eur BrL JpY HKd trY SEK trY GBp EGp JpY trY KrW uSd
971 405 522 668 497 668 417 085 411 949 272 747 243 739 231 972 220 539 178 643 171 150 145 601 127 053 112 966 100 795 93 045 87 262 4 806 288
-551 848 13 070 -143 309 86 710 244 013 73 722 -40 041 18 116 122 216 -109 472 75 017 -60 543 -117 745 -100 130 -9 983 -58 593 -10 313 -569 111
3,29 % 1,77 % 1,69 % 1,41 % 1,40 % 0,92 % 0,83 % 0,79 % 0,75 % 0,61 % 0,58 % 0,49 % 0,43 % 0,38 % 0,34 % 0,32 % 0,30 % 16,28 %
New York oslo Brs New York Frankfurt Sao paulo tokyo Hong Kong Istanbul Stockholm Istanbul London Cairo tokyo Istanbul Seoul New York
Cash 1,3%
Energy 11,2% Raw Materials 9,7%
Finance 16,3%
167 936 15,39 199 025 357 000,00 283 780 85,60 213 856 6,50 98 323 127,70 288 115 1,94 96 133 1,72 206 143 16,90 244 798 397,00 213 096 1,88 110 778 14 000,00 151 638 8,74 97 575 5 375 399
Health 5,7%
Industrials 15,7%

South America 8,5% Cash 1,3% Asia ex Japan 18,4% Peripheral EU 9,4% North-Africa 0,7% Norway 3,4%
649 010 5 210 091 1 300 268 2 199 798 146 978 2 109 702 50 789
1 495 617 571 000,00 843 915 29,31 684 514 6 540,00 325 540 25,22 148 488 239,20 179 617 13,19 43 234 354,90 44 279 3 765 205
KrW uSd JpY uSd uSd uSd uSd
1 840 361 895 379 646 838 325 292 206 139 163 159 105 687 42 011 4 224 866
344 744 51 464 -37 676 -248 57 650 -16 458 62 453 -2 268 459 661
6,23 % 3,03 % 2,19 % 1,10 % 0,70 % 0,55 % 0,36 % 0,14 % 14,31 %
Seoul NASdAQ tokyo NASdAQ London Int. NASdAQ London Int.
EMEA 6,7% Japan 5,9% Eurozone 15,5%
North America 30,8%
10 246 104 34 207 181 7 150 200 1 386 102 33 123 547 921 819 840 780 105 735 414 448 379 877 217 165 137 600 129 667 2 225 272 9,36 74,00 77,10 49,45 0,73 28,64 uSd tHB HKd uSd Eur uSd 562 316 475 890 415 197 401 890 191 204 154 798 131 513 2 332 808 -278 464 370 156 749 22 013 -25 961 17 197 1 846 107 536 1,90 % 1,61 % 1,41 % 1,36 % 0,65 % 0,52 % 0,45 % 7,90 % New York Bangkok Hong Kong New York BrsaItaliana New York
Samsung Electronics Co Ltd tyco International Ltd Eletrobras SA Citigroup Inc oracle Corp
7.3% 5.3% 3.8% 3.3% 3.0% 2.9% 2.8% 2.7% 2.5% 2.3% 35.7%
11 295 481 7 122 805
698 456 594 014 1 292 471 31 159 009
21,22 15,93
BrL BrL
757 421 358 553 1 115 974 29 137 181 387 197 29 524 377
58 965 -235 461 -176 496 -2 021 828
2,57 % 1,21 % 3,78 % 98,69 % 1,31 % 100,00 %
Sao paulo Sao paulo
pfizer Inc China Mobile Ltd tesco pLC unilever NV Kyocera Corp totAL 10 LArGESt HoLdINGS
691,0955
* From the moor north of Skagen, 1885. detail. By p.S. Kryer, one of the Skagen painters. the picture is owned by the Skagens Museum.
34
S e c u r i t i e S P O r t F O l i O S K A G e N K O N -t i K i A S O F 3 0 - 0 9 -2 011
hiStOricAl Price develOPmeNt SK AGeN KON-tiKi (eur)

80 NAV SKAGEN Kon-Tiki SKAGEN Kon-Tiki Emerging Markets Index 20 % annual return
40
20
SKAGeN KON-tiKi
Leading the way in new waters* the SKAGeN Kon-tiki equity fund will invest at least 50 percent of its assets in emerging markets. these are markets that are not included in the mSci world index. Nevertheless, following on from our requirement 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.
risk
10
2003
2004
2005
2006
2007
2008
2009
2010
2011
Security
Number
market price
currency
marketvalue NOK*
Share of Stockfund exchange
eNerGy Baker Hughes Inc Gazprom oao Adr petroleo Brasileiro pref Adr Seadrill Ltd tullow oil plc Archer Ltd petrobras - petroleo Bras-pr Minor items total energy rAw mAteriAlS Vale Sa Spons Adr Vale SA-pref A Asia Cement China Holdings drdgold Ltd Adr Minor items total raw materials iNduStriAlS ABB Ltd
Aveng Ltd Harbin Electric Company Ltd AirAsia Bhd A p Moller - Maersk A Empresas ICA S.A.B Golar Lng Ltd. Bidvest Group Ltd Barloworld Ltd tekfen Holding AS Enka Insaat Ve Sanayi AS Norwegian Air Shuttle ASA LG Corp pref Minor items total industrials
6 178 535 18 685 821 5 943 178 3 735 841 2 300 551 8 945 064 3 000 000
1 763 321 1 288 960 1 026 138 346 223 145 026 248 260 231 861 315 994 5 365 784
46,27 9,69 21,05 163,60 12,92 21,73 19,24
uSd uSd uSd NoK GBp NoK BrL
1 676 219 1 061 651 733 528 611 184 271 562 194 376 182 395 216 209 4 947 125
-87 101 -227 309 -292 610 264 960 126 536 -53 884 -49 465 -99 785 -418 659
4,58 % 2,90 % 2,00 % 1,67 % 0,74 % 0,53 % 0,50 % 0,59 % 13,51 %
New York London Int. New York oslo Brs London oslo Brs Sao paulo
7 922 364 1 231 900 50 687 500 3 724 701
813 362 210 807 186 338 206 450 240 792 1 657 749
21,36 39,64 3,13 5,06
uSd BrL HKd uSd
992 090 154 311 119 489 110 417 128 807 1 505 113
178 728 -56 496 -66 850 -96 033 -111 986 -152 636
2,71 % 0,42 % 0,33 % 0,30 % 0,35 % 4,11 %
New York Sao paulo Hong Kong NASdAQ
Standard & poors qualitative rating Morningstar quantitative rating Morningstar qualitative rating Wassum Lipper Europe 2011, Best Fund 5 years Equity Emerging markets Fund start date return since start Average annual return Assets under management Number of unitholders Subscription fee redemption fee Management fee 5 April 2002 340.3% 16.9% Eur 4650 million
8 957 636 21 017 094 68 000 000 58 091 500 8 700 42 542 700 1 325 272 2 105 398 3 626 000 8 158 907 8 416 664 1 578 768 808 430
964 815 617 358 614 366 135 763 396 925 621 197 215 235 253 258 181 674 123 013 105 720 117 111 118 266 281 468 4 746 171
118,80 34,51 6,43 3,03 31 420,00 15,53 190,50 149,70 60,37 5,70 4,50 61,25 23 300,00
SEK ZAr HKd MYr dKK MXN NoK ZAr ZAr trY trY NoK KrW
909 467 528 671 329 307 323 432 289 277 280 231 252 464 229 733 159 557 146 618 119 408 96 700 93 544 140 857 3 899 266
-55 348 -88 687 -285 059 187 669 -107 648 -340 966 37 230 -23 525 -22 117 23 605 13 687 -20 412 -24 723 -140 611 -846 905
2,48 % 1,44 % 0,90 % 0,88 % 0,79 % 0,77 % 0,69 % 0,63 % 0,44 % 0,40 % 0,33 % 0,26 % 0,26 % 0,38 % 10,65 %
Stockholm Johannesburg Hong Kong Kuala Lumpur Kbenhavn Mexico oslo Brs Johannesburg Johannesburg Istanbul Istanbul oslo Brs Seoul
92 631 0% 0% 2 % per year plus/ minus variable management fee one-time subscription Eur 150 Norway, Sweden, denmark, Finland, Netherlands, Luxembourg, Iceland, uK and Switzerland MSCI Emerging Markets Index (NoK) Yes J. Kristoffer Stensrud Knut Harald Nilsson Cathrine Gether ross porter
cONSumer diScretiONAry Hyundai Motor pref (2pb) Hyundai Motor pref (1p) Mahindra & Mahindra Ltd Gdr Great Wall Motor Co Ltd LG Electronics Inc pref drB-Hicom Bhd Shangri-La Asia Ltd Minor items total consumer discretionary
3 559 600 3 248 610 7 610 378 105 000 000 3 150 000 54 368 600 12 268 213
565 753 517 372 136 574 190 465 850 969 205 041 110 167 300 901 2 877 242
68 300,00 65 000,00 16,57 9,02 24 700,00 1,74 15,02
KrW KrW uSd HKd KrW MYr HKd
1 207 362 1 048 640 739 392 713 308 386 387 173 830 138 782 202 604 4 610 305
641 608 531 268 602 818 522 843 -464 582 -31 211 28 615 -98 297 1 733 063
3,30 % Seoul 2,86 % Seoul 2,02 % London Int. 1,95 % Hong Kong 1,06 % Seoul 0,47 % Kuala Lumpur 0,38 % Hong Kong 0,55 % 12,59 %
Benchmark index
S e c u r i t i e S P O r t F O l i O S K A G e N K O N -t i K i A S O F 3 0 - 0 9 -2 011
Acquistion value NOK * currency marketvalue NOK* unrealised gain/loss * Share of Stockfund exchange
35
Security
Number
market price
cONSumer StAPleS
Shoprite Holdings Ltd Cosan Ltd-Class A Shares Kulim Malaysia Berhad Yazicilar Holding AS pZ Cussons plc royal unibrew A/S Heineken NV podravka prehrambena Ind dd Minor items total consumer Staples 6 722 590 8 195 211 67 500 400 9 654 470 8 730 032 489 758 513 375 406 584 320 674 411 829 213 083 239 354 146 457 82 208 146 165 111 935 218 850 1 890 554 113,50 9,68 3,36 9,42 3,30 284,00 33,24 258,00 ZAr uSd MYr trY GBp dKK Eur HrK 556 161 465 137 416 747 286 721 262 892 147 193 134 385 110 141 158 756 2 538 136 235 487 53 309 203 664 47 368 116 436 64 985 -11 780 -1 794 -60 094 647 581 Johannes1,52 % burg 1,27 % New York 1,14 % Kuala Lumpur 0,78 % Istanbul 0,72 % London 0,40 % Kbenhavn 0,37 % Amsterdam 0,30 % Zagreb 0,43 % 6,93 %
heAlth cAre richter Gedeon Nyrt Stada Arznemittel AG Hanmi pharm Co Ltd
China Shineway pharmaceutical Eis Eczacibasi Ilac Ve Sanayi Minor items total health care
SKAGeN KON-tiKi
Leading the way in new waters*
SectOr diStributiON
Utilities 5,5% Cash 2,0% Telecom 10,8% IT 10,2%
968 258 2 597 658 724 500 22 497 000 21 418 365
1 070 376 383 691 315 456 162 815 146 800 299 687 2 378 825
29 750,00 15,70 68 500,00 9,64 2,15
HuF Eur KrW HKd trY
772 712 321 172 246 459 163 336 145 180 156 548 1 805 407
-297 664 -62 519 -68 997 522 -1 620 -143 139 -573 417
2,11 % 0,88 % 0,67 % 0,45 % 0,40 % 0,43 % 4,93 %
Budapest Frankfurt Seoul Hong Kong Istanbul
FiNANciAlS Banco do Estado rio Grande do Sul pref Haci omer Sabanci Holding AS VtB Bank ojsc Gdr Standard Chartered plc
State Bank of India Korean reinsurance Co Kiwoom Securities Co Ltd Gjensidige Forsikring ASA JSE Limited Bangkok Bank public Co-Nvdr EFG-Hermes Holding SAE Ghana Commercial Bank Ltd Asya Katilim Bankasi AS Yapi Ve Kredi Bankasi AS Kiatnakin Bank pcl-Nvdr Hellenic Exchanges SA Holdings Nordnet AB Minor items total Financials
19 663 029 45 315 132 33 792 847 6 376 413 2 305 149 4 671 633 1 065 984 4 944 032 5 694 251 9 356 600 11 959 505 17 397 904 25 538 097 11 348 826 19 238 700 4 121 279 7 034 191
428 194 899 391 1 115 212 742 346 662 042 181 791 194 810 291 698 214 588 239 354 353 507 83 591 263 460 149 705 142 186 152 049 97 675 529 561 6 741 159
15,39 6,50 4,14 12,73 1 911,05 13 700,00 57 000,00 60,65 64,24 141,00 16,90 2,51 1,94 4,13 28,75 2,93 15,30
BrL trY uSd GBp INr KrW KrW NoK ZAr tHB EGp GHS trY trY tHB Eur SEK
956 260 928 618 819 900 741 909 527 579 317 837 301 746 299 856 266 631 248 025 198 659 159 804 156 196 147 768 103 985 95 095 91 978 486 144 6 847 990
528 066 29 228 -295 311 -438 -134 463 136 047 106 935 8 158 52 043 8 670 -154 847 76 213 -107 264 -1 936 -38 201 -56 954 -5 697 -43 416 106 831
2,61 % 2,54 % 2,24 % 2,03 % 1,44 % 0,87 % 0,82 % 0,82 % 0,73 % 0,68 % 0,54 % 0,44 % 0,43 % 0,40 % 0,28 % 0,26 % 0,25 % 1,33 % 18,70 %
Sao paulo Istanbul London Int. London National India Seoul Seoul oslo Brs Johannesburg Bangkok Cairo Ghana Istanbul Istanbul Bangkok Athen Stockholm
Energy 13,5% Raw Materials 4,1%
Finance 18,7%
Health 4,9%
Industrials 10,6%

Cash 2,0%
Asia ex Japan 39,5%
West Africa 2,0%

South America 16,0% Peripheral EU 6,5% North Africa 0,6% Norway 4,9% North America 4,6%
iNFOrmAtiON techNOlOGy Samsung Electronics Co Ltd pref Hon Hai precision Industry Samsung Electronics Co Ltd pref Gdr Softbank Corp
Naspers Ltd Minor items total information technology
555 556 65 100 000 508 034 2 000 000 693 976
1 372 545 1 485 100 499 019 443 593 163 835 224 066 4 188 157
571 000,00 69,20 239,20 2 292,00 350,97
KrW tWd uSd JpY ZAr
1 575 359 865 170 712 524 348 682 177 534 61 357 3 740 626
202 814 -619 931 213 506 -94 911 13 700 -162 709 -447 531
4,30 % 2,36 % 1,95 % 0,95 % 0,48 % 0,17 % 10,22 %
Seoul taipei London Int. tokyo Johannesburg
East Africa 0,1%

EMEA 21,4% Japan 1,0%
Eurozone 1,5%
telecOm China Mobile Ltd Adr Sistema Jsfc Gdr

Bharti Airtel Ltd Indosat tbk pt Adr total telecom
5 096 446 11 213 965 19 324 305 4 154 595
1 513 808 891 955 885 064 708 199 3 999 025
49,45 14,00 378,00 28,64
uSd uSd INr uSd
1 477 677 920 520 874 806 697 666 3 970 669
-36 131 28 565 -10 258 -10 533 -28 356
4,04 % 2,51 % 2,39 % 1,91 % 10,84 %
New York London Int. National India New York
Samsung Electronics Co Ltd Hyundai Motor Co Eletrobras SA 6.3% 6.2 % 5.5 % 4.6 % 4.0 % 3.1 % 2.9 % 2.6 % 2.5 % 2.5 % 40.2 %
utilitieS Centrais Eletricas Brasileiras SA pref Centrais Eletricas Brasileiras SA Minor items total utilities
27 751 563 2 250 451
2 061 154 174 691 58 627 2 294 472 36 139 136
21,22 15,93
BrL BrL
1 860 887 113 285 39 029 2 013 200 35 877 836 740 904 36 618 740
-200 267 -61 406 -19 598 -281 271 -261 301
5,08 % 0,31 % 0,11 % 5,50 % 97,98 % 2,02 % 100,00 %
Sao paulo Sao paulo
Baker Hughes Inc China Mobile Ltd Vale SA Gazprom oAo Banrisul Haci omer Sabanci Holding AS Sistema JSFC
453,1828
totAL 10 LArGESt HoLdINGS
* Skagen reefs lightship, 1892. detail. By Carl Locher, one of the Skagen painters. the picture is owned by the Skagens Museum.
36
S e c u r i t i e S P O r t F O l i O S K A G e N t e l l u S A S O F 3 0 - 0 9 -2 011
unrealised gain/loss ***
Face value ***
market value incl. accrued interest ***
cost price ***
market value ***
maturity
Security
SKAGeN telluS
A doorway to global interest rates*
SKAGeN tellus is an actively managed global bond fund investing in bonds issued by governments, regional authorities 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.
risk
GOverNmeNt bONdS Australian Government Canadian Government European Bank recon & dev Colombian Government danish Government Finnish Government Irish Government Slovakian Government Hong Kong Government Mexican Government polish Government taiwanese Government uS Government South African Government German Government uK Government Norwegian Government Swedish Government total bond Portfolio
disposable liquidity
15.04.2012 01.12.2011 17.06.2015 14.04.2021 15.11.2011 15.09.2012 18.10.2020 27.04.2020 07.12.2011 20.11.2036 25.10.2021 10.02.2012 31.12.2011 31.03.2036 23.11.2011 07.11.2011 21.03.2012 16.11.2011
5,75 1,25 0,50 7,75 6,00 4,25 5,00 4,00 0,00 10,00 5,75 0,21 1,00 6,25 0,00 0,00 0,00 0,00
4 000 5 000 31 300 5 000 000 21 000 4 000 5 000 4 000 50 000 40 000 15 000 150 000 10 500 50 000 8 000 4 000 30 000 48 000
23 388 27 548 28 362 17 419 22 484 31 472 33 604 31 075 38 627 21 226 26 434 28 376 57 168 29 714 61 618 35 732 29 393 40 756 584 396
47 737
573,67 563,05 90,61 0,33 106,31 813,76 665,95 771,28 75,10 52,79 175,52 19,09 586,46 53,32 786,10 911,29 99,17 85,15
601 116 41 544 1 164 55 0 0 0 0 1 427 39 154 0 0 0 0 0
22 947 28 152 28 359 16 324 22 326 32 550 33 298 30 851 37 548 21 116 26 328 28 634 61 578 26 660 62 888 36 452 29 752 40 872
23 547 28 269 28 401 16 868 23 490 32 605 33 298 30 851 37 548 21 116 27 756 28 673 61 733 26 660 62 888 36 452 29 752 40 872 590 777
49 585
-441 604 -3 -1 095 -158 1 078 -307 -224 -1 079 -110 -106 258 4 410 -3 054 1 270 719 359 116 2 241
1 847
3,68 % 4,41 % 4,44 % 2,63 % 3,67 % 5,09 % 5,20 % 4,82 % 5,86 % 3,30 % 4,33 % 4,48 % 9,64 % 4,16 % 9,82 % 5,69 % 4,65 % 6,38 % 92,26 %
7,74 %
4 141 586 637

2 49 584
tOtAl
Portfolio Key Figures
632 132
4 142 636 220
640 363
4 088 100,00 %
Effective underlying return Effective yield to clients* duration**
2,27 % 1,47 % 2,24
* Effective underlying return adjusted for managment fee. ** duration is a simplified expression of how much the price of the security will change if the interest rate changes by one percentage point. *** Figures in 1000 NoK
Morningstar Fund start date return since start Average annual return Assets under management Number of unitholders Subscription fee redemption fee Management fee Minimum subscription amount Authorised for marketing in
29 September 2006 29.5% 5.31% Eur 81 million
Effective interest is the average annual return of an interest bearing security until maturity. Securities are valued at market price as of 30.09.2011. 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 30.09.2011 103,5295
2 197 0% 0% 0,8 % per year one-time subscription Eur 150 Norway, Sweden, denmark, Finland, Netherlands, Luxembourg, Iceland, uK and Switzerland Barclays Capital Global treasury Index 3-5 years Yes torgeir Hien
Benchmark index
* Interior. Brndums annex, ca. 1920. detail. By Anna Ancher, one of the Skagen painters. the picture is owned by the Skagens Museum.
Share of fund
Accrued interest ***
coupon
market price
F i N A N c i A l S tAt e m e N t
37
Financial statement
AS OF 30.09.2011
income Statement
(all figures in NOK 1000)
SKAGeN vekst 01-01-2011 - 30-09-2011
SKAGeN Global 01-01-2011 - 30-09-2011
SKAGeN Kon-tiki SKAGeN Avkastning 01-01-2011 01-01-2011 - 30-09-2011 - 30-09-2011
SKAGeN hyrente 01-01-2011 - 30-09-2011
SKAGeN hyrente institusjon 01-01-2011 - 30-09-2011
SKAGeN tellus 01-01-2011 - 30-09-2011
SKAGeN Krona** 01-01-2011 - 30-09-2011
POrtFOliO reveNue ANd cOStS Interest income and costs dividends realised capital gain/loss Change unrealised gain/loss Guarantee commisssion Broker's fee Currency gain/loss POrtFOliO reSult mANAGemeNt reveNue ANd cOStS Commission from sale and redemption of units Management fee fixed Management fee variable* ASSet mANAGemeNt reSult reSult beFOre tAx
tax cost Net iNcOme FOr the PeriOd
2 756 203 315 659 774 -3 201 938 454 -4 810 1 236 -2 339 212
9 058 675 064 1 471 291 -6 970 032 -34 770 -42 824 -4 892 213
3 011 942 245 2 108 230 -11 925 179 -39 900 -12 535 -8 924 128
34 982 -10 724 -5 724 -12 12 566 31 087
97 577 -68 -6 247 -106 91 156
37 823 -324 -1 090 -65 36 345
7 840 -30 511 2 716 -24 -47 -20 026
5 249 166 -54 5 360
-70 374 -70 374 -2 409 587 -10 257 -2 419 843
-250 692 -250 692 -5 142 905 -69 452 -5 212 357
-679 133 -52 771 -731 904 -9 656 032 -92 095 -9 748 127
-4 922 -4 922 26 165 26 165
-7 212 -7 212 83 944 83 944
-1 679 -1 679 34 666 34 666
-4 408 -4 408 -24 433 -40 -24 474
-381 -381 4 979 4 979
balance sheet
ASSetS Norwegian securities at cost price Foreign securities at cost price unrealised capital gains/loss Accrued interest securities tOtAl SecuritieS POrtFOliO dividend receivable Accrued interest bank tOtAl Accrued iNcOme Accounts receivable - brokers Accounts receivable - management company tax receivable on dividends other receivables tOtAl Other receivAbleS Bank deposits tOtAl ASSetS equit y cAPitAl unit capital at par value premium PAid-iN equity cAPitAl retained earnings tOtAl equity cAPitAl debt Bank overdraft Accounts payable - brokers Accounts payable - management company other debt tOtAl Other debt tOtAl debt ANd equity cAPitAl
Number of units issued Base price per unit
SKAGeN vekst 30-09-2011
SKAGeN Global 30-09-2011
SKAGeN Kontiki SKAGeN Avkastning 30-09-2011 30-09-2011
SKAGeN hyrente 30-09-2011
SKAGeN hyrente institusjon 30-09-2011
SKAGeN tellus 30-09-2011
SKAGeN Krona 30-09-2011
4 323 374 3 466 429 -740 437 1 835 7 051 202 11 691 6 11 697 33 359 1 4 268 540 38 169 65 388 7 166 456
846 194 30 298 423 -2 000 188 29 144 430 98 632 222 98 855 79 403 2 27 053 106 458 374 844 29 724 587
1 594 401 34 455 742 -179 293 35 870 850 93 901 166 94 067 399 978 3 3 472 3 216 406 669 762 228 37 133 814
929 894 215 470 -4 989 8 970 1 149 344 1 1 125 113 1 274 458
3 162 632 -5 804 17 861 3 174 688 17 344 939 498 4 131 531
1 071 112 -1 306 4 739 1 074 546 571 074 1 645 620
29 393 555 003 1 907 7 417 593 720 2 2 80 661 1 1 078 81 740 54 763 730 225
377 282 -102 1 823 379 004 12 788 391 792
647 232 -609 306 37 926 7 097 499 7 135 424
4 265 103 18 205 379 22 470 482 7 063 862 29 534 344
8 051 158 20 197 078 28 248 236 8 324 004 36 572 240
970 309 333 569 1 303 878 -31 248 1 272 630
4 001 947 42 650 4 044 597 84 342 4 128 939
1 608 773 -97 1 608 675 34 362 1 643 038
618 376 52 547 670 923 -30 765 640 159
376 995 4 163 381 158 4 842 386 000
8 150 20 532 2 349 31 031 7 166 456 6 472 316,65 1102,6237
35 282 78 899 76 062 190 243 29 724 587 42 651 033,65 691,0955
31 913 263 946 265 714 561 574 37 133 814 80 511 578,14 453,1828
1 622 205 1 827 1 274 458 9 703 090,58 131,1602
2 592 2 592 4 131 531 40 019 474,63 103,1730
1 991 592 2 582 1 645 620 16 087 725,35 102,1232
88 602 1 335 130 90 066 730 225 6 183 763,05 103,5295
5 009 152 631 5 792 391 792 3 769 950,79 102,3878
Note: divergence in price relative to the portfolios is due to accruals divergence as of 30.09.2011. * Calculated variable management fee as of 30.09.11: pursuant to the regulations, the definitive statement shall take place as of 31.12.2011 based on value developments during the rest of the year. ** Figures in SEK 1000
38
returN ANd riSK me ASuremeNtS
return and risk measurements

returns in euro*
as of 30-09-2011 year to date 1 year 2 year 3 year 5 year 10 year Since start
NOtice
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 developments. 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 company. SKAGEN Kon-tiki has a fixed management fee of 2% pro anno. Better value development measured in percent in the funds net asset value compared with the MSCI Emerging Markets Index (in NoK) is shared 90/10 between the unit holders and the management 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 calculated daily and charged quarterly. please refer to the product sheets and prospectuses for a detailed description of the cost, etc. they are available upon request from SKAGEN Funds or at www.skagenfunds.com
SKAGEN Vekst oSEBX/MSCI AC total return Index (50/50) SKAGEN Global MSCI World Linked Index SKAGEN Kon-tiki MSCI Emerging Markets Index SKAGEN tellus Barclays Capital Global treasury Index 3 - 5 years
-25,2 % -17,3 % -15,6 % -13,3 % -21,4 % -22,1 % -3,19 % 4,43 %
-12,4 % -5,5 % -5,0 % -4,4 % -13,3 % -15,2 % -2,23 % 5,90 %
0,9 % 9,4 % 6,1 % 5,2 % 6,7 % 4,6 % 7,26 % 8,91 %
3,9 % 6,0 % 5,2 % 1,4 % 11,3 % 7,9 % 7,49 % 9,10 %
-1,1 % 0,3 % 1,2 % -3,4 % 7,7 % 3,6 % 5,31 % 6,29 %
12,7 % 9,7 % 12,5 % -0,2 %
14,8 % 8,6 % 14,9 % 0,6 % 16,9 % 7,8 % 5,31 % 6,29 %
risk and performance measurements

as of 30-09-2011 SKAGeN vekst SKAGeN Global SKAGeN Kon-tiki SKAGeN tellus
meAN vAriANce ANAlySiS lASt 5 yeArS

Standard deviation, fund Standard deviation, benchmark index Sharpe-ratio, fund Sharpe-ratio, benhmark index relative volatility/tracking error Information ratio Correlation alfa beta
r2
25,5 % 31,6 % -0,14 -0,07 10,7 % -0,13 0,95 -1,9 % 0,77 91 %
19,7 % 15,6 % -0,07 -0,38 8,0 % 0,59 0,92 5,7 % 1,17 85 %
24,7 % 23,4 % 0,21 0,05 5,5 % 0,75 0,97 4,1 % 1,03 95 %
7,55 % 8,62 % 0,38 0,44 10,19 % -0,10 0,21
GAiN lOSS ANAlySiS lASt 5 yeArS

relative gain relative loss relative gain/loss ratio positive index divergence Negative index divergence Index divergence ratio percentage positive index divergence percentage positive index divergence when market is up percentage positive index divergence when market is down percentage of number of positive index divergence percentage of number of positive index divergence when market is up percentage of number of positive index divergence when market is down
81 % 85 % 0,95 12,72 14,08 0,90 47 % 20 % 80 % 40 % 26 % 60 %
131 % 106 % 1,24 12,75 7,90 1,61 62 % 73 % 50 % 60 % 71 % 48 %
110 % 97 % 1,13 10,06 6,04 1,67 63 % 63 % 62 % 57 % 56 % 58 %
vAlue At riSK lASt 5 yeArS; 2.5 % cONFideNce

Value at risk: observed, NAV Value at risk: observed, Benchmark
relative Value at risk, observed
-20,4 % -26,9 % -5,5 %
-15,0 % -10,0 % -6,4 %
-19,0 % -16,8 % -4,2 %
GAiN/lOSS ANAlySiS SiNce iNcePtiON

relative gain relative loss relative gain/loss ratio positive index divergence Negative index divergence Index divergence ratio
96 % 77 % 1,24 15,41 9,89 1,56
162 % 103 % 1,57 21,40 8,51 2,51
124 % 100 % 1,25 13,88 5,87 2,37
89 % 94 % 0,95 11,49 12,32 0,93
* All return figures beyond 12 months are annualised.
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 available in the funds product sheet (simplified prospectus) and the general commercial terms. Statutory information is sent to unit holders in the welcome letter immediately after the first subscription. Subsequently, unit holders can find all information on our website www. skagenfunds.com as well as in the annual report.
iNveStmeNt PhilOSOPhy
39
Our investment philosophy

POrtFOliO mANAGerS
beate bredesen
Kristian Falnes
elisabeth A. Gausel
Sren milo christensen
torgeir hien
Knut harald Nilsson
ross Porter
chris-tommy Simonsen
Ola Sjstrand
Kristoffer Stensrud
jane Sirevg tvedt
cathrine Gether
torkell eide
Ole Seberg
harald espedal
the companies show the way
the objective of SKAGEN Funds is to provide our unitholders with the best possible return on the risk they assume. We subscribe to a value based management philosophy and have a broad mandate, which means that our managers may freely choose shares in companies on stock exchanges worldwide. risk is reduced by investing in a number of companies in different industries worldwide. SKAGEN Funds focuses on values. We search for companies that are undervalued, under-researched and unpopular. thoroughly researched and popular companies tend to be overvalued, with an equally high downside potential when the share goes out of fashion. Historically speaking, SKAGEN Funds management philosophy, combined with our focus on values, has produced good returns. We have competent managers who are faithful to the investment philosophy.
rewarded for risk-taking
rewarded as handsomely as possible for the risk assumed. two funds with equal returns may in fact have completely different risk profiles. In that case, the fund with the lowest absolute risk is clearly best. that way, you get the highest risk-adjusted return.
Avoiding bubbles
one of the portfolio managers tasks is to balance the risk in the securities markets on behalf of the unitholders. As a unit owner, you should therefore be interested in being
As opposed to many other managers, who invest in companies because they are represented in an index, we buy the companies we think are the most attractive, regardless of indices. that way, we avoid being led into index temptation which at times results in popular industries and shares achieving a far too high price relative to what they can defend with respect to values and earnings. Bubbles form, and sooner or later burst. Such bubble periods create a good climate for us active managers to find undervalued, unpopular and under-researched companies. over time, however, it is always corporate values and value creation that form the basis for stock exchange pricing.
thorough analysis reduces risk
analysis. that reduces the risk. one important element in our research is ethics. In the long term, it does not pay to invest in companies that are unethical, whether we are talking about environmental sinners, companies benefiting from illegal child labour or other illegalities. SKAGEN Funds also carefully considers political and other risks. We are attentive to industry imbalances and too narrow geographic diversification, and we keep a close watch on corporate leverage.
belief in common sense
Behind everything we do there is thorough
In recent years we have visited or been visited by hundreds of companies at home and abroad, in order to gather first hand information. A companys financial strength, price and profit development are thoroughly analysed before decisions are made. We put more stock in our own analysis than in others, and are confident that our own research contributes to us always knowing something extra about our investments. We dont believe in rumours and whims. rather we rely on common sense and hard work without disregarding the sound intuition you gain with experience.
SKAGeN continues to expand in europe
Offices:
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)
countries highlighted in dark blue are a home market. countries highlighted in light blue are those in which SKAGeN has an office. countries highlighted in green are those in which SKAGeN has marketing permission.
Either visit us at our office, send an email or call us and we will do our utmost to assist you.
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 now consists of a total of nineteen people and is based between Stavanger, Norway, London, uK and Amsterdam, the Netherlands.
Graphical production: printting produksjon as
P h O N e : + 47 51 21 3 8 5 8 * e m A i l : cO N tA c t@ S K A G e N F u N d S . cO m

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Market report

reAd the POrtFOliO mANAGerS rePOrt ON PAGe 15

SK AGeN FuNdS mArKet rePOrt 2011

Postal address: SKAGEN AS postbox 160 4001 Stavanger, Norway www.skagenfunds.com

READ THE PORTFOLIO MANAGERS REPORT. PAGE 15

Are the major fluctuations in the stock market here to stay?

13 Save the date: New years conferences 14 exceeded expectations:

SK AGEN F uNdS MArKE t rEport Number 3

SKAGeN Funds returns

equit y FuNd SK AGeN veKSt

equit y FuNd SK AGeN GlObAl

SKAGEN Vekst OSEBX/MSCI AC (50/50)

equit y FuNd SK AGeN KON-tiKi

bONd FuNd SK AGeN telluS

-10 -13,3 % -20 -15,2 %

SKAGEN Tellus Barclays Capital Global Treasury Index 3 - 5 years (euro)

An absence of (political) leadership

SK AGEN F uNdS mArKEt rEport Number 3

tulips from Amsterdam

meet the team

In the Netherlands there are 89 active fund

the dutch office is located in the cultural heart of Amsterdam, on museumplein

SK AGEN F uNdS MArKEt rEport Number 3

SKAGeN portfolio manager:

long period of rising markets ahead

ole Seberg, portfolio manager of SKAGEN Vekst

SK AGEN F uNdS mArKEt rEport Number 3

Christian Jessen skagenfondene.dk

SK AGEN F uNdS MArKEt rEport Number 3

A job for Super mario

and confront Europes fragmented politicians.

iNFlAtiON ANd POlicy rAte iN the eurO zONe, 1999-dAte

SK AGEN F uNdS mArKEt rEport Number 3

The article is written by Jane Tvedt

SK AGEN F uNdS MArKEt rEport Number 3

dizzying volatility: A new normal?

SK AGEN F uNdS mArKEt rEport Number 3

Nick Henderson nhe skagenfunds.co.uk

SK AGEN F uNdS MArKEt rEport Number 3

AAA rating easily retained

New A-rating for SKAGeN vekst

New house to childrens village

SK AGEN F uNdS mArKEt rEport Number 3

Save the date: New years conferences

torgeir hien goes Swiss

SK AGEN F uNdS MArKEt rEport

My page is a web portal which provides access to:

SK AGEN F uNdS MArKE t rEport Number 3

POrtFOliO mANAGerS rePOrt

trust crisis creates opportunities

we believe that capital markets

Greece will likely default on its national

the time for words is over now is

to what extent the world economy

the wildcard is china. Authorities

bond yields are at historic lows in

After a time of macro-driven stock

the pricing of our equity funds is

POrtFOliO mANAGerS rePOrt

Not a carbon copy

Source: IMF, CEIC

POrtFOliO mANAGerS rePOrt

-19 % -27 % -29 % -32 % -24 % -21 % -19 % -20 %