SKAGEN Vekst Statusrapport Oktober 2013

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1 SKAGEN Vekst Statusrapport Oktober 2013

2 Hovedtrekk i oktober 2013 SKAGEN Vekst endte måneden med en NAV på NOK NOK opp 4,7 prosent fra september, mens fondets referanseindeks som består av OSEBX og MSCI AC World steg 4,4 prosent i samme periode. Hittil i år har fondet steget med 21,0 prosent mot referanseindeksens oppgang på 23,5 prosent. De største bidragsyterne i oktober var Samsung, Royal Caribbean, Norwegian Air, Baker Hughes og REC. Kia Motors, Bonheur, Korea Re, Wilh Wilhelmsen og Tribona var de største negative bidragsyterne. SKAGEN Vekst reduserte postene i Morpol (ut), Kesko (ut), Sistema, Olav Thon and Fortum. Fondet økte postene i ABB, Sberbank (ny), REC Solar (ny) og Statoil. Basert på estimert inntjening for 2013, er fondets 35 største poster (84 prosent av totalen) verdsatt til pris/inntjening 10.9x. Til sammenligning er verdsettelsen av referanseindeksen 14.1x. Basert på forventet inntjening neste år er verdsettelsen for fondet 8.7x inntjeningen mot referanseindeksens 12.7x. I løpet av oktober har 3 av 4 selskaper kommet med veldig gode resultatoppdateringer og vi forventer derfor at estimatene for inntjening vil bevege seg oppover de neste måneder. Dette er ikke reflektert i den nåværende prisingen av SKAGEN Vekst. 2

3 Avkastning, oktober 2013 Oktober Hittil i kv. Hittil i år 1 år 3 år 5 år 10 år Siden start* SKAGEN Vekst 4,7% 4,7% 21,0% 26,2% 4,9% 11,9% 12,0% 14,8% Referanseindeks* 4,4% 4,4% 23,5% 24,4% 10,1% 17,3% 12,9% 9,6% Meravkastning 0,3% 0,3% -2,5% 1,8% -5,2% -5,3% -0,9% 5,2% Note: Alle avkastningstall ut over 12 måneder er annualisert (geometrisk avkastning) * Startdato: 1 desember 1993 ** Referanseindeks før var OSEBX 3

4 Avkastning norsk mot utenlandsk del i fondet YTD 2012 Siste 3 år Norsk del av SKAGEN Vekst 21,4 % 17,2 % 26,9 % Oslo Børs Hovedindeks 19,9 % 15,4 % 31,6 % Meravkastning 1,6 % 1,8 % -4,7 % Global del av SKAGEN Vekst 27,1 % 4,3 % 15,9 % Verdensindeks (NOK) 27,3 % 8,3 % 35,9 % Meravkastning -0,2 % -4,0 % -20,0 % 4

5 Årlig avkastning siden start (%)* SKAGEN Vekst har gjort det bedre enn indeks* i 11 av 20 år Prosent SKAGEN Vekst* (NOK) Benchmark Index (NOK) YTD 2013 * Startdato: 1 desember 1993 ** Referanseindeks før var OSEBX 5

6 Markeder i oktober 2013 (%) Italia India Spania Norge (OSEBX) Polen Indonesia SKAGEN VEKST Tyskland Tyrkia Nederland USA (Nasdaq) Thailand USA (S&P 500) Vekstmarkedsindeksen Frankrike Russland Verdensindeksen Taiwan Sør-Afrika Storbritannia Østerrike Canada Mexico Brasil Kina (Hong Kong) Danmark Sør-Korea Singapore Hong Kong Sverige Japan Kina (lokal)

7 Markeder hittil i år (%) Prosent Finland Spania USA (Nasdaq) Italia Frankrike USA (S&P 500) Japan Danmark Tyskland Sverige Nederland Verdensindeksen Storbritannia SKAGEN VEKST Norge (OSEBX) Taiwan Hong Kong Canada Thailand SKAGEN M2 Singapore Polen Sør-Korea Sør-Afrika Russland Vekstmarkedsindeksen Kina (lokal) India Kina (Hong Kong) Mexico Tyrkia Indonesia Brasil

8 Største bidragsytere, oktober 2013 Største positive bidragsytere Største negative bidragsytere Company NOK (m) Company NOK (m) Samsung Electronics 78 Royal Caribbean Cruises 44 Norwegian Air Shuttle 40 Baker Hughes 30 REC Solar 28 Akzo Nobel 27 Danske Bank 22 Continental AG 22 Kongsberg Gruppen 19 DNO International 12 Kia Motors -11 Bonheur -10 Korea Re -7 Wilh Wilhelmsen -7 Tribona -6 LG Corp -6 Teva Pharmaceutical -6 Proact IT -5 TTS Group -5 Ganger Rolf -4 Total verdiskapning i oktober i 2013: 396m NOK Note: Bidrag til absolutt avkastning 8

9 Største bidragsytere, hittil i år Største positive bidragsytere Største negative bidragsytere Company NOK (m) Company NOK (m) Norwegian Air Shuttle 157 Continental AG 150 Royal Caribbean Cruises 131 Samsung Electronics 122 Danske Bank 90 Baker Hughes 76 Bank Norwegian 59 Akzo Nobel 55 REC 50 Stolt-Nielsen 49 EMGS -31 Agrinos -27 Marine Accurate Well -26 Eurasian Natural Resources -19 Hurtigruten -16 I M Skaugen -14 Gazprom -13 Air Asia -11 Proact IT -10 Q-Free -9 Total verdiskapning hittil i 2013: NOK million Note: Bidrag til absolutt avkastning 9

10 Største kjøp og salg, oktober 2013 Kjøp Sberbank pref (83 RUB) Sberbank er den største banken i Russland. Har hatt 100 % markedsandel i konsument markedet. Har 45% andel av innskudd og 33% andel av lån. Har filialer og ansatte. Veksten i Russland flyttes fra Moskva og St. Petersburg ut i regionene. Sberbank har best posisjon til å ta markedsandeler i det ellers lite penetrerte markedet for finansielle tjenester i Russland. Disiplinert ledelse (nytt team siden 2007) og god lønnsomhet med en avkastning på egenkapitalen (ROE) tilsvarende 20%. Preferanseaksjene handles bare til 0,95x bokført verdi (1,08x der immaterielle eiendeler er utelukket). Pris/inntjening er 5,1x. REC Solar (76 NOK) REC Solar kom inn i SKAGEN Vekst etter omorganiseringen hvor REC ble delt i to selskaper; REC Silicon og REC Solar. REC Silicon lager polysilicon som er det viktigste materialet til å lage solenergisystemer og REC Solar lager solcellepaneler. Etterspørsel og penetrasjon for solenergi er fortsatt i sine tidlige dager og begge REC-selskapene er godt posisjonert for å skape verdier for aksjonærene gjennom sine posisjoner i verdikjeden. REC Solar er verdsatt til 3mrd NOK og 7x 2014 inntjening. 10

11 Største kjøp og salg, oktober 2013 Salg Kesko (23.50 ) - ut Det finske detaljhandelsselskapet, med dominerende markedsandel i Finland, ble solgt ut av porteføljen etter skuffende driftsresultater i en lengre periode, og uten at det er noen utsikter for forbedring de kommende årene. Salgsresultater og lønnsomhet er dårligere enn gjennomsnittet i bransjen. Grep fra ledelsen sin side har ikke vært nok til å oppveie for den motvind selskapet har opplevd fra forbruksmønstre i Finland, der størstedelen av inntektene er tatt ut. Morpol (11.85 NOK) - ut Morpol, en polske baserte fiskeoppdretter og røkelaks produsent, ble solgt ut av porteføljen. Morpol har vært gjennom en turbulent tid etter noteringen på Oslo Børs i I slutten av 2012 ble majoritetskontrollen av selskapet overtatt av Marine Harvest. Mens oppdrettsnæringen sannsynligvis vil vise gode resultater framover, har vi vurdert det slik at det finnes bedre måter å få eksponering til trender i denne bransjen enn det Morpol kan tilby. 11

12 Viktigste endringer så lang i 2013 Økte poster Reduserte poster Q1 Danske Bank Deoleo (ny) DNO International Eurasian Natural Res (ny) Kia Motors (ny) Q1 Aveng (ut) Altona Mining (ut) Gjensidige (ut) Sparbank Vest( ut) Subsea 7 (ut) Q2 Q3 Air Asia (ny) Continental AG Kia Motors Matas (ny) REC OCI (ny) Royal Unibrew SAP Sevan Drilling Mahindra & Mahindra Frontline 2012 (ny) Q2 Q3 ABG Sundal Collier (ut) Cermaq (ut) Eurasian Natural Res (ut) Marine Accurate Well (ut) Kongsberg Automotive (ut) Natuzzi (ut) NHST Media Group (ut) NKT Holding (ut) Noreco (ut) Norsk Skog (ut) Transocean (ut) Talanx (ut) Matas (ut) Stolt-Nielsen Wilh Wilhelmsen Hld Q4 Sberbank pref (ny) ABB REC Solar (ny) Statoil Q4 Kesko (ut) Helgeland Sparebank (ut) Morpol (ut) Fortum Olav Thon Eiendom 12

13 Største poster SKAGEN Vekst, pr oktober 2013 Postens Kurs P/E P/E P/E P/B Kursstørrelse 2012e 2013e 2014e siste m ål Samsung Electronics 7,2 % ,6 5,2 4,8 1, Royal Caribbean Cruises Ltd 6,4 % 42 21,5 17,3 13,5 1,1 60 Kongsberg Gruppen 4,6 % ,2 12,6 11,8 2,4 160 Norw egian Air Shuttle 4,5 % ,7 16,3 8,2 2,9 340 Continental AG 4,5 % ,2 12,9 11,1 3,2 160 Teva Pharmaceutical 3,9 % 37 16,6 7,5 7,2 1,4 52 Akzo Nobel NV 3,5 % 54 15,9 18,4 16,0 2,2 63 Danske Bank A/S 3,4 % ,3 15,8 10,3 0,9 160 SAP 2,9 % 58 19,1 17,3 15,4 4,6 95 Solstad Offshore 2,9 % ,8 7,5 6,1 1,0 200 Vektet topp 10 43,9 % 13,0 10,3 8,6 1,5 35% Vektet topp 35 84,1 % 14,9 10,9 8,7 1,5 41% Referanse indeks 16,1 14,1 12,3 1,8 13

14 Sektor og geografisk fordeling mot indeks Energi Råvarer Kapitalvarer, service og transport Inntektsavhengige forbruksvarer Defensive konsumvarer Medisin Bank og finans Informasjonsteknologi Telekom Nyttetjenester Kontanter Sektor Asia ex Japan EMEA Japan Kjerne EU Nord Amerika Norge Perifer EU Sør Amerika Oceania Kontanter Geografisk Fond Indeks

15 Nyheter og annet om porteføljeselskaper på engelsk 15

16 Key earnings releases and corporate news, October 2013 Samsung Electronics (7.2%) Samsung profits surged 26% in 3Q13 driven by semiconductors and smartphones and the cash pile just gets bigger and bigger Samsung released final 3Q13 performance numbers showing 13% revenue growth, 26% growth in operating income and 25% ROE. The net cash pile grew 173% since 3Q12 by an impressive 8trl KRW in the last three months. And it now constitutes 19% of the market cap. Mobiles grew sales 25% to 36.6trl KRW and with a operating margin of 18%, down a little year on year, but expected to improve in 4Q13 due to seasonal volume trends, but subject to competitor behavior Semi s grew sales 11% to 9.7trl KRW and with a operating margin of 22%, double that from last year as volumes and pricing mix in DRAM and NAND are favorable and are expected to remain so for a while Consumer Electronics and Display had combined sales of 20.2trl KRW, down 4% and operating margin of 6.5%, down 1 percentage point in the last year. TV and monitor volumes and competition remains intense and prices are in almost constant decline. OLED segment in Display is only bright spot within this revenue stream. Investment case World class electronics company with pole position in smartphones and semiconductors together with Apple and Intel. Global leader in TV s with 25% share, and highest margins, however that industry is not good for building value. Despite going from strength to strength the Samsung shares are not expensive. The reason is probably a mix of chaebol structure with opaque intercompany and family connections, investor nervousness about mobile phone champions expected longevity (Nokia and Blackberry as risk examples) and volatile earnings in the semiconductor business. However, the cash pile is good and the way it builds should eventually be a benefit to shareholders. The ordinary shares trade with a P/E of 7.0x and excluding the cash pile it s only 5.6x. The pref shares cash adjusted P/E is only 3.6x => earnings yield of 28%. 16

17 Key earnings releases and corporate news, October 2013 Royal Caribbean Cruises (6.4%) 3Q13 report was in line with expectation and guidance up-grade gave 6 percent boost to stock price RCL reported revenues up 4 percent to USD 2.3bn and operating profit of USD 444m, down 2 percent, which was in line with sell-side expectations. The value is in the details of the report. RCL carried 1,259K passengers in 3Q13, up 1 percent. The average spending per passenger was USD 1,836 for a typical week. A ticket was USD 1,328, up 1 percent and on board spending (spa, drinks, tours and entertainment) was USD 508, up USD 34, or 7 percent. What does this tell us? RCL is good at filling its ships (capacity utilisation was 107 percent) and making the passengers spend additional cash on tours, alcoholic drinks, entertainment, casino and other kinds of fun/services not included in the ticket price. On the cost side RCL has a line called on board cost and other. Assuming this is fully linked to the on-board spending revenues, the on-board spending generated operating income of USD 461m, up USD 36m. Wages and fuel are more or less the same irrespective of on-board spending, so put simply: RCL generates the bulk of operating profit from on-board sales. We believe the business model to bring passengers on board and make them spend. Other cost items rose such as travel agent commissions USD 12m, wages USD 12m, but the biggest change was others of USD 34m. RCL upped guidance for yield from 1-2 percent to 3 percent growth as thr booking environment is good. This is contrary to rival Carnival with a multi-brand strategy and a recent disappointing performance update. RCL was very happy with the news and the shares jumped 6 percent. Investment case update Operate a fleet of 42 cruise ships and fill them up with big spenders. The supply/demand balance in the cruise industry is getting better as the number of new vessels are less than the increase in demand. Filling the ships at ever better ticket prices and on board spending seems to be going upward. The history of industry profitability is not impressive, so the valuation reflects this but as key metrics for better profitability work their way through industry behavior, the profitability perception will change. It has taken time to get to this point, and the reaction to the 3Q13 report is one more step and an eye-opener for investors. With conservative estimates, and not assuming a global economic down turn in the coming years, the target price for 2015 is USD 65 (versus current USD 42). There is further upside if more and more passengers feel they have entered a spending Eldorado once on-board the ship. 17

18 Key earnings releases and corporate news, October 2013 Norsk Hydro (2.6%) Strong 3Q13 report due to cost cuts and hydro power volumes Norsk Hydro reported underlying Q3 EBIT of NOK 659m. Underlying EPS at NOK 0.14 vs consensus at NOK Operating cash flow at NOK 1.1bn. Primary metals was much better than expected with an EBIT of NOK 337m. Cash cost continued down to 1,450 USD/t vs. 1,575 USD/t in Q2. Bauxite & Alumina ( the Vale assets ) reported weaker than expected EBIT of NOK -370m. Norsk Hydro blames Alunorte production on power outage and increased sourcing of alumina. The alumina cash cost at USD 265/t was up 5 percent from Q2. The energy division reported underlying EBIT of NOK 485m (vs consensus at NOK 300m) due to higher production (2,838 GWh vs cons at GWh). NHY expects global aluminium demand ex China to grow by 2 percent in 2013 (down from 2-4 percent by Q2) resulting in a largely balanced market. Hydro has sold 50 percent of aluminium production at USD 1,800/t for Q4. Investment case Norsk Hydro is still a bet on higher aluminium prices, which again could come from higher economic activity, better balance of inventories and closure of unprofitable production among producers. NHY has about NOK 18 per share in value from energy production, which leaves NOK 9 per share for the aluminium business. Management is doing a great job at cutting costs. 18

19 Key earnings releases and corporate news, October 2013 Kongsberg Gruppen (4.6%) Kongsberg reported better than expected performance in 3Q13 as the Civilian units slowly but surely get bigger than the defense units Revenues were NOK 3.45bn, down 6 percent and EBITDA was NOK 518m, down 20 percent. Keep in mind that the quarterly performance is rather volatile and the results were better than sell-side expected. Maritime revenues were NOK 2.0bn, up 7 percent YoY, EBITDA NOK 310m, up 12 percent and order book up 10 percent to NOK 7.1bn. After quarter-end they recieved additional NOK 400m in orders from Hyundai/Samsung/Cosco shipyards for advanced position systems for offshore units. Defense revenues were down 10 percent to NOK 0.9bn and EBITDA was up 9 percent to NOK 129m. The order book declined 19 percent to NOK 5.8bn as the company delivered guns and missiles in Poland, Finland and Norway. Going forward, the change for this segment is the F-35 program ramp-up from 2015 and onwards. Protech revenues dropped 51 percent to NOK 337m and EBITDA dropped 68 percent to NOK 66m, reflecting few new orders. Kongsberg has a leading position in remote controlled weapon systems and this unit was a big driver for the stock-price. Oil & Gas (the new unit from 2013) revenues grew 38 percent to NOK 256m while EBITDA declined 48 percent to NOK 18m and related to cost for new orders, which rose 180 percent to NOK 855m. Net cash was NOK 1.1bn by end of 3Q13, down NOK 0.2bn during the quarter as more cash has been tied up in working capital. Investment case update Kongsberg develops, manufactures and markets high technology defense, maritime and positioning systems. The company had tremendous growth from 2006 to 2010 as the remote control weapon system installed on top of vehicles made the total defence revenue stream go from NOK 3bn to NOK 9bn. The operating profit followed suit and on a Group level it rose from NOK 448m in 2006 to NOK 2.1bn in However, since 2010 the demand for these systems has faded and Kongsberg has been busy repositioning for strong demand in the civilian activities. While in the transition phase, the stock trades at 10x earnings and with a solid net cash position the risk is low. After 2015 the total revenue streams should start to pick up speed again, which is not reflected in current price. 19

20 Key earnings releases and corporate news, October 2013 AkzoNobel (3.5%) AkzoNobel jumped 8 percent on better operating income driven by effects from performance improvement program Akzo reported revenues of EUR 3.8bn, down 5 percent and operating income of EUR 303m, up 22 percent and 6 percent higher than expectations. Operating margin (excluding pension costs) consequently grew from 8.8 percent to 10 percent. Adverse currency movement of 6 percent overshadowed the underlying performance of 3 percent growth. Continued pruning of assets and operations is starting to show its effect, also on sceptical investors. Deco paint (wall paint) volumes grew 5 percent and Operating-margin jumped from 4.2 percent to 9.4 percent. Performance coatings (car paint etc.) grew volumes by 2 percent and margin improved from 8.9 percent to 11.3 percent Specialty chemicals had 0 percent volume growth and sold assets which resulted in revenues declining 10 percent. Operating margin fell from 9.5 percent to 8.5 percent. Investment case Global paint leader which has seen modest demand after the 2008 financial down-turn. Given that Akzo is exposed to housing (new build and repair / maintenance), cars, ships and aircrafts, it has felt the repercussions of the downturn. However, as things eventually improve and Akzo s organizational structure is more lean now than before, the up-tick in demand will have very distinct impact on the bottom line. The big question has been when global paint markets would start to recover. The 3Q13 report certainly shows that volumes are moving in the right direction. Akzo can t do much about the currency moves, which over time is expected to be neutral. Akzo trades at close to the 20 year average valuation multiple and as such the upside potential is primarily driven by further expansion and pruning of the business. Growth rate in overall paint industry is 3-4 percent and Akzo generates a ROE around 10 percent currently. The target is to lift ROIC to 14 percent, which is approximately 12 percent ROE: P/E 2014 is 15.3x and 2015 is 13.6x. 20

21 Key earnings releases and corporate news, October 2013 Danske Bank (3.4%) Beauty is in the inside. Danske headline numbers looked bad due to poor trading, but the underlying improved in a good manner. Stock rose 1 percent on news. Total revenues missed estimates by 12 percent and is wholly explained by a big miss in trading. 3Q13 revenues was DKK 9.0bn, down 16 percent YoY. Costs were 3 percent lower to DKK 5.5bn and loan losses 43 percent lower to DKK 0.96bn (20 basis points loan loss ratio). Net interest income rose 1.9 percent from 2Q13 to DKK 5.6bn as margin initiatives work their way through. Fees were up 3 percent since last quarter as the fee structure changed on 1 September. The change will further impact positively in coming quarters. Trading was a big miss at only DKK 0.4bn versus about DKK 2bn in a normal quarter. The explanation is poor; low volumes and adverse market conditions. Other incomes from Danica, insurance etc is always a bit volatile, but was in line with expectations of DKK 0.75bn. Costs were DKK 5.5bn and DKK 0.1m lower due to fewer branches and employees. Going forward Danske will further reduce costs by DKK 250m per quarter and with full effect in Pre-tax profit from core operations was DKK 2.6bn, down DKK 0.8bn YoY, so had they not taken the wrong road in trading, then 3Q13 would have been at levels not seen since Guidance for 2013 was adjusted for the trading result and 2015 guidance was adjusted by the new CEO to a more realistic level of 9 percent from 12 percent, but long term. Investment case Danske is the largest bank in Denmark with about 50 percent of the business in DK. Sweden, Norway and Finland are each percent and Ireland + Northern Ireland is 8 percent. At some point in they forgot the traditional banking skills and ventured into silly loans and acquisitions. Since 2008 it has been a long list of house cleaning. The process is not completely over, but as the headwind from the Danish economy turns into tailwind the prospects for the coming year look good. Risks are tougher regulation, loss of market share after less successful marketing campaign and the reversal of the economic improvement. 21

22 Key earnings releases and corporate news, October 2013 SAP (2.9%) SAP share price jumped 7 percent on good 3Q 2013 performance driven by strong growth in cloud and HANA SAP reported 12 percent volume growth, but due to currency movement it only showed up as 2 percent growth when measured in EUR. In the reported numbers EMEA grew 8 percent, Americas were flat and Asia down 7 percent. Operating profit grew 13 percent as performance based compensation and number of employees leveled off. New software contracts were down 5, however as customers move towards mobile and cloud based software platforms that revenue stream grew 203 percent and especially driven by Americas. HANA, the cutting edge, high speed data analytics software grew 80 percent and more than 2,000 corporations now have HANA installed. SAP launched the free data analytics software called Lumira for Excel spreadsheet and works as a teaser for HANA. Investment case Global leader in corporate software and moving from in-house platforms to mobile, cloud and high speed data analytics. Competitors are working to catch-up with SAP s position and probably will do at some time, but the market is large enough for several providers. SAP has about 200,000 customers that spend EUR 80,000 on average, so the scope for upselling is huge as SAP only has 5-6 percent share of pocket of their customers. In addition comes low penetration of standard systems in Asia and for the financial industry as such. SAP trades at valuation multiples not seen since early 1990 s when SAP launched based Enterprise Resource Planning systems. SAP s historical growth is 15 percent over the past 23 years and expected growth towards 2016 is 8 percent per year. ROE is 24 percent with a high of 31 percent in 2011 and low of 20 percent in 2010, so growth and the profitability builds value all the time. P/E 2014 is 15.3x and 2015 is 13.5x. 22

23 Key earnings releases and corporate news, October 2013 Hexagon Composites (0.6%) Stock jumped 15 percent on accelerated growth in 3Q13 EBITDA up 4-fold with strong sale from high-pressure cylinders. Revenues in 3Q13 were NOK 391m, up 67 percent, EBITDA NOK 61m, up 4-fold. The stock is up 325 percent in the past year. High pressure cylinders: 81 percent revenue growth to NOK 274m and driven by exponential demand growth for storage and tanks for gas fuelled trucks in US. EBITDA margin improved from 15.6 percent to 19.6 percent. Composite cylinders grew sales 84 percent to NOK 70m due to a long warm summer (gas containers for grills and caravans). EBITDA margin was 13.9 percent. Composite reinforcement had revenue of NOK 50m, up 10 percent and EBITDA of NOK 5m. This unit makes reinforcements for wind-mills, doors, aircrafts etc. so there is a high correlation with orders and profitability impacted by cheap Chinese competition. Investment case Hexagon is well positioned to benefit from a shift from oil based fuels into more gas based fuels especially in US, but the rest of the world will likely go in same direction as price and environment are in favour of gas. In the US there are 122,000 gas stations, but so far only about 600 have CNG (compressed natural gas). Next generation trucks and busses will use gas as fuel, so Hexagon should do well as they sell both the tank in the truck as well as the storage cylinders at the gas station. Also Hexagon makes storage tanks used on-site of shale gas drillers. On top comes increasing demand from gasgrills in households. Financial performance is good. Company could well overshoot sell side projections of revenue growth from from NOK 1.0bn to NOK 2.5bn and with a 15 percent EBITDA margin. If revenues hit NOK 3bn and EBITDA margin 17.5 percent, then it s trading at only 10x 2015 earnings and with high growth that seems too low. 23

24 The largest companies in SKAGEN Vekst Samsung Electronics, the Korean electronics group, has enjoyed very solid growth in consumer electronics especially smart-phones. Pole position in global semiconductor market. Cash generation is very good and the company has historically wisely invested into new business areas solar power and healthcare is on the roadmap for the future. RCL is the second largest cruise company globally with 25 percent market share. It sailed 5m passenger in After a decade of lower returns on invested capital the cruise industry should be supported by increased consumer demand in the coming years. Kongsberg Gruppen provides high-tech capital goods to the defense and maritime industries such as positions control and remote control systems. The growth in is mainly driven by the maritime products unit, while the longer term growth is fuelled by components and missiles for the F- 35 aircraft program. Norwegian Air Shuttle is the leading Nordic based low cost airline, which in 2012 flew 18m passengers. The fleet of airliners and route network is growing rapidly proving the concept from Norwegian local low cost airline, to Nordic, to European and to Global reach. Continental AG produces tyres for cars and trucks and makes auto technology such as power trains, safety systems and automated drive systems. The replacement cycle for tires is getting stretched in some markets, so near term earnings look promising. In the longer term Continental s pole position in global auto technology provides a good backdrop for substantial growth. 24

25 The largest companies in SKAGEN Vekst Teva is the largest generic (off patent) drug company worldwide and has more than half of revenues from patented drugs most known is Teva s multiple sclerosis drug; Copaxone. Teva expanded a lot in the past decade and since 2012 managers focus has been to clean the organisation and optimise its drug portfolio, production units, selling channels and cut costs. AkzoNobel is the largest paint company in Europe and a global leader in performance coating and specialty chemicals. Deco paint is mainly Europe, but it has good growth in Emerging Markets too is in Akzo in process of optimizing it is structure after the corporate makeover 6-7 years ago and with pending demand for re-painting and new builds in Europe profitability is set to improve. Danske Bank is the second largest bank in the Nordic region. Also active in Ireland. After an unsustainable acquisition binge and loan growth before 2008, the bank has struggled with high loan losses and sub-optimal cost structure, so in 2012 a new management group started a travel to clean up and prepare the customers and organization for a automated banking future. Established as main frame software provider in the 1970 ies, SAP developed into global leader in Enterprise Resource Planning software in the 1990 ies and since 2012 SAP has begun moving into next generation corporate software solutions in mobility, cloud and high-speed data-analytics. Upgrades, deeper penetration with current customers as well as entry into Asian corporates and standard solutions for financial industry are the future growth drivers. Solstad Offshore is a Norwegian supply vessel owner and operator for the oil/gas industry providing transport services to offshore drilling rigs. Has 51 vessels of which two are new build contracts. 15 of the vessels are anchor handler/tug (ATHS), 16 are construction support (CSV), 9 are platform supply and 9 are in Solstad Asia Pacific unit. 25

26 For more information please visit: Latest Market report Information about SKAGEN Vekst on our website Historical returns are no guarantee for future returns. Future returns will depend, inter alia, on market developments, the fund manager s skill, the fund s risk profile and subscription and management fees. The return may become negative as a result of negative price developments. SKAGEN seeks to the best of its ability to ensure that all information given in this report is correct, however, makes reservations regarding possible errors and omissions. Statements in the report reflect the portfolio managers viewpoint at a given time, and this viewpoint may be changed without notice. The report should not be perceived as an offer or recommendation to buy or sell financial instruments. SKAGEN does not assume responsibility for direct or indirect loss or expenses incurred through use or understanding of the report. Employees of SKAGEN AS may be owners of securities issued by companies that are either referred to in this rapport or are part of the fund's portfolio.