Arctic Norwegian Value Creation Monthly Report February 2019

FUND COMMENTS Arcc Norwegian Value Creaon (Class B) increased by 4.8% in February, bringing YTD return to 11.7%. Since incep- on in August 2014, the fund has returned 72.7% compared to 43.6% for the Norwegian benchmark. The largest posive contributors to fund performance in February were Schibsted, Elkem and Kongsberg Gruppen. Schibsted once again delivered a decent report. The main online marketplaces, France (Leboncoin), (Finn) and Spain delivered sales growth of 16%, 17% and 13%, respecvely. Sweden, however, is struggling with a slight decline in sales. Losses in investment phase companies were sharply reduced. Publishing, the tradional media houses, delivered 9% earnings growth and a 10% EBITDA-margin. There is increased focus on the demerger of its internaonal marketplaces into a new company, Adevinta, which will take place in April. Elkem reported reasonably strong Q4 profits despite very weak Chinese silicones markets in the laer part of 2018. An annual dividend of NOK 2.6 was announced, corresponding to a yield of 11.4% on the day prior to the results release. Addionally, costs are cut to the tune of NOK 500 million, and the silicones market has shown signs of re- newed strength aer the Chinese New Year. Kongsberg reported an increase in quarterly earnings of 25% year-over -year. Most notably, its defense area reported exceponally strong margins. In its Marime business, profitability connued its upward trend, while revenues increased following a three-year slump. Cash flow was exceponally strong, albeit boosted by prepayments in its defense business. The most negave contributors to fund performance in February were B2Holding, Lerøy Seafood Group and . Debt collector B2Holding reported another quarter with disappoinng cash collecon. Moreover, the mar- ket disapproved of the company’s sale of claims with a loss of NOK 61 mill. The share price of Lerøy lagged those of its aquaculture peers as the company reported lower Q4 profits than expected, driven by weak realized trout pric- es, lower producon volumes than expected, as well as poor profitability in white fish processing. Hydro reported a disappoinng loss in Q4. The financial impact of the connued mandatory producon stop at Alunorte proved to be even bigger than expected. Furthermore, Hydro’s downstream segments reported mediocre results, and sen- ment towards aluminum connued to be uninspiring. Year to date, Aker BP, Aker and Elkem have been the most significant posive contributors to performance, while Veidekke, Norsk Hydro and Lerøy have been the largest detractors. In February, we increased our holding in Lerøy while we reduced our posion in . At the end of February, the porolio was valued at 14.5 mes 12 months forward earnings and 1.7 mes book val- ue. Corresponding figures for the Norwegian market were 14.9 and 1.8, respecvely. , March 2019 Sindre Sørbye Ole E. Dahl Tore Mengshoel Thomas Rasmussen Porolio Manager Porolio Manager Porolio Manager Analyst

ABOUT THE FUND Arcc Norwegian Value Creaon is research driven and truly index-independent UCITS fund. The investment process focus on idenfying companies which are considered to be value-creang over me at a reasonable price. The porolio is con- structed by boom up stock picking. There are no constraints regarding sectors and the goal is to achieve the best possible long-term risk-adjusted return. The funds benchmark is Mutual Fund Index (OSEFX).

20% 17.5 % 14.0 % 15% 12.8 % 11.7 % 11.8 %

10% 8.5 % 8.3 % 6.3 % 4.7 % 5% 3.7 %

0% Month YTD 12m 36m p.a. 60m p.a. Incep. p.a. Arctic Norwegian Value Crea tion II Class B (25/8‐14) OSEFX FUND COMPOSITION END OF MONTH

Real Estate 0.6% 10 largest positions Energy 17.7% Kongsberg Gruppen ASA 5.1 % Europris ASA 3.8 % Industrials 9.6% Schibsted ASA 5.1 % Elkem ASA 3.7 % Health Care 0.0% Aker BP ASA 5.0 % Lerøy Seafood Group 3.7 % Consumer Discretionary 4.7% ASA 4.0 % Telenor ASA 3.5 % Materials 11.4% Aker ASA 3.9 % Oslo Børs VPS Holding A 3.4 % Information Technology 5.9% Financials 26.1% 5 largest overweights +/‐ 5 largest underweights +/‐ Consumer Staples 13.6% Kongsberg Gruppen 4.0 % ASA -8.6 % Telecommunication Services 3.7% Elkem ASA 3.8 % ASA -7.5 % Utilities 1.6% Oslo Børs VPS Holding A 3.4 % DNB ASA -6.7 % Europris ASA 3.3 % Telenor -5.4 % 0% 5% 10% 15% 20% 25% 30% XXL ASA 2.7 % Orkla -4.3 %

FUND PERFORMANCE AND RISK FIGURES —CLASS B NOK (FORMER CLASS A)

3 6 Since Month months months YTD 1 year 3 years launch Fund 4.7 % 4.1 % -2.1 % 11.7 % 11.8 % 62.2 % 72.7 % Benchmark 3.7 % 0.6 % -4.0 % 8.5 % 6.3 % 48.3 % 43.6 % Difference 1.0 % 3.5 % 1.9 % 3.2 % 5.5 % 13.9 % 29.2 % Vinx Nordic Net, NOK 4.2 % 4.6 % -3.4 % 7.5 % 3.0 % 26.0 % 57.5 % Euro Stoxx 600, EUR 4.2 % 4.7 % -1.8 % 10.7 % 1.1 % 21.4 % 23.1 % S&P 500 TR, USD 3.2 % 1.4 % -3.0 % 11.5 % 4.7 % 53.2 % 53.0 % MSCI AC World, LC 3.1 % 2.5 % -2.8 % 10.5 % 1.6 % 42.8 % 37.2 %

5 top contribut. Fund Fund Contri‐ 5 bottom contribut. Fund Fund Contri‐ year to date weight return bution year to date weight return bution Aker Bp Asa 5.1 % 35.3 % 1.57 % Veidekke Asa 1.8 % -6.9 % -0.15 % Aker Asa-A Shares 3.6 % 40.0 % 1.25 % Norsk Hydro Asa 1.1 % -9.6 % -0.09 % Elkem Asa 3.4 % 32.7 % 1.04 % Leroy Seafood Group 3.2 % -2.2 % -0.07 % Schibsted Asa-B Shs 4.9 % 20.8 % 0.98 % Telenor Asa 4.3 % -0.4 % -0.03 % Europris Asa 3.7 % 23.8 % 0.83 % Fjord1 Asa 1.7 % -1.2 % -0.02 %

Standard Sharpe Tracking Information Portfolio characteristics Deviation Ratio Error Ratio Arctic Norwegian Value Creation 10.9 % 1.6 4.3 % 0.8 Benchmark 10.0 % 1.4 *) Based on 36 months performance Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD 2019 6.64 % 4.75 % 11.70 % 2018 -0.75 % -0.84 % -0.69 % 6.85 % 4.70 % -0.03 % 0.80 % 2.02 % 1.70 % -7.32 % -0.19 % -6.84 % -1.47 % 2017 1.70 % 0.29 % -2.35 % 4.19 % 0.70 % -0.07 % 3.81 % -0.48 % 4.53 % 3.17 % -2.03 % 3.09 % 17.51 % 2016 -7.33 % 2.60 % 2.10 % 4.08 % 3.70 % -3.14 % 3.81 % 1.29 % 1.71 % 3.60 % 1.99 % 3.96 % 19.23 % 2015 4.66 % -1.15 % 1.42 % 3.48 % 0.13 % -2.25 % 1.62 % -5.13 % -1.22 % 3.68 % 4.05 % -0.76 % 8.34 % 2014 0.44 % 0.28 % -0.88 % 1.49 % 2.05 % 3.39 %

Disclaimer: Historical returns are no guarantee for future returns. Future 100.0 % returns will depend, inter alia, on market developments, the fund man‐ ager’s skill, the fund’s risk profile and subscripon and management fees. 80.0 % The return may become negave as a result of negave price develop‐

60.0 % ments. Arcc Fund Management AS seeks to the best of its ability to ensure that all informaon given in this report is correct, however, makes reserva‐ 40.0 % ons regarding possible errors and omissions. Statements in the report reflect the porolio managers’ viewpoint at a given me, and this view‐ 20.0 % point may be changed without noce. The report should not be perceived as an offer or recommendaon to buy or sell financial instruments. Arcc 0.0 % Fund Management AS does not assume responsibility for direct or indirect loss or expenses incurred through use or understanding of the report. -20.0 % Employees of Arcc Fund Management AS may be owners of securies 08/14 01/15 06/15 11/15 04/16 09/16 02/17 07/17 12/17 05/18 10/18 issued by companies that are either referred to in this rapport or are part of Arctic Norwegian Value Creation Class B (Start 22.08.14) OSEFX the fund's porolio.