Arctic Norwegian Value Creation Monthly Report December 2018

FUND COMMENTS Arcc Norwegian Value Creaon (Class B) fell by 6.8% in December, bringing 2018 return to ‐1.5%. Since incepon in August 2014, the fund has returned 54.6%, while the OSEFX market benchmark has given a return of 32.3%. Lerøy Seafood, Scatec Solar and Austevoll Seafood were the largest posive contributors to fund performance in 2018, returning 54%, 50% and 65% respecvely. Lerøy and Austevoll gained due to healthy demand for salmon combined with low supply growth. Furthermore, the sector has been subject to a significant mulple expansion, partly due to defensive sector characteriscs. Lerøy improved its biological performance, while Austevoll benefied from increased Peruvian anchoveta quotas. The share price of Austevoll rose significantly more than what would be implied by its holding in Lerøy. Scatec has seen its capacity of assets in operaons and under construcon more than double during 2018. At its Investor Day in May, Scatec announced ambious growth and profitability targets. In November, acquired 10% of Scatec fueling speculaons about a full takeover. XXL, Elkem and B2 Holding were the largest detractors last year. XXL benefited from a good winter, but spring and summer seasons were weak. Moreover, XXL delivered a profit warning for 4Q mainly due to lower gross margins in Norway. Campaign acvity has been high, negavely affecng margins. Margins are further weakened by the ex‐ pansion in Austria, which will be loss making the first years. There have been several management changes, includ‐ ing resignaons of two CEO’s. Transion of sales from stores to online has increased uncertainty, although XXL is delivering strong online growth. Aer Elkem’s strong share price run unl August following the IPO in March, the share has more than halved from its peak. As demand for silicones in China stalled in the autumn, prices plummet‐ ed. Moreover, demand for other products are affected by global growth, and prices for ferrosilicon and silicon met‐ al have eased. The share price of B2Holding declined as a very weak senment towards debt collector companies took its toll. The company’s reported results have been reasonably good, but debt collecons have, however, been lower than expected. The largest posive contribuons to fund performance in December came from Oslo Børs VPS Holding, and Gjensidige. Euronext announced its intenon to launch a NOK 145 cash bid for Oslo Børs VPS aer securing 50.6% support through 45.5% irrevocable pre‐acceptances and 5.1% ownership. Telenor and Gjensidige, with low financial leverage and defensive characteriscs, performed well in a turbulent market. The most negave contribuons last month came from XXL, Transocean and Elkem. The laer two due to weak senment towards oil service and cycli‐ cals. Last year we added Elkem, Transcoean, Northern Drilling, Ocean Yield and to our porolio, while we exited Solstad Offshore, Austevoll, NEL, Saferoad and Ekornes, the laer two due to bid for the companies. At the end of December, the porolio was valued at 12.6 mes earnings (12m fwd) and 1.5 mes book value. Cor‐ responding figures for the Norwegian market were 13.2 and 1.8, respecvely. Oslo, January 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 Oslo Stock Exchange Mutual Fund Index (OSEFX).

15% 11.3 % 10.5 % 8.5 % 10% 6.6 % 5%

0%

‐5% ‐1.5 % ‐2.2 % ‐1.5 % ‐2.2 %

‐10% ‐6.8 % ‐7.3 % 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 15.5% Kongsberg Gruppen ASA 5.5 % Europris ASA 3.6 % Industrials 10.5% Schibsted ASA 5.0 % Storebrand ASA 3.5 % Health Care 0.0% Telenor ASA 4.9 % Oslo Børs VPS Holding A 3.5 % Consumer Discretionary 4.3% Aker BP ASA 4.4 % Elkem ASA 3.4 % Materials 11.0% ASA 4.0 % Gjensidige Forsikring AS 3.4 % Information Technology 6.7% Financials 27.6% 5 largest overweights +/‐ 5 largest underweights +/‐ Consumer Staples 12.9% Kongsberg Gruppen 4.4 % Equinor ASA ‐8.9 % Telecommunication Services 5.0% Oslo Børs VPS Holding A 3.5 % Marine Harvest ‐7.4 % Utilities 2.0% Elkem ASA 3.4 % DNB ASA ‐5.9 % Europris ASA 3.2 % Telenor ‐4.9 % 0% 5% 10% 15% 20% 25% 30% Sbanken ASA 2.7 % Orkla ‐4.7 %

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

3 6 Since Month months months YTD 1 year 3 years launch Fund ‐6.8 % ‐13.8 % ‐9.9 % ‐1.5 % ‐1.5 % 38.0 % 54.6 % Benchmark ‐7.3 % ‐14.3 % ‐8.6 % ‐2.2 % ‐2.2 % 27.6 % 32.3 % Difference 0.5 % 0.5 % ‐1.3 % 0.7 % 0.7 % 10.4 % 22.4 % Vinx Nordic Net, NOK ‐2.7 % ‐8.4 % ‐3.8 % ‐5.9 % ‐5.9 % 8.0 % 46.6 % Euro Stoxx 600, EUR ‐5.5 % ‐11.6 % ‐10.5 % ‐10.8 % ‐10.8 % 0.4 % 11.2 % S&P 500 TR, USD ‐9.0 % ‐13.5 % ‐6.9 % ‐4.4 % ‐4.4 % 30.4 % 37.2 % MSCI AC World, LC ‐7.3 % ‐12.5 % ‐8.4 % ‐7.7 % ‐7.7 % 20.6 % 24.1 %

5 top contribut. Fund Fund Contri‐ 5 bottom contribut. Fund Fund Contri‐ year to date weight return bution year to date weight return bution Leroy Seafood Group 3.3 % 54.0 % 1.48 % Xxl Asa 3.5 % ‐68.5 % ‐3.54 % Austevoll Seafood As 1.0 % 66.0 % 1.26 % B2 Holding Asa 1.7 % ‐40.2 % ‐1.01 % Scatec Solar Asa 3.3 % 49.9 % 1.18 % Elkem As 3.2 % ‐20.2 % ‐1.01 % Tomra Systems Asa 2.6 % 50.5 % 1.05 % Europris Asa 3.2 % ‐26.3 % ‐0.83 % Oslo Bors Vps Holdin 2.4 % 30.6 % 0.86 % Transocean Ltd 1.6 % ‐36.9 % ‐0.66 %

Standard Sharpe Tracking Information Portfolio characteristics Deviation Ratio Error Ratio Arctic Norwegian Value Creation 11.4 % 1.0 4.2 % 0.7 Benchmark 11.1 % 0.7 *) Based on 36 months performance Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD 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.