Arctic Norwegian Value Creation Monthly Report August 2019
FUND COMMENTS Arc c Norwegian Value Crea on (Class B) fell by 0.3% in August bringing return year to date to 9.9%. Since incep on in August 2014, the fund has returned 69.9% compared to a return of 42.0% for the Norwegian OSEFX benchmark. The largest posi ve contribu ons to fund performance in August came from Schibsted, Veidekke and Lerøy Seafood Group. Schibsted con nued to perform well supported by strong share price development for its main asset, Adevinta. Adevinta comprises more than 2/3 of Schibsted’s market value. Schibsted started its buy-back program for up to 2% of the shares in August. The Tinius Trust, its main shareholder, increased its holdings during last month. Veidekke reported Q2 figures ahead of expecta ons on both topline and margin. Previously taken measures to improve margins, especially within the Civil Engineering Norway and Industrial segments, are star ng to show results, while the order book of NOK 35 billion is at all- me high. With an improving balance sheet, the NOK 5 dividend per share should be intact, offering an a rac ve yield. The share price of Lerøy benefi ed from a generally strong sen ment for the aquaculture sector. Having said that, Lerøy reported a somewhat disappoin ng second quarter while salmon prices retreated during the month. The most nega ve contribu ons to performance last month came from XXL, Storebrand and B2 Holding. XXL’s Q2 in July showed weak like-for-like growth in Norway and uncertainty about sales con nued last month. Moreover, XXL has manipulated the number of items sold at pre-discount sales prices at some stores in order to jus fy large percentwise campaign discounts. The Norwegian Consumer Authority will look into the ma er and XXL has ini ated its own inves ga on. Gresvig Retail Group, the second largest sport retail chain in Norway will rebrand its G-Max and G-Sport stores into Intersport stores. Sport retail sales for July in Norway and Sweden increased 3.7% and 3.6% respec vely. Storebrand’s share price fell as long term interest rates declined. Norwegian five year swap rates declined by 24 bps to 1.51%, and - ceteris paribus - this may hit the company’s solvency ra o by almost 10 %- points. The CEO of B2 Holding stepped down in the middle of August. A week later, the company issued a profit warning. The company took write-downs of NOK 421 mill. as collec on es mates have proven to be too op mis c. B2 Holding’s Q2 report at the end of the month was in line with adjusted expecta ons. Year to date, Bonheur, Schibsted and Gjensidige have been the largest posi ve contributors to fund performance, while B2 Holding, Norsk Hydro and Sbanken have been the largest detractors. We increased our investments in Veidekke and Storebrand, while we reduced our holdings in Adevinta, Mowi and Yara. At the end of August, the por olio was valued at 13.2 mes earnings (12m fwd) and 1.6 mes book value. Corresponding figures for the Norwegian market were 14.1 and 1.7, respec vely. Oslo, September 2019 Sindre Sørbye Ole E. Dahl Tore Mengshoel Thomas Rasmussen Por olio Manager Por olio Manager Por olio Manager Analyst
ABOUT THE FUND Arc c Norwegian Value Crea on is research driven and truly index-independent UCITS fund. The investment process focus on iden fying companies which are considered to be value-crea ng over me at a reasonable price. The por olio is con- structed by bo om 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% 12.4 % 11.2 % 11.1 % 11.1 % 9.9 % 9.6 % 10% 7.7 %
5% 0.6 % 0% -0.3 % -5% -3.7 % -3.0 % Month YTD 12m 36m p.a. 60m p.a. Incep. p.a. Arctic Norwegian Value Creation II Class B (25/8-14) OSEFX FUND COMPOSITION END OF MONTH
Real Estate 0.5% 10 largest positions Energy 16.9% Lerøy Seafood Group 5.7 % Aker BP ASA 4.0 % Industrials 11.3% Kongsberg Gruppen ASA 5.0 % Aker ASA 4.0 % Health Care 0.0% Schibsted ASA 4.8 % Yara International ASA 4.0 % Consumer Discretionary 8.6% Telenor ASA 4.2 % Evry ASA 3.3 % Materials 11.3% Europris ASA 4.2 % Gjensidige Forsikring AS 3.3 % Information Technology 6.8% Financials 21.2% 5 largest overweights +/- 5 largest underweights +/- Consumer Staples 8.0% Lerøy Seafood Group 4.0 % Equinor ASA -8.4 % Telecommunication Services 11.6% Kongsberg Gruppen 4.0 % Mowi ASA -6.1 % Utilities 1.7% Europris ASA 3.8 % DNB ASA -5.8 % Aker 2.8 % Telenor -5.2 % 0% 5% 10% 15% 20% 25% EVRY ASA 2.7 % Orkla -4.4 %
FUND PERFORMANCE AND RISK FIGURES —CLASS B NOK (FORMER CLASS A)
3 6 Since Month months months YTD 1 year 3 years launch Fund -0.3 % 0.0 % -1.7 % 9.9 % -3.7 % 42.1 % 69.9 % Benchmark 0.6 % 1.6 % 1.0 % 9.6 % -3.0 % 37.5 % 45.0 % Difference -1.0 % -1.6 % -2.6 % 0.2 % -0.7 % 4.6 % 24.9 % Vinx Nordic Net, NOK 1.7 % 6.2 % 4.6 % 12.4 % 1.0 % 27.5 % 64.8 % Euro Stoxx 600, EUR -1.3 % 3.4 % 4.1 % 15.2 % 2.2 % 20.1 % 28.1 % S&P 500 TR, USD -1.6 % 6.9 % 6.2 % 18.3 % 2.9 % 43.2 % 62.4 % MSCI AC World, LC -2.0 % 4.6 % 3.7 % 14.6 % 0.8 % 32.2 % 42.3 %
5 top contribut. Fund Fund Contri- 5 bottom contribut. Fund Fund Contri- year to date weight return bution year to date weight return bution Bonheur Asa 2.3 % 107.6 % 1.77 % B2 Holding Asa 1.7 % -38.3 % -0.62 % Schibsted Asa-B Shs 4.2 % 34.2 % 1.56 % Sbanken Asa 2.6 % -14.3 % -0.38 % Gjensidige Forsikrin 3.3 % 36.3 % 1.08 % Drilling Co Of 1972/ 0.7 % -24.6 % -0.37 % Aker Bp Asa 4.5 % 17.0 % 0.93 % Norsk Hydro Asa 1.5 % -23.7 % -0.37 % Tomra Systems Asa 2.7 % 33.8 % 0.85 % Xxl Asa 2.8 % -12.4 % -0.36 %
Standard Sharpe Tracking Information Portfolio characteristics Deviation Ratio Error Ratio Arctic Norwegian Value Creation 10.9 % 1.1 4.4 % 0.3 Benchmark 9.7 % 1.1 *) Based on 36 months performance Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD 2019 6.64 % 4.75 % 0.42 % 1.88 % -3.92 % 2.27 % -1.84 % -0.34 % 9.85 % 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 subscrip on and management fees. 80.0 % The return may become nega ve as a result of nega ve price develop-
60.0 % ments. Arc c Fund Management AS seeks to the best of its ability to ensure that all informa on given in this report is correct, however, makes reserva- 40.0 % ons regarding possible errors and omissions. Statements in the report reflect the por olio managers’ viewpoint at a given me, and this view- 20.0 % point may be changed without no ce. The report should not be perceived as an offer or recommenda on to buy or sell financial instruments. Arc c 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 Arc c Fund Management AS may be owners of securi es 08/14 01/15 06/15 11/15 04/16 09/16 02/17 07/17 12/17 05/18 10/18 03/19 08/19 issued by companies that are either referred to in this rapport or are part of Arctic N orwegian Value Creation Class B (Start 22.08.14) OSEFX the fund's por olio.