Quarterly Report. Nordea 1 Emerging Stars Equity Fund. Fund data. Overview. Portfolio Managers. Investment strategy. Second quarter 2018

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1 For professional investors only* Quarterly Report Second quarter 2018 Nordea 1 Emerging Stars Equity Fund ISIN: LU (BP-USD) Overview Over the second quarter of 2018, the fund returned %, outperforming the broader market (measured by the MSCI Emerging Markets - Net Return Index in USD) by 0.31 % 1 The fund s outperformance was driven by both positive security selection and asset allocation. Country-wise, South Africa, Korea and India were among the top contributors to performance, while Real Estate, Consumer Discretionary and IT were the largest drivers sectorwise We continue to see an attractive risk/reward relation with a good absolute return potential in EM. Volatility will for sure still be around in the market the spectrum of outcomes from the political scene in the US, Europe and China can be widespread but our base case is that we will see more noise rather than actual fundamental changes to economic structures. Good structural long term fundamentals, attractive valuation levels, and a current weak sentiment towards EM equities in general will be factors that can make the investment in this asset class very positive 1) Sources: Nordea Investment Funds S.A. and Datastream. Period under consideration: The performance represented is historical; past performance is not a reliable indicator of future results and investors may not recover the full amount invested. Fund data Share class Fund category BP-USD Accumulating NAV in USD Base Currency USD Fund AUM Million (USD) 3, Front end fee in % Up to 5.00 Annual management fee in % 1.50 Launch date ISIN Sedol WKN Bloomberg ticker LU B4V3771 A1JHTL NEMSBPU LX No. of holdings 44 Morningstar Rating Overall 2 Data as of ) Data Source 2018 Morningstar, Inc. All Rights Reserved. Date: , Global Emerging Markets Morningstar category. For the BI-USD share class. The Morningstar Rating is an assessment of a fund s past performance based on both return and risk which shows how similar investments compare with their competitors. A high rating alone is insufficient basis for an investment decision. Past performance is no guarantee of future results. Portfolio Managers Nordea Fundamental Equities Team Investment strategy The fund invests in Global Emerging Markets companies which are domiciled or exercise the predominant part of their activity in Emerging Markets. The fund s strategy focuses on structural growth, which means that the portfolio is composed of stocks which provide high shareholder value on the company level and which take significant advantage of the long-term structural mega-trends, demographics, technology and globalisation and sustainability. The fund has a particular focus on the companies ability to comply with international standards for environment, social and corporate governance (ESG) and uses this actively in its investment process. Juliana Hansveden Portfolio Manager Emily Leveille Co-Portfolio Manager * investing for their own account - according to MiFID definition

2 Quarterly commentary Q Global markets were subject to more volatility in the second quarter of 2018 as US policy towards trading partners and allies continue to be highly unpredictable and unusually combative. The threat of a trade war with China and the imposition of tariffs on imported steel and aluminium has generated uncertainty around global trade and increased the chances of greater protectionism. It has also raised the spectre of higher inflation, particularly in the US, at a time when the economy has very little slack, and energy prices are also on the rise. Other market-moving events of the quarter included the imposition of further sanctions on Russia, a currency crisis in Argentina and Turkey which spread, at least initially, to historically vulnerable markets like Indonesia and South Africa, and the decision by the US to pull out of the Iran nuclear agreement and re-impose sanctions on that country. The USD rose against all currencies, due partially to investors responding to the previously mentioned events by adding to lower-risk assets, and partially because of significant repatriation of profits held overseas by US firms following the tax cuts in the US earlier this year. In this environment, the Nordea 1 Emerging Stars Equity Fund (BP-USD) outperformed the benchmark (the MSCI Emerging Markets Net Return Index) by 31bps. 3 The outperformance was driven both by positive contribution from asset allocation as well as stock selection. Within asset allocation it was primarily the stock picking in South Africa and Korea together with the overweight in India that drove the performance. On the other hand, security selection was not so strong in Taiwan and Brazil. Sector wise, Consumer Discretionary and Real Estate were the main contributors. In terms of asset allocation, the overweight in IT was positive for the fund. At the stock level, among the top contributors we find: Phoenix Mills (India, Real Estate) outperformance with the news that the company has entered into an agreement to purchase new land to build a shopping mall in Bangalore in an area with rapid residential development. Phoenix Mills also reported strong numbers, reflecting the high quality of their assets and contracts linked to tenant sales, which are beginning to recover. Samsung SDI (Korea, IT) outperformed this month on generally positive news flow regarding EV vehicle and battery demand, as well as more positive expectations around demand for OLED screen technology. We had the chance to meet with Samsung SDI in June and came away with renewed conviction on the company s ability to be a leader in EV battery technology as well as large energy battery technology for their Energy Storage Systems business AIA Group (China, Financials) outperformed this quarter primarily due to announcements by the central bank governor in China that indicate a faster and more material opening of China s life insurance industry for foreign players. This specifically benefits AIA which is already growing very quickly in China, and reforms will allow it to expand geographically and gain share where it could not previously. Among the bottom contributors to performance we find: Itaú Unibanco (Brazil, Financials) underperformance was not driven by fundamentals in our view, but rather by a pullback in the Brazilian market and the currency due to slower than expected economic recovery, and investors positioning themselves for the impact of rate hikes in the US. We continue to believe Itau is one of the strongest banking franchises in emerging markets, and will benefit from a recovery in Brazilian GDP and any reforms that pass in the coming years to stabilize Brazil s government debt/ GDP. Banco Macro (Argentina, Financials) underperformed due to currency weakness in the Argentine economy, brought on by expectations of rate hikes, and macroeconomic fundamentals which have improved, but remain very exposed to the external market. Part of the case for Banco Macro was continued economic recovery in Argentina - inflation falling, growth recovering, and the ability for President Macri to carry out important but difficult economic reforms. We believe that the recent events have changed the fundamental picture, and that the administration will have to implement much harsher reforms, which will lower their chances of re-election. All of this culminated in a loss of conviction in the company s business for the next 3-5 years, and so we sold the stock. Sberbank (Russia, Financials) stock price suffered from the announcement of additional sanctions from the US on a set of Russian oligarchs, in response to Russia s meddling in the US presidential elections. There was a general market sell-off in response to these sanctions, though Sberbank has not been specifically targeted by any sanctions. During the quarter, the most significant investment were: The airline company Azul (Brazil, Financials) which has a unique hub-and-spoke model. We see structural growth in demand for airline travel as Brazil develops. Azul s returns to shareholders should continue to grow as the company is updating its fleet to reduce cost per seat and increase fuel efficiency, adding ancillary revenue from cargo and passenger services, and expanding its loyalty program. 3) Sources: Nordea Investment Funds S.A. and Datastream. Period under consideration: The performance represented is historical; past performance is not a reliable indicator of future results and investors may not recover the full amount invested.

3 HFDC Bank (India, Financials) is one of India s leading private banks. HDFC has the strongest consumer franchise in India and management has continued to manage the business for long-term returns, avoiding pitfalls that many competitors have not. Raia Drogasil (Brazil, Consumer Staples) is a leading drugstore chain in Brazil and we expect the company to continue to gain share in a market growing structurally because of rising incomes and a quickly ageing population in Brazil. complicating policy decisions. The increased uncertainty around global trade conditions could have a negative impact on some emerging markets whose economies depend on exports, but the scale of the impact is unclear. As investors, it is in times like these that we must remember to keep a longterm perspective and continue to look for good businesses exposed to structural growth that are generating Economic Value Added for shareholders, as this is what will drive investment results in the long run. In the meantime, we have divested from: The Chinese car maker BYD (China, Consumer Discretionary) as the company is too reliant on government subsidies and we see risk of equity capital increase. Netease (China, IT), a Chinese gaming and ecommerce company, was sold as the PC gaming market is becoming saturated and Netease has not invested in casual and mobile gamers X5 (Russia, Consumer Discretionary), a Russian food retailer, was sold as growth guidance became unsustainable and store management deteriorated. ICICI Bank (India, Financials) was sold as disappointing risk management and corporate governance does not give confidence in future returns to minority shareholders. Emerging Markets continue to have extremely attractive long-term fundamental characteristics, both in absolute terms and relative to developed economies. In EM, we see economies with faster rates of growth, younger populations, higher savings rates, lower debt levels, and positive productivity changes, when compared to developed markets. The macroeconomic picture may vary from country to country but growth rates overall remain well above most DM, and most EM have much healthier fiscal balances and external accounts than they did during the Taper Tantrum of Valuations are also in line with long-term averages, which gives us another measure of comfort when compared for example to the US, where both valuations and profitability are at historical highs. That being said, more volatility is likely in the market the spectrum of outcomes on the political front in the US, EU and China is wide the escalation of the trade war between the US and China was not our base case (as trade wars are always a lose-lose proposition) and this is probably the most significant risk to sustained global growth and a low inflation environment. Central banks will continue to try and gradually end the extreme monetary easing cycle that has been with us for much of the last decade; however, with trade tensions now part of the global backdrop, the chances of a spike in inflation or a slowdown in growth are higher,

4 Cumulative returns as of in % Time frame Fund 4 Index 5 Year to date month months months year years years Since launch Performance of the fund versus index (since inception on ) Calendar year returns in % Time frame Fund 4 Index Apr-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Nordea 1 Emerging Stars Equity Fund (BP-USD) MSCI Emerging Markets Net Return Index 4) ISIN Code LU Inception date: ) MSCI Emerging Markets Net Return Index. Sources: Nordea Investment Funds S.A. and Bloomberg. Period under consideration: The performance represented is historical; past performance is not a reliable indicator of future results and investors may not recover the full amount invested. Quarterly sector contribution in % Sector Average fund weight A Relative fund weight Non-weighted Weighted Index Fund Fund absolute Fund relative performance performance contribution B contribution Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Real Estate Telecommunication Services Utilities C D D 0.77 E A) Rebased to 100. B) Sum of individual contribution equals to the fund s performance for period of report. C) The figure represents the overall performance of the index over the quarter expressed in the fund s share-class currency. D) The figure represents the gross of fees performance of the fund in USD from to The performance represented is historical; past performance is not a reliable indicator of future results and investors may not recover the full amount invested. E) Sum of relative contribution equals to the fund s excess return. Source: Nordea Investment Funds S.A. Date: Quarterly country contribution in % Country Average fund weight A Relative fund weight Non-weighted Weighted Index Fund Fund absolute Fund relative performance performance contribution B contribution China India Republic Of Korea Taiwan, province of China Brazil South Africa Hong Kong Russia Mexico Indonesia Other C D D 0.77 E A) Rebased to 100. B) Sum of individual contribution equals to the fund s performance for period of report. C) The figure represents the overall performance of the index over the quarter expressed in the fund s share-class currency. D) The figure represents the gross of fees performance of the fund in USD from to The performance represented is historical; past performance is not a reliable indicator of future results and investors may not recover the full amount invested. E) Sum of relative contribution equals to the fund s excess return. Source: Nordea Investment Funds S.A. Date:

5 Top ten weights contribution during the quarter in % Company Average weight Performance 6 Absolute contrib. Tencent Holdings Samsung Electronics Alibaba Group Holding ADR Taiwan Semiconductor Manufacturing Naspers Ping An Insurance Group Co of China Housing Development Finance Phoenix Mills AIA Group Samsung SDI ) The performance is expressed in the fund s base currency based on the holding period of the stock and is gross of fees. The performance represented is historical; past performance is not a reliable indicator of future results. Source: Nordea Investment Funds S.A. Period under consideraton: Top ten contributors during the quarter in % Company Average weight Performance 6 Absolute contrib. Infosys Phoenix Mills Naspers Samsung SDI AIA Group Varun Beverages Sunny Optical Technology Group Alibaba Group Holding ADR ememory Technology Antofagasta ) The performance is expressed in the fund s base currency based on the holding period of the stock and is gross of fees. The performance represented is historical; past performance is not a reliable indicator of future results. Source: Nordea Investment Funds S.A. Period under consideraton: Bottom ten contributors during the quarter in % Company Average weight Performance 6 Absolute contrib. Itau Unibanco Holding Taiwan Semiconductor Manufacturing Samsung Electronics Sberbank of Russia PJSC Banco Macro ADR Azul ADR Qualicorp Consultoria e Corretora de Seguros Ping An Insurance Group Co of China Bank Rakyat Indonesia Persero Tencent Holdings ) The performance is expressed in the fund s base currency based on the holding period of the stock and is gross of fees. The performance represented is historical; past performance is not a reliable indicator of future results. Source: Nordea Investment Funds S.A. Period under consideraton: Market capitalisation as of in % Mn USD Fund < 1, ,000 2, ,000 5, ,000 10, ,000 20, ,000 30, ,000 40, ,000 50, , , , , >200, Source: Nordea Investment Funds S.A. Date:

6 Source (unless otherwise stated): Nordea Investment Funds S.A. Period under consideration (unless otherwise stated): Performance calculated NAV to NAV (net of fees and Luxembourg taxes) in the currency of the respective share class, gross income and dividends reinvested, excluding initial and exit charges as per Initial and exit charges could affect the value of the performance. The performance represented is historical; past performance is not a reliable indicator of future results and investors may not recover the full amount invested. The value of shares can greatly fluctuate as a result of the sub-fund s investment policy and cannot be ensured. If the currency of the respective share class differs from the currency of the country where the investor resides the represented performance might vary due to currency fluctuations. The sub-funds mentioned are part of Nordea 1, SICAV, an open-ended Luxembourg-based investment company (Société d Investissement à Capital Variable), validly formed and existing in accordance with the laws of Luxembourg and with European Council Directive 2009/65/EC of 13 July This document is advertising material and does not disclose all relevant information concerning the presented sub-funds. Any investment decision in the sub-funds should be made on the basis of the current prospectus and the Key Investor Information Document (KIID), which are available, along with the current annual and semi-annual reports, electronically in English and in the local language of the market where the mentioned SICAV is authorised for distribution, without charge upon request from Nordea Investment Funds S.A., 562, rue de Neudorf, P.O. Box 782, L-2017 Luxembourg, from the local representatives or information agents, or from our distributors. Investments in derivative and foreign exchange transactions may be subject to significant fluctuations which may affect the value of an investment. Investments in Emerging Markets involve a higher element of risk. The value of shares can greatly fluctuate as a result of the sub-fund s investment policy and cannot be ensured. Investments in equity and debt instruments issued by banks could bear the risk of being subject to the bail-in mechanism (meaning that equity and debt instruments could be written down in order to ensure that most unsecured creditors of an institution bear appropriate losses) as foreseen in EU Directive 2014/59/EU. For further details of investment risks associated with these sub-funds, please refer to the relevant Key Investor Information Document (KIID), available as described above. Nordea Investment Funds S.A. has decided to bear the cost for research, i.e. such cost is covered by existing fee arrangements (Management-/Administration-Fee). Nordea Investment Funds S.A. only publishes product-related information and does not make any investment recommendations. Published by Nordea Investment Funds S.A., 562, rue de Neudorf, P.O. Box 782, L-2017 Luxembourg, which is authorized by the Commission de Surveillance du Secteur Financier in Luxembourg. Further information can be obtained from your financial advisor. He/she can advise you independently of Nordea Investment Funds S.A. Additional information for investors in Switzerland: The Swiss Representative and Paying Agent is BNP Paribas Securities Services, Paris, succursale de Zurich, Selnaustrasse 16, CH Zurich, Switzerland. Additional information for investors in Germany: The Information Agent in Germany is Société Générale S.A. Frankfurt Branch, Neue Mainzer Straße 46-50, D Frankfurt am Main. A hard copy of the above-mentioned fund documentation is also available from here. Additional information for investors in Austria: Sub-paying Agent and Representative in Austria is Erste Bank der Österreichischen Sparkassen AG, Am Belvedere 1, A-1100 Vienna. Additional information for investors in the Netherlands: Nordea 1, SICAV is a Luxembourg Undertaking for Collective Investment in Transferable Securities (UCITS) registered in the Netherlands in the register kept by the AFM, and as such is allowed to offer its shares in the Netherlands. The AFM register can be consulted via Additional information for investors in France: With the authorisation of the AMF the shares of the sub-funds of Nordea 1, SICAV may be distributed in France. Centralising Correspondent in France is CACEIS Bank, located at 1-3, place Valhubert, Paris. Investors are advised to conduct thorough research before making any investment decision. Additional information for investors in Belgium: The Representative Agent in Belgium is BNP Paribas Securities Services S.C.A., Brussels branch, 25 Rue de Loxum, Brussels, B-1000-Belgium. A hard copy of the above-mentioned fund documentation is available upon demand free of charge. Additional information for investors in Spain: Nordea 1, SICAV is duly registered in the CNMV official registry of foreign collective investment institutions (entry no. 340) as authorised to be marketed to the public in Spain. The Depositary of the SICAV s assets is, J.P. Morgan Bank Luxembourg S.A. In Spain, any investment must be made through the authorised distributors and on the basis of the information contained in the mandatory documentation that must be received from the SICAV s authorised distributor prior to any subscription. The Representative Agent is Allfunds Bank S.A., Paseo de la Castellana 9, ES Madrid, Spain. A complete list of the authorised distributors is available in the CNMV s webpage ( Additional information for investors in Portugal: The Management Company of the SICAV, Nordea Investment Funds, S.A., and the Depositary of the SICAV s assets, J.P. Morgan Bank Luxembourg S.A., are validly formed and existing in accordance with the laws of Luxembourg and authorized by the Commission de Surveillance du Secteur Financier in Luxembourg. Our distributor in Portugal is BEST - Banco Electrónico de Serviço Total, S.A., duly incorporated under the laws of Portugal and registered with the CMVM as a financial intermediary. Additional information for investors in Italy: Fund documentation as listed above is also available in Italy from the distributors and on the website The updated list of distribution agents in Italy, grouped by homogenous category, is available from the distributors themselves, at State Street Bank International GmbH Succursale Italia, branches (located in the main towns of each region), BNP Paribas Securities Services - Succursale di Milano, Banca Sella Holding S.p.A, Banca Monte dei Paschi di Siena S.p.A., Allfunds Bank S.A. Succursale di Milano, Société Générale Securities Services S.p.A. and on the website Any requests for additional information should be sent to the distributors. Before investing, please read the prospectus and the KIID carefully. We recommend that you read the most recent annual financial statement in order to be better informed about the fund s investment policy. The prospectus and KIID for the sub-funds have been published with Consob. Additional information for investors in the United Kingdom: Approved by Nordea Bank AB, 5 Aldermanbury Square, London EC2V 7AZ, which is regulated by the FCA in the United Kingdom. Additional information for investors in Sweden: The Paying Agent is Nordea Bank AB (publ), Smålandsgatan 17, Stockholm SE The Representative Agent is Nordea Funds Ltd, Swedish Branch, Mäster Samuelsgatan 21, Stockholm, SE Additional information for investors in Denmark: The Information and Paying Agent is Nordea Danmark, filial af Nordea Bank AB (publ), Sverige, Strandgade 3, Christiansbro, DK-1401 Copenhagen K. A hard copy of the above-mentioned fund documentation is available here. Additional information for investors in Norway: The Paying Agent is Nordea Bank AB (publ), Filial i Norge, Essendrops gate 7, Postboks 1166 Sentrum, NO-0107 Oslo. The Representative Agent is Nordea Funds Ltd., Norwegian Branch, Essendrops gate 7, Postboks 1166 Sentrum, NO-0107 Oslo. Additional information for investors in Finland: The Paying Agent is Nordea Bank AB (publ), Finnish Branch, Satamaradankatu 5, FI NORDEA, Helsinki. The Representative Agent is Nordea Funds Ltd, Satamaradankatu 5, FI NORDEA, Helsinki. Additional information for investors in Latvia: The Representative and Paying Agent is Luminor Bank AS, Skanstes iela 12, Riga, LV Additional information for investors in Estonia: The Representative and Paying Agent in Estonia is Luminor Bank AS, Liivalaia 45, Tallinn. Additional information for investors in Lithuania: The Representative and Paying Agent in Lithuania is Luminor Bank AB, Konstitucijos pr. 21A, Vilnius. Shareholders must evaluate possible investment risks and take this into consideration when making investment decisions. Information for investors in Brazil: Nordea 1, SICAV have not been, and will not be, registered with the CVM and may not be offered or sold in Brazil except in circumstances which do not constitute a public offering or distribution under Brazilian laws and regulations. Investors within Brazil should consult with their own counsel as to the applicability of these laws and regulations or any exemption there from. This material aims to provide information only and does not constitute and should not be construed as an offer to buy or sell or solicitation of an offer to buy or sell any security or financial instrument. Source (unless otherwise stated): Nordea Investment Funds S.A. Unless otherwise stated, all views expressed are those of Nordea Investment Funds S.A. This document may not be reproduced or circulated without prior permission and must not be passed to private investors. This document contains information only intended for professional investors and independent financial advisers and is not intended for general publication. Reference to companies or other investments mentioned within this document should not be construed as a recommendation to the investor to buy or sell the same, but is included for the purpose of illustration.