+3.00% RHENMAN GLOBAL OPPORTUNITIES L/S. July 2018 RHEPA.COM. Monthly update RC1 (SEK)

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1 July 2018 RHENMAN GLOBAL OPPORTUNITIES L/S RC1 (SEK) +3.00% A global long/short equity fund able to invest in all sectors around the world. Fundamental portfolio management by a portfolio manager with almost 30 years experience of the finance sector. The portfolio team supported by the renowned Advisory Board. Monthly update During May and June, investors were fully focused on political events; not least President Trump s various moves on trade. In July, however, their interest shifted to corporate earnings reports. Overall, July s reports were full of good or better-thanexpected news, which supported risk willingness. The most notable event, however, was the market s extremely negative reaction to two of the so-called FAANG companies, Facebook and Netflix. Lower-than-expected growth in the second quarter and more moderate forecasts for the third quarter led to falling share prices of percent for both companies. Facebook lost about 150 billion dollars in market capitalization in one day, more than any other company has ever done. At the same time, reports from several so-called value companies were received positively. The world index rose by slightly more than 1 percent measured in Swedish kronor. The healthcare sector, industrial companies and banks led the climb, while consumer discretionary, energy and raw materials dragged down performance. President Trump continued to set the agenda for political news reports. In mid-july, he met with the Russian President Vladimir Putin in Helsinki, setting off strong negative reactions in the United States. Later in the month, the President of the European Commission Jean-Claude Juncker visited the White House and, despite low expectations, the visit resulted in a joint statement on further negotiations to prevent extended tariffs between the United States and the EU. At the end of the month, Trump made an unexpected announcement to initiate a dialogue with Iran. This was most likely the result of general concern that the fragile balance in the energy market could be upset if Iran were to be shut out. Meanwhile, other events, such as the British government s continued dilemma concerning the Brexit process and the increasingly precarious financial situation in Turkey, had no major impact on the stock markets, other than locally. FUND PERFORMANCE Measured in its main share class RC1 (SEK), the fund rose 3.0 percent. Banks and healthcare companies were the primary contributors, while energy companies and consumer staples dragged down returns. Both the fund s long and short positions boosted performance by 2.4 percent and 0.6 percent, respectively. All the strongest and weakest contributors during the month were US positions, and the fund benefited on both the short and the long side. The main contribution to the fund s short position came from streaming giant Netflix. Its share price declined sharply after the company reported that the number of new subscribers in the second quarter was less than expected (5.2 million instead of 6.2 million). In addition, the company s expectations for the next quarter s growth in terms of the number of users were reduced to a rate lower than the previous year. Some speculate that the reason is lack of new content. This is despite the fact that Netflix has doubled its marketing budget compared to the previous year and has raised new debt in order to spend close to 4 billion dollars more than it is expected to generate in Investors have come Continued on the next page Rhenman & Partners Asset Management AB is under the supervision of The Swedish Financial Supervisory Authority (Finansinspektionen) as of February RHEPA.COM

2 to value Netflix at a significantly higher level than other media companies on the grounds that its future potential is huge. However, it seems clear that the company s story, rather than the fundamentals, is what has driven share price developments. Before the price slump this month, the company had a higher market capitalization than entertainment giant Disney despite reporting less than a quarter of Disney s revenue. As a result of a series of positive reports from semiconductor manufacturers, the subsector was considered a bright spot in the technology sector which was otherwise relatively weak in July. This positive sentiment supported the fund s holdings in Qualcomm which published a well-received report for the second quarter and, to investors delight, announced that it was abandoning its 44 billion dollar bid for NXP Semiconductors after a rejection by Chinese authorities at the end of the month. This was positively interpreted by investors because it was expected to lead to a significant repurchase of shares. These expectations were fulfilled a few days later when the company announced that, through a socalled Dutch auction, it will begin repurchases in September. Another positive contributor was the fund s holdings in JP Morgan, the major US bank. The company s stock price rose following a strong second-quarter report that showed solid growth in all areas. The report also showed that JP Morgan has successfully embraced technological innovations and has increased its market share by offering comprehensive services through its online bank. Of the stocks that contributed negatively to fund performance, Ford had the greatest impact. Its stock declined even before the company released its report, in conjunction with weak reports from other car manufacturers including GM and Fiat Chrysler. When Ford later reported its figures, it became clear that it had lowered its profit forecasts for The company announced that it would spend 11 billion dollars over the next three to five years on restructuring operations and certain other actions, such as exiting certain markets. Its report revealed that operations in Europe and Asia had become loss-making businesses, despite the fact that they had both previously been profitable. In September, Ford will present a detailed restructuring plan showing how it will make the company more profitable. The fund s position in Japanese brewery group Asahi Group also weighed down on returns in July. Its share price has fluctuated sharply since the start of the year, making its performance appear either strong or weak depending on the dates we look at. In early July, the share price decreased in line with generally weak performance on the Tokyo stock exchange and, despite higher mid-month levels, its price was lower at the end of the month. In the meantime, news feeds remained relatively quiet while investors raised their sights toward the company s earnings report slated for early August. Another negative contributor in July was oil service company Halliburton, which is also the world s largest provider of fracking services (a method for extracting oil). Its stock fell after the company reported a weaker operating profit than expected in its largest market area and a lower forecast than investors had hoped for. Halliburton is struggling with temporarily slowed production in the Permian Basin, an area in western Texas and New Mexico that has become one of the world s largest oilfields. Inadequate pipelines and railways have created a bottleneck that has led to a fall in local oil prices and has lowered demand for Halliburton s extraction technology. At the same time, the company s biggest rival, Schlumberger, has started to compete harder on the domestic market. In addition, the price of oil fell during the month after the Trump administration discussed using crude oil reserves to prevent rising gasoline prices, and indicated that the United States might issue exemptions to countries that buy crude oil from Iran. FORECAST So far in 2018, the main driving force behind world indices has been growth companies, mainly American. Investors are looking to the United States because of widespread concerns about economic activity, not least in Europe. In the United States, the number of relatively cyclically-insensitive growth companies is considerably larger. This has meant large inflows to the US stock market at the expense of inflows to other regions. However, developments in July showed an increased breadth of investor interest. For example, we saw that healthy reports and less concerns over trade disputes, at least in the EU, had a positive impact on several stocks that had lagged behind earlier in the year. The sharp drops in share prices for Facebook and Netflix can possibly be a sign that the historically high differences in valuations between different sectors might now be decreasing. The big question is, of course, how long the current strong economic cycle can last. There are two areas of concern. One is if and when trade disputes will affect companies willingness to invest. The second is whether or not continued interest rate hikes in the United States will dampen demand. Our view is that weaker economic development has already largely been priced into many sectors and individual companies. We therefore see continued good share price potential for the companies in which the fund has invested. Fund characteristics KIID AND PROSPECTUS (WEBPAGE) RhenmanPartnersFund/ INVESTABLE CURRENCIES Euro (EUR)/Swedish Krona (SEK) RETURN TARGET Annualised net returns of +7-8 % over time LEGAL STRUCTURE AIF/FCP (Fonds Commun de Placement) under Part II of the Luxembourg Law on Investment Funds PORTFOLIO MANAGER Rhenman & Partners Asset Management AB HEAD OF INVESTMENT TEAM Staffan Knafve AIFM/MANAGEMENT COMPANY SEB Fund Services S.A. PRIME BROKER Skandinaviska Enskilda Banken AB (publ) DEPOSITARY AND PAYING AGENT Skandinaviska Enskilda Banken S.A. AUDITOR PricewaterhouseCoopers (PwC) SUBSCRIPTION/REDEMPTION Monthly MINIMUM TOP UP No minimum NOTICE PERIOD 3 working days HURDLE RATE Euribor 90D (high-water mark) 2

3 FUND PERFORMANCE - RC1 (SEK) NAV Aug-16 Nov-16 Feb-17 May-17 Aug-17 Nov-17 Feb -18 May-18 JULY 2018 SHARE CLASS NAV 1 MONTHLY RETURN 1 YTD SINCE INCEPTION 1 RC1 (SEK) % 4.87% 2.74% RC9 (SEK) % 4.16% 5.16% IC1 (EUR) % 8.76% 7.01% 3 mån Euribor (EUR) % 0.11% 0.53% SHARE CLASS CHARACTERISTICS INSTITUTIONAL SHARE CLASSES ONLY INSTITUTIONAL INVESTORS MINIMUM INVESTMENT MGT. FEE PERF. FEE ISIN NO. BLOOMBERG TICKER LIPPER REUTERS TELEKURS IC1 (EUR) % 20 % LU RGLOPC1 LX IC1 (SEK) % 20 % LU RGLOPI1 LX SHARE CLASS CHARACTERISTICS RETAIL SHARE CLASSES ALSO OPEN TO INSTUTIONAL INVESTORS MINIMUM INVESTMENT MGT. FEE PERF. FEE ISIN NO. BLOOMBERG TICKER LIPPER REUTERS TELEKURS RC1 (SEK) % 20 % LU RGLOPR1 LX RC9 (SEK) % 20 % LU RGLOPR9 LX Administrative fees are charged in addition to the fees above. Further information is available in the KIID as well as the prospectus (part B, B14-18). Note: 1) Please find launch date information on page 4. 3

4 PORTFOLIO CONSTRUCTION 2 CURRENCY EXPOSURE 3 PYRAMID LEVEL POSITION SIZE NO. High conviction 3 %-10 % 18 Core holdings 1 %-3 % 17 Fractional positions 0.5 %-1 % 2 Candidate holdings 0 %-0.5 % 0 USD 52 % EUR 12 % JPY 10 % CHF 10 % SEK 9 % Other 7 % RISK (RC1 SEK) EXPOSURE 6 AUM 7 LARGEST LONG POSITIONS Value at risk % Long 107 % Fund: 1 Exxon Mobil Corp Standard Deviation % Short -6 % EUR 10m 2 Nestle SA Reg Sharpe Ratio Gross 113 % USD 12m 5 JPMorgan Chase & Co Net 101 % Total: EUR 676m 4 Telefon AB LM Ericsson B 5 Roche Holding Ltd Pref Notes: 2) As a percentage of the market value of the long and short positions (excluding cash positions). 3) The AUM is adjusted for fund inflow at month end. 4) For holdings at month end (95% conf. int. 250 days history). 5) Standard deviation and Sharpe ratio are annualized. 6) The exposure is not adjusted for net fund flow at month end. 7) Number of long equity positions (excluding any ETFs). NAV & PERFORMANCE DATA RC1 (SEK) NAV YEAR JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC RC1 (SEK) PERFORMANCE %, NET OF FEES RC9 (SEK) NAV YEAR JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC RC9 (SEK) PERFORMANCE %, NET OF FEES IC1 (EUR) NAV IC1 (EUR) PERFORMANCE %, NET OF FEES ,76 4

5 ABOUT RHENMAN & PARTNERS Rhenman & Partners Asset Management, founded in 2008, is a Stockholm-based investment manager focusing on two niche funds administered by SEB Fund Services S.A.: Rhenman Healthcare Equity L/S, founded in 2009, and Rhenman Global Opportunities L/S, founded in Assets under management amount to approximately EUR 600m. Investment Teams of both Funds are in their investment processes supported by renowned Advisory Boards, including professors and experts with many years of market experience and extensive networks around the world. Legal Disclaimer Rhenman Global Opportunities L/S. The Fund is not an investment fund as defined in the European Union directives relating to undertakings for collective investment in transferable securities (UCITS). Legal information regarding Fund is contained in the Prospectus and the KIID. available at Rhenman & Partners Asset Management AB (Rhenman & Partners) webpage: the-fund/prospectus/. 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