thirdly, the one we are in, are authorities

trying to find solutions to the problems.

As we a have said time and time again, we

are now at a time where a solution must

be found for the future.

So what has been done over the last two

years? Well, the firewall has been in-

creased to over a thousand billion Euro by

implementing two resource funds, helping

the bail out of Greece, Portugal and Ire-

land. A financial deficit program has been

agreed and a banking package towards

Spain has been introduced. However, at

the present time we must admit this has

not yet calmed the financial markets. So

what do we need? In our opinion, and as

we have stated so many times in our previ-

ous newsletters, a financial union is a

must. We cannot have a common cur-

rency without having a common finance

policy, working policy etc. The Euro was

built on hopes and dreams that each

country would react in the same way and

have the same financial discipline. Clearly,

If the EU was a racing pigeon, it would

be called "Optimistic" and it would

circle the acropolis looking for direc-

tion, only to be shot down by a Span-

iard, picked up and sold to a German

by an Irishman. The EU is having to

make decisions again as a collective

which is like getting the prisoners, the

jail guards and the prison commis-

sioner to agree on prison policies. The

French refuse to serve Brie with the

consistency of Palestine, Sacré bleu

thank God. Greece saw the EU as a

brand it wanted to be associated with

so "played" with the paperwork, we

knew and let them. The U.K followed

their normal line of not "jumping the

queue" and "rules are rules" attitude.

And Ireland? well they saw the EU as a

cow that needed milking. And to top it

all the Germans just went and

"vorsprung" the lot of us. It took 30

years to define "chocolate" within the

EU so what, in reality, are the chances

of us all managing to find a financial

union solution?

So after a good start to the year, we

have again experienced high uncer-

tainty and further volatility in the

financial markets in Q2. The reason for

this once again were the Greeks, their

first election was not able to give a

clear picture on who was going to run

the new government, therefore a new

election was ordered by the Greek

President adding a further month of

uncertainty. In the same period the

pressure on the Spanish banks grew to

new heights, bringing further pressure

on the Spanish and Italian yields which

hit a new EU area all-time high of

7,125%. Portugal, Ireland and Greece all

had to ask the EU for assistance when

they reached the 7% mark. We must

admit we had not seen this coming and

as we have written in our Q1 newsletter,

we did feel that the measures taken by

the ECB had put a more positive tone in

the market. The above outcome came as

a surprise as we did not see any other

solution for Greece than to vote for the

EU package in the first election.

Spain pressured, has recently sought

support from the EU to finance the their

banks. A loan package was presented,

which created a short relief rally, but the

detail regarding the package was very

limited and the loan was to the Spanish

Government and not directly to the

banks. Thus, in effect creating a higher

debt level and possibly new downgrades

from the credit agencies. Climbing

yields in Italy showed the market conta-

gion. However, a part of this explana-

tion had to do with support for the

technocrat government, led by Mario

Monti, which was weakening due to the

very hard savings pro-

grams executed and the

uncertainty if Italy was

able to fund them-

selves.

We clearly still have a

lot of uncertainty and

face more "problem

resolving" before we

will see more easing in

the market. Some could

say we are now at the

third and hopefully the

last phase of the crisis.

The first phase being

denial of Europe having

a problem. The second

being protests against

governments and

“ON THE WINGS OF A DOVE”

Inside this issue:

STRATEGY 2

STRATEGY—CURRENCY 3

STRATEGY—STOCKS 3

STRATEGY—STOCKS 4

STRATEGY— BONDS 4

BUSINESS DEVELOPMENT 5

JULY 2012 NEWS LETTER

“Latin market and a new player in the

AlphaCapita Oil sector ”

Outlook

Page 2

“However, as simple

as it sounds,

politicians will need

to feel their "jobs

Outlook continued

as one can see how the French flaunt all EU regulation on food, the EU individually has done the

same financially. So to answer the question, integration and a banking union that does not only

provide liquidity for the banks but aids solvency is what is needed, like they did in the U.S with

"tarp". However, as simple as it sounds, politicians will need to feel their "jobs worth" and these

ideas will no doubt be pulled from pillar to post prolonging any cure. If they could just implement a few ideas fast, creating

important steps towards a union this would ease pressure in the market right now .Of course the recent election in Greece,

with the win of the New Democrats has struck off one of the issues. However this must not take away the above focus on

working toward more integration.

In Asia we have recently seen that China has lowered the cash demands for banks, as the latest figures have shown growth

declining. Coupled with the Chinese government having been out discussing their expectation for Q3 which should bring the

growth back to over 8% p.a. This is key for the global growth.

As focus is very much on the EU and EU deficit, many investors have forgotten to look at the U.S. Here the deficit continues to

increase and the current debt ceiling is getting closer. Expectations are that if congress and the U.S President cannot deliver

some kind of agreement to reduce this deficit, the regulations agreed on last summer will go into force. This will mean an

amount of 600 billion USD will be taken out of the U.S economy yearly by cost cutting via military and social security. At the

latest FED meeting they prolonged operation "twist", FED selling short term bonds and then buying long term debt, for an-

other six months to the end of year. The market expectation was disappointing, however the statement from Chairman Ben

Bernanke did show that the FED is ready to support further if needed. A clear sign of a continued bias towards easing. For

investors it is important to note that the U.S central bank has more obligations in regards to stabilizing unemployment and

therefore we have seen a lot more activity in comparison to ECB. So the next couple of months are going to be interesting to

see if the FED is really going to support the market further. The unemployment rate is going to be a key figure to watch.

Strategy

With all that we have said so far, it is important to note, that stocks are in general trading with very attractive ratios. However,

further uncertainty in the EU and an unthinkable breakup of the Euro will cause all sorts of interesting valuations. Even as the

price looks attractive at the present time they can easily go lower. So alongside U.S and emerging markets the present climate

in the E.U causes dilemmas for long term investment strategies.

By trying to protect our portfolios we have therefore in Q2 reduced our holdings in the more volatile equities. This does not

mean we have sold out of them in totally, but simply reduced the amount held. The revenue of this sell off has been left as

cash for the moment.

We also reduced our allocation in corporate bonds. This was done within the allocation of "higher risk rated" bonds as we did

not want to be caught in a liquidity trap if the market went bottom up. We still like this asset class as we can get a decent

yields. We will re-enter but we need more clarity regarding the EU crisis first.

Our focus has not changed despite the recent turmoil. We still very much like to have a good diversification on the portfolios,

and we still like investment cases with a long term view. We also still believe in the strategy of always being invested in equi-

ties. This strategy has in the current market resulted in more volatility in our portfolios than we like. We are strong believers

that it is more or less impossible to time the market correctly at the moment, therefore "dipping in and out" of the market is

not only risky, but also costly in our opinion.

Looking into Q3 and the rest of summer, we still expect good earnings from the companies we invest in. For good earnings

reports to actually reward stock valuations will very much depend on the tension in the EU easing. Also, we are getting closer

to the U.S elections and as mentioned in other newsletters, we normally experience good returns in years with a US election.

Of course it will be interesting to see how the central banks, FED, ECB, BoE, etc. will react going forward if tension is kept at

this level. Lest hope that the central banks somehow will keep a floor under the financial markets. Argumentally not their true

mandate, but as the politicians cannot find their way out of a room with the door clearly marked with the sign "exit", central

banks will no doubt keep supporting in their efforts to deliver financial stability in the long term. So to conclude on our strat-

egy, we keep a positive view for

2012 but it is going to be a bumpy

ride. With clarity being the big-

gest problem at present, we have

allocated our portfolios in a bal-

anced manner. Meaning we are

defensively placed with our bond

and cash reserves, yet ready for a

pull from recession in regards our

present stock allocation. As things

become clearer we will be able to

start to re allocate in either direc-

tion.

“Nokia CEO Stephen

Elop announced a

downgrade of their

results for q1 and

q2."

As the tensions have raised we felt it would be too big a risk to keep our long EURCHF position, even after the SNB (Swiss Central Bank) had

stated they would defend the 1,20 floor with all means. We therefore closed down the position with a 1% loss.

Can the SNB continue to defend the CHF? Theoretically yes, as SNB can print money but it would be highly unlikely as this would have a nega-

tive impact on the economy in the future. According to latest figures from SNB (March) foreign currency investments amounts to 245.5 billion

CHF out of a total currency balance sheet of 345.3 billion. How much of this is attributed with outright currency purchase is unknown, but it definitely shows that the SNB

has been in the market buying foreign currency to keep EURCHF above the 1.20 level. We do expect the CHF to trade around 1.20 to 1.22 for some time to come even though

the CHF is highly overvalued and hurting the future Swiss economy. We expect that a move toward the 1.25 level will happen, but not before the end of this year.

In Q2 we also experienced a strengthening of the USD against Euro. This again, had to do with the flight to safety. As we have around 20% of our investments in USD, we

have benefited on our performance with around 3%.

If we look at the "Euro collapse" scenario, which is not a realistic case in our opinion. We take the view that, as we are predominantly invested in assets primarily in Den-

mark, Germany, UK and U.S. and should the reintroduction of the DEM (German D- mark) come, it would most likely be a much stronger currency, with some analysts

predicting a strength of over 30% of the present Euro. The Danish Kroner will no doubt follow as it has been a tradition for the last thirty years that the DKK is linked to the

D-Mark/Euro. Early on we would most likely see a much stronger USD and sterling, again flight to safety. So with our present geographical asset allocation we would be

reasonably well positioned for such a Euro melt down.

Page 3

In Q1 we bought into

Mobile producer Nokia

after a long time of moni-

toring it. The surprise for

us was therefore very big

when Nokia CEO Stephen

Elop announced a down-

grade of their results for q1

and q2. Then came out

recently downgrading the

forecast further and re-

ducing the work force by

10.000 employees. This

was especially a surprise as in Barcelona he had announced, that "Nokia has now turned the corner and things were going forward"

With all this new information out, we must admit that this is a big setback for Nokia. We cannot see any short term indicators which should turn a positive momentum on

Nokia. We still believe in a turnaround of Nokia, but the share price will properly go lower before this can kick in. If Nokia comes down to two Euro we will rethink if it's a

business case again. Our position closed due to our stop loss target triggering at €2.95 last week. Today Nokia is trading at 1.90 Euro level.

ON CURRENCY

ON STOCKS

“Chart showing EURCHF spot”

Page 4

“Chinese

Government

indicating growth

will come back in the

second half of 2012”

“The bond market

clearly shows the big

imbalances we are

experiencing right

now.”

STOCKS - continued

ON BONDS

The bond market clearly shows the

big imbalances we are experiencing

right now. We are now seeing bor-

rowing costs in the peripheral EU

countries hitting new highs. At the

same time we see negative yields or

close to negative in countries like

Denmark and Germany. This is not

helpful at all and needs addressing.

In Q2 we sold out of one of our

corporate bonds, 11% ATU 2017.

Nothing wrong with the issuer, but

more to do with liquidity in view of

the Greek saga. We realised a profit

ranging between 10% and 2% de-

pending on the clients original

entry point into this asset. We do

believe in the "corporate bond" as a

positive and a must have asset class

going further into the year, espe-

cially as mortgaged and government

bonds are producing such low

yields.

The latest survey from Moody’s,

shows that the default rate is very

low. At present we see a 3 % default

rate, levels we saw before 2008.

With Moody’s expecting in the short

term, only a worst case rate of 7%,

still historically low.

We do expect as soon as the market

normalizes, if there is such a term

these days, to see some big move-

ments in yields on government

bonds. Our strategies therefore

continue to have variable bonds

with short durations. When the time

is right we will add more allocation

to our position that will benefit from

longer yields in US. But for now we

intend to keep the powder dry

especially if the FED continues with

their bias towards easing as this

would undermine this position on

the short term.

Late Q2 we once again have re-bought

into BMW. In Q1 we sold out with a

good profit and as mentioned in previ-

ous articles, not because we did not like

the investment case, but because of

their very good performance and subse-

quent profit taking on our part. With

the Chinese Government indicating

growth will come back in the second

half of 2012, we see continued sales

within the Asian market.

Recently we have added more allocation

into Petro Brass. Petro Brass has in the

short term not performed in a satisfac-

tory way. However, Petro Brass with

one of the highest oil reserves on the

planet and with expectations of higher

oil prices, coupled with being a value

stock with a good dividend payment, it

still fits our oil and emerging market

allocation. We are also currently posi-

tioning for more allocation into Sie-

mens, one of our main holdings. Within

Siemens we strongly believe the focus

for the future will be on internal cost

cutting and further organic growth.

Siemens is a well diversified stock and

pays out a good dividend. As men-

tioned, we are keeping good reserves of

cash as the future is understandably

difficult to predict. We will however try

to find good opportunities but keep

stop losses tight.

“Chart showing BMW AG”

Disclaimer

None of the information contained herein constitute an offer to purchase or sell a financial instrument, or to make any investments. AlphaCapita (Switzerland) SA does not take into account your personal invest-ment objectives or financial situation and makes no representation and assumes no liability to the accuracy or completeness of the information nor for any loss arising from any investment based on a recommen-dation, forecast or other information supplied from any employee of AlphaCapita (Switzerland) SA, third party, or otherwise. All expressions of opinion are subject to change without notice. Any opinions made may be personal to the author and may not reflect the opinions of AlphaCapita (Switzerland) SA.

AlphaCapita (Switzerland) SA

Balsberg

CH-8058 Zurich-Airport

Switzerland

Phone: +41 43 813 3020

E-mail: info@alphacapita.com

web : www.alphacapita.com

AlphaCapita (Switzerland) SA

AlphaCapita recruits new Business developer

It has been a key part of our strategy to have good people on the ground to help clients locally

with their needs and aspirations within the financial markets. Owain has been known by Al-

phaCapita for many years and we are really proud to welcome him to the team.

.

Owain David - Business development United Kingdom

ON OWAIN

Owain Rhys David, has a real passion for the markets, having followed a degree in Business Eco-

nomics with a Masters in International Economics, Banking and Finance he has spent the last 7

years on the front line of Finance as an Inter Dealer Broker.

Working within Equity Derivatives he has brokered deals between

Investment Banks and financial institutions throughout Europe.

Leading on from this financial Sales experience he has made a seam-

less transition into the Capital Raising division of AlphaCapita.

Owain is an extremely personable and professional individual who

acts with the utmost respect regarding private and sensitive informa-

tion.

This has been recognised in his career in Finance and has allowed

him to network extensively with both senior finance professionals

and Ultra High Net Worth Individuals.

Outside the office Owain enjoys nothing more than watching or tak-

ing part in all sports especially Rugby, Golf and Skiing