EUROZONE ECONOMIES ARE FISCALLY STRONGER AND MORE BUSINESS COMPETITIVE THAN ANGLO SAXON COUNTERPARTS

We outperformed the market in September and also made two important new investments over the month: EDF and Foxtons. French energy group EDF boasts the largest nuclear generation capacity in the world and is the largest power generator in France and the UK. The value of EDF could grow significantly in the future. Most notably, EDF are preparing to extend nuclear lifetimes from 40 to 50 years. If approved this could add some 50% to the value of the group. The French regulator, furthermore, appears to view the group more sympathetically than in the past. We could expect tariff and interconnect price increases to more fairly compensate for production costs in the future. Trading on 10 times earnings and yielding 6% the share appears good value.

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HIGHLY COMPELLING VALUATION BACKDROP

We significantly outperformed the market in July. We made a new investment in the French car group Peugeot. The company has struggled in the face of a 23% fall in European new car sales over the past 5 years. Management, however, has responded aggressively in order to stabilise the business with the introduction of the Rebound 2015 programme. The benefits of cost cutting (Aulnay plant closure), increased modularization and joint purchasing with GM should enable operating cash break even by 2014. The fleet, furthermore, is being refreshed with 12 new launches in 2013 and 2014. Management is also investing heavily in China, Russia and Latin America in order to try and reduce dependence on the European car market. The news that the EU has endorsed the French state’s move to support the company’s debt will give the group vital time to be able to refinance into, hopefully, a more buoyant European car market. The share could be trading on 2 to 3 times recovery earnings which appears compelling considering Peugeot’s 13% and 21% shares of the European car and van markets respectively.

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DISCERNING A POSITIVE OUTLOOK FOR EUROPEAN ECONOMIES

We significantly outperformed the market in June. We remain encouraged by how markets have been able to cope with the twin challenges of the inconclusive Italian election result and the Cypriot debt restructuring. Feedback from our intensive company visiting programme, furthermore, is suggesting that the economic backdrop in the periphery of Europe is beginning to stabilise, if not actually improve somewhat. Spanish new company start-ups, for example, were at a five year high April. The valuation backdrop remains highly compelling, with European shares still trading at a 40% discount to American counterparts. We believe this to be unjustified whilst the corporate sector is in such rude health and generating returns on equity comparable to their US competitors.

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VALUATIONS REMAINS COMPELLING WITH EUROPEAN SHARES TRADING AT A 40% DISCOUNT TO THEIR AMERICAN COUNTERPARTS

We significantly outperformed the market in May. As we have written many times over the past few months we remain very positive on the outlook for equities. Recently, we have been encouraged by how markets have been able to cope with the twin challenges of the inconclusive Italian election result and the Cypriot debt restructuring. Feedback from our intensive company visiting programme, furthermore, is suggesting the economic backdrop in the periphery of Europe is beginning to stabilise if not actually improve somewhat. Spanish new company start-ups, for example, were at the highest level in April over the past five years. The valuation backdrop remains highly compelling with European shares still trading at a 40% discount to their American counterparts. We believe this to be unjustified whilst the corporate sector is in such rude health and generating returns on equity comparable to their competitors across the Atlantic. Almost two thirds of the fund is built up with the very best quality growth companies.

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WE CONTINUE TO BE POSITIVE ON THE OUTLOOK FOR EUROPEAN EQUITIES

We underperformed the market in March. We were hurt by weakness in a number of our banking investments. We remain, however, very confident in the outlook for the sector. We continue to be positive on the outlook for European equities. As Europe struggles to emerge from the financial crisis, policy makers are continuing to search for the right balance of measures including austerity, monetary action from the ECB and the beginnings of closer regulatory and fiscal harmonization across the region. The Italian election was part of this debate. Many investors fail to appreciate the depth of the will, at the heart of Europe, to make the European project work.

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EMMANUEL DESPAX TO PERFORM AND RECORD STUNNING NEW STEPHEN GOSS CONCERTO COMMISSIONED BY STUART MITCHELL

S.W. Mitchell Capital are proud to announce Emmanuel Despax’ upcoming performance at Cadogan Hall following his acclaimed Paris recital debut at the Louvre Auditorium. Set in a fantastic location in the heart of Chelsea, Cadogan Hall is one of London’s leading venues. The Hall’s excellent acoustic and luxurious surroundings makes it the first choice for some of the UK’s top orchestras, including the reident Royal Philharmonic.

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