Monthly Report July 2011

Stock markets Decline Performance Underperformance Investments Invested, partial Hedge Outlook Volatile

Markets

The weakness of the global economy is the result of the recession in Japan that followed the catastrophic natural disasters, tightening measures taken by the Chinese government to curb inflation, a spate of weather related catastrophes as well as high oil prices. These are all exceptional events with a temporary effect on the economy. In 2H11 the economy should improve again. In the final stages of QE2 there was credit growth in the US. The money supply has significantly increased and the velocity of circulation improved. Private households have reduced their debts and consequently created leeway for consumer spending. If the positive earnings development for corporates continues, they will start using their cash surplus. Moreover, corporates have to renew their investments to survive competition. The weak USD has a strong influence on the corporate results in the US. The extremely contradicting opinions regarding the markets are evidence of the deep uncertainty among analysts and investors. Times like

Share price performance as of July 31, 2011

Net Asset

Value

CHF 17.82

July

2011

-4.35%

YTD

-4.96%

3 years

6.71%

Since inception

3.67% p.a.

Share price development as of July 31, 2011 (indexed)

100

90

80

70

60

50

40

30

these call for investments in the stock markets. The high risk premium of shares

is an indicator of how low-priced these are compared to bonds and cash. US

Jan 08

Jul 08

Jan 09

Jul 09

Jan 10

Jul 10

Jan 11

Jul 11

companies hold more than USD 2’500bn in liquid assets, which gives them the opportunity to raise dividends, repurchase stocks and finance acquisitions, besides making investments and generating jobs. All these factors should have a positive effect on stock prices.

Performance

In a volatile environment Formulafirst Ltd. declined by 4.35%, while the MSCI Europe lost 2.61%. The resulting underperformance of Formulafirst Ltd. against the MSCI Europe for July 2011 amounts to 1.74%-points. The underperformance since beginning of the year amounts to 1.12%-points.

Formulafirst (CHF) MSCI Europe Index (EUR) SO Index (EUR)

Breakdown by sectorsInvestments

As regards early cyclical Adecco there are no signs of an economic downturn. In today’s volatile environment companies are forced to cover their rising demand for labor with temporary workers. Moreover, corporates have to initiate structural changes towards raising flexibility. Flexible manufacturing as well as streamlined administrative structures are essential, to be able to compete with Asia. Moreover new markets in the West will adopt models of temporary employment. Thus the growth potential for Adecco is still huge. With operations in more than 60 countries Adecco wants to become the leading provider of services to promote the mobility of skilled labor. The lack of skilled personnel will become apparent in Europe, when from 2015 onwards people retiring will outnumber new entrants to the labor market. The shortage will lead to higher wages and as a consequence increase Addeco’s margins. The positive business trend will continue throughout the year; however growth rates will be comparably lower given the base effect.

Materials Healthcare Industrials

Consumer discretionaries

Consumer staples

Cash

Breakdown by OMC/SIC

6.0%

14.7%

12.9%

19.6%

24.0%

22.8%

Utilizing the strong Swiss Franc Sika acquired the Italian company Technokolla,

OMC 100.0%

one of the leading companies in the tile laying systems business. Sika produces

SIC

0.0%

adhesives for tiles. The company plans to expand its very well developed sales and distribution network, which will enable it to supply the regional construction industry with a broad range of products.

OMC: Owner Managed Companies, SIC: Smart Investors‘ Companies

Outlook

Contrary to earlier statements that there will be no similar programs following QE2, Ben Bernanke stated in his speech in the Congress that the Federal Reserve Bank would be prepared to implement new measures, including the purchase of additional government bonds, if the US economy begins to falter. The ongoing debate over raising the federal debt limit will most probably come to a conclusion in the last moment. Moreover the euro zone will succeed in temporarily stabilizing its credit crisis. As the global economy will continue to grow and many private and institutional investors are still underinvested in equity, we predict a promising second half of the year.

The largest positions

Synthes Rational Beiersdorf Fresenius SE Sika

Forbo

7.1%

6.8%

6.6%

8.0%

9.9%

11.7%

This information is not an offer to purchase or subscribe to shares in Formulafirst and may not be circulated in any jurisdictions where it violates any applicable laws or regulations, including and without restric- tion in the United States of America. While the information given is considered reliable, Formulafirst, respectively 2trade group ltd. don’t guarantee that it is complete or accurate. Opinions and estimates may be amended without notice. Past performance is not an indication of future performance.

Formulafirst – investing in “smart owners“Formulafirst: the concept Smart Owners consistently outperform the market (indexed)Investment idea

Experience shows that owners generally invest more successfully than em- ployees. The Investment company Formulafirst focuses on Smart Owners as they are known. The investment universe includes

a) owner-managed companies in Central Europe (D-A-CH) and b) companies that are controlled by “Smart Investors”

Owner-managed companies and those that are controlled by owner-ori- ented groups of investors are generally distinguished by their consistent strategy of long-term and sustainable growth. Since owner-managers have

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2002

2004 2006 2008

31.07.2011

2010

a substantial share of their wealth and, in most cases, of their working time invested in the company, their strategic business orientation includes goals such as maintaining the company’s independence, a smooth transfer to the next generation as well as safeguarding and growing the company’s assets. The long-term perspective, in some cases spanning several genera- tions, is a major reason why these companies are more focused on their long-term strategic positioning rather than on the short-term maximization of returns.

Investment criteria

For owner-managed companies to be included in the investment universe of Formulafirst, the following conditions must be met: a) headquarters in Central Europe (Switzerland, Austria and Germany), b) listed on an regular stock exchange, c) minimum market capitalization of EUR 100 million, d) managed by owner-managers holding at least 15% but no more than 75% of voting rights. The universe of owner-managed companies from which the best stocks are picked by Formulafirst for investment includes the 53 such companies with the highest market capitalization.

To identify the 15 best “Smart Investors”, the very best performers among a large number of names are filtered out by comparing their historical per- formance data. From these companies held by “Smart Investors”, the ones that are selected are those that are owned 15% to 75% by these kinds of investors. The companies selected form the basis for Formulafirst’s invest- ments.

Investment strategy

Made up of the 53 owner-managed companies as well as the 32 companies from the “Smart Investors” selection, the investment universe is screened by a thorough fundamental analysis in a primarily “bottom-up” approach and the most promising stocks are identified.

Formulafirst invests in equities (primarily in Europe and the USA), convert- ible instruments, options (managing existing positions), futures (to hedge currency and market risks) and shares of holding companies and funds. Investment exposure is 100% of fund assets. The investment horizon is long-term and the selection of portfolio positions is limited to a reasonable number. The size of individual investments may not exceed 10% of the portfolio when purchased (cost). The investment style is primarily based on the “value” approach and investments are made in an anti-cyclical manner. The maximum sector weighting in the portfolio should not exceed 30%.

Smart Owners Index (EUR) MSCI Europe Index (EUR)

Company detailsCompany: Formulafirst Ltd., British Virgin IslandsBoard of Directors: Derek P. Baudains, Kay Reddy, Markus GreschInvestment manager: 2trade group ltd., ZugManagement team: Sammy Matter, Martin Treffer, Daniel BiedermannAuditors: PricewaterhouseCoopers, Zürich Corporate structure: Public limited company Inception: 18.12.02Type of stock: bearer sharesShares outstanding: 2,130,835Market capitalization: CHF 38 mnListing: Swiss Exchange SIXFees: Management fee of 1.5% p.a., Performance fee 20% above 3% p.a., current hurdle at CHF 24.31Security number: 146 29 83Reuters: FFI.SBloomberg: FFI SW Equity, FFI SW Equity NAVNet asset value: Website daily, Wednesday/Saturday in FuW (Finanz und Wirtschaft)Address: 2trade group ltd.

Baarerstrasse 2, CH-6301 Zug

Investor relations: Dynamics Group Ltd.

Alexandre Müller

Tel.: +41 43 268 32 32

Internet: www.formulafirst.ch

E-mail: info@formulafirst.ch