th

20 April 2015

First Quarter 2015 Investor Letter

Review and Outlook
The Peninsula Capital Fund (the Fund) returned +14.2% net of fees and expenses in the first quarter of
2015, whilst the S&P 500 and the Euro Stoxx 50 returned +0.95% and +18.3% respectively.
It has been a most interesting start of the year. Most notably, the pessimism regarding a potential Grexit
from the euro quickly dissipated as the Syriza party representatives demonstrated a rough negotiating
mood but a less radical than expected approach when dealing with Brussels on the rigorous austerity
measures currently imposed and the financial aid package. Coincidentally, Mr. Draghi launched a full
blown Quantitative Easing program for the first time in Europe (EUR60bn / month until at least September
2016) leading to a major USD/EUR rally (+12.3%). Here in Europe, this has come at a timely moment
when much help was needed. The combination of the euro depreciation, negative short-term rates and the
steep decline in oil and refined products prices, will certainly benefit exporters, lending and consumers
here in the EU. The ECB has now been the last Tier 1 central bank to embrace such an aggressive
monetary policy, only time will tell how this witches Sabbath ends.
Our top contributors for the quarter were: Maire Tecnimont (+43.6%) and our Ibex 35 Futures position
(+16.5%). MT delivered strong Q4 results. Backlog looks solid and the company has an attractive project
pipeline that provides sales visibility for the mid-run. At the same time, it has been able to maintain higher
margins than peers thanks to a dominant position in niche markets. Additionally, management announced
it will close a debt refinancing package with favourable cost and repayment conditions after the sale of its
Biomass plant and the proceeds received from the Chilean litigation. Furthermore, the company expects to
sell a minority stake in its Stamicarbon subsidiary and part of its infrastructure division during the year. The
combination of these disposals with an expected improvement of working capital could mean the company
returns to a net cash position, key factor to bolster a stock re-rating. We are aware the asset disposal plan
entails execution risks and the normalisation of WC looks challenging, however, management is delivering
and is taking steps in the right direction and thus, we are holding the shares for the time being.
Our top detractors were: Westmoreland Coal (-7.2%), RWE (-4.5%) and Gencorp (-3.6%). WLBs share
price underperformance continued during the quarter. We believe it is being affected by the weak coal
price environment and its unexciting operating results. After reviewing Q4 results and holding several calls
with management, we still believe the equity story remains intact. Operationally, its long-term cost-plus
contracts provide protection from coal price swings resulting in steady cash flow generation. Moreover, the
difficult position of its main peers will prompt attractive M&A opportunities at fire-sale prices as they
desperately try to raise cash to avoid financial distress. Lastly, the recent acquisition of an MLP structure
provides an attractive platform to unlock value for the parent company, as it gradually drops down assets
and investors recognise the value of stable and growing cash distributions.
New Positions
Ibex 35 Futures: At the beginning of the year, we found ourselves holding a large portion of cash (c.75%
of AuM) after we sold various stocks for different reasons we explain below. However, we were firmly
convinced that the environment for European equities was extremely appealing due to the oil price decline,
the exchange rate weakness and the most probable implementation of a QE program by the BCE. Having
said this, we saw that most of our favourite companies with recurrent cash flow generation and prudent
financial positions were trading at high multiples and we didnt find interesting special situations with
adequate risk-adjusted returns. To solve this contradictory situation, we decided to purchase IBEX 35
futures that would enable us to take advantage of the favourable European conditions avoiding the specific
risk of investing in individual names.
Reduced Positions
Amundi Topix ETF: We sold our position in the Japanese Topix index to raise cash for our IBEX 35
strategy as we believed it made more sense to invest in European equities that were poised to enjoy
significant tailwinds and we felt much more comfortable owning European assets due to obvious
geographical and cultural reasons. Total return: +14.4%.
Aperam has been one of our most successful investments so far. When we bought the shares, they were
trading at a significant discount to its peers and we believed its superior fundamentals and healthier BS
would drive the stocks re-rating closing up its valuation gap. Despite the company is still delivering
excellent operating results, we thought the shares were trading at fair price, and complying with our strict
value approach we exited the position. Total return: +124.7%.

Gencorp had been one of our conviction ideas for a long time. We were convinced it would take
advantage of its dominant position in its niche after it acquired Rocketdyne and, at the same time, its real
estate assets provided downside protection. Unfortunately, during our holding period we envisaged certain
red flags that made us change our mind: a) poor operating performance and marginal synergies post
acquisition; b) low focus on cash generation and debt reduction; c) managements lack of communication
with the market and continued delay of the long-time awaited investor day and d) stock price too
dependent on the value of its RE assets due to an underperforming core business. We sold the shares
with a +7.0% total return.
RWE: We decided to sell the shares on the back of: a) unclear consequences of the nuclear tax litigation;
b) lack of execution on its asset disposal plan; c) poor power price environment in Germany and d) delay
in its turnaround strategy to streamline its operations. Total return: -13.7%.
All in all, this quarter has been very positive for the Fund. We are excited with the future prospects of each
one of our current equity holdings and have cleaned out the legacy positions that didnt comply with our
investment strategy. Our goal is to deliver good absolute returns so that our fellow investors can enjoy the
benefits of compounding over the long-run. We will try to accomplish this goal having in mind that capital
preservation and risk control should be the most important values driving our investment decisions.

Sincerely,

Antonio Sainz Suelves

Managing Partner

Jose Mara Casta Echevarra

Managing Partner

DISCLAIMER: This document has been distributed for informational purposes only. Neither the
information nor any opinions expressed constitute a recommendation to buy or sell the securities or assets
mentioned, or to invest in any investment product or strategy related to such securities or assets. It is not
intended to provide personal investment advice, and it does not take into account the specific investment
objectives, financial situation or particular needs of any person or entity that may receive this document.
Persons reading this document should seek professional financial advice regarding the appropriateness of
investing in any securities or assets discussed in this document. The authors opinions are subject to
change without notice. Forecasts, estimates, and certain information contained herein are based upon
proprietary research, and the information used in such process was obtained from publicly available
sources. Information contained herein has been obtained from sources believed to be reliable, but such
reliability is not guaranteed. The investment fund Peninsula Capital, FIL may have a position in the
securities or assets discussed in this article. Peninsula Capital FIL may re-evaluate its holdings in such
positions and sell or cover certain positions without notice. No part of this document may be reproduced in
any form, or referred to in any other publication, without express written permission of Peninsula Capital,
FIL. Past performance is no guarantee of future results.