Portfolio Manager's Review: The Magic Formula Issue, by The Manual of Ideas

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A Quarterly Publication of BeyondProxy LLC www.manualofideas.com Thanksgiving 2008
THE “MAGIC FORMULA” 100

► Joel Greenblatt’s winning investment approach – why it works
► Analysis of Top 100 companies passing “Magic Formula” screen
► Proprietary selection of Top 10 investment opportunities
Companies include Accenture, Acme Packet, Aladdin Knowledge, Allegheny, Ambassadors Group,
American Eagle Outfitters, AmerisourceBergen, Bare Escentuals, Barrett Business Services, Biovail, Boeing,
Broadridge Financial, BSQUARE, Cadence Design, CF Industries, Coach, CTC Media, Darling, Dell,
Deluxe, DepoMed, Diamond Mgmt & Technology, DISH Network, Double-Take Software, Dynacq Healthcare,
EarthLink, eBay, EMCOR, Emulex, First Advantage, Forest Labs, Foster Wheeler, Gannett, Garmin,
Hansen Natural, Heidrick & Struggles, Herbalife, Herman Miller, Hurco, iBasis, ICF International, Iconix,
infoGROUP, Jackson Hewitt, KBR, Kenexa, KHD Humboldt Wedag, King Pharma, Korn/Ferry, Lam Research,
LCA-Vision, Lear, Lincare, Lorillard, Manitowoc, McGraw-Hill, Medicis Pharma, MEMC Electronic Materials,
Meredith, Mesabi Trust, Microsoft, Monster, Mosaic, Net 1 Ueps, New Frontier Media, NutriSystem, NVIDIA,
Pacer, Perini, Pre-Paid Legal, Precision Castparts, Premier Exhibitions, PRIMEDIA, Questcor Pharma,
R.G. Barry, RadioShack, Robert Half, Rockwell Automation, Seagate, Sierra Wireless, Sigma Designs,
Spark Networks, SPSS, Syneron Medical, Take-Two Interactive, Tempur-Pedic, TheStreet.com,
Total System Services, Travelzoo, USA Mobility, VAALCO Energy, Value Line, ValueClick,
Varian Semiconductor, Verigy, Versant, Viacom, ViroPharma, Western Digital, and more.
Special Section, pages 4-259
Also inside: Proprietary Stock Screens

Proprietary Investment Idea Lists Searching for equities with asymmetrical risk-reward
profiles… “shunned by the market, but not by insiders”
Top 10… best of the best companies with hidden “biggest losers” “biggest losers (deleveraged)”
assets superinvestor ideas tax-selling bargains “biggest losers (deleveraged, likely profitable)” “lots
stocks you’ve never heard of bargains in financial of revenue, but little enterprise value” “neglected
sector heavily shorted stocks Renaissance gross profiteers” “companies with strong, liquid
Technologies ideas foreign companies listed in U.S. balance sheets” “underperformers” “sale,
or Canada branded businesses explosive stocks liquidation or recap opportunities” “good businesses
Top 10 ideas for… activist value investors deep at good prices”… based on LTM EBIT… this FY EPS
value investors cash flow investors GARP estimates… next FY EPS estimates… 2012 EPS estimates
investors special situation investors nano cap Industry Browsers
investors micro cap investors small cap investors
mid cap investors large cap investors Snapshots of sectors including… basic materials
capital goods consumer cyclical consumer non-
Portfolios With “Signal Value” cyclical energy financial healthcare
Top ideas of top investors… Ackman Berkowitz services technology transportation utilities
Buffett Cumming & Steinberg Einhorn Beyond the MOI…
Greenberg Hawkins Icahn Klarman
Lichtenstein Loeb Mandel Pabrai Pzena Best free ideas and opinion on the Internet
Lampert Hohn Watsa Whitman
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EDITORS’ COMMENTARY collection of Titanic artifacts. 16% shareholder Mark

Dislocations Galore Sellers launched a push to fire the CEO earlier this month.
Syneron (ELOS), an aesthetic medical products
I
deas are the lifeblood of the investment business. To company, has substantial earning power yet trades below
be sure, many investors have failed despite good net cash and investments. Baupost is a major shareholder.
ideas, but few have succeeded without them. Our goal Tempur-Pedic (TPX), the non-innerspring mattress
is to put you in the best possible position by consistently leader, has been heavily shorted due to its discretionary,
delivering high-quality analysis and winning ideas. high-ticket product, input cost pressures and financial
It’s a good time to be in the ideas business. The leverage. The short thesis grossly underestimates the
dislocations over the past few months have been truly company’s highly variable cost structure and ability to
extraordinary. The deleveraging wave sweeping markets service the debt, potentially setting up a short squeeze.
and the blowup of specific pools of capital have left an Travelzoo (TZOO), an online distributor of travel
unprecedented number of securities trading with little deals, has been dismissed as a casualty of weak consumer
regard for intrinsic value. spending. However, the company’s solid U.S. profitability
We’ve uncovered some compelling opportunities is masked by startup losses related to global expansion.
among the 100 “magic formula” companies analyzed in With large insider ownership and insider buying, the
this issue. While our Top 10 picks are most noteworthy, market appears to have hugely misjudged intrinsic value.
you are likely to find many more companies deserving of Barely missing our Top 10 selections are fellow
further investigation. So, make yourself comfortable and magic formula stocks Barrett (BBSI), Dell (DELL),
get ready for a rewarding journey into idea land. New Frontier (NOOF), and Versant (VSNT).
Our Top 10 magic formula selections are high-ROIC
businesses misunderstood by investors and, therefore, THIS IS CURIOUS…
mispriced. American Eagle (AEO), the youth fashion Volkswagen (VOW.DE) briefly became the most
brand, has been shunned despite one of the best business highly valued stock in the world, hitting 1,000 euros per
models in retail, featuring strong brand loyalty, efficient share even as intrinsic value remained well below 100.
sourcing and excellent store economics.
Playboy (PLA) trades at an adjusted enterprise value
Garmin (GRMN), the leading provider of personal of $90 million, despite ownership of the Playboy Mansion
navigation devices, has lost the momentum that had (on the books for $1 million but worth well north of $50
attracted speculators; yet, the company continues to enjoy million) and annualized EBIT of more than $25 million
a large market opportunity and trades at 6x 2009E EPS. from the growing brand licensing segment alone.
KHD Humboldt Wedag (KHD), a global cement Tree.com (TREE), an InterActiveCorp spinoff, has a
plant engineering firm, is run by an unusually adept CEO market value of $21 million, despite more than $40
and has massive under-appreciated non-core assets, million of net cash, recent buying by the CEO and CFO,
including cash, preferred stock and an iron ore interest. and a takeout value five years ago of $700+ million.
MEMC Electronic Materials (WFR), a wafer Cresud (CRESY), a leading Argentinian agricultural
maker for semiconductor and solar applications, is valued company, trades at $6 per share, below the value of its
as a commodity semi cap equipment firm, ignoring the public company holdings and the net cash raised in a
company’s leadership in the growing solar industry. Leucadia-backed $16 per-share rights offering in March.
Microsoft (MSFT) has finally said “no” to Yahoo The market ascribes no value to Cresud’s ownership of
and embarked on a $40 billion accretive stock buyback, more than one million acres of productive land.
yet it continues to trade at a major discount to the sum-of-
the-parts value of its business units.
Enjoy — and be sure to keep the good ideas coming
Net 1 (UEPS), a provider of payment cards to the by subscribing today (see subscription form on last page).
unbanked in South Africa and elsewhere, continues to Do also let us know how we can make the MOI more
grow and has recently removed major uncertainty, yet it valuable to you. Email us at editor@manualofideas.com.
trades at 5x forward earnings.
Premier Exhibitions (PRXI), a developer of —The Manual of Ideas Editorial Team
museum-quality exhibitions and the salvor-in-possession
of the Tianic shipwreck site, has misstepped and is now
valued not only at a low single digit multiple of
normalized EPS but also below the appraised value of its
employed). The two rankings are given equal weight in
Magic Formula 100 the final compilation of the MFI Top 100. This simple
process stands in stark contrast to most quantitative
Greenblatt’s Approach – Why It Works screening methods, which rely on multiple variables and
Our Top 10 Magic Formula Selections are difficult to replicate.
Profiles of Magic Formula 100 Makes sense. Few investors would prefer a bad
business to a good one, and few would purposely ignore
the price they pay for a stock. MFI seeks out good
M companies that are available at good prices. The result is a

agic Formula investing is based on a simple
yet powerful way of searching for list of businesses that offer both a high earnings yield and
undervalued stocks. According to Joel a relatively high probability that capital reinvested in the
Greenblatt’s The Little Book That Beats The Market, business will generate high returns. It makes intuitive
portfolios of stocks selected quantitatively based on MFI sense that such stocks should outperform.
criteria have handily outperformed the S&P 500 over the
past couple of decades.
WHY MAGIC FORMULA WILL CONTINUE TO WORK
“Institutional imperative” makes adherence to
Magic Formula Performance vs. S&P 500, 1988-2004 MFI difficult. Institutional managers care not only about
80%
investment risk but, perhaps more acutely, about career
60%
risk. Many managers cannot afford to follow a winning
strategy if it involves enduring long stretches of relative
40% underperformance. It is much safer from a career
standpoint to be “wrong” when everyone else is losing
20%
money than to be “wrong” when everyone is making
0% money. During the 1988-2004 period studied by
Greenblatt, MFI handily outperformed the S&P 500, yet
-20%
MF (all companies) MF (largest 1000 companies) S&P 500
the strategy experienced two non-overlapping three-year
-40%
periods of underperformance. While most fund managers
may be able to endure a quarter or a year of
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
CAGR, 1988-2004 underperformance, they may be left with few investors

Magic Formula (all companies) 31% after a two- or three-year period of subpar results. It is
Magic Formula (largest 1000 companies) 23%
S&P 500 12%
therefore extremely difficult to stick with MFI when the
Source: Joel Greenblatt, The Little Book That Beats the Market. going gets tough.
Investors have a hard time turning off their
emotional biases. Even a quick peek at the list of
WHY WE LIKE MAGIC FORMULA INVESTING* candidates generated by the MFI screen – available at
Advocated by “super investor” Joel Greenblatt. www.magicformulainvesting.com – is likely to make an
Greenblatt invented MFI as a do-it-yourself version of the investor’s stomach churn. Many companies on the list are
approach he has espoused while amassing one of the most either in out-of-favor industries or have major company-
impressive investment track records of all time. While specific issues, such as regulatory scrutiny, accounting
reliable data on Greenblatt’s complete track record is not problems, executive turnover, or deteriorating operating
available, some estimates put his annualized returns over momentum. While many investors may agree
the past couple of decades at well north of 20%. From conceptually that buying good companies when they are
1985-1994, Greenblatt managed the Gotham Partners out of favor is a path to long-term outperformance, a
hedge fund, reporting annualized returns of 50% (after much smaller number would actually be willing to follow
expenses, before performance fees). Gotham returned all such a strategy. As a quantitative method, the MFI screen
outside capital in January 1995. is perfectly sanguine about picking a headhunting firm
during a recession or a laser eye surgery provider when
Simple. The MFI screen ranks companies based on
the media is calling into question the safety of laser eye
only two variables: “cheapness” (pre-tax unlevered
surgery. Professional investors legitimately want to use
earnings yield) and “goodness” (return on capital
the MFI list as a starting point from which to do further
*
research and ultimately make a subjective judgment
(besides the fact that it makes money)
regarding an investment opportunity. Unfortunately, the OUR PROPRIETARY TOP 10 SELECTION PROCESS
subjective judgment is frequently tainted by emotional The Manual of Ideas has developed a process that
bias. As a result, the investor may dismiss the seeks to improve upon the already impressive
headhunting firm by thinking, “Of course it’s cheap, performance of the magic formula screen. The MF 100
we’re in a recession!” Similarly, the investor may dismiss is an unranked list of the 100 most attractive companies
the laser eye surgery company by thinking, “Of course it’s based on earnings yield and return on capital employed.
cheap, they might go out of business!” We highly recommend Joel Greenblatt’s MFI website,
MFI never runs out of investment candidates. www.magicformulainvesting.com.
Several value investment strategies have become de facto MOI’s methodology recognizes that not every
obsolete over time. For example, whereas Ben Graham equity investment should be approached with the same
successfully searched for so-called “net nets” more than a set of questions. Security analysis should be tailored to
half-century ago, such companies have become virtually the type of opportunity examined. For example, an
extinct today. The few companies whose current assets investor analyzing a company that trades at a large
exceed the sum of their equity market value and total discount to net cash and tangible book value might
liabilities are typically either depleting those current inquire whether the company can be liquidated without
assets at a rapid pace or there are other reasons why major asset impairments, not whether the company’s
theoretical liquidation values might not be realized. As a long-term competitive position is favorable. On the other
result, today’s professional investors cannot build their hand, an investor analyzing a company that trades well
businesses around “net nets.” By contrast, MFI simply above book value and at a high multiple of earnings must
ranks public companies relative to each other. There is no examine prospects for sustained rapid earnings growth.
absolute cheapness requirement, whether it be “net net” or
that book value exceed market value. As a result, MFI The performance of the MFI screen can be
will always provide investors with an investable list of improved if one asks questions that take into account
relatively attractive public companies. the nature of magic formula selections. Of particular
concern is the fact that MFI favors firms exhibiting high
Investors tend to remain skeptical of winning returns on capital employed. Such companies are
strategies even after long periods of outperformance. generally not cheap based on the liquidation value of their
Investors have been taught – you might say assets. Instead, they might be cheap based on current and
“brainwashed” – that markets are efficient and there is no prospective earning power. As a result, a crucial
free lunch. As a result, they struggle with the notion that a determination when evaluating MF selections is whether
simple quantitative strategy can systematically they exhibit above-average returns on capital for
outperform the best efforts of large numbers of securities transitory reasons or for reasons that have some
analysts and portfolio managers. For example, stocks that permanence. Warren Buffett calls this moat; others may
trade at a low multiple of price to book value have know it as sustainable competitive advantage. It is also
outperformed the broader market in a statistically crucial whether a business operates in a growing industry
significant way for a long period of time. Economists that allows the company to reinvest a portion of free cash
Eugene Fama and Kenneth French have studied this flow at high rates of return.
phenomenon extensively (latest data is available at
www.kennethfrench.com). Ironically, even after having The MOI seeks out companies whose earnings
observed this contradiction of the efficient markets yield is likely to increase over time if the stock price
hypothesis (EMH) for many years, Fama, in true remains unchanged. Such companies not only sustain
professorial fashion, tried to explain it away by invoking high returns on capital, but also grow earnings by
the EMH adherents’ favorite axiom: If a strategy reinvesting cash in the business. As they generate high
outperforms, it must be riskier! Unfortunately for Fama, returns, such companies need to reinvest only a portion of
the strategy of buying stocks with low price-to-book FCF in order to achieve respectable growth. As a result,
multiples also exhibited relatively low volatility. they generally have cash available for dividends and stock
Volatility, of course, is the EMH adherents’ favorite repurchases. Buybacks executed at “good” prices
definition of risk. Undeterred, Fama concluded that low accelerate EPS growth and value creation.
price-to-book stocks must be riskier in other ways… The
In order to narrow down the list of 100 MF
continuing lack of disappearance of the low price-to-book
companies to the ten most promising investments, we
“anomaly” suggests that investors may not flock to MFI
use a scoring methodology to rank the companies. We
even after many years of demonstrated outperformance.
then consider the scoring results and a number of
increasingly subjective criteria to narrow down the list to
ten investments. In addition to “positive” criteria, such as occurred at prices roughly equal to or below the
sustainability of competitive advantage, management current market price.
quality and industry growth, our selection methodology
takes into account the following negative criteria, among • Alignment of interests: We avoid companies with
others (as Charlie Munger might say, “Invert!”): major CEO conflicts of interest or corporate
governance abuses.
• Pro forma adjustments: We eliminate companies
that would not be on the MF list if their financial • Value proposition: We avoid companies that
statements were adjusted to reflect true operating offer a questionable value proposition to their
performance (may include companies recently end customers.
engaged in large M&A). • M&A rollups: We avoid companies that have
• Capital reinvestment: We avoid companies with meaningful integration risks due to major
virtually no opportunity for high-return reliance on acquisition-driven growth.
reinvestment of capital (typically companies in
industries in long-term decline).
MAGIC FORMULA TOP 10 — MOI SELECTIONS
• Threats to key revenue source: We avoid (in alphabetical order)
companies dependent on a specific customer or
• American Eagle Outfitters (AEO)
contract, if loss of latter has become a real
• Garmin (GRMN)
possibility (circumstances may include
acquisition of major customer, ongoing re-bid • KHD Humboldt Wedag (KHD)
process for large contract, or loss of patent • MEMC Electronic Materials (WFR)
protection). • Microsoft (MSFT)
• Net 1 UEPS (UEPS)
• Cyclicality: We avoid capital-intensive • Premier Exhibitions (PRXI)
businesses that generate high ROIC only during • Syneron (ELOS)
cyclical upswings in their respective industries. • Tempur-Pedic International (TPX)
• Faddishness: We avoid companies providing a • Travelzoo (TZOO)
product or service that has a reasonably high
likelihood of being a fad.
• Insider selling: We avoid companies with heavy

recent insider selling, particularly if such selling
American Eagle Outfitters (NYSE: AEO) Branded Apparel Retail (www.ae.com)

Price: $8.88 ($8.44-$23.84) P/E FYE 2/2/08: 4.9x Year ended 1/28/06 2/3/07 2/2/08 8/2/08
Market value: $1.8 billion P/E FYE 1/31/09: 7.0x Revenue: 2,322 2,794 3,055 3,069
Enterprise value: $1.5 billion P/E FYE 1/31/10: 7.2x GP: 1,078 1,340 1,423 1,361
Shares out: 205.9 million P/E FYE 1/31/11: 6.5x EBIT: 459 587 599 514
Institutional ownership: 80% EV / LTM revenue: 0.5x Net income: 294 387 400 344
Insider ownership: 10% EV / LTM EBIT: 3.0x Diluted EPS: 1.26 1.70 1.82 1.61
Insider buys/sales: 4/2 P / tangible book: 1.3x Capex: 82 226 250 288
FCF: 384 523 214 201
Business: American Eagle Outfitters sells its own brand of laidback,
Net cash: 752 814 620 305
current clothing targeting 15-25 year-olds, providing quality
merchandise at affordable prices. The collection includes standards like ST assets: 1,077 1,189 1,021 859
jeans and graphic Ts as well as accessories, outerwear, and footwear. ST liabilities: 352 465 376 386
AEO operates ~875 stores in the U.S. and ~75 in Canada. AEO also Intangibles: 10 10 12 11
markets a girls’ underwear collection, aerie, available in 81 standalone Book value: 1,156 1,417 1,341 1,405
and AE stores. Martin + Osa targets 28-40 year-olds and offers Refined Total assets: 1,606 1,980 1,868 1,945
Casual clothing and accessories in 22 stores. ROIC: >100% >100% >100% 65%
Thesis: American Eagle is a well-managed specialty retailer with a

strong, proprietary brand and good alignment of interests (insiders own $40
12%; chairman Schottenstein bought one million shares at $23-24 last
$30
year). While investors are acutely aware of the macro headwinds facing
the average AEO customer, the market is not giving AEO enough credit $20
for continuing to deliver strong returns on capital invested in AE stores. $10
At the recent trading price, AEO shares offer a rare opportunity to buy a
$0
great company with no net debt at a small premium to tangible book.
99 00 01 02 03 04 05 06 07 08
We value AEO at $17-27 per share, based on a range of 6x trailing
EBIT to 8x estimated normalized EBIT (detailed analysis herein).
Garmin (Nasdaq: GRMN) Personal and Specialty Navigation Devices (www.garmin.com)

Enterprise value: $3.3 billion P/E FYE 12/31/09: 5.7x GP: 535 882 1,463 1,632
FCF: 220 269 525 496
Business: Garmin provides GPS-enabled navigation, communication
Net cash: 367 410 745 540
and information devices and applications. Garmin’s products serve
automotive, mobile, wireless, outdoor recreation, marine, aviation, and ST assets: 801 1,169 2,333 2,037
OEM applications. Large dealers and distributors include Best Buy and ST liabilities: 196 338 802 697
Wal-Mart, but no customer accounts for 10% or more of revenue. Intangibles: 36 68 196 214
Book value: 1,157 1,558 2,351 2,140
Thesis: Garmin shares are unjustifiably cheap. The company is the
Total assets: 1,362 1,897 3,292 3,015
worldwide leader in personal navigation devices, ahead of Dutch
ROIC: 92% >100% 99% 88%
provider TomTom, which has a leveraged balance sheet and appears
to be struggling to survive the current downturn. Garmin continues to
grow revenue, and while unit growth has slowed, the market for $150
personal navigation devices continues to benefit from increasing
consumer adoption. Profits have stagnated due to rapid ASP erosion. $100
However, price declines appear likely to moderate, enabling the
company to continue reasonably strong operating performance even in $50
a weak economic environment. The stock has been “orphaned” as
$0
momentum investors have exited. We value Garmin at $35-65 per
00 00 01 02 03 04 05 06 07 08
share, based on a range of 10x estimated 2009 earnings to 10x
estimated normalized earnings (detailed analysis herein).
KHD Humboldt Wedag (NYSE: KHD) Cement Plant Engineering (www.khdhumboldt.com)

Market value: $278 million P/E FYE 12/31/08: 4.3x Revenue: 384 459 580 638
Enterprise value: -$118 million P/E FYE 12/31/09: 5.1x GP: 52 72 86 116
Institutional ownership: 44% EV / LTM revenue: n/m Net income: 25 30 34 70
Insider ownership: 22% EV / LTM EBIT: n/m Diluted EPS: 1.01 1.04 1.42 2.31
FCF: 65 40 127 111
Business: KHD Humboldt Wedag operates in two segments: Industrial
Net cash: 102 221 356 395
plant engineering and equipment supply provides technologies,
equipment, and engineering services for cement, coal, and minerals ST assets: 462 513 634 709
processing. The segment also builds plants that produce clinker, ST liabilities: 249 316 396 412
cement, clean coal, and minerals. The resource property segment Intangibles: 0 0 0 0
consists of a mining sublease on which the Wabush iron ore mine is Book value: 285 319 307 352
situated that commenced in 1956 and expires in 2055. Total assets: 610 748 789 848
ROIC: 52% >100% n/m n/m
Thesis: KHD is a rare cyclical magic formula stock we find compelling.
The business has existed for more than a century, and KHD has proven
itself an innovator. Growth exploded in recent years, as cement plant
engineering services and equipment experienced strong global $50
demand. Chairman Michael Smith has a proven track record of efficient $40
capital allocation at several public companies. The market is myopically $30
focused on the outlook for cement engineering while completely $20
ignoring KHD’s excess assets. We value KHD at $25-37 per share, $10
based on a sum-of-the-parts valuation analysis that considers the $0
company’s $481 million in net cash, investments and Mass Financial 99 00 01 02 03 04 05 06 07 08
preferred shares; the Wabush iron ore interest; and the core cement
engineering business (detailed analysis herein).
MEMC Electronic Materials (NYSE: WFR) Wafers for Semiconductor and Solar Applications (www.memc.com)
Enterprise value: $2.4 billion P/E FYE 12/31/09: 3.7x GP: 367 689 1,001 1,105
FCF: 158 379 641 410
Business: MEMC provides silicon wafers for semiconductor and solar
Net cash: 101 551 1,286 1,089
applications. It has global R&D and manufacturing facilities. Customers
include semi device and solar cell makers. MEMC sells wafers from ST assets: 436 900 1,590 1,429
100-300mm and intermediate products such as polysilicon and silane ST liabilities: 225 258 444 523
gas. The company has 200+ U.S. and 450+ foreign patents. Samsung Intangibles: 0 0 0 0
and Yingli Green Energy each accounted for 10%+ of revenue in 2007. Book value: 711 1,167 2,035 2,080
Total assets: 1,148 1,766 2,887 2,985
Thesis: MEMC is a technology company tapping into long-term
ROIC: 46% 90% >100% >100%
semiconductor industry growth and global adoption of solar cells.
Shares have declined as the outlook for semi cap equipment makers
has deteriorated and management has slashed guidance (the CEO
$150
resigned in late October). We believe momentum-oriented investors
$100
have overreacted to the slowdown in growth. While semi cap
equipment is highly cyclical, solar represents a major secular growth $50
opportunity, which the market is currently ignoring. We value MEMC at
$30-36 per share, based on a range of 6x trailing EBIT to 10x $0
estimated 2009 EPS (detailed analysis herein). 99 00 01 02 03 04 05 06 07 08
Microsoft (Nasdaq: MSFT) Operating Systems, Business Software, Games & Online Services (www.microsoft.com)
Enterprise value: $159.7 billion P/E FYE 6/30/10: 8.8x GP: 36,632 40,429 48,822 49,948
Shares out: 8,895.6 million P/E FYE 6/30/11: 7.7x EBIT: 16,064 18,499 22,180 22,204
Institutional ownership: 61% EV / LTM revenue: 2.6x Net income: 12,599 14,065 17,681 17,765
Insider buys/sales: 1/28 P / tangible book: 9.2x Capex: 1,578 2,264 3,182 3,450
FCF: 12,826 15,532 18,430 15,654
Business: Microsoft, founded in 1975, is the world’s largest software
Net cash: 34,161 23,411 23,662 18,747
firm. It operates in five segments: Client (Windows OS), Server and
Tools (Windows & SQL Server), Online Services (MSN), Business ST assets: 49,010 40,168 43,242 37,202
(Office, Project, Visio, Exchange, Live Meeting), and Entertainment and ST liabilities: 22,442 23,754 29,886 24,383
Devices (Xbox, Zune, Windows Mobile, Windows Embedded). Intangibles: 4,405 5,638 14,081 14,190
Book value: 40,104 31,097 36,286 33,594
Thesis: Microsoft is quite possibly the world’s best business, as
Total assets: 69,597 63,171 72,793 65,117
reflected by the company’s global ubiquity, virtually unassailable market
ROIC: n/m n/m n/m n/m
position in operating systems, strong management, and ability to
generate enormous profits while employing no capital in the business.
While Microsoft is cheap based on 10x estimated FY09 headline EPS, $80
the undervaluation becomes even more apparent if one considers that $60
the company’s balance sheet remains deleveraged and that valuable $40
businesses, such as MSN and Xbox, are not yet contributing to
headline EPS. We value Microsoft at $41-54 per share, based on the $20
sum-of-the-parts valuation analysis presented herein. Our estimate $0
ascribes no value to the company’s recently announced $40 billion 99 00 01 02 03 04 05 06 07 08
stock repurchase plan, which should be highly accretive to EPS.
Net 1 Ueps Technologies (Nasdaq: UEPS) Electronic Payment Processing (www.net1ueps.co.za)

Enterprise value: $509 million P/E FYE 6/30/10: 5.1x GP: 146 170 187 190
FCF: 74 62 115 39
Business: Net 1 provides a proprietary universal electronic payment
Net cash: 190 168 269 131
system (UEPS) to the underbanked in developing economies. It
operates in four segments, primarily in South Africa: The transaction- ST assets: 241 248 346 370
based activities segment earns fee income from a state welfare ST liabilities: 43 55 77 185
distribution service. The smart card segment derives revenue from the Intangibles: 20 118 99 207
provision of smart card accounts. The financial services segment Book value: 209 281 340 358
provides short-term loans on a principal basis and life insurance on an Total assets: 270 376 454 588
agency basis. The hardware, software and technology segment derives ROIC: >100% >100% >100% >100%
revenue from sales of hardware, SIM cards/licenses, and cryptography.
Thesis: Net 1 has developed a workable electronic payment solution

for the underbanked in developing countries. The company’s system $80
addresses the needs of four billion people, an enormous addressable $60
market. While Net 1 faces the long-term risk of losing government- $40
related revenue in South Africa (two-thirds of revenue), a competitive
bidding process was terminated in early November, with Net 1 retaining $20
all contracts on existing terms. Revenue and earnings continue to grow $0
despite global macroeconomic weakness. We value the company at 00 00 01 02 03 04 05 06 07 08
$20-30 per share, based on a range of 10x trailing EBIT to 15x forward
EPS (detailed analysis herein).
Premier Exhibitions (Nasdaq: PRXI) Recreational Activities – Exhibitions (www.prxi.com)

Shares out: 29.2 million P/E FYE 2/28/11: n/a EBIT: 3 12 18 5
FCF: 0 9 12 (4)
Business: Premier develops touring, museum-quality exhibitions. The
Net cash: 3 17 18 9
exhibitions, including Bodies and Titanic, have attracted 20 million
visitors. Since 1994, Premier subsidiary RMS Titanic has been salvor- ST assets: 10 25 28 24
in-possession of the wreck of the Titanic, as ordered by a federal ST liabilities: 3 2 4 6
district court. RMS has conducted multiple expeditions, recovering Intangibles: 4 3 10 12
5,500 artifacts. Revenue sources include exhibition ticket sales, Book value: 20 33 47 46
merchandise sales, licensing activities, and sponsorship agreements. Total assets: 22 35 51 53
ROIC: 83% >100% >100% 29%
Thesis: Premier’s revenue has exploded in recent years, primarily due
to the success of the Bodies exhibitions. The company has misstepped
recently, allowing the cost structure to get out of hand. However, with $20
involvement by 16% shareholder Mark Sellers, Premier should be able
$15
to improve execution. While the company may not remain salvor-in-
possession of the Titanic wreck site in the long term, it owns 2,000 $10
recovered artifacts, appraised at $46 million but on the books for only $5
$3 million. We value Premier at $1.50-7.50 per share, reflecting high
$0
earnings uncertainty. At the low end, we ascribe zero value to the
00 00 00 00 00 04 05 06 07 08
company’s ongoing business, zero value to the net cash position of $9
million, and $46 million to the Titanic assets (detailed analysis herein).
Syneron Medical (Nasdaq: ELOS) Aesthetic Medical Products (www.syneron.com)

FCF: 30 36 46 41
Business: Syneron provides aesthetic medical products based on
Net cash: 133 103 168 120
proprietary Electro-Optical Synergy (Elos) technology, which uses
electrical and optical energy to provide effective and safe aesthetic ST assets: 166 153 222 179
treatments. The products are primarily sold to physicians and target ST liabilities: 21 26 33 30
non-invasive procedures, including hair removal, wrinkle reduction, Intangibles: 0 1 5 5
treatment of superficial vascular and pigmented lesions, and treatment Book value: 145 194 231 254
of leg veins. The company has an installed base of 10,000 products. Total assets: 170 225 269 290
ROIC: >100% >100% 98% 70%
Thesis: Syneron offers innovative products in the growing global
market for aesthetic medical procedures. Investors appear to be
ignoring the company’s existing earning power and emerging growth $50
prospects, including new recurring revenue opportunities related to the $40
LipoLite Energy Access Program and a potentially meaningful $30
partnership with P&G. We value Syneron at $14-18 per share, based $20
on a sum-of-the-parts analysis that considers the company’s $219 $10
million in net cash and investments and values the aesthetic products $0
business based on a range of 8x trailing EBIT to 8x estimated 00 00 00 00 00 04 05 06 07 08
normalized EBIT (detailed analysis herein).
Tempur-Pedic International (NYSE: TPX) Mattresses and Pillows (www.tempurpedic.com)

Market value: $503 million P/E FYE 12/31/08: 7.2x Revenue: 837 945 1,107 1,028
Institutional ownership: n/a EV / LTM revenue: 0.9x Net income: 99 112 142 98
Insider buys/sales: 0/0 P / tangible book: n/m Capex: 87 38 17 17
FCF: 15 128 109 149
Business: Tempur-Pedic provides premium, branded, non-innerspring
Net cash: (327) (345) (569) (431)
mattresses and pillows. The company operates in two segments:
Domestic consists of two U.S. factories and a distribution subsidiary. ST assets: 228 238 327 320
International consists of a factory in Denmark and distribution subs. ST liabilities: 121 132 127 146
Intangibles: 274 269 267 267
Thesis: Tempur-Pedic enjoys a wide competitive moat, fortified by Book value: 226 213 48 84
strong brand equity, pricing power, industry-leading cost structure, high
Total assets: 702 726 806 782
returns on capital, and favorable long-term growth prospects. We
ROIC: 68% 62% 70% 59%
believe investors underestimate the variability of the company’s cost
structure and the company’s ability to service debt in a difficult market
environment. The discretionary nature of Tempur-Pedic’s high-ticket $40
products makes the stock an easily conceptualized short. The high $30
short interest could, however, result in explosive stock price upside $20
once the market refocuses on the company’s significant normalized
earnings power. We value Tempur-Pedic at $11-18 per share, based $10
on 7x trailing EBIT and 12x estimated normalized EPS. $0
00 00 00 00 00 04 05 06 07 08
Travelzoo Inc. (Nasdaq: TZOO) Travel-related Internet Media (www.travelzoo.com)

Market value: $64 million P/E FYE 12/31/08: n/m Revenue: 51 70 79 81
Enterprise value: $48 million P/E FYE 12/31/09: n/m GP: 50 69 77 78
Institutional ownership: 29% EV / LTM revenue: 0.6x Net income: 8 17 9 (4)
Insider ownership: 45% EV / LTM EBIT: 9.4x Diluted EPS: 0.45 1.01 0.57 (0.28)
FCF: 8 17 9 (6)
Business: Travelzoo’s free Internet media properties reach 12 million
Net cash: 44 34 23 16
consumers in the U.S., Europe and Asia. The properties include the
Travelzoo website, the Top 20 list of weekly deals, email alerts, and a ST assets: 55 43 36 30
travel search engine. Travelzoo publishes offers from 900 advertisers, ST liabilities: 7 7 10 12
with deal experts reviewing offers to find the best travel deals. Intangibles: 0 0 0 0
Book value: 49 37 26 22
Thesis: Travelzoo is a good business run by capable insiders who
Total assets: 56 44 37 35
have loaded up on shares this year. The market values Travelzoo’s
ROIC: >100% >100% >100% >100%
international startup operations materially below zero even though the
company has a proven model and management knows Europe well
(founder Ralph Bartel was educated in Germany and Switzerland). The $150
downside appears limited as the Bartel brothers are heavily
$100
incentivized to create shareholder value. If international operations do
not achieve desired profitability, management could shut them down $50
and sell the U.S. business to a competitor such as Priceline.com. We
value Travelzoo at $25-26 per share, based on a probability-weighted $0
scenario analysis that includes estimated ranges of annualized EBIT 00 00 00 02 03 04 05 06 07 08
for North America and the rest of the world (detailed analysis herein).
In-depth profiles of the Magic Formula Top 10 are included in

alphabetical order among the 100 companies profiles in this issue.
The “Magic Formula” 100

► Review of Top 100 companies passing “Magic Formula” screen
The “Magic Formula” 100 — Overview of Companies Analyzed (in alphabetical order)
Recent Market Enterprise LTM LTM Date of FY

Price Value Value EBIT / EBIT / Latest End
*
Company / Ticker ($) ($mn) ($mn) EV Capital Quarter Date
Accenture Ltd. / ACN 28.67 20,919 17,304 17% >99% 8/31/08 8/31/09
Acme Packet, Inc. / APKT 3.69 204 77 22% 0-25% 9/30/08 12/31/08
Aladdin Knowledge Systems Ltd. / ALDN 9.44 131 120 3% 0-25% 9/30/08 12/31/08
Allegheny Technologies Incorpo / ATI 21.20 2,041 2,285 41% 25-50% 9/30/08 12/31/08
Ambassadors Group, Inc. / EPAX 8.40 160 98 23% 25-50% 9/30/08 12/31/08
American Eagle Outfitters / AEO 8.88 1,828 1,523 34% 25-50% 7/31/08 1/31/09
AmerisourceBergen Corp. / ABC 29.98 4,751 5,062 16% >99% 9/30/08 9/30/09
Bare Escentuals, Inc. / BARE 4.45 407 629 29% >99% 9/30/08 12/31/08
Barrett Business Services, Inc / BBSI 10.14 108 57 18% 25-50% 9/30/08 12/31/08
Biovail Corporation (USA) / BVF 8.57 1,360 1,134 6% 25-50% 9/30/08 12/31/08
Boeing Company, The / BA 41.04 30,076 32,906 16% >99% 9/30/08 12/31/08
Broadridge Financial Solutions / BR 11.10 1,570 1,639 21% 50-99% 9/30/08 6/30/09
BSQUARE Corporation / BSQR 2.93 30 20 18% 50-99% 9/30/08 12/31/08
Cadence Design Systems, Inc. / CDNS 3.93 1,023 864 21% 50-99% 6/30/08 12/31/08
CF Industries Holdings, Inc. / CF 54.97 3,126 1,978 52% 50-99% 9/30/08 12/31/08
Coach, Inc. / COH 16.20 5,296 4,889 23% >99% 9/30/08 6/30/09
COMSYS IT Partners, Inc. / CITP 4.14 84 153 23% 50-99% 9/30/08 12/31/08
CTC Media, Inc. / CTCM 4.45 677 747 35% >99% 9/30/08 12/31/08
Darling International Inc. / DAR 4.57 374 371 37% 50-99% 9/30/08 12/31/08
Dell Inc. / DELL 10.89 21,327 14,263 23% >99% 7/31/08 1/31/09
Deluxe Corporation / DLX 10.89 557 1,424 15% >99% 9/30/08 12/31/08
DepoMed, Inc. / DEPO 1.64 84 19 96% 25-50% 9/30/08 12/31/08
Diamond Mgt. & Technology Cons / DTPI 3.96 101 54 12% 25-50% 9/30/08 3/31/09
DISH Network Corp. / DISH 11.00 4,918 9,466 20% 50-99% 9/30/08 12/31/08
Double-Take Software, Inc. / DBTK 7.07 156 88 20% 50-99% 9/30/08 12/31/08
Dynacq Healthcare, Inc. / DYII 3.39 53 22 69% 50-99% 5/31/08 8/31/08
EarthLink, Inc. / ELNK 6.36 689 501 42% >99% 9/30/08 12/31/08
eBay Inc. / EBAY 12.36 15,783 12,139 19% >99% 9/30/08 12/31/08
EMCOR Group, Inc. / EME 13.80 904 763 38% >99% 9/30/08 12/31/08
Emulex Corporation / ELX 7.22 593 299 21% 0-25% 9/30/08 6/30/09
Energen Corporation / EGN 28.40 2,037 2,609 22% >99% 9/30/08 12/31/08
First Advantage Corporation / FADV 12.02 715 720 14% 50-99% 9/30/08 12/31/08
Forest Laboratories, Inc. / FRX 22.97 6,923 5,033 24% 25-50% 9/30/08 3/31/09
Foster Wheeler Ltd. / FWLT 19.94 2,667 1,581 39% >99% 9/30/08 12/31/08
Gannett Co., Inc. / GCI 8.15 1,859 5,645 nm nm 9/30/08 12/31/08
Garmin Ltd. / GRMN 19.04 3,856 3,317 28% 50-99% 9/30/08 12/31/08
Hansen Natural Corporation / HANS 25.36 2,344 2,074 13% >99% 9/30/08 12/31/08
Heidrick & Struggles Internati / HSII 21.24 347 164 42% >99% 9/30/08 12/31/08
Herbalife Ltd. / HLF 17.56 1,121 1,298 28% >99% 9/30/08 12/31/08
Herman Miller, Inc. / MLHR 14.61 784 1,002 25% 50-99% 8/31/08 5/31/09
Hurco Companies, Inc. / HURC 17.17 110 77 49% 50-99% 7/31/08 10/31/08
iBasis, Inc. / IBAS 2.15 153 122 10% >99% 9/30/08 12/31/08
ICF International, Inc. / ICFI 18.00 266 353 17% >99% 9/30/08 12/31/08
Iconix Brand Group, Inc. / ICON 8.72 508 1,098 13% >99% 9/30/08 12/31/08
infoGROUP Inc / IUSA 3.38 192 494 8% >99% 9/30/08 12/31/08
Jackson Hewitt Tax Service Inc / JTX 11.76 339 620 10% >99% 7/31/08 4/30/09
KBR, Inc. / KBR 13.11 2,118 1,008 47% >99% 9/30/08 12/31/08
[MFI100 ● Top100_browser ● MOI_macros_100.xls, MOI100A]
*
Numbers shown are based on GAAP data, while the screening process uses EBIT adjusted for non-recurring items.
The “Magic Formula” 100 — Overview of Companies Analyzed (in alphabetical order) (continued)

*
Kenexa Corporation / KNXA 5.59 126 100 30% 25-50% 9/30/08 12/31/08
KHD Humboldt Wedag Internation / KHD 9.10 278 -118 nm >99% 9/30/08 12/31/08
King Pharmaceuticals, Inc. / KG 9.64 2,376 1,472 24% 25-50% 9/30/08 12/31/08
Korn/Ferry International / KFY 11.61 553 344 26% >99% 7/31/08 4/30/09
Lam Research Corporation / LRCX 17.99 2,248 1,488 22% 50-99% 9/30/08 6/30/09
LCA-Vision Inc. / LCAV 3.91 73 32 22% 0-25% 9/30/08 12/31/08
Lear Corporation / LEA 1.40 108 1,925 16% 25-50% 9/30/08 12/31/08
Lincare Holdings Inc. / LNCR 25.03 1,862 2,452 16% 50-99% 9/30/08 12/31/08
Lorillard Inc. / LO 60.78 10,215 9,007 14% >99% 9/30/08 12/31/08
Manitowoc Company, Inc. / MTW 6.92 902 974 60% 50-99% 9/30/08 12/31/08
McGraw-Hill Companies, Inc., T / MHP 23.36 7,347 8,366 17% >99% 9/30/08 12/31/08
Medicis Pharmaceutical Corpora / MRX 11.24 638 500 14% 0-25% 6/30/08 12/31/08
MEMC Electronic Materials, Inc / WFR 15.34 3,443 2,354 40% >99% 9/30/08 12/31/08
Meredith Corporation / MDP 16.11 727 1,163 19% 50-99% 9/30/08 6/30/09
Mesabi Trust / MSB 8.89 117 103 32% >99% 7/31/08 1/31/09
Microsoft Corporation / MSFT 20.06 178,445 159,698 14% >99% 9/30/08 6/30/09
Monster Worldwide, Inc. / MWW 11.62 1,432 1,040 19% >99% 9/30/08 12/31/08
Mosaic Company, The / MOS 32.47 14,425 13,725 28% 50-99% 8/31/08 5/31/09
Net 1 Ueps Technologies Inc / UEPS 10.97 641 509 22% >99% 9/30/08 6/30/09
New Frontier Media, Inc. / NOOF 1.80 41 26 46% >99% 9/30/08 3/31/09
NutriSystem Inc. / NTRI 13.22 391 333 29% 50-99% 9/30/08 12/31/08
NVIDIA Corporation / NVDA 7.17 3,991 2,686 14% 25-50% 10/31/08 1/31/09
Pacer International, Inc. / PACR 10.27 359 395 28% >99% 9/30/08 12/31/08
Perini Corporation / PCR 14.42 726 387 43% >99% 9/30/08 12/31/08
Precision Castparts Corp. / PCP 55.04 7,674 7,585 21% 50-99% 9/30/08 3/31/09
Premier Exhibitions, Inc. / PRXI 0.78 23 14 34% 25-50% 8/31/08 2/28/09
Pre-Paid Legal Services, Inc. / PPD 35.92 417 449 22% >99% 9/30/08 12/31/08
PRIMEDIA Inc. / PRM 1.37 61 287 18% >99% 9/30/08 12/31/08
Questcor Pharmaceuticals, Inc. / QCOR 8.15 529 489 12% >99% 9/30/08 12/31/08
R.G. Barry Corp. / DFZ 5.28 56 49 21% 0-25% 9/30/08 6/30/09
RadioShack Corporation / RSH 9.65 1,207 1,145 34% 50-99% 9/30/08 12/31/08
Robert Half International Inc. / RHI 17.81 2,762 2,392 20% >99% 9/30/08 12/31/08
Rockwell Automation / ROK 26.08 3,797 4,219 21% 50-99% 9/30/08 9/30/09
Seagate Technology / STX 4.87 2,378 3,255 33% 25-50% 9/30/08 6/30/09
Sierra Wireless, Inc. (USA) / SWIR 7.88 244 42 >99% 25-50% 9/30/08 12/31/08
Sigma Designs, Inc. / SIGM 8.79 232 111 56% 50-99% 7/31/08 1/31/09
Spark Networks Inc / LOV 3.05 65 61 16% >99% 9/30/08 12/31/08
SPSS Inc. / SPSS 24.30 441 284 18% >99% 9/30/08 12/31/08
Syneron Medical Ltd. / ELOS 7.74 215 95 26% 0-25% 9/30/08 12/31/08
Take-Two Interactive Software, / TTWO 10.76 835 496 27% >99% 7/31/08 10/31/08
Tempur-Pedic International Inc / TPX 6.72 503 934 19% 50-99% 9/30/08 12/31/08
TheStreet.com, Inc. / TSCM 3.17 97 19 36% 25-50% 9/30/08 12/31/08
Total System Services, Inc. / TSS 12.16 2,393 2,348 15% 50-99% 9/30/08 12/31/08
Travelzoo Inc. / TZOO 4.48 64 48 11% >99% 9/30/08 12/31/08
USA Mobility, Inc. / USMO 9.55 260 156 nm nm 9/30/08 12/31/08
VAALCO Energy, Inc. / EGY 4.39 256 157 79% >99% 9/30/08 12/31/08
Value Line, Inc. / VALU 32.88 328 204 16% 25-50% 7/31/08 4/30/09
ValueClick, Inc. / VCLK 5.71 495 406 19% 50-99% 9/30/08 12/31/08
Varian Semiconductor / VSEA 17.47 1,269 1,063 14% 25-50% 9/30/08 9/30/09
Verigy Ltd. / VRGY 10.96 646 261 36% 25-50% 7/31/08 10/31/08
Versant Corporation / VSNT 14.46 54 27 36% >99% 7/31/08 10/31/08
Viacom, Inc. / VIA.B 16.78 10,295 18,722 16% >99% 9/30/08 12/31/08
ViroPharma Incorporated / VPHM 11.70 921 502 20% 25-50% 9/30/08 12/31/08
*
Numbers shown are based on GAAP data, while the screening process uses EBIT adjusted for non-recurring items.
The “Magic Formula” 100 — Overview of Companies Analyzed (sorted by market value)

Microsoft Corporation / MSFT 20.06 178,445 159,698 14% >99% 9/30/08 6/30/09
Boeing Company, The / BA 41.04 30,076 32,906 16% >99% 9/30/08 12/31/08
Dell Inc. / DELL 10.89 21,327 14,263 23% >99% 7/31/08 1/31/09
Accenture Ltd. / ACN 28.67 20,919 17,304 17% >99% 8/31/08 8/31/09
eBay Inc. / EBAY 12.36 15,783 12,139 19% >99% 9/30/08 12/31/08
Mosaic Company, The / MOS 32.47 14,425 13,725 28% 50-99% 8/31/08 5/31/09
Viacom, Inc. / VIA.B 16.78 10,295 18,722 16% >99% 9/30/08 12/31/08
Lorillard Inc. / LO 60.78 10,215 9,007 14% >99% 9/30/08 12/31/08
Precision Castparts Corp. / PCP 55.04 7,674 7,585 21% 50-99% 9/30/08 3/31/09
McGraw-Hill Companies, Inc., T / MHP 23.36 7,347 8,366 17% >99% 9/30/08 12/31/08
Forest Laboratories, Inc. / FRX 22.97 6,923 5,033 24% 25-50% 9/30/08 3/31/09
Coach, Inc. / COH 16.20 5,296 4,889 23% >99% 9/30/08 6/30/09
DISH Network Corp. / DISH 11.00 4,918 9,466 20% 50-99% 9/30/08 12/31/08
AmerisourceBergen Corp. / ABC 29.98 4,751 5,062 16% >99% 9/30/08 9/30/09
NVIDIA Corporation / NVDA 7.17 3,991 2,686 14% 25-50% 10/31/08 1/31/09
Garmin Ltd. / GRMN 19.04 3,856 3,317 28% 50-99% 9/30/08 12/31/08
Rockwell Automation / ROK 26.08 3,797 4,219 21% 50-99% 9/30/08 9/30/09
MEMC Electronic Materials, Inc / WFR 15.34 3,443 2,354 40% >99% 9/30/08 12/31/08
CF Industries Holdings, Inc. / CF 54.97 3,126 1,978 52% 50-99% 9/30/08 12/31/08
Robert Half International Inc. / RHI 17.81 2,762 2,392 20% >99% 9/30/08 12/31/08
Foster Wheeler Ltd. / FWLT 19.94 2,667 1,581 39% >99% 9/30/08 12/31/08
Total System Services, Inc. / TSS 12.16 2,393 2,348 15% 50-99% 9/30/08 12/31/08
Seagate Technology / STX 4.87 2,378 3,255 33% 25-50% 9/30/08 6/30/09
King Pharmaceuticals, Inc. / KG 9.64 2,376 1,472 24% 25-50% 9/30/08 12/31/08
Hansen Natural Corporation / HANS 25.36 2,344 2,074 13% >99% 9/30/08 12/31/08
Lam Research Corporation / LRCX 17.99 2,248 1,488 22% 50-99% 9/30/08 6/30/09
KBR, Inc. / KBR 13.11 2,118 1,008 47% >99% 9/30/08 12/31/08
Allegheny Technologies Incorpo / ATI 21.20 2,041 2,285 41% 25-50% 9/30/08 12/31/08
Energen Corporation / EGN 28.40 2,037 2,609 22% >99% 9/30/08 12/31/08
Lincare Holdings Inc. / LNCR 25.03 1,862 2,452 16% 50-99% 9/30/08 12/31/08
Gannett Co., Inc. / GCI 8.15 1,859 5,645 nm nm 9/30/08 12/31/08
American Eagle Outfitters / AEO 8.88 1,828 1,523 34% 25-50% 7/31/08 1/31/09
Broadridge Financial Solutions / BR 11.10 1,570 1,639 21% 50-99% 9/30/08 6/30/09
Monster Worldwide, Inc. / MWW 11.62 1,432 1,040 19% >99% 9/30/08 12/31/08
Biovail Corporation (USA) / BVF 8.57 1,360 1,134 6% 25-50% 9/30/08 12/31/08
Varian Semiconductor / VSEA 17.47 1,269 1,063 14% 25-50% 9/30/08 9/30/09
RadioShack Corporation / RSH 9.65 1,207 1,145 34% 50-99% 9/30/08 12/31/08
Herbalife Ltd. / HLF 17.56 1,121 1,298 28% >99% 9/30/08 12/31/08
Cadence Design Systems, Inc. / CDNS 3.93 1,023 864 21% 50-99% 6/30/08 12/31/08
ViroPharma Incorporated / VPHM 11.70 921 502 20% 25-50% 9/30/08 12/31/08
EMCOR Group, Inc. / EME 13.80 904 763 38% >99% 9/30/08 12/31/08
Manitowoc Company, Inc. / MTW 6.92 902 974 60% 50-99% 9/30/08 12/31/08
Take-Two Interactive Software, / TTWO 10.76 835 496 27% >99% 7/31/08 10/31/08
Herman Miller, Inc. / MLHR 14.61 784 1,002 25% 50-99% 8/31/08 5/31/09
Meredith Corporation / MDP 16.11 727 1,163 19% 50-99% 9/30/08 6/30/09
Perini Corporation / PCR 14.42 726 387 43% >99% 9/30/08 12/31/08
First Advantage Corporation / FADV 12.02 715 720 14% 50-99% 9/30/08 12/31/08
The “Magic Formula” 100 — Overview of Companies Analyzed (sorted by market value) (continued)

EarthLink, Inc. / ELNK 6.36 689 501 42% >99% 9/30/08 12/31/08
CTC Media, Inc. / CTCM 4.45 677 747 35% >99% 9/30/08 12/31/08
Verigy Ltd. / VRGY 10.96 646 261 36% 25-50% 7/31/08 10/31/08
Net 1 Ueps Technologies Inc / UEPS 10.97 641 509 22% >99% 9/30/08 6/30/09
Medicis Pharmaceutical Corpora / MRX 11.24 638 500 14% 0-25% 6/30/08 12/31/08
Emulex Corporation / ELX 7.22 593 299 21% 0-25% 9/30/08 6/30/09
Deluxe Corporation / DLX 10.89 557 1,424 15% >99% 9/30/08 12/31/08
Korn/Ferry International / KFY 11.61 553 344 26% >99% 7/31/08 4/30/09
Questcor Pharmaceuticals, Inc. / QCOR 8.15 529 489 12% >99% 9/30/08 12/31/08
Iconix Brand Group, Inc. / ICON 8.72 508 1,098 13% >99% 9/30/08 12/31/08
Tempur-Pedic International Inc / TPX 6.72 503 934 19% 50-99% 9/30/08 12/31/08
ValueClick, Inc. / VCLK 5.71 495 406 19% 50-99% 9/30/08 12/31/08
SPSS Inc. / SPSS 24.30 441 284 18% >99% 9/30/08 12/31/08
Pre-Paid Legal Services, Inc. / PPD 35.92 417 449 22% >99% 9/30/08 12/31/08
Bare Escentuals, Inc. / BARE 4.45 407 629 29% >99% 9/30/08 12/31/08
NutriSystem Inc. / NTRI 13.22 391 333 29% 50-99% 9/30/08 12/31/08
Darling International Inc. / DAR 4.57 374 371 37% 50-99% 9/30/08 12/31/08
Pacer International, Inc. / PACR 10.27 359 395 28% >99% 9/30/08 12/31/08
Heidrick & Struggles Internati / HSII 21.24 347 164 42% >99% 9/30/08 12/31/08
Jackson Hewitt Tax Service Inc / JTX 11.76 339 620 10% >99% 7/31/08 4/30/09
Value Line, Inc. / VALU 32.88 328 204 16% 25-50% 7/31/08 4/30/09
KHD Humboldt Wedag Internation / KHD 9.10 278 -118 nm >99% 9/30/08 12/31/08
ICF International, Inc. / ICFI 18.00 266 353 17% >99% 9/30/08 12/31/08
USA Mobility, Inc. / USMO 9.55 260 156 nm nm 9/30/08 12/31/08
VAALCO Energy, Inc. / EGY 4.39 256 157 79% >99% 9/30/08 12/31/08
Sierra Wireless, Inc. (USA) / SWIR 7.88 244 42 >99% 25-50% 9/30/08 12/31/08
Sigma Designs, Inc. / SIGM 8.79 232 111 56% 50-99% 7/31/08 1/31/09
Syneron Medical Ltd. / ELOS 7.74 215 95 26% 0-25% 9/30/08 12/31/08
Acme Packet, Inc. / APKT 3.69 204 77 22% 0-25% 9/30/08 12/31/08
infoGROUP Inc / IUSA 3.38 192 494 8% >99% 9/30/08 12/31/08
Ambassadors Group, Inc. / EPAX 8.40 160 98 23% 25-50% 9/30/08 12/31/08
Double-Take Software, Inc. / DBTK 7.07 156 88 20% 50-99% 9/30/08 12/31/08
iBasis, Inc. / IBAS 2.15 153 122 10% >99% 9/30/08 12/31/08
Aladdin Knowledge Systems Ltd. / ALDN 9.44 131 120 3% 0-25% 9/30/08 12/31/08
Kenexa Corporation / KNXA 5.59 126 100 30% 25-50% 9/30/08 12/31/08
Mesabi Trust / MSB 8.89 117 103 32% >99% 7/31/08 1/31/09
Hurco Companies, Inc. / HURC 17.17 110 77 49% 50-99% 7/31/08 10/31/08
Barrett Business Services, Inc / BBSI 10.14 108 57 18% 25-50% 9/30/08 12/31/08
Lear Corporation / LEA 1.40 108 1,925 16% 25-50% 9/30/08 12/31/08
Diamond Mgt. & Technology Cons / DTPI 3.96 101 54 12% 25-50% 9/30/08 3/31/09
TheStreet.com, Inc. / TSCM 3.17 97 19 36% 25-50% 9/30/08 12/31/08
COMSYS IT Partners, Inc. / CITP 4.14 84 153 23% 50-99% 9/30/08 12/31/08
DepoMed, Inc. / DEPO 1.64 84 19 96% 25-50% 9/30/08 12/31/08
LCA-Vision Inc. / LCAV 3.91 73 32 22% 0-25% 9/30/08 12/31/08
Spark Networks Inc / LOV 3.05 65 61 16% >99% 9/30/08 12/31/08
Travelzoo Inc. / TZOO 4.48 64 48 11% >99% 9/30/08 12/31/08
PRIMEDIA Inc. / PRM 1.37 61 287 18% >99% 9/30/08 12/31/08
R.G. Barry Corp. / DFZ 5.28 56 49 21% 0-25% 9/30/08 6/30/09
Versant Corporation / VSNT 14.46 54 27 36% >99% 7/31/08 10/31/08
Dynacq Healthcare, Inc. / DYII 3.39 53 22 69% 50-99% 5/31/08 8/31/08
New Frontier Media, Inc. / NOOF 1.80 41 26 46% >99% 9/30/08 3/31/09
BSQUARE Corporation / BSQR 2.93 30 20 18% 50-99% 9/30/08 12/31/08
Premier Exhibitions, Inc. / PRXI 0.78 23 14 34% 25-50% 8/31/08 2/28/09
The “Magic Formula” 100 — Stock Price Performance (sorted by price decline since 12/31/07)
Recent ∆ to 52-Wk Price Performance

Price Low High Since Since Since
Company / Ticker ($) ($) ($) 12/31/07 12/30/05 12/31/03
Lear Corporation / LEA 1.40 -16% >999% -95% -95% -98%
Premier Exhibitions, Inc. / PRXI 0.78 -5% >999% -93% -82% na
Manitowoc Company, Inc. / MTW 6.92 -1% 644% -86% -45% -11%
CTC Media, Inc. / CTCM 4.45 -22% 613% -85% na na
Sigma Designs, Inc. / SIGM 8.79 -10% 730% -84% -43% 17%
PRIMEDIA Inc. / PRM 1.37 -42% 637% -84% -86% -92%
MEMC Electronic Materials, Inc / WFR 15.34 -10% 526% -83% -31% 59%
Bare Escentuals, Inc. / BARE 4.45 -17% 572% -82% na na
Seagate Technology / STX 4.87 -11% 481% -81% -76% -74%
LCA-Vision Inc. / LCAV 3.91 -45% 446% -80% -92% -72%
Garmin Ltd. / GRMN 19.04 -5% 492% -80% -43% -30%
TheStreet.com, Inc. / TSCM 3.17 -3% 428% -80% -56% -22%
Gannett Co., Inc. / GCI 8.15 -4% 393% -79% -87% -91%
NVIDIA Corporation / NVDA 7.17 -17% 408% -79% -41% -7%
Cadence Design Systems, Inc. / CDNS 3.93 -38% 351% -77% -77% -78%
Allegheny Technologies Incorpo / ATI 21.20 -13% 365% -75% -41% 60%
Foster Wheeler Ltd. / FWLT 19.94 -11% 330% -74% 8% 94%
Tempur-Pedic International Inc / TPX 6.72 -10% 392% -74% -42% -57%
ValueClick, Inc. / VCLK 5.71 -4% 333% -74% -68% -37%
COMSYS IT Partners, Inc. / CITP 4.14 -9% 324% -74% -63% na
Kenexa Corporation / KNXA 5.59 -3% 330% -71% -74% na
Meredith Corporation / MDP 16.11 -6% 263% -71% -69% -67%
Acme Packet, Inc. / APKT 3.69 -11% 260% -71% na na
KHD Humboldt Wedag Internation / KHD 9.10 -20% 293% -70% -18% -1%
DISH Network Corp. / DISH 11.00 -5% 316% -68% -55% -64%
Double-Take Software, Inc. / DBTK 7.07 -13% 275% -67% na na
New Frontier Media, Inc. / NOOF 1.80 -11% 241% -67% -72% -81%
Travelzoo Inc. / TZOO 4.48 -8% 284% -67% -80% -49%
Deluxe Corporation / DLX 10.89 -31% 209% -67% -64% -74%
KBR, Inc. / KBR 13.11 -10% 239% -66% na na
Mosaic Company, The / MOS 32.47 -26% 403% -66% 122% na
Perini Corporation / PCR 14.42 -19% 305% -65% -40% na
Monster Worldwide, Inc. / MWW 11.62 -14% 222% -64% -72% -47%
Aladdin Knowledge Systems Ltd. / ALDN 9.44 -12% 185% -64% -45% 6%
Jackson Hewitt Tax Service Inc / JTX 11.76 -10% 193% -63% -58% na
eBay Inc. / EBAY 12.36 -8% 184% -63% -71% -62%
Net 1 Ueps Technologies Inc / UEPS 10.97 -10% 203% -63% -62% -66%
Rockwell Automation / ROK 26.08 -18% 178% -62% -56% -27%
infoGROUP Inc / IUSA 3.38 -13% 195% -62% -69% -54%
Viacom, Inc. / VIA.B 16.78 -14% 171% -62% -59% na
Hurco Companies, Inc. / HURC 17.17 -9% 204% -61% -44% 221%
Darling International Inc. / DAR 4.57 -10% 283% -60% 15% 66%
Precision Castparts Corp. / PCP 55.04 -14% 181% -60% 6% 142%
Verigy Ltd. / VRGY 10.96 -4% 155% -60% na na
Lam Research Corporation / LRCX 17.99 -7% 167% -58% -50% -44%
iBasis, Inc. / IBAS 2.15 -35% 176% -58% -61% -55%
American Eagle Outfitters / AEO 8.88 -5% 168% -57% -42% 62%
The “Magic Formula” 100 — Stock Price Performance (sorted by price decline since 12/31/07) (continued)
Recent ∆ to 52-Wk Price Performance

Price Low High Since Since Since
Company / Ticker ($) ($) ($) 12/31/07 12/30/05 12/31/03
Mesabi Trust / MSB 8.89 -4% 257% -57% -47% 27%
BSQUARE Corporation / BSQR 2.93 -22% 136% -57% -10% -48%
Medicis Pharmaceutical Corpora / MRX 11.24 -12% 147% -57% -65% -68%
Total System Services, Inc. / TSS 12.16 -9% 146% -57% -39% -61%
Herbalife Ltd. / HLF 17.56 -5% 191% -56% -46% na
Energen Corporation / EGN 28.40 -13% 180% -56% -22% 38%
Emulex Corporation / ELX 7.22 -5% 148% -56% -64% -73%
Iconix Brand Group, Inc. / ICON 8.72 -25% 170% -56% -14% 315%
Dell Inc. / DELL 10.89 -19% 161% -56% -64% -68%
Herman Miller, Inc. / MLHR 14.61 -6% 132% -55% -48% -40%
Ambassadors Group, Inc. / EPAX 8.40 -12% 148% -54% -63% -29%
Boeing Company, The / BA 41.04 -5% 131% -53% -42% -3%
Varian Semiconductor / VSEA 17.47 -5% 149% -53% -11% -10%
NutriSystem Inc. / NTRI 13.22 -24% 139% -51% -63% 669%
Broadridge Financial Solutions / BR 11.10 -10% 118% -51% na na
Versant Corporation / VSNT 14.46 -2% 132% -50% 164% -7%
CF Industries Holdings, Inc. / CF 54.97 -31% 215% -50% 260% na
DepoMed, Inc. / DEPO 1.64 -4% 176% -50% -73% -77%
Coach, Inc. / COH 16.20 -10% 136% -47% -51% -14%
Sierra Wireless, Inc. (USA) / SWIR 7.88 -11% 169% -47% -29% -49%
McGraw-Hill Companies, Inc., T / MHP 23.36 -27% 110% -47% -55% -33%
Diamond Mgt. & Technology Cons / DTPI 3.96 -54% 107% -46% -50% -61%
Barrett Business Services, Inc / BBSI 10.14 -11% 92% -44% -59% 17%
Microsoft Corporation / MSFT 20.06 -7% 83% -44% -23% -27%
Heidrick & Struggles Internati / HSII 21.24 -11% 79% -43% -34% -3%
RadioShack Corporation / RSH 9.65 -4% 111% -43% -54% -69%
Hansen Natural Corporation / HANS 25.36 -19% 98% -43% 29% >999%
Syneron Medical Ltd. / ELOS 7.74 0% 133% -42% -76% na
Take-Two Interactive Software, / TTWO 10.76 -7% 160% -42% -39% -44%
EMCOR Group, Inc. / EME 13.80 -7% 161% -42% -18% 26%
Spark Networks Inc / LOV 3.05 -11% 97% -39% na na
Korn/Ferry International / KFY 11.61 -15% 79% -38% -38% -13%
Forest Laboratories, Inc. / FRX 22.97 -13% 86% -37% -44% -63%
Biovail Corporation (USA) / BVF 8.57 -22% 102% -36% -64% -60%
Pre-Paid Legal Services, Inc. / PPD 35.92 -16% 60% -35% -6% 38%
Robert Half International Inc. / RHI 17.81 -20% 68% -34% -53% -24%
USA Mobility, Inc. / USMO 9.55 -33% 63% -33% -66% na
AmerisourceBergen Corp. / ABC 29.98 -7% 62% -33% -25% 10%
SPSS Inc. / SPSS 24.30 -10% 78% -32% -21% 36%
Pacer International, Inc. / PACR 10.27 -12% 145% -30% -61% -49%
Lincare Holdings Inc. / LNCR 25.03 -9% 51% -29% -40% -17%
ICF International, Inc. / ICFI 18.00 -19% 57% -29% na na
First Advantage Corporation / FADV 12.02 -42% 95% -27% -55% -37%
R.G. Barry Corp. / DFZ 5.28 -2% 67% -25% -14% 20%
Accenture Ltd. / ACN 28.67 -14% 50% -20% -1% 9%
Value Line, Inc. / VALU 32.88 -9% 44% -19% -7% -34%
EarthLink, Inc. / ELNK 6.36 -4% 60% -10% -43% -36%
Dynacq Healthcare, Inc. / DYII 3.39 -9% 115% -8% 40% -56%
King Pharmaceuticals, Inc. / KG 9.64 -28% 31% -6% -43% -37%
VAALCO Energy, Inc. / EGY 4.39 -20% 105% -6% 4% 214%
Questcor Pharmaceuticals, Inc. / QCOR 8.15 -55% 10% 41% 684% >999%
ViroPharma Incorporated / VPHM 11.70 -34% 30% 47% -37% 322%
Lorillard Inc. / LO 60.78 -12% 30% na na na
The “Magic Formula” 100 — P/E Multiples (sorted by P/E based on estimated EPS for next fiscal year)
Recent Market P/E (A) P/E (Estimated) FY

Price Value Last This Next In End
Company / Ticker ($) ($mn) FY FY FY 2 Yrs Date
PRIMEDIA Inc. / PRM 1.37 61 nm 2x 2x na 12/31/08
Manitowoc Company, Inc. / MTW 6.92 902 3x 2x 2x 2x 12/31/08
Mosaic Company, The / MOS 32.47 14,425 7x 3x 3x 3x 5/31/09
Gannett Co., Inc. / GCI 8.15 1,859 2x 2x 3x 3x 12/31/08
Seagate Technology / STX 4.87 2,378 2x 5x 3x 2x 6/30/09
CTC Media, Inc. / CTCM 4.45 677 5x 4x 4x 3x 12/31/08
CF Industries Holdings, Inc. / CF 54.97 3,126 8x 4x 4x 4x 12/31/08
MEMC Electronic Materials, Inc / WFR 15.34 3,443 4x 4x 4x 3x 12/31/08
Bare Escentuals, Inc. / BARE 4.45 407 5x 4x 4x 4x 12/31/08
Deluxe Corporation / DLX 10.89 557 4x 4x 4x 4x 12/31/08
Premier Exhibitions, Inc. / PRXI 0.78 23 2x 20x 4x na 2/28/09
Kenexa Corporation / KNXA 5.59 126 6x 4x 5x 5x 12/31/08
DISH Network Corp. / DISH 11.00 4,918 7x 5x 5x 4x 12/31/08
EarthLink, Inc. / ELNK 6.36 689 nm 3x 5x 9x 12/31/08
infoGROUP Inc / IUSA 3.38 192 5x 12x 5x na 12/31/08
Sigma Designs, Inc. / SIGM 8.79 232 4x 5x 5x na 1/31/09
Perini Corporation / PCR 14.42 726 4x 4x 5x 5x 12/31/08
Foster Wheeler Ltd. / FWLT 19.94 2,667 7x 5x 5x 5x 12/31/08
Allegheny Technologies Incorpo / ATI 21.20 2,041 3x 4x 5x 4x 12/31/08
Net 1 Ueps Technologies Inc / UEPS 10.97 641 7x 6x 5x 5x 6/30/09
KHD Humboldt Wedag Internation / KHD 9.10 278 6x 4x 5x 8x 12/31/08
Herbalife Ltd. / HLF 17.56 1,121 7x 5x 5x 5x 12/31/08
New Frontier Media, Inc. / NOOF 1.80 41 5x 7x 5x na 3/31/09
EMCOR Group, Inc. / EME 13.80 904 7x 5x 5x 6x 12/31/08
Garmin Ltd. / GRMN 19.04 3,856 5x 5x 6x 6x 12/31/08
R.G. Barry Corp. / DFZ 5.28 56 6x 8x 6x na 6/30/09
Precision Castparts Corp. / PCP 55.04 7,674 8x 7x 6x 6x 3/31/09
RadioShack Corporation / RSH 9.65 1,207 6x 6x 6x 7x 12/31/08
Meredith Corporation / MDP 16.11 727 6x 7x 6x 5x 6/30/09
Pacer International, Inc. / PACR 10.27 359 7x 6x 6x 6x 12/31/08
Forest Laboratories, Inc. / FRX 22.97 6,923 8x 7x 6x 6x 3/31/09
Boeing Company, The / BA 41.04 30,076 8x 9x 6x 6x 12/31/08
Energen Corporation / EGN 28.40 2,037 7x 7x 7x 6x 12/31/08
Viacom, Inc. / VIA.B 16.78 10,295 7x 7x 7x 6x 12/31/08
Darling International Inc. / DAR 4.57 374 8x 5x 7x 5x 12/31/08
Jackson Hewitt Tax Service Inc / JTX 11.76 339 11x 8x 7x 6x 4/30/09
Coach, Inc. / COH 16.20 5,296 7x 7x 7x 6x 6/30/09
Iconix Brand Group, Inc. / ICON 8.72 508 8x 8x 7x na 12/31/08
Broadridge Financial Solutions / BR 11.10 1,570 8x 8x 7x na 6/30/09
American Eagle Outfitters / AEO 8.88 1,828 5x 7x 7x 6x 1/31/09
NutriSystem Inc. / NTRI 13.22 391 4x 7x 7x 6x 12/31/08
Herman Miller, Inc. / MLHR 14.61 784 6x 7x 7x 7x 5/31/09
KBR, Inc. / KBR 13.11 2,118 12x 8x 7x 7x 12/31/08
Rockwell Automation / ROK 26.08 3,797 7x 7x 7x 6x 9/30/09
eBay Inc. / EBAY 12.36 15,783 49x 7x 7x 7x 12/31/08
Tempur-Pedic International Inc / TPX 6.72 503 4x 7x 8x 7x 12/31/08
Dell Inc. / DELL 10.89 21,327 8x 8x 8x 8x 1/31/09
The “Magic Formula” 100 — P/E Multiples (sorted by P/E based on estimated EPS for next fiscal year) (continued)
Recent Market P/E (A) P/E (Estimated) FY

Price Value Last This Next In End
Company / Ticker ($) ($mn) FY FY FY 2 Yrs Date
Medicis Pharmaceutical Corpora / MRX 11.24 638 10x 9x 8x 6x 12/31/08
Take-Two Interactive Software, / TTWO 10.76 835 nm 5x 8x 6x 10/31/08
VAALCO Energy, Inc. / EGY 4.39 256 14x 5x 8x na 12/31/08
Emulex Corporation / ELX 7.22 593 nm 9x 8x na 6/30/09
AmerisourceBergen Corp. / ABC 29.98 4,751 10x 10x 9x 8x 9/30/09
USA Mobility, Inc. / USMO 9.55 260 nm 7x 9x 13x 12/31/08
Total System Services, Inc. / TSS 12.16 2,393 10x 9x 9x 8x 12/31/08
Microsoft Corporation / MSFT 20.06 178,445 11x 10x 9x 8x 6/30/09
McGraw-Hill Companies, Inc., T / MHP 23.36 7,347 8x 9x 9x 8x 12/31/08
Barrett Business Services, Inc / BBSI 10.14 108 7x 10x 9x 9x 12/31/08
Accenture Ltd. / ACN 28.67 20,919 11x 10x 9x 8x 8/31/09
ValueClick, Inc. / VCLK 5.71 495 8x 10x 9x 9x 12/31/08
Ambassadors Group, Inc. / EPAX 8.40 160 5x 9x 10x na 12/31/08
COMSYS IT Partners, Inc. / CITP 4.14 84 2x 4x 10x na 12/31/08
Korn/Ferry International / KFY 11.61 553 8x 10x 10x 6x 4/30/09
Double-Take Software, Inc. / DBTK 7.07 156 8x 12x 11x 10x 12/31/08
Syneron Medical Ltd. / ELOS 7.74 215 7x 9x 11x 6x 12/31/08
Lorillard Inc. / LO 60.78 10,215 12x 12x 11x 10x 12/31/08
Monster Worldwide, Inc. / MWW 11.62 1,432 10x 8x 11x 9x 12/31/08
NVIDIA Corporation / NVDA 7.17 3,991 5x 9x 11x 8x 1/31/09
Lincare Holdings Inc. / LNCR 25.03 1,862 10x 8x 11x 9x 12/31/08
King Pharmaceuticals, Inc. / KG 9.64 2,376 13x 8x 12x 13x 12/31/08
Hansen Natural Corporation / HANS 25.36 2,344 17x 14x 12x 10x 12/31/08
SPSS Inc. / SPSS 24.30 441 15x 13x 12x 13x 12/31/08
First Advantage Corporation / FADV 12.02 715 6x 13x 13x 12x 12/31/08
ICF International, Inc. / ICFI 18.00 266 7x 10x 13x 11x 12/31/08
Acme Packet, Inc. / APKT 3.69 204 12x 15x 14x 12x 12/31/08
Heidrick & Struggles Internati / HSII 21.24 347 7x 9x 14x 11x 12/31/08
Lam Research Corporation / LRCX 17.99 2,248 5x >99x 15x 9x 6/30/09
Questcor Pharmaceuticals, Inc. / QCOR 8.15 529 16x 18x 16x 13x 12/31/08
Varian Semiconductor / VSEA 17.47 1,269 13x >99x 22x 15x 9/30/09
ViroPharma Incorporated / VPHM 11.70 921 10x 12x 22x >99x 12/31/08
Verigy Ltd. / VRGY 10.96 646 7x 9x 22x 14x 10/31/08
Aladdin Knowledge Systems Ltd. / ALDN 9.44 131 9x >99x 24x 13x 12/31/08
Robert Half International Inc. / RHI 17.81 2,762 10x 11x 25x 22x 12/31/08
iBasis, Inc. / IBAS 2.15 153 7x 43x 31x 31x 12/31/08
Diamond Mgt. & Technology Cons / DTPI 3.96 101 12x 57x 33x na 3/31/09
TheStreet.com, Inc. / TSCM 3.17 97 3x 29x 53x 17x 12/31/08
Cadence Design Systems, Inc. / CDNS 3.93 1,023 4x >99x 66x 11x 12/31/08
Hurco Companies, Inc. / HURC 17.17 110 5x na na na 10/31/08
Mesabi Trust / MSB 8.89 117 6x na na na 1/31/09
BSQUARE Corporation / BSQR 2.93 30 11x na na na 12/31/08
Versant Corporation / VSNT 14.46 54 7x na na na 10/31/08
Sierra Wireless, Inc. (USA) / SWIR 7.88 244 7x na na na 12/31/08
Spark Networks Inc / LOV 3.05 65 10x na na na 12/31/08
Biovail Corporation (USA) / BVF 8.57 1,360 7x na na na 12/31/08
Pre-Paid Legal Services, Inc. / PPD 35.92 417 9x na na na 12/31/08
Value Line, Inc. / VALU 32.88 328 13x na na na 4/30/09
Dynacq Healthcare, Inc. / DYII 3.39 53 14x na na na 8/31/08
Lear Corporation / LEA 1.40 108 0x 1x nm 1x 12/31/08
LCA-Vision Inc. / LCAV 3.91 73 2x nm nm 11x 12/31/08
Travelzoo Inc. / TZOO 4.48 64 8x nm nm na 12/31/08
DepoMed, Inc. / DEPO 1.64 84 2x nm nm nm 12/31/08
The “Magic Formula” 100 — Historical and Prospective EPS (in alphabetical order)
Recent FY EPS (Actual) EPS (Estimated)

Price End 2 Yrs Last This Next In
Company / Ticker ($) Date Ago FY FY FY 2 Yrs
Accenture Ltd. / ACN 28.67 8/31/09 1.97 2.65 2.84 3.13 3.40
Acme Packet, Inc. / APKT 3.69 12/31/08 0.50 0.30 0.24 0.26 0.31
Aladdin Knowledge Systems Ltd. / ALDN 9.44 12/31/08 0.93 1.02 0.08 0.40 0.70
Allegheny Technologies Incorpo / ATI 21.20 12/31/08 5.61 7.26 5.48 4.15 5.02
Ambassadors Group, Inc. / EPAX 8.40 12/31/08 1.25 1.55 0.98 0.86 na
American Eagle Outfitters / AEO 8.88 1/31/09 1.70 1.82 1.27 1.23 1.37
AmerisourceBergen Corp. / ABC 29.98 9/30/09 2.53 2.89 3.15 3.51 3.86
Bare Escentuals, Inc. / BARE 4.45 12/31/08 0.65 0.95 1.04 1.07 1.22
Barrett Business Services, Inc / BBSI 10.14 12/31/08 1.40 1.44 0.97 1.11 1.18
Biovail Corporation (USA) / BVF 8.57 12/31/08 1.35 1.22 na na na
Boeing Company, The / BA 41.04 12/31/08 2.84 5.26 4.72 6.32 6.82
Broadridge Financial Solutions / BR 11.10 6/30/09 1.42 1.36 1.48 1.55 na
BSQUARE Corporation / BSQR 2.93 12/31/08 (0.05) 0.27 na na na
Cadence Design Systems, Inc. / CDNS 3.93 12/31/08 0.46 1.00 0.01 0.06 0.35
CF Industries Holdings, Inc. / CF 54.97 12/31/08 0.60 6.57 13.98 15.06 12.25
Coach, Inc. / COH 16.20 6/30/09 1.69 2.17 2.21 2.34 2.79
COMSYS IT Partners, Inc. / CITP 4.14 12/31/08 1.10 1.66 1.00 0.41 na
CTC Media, Inc. / CTCM 4.45 12/31/08 0.69 0.86 1.19 1.27 1.60
Darling International Inc. / DAR 4.57 12/31/08 0.07 0.56 1.00 0.68 0.86
Dell Inc. / DELL 10.89 1/31/09 1.14 1.31 1.36 1.44 1.36
Deluxe Corporation / DLX 10.89 12/31/08 1.95 2.76 2.48 2.52 2.84
DepoMed, Inc. / DEPO 1.64 12/31/08 (0.97) 1.05 (0.52) (0.85) (0.50)
Diamond Mgt. & Technology Cons / DTPI 3.96 3/31/09 0.21 0.33 0.07 0.12 na
DISH Network Corp. / DISH 11.00 12/31/08 1.37 1.68 2.11 2.43 2.54
Double-Take Software, Inc. / DBTK 7.07 12/31/08 (0.03) 0.87 0.61 0.66 0.74
Dynacq Healthcare, Inc. / DYII 3.39 8/31/08 (0.21) 0.24 na na na
EarthLink, Inc. / ELNK 6.36 12/31/08 0.19 (0.45) 1.83 1.40 0.71
eBay Inc. / EBAY 12.36 12/31/08 0.79 0.25 1.70 1.67 1.77
EMCOR Group, Inc. / EME 13.80 12/31/08 1.30 1.86 2.61 2.53 2.20
Emulex Corporation / ELX 7.22 6/30/09 0.34 (0.09) 0.83 0.86 na
Energen Corporation / EGN 28.40 12/31/08 3.73 4.28 4.34 4.33 4.97
First Advantage Corporation / FADV 12.02 12/31/08 1.13 2.10 0.95 0.93 1.01
Forest Laboratories, Inc. / FRX 22.97 3/31/09 1.41 3.06 3.28 3.57 3.99
Foster Wheeler Ltd. / FWLT 19.94 12/31/08 1.86 2.72 3.72 3.91 3.97
Gannett Co., Inc. / GCI 8.15 12/31/08 4.81 4.17 3.44 2.60 2.58
Garmin Ltd. / GRMN 19.04 12/31/08 2.35 3.89 3.74 3.36 3.29
Hansen Natural Corporation / HANS 25.36 12/31/08 0.99 1.51 1.77 2.08 2.47
Heidrick & Struggles Internati / HSII 21.24 12/31/08 1.81 2.97 2.36 1.47 1.87
Herbalife Ltd. / HLF 17.56 12/31/08 1.92 2.63 3.56 3.25 3.58
Herman Miller, Inc. / MLHR 14.61 5/31/09 1.98 2.56 2.08 2.01 2.11
Hurco Companies, Inc. / HURC 17.17 10/31/08 2.42 3.24 na na na
iBasis, Inc. / IBAS 2.15 12/31/08 1.06 0.33 0.05 0.07 0.07
ICF International, Inc. / ICFI 18.00 12/31/08 1.10 2.72 1.88 1.38 1.57
Iconix Brand Group, Inc. / ICON 8.72 12/31/08 0.72 1.04 1.15 1.23 na
infoGROUP Inc / IUSA 3.38 12/31/08 0.60 0.73 0.28 0.73 na
Jackson Hewitt Tax Service Inc / JTX 11.76 4/30/09 1.93 1.09 1.51 1.71 2.05
KBR, Inc. / KBR 13.11 12/31/08 0.39 1.08 1.71 1.80 1.99
The “Magic Formula” 100 — Historical and Prospective EPS (in alphabetical order) (continued)
Recent FY EPS (Actual) EPS (Estimated)

Price End 2 Yrs Last This Next In
Company / Ticker ($) Date Ago FY FY FY 2 Yrs
Kenexa Corporation / KNXA 5.59 12/31/08 0.78 0.93 1.31 1.24 1.18
KHD Humboldt Wedag Internation / KHD 9.10 12/31/08 1.04 1.42 2.12 1.77 1.18
King Pharmaceuticals, Inc. / KG 9.64 12/31/08 1.19 0.75 1.19 0.83 0.75
Korn/Ferry International / KFY 11.61 4/30/09 1.24 1.46 1.15 1.11 1.82
Lam Research Corporation / LRCX 17.99 6/30/09 4.85 3.47 0.13 1.23 2.01
LCA-Vision Inc. / LCAV 3.91 12/31/08 1.34 1.64 (0.17) (0.17) 0.37
Lear Corporation / LEA 1.40 12/31/08 (10.35) 3.09 1.08 (0.39) 1.47
Lincare Holdings Inc. / LNCR 25.03 12/31/08 2.16 2.58 3.14 2.26 2.76
Lorillard Inc. / LO 60.78 12/31/08 4.75 5.16 5.05 5.63 6.04
Manitowoc Company, Inc. / MTW 6.92 12/31/08 1.33 2.62 3.24 3.11 3.24
McGraw-Hill Companies, Inc., T / MHP 23.36 12/31/08 2.40 2.94 2.63 2.65 3.00
Medicis Pharmaceutical Corpora / MRX 11.24 12/31/08 (0.88) 1.08 1.29 1.48 1.80
MEMC Electronic Materials, Inc / WFR 15.34 12/31/08 1.61 3.56 3.57 4.13 4.63
Meredith Corporation / MDP 16.11 6/30/09 3.44 2.82 2.45 2.53 3.05
Mesabi Trust / MSB 8.89 1/31/09 1.31 1.39 na na na
Microsoft Corporation / MSFT 20.06 6/30/09 1.42 1.87 2.02 2.29 2.60
Monster Worldwide, Inc. / MWW 11.62 12/31/08 1.16 1.15 1.37 1.07 1.32
Mosaic Company, The / MOS 32.47 5/31/09 0.95 4.67 10.40 11.37 9.91
Net 1 Ueps Technologies Inc / UEPS 10.97 6/30/09 1.11 1.50 1.90 2.14 2.29
New Frontier Media, Inc. / NOOF 1.80 3/31/09 0.51 0.36 0.26 0.33 na
NutriSystem Inc. / NTRI 13.22 12/31/08 2.31 2.98 1.81 1.82 2.07
NVIDIA Corporation / NVDA 7.17 1/31/09 0.76 1.31 0.84 0.66 0.87
Pacer International, Inc. / PACR 10.27 12/31/08 1.80 1.51 1.67 1.60 1.79
Perini Corporation / PCR 14.42 12/31/08 1.54 3.54 3.67 2.95 2.92
Precision Castparts Corp. / PCP 55.04 3/31/09 4.42 6.88 7.65 8.72 9.52
Premier Exhibitions, Inc. / PRXI 0.78 2/28/09 0.24 0.37 0.04 0.18 na
Pre-Paid Legal Services, Inc. / PPD 35.92 12/31/08 3.51 3.88 na na na
PRIMEDIA Inc. / PRM 1.37 12/31/08 (1.48) (1.26) 0.64 0.80 na
Questcor Pharmaceuticals, Inc. / QCOR 8.15 12/31/08 (0.18) 0.51 0.45 0.52 0.61
R.G. Barry Corp. / DFZ 5.28 6/30/09 2.46 0.92 0.66 0.90 na
RadioShack Corporation / RSH 9.65 12/31/08 0.54 1.74 1.75 1.52 1.35
Robert Half International Inc. / RHI 17.81 12/31/08 1.65 1.81 1.64 0.72 0.82
Rockwell Automation / ROK 26.08 9/30/09 3.53 3.90 3.53 3.58 4.20
Seagate Technology / STX 4.87 6/30/09 1.56 2.36 0.89 1.42 1.97
Sierra Wireless, Inc. (USA) / SWIR 7.88 12/31/08 0.38 1.16 na na na
Sigma Designs, Inc. / SIGM 8.79 1/31/09 0.24 2.46 1.79 1.84 na
Spark Networks Inc / LOV 3.05 12/31/08 0.21 0.31 na na na
SPSS Inc. / SPSS 24.30 12/31/08 0.73 1.65 1.90 1.96 1.92
Syneron Medical Ltd. / ELOS 7.74 12/31/08 1.44 1.12 0.89 0.72 1.27
Take-Two Interactive Software, / TTWO 10.76 10/31/08 (2.60) (1.93) 2.12 1.37 1.83
Tempur-Pedic International Inc / TPX 6.72 12/31/08 1.28 1.74 0.93 0.89 1.03
TheStreet.com, Inc. / TSCM 3.17 12/31/08 0.47 0.99 0.11 0.06 0.19
Total System Services, Inc. / TSS 12.16 12/31/08 1.26 1.20 1.31 1.41 1.53
Travelzoo Inc. / TZOO 4.48 12/31/08 1.01 0.57 (0.40) (0.06) na
USA Mobility, Inc. / USMO 9.55 12/31/08 1.46 (0.19) 1.42 1.11 0.75
VAALCO Energy, Inc. / EGY 4.39 12/31/08 0.67 0.32 0.84 0.54 na
Value Line, Inc. / VALU 32.88 4/30/09 2.47 2.56 na na na
ValueClick, Inc. / VCLK 5.71 12/31/08 0.62 0.70 0.56 0.61 0.63
Varian Semiconductor / VSEA 17.47 9/30/09 1.73 1.32 0.07 0.81 1.15
Verigy Ltd. / VRGY 10.96 10/31/08 0.00 1.62 1.22 0.49 0.80
Versant Corporation / VSNT 14.46 10/31/08 1.01 1.98 na na na
Viacom, Inc. / VIA.B 16.78 12/31/08 2.19 2.41 2.49 2.53 2.90
ViroPharma Incorporated / VPHM 11.70 12/31/08 0.95 1.21 0.98 0.54 0.10
The “Magic Formula” 100 — Latest Quarterly EPS Surprise (sorted by magnitude of surprise)
Recent Market Date of Latest EPS Surprise

Price Value Latest Date EPS EPS %
Company / Ticker ($) ($mn) Quarter (Actual) (Estimated) Diff.
Diamond Mgt. & Technology Cons / DTPI 3.96 101 9/30/08 11/6/08 0.02 0.01 >99%
Premier Exhibitions, Inc. / PRXI 0.78 23 8/31/08 10/7/08 0.03 0.01 >99%
Varian Semiconductor / VSEA 17.47 1,269 9/30/08 10/30/08 0.05 0.01 >99%
Take-Two Interactive Software, / TTWO 10.76 835 7/31/08 9/4/08 0.93 0.54 72%
NVIDIA Corporation / NVDA 7.17 3,991 10/31/08 11/6/08 0.20 0.12 67%
COMSYS IT Partners, Inc. / CITP 4.14 84 9/30/08 11/5/08 0.30 0.20 50%
KHD Humboldt Wedag Internation / KHD 9.10 278 9/30/08 11/12/08 0.80 0.55 45%
ViroPharma Incorporated / VPHM 11.70 921 9/30/08 10/29/08 0.33 0.23 43%
King Pharmaceuticals, Inc. / KG 9.64 2,376 9/30/08 11/6/08 0.33 0.26 27%
Broadridge Financial Solutions / BR 11.10 1,570 9/30/08 11/6/08 0.25 0.20 25%
EarthLink, Inc. / ELNK 6.36 689 9/30/08 10/28/08 0.50 0.40 25%
SPSS Inc. / SPSS 24.30 441 9/30/08 11/4/08 0.55 0.44 25%
Emulex Corporation / ELX 7.22 593 9/30/08 10/23/08 0.22 0.18 22%
Energen Corporation / EGN 28.40 2,037 9/30/08 10/22/08 1.01 0.83 22%
Monster Worldwide, Inc. / MWW 11.62 1,432 9/30/08 10/30/08 0.40 0.33 21%
Korn/Ferry International / KFY 11.61 553 7/31/08 9/9/08 0.36 0.30 20%
Pacer International, Inc. / PACR 10.27 359 9/30/08 10/28/08 0.49 0.41 20%
VAALCO Energy, Inc. / EGY 4.39 256 9/30/08 11/10/08 0.38 0.32 19%
Questcor Pharmaceuticals, Inc. / QCOR 8.15 529 9/30/08 10/30/08 0.13 0.11 18%
Seagate Technology / STX 4.87 2,378 9/30/08 10/22/08 0.26 0.22 18%
Deluxe Corporation / DLX 10.89 557 9/30/08 10/23/08 0.65 0.55 18%
Sigma Designs, Inc. / SIGM 8.79 232 7/31/08 8/28/08 0.47 0.40 18%
Heidrick & Struggles Internati / HSII 21.24 347 9/30/08 10/28/08 0.80 0.69 16%
Barrett Business Services, Inc / BBSI 10.14 108 9/30/08 10/28/08 0.38 0.33 15%
Medicis Pharmaceutical Corpora / MRX 11.24 638 6/30/08 8/5/08 0.40 0.35 14%
Double-Take Software, Inc. / DBTK 7.07 156 9/30/08 10/28/08 0.16 0.14 14%
Forest Laboratories, Inc. / FRX 22.97 6,923 9/30/08 10/21/08 0.80 0.71 13%
eBay Inc. / EBAY 12.36 15,783 9/30/08 10/15/08 0.46 0.41 12%
PRIMEDIA Inc. / PRM 1.37 61 9/30/08 11/6/08 0.20 0.18 11%
Perini Corporation / PCR 14.42 726 9/30/08 11/6/08 1.01 0.91 11%
Rockwell Automation / ROK 26.08 3,797 9/30/08 11/10/08 1.08 0.98 10%
USA Mobility, Inc. / USMO 9.55 260 9/30/08 10/29/08 0.35 0.32 9%
EMCOR Group, Inc. / EME 13.80 904 9/30/08 10/23/08 0.72 0.66 9%
Herman Miller, Inc. / MLHR 14.61 784 8/31/08 9/17/08 0.60 0.55 9%
RadioShack Corporation / RSH 9.65 1,207 9/30/08 10/23/08 0.39 0.36 8%
Iconix Brand Group, Inc. / ICON 8.72 508 9/30/08 11/3/08 0.30 0.28 7%
Lincare Holdings Inc. / LNCR 25.03 1,862 9/30/08 10/20/08 0.76 0.72 6%
Allegheny Technologies Incorpo / ATI 21.20 2,041 9/30/08 10/22/08 1.45 1.38 5%
McGraw-Hill Companies, Inc., T / MHP 23.36 7,347 9/30/08 10/28/08 1.28 1.22 5%
Lam Research Corporation / LRCX 17.99 2,248 9/30/08 10/22/08 0.26 0.25 4%
Garmin Ltd. / GRMN 19.04 3,856 9/30/08 10/29/08 0.87 0.84 4%
American Eagle Outfitters / AEO 8.88 1,828 7/31/08 8/26/08 0.29 0.28 4%
Verigy Ltd. / VRGY 10.96 646 7/31/08 8/21/08 0.29 0.28 4%
Herbalife Ltd. / HLF 17.56 1,121 9/30/08 11/3/08 0.89 0.86 3%
Kenexa Corporation / KNXA 5.59 126 9/30/08 11/3/08 0.36 0.35 3%
AmerisourceBergen Corp. / ABC 29.98 4,751 9/30/08 10/30/08 0.73 0.71 3%
The “Magic Formula” 100 — Latest Quarterly EPS Surprise (sorted by magnitude of surprise) (continued)
Recent Market Date of Latest EPS Surprise

Price Value Latest Date EPS EPS %
Company / Ticker ($) ($mn) Quarter (Actual) (Estimated) Diff.
Coach, Inc. / COH 16.20 5,296 9/30/08 10/21/08 0.44 0.43 2%
KBR, Inc. / KBR 13.11 2,118 9/30/08 10/31/08 0.44 0.43 2%
Lorillard Inc. / LO 60.78 10,215 9/30/08 10/27/08 1.38 1.35 2%
Microsoft Corporation / MSFT 20.06 178,445 9/30/08 10/23/08 0.48 0.47 2%
Hansen Natural Corporation / HANS 25.36 2,344 9/30/08 11/6/08 0.54 0.53 2%
Accenture Ltd. / ACN 28.67 20,919 8/31/08 9/25/08 0.67 0.66 2%
Gannett Co., Inc. / GCI 8.15 1,859 9/30/08 10/24/08 0.76 0.75 1%
Acme Packet, Inc. / APKT 3.69 204 9/30/08 11/6/08 0.05 0.05 0%
Cadence Design Systems, Inc. / CDNS 3.93 1,023 6/30/08 7/23/08 0.14 0.14 0%
ICF International, Inc. / ICFI 18.00 266 9/30/08 11/5/08 0.45 0.45 0%
Meredith Corporation / MDP 16.11 727 9/30/08 10/29/08 0.41 0.41 0%
New Frontier Media, Inc. / NOOF 1.80 41 9/30/08 11/5/08 0.06 0.06 0%
Robert Half International Inc. / RHI 17.81 2,762 9/30/08 10/22/08 0.43 0.43 0%
Tempur-Pedic International Inc / TPX 6.72 503 9/30/08 10/16/08 0.32 0.32 0%
Viacom, Inc. / VIA.B 16.78 10,295 9/30/08 11/3/08 0.55 0.55 0%
Precision Castparts Corp. / PCP 55.04 7,674 9/30/08 10/21/08 1.89 1.91 -1%
Manitowoc Company, Inc. / MTW 6.92 902 9/30/08 10/28/08 0.80 0.81 -1%
Foster Wheeler Ltd. / FWLT 19.94 2,667 9/30/08 11/5/08 0.89 0.91 -2%
MEMC Electronic Materials, Inc / WFR 15.34 3,443 9/30/08 10/23/08 0.86 0.88 -2%
Total System Services, Inc. / TSS 12.16 2,393 9/30/08 10/9/08 0.33 0.34 -3%
Darling International Inc. / DAR 4.57 374 9/30/08 11/6/08 0.28 0.29 -3%
Bare Escentuals, Inc. / BARE 4.45 407 9/30/08 10/30/08 0.25 0.26 -4%
Boeing Company, The / BA 41.04 30,076 9/30/08 10/22/08 0.94 0.98 -4%
NutriSystem Inc. / NTRI 13.22 391 9/30/08 10/22/08 0.45 0.48 -6%
Mosaic Company, The / MOS 32.47 14,425 8/31/08 10/1/08 2.65 2.94 -10%
Ambassadors Group, Inc. / EPAX 8.40 160 9/30/08 10/28/08 0.70 0.79 -11%
Dell Inc. / DELL 10.89 21,327 7/31/08 8/28/08 0.31 0.36 -14%
Net 1 Ueps Technologies Inc / UEPS 10.97 641 9/30/08 11/6/08 0.42 0.49 -14%
First Advantage Corporation / FADV 12.02 715 9/30/08 10/27/08 0.24 0.29 -17%
CTC Media, Inc. / CTCM 4.45 677 9/30/08 10/30/08 0.13 0.18 -28%
iBasis, Inc. / IBAS 2.15 153 9/30/08 10/21/08 0.05 0.08 -38%
Syneron Medical Ltd. / ELOS 7.74 215 9/30/08 11/11/08 0.08 0.13 -38%
R.G. Barry Corp. / DFZ 5.28 56 9/30/08 11/3/08 0.10 0.24 -58%
DISH Network Corp. / DISH 11.00 4,918 9/30/08 11/10/08 0.20 0.58 -66%
CF Industries Holdings, Inc. / CF 54.97 3,126 9/30/08 10/27/08 0.82 3.57 -77%
ValueClick, Inc. / VCLK 5.71 495 9/30/08 10/29/08 0.02 0.14 -86%
infoGROUP Inc / IUSA 3.38 192 9/30/08 10/27/08 (0.07) 0.16 <-99%
TheStreet.com, Inc. / TSCM 3.17 97 9/30/08 10/29/08 (0.04) 0.06 <-99%
Aladdin Knowledge Systems Ltd. / ALDN 9.44 131 9/30/08 10/16/08 (0.02) (0.21) nm
Biovail Corporation (USA) / BVF 8.57 1,360 9/30/08 na na na nm
BSQUARE Corporation / BSQR 2.93 30 9/30/08 na na na nm
DepoMed, Inc. / DEPO 1.64 84 9/30/08 10/30/08 (0.12) (0.15) nm
Dynacq Healthcare, Inc. / DYII 3.39 53 5/31/08 na na na nm
Hurco Companies, Inc. / HURC 17.17 110 7/31/08 na na na nm
Jackson Hewitt Tax Service Inc / JTX 11.76 339 7/31/08 9/4/08 (0.69) (0.69) nm
LCA-Vision Inc. / LCAV 3.91 73 9/30/08 10/28/08 (0.25) (0.07) nm
Lear Corporation / LEA 1.40 108 9/30/08 10/30/08 (0.75) (0.04) nm
Mesabi Trust / MSB 8.89 117 7/31/08 na na na nm
Pre-Paid Legal Services, Inc. / PPD 35.92 417 9/30/08 na na na nm
Sierra Wireless, Inc. (USA) / SWIR 7.88 244 9/30/08 na na na nm
Spark Networks Inc / LOV 3.05 65 9/30/08 na na na nm
Travelzoo Inc. / TZOO 4.48 64 9/30/08 10/27/08 (0.13) (0.09) nm
Value Line, Inc. / VALU 32.88 328 7/31/08 na na na nm
Versant Corporation / VSNT 14.46 54 7/31/08 na na na nm
The “Magic Formula” 100 — Revenue and EPS Growth (sorted by next FY EPS growth)
Revenue Growth EPS Growth

5-Year Last FY LTM Last FY This FY Next FY LTGR
Company / Ticker CAGR (Actual) (Estimated) (Estimated) (Estimated)
Aladdin Knowledge Systems Ltd. / ALDN 16% 19% 16% 10% -92% >99% 17%
Premier Exhibitions, Inc. / PRXI 84% >99% 41% 54% -89% >99% 18%
Varian Semiconductor / VSEA 18% -21% -21% -24% -95% >99% 15%
infoGROUP Inc / IUSA 18% 58% 19% 22% -62% >99% na
Lam Research Corporation / LRCX 27% -4% -16% -28% -96% >99% 12%
Cadence Design Systems, Inc. / CDNS 5% 9% -5% >99% -99% >99% 11%
Diamond Mgt. & Technology Cons / DTPI 6% 8% -6% 57% -79% 71% 11%
Seagate Technology / STX 14% 12% 5% 51% -62% 60% 12%
iBasis, Inc. / IBAS 42% 15% 69% -69% -85% 40% na
R.G. Barry Corp. / DFZ -2% 4% 1% -63% -28% 36% na
Boeing Company, The / BA 4% 8% -1% 85% -10% 34% 11%
New Frontier Media, Inc. / NOOF 9% -12% 2% -29% -28% 27% 10%
PRIMEDIA Inc. / PRM -25% 2% -10% nm nm 25% na
Hansen Natural Corporation / HANS 58% 49% 27% 53% 17% 18% 15%
MEMC Electronic Materials, Inc / WFR 23% 25% 17% >99% 0% 16% 18%
Questcor Pharmaceuticals, Inc. / QCOR 28% >99% >99% nm -12% 16% 18%
DISH Network Corp. / DISH 18% 13% 8% 23% 26% 15% 8%
Medicis Pharmaceutical Corpora / MRX 13% 16% 22% nm 19% 15% 19%
Barrett Business Services, Inc / BBSI 21% 12% 9% 3% -33% 14% 15%
Precision Castparts Corp. / PCP 31% 29% 14% 56% 11% 14% 17%
Microsoft Corporation / MSFT 13% 18% 14% 32% 8% 13% 11%
Jackson Hewitt Tax Service Inc / JTX 10% -5% -6% -44% 39% 13% 9%
Net 1 Ueps Technologies Inc / UEPS 28% 13% 13% 35% 27% 13% 18%
Lorillard Inc. / LO nm 6% 35% 9% -2% 11% 8%
AmerisourceBergen Corp. / ABC 7% 7% 7% 14% 9% 11% 12%
Accenture Ltd. / ACN 14% 18% 18% 35% 7% 10% 10%
Mosaic Company, The / MOS 43% 70% 87% >99% >99% 9% na
ValueClick, Inc. / VCLK 59% 18% 9% 13% -20% 9% 11%
Forest Laboratories, Inc. / FRX 11% 11% 9% >99% 7% 9% 9%
Acme Packet, Inc. / APKT nm 34% 11% -40% -20% 8% 16%
Double-Take Software, Inc. / DBTK nm 36% 21% nm -30% 8% 21%
CF Industries Holdings, Inc. / CF 22% 36% 52% >99% >99% 8% 4%
Total System Services, Inc. / TSS 14% 1% 3% -5% 9% 8% 12%
Iconix Brand Group, Inc. / ICON 0% 98% 51% 44% 11% 7% 17%
CTC Media, Inc. / CTCM nm 27% 44% 25% 38% 7% 19%
Coach, Inc. / COH 27% 22% 18% 28% 2% 6% 14%
Dell Inc. / DELL 12% 6% 10% 15% 4% 6% 12%
KBR, Inc. / KBR 11% -1% 22% >99% 58% 5% 15%
Foster Wheeler Ltd. / FWLT 8% 46% 38% 46% 37% 5% 20%
Broadridge Financial Solutions / BR nm 3% 4% -4% 9% 5% 10%
Emulex Corporation / ELX 10% 4% 0% nm nm 4% 10%
Meredith Corporation / MDP 8% -2% -5% -18% -13% 3% na
SPSS Inc. / SPSS 7% 11% 9% >99% 15% 3% 12%
Bare Escentuals, Inc. / BARE nm 30% 16% 46% 9% 3% 14%
Sigma Designs, Inc. / SIGM 65% >99% 91% >99% -27% 3% 17%
Deluxe Corporation / DLX 5% -2% -6% 42% -10% 2% 5%
Viacom, Inc. / VIA.B 17% 18% 15% 10% 3% 2% 12%
The “Magic Formula” 100 — Revenue and EPS Growth (sorted by next FY EPS growth) (continued)
Revenue Growth EPS Growth

5-Year Last FY LTM Last FY This FY Next FY LTGR
Company / Ticker CAGR (Actual) (Estimated) (Estimated) (Estimated)
Rockwell Automation / ROK 7% 14% 14% 10% -9% 1% 14%
McGraw-Hill Companies, Inc., T / MHP 8% 8% -4% 23% -11% 1% na
NutriSystem Inc. / NTRI 95% 37% -8% 29% -39% 1% 17%
Energen Corporation / EGN 17% 3% 6% 15% 1% 0% 6%
eBay Inc. / EBAY 45% 29% 20% -68% >99% -2% 14%
First Advantage Corporation / FADV 21% 6% -4% 86% -55% -2% 13%
EMCOR Group, Inc. / EME 8% 21% 25% 43% 40% -3% 15%
American Eagle Outfitters / AEO 17% 9% 3% 7% -30% -3% 13%
Herman Miller, Inc. / MLHR 9% 5% 2% 29% -19% -3% 2%
Korn/Ferry International / KFY 20% 21% 18% 18% -21% -3% 14%
Manitowoc Company, Inc. / MTW 24% 37% 29% 97% 24% -4% 13%
Pacer International, Inc. / PACR 4% 4% 10% -16% 11% -4% 10%
Tempur-Pedic International Inc / TPX 30% 17% -4% 36% -47% -4% 13%
Kenexa Corporation / KNXA 41% 62% 21% 19% 41% -5% 19%
Herbalife Ltd. / HLF 14% 14% 18% 37% 35% -9% 14%
Garmin Ltd. / GRMN 47% 79% 42% 66% -4% -10% 13%
Ambassadors Group, Inc. / EPAX 26% 29% -15% 24% -37% -12% 15%
RadioShack Corporation / RSH -1% -11% 0% >99% 1% -13% 10%
KHD Humboldt Wedag Internation / KHD 15% 27% 11% 37% 49% -17% 33%
Syneron Medical Ltd. / ELOS 65% 21% 1% -22% -21% -19% 14%
Perini Corporation / PCR 34% 52% 23% >99% 4% -20% 11%
NVIDIA Corporation / NVDA 17% 34% 10% 72% -36% -21% 14%
USA Mobility, Inc. / USMO -12% -15% -15% nm nm -22% na
Monster Worldwide, Inc. / MWW 15% 23% 11% -1% 19% -22% 20%
EarthLink, Inc. / ELNK -2% -7% -19% nm nm -23% na
Allegheny Technologies Incorpo / ATI 23% 10% -2% 29% -25% -24% 15%
Gannett Co., Inc. / GCI 3% -5% -10% -13% -18% -24% 3%
ICF International, Inc. / ICFI nm >99% 10% >99% -31% -27% 15%
Lincare Holdings Inc. / LNCR 11% 13% 7% 19% 22% -28% 17%
King Pharmaceuticals, Inc. / KG 14% 7% -17% -37% 59% -30% -13%
Darling International Inc. / DAR 20% 59% 40% >99% 79% -32% na
Take-Two Interactive Software, / TTWO 4% -5% 58% nm nm -35% 13%
VAALCO Energy, Inc. / EGY 66% 27% 83% -52% >99% -36% 8%
Heidrick & Struggles Internati / HSII 11% 29% 6% 64% -21% -38% 14%
ViroPharma Incorporated / VPHM >99% 22% 18% 27% -19% -45% 25%
TheStreet.com, Inc. / TSCM 26% 28% 26% >99% -89% -45% 18%
Robert Half International Inc. / RHI 20% 16% 8% 10% -9% -56% 15%
COMSYS IT Partners, Inc. / CITP 14% 1% -1% 51% -40% -59% 15%
Verigy Ltd. / VRGY nm -2% -1% nm -25% -60% 20%
Biovail Corporation (USA) / BVF 1% -21% -18% -10% nm nm na
BSQUARE Corporation / BSQR 10% 19% 11% nm nm nm na
DepoMed, Inc. / DEPO >99% >99% -52% nm nm nm na
Dynacq Healthcare, Inc. / DYII -8% 19% 43% nm nm nm na
Hurco Companies, Inc. / HURC 22% 27% 25% 34% nm nm na
LCA-Vision Inc. / LCAV 36% 22% -14% 22% nm nm 14%
Lear Corporation / LEA 2% -10% -10% nm -65% nm 9%
Mesabi Trust / MSB 30% 6% >99% 6% nm nm na
Pre-Paid Legal Services, Inc. / PPD 5% 3% 3% 11% nm nm na
Sierra Wireless, Inc. (USA) / SWIR 42% 99% 53% >99% nm nm na
Spark Networks Inc / LOV 32% -5% -10% 48% nm nm na
Travelzoo Inc. / TZOO 52% 14% 4% -44% nm nm na
Value Line, Inc. / VALU 0% -1% -1% 4% nm nm na
Versant Corporation / VSNT 1% 27% 23% 96% nm nm na
The “Magic Formula” 100 — Percentile Rank within Industry (sorted by LTM EBIT margin rank)
Market Percentile Rank within Industry

Value Revenue Growth EPS Growth LTM EBIT
Company / Ticker ($mn) 5-Year LTM LTM Estimated Margin
Mesabi Trust / MSB 117 81 93 91 na 100
Iconix Brand Group, Inc. / ICON 508 18 85 68 70 97
Questcor Pharmaceuticals, Inc. / QCOR 529 79 97 na 74 96
VAALCO Energy, Inc. / EGY 256 95 91 82 16 96
DepoMed, Inc. / DEPO 84 98 4 82 na 95
MEMC Electronic Materials, Inc / WFR 3,443 73 66 62 75 90
ViroPharma Incorporated / VPHM 921 98 67 47 88 90
Net 1 Ueps Technologies Inc / UEPS 641 79 60 73 74 89
CTC Media, Inc. / CTCM 677 na 83 74 78 89
Value Line, Inc. / VALU 328 18 32 53 na 88
Energen Corporation / EGN 2,037 63 46 53 11 87
Versant Corporation / VSNT 54 19 73 69 na 87
Microsoft Corporation / MSFT 178,445 55 62 64 37 86
Coach, Inc. / COH 5,296 79 67 63 56 86
Bare Escentuals, Inc. / BARE 407 na 64 67 54 85
Lorillard Inc. / LO 10,215 na 80 65 16 84
Mosaic Company, The / MOS 14,425 89 91 98 na 84
Forest Laboratories, Inc. / FRX 6,923 49 53 88 22 84
Hansen Natural Corporation / HANS 2,344 93 76 71 58 82
CF Industries Holdings, Inc. / CF 3,126 72 86 94 3 82
eBay Inc. / EBAY 15,783 89 70 na 53 82
Sigma Designs, Inc. / SIGM 232 94 92 95 72 81
Garmin Ltd. / GRMN 3,856 90 83 64 51 81
Lincare Holdings Inc. / LNCR 1,862 48 49 65 68 81
Dynacq Healthcare, Inc. / DYII 53 8 83 na na 81
Precision Castparts Corp. / PCP 7,674 82 62 47 71 80
Jackson Hewitt Tax Service Inc / JTX 339 46 24 32 21 80
Ambassadors Group, Inc. / EPAX 160 78 15 30 58 80
New Frontier Media, Inc. / NOOF 41 42 38 43 25 79
McGraw-Hill Companies, Inc., T / MHP 7,347 38 27 40 na 79
Pre-Paid Legal Services, Inc. / PPD 417 31 40 63 na 79
Viacom, Inc. / VIA.B 10,295 65 63 52 45 78
EarthLink, Inc. / ELNK 689 14 13 96 na 78
King Pharmaceuticals, Inc. / KG 2,376 58 14 75 0 78
Total System Services, Inc. / TSS 2,393 56 40 40 44 77
Varian Semiconductor / VSEA 1,269 66 12 36 57 76
Double-Take Software, Inc. / DBTK 156 na 70 45 83 76
SPSS Inc. / SPSS 441 36 53 77 40 75
Tempur-Pedic International Inc / TPX 503 81 27 39 47 75
Syneron Medical Ltd. / ELOS 215 94 36 34 54 75
Allegheny Technologies Incorpo / ATI 2,041 74 30 39 58 75
PRIMEDIA Inc. / PRM 61 3 20 19 na 74
DISH Network Corp. / DISH 4,918 66 50 61 16 74
American Eagle Outfitters / AEO 1,828 64 40 43 47 74
Darling International Inc. / DAR 374 69 82 92 na 74
Hurco Companies, Inc. / HURC 110 72 74 65 na 74
Spark Networks Inc / LOV 65 83 20 95 na 74
The “Magic Formula” 100 — Percentile Rank within Industry (sorted by LTM EBIT margin rank) (continued)
Market Percentile Rank within Industry

Value Revenue Growth EPS Growth LTM EBIT
Company / Ticker ($mn) 5-Year LTM LTM Estimated Margin
Lam Research Corporation / LRCX 2,248 78 15 28 44 72
Acme Packet, Inc. / APKT 204 na 57 28 67 72
Broadridge Financial Solutions / BR 1,570 na 42 40 25 72
Kenexa Corporation / KNXA 126 88 70 48 78 72
Herbalife Ltd. / HLF 1,121 58 67 75 56 72
Meredith Corporation / MDP 727 39 25 37 na 71
Deluxe Corporation / DLX 557 28 24 37 4 71
Rockwell Automation / ROK 3,797 37 61 24 54 71
Monster Worldwide, Inc. / MWW 1,432 58 56 56 78 71
NutriSystem Inc. / NTRI 391 97 22 31 69 70
KHD Humboldt Wedag Internation / KHD 278 60 57 67 96 70
Medicis Pharmaceutical Corpora / MRX 638 55 71 32 77 69
Emulex Corporation / ELX 593 44 33 13 25 69
First Advantage Corporation / FADV 715 71 27 87 50 69
Cadence Design Systems, Inc. / CDNS 1,023 28 25 45 35 68
Herman Miller, Inc. / MLHR 784 41 39 54 1 68
Verigy Ltd. / VRGY 646 na 33 63 79 68
Accenture Ltd. / ACN 20,919 56 67 70 31 67
ValueClick, Inc. / VCLK 495 93 52 37 33 66
Korn/Ferry International / KFY 553 69 67 54 56 65
Heidrick & Struggles Internati / HSII 347 50 47 41 56 65
Robert Half International Inc. / RHI 2,762 69 50 54 57 64
R.G. Barry Corp. / DFZ 56 14 37 24 na 63
Foster Wheeler Ltd. / FWLT 2,667 38 82 68 78 63
Boeing Company, The / BA 30,076 27 32 48 37 62
RadioShack Corporation / RSH 1,207 15 33 58 25 62
NVIDIA Corporation / NVDA 3,991 63 55 29 56 62
Take-Two Interactive Software, / TTWO 835 27 87 95 47 62
TheStreet.com, Inc. / TSCM 97 77 75 21 74 62
Seagate Technology / STX 2,378 58 45 40 41 61
ICF International, Inc. / ICFI 266 na 55 38 58 61
Biovail Corporation (USA) / BVF 1,360 20 14 20 na 61
Sierra Wireless, Inc. (USA) / SWIR 244 88 86 74 na 61
Premier Exhibitions, Inc. / PRXI 23 97 83 22 72 58
Travelzoo Inc. / TZOO 64 92 43 14 na 56
BSQUARE Corporation / BSQR 30 44 56 76 na 54
Dell Inc. / DELL 21,327 50 55 55 40 53
Pacer International, Inc. / PACR 359 27 55 69 31 53
COMSYS IT Partners, Inc. / CITP 84 56 31 42 58 53
KBR, Inc. / KBR 2,118 49 72 56 58 52
EMCOR Group, Inc. / EME 904 40 74 74 58 51
Barrett Business Services, Inc / BBSI 108 72 52 27 58 50
Diamond Mgt. & Technology Cons / DTPI 101 33 24 74 32 49
Perini Corporation / PCR 726 84 72 57 35 49
LCA-Vision Inc. / LCAV 73 86 16 21 53 49
Aladdin Knowledge Systems Ltd. / ALDN 131 63 64 26 68 48
iBasis, Inc. / IBAS 153 88 89 22 na 45
Lear Corporation / LEA 108 21 20 90 21 45
Manitowoc Company, Inc. / MTW 902 75 77 60 45 31
Gannett Co., Inc. / GCI 1,859 24 20 7 2 29
infoGROUP Inc / IUSA 192 66 68 28 na 28
AmerisourceBergen Corp. / ABC 4,751 37 48 35 41 25
USA Mobility, Inc. / USMO 260 6 15 3 na 22
The “Magic Formula” 100 — Selected Metrics (sorted by net cash to market value)
Recent EV / Price /
Price LTM Tangible Net Debt / Net Cash / Dividend
Company / Ticker ($) Revenue Book Equity MV Yield
KHD Humboldt Wedag Internation / KHD 9.10 nm 0.8x nm 142% -
DepoMed, Inc. / DEPO 1.64 0.3x 2.7x nm 91% -
Sierra Wireless, Inc. (USA) / SWIR 7.88 0.1x 0.9x nm 83% -
TheStreet.com, Inc. / TSCM 3.17 0.3x 1.0x nm 80% 3.2%
Acme Packet, Inc. / APKT 3.69 0.7x 1.4x nm 62% -
Verigy Ltd. / VRGY 10.96 0.3x 1.2x nm 60% -
Dynacq Healthcare, Inc. / DYII 3.39 0.5x 0.8x nm 58% -
Syneron Medical Ltd. / ELOS 7.74 0.7x 0.9x nm 56% -
LCA-Vision Inc. / LCAV 3.91 0.1x 0.8x nm 55% -
Heidrick & Struggles Internati / HSII 21.24 0.3x 1.8x nm 53% 2.4%
KBR, Inc. / KBR 13.11 0.1x 1.4x nm 52% 1.5%
Sigma Designs, Inc. / SIGM 8.79 0.5x 0.9x nm 52% -
Versant Corporation / VSNT 14.46 1.3x 2.2x nm 51% -
Emulex Corporation / ELX 7.22 0.6x 1.5x nm 50% -
Barrett Business Services, Inc / BBSI 10.14 0.2x 1.7x nm 47% 3.2%
Diamond Mgt. & Technology Cons / DTPI 3.96 0.3x 1.4x nm 47% 8.8%
Perini Corporation / PCR 14.42 0.1x 2.1x nm 47% -
ViroPharma Incorporated / VPHM 11.70 2.5x 2.0x nm 45% -
Double-Take Software, Inc. / DBTK 7.07 1.1x 2.6x nm 44% -
Foster Wheeler Ltd. / FWLT 19.94 0.3x 3.2x nm 41% -
Take-Two Interactive Software, / TTWO 10.76 0.5x 2.5x nm 41% -
USA Mobility, Inc. / USMO 9.55 0.4x 1.5x nm 40% 10.5%
Premier Exhibitions, Inc. / PRXI 0.78 0.2x 0.7x nm 40% -
Ambassadors Group, Inc. / EPAX 8.40 0.9x 2.3x nm 39% 5.5%
VAALCO Energy, Inc. / EGY 4.39 1.3x 1.5x nm 39% -
King Pharmaceuticals, Inc. / KG 9.64 0.7x 1.2x nm 38% -
Korn/Ferry International / KFY 11.61 0.4x 1.6x nm 38% -
Value Line, Inc. / VALU 32.88 2.5x 3.8x nm 38% 4.9%
New Frontier Media, Inc. / NOOF 1.80 0.5x 1.3x nm 37% 27.8%
CF Industries Holdings, Inc. / CF 54.97 0.7x 1.8x nm 37% 0.7%
SPSS Inc. / SPSS 24.30 1.0x 3.4x nm 36% -
Lam Research Corporation / LRCX 17.99 0.6x 1.6x nm 34% -
BSQUARE Corporation / BSQR 2.93 0.3x 1.5x nm 33% -
Dell Inc. / DELL 10.89 0.2x 57.3x nm 33% -
NVIDIA Corporation / NVDA 7.17 0.7x 2.0x nm 33% -
MEMC Electronic Materials, Inc / WFR 15.34 1.2x 1.7x nm 32% -
Hurco Companies, Inc. / HURC 17.17 0.4x 1.0x nm 30% -
Monster Worldwide, Inc. / MWW 11.62 0.8x 4.3x nm 27% -
Forest Laboratories, Inc. / FRX 22.97 1.3x 2.1x nm 27% -
EarthLink, Inc. / ELNK 6.36 0.4x 3.6x nm 27% -
Travelzoo Inc. / TZOO 4.48 0.6x 2.9x nm 25% -
eBay Inc. / EBAY 12.36 1.6x 3.9x nm 23% -
Medicis Pharmaceutical Corpora / MRX 11.24 1.1x 2.3x nm 22% 1.4%
Net 1 Ueps Technologies Inc / UEPS 10.97 2.0x 4.2x nm 21% -
iBasis, Inc. / IBAS 2.15 0.1x nm nm 20% -
Kenexa Corporation / KNXA 5.59 0.6x 1.8x nm 20% -
ValueClick, Inc. / VCLK 5.71 0.6x 5.2x nm 18% -
The “Magic Formula” 100 — Selected Metrics (sorted by net cash to market value) (continued)
Recent EV / Price /
Price LTM Tangible Net Debt / Net Cash / Dividend
Company / Ticker ($) Revenue Book Equity MV Yield
Accenture Ltd. / ACN 28.67 0.7x 12.3x nm 17% 1.7%
American Eagle Outfitters / AEO 8.88 0.5x 1.3x nm 17% 4.5%
Biovail Corporation (USA) / BVF 8.57 1.3x 4.3x nm 17% 17.5%
Varian Semiconductor / VSEA 17.47 1.3x 2.5x nm 16% -
Cadence Design Systems, Inc. / CDNS 3.93 0.5x 2.0x nm 16% -
EMCOR Group, Inc. / EME 13.80 0.1x 5.4x nm 16% -
NutriSystem Inc. / NTRI 13.22 0.4x 3.2x nm 15% 5.3%
Garmin Ltd. / GRMN 19.04 1.0x 2.0x nm 14% 3.9%
Robert Half International Inc. / RHI 17.81 0.5x 3.3x nm 13% 2.5%
R.G. Barry Corp. / DFZ 5.28 0.4x 1.2x nm 13% -
Lorillard Inc. / LO 60.78 2.3x 14.1x nm 12% 6.1%
Mesabi Trust / MSB 8.89 5.5x nm nm 12% 56.2%
Hansen Natural Corporation / HANS 25.36 2.3x 4.8x nm 12% -
Microsoft Corporation / MSFT 20.06 2.6x 9.2x nm 11% 2.6%
Aladdin Knowledge Systems Ltd. / ALDN 9.44 1.1x 1.1x nm 8% -
Questcor Pharmaceuticals, Inc. / QCOR 8.15 9.8x 12.5x nm 8% -
Coach, Inc. / COH 16.20 1.5x 4.9x nm 8% -
Spark Networks Inc / LOV 3.05 0.9x nm nm 6% -
RadioShack Corporation / RSH 9.65 0.3x 1.5x nm 5% 2.6%
Mosaic Company, The / MOS 32.47 1.4x 2.5x nm 5% 0.6%
Total System Services, Inc. / TSS 12.16 1.3x 4.9x nm 2% 2.3%
Precision Castparts Corp. / PCP 55.04 1.1x 3.8x nm 1% 0.2%
Darling International Inc. / DAR 4.57 0.6x 2.3x nm 1% -
First Advantage Corporation / FADV 12.02 0.9x 10.8x 1% -1% -
Broadridge Financial Solutions / BR 11.10 0.7x 6.3x 9% -4% 2.5%
AmerisourceBergen Corp. / ABC 29.98 0.1x 1.8x 11% -7% 1.0%
Pre-Paid Legal Services, Inc. / PPD 35.92 1.0x 16.3x >99% -8% -
Manitowoc Company, Inc. / MTW 6.92 0.2x 1.0x 5% -8% 1.2%
Boeing Company, The / BA 41.04 0.5x 10.1x 32% -9% 3.9%
Pacer International, Inc. / PACR 10.27 0.2x 6.9x 11% -10% 5.8%
CTC Media, Inc. / CTCM 4.45 1.6x nm 10% -10% -
Rockwell Automation / ROK 26.08 0.7x 7.3x 25% -11% 4.4%
Allegheny Technologies Incorpo / ATI 21.20 0.4x 0.9x 10% -12% 3.4%
McGraw-Hill Companies, Inc., T / MHP 23.36 1.2x nm 62% -14% 3.8%
Herbalife Ltd. / HLF 17.56 0.6x nm 64% -16% 4.6%
Herman Miller, Inc. / MLHR 14.61 0.5x nm >99% -28% 2.4%
Energen Corporation / EGN 28.40 1.8x 1.2x 35% -28% 1.7%
Lincare Holdings Inc. / LNCR 25.03 1.5x nm 66% -32% -
ICF International, Inc. / ICFI 18.00 0.5x nm 45% -33% -
Seagate Technology / STX 4.87 0.3x 1.1x 19% -37% 9.9%
Bare Escentuals, Inc. / BARE 4.45 1.2x nm nm -54% -
Meredith Corporation / MDP 16.11 0.7x nm 56% -60% 5.3%
COMSYS IT Partners, Inc. / CITP 4.14 0.2x nm 41% -81% -
Viacom, Inc. / VIA.B 16.78 1.4x nm >99% -82% -
Jackson Hewitt Tax Service Inc / JTX 11.76 2.2x nm >99% -83% 6.1%
Tempur-Pedic International Inc / TPX 6.72 0.8x nm >99% -86% -
DISH Network Corp. / DISH 11.00 0.9x nm nm -92% -
Iconix Brand Group, Inc. / ICON 8.72 6.9x nm 98% -116% -
Deluxe Corporation / DLX 10.89 0.9x nm >99% -156% 9.2%
infoGROUP Inc / IUSA 3.38 0.7x nm >99% -157% 10.4%
Gannett Co., Inc. / GCI 8.15 0.8x nm 57% -204% 19.6%
PRIMEDIA Inc. / PRM 1.37 0.9x nm nm -374% 20.4%
Lear Corporation / LEA 1.40 0.1x nm >99% -1682% -
The “Magic Formula” 100 — Insider Ownership, Open Market Activity (sorted by # of buys)
Market Recent Last Six Months

Value Price YTD Insider Insider Insider
Company / Ticker ($mn) ($) Change Ownership Buys Sales
Travelzoo Inc. / TZOO 64 4.48 -67% 45% 129 -
PRIMEDIA Inc. / PRM 61 1.37 -84% 1% 12 2
Deluxe Corporation / DLX 557 10.89 -67% 1% 9 -
New Frontier Media, Inc. / NOOF 41 1.80 -67% 2% 8 4
Diamond Mgt. & Technology Cons / DTPI 101 3.96 -46% 15% 7 5
Perini Corporation / PCR 726 14.42 -65% 1% 7 -
Garmin Ltd. / GRMN 3,856 19.04 -80% 46% 6 -
Ambassadors Group, Inc. / EPAX 160 8.40 -54% 5% 5 3
CF Industries Holdings, Inc. / CF 3,126 54.97 -50% 1% 5 17
Dell Inc. / DELL 21,327 10.89 -56% 11% 5 3
Coach, Inc. / COH 5,296 16.20 -47% 1% 5 1
Precision Castparts Corp. / PCP 7,674 55.04 -60% 1% 5 5
Herbalife Ltd. / HLF 1,121 17.56 -56% 2% 5 5
Foster Wheeler Ltd. / FWLT 2,667 19.94 -74% 1% 4 4
Premier Exhibitions, Inc. / PRXI 23 0.78 -93% 13% 4 -
Monster Worldwide, Inc. / MWW 1,432 11.62 -64% 5% 4 -
ValueClick, Inc. / VCLK 495 5.71 -74% 1% 4 -
American Eagle Outfitters / AEO 1,828 8.88 -57% 10% 4 2
Mosaic Company, The / MOS 14,425 32.47 -66% 65% 4 2
Iconix Brand Group, Inc. / ICON 508 8.72 -56% 7% 4 -
Mesabi Trust / MSB 117 8.89 -57% 1% 3 -
Spark Networks Inc / LOV 65 3.05 -39% 0% 3 -
Allegheny Technologies Incorpo / ATI 2,041 21.20 -75% 2% 3 -
ICF International, Inc. / ICFI 266 18.00 -29% 51% 3 7
Meredith Corporation / MDP 727 16.11 -71% 11% 3 2
Jackson Hewitt Tax Service Inc / JTX 339 11.76 -63% 1% 3 -
Gannett Co., Inc. / GCI 1,859 8.15 -79% 1% 3 -
Sigma Designs, Inc. / SIGM 232 8.79 -84% 4% 2 -
BSQUARE Corporation / BSQR 30 2.93 -57% 2% 2 -
eBay Inc. / EBAY 15,783 12.36 -63% 16% 2 8
R.G. Barry Corp. / DFZ 56 5.28 -25% 9% 2 7
First Advantage Corporation / FADV 715 12.02 -27% 82% 2 5
Dynacq Healthcare, Inc. / DYII 53 3.39 -8% 57% 1 -
KBR, Inc. / KBR 2,118 13.11 -66% 1% 1 3
Barrett Business Services, Inc / BBSI 108 10.14 -44% 21% 1 -
ViroPharma Incorporated / VPHM 921 11.70 47% 1% 1 3
VAALCO Energy, Inc. / EGY 256 4.39 -6% 4% 1 -
Korn/Ferry International / KFY 553 11.61 -38% 2% 1 -
Lam Research Corporation / LRCX 2,248 17.99 -58% 1% 1 1
MEMC Electronic Materials, Inc / WFR 3,443 15.34 -83% 1% 1 -
Medicis Pharmaceutical Corpora / MRX 638 11.24 -57% 1% 1 2
iBasis, Inc. / IBAS 153 2.15 -58% 57% 1 -
Microsoft Corporation / MSFT 178,445 20.06 -44% 13% 1 28
Boeing Company, The / BA 30,076 41.04 -53% 1% 1 -
Pacer International, Inc. / PACR 359 10.27 -30% 1% 1 9
Bare Escentuals, Inc. / BARE 407 4.45 -82% 14% 1 -
Lear Corporation / LEA 108 1.40 -95% 0% 1 3
The “Magic Formula” 100 — Insider Ownership, Open Market Activity (sorted by # of buys) (continued)
Market Recent Last Six Months

Value Price YTD Insider Insider Insider
Company / Ticker ($mn) ($) Change Ownership Buys Sales
KHD Humboldt Wedag Internation / KHD 278 9.10 -70% 22% - -
DepoMed, Inc. / DEPO 84 1.64 -50% 12% - -
Sierra Wireless, Inc. (USA) / SWIR 244 7.88 -47% 1% - -
TheStreet.com, Inc. / TSCM 97 3.17 -80% 31% - -
Acme Packet, Inc. / APKT 204 3.69 -71% 52% - 9
Verigy Ltd. / VRGY 646 10.96 -60% 1% - 19
Syneron Medical Ltd. / ELOS 215 7.74 -42% 10% - -
LCA-Vision Inc. / LCAV 73 3.91 -80% 1% - -
Heidrick & Struggles Internati / HSII 347 21.24 -43% 2% - 1
Versant Corporation / VSNT 54 14.46 -50% 9% - 3
Emulex Corporation / ELX 593 7.22 -56% 2% - 1
Double-Take Software, Inc. / DBTK 156 7.07 -67% 21% - 1
Take-Two Interactive Software, / TTWO 835 10.76 -42% 1% - -
USA Mobility, Inc. / USMO 260 9.55 -33% 1% - 1
King Pharmaceuticals, Inc. / KG 2,376 9.64 -6% 1% - 1
Value Line, Inc. / VALU 328 32.88 -19% 87% - -
SPSS Inc. / SPSS 441 24.30 -32% 1% - 7
NVIDIA Corporation / NVDA 3,991 7.17 -79% 5% - 12
Hurco Companies, Inc. / HURC 110 17.17 -61% 10% - -
Forest Laboratories, Inc. / FRX 6,923 22.97 -37% 1% - 5
EarthLink, Inc. / ELNK 689 6.36 -10% 8% - 32
Net 1 Ueps Technologies Inc / UEPS 641 10.97 -63% 16% - 2
Kenexa Corporation / KNXA 126 5.59 -71% 7% - -
Accenture Ltd. / ACN 20,919 28.67 -20% 1% - 5
Biovail Corporation (USA) / BVF 1,360 8.57 -36% 10% - -
Varian Semiconductor / VSEA 1,269 17.47 -53% 1% - -
Cadence Design Systems, Inc. / CDNS 1,023 3.93 -77% 0% - 1
EMCOR Group, Inc. / EME 904 13.80 -42% 2% - 10
NutriSystem Inc. / NTRI 391 13.22 -51% 7% - 17
Robert Half International Inc. / RHI 2,762 17.81 -34% 3% - 7
Lorillard Inc. / LO 10,215 60.78 na 61% - -
Hansen Natural Corporation / HANS 2,344 25.36 -43% 17% - -
Aladdin Knowledge Systems Ltd. / ALDN 131 9.44 -64% 19% - -
Questcor Pharmaceuticals, Inc. / QCOR 529 8.15 41% 7% - 15
RadioShack Corporation / RSH 1,207 9.65 -43% 0% - -
Total System Services, Inc. / TSS 2,393 12.16 -57% 5% - 5
Darling International Inc. / DAR 374 4.57 -60% 4% - 17
Broadridge Financial Solutions / BR 1,570 11.10 -51% 0% - 3
AmerisourceBergen Corp. / ABC 4,751 29.98 -33% 1% - 1
Pre-Paid Legal Services, Inc. / PPD 417 35.92 -35% 35% - 12
Manitowoc Company, Inc. / MTW 902 6.92 -86% 4% - 3
CTC Media, Inc. / CTCM 677 4.45 -85% 62% - -
Rockwell Automation / ROK 3,797 26.08 -62% 0% - -
McGraw-Hill Companies, Inc., T / MHP 7,347 23.36 -47% 2% - -
Herman Miller, Inc. / MLHR 784 14.61 -55% 2% - 1
Energen Corporation / EGN 2,037 28.40 -56% 0% - -
Lincare Holdings Inc. / LNCR 1,862 25.03 -29% 0% - 6
Seagate Technology / STX 2,378 4.87 -81% 2% - 3
COMSYS IT Partners, Inc. / CITP 84 4.14 -74% 9% - 2
Viacom, Inc. / VIA.B 10,295 16.78 -62% 12% - 1
Tempur-Pedic International Inc / TPX 503 6.72 -74% 9% - -
DISH Network Corp. / DISH 4,918 11.00 -68% 80% - 17
infoGROUP Inc / IUSA 192 3.38 -62% 41% - -
Accenture Ltd. (NYSE: ACN) Hamilton, Bermuda, 441-296-8262

Services: Business Services http://www.accenture.com
Trading Data Consensus EPS Estimates Valuation

Price: $28.67 (as of 11/14/08) Month # of P/E FYE 8/31/08 10.8x
52-week range: $24.76 - $43.04 Latest Ago Ests P/E FYE 8/31/09 10.1x
Market value: $20.9 billion This quarter $0.69 $0.70 16 P/E FYE 8/31/10 9.2x
Enterprise value: $17.3 billion Next quarter 0.63 0.64 14 P/E FYE 8/31/11 8.4x
Shares out: 729.6 million FYE 8/31/09 2.84 2.89 17 EV / LTM revenue 0.7x
Ownership Data FYE 8/31/10 3.13 3.18 17 EV / LTM EBITDA n/a
Insider ownership: 1% FYE 8/31/11 3.40 3.45 4 EV / LTM EBIT 5.7x
Insider buys (last six months): 0 LT EPS growth 10.3% 11.3% 3 P / tangible book 12.3x
Insider sales (last six months): 5 Latest Quarterly EPS Surprise Greenblatt Criteria
Institutional ownership: 65% Date Actual Estimate LTM EBIT yield 17%
# of institutional owners: 1233 9/25/08 $0.67 $0.66 LTM pre-tax ROC n/m
Operating Performance and Financial Position

($ millions, except Fiscal Years Ended LTME FQE FQE
per share data) 8/31/02 8/31/03 8/31/04 8/31/05 8/31/06 8/31/07 8/31/08 8/31/08 8/31/07 8/31/08
Revenue 13,105 13,397 15,114 17,094 18,228 21,453 25,314 25,314 5,573 6,561
Gross profit 4,677 4,310 4,616 5,092 4,994 6,041 7,186 7,186 1,594 1,905
EBIT 1,385 1,551 1,759 2,111 1,841 2,493 3,012 3,012 642 785
Net income 245 498 691 941 973 1,243 1,692 1,692 317 435
Diluted EPS 0.56 1.05 1.22 1.56 1.59 1.97 2.65 2.65 0.50 0.67
Cash from ops 1,090 1,544 1,756 1,887 2,668 2,631 2,803 2,803 777 1,031
Capex 263 212 282 318 306 364 320 320 139 87
Free cash flow 828 1,333 1,474 1,569 2,362 2,266 2,483 2,483 638 944
Cash & investments 1,317 2,332 2,838 2,948 3,420 3,546 3,623 3,623 3,546 3,623
Total current assets 4,052 5,037 6,139 6,685 7,191 7,971 9,159 9,159 7,971 9,159
Intangible assets 168 189 215 379 528 644 840 840 644 840
Total assets 5,479 6,459 8,014 8,957 9,498 10,747 12,399 12,399 10,747 12,399
Short-term debt 63 46 37 31 25 24 7 7 24 7
Total current liabilities 3,327 3,308 4,394 4,931 5,773 6,879 6,848 6,848 6,879 6,848
Long-term debt 3 14 32 44 27 3 2 2 3 2
Total liabilities 5,040 5,628 6,542 7,261 7,603 8,684 9,858 9,858 8,684 9,858
Preferred stock 0 0 0 0 0 0 0 0 0 0
Common equity 439 832 1,472 1,697 1,894 2,063 2,541 2,541 2,063 2,541
EBIT/capital employed >100% >100% n/m n/m n/m n/m n/m n/m n/m n/m
Ten-Year Stock Price Performance and Trading Volume Dynamics
$50
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
Jan 00 Jan 00 Oct 01 Oct 02 Oct 03 Oct 04 Oct 05 Oct 06 Oct 07 Oct 08
BUSINESS OVERVIEW • Guiding for revenue growth of 9-12% (constant

Accenture is a global management consulting, IT services currency) and EPS growth of 8-11% in FY09.
and outsourcing company. It has 186,000 employees in 49 The company expects new bookings of $26-29
countries and operates in five segments: communications and billion in FY09, compared to $26.8 in FY08. EBIT
high tech, financial services, government, products, and margin is expected to expand by 10-40 bps in FY09,
resources. Outsourcing contracts (40% of revenue) typically and management forecasts FCF of $2.6-2.8 billion.
have longer terms than consulting contracts (60% of revenue) • Strong balance sheet; share buybacks. Accenture
and generally have lower gross margins than consulting. had $3.6 billion of net cash as of August 31, having
repurchased 61 million shares for $2.3 billion in
SELECTED OPERATING DATA FY08 (another $2.5 billion remains authorized). The
1
FYE August 31 2006 2007 2008 2009E company paid an annual dividend of $0.50 per share
% of net revenue by type of work:
Consulting 59% 60% 60% --
in November, up from $0.42 per share a year earlier.
Outsourcing 41% 40% 40% -- • Share price implies 12% trailing FCF yield, 11x
% of net revenue by operating group: trailing P/E and 10x forward P/E.
Communications & tech 25% 23% 23% --
Financial services 21% 22% 21% --
Products 24% 25% 26% --
INVESTMENT RISKS & CONCERNS
Public service 13% 13% 12% -- • Dependent on technology and related services
Resources 16% 16% 17% -- spending by enterprises, with 21% of FY08
Net revenue growth by operating group (constant currency basis): revenue from the financial services sector. The
Communications & tech 6% 5% 10% --
Financial services 7% 16% 6% --
company is vulnerable to a global recession, as
Products 15% 18% 17% -- EMEA and Asia Pacific contribute 58% of revenue.
Public service 4% 12% 7% -- • Majority of revenue derived on project-by-
Resources 12% 17% 14% -- project basis, with many consulting engagements
∆ net revenue 9% 13% 11% 9-12%
% of net revenue by geography:
less than 12 months in duration. Backlog is typically
Americas 47% 43% 42% -- a small portion of expected annual revenue.
EMEA 46% 48% 49% -- • People business with fairly low barriers to entry.
Asia Pacific 8% 9% 9% -- While Accenture has scale advantages, particularly
EBIT margin by operating group:
Communications & tech 15.1% 12.6% 12.1% --
in outsourcing, IT and management consulting is
Financial services 10.9% 11.3% 13.2% -- subject to constant entry by new competitors. The
Products 10.0% 13.6% 14.2% -- company had a 16% attrition rate in FY08.
Public service 3.8% 10.6% 9.1% --
Resources 12.7% 14.8% 14.4% --
Total EBIT margin 11.1% 12.7% 12.9% 13-13.3%
COMPARABLE PUBLIC COMPANY ANALYSIS
08 09
Other financial data: ($mn) MV EV EV/Rev P/TB
New bookings ($bn) 20.4 22.0 26.8 26.0-28.0 P/E P/E
Net revenue ($bn) 16.6 19.7 23.4 -- BE 13 703 .2x n/m n/m n/m
FCF ($bn) 2.4 2.3 2.5 2.6-2.8 CSC 4,322 7,354 .4x 7.7x 7x 6x
Effective tax rate 26% 34% 29% 30-32% DTPI 101 54 .3x 1.4x 57x 33x
Diluted EPS growth 2% 24% 35% 8-11%
IBM 107,920 132,577 1.3x 19.2x 9x 9x
Other operating metrics:
Utilization na 85% 84% -- ACN 20,919 17,304 .7x 12.3x 10x 9x
Attrition 18% 18% 16% --
1
Reflects management guidance provided on September 25, 2008.
MAJOR HOLDERS
Insiders <1% │ Barclays 8% │ Wellington 5%
INVESTMENT HIGHLIGHTS
• Top global technology-focused consulting firm. RATINGS
Accenture has one of the broadest service offerings VALUE Intrinsic value materially higher than market value?
in the industry. Competitors include IBM Global MANAGEMENT Capable and properly incentivized?
Services, EDS (HP), and Computer Sciences Corp. FINANCIAL STRENGTH Solid balance sheet?
• Management expressed “continued confidence” MOAT Able to sustain high returns on invested capital?
in the business following strong FQ4 results. EARNINGS MOMENTUM Fundamentals improving?
While CEO Green noted “uncertainty in the MACRO Poised to benefit from economic and secular trends?
economic environment,” he expressed confidence EXPLOSIVENESS 5%+ probability of 5x upside in one year?
that revenue and income would increase in FY09.
THE BOTTOM LINE

Accenture is a global leader in helping businesses improve processes and maximize return on their technology investments.
At the current valuation, Accenture shares should yield a long-term return that meaningfully exceeds long-term growth in
technology capex by global enterprises. However, management’s guidance regarding FY09 bookings and EBIT margin
appears quite vulnerable to continued macroeconomic deterioration.
Acme Packet, Inc. (Nasdaq: APKT) Burlington, MA, 781-328-4400

Technology: Communications Equipment http://www.acmepacket.com

Market value: $204 million This quarter $0.07 $0.06 9 P/E FYE 12/31/09 14.2x
Enterprise value: $77 million Next quarter 0.05 0.05 9 P/E FYE 12/31/10 11.9x
Insider ownership: 52% FYE 12/31/10 0.31 n/a 1 EV / LTM EBIT 4.4x
# of institutional owners: 202 11/6/08 $0.05 $0.05 LTM pre-tax ROC 80%

per share data) 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 3 16 36 84 113 117 30 28
Gross profit 2 10 27 67 91 94 24 23
EBIT (8) (7) (0) 23 25 17 7 3
Net income (8) (7) 0 29 20 13 6 2
Diluted EPS (0.16) (0.15) 0.00 0.50 0.30 0.20 0.08 0.03
Cash from ops (7) (5) 2 26 16 30 (1) 3
Capex 1 2 4 6 6 5 1 1
Free cash flow (8) (7) (1) 20 11 25 (3) 1
Cash & investments n/a 17 15 119 136 127 128 127
Total current assets n/a 23 26 146 176 168 165 168
Intangible assets n/a 0 0 0 0 0 0 0
Total assets n/a 26 30 154 187 178 174 178
Short-term debt n/a 0 0 0 0 0 0 0
Total current liabilities n/a 8 12 23 23 30 19 30
Long-term debt n/a 0 0 0 0 0 0 0
Total liabilities n/a 8 13 23 23 30 20 30
Preferred stock n/a 0 0 0 0 0 0 0
Common equity n/a 18 18 131 163 149 154 149
EBIT/capital employed n/a -789% -25% >100% >100% 80% n/m n/m
$25
$20
$15
$10
$5
$0
Jan 00 Jan 00 Jan 00 Jan 00 Jan 00 Jan 00 Jan 00 Oct 06 Oct 07 Oct 08
BUSINESS OVERVIEW • Strong balance sheet, with $127 million of cash

Acme Packet provides session border controllers (SBCs), and no debt as of September 30.
which enable service providers and enterprises to deliver • Stock price implies 12% trailing FCF yield, 18x
secure interactive communications—voice, video and other trailing P/E and 14x forward P/E.
real-time multimedia sessions—across defined border points
where Internet Protocol (IP) networks connect, known as INVESTMENT RISKS & CONCERNS
network borders. Service providers include wireline, • Lowered 2008 revenue guidance from $142-$147
wireless, cable and Internet telephony service providers. million to $116-$118 million and non-GAAP EPS
Acme has 540 customers in 85 countries, including 29 of the from $0.38-$0.42 to $0.23-$0.25. In July, Acme
world’s top 30 communications service providers. Direct blamed Q2 weakness on order pushouts and late
sales accounted for 39% of revenue in 2007. Product and shipments, suggesting than no deals had been lost.
service revenue accounted for 84% and 16% of revenue, The subsequent guidance revision is not consistent
respectively, in 2007. Acme was founded in 2000 and with the explanation of the Q2 shortfall.
completed an IPO at $9.50 per share in October 2006. • Dependent on technological edge in SBCs.
Acme’s key competitive advantage is the leading-
SELECTED OPERATING DATA edge family of Net-Net session border controllers. A
YTD loss of technology leadership, or a change in service
FYE December 31 2005 2006 2007 9/30/08 providers’ need for SBCs, might threaten the firm.
% of revenue by geography:
North America 59% 57% 48% 50% • Competition from startups and large players,
Rest of the world 41% 43% 52% 50% including NexTone, Newport, DiTech, Juniper,
Revenue growth by geography: AudioCodes, Sonus, and Ericsson. Cisco recently
North America 165% 125% 12% 8% launched a new product for the SBC market.
Rest of the world 86% 145% 64% 2%
Total revenue growth 126% 133% 34% 5% • Customer concentration. Alcatel Lucent, Nokia
Siemens Networks, Sprint, and Ericsson accounted
INVESTMENT HIGHLIGHTS for 17%, 15%, 13% and 11% of 2007 revenue,
• Explosive revenue growth from 2004-07, but respectively. Acme acknowledges that its key
sharp slowdown this year. Growth has been driven customers “have substantial negotiating leverage.”
by demand for session border controllers (SBCs) in
next-generation networks being deployed by service COMPARABLE PUBLIC COMPANY ANALYSIS
($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
providers. The global market for SBCs in service
ALU 5,241 6,063 .3x n/m n/m 9x
provider networks is expected to increase from $215
CSCO 97,853 77,961 1.9x 4.8x 12x 11x
million in 2007 to $1.1 billion by 2012.1
JNPR 7,935 5,914 1.7x 3.8x 13x 11x
• Leader in session border controllers (SBCs). The
company has roughly 50% market share in SBCs, APKT 204 77 .7x 1.4x 15x 14x
twice as much as the next largest competitor.
• Experienced, entrepreneurial management. Co- MAJOR HOLDERS
founder and CEO Andrew Ory (41) was previously CEO Andrew Ory 8% │ Other insiders 46% (includes Menlo
co-founder and CEO of Priority Call Management, a Ventures 22% and Advanced Technology Ventures 6%)
company with a similar customer base to that of
Acme. Ory sold Priority for $162 million in 1999. RATINGS
• International represented 52% of revenue in VALUE Intrinsic value materially higher than market value?
2007, up from 43% in 2006 and 41% in 2005. MANAGEMENT Capable and properly incentivized?
• Manufacturing outsourced to third parties (Jabil, FINANCIAL STRENGTH Solid balance sheet?
Benchmark Electronics, and TTM Technologies). MOAT Able to sustain high returns on invested capital?
• Expanded stock repurchase program from $20 EARNINGS MOMENTUM Fundamentals improving?
million to $55 million in August. The company has MACRO Poised to benefit from economic and secular trends?
repurchased $36 million of stock so far this year. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
1
Source: Company, Dell’Oro Group.
THE BOTTOM LINE

Acme experienced impressive growth through FY07 but has stumbled recently. We are not entirely satisfied with
management’s explanation of the sharp slowdown in growth in 2008, and find it difficult to assess whether the slowdown is
temporary. While CEO Ory has founded and sold a business before, and while Acme investors may ultimately be rewarded in
similar fashion, we cannot gain enough comfort with the company’s operating direction. Longer term, we believe a sale may
be the only outcome that provides satisfactory shareholder value, as we see no sustainable competitive advantage here.
Aladdin Knowledge Systems Ltd. (Nasdaq: ALDN) Petach Tikva, Israel, 212-564-5678
Technology: Software & Programming http://www.aladdin.com

Market value: $131 million This quarter -$0.17 -$0.05 7 P/E FYE 12/31/09 23.6x
Enterprise value: $120 million Next quarter 0.05 n/a 3 P/E FYE 12/31/10 13.5x
# of institutional owners: 68 10/16/08 -$0.02 -$0.21 LTM pre-tax ROC 18%

per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 47 50 55 69 82 89 106 117 26 31
Gross profit 37 39 45 55 65 69 79 86 20 22
EBIT (10) (2) 2 10 13 13 14 3 4 (1)
Net income (15) (7) 3 9 12 14 15 6 4 (0)
Diluted EPS (1.32) (0.59) 0.23 0.68 0.85 0.93 1.02 0.44 0.30 (0.02)
Cash from ops (5) 4 6 9 15 19 22 9 7 (1)
Capex 1 1 1 1 2 5 3 3 1 1
Free cash flow (6) 3 5 8 12 14 19 6 6 (2)
Cash & investments 13 15 20 26 77 91 95 11 83 11
Total current assets 33 32 38 48 103 120 128 59 117 59
Total assets 53 49 56 71 126 149 150 182 146 182
Short-term debt 0 0 0 0 0 0 0 0 0 0
Total current liabilities 8 9 11 14 18 20 24 37 25 37
Long-term debt 0 0 0 0 0 0 0 0 0 0
Total liabilities 11 12 15 18 21 26 31 58 30 58
Common equity 43 36 41 53 105 123 119 124 116 124
EBIT/capital employed -66% -16% 23% 98% >100% >100% 89% 18% n/m n/m
$50
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
Oct 99 Oct 00 Oct 01 Oct 02 Oct 03 Oct 04 Oct 05 Oct 06 Oct 07 Oct 08
BUSINESS OVERVIEW • Active M&A strategy, including 39% investment

Aladdin is an information security company specializing in in Athena Smartcard, €10 million purchase of
authentication, software digital rights management (DRM) Eutronsec, and $65 million acquisition of SafeWord
and content security. It operates in two segments: product line from Secure Computing (SCUR).
Software Security DRM provides software and hardware that SafeWord offers one-time-password authentication.
helps software publishers manage licensing and distribution • Guiding for revenue growth of 15-25% and EPS
of their software to prevent theft and piracy. decline from $1.02 in 2007 to $0.04-0.10 in 2008;
Enterprise Security provides USB-based hardware and one- non-GAAP EPS to decline from $1.20 in 2007 to
time-password devices for user authentication and content $0.74-0.84 in 2008. The guidance includes the
security solutions that protect computers against intrusion. SafeWord acquisition. A slowdown in revenue
growth, M&A expenses and the strengthening of the
SELECTED OPERATING DATA Israeli shekel are behind the likely decline in EPS.
YTD • Received $14.50 per share acquisition proposal
FYE December 31 2005 2006 2007 9/30/08 from Vector Capital in October, following rejection
% of revenue by segment: of $13 per share Vector proposal in August. The
Software security (DRM) 69% 68% 62% 58% company also rejected a proposal by Vector to buy
1
Enterprise security 31% 32% 38% 42%
Revenue growth by segment: Aladdin’s DRM business for $125-135 million.
Software security (DRM) 12% 7% 9% 4% Vector owns 14% of Aladdin shares.
Enterprise security 36% 13% 40% 32% • Stock price implies 5% trailing FCF yield, 21x
Total revenue growth 18% 9% 19% 14% trailing P/E and 24x forward P/E.
Gross profit margin by segment:
Software security (DRM) 83% 85% 82% n/a
Enterprise security 72% 62% 61% n/a INVESTMENT RISKS & CONCERNS
Total gross margin 79% 78% 74% 74% • M&A strategy with “focus on market share.”
EBIT margin by segment: Second criterion is “technology,” with value
Software security (DRM) 36% 40% 38% n/a
Enterprise security -32% -38% -28% n/a creation apparently in third place.
Total EBIT margin 15% 15% 13% 3% • Competitors include SafeNet, Macrovision and
% of revenue by product line: Wibu in software DRM; RSA in authentication;
HASP tokens 68% 68% 62% n/a
Trend Micro in content security for gateways; as
eSafe 14% 14% 14% n/a
eToken 17% 18% 24% n/a well as McAfee, Symantec, Blue Coat, Secure
% of revenue by geography: Computing, IronPort, Websense, and SurfControl.
U.S. 33% 26% 23% n/a
Europe ex. Germany 26% 30% 32% n/a COMPARABLE PUBLIC COMPANY ANALYSIS
Germany 21% 22% 23% n/a
Asia incl. Japan 13% 15% 15% n/a ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
Israel and others 7% 7% 7% n/a MFE 4,350 3,570 2.3x 6.3x 14x 13x
1
Enterprise security revenue in 2007 includes 2% from educational products. MVSN 1,169 1,768 6.7x n/m 17x 10x
SYMC 10,208 10,003 1.6x n/m 9x 8x
INVESTMENT HIGHLIGHTS ALDN 131 120 1.0x 1.1x 118x 24x
• Leading software rights management products,
used by software publishers to protect their IP and MAJOR HOLDERS
reduce piracy losses. Software DRM is a ~$200 CEO Margalit 13% │ Other insiders 7% │ Vector 14% │
million market globally, growing in the low teens.1 Galleon 12% │ Manning & Napier 10% │ RenTech 5%
• eToken is leader in USB authentication, a $150
million market growing at 30%+. Aladdin also RATINGS
competes in the one-time-password authentication, a VALUE Intrinsic value materially higher than market value?
$450 million market growing at roughly 20%.1 MANAGEMENT Capable and properly incentivized?
• eSafe secure Web gateway competes in $650 FINANCIAL STRENGTH Solid balance sheet?
million market growing at 20%+.1 eSafe provides MOAT Able to sustain high returns on invested capital?
advanced protection against Web-based threats. EARNINGS MOMENTUM Fundamentals improving?
• CEO Jacob Margalit (45) founded company in MACRO Poised to benefit from economic and secular trends?
1985. CFO Shemer (38) joined Aladdin in 2007. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
1
Source: Frost & Sullivan, Company, The Manual of Ideas.
THE BOTTOM LINE

Aladdin has a strong product offering in the growing software digital rights management, authentication and secure Web
gateway markets. The shares may be cheaper than they appear, as the enterprise security segment has posted losses, masking
the strong profitability of software DRM. However, we question the company’s acquisition strategy, as it appears to have
negatively affected earnings even while boosting growth and strengthening the product offerings. Nonetheless, the current
enterprise value may be less than the intrinsic value of just the software DRM segment, making this an interesting prospect.
Allegheny Technologies Incorpo (NYSE: ATI) Pittsburgh, PA, 412-394-2800

Basic Materials: Misc. Fabricated Products, Member of S&P 500 http://www.alleghenytechnologies.co…

Ownership Data FYE 12/31/09 4.15 5.40 11 EV / LTM EBITDA 2.5x

per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 2,128 1,908 1,937 2,733 3,540 4,937 5,453 5,471 1,335 1,392
Gross profit 266 163 64 245 654 1,196 1,449 1,224 367 307
EBIT (7) (68) (247) 52 355 901 1,153 928 293 232
Net income (25) (66) (315) 20 362 574 747 604 194 144
Diluted EPS (0.31) (0.82) (3.88) 0.22 3.61 5.61 7.26 5.95 1.88 1.45
Cash from ops 123 204 82 24 224 312 710 524 294 248
Capex 104 49 74 50 91 238 447 532 130 110
Free cash flow 19 156 8 (26) 133 73 262 (8) 165 139
Total current assets 926 796 743 1,160 1,484 1,988 2,249 2,141 2,348 2,141
Total assets 2,643 2,093 1,903 2,316 2,732 3,281 4,096 4,312 3,917 4,312
Short-term debt 9 10 28 29 13 24 21 21 17 21
Long-term debt 573 509 504 553 547 530 507 495 513 495
Common equity 945 449 175 426 800 1,503 2,224 2,365 2,073 2,365
EBIT/capital employed -1% -5% -23% 5% 29% 60% 59% 39% n/m n/m
$140
$120
$100
$80
$60
$40
$20
$0
BUSINESS OVERVIEW • Chairman and CEO Patrick Hassey (62) joined

Allegheny is a diversified specialty metals producer. Target in 2003. He previously served in various roles at
markets include aerospace and defense, oil and gas, electrical Alcoa, including as group president of Industrial
energy, medical, auto, food equipment, machine tools, and Components. Richard Harshman (51) has served as
construction. The company operates in three segments: CFO since 2000, having joined from Teledyne.
High Performance Metals provides titanium-, nickel- and • Repurchased 5.4 million shares for $303 million
cobalt-based alloys and superalloys, and exotic alloys such as under $500 million program authorized in late 2007.
zirconium, hafnium and niobium, primarily in long product • Stock price implies negative trailing FCF yield,
forms such as ingot, billet, bar, rod, wire, and seamless tube. 4x trailing P/E and 5x forward P/E.
Flat-Rolled Products provides stainless steel, nickel-based
alloys and titanium alloys in a variety of forms, including INVESTMENT RISKS & CONCERNS
plate, sheet, engineered strip, and precision-rolled strip. • Guiding for earnings decline of 23-24% in 2008,
with estimated EPS of $5.51-5.61. Q3 saw “more
Engineered Products produces tungsten powder, heavy
competitive pricing” for most products and lower
alloys and carbide materials, and carbide cutting tools.
demand for standard stainless sheet and plate.
SELECTED OPERATING DATA • Specialty metals customers operate in cyclical
YTD
industries, including aerospace and defense, oil and
FYE December 31 2005 2006 2007 9/30/08 gas, electrical energy, and infrastructure.
% of revenue by segment: • Annual capex to range from $500-600 million
High performance metals 35% 37% 38% 36% over four years, following decision to invest $1.2
Flat-rolled products 54% 55% 54% 56%
Engineered products 11% 9% 8% 8% billion in flat-rolled products segment. The
Revenue growth by segment: company intends to build a specialty metals hot
High performance metals 57% 45% 14% -4% rolling and processing facility and consolidate a
Flat-rolled products 16% 42% 9% 2% grain-oriented electrical steel melt into the
Engineered products 33% 10% 0% 9%
∆ revenue 30% 39% 10% 0%
Brackenridge, PA melt shop. Management’s
∆ backlog (period end) 75% 23% -17% estimate of a 20% ROI by 2014 may prove wrong.
EBIT margin by segment: • Retirement benefits liability of $465 million
High performance metals 27% 36% 35% 28% related to the company’s U.S. defined-benefit
Flat-rolled products 8% 13% 17% 13% pension plan. The plan appears to be well funded.
Engineered products 12% 13% 7% 6%
Corporate and other -2% -2% -2% -1%
Total EBIT margin 13% 20% 22% 17% COMPARABLE PUBLIC COMPANY ANALYSIS
D&A as % of revenue 2% 2% 2% 2% ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
Capex as % of revenue 3% 5% 8% 9% CRS 704 632 .2x 1.0x 5x 4x
Revenue by geography:
NUE 10,276 11,878 .5x 1.9x 5x 6x
U.S. 59% 61% 54% n/a
International
1
41% 39% 46% n/a RTI 253 206 .3x 0.5x 4x 5x
1
Includes sales from U.S. operations to international customers. TIE 1,389 1,369 1.2x 1.2x 9x 9x
X 3,459 5,891 .2x 0.8x 2x 3x
INVESTMENT HIGHLIGHTS ATI 2,041 2,285 .4x 0.9x 4x 5x
• Transformed business through renewed profit
focus, implementing $590 million of gross cost MAJOR HOLDERS
reductions from 2005-07. The company has formed CEO Hassey <1% │ Other insiders 2% │ TCW 7% │
market sector teams to target more effectively Singleton 6%
verticals such as aerospace, defense and oil and gas.
• Poised to benefit from interest in nuclear energy. RATINGS
The company is forming a market sector team to VALUE Intrinsic value materially higher than market value?
target this opportunity. Specialty metals that address MANAGEMENT Capable and properly incentivized?
this market include zirconium and hafnium for fuel FINANCIAL STRENGTH Solid balance sheet?
bundles, titanium and corrosion-resistant alloys for MOAT Able to sustain high returns on invested capital?
condenser units, and condenser tubing. EARNINGS MOMENTUM Fundamentals improving?
• “Steady” demand from aerospace and “growing” MACRO Poised to benefit from economic and secular trends?
demand from global industrial markets is partly EXPLOSIVENESS 5%+ probability of 5x upside in one year?
offsetting weakness in U.S. auto and housing.
THE BOTTOM LINE

Allegheny has transformed itself in recent years, refocusing on profitability and boosting returns on capital into the mid 20s,
a highly respectable level for a capital-intensive industrial business. We are concerned that weak macro trends may put
pressure on revenue and margins, depressing returns on capital into the teens or even lower. As a result, we are not convinced
that Allegheny is a “good enough” business to make it one of the more compelling magic formula selections.
Ambassadors Group, Inc. (Nasdaq: EPAX) Spokane, WA, 509-568-7800

Services: Personal Services http://www.ambassadorsgroup.com

Enterprise value: $98 million Next quarter n/a -0.31 0 P/E FYE 12/31/10 n/a
Insider ownership: 5% FYE 12/31/10 n/a 1.11 0 EV / LTM EBIT 4.3x
# of institutional owners: 203 10/28/08 $0.70 $0.79 LTM pre-tax ROC >100%

per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 43 36 38 52 69 89 115 97 52 40
Gross profit 0 0 0 0 67 78 96 77 46 33
EBIT 13 15 15 23 31 34 42 23 32 19
Net income 10 11 10 16 22 27 31 18 23 13
Diluted EPS 0.48 0.53 0.50 0.75 1.05 1.25 1.55 0.91 1.12 0.70
Cash from ops 7 21 17 28 38 37 16 16 (47) (30)
Capex 1 0 1 2 2 7 19 5 5 2
Free cash flow 6 21 16 26 36 31 (3) 11 (52) (32)
Total assets 46 59 79 98 125 154 122 115 126 115
Short-term debt 0 0 0 0 0 0 0 0 0 0
Long-term debt 0 0 1 1 0 0 0 0 0 0
Common equity 25 28 41 50 67 84 72 78 87 78
EBIT/capital employed n/m n/m n/m n/m n/m n/m n/m >100% n/m n/m
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
Jan 00 Jan 00 Jan 00 Oct 02 Oct 03 Oct 04 Oct 05 Oct 06 Oct 07 Oct 08
BUSINESS OVERVIEW • Enrolled revenue of $173 million (up 10% y-y) as

Ambassadors Group is an educational travel company of October 26 for 2009 travel relating to 29,580 net
focused on international travel for students. The company’s enrolled participants (down 4% y-y).
programs, including “Student Ambassador Programs” and • Chairman John Ueberroth and CEO Jeffrey
“Student Leader Programs,” help grade and high school Thomas assumed their current roles in 2001.
students learn about the history and culture of other places. Both executives have extensive travel industry
The majority of travel is scheduled in June and July. experience and own 4-5% of the company each.
The company has the exclusive right from People to People, Ueberroth is a business leader honored on the cover
a non-profit organization founded by President Eisenhower of Time for his role in the 1984 L.A. Olympics.
and originally administered by the U.S. State Department, to • Repurchased $24 million of stock in past twelve
develop and conduct student programs through 2020. Eight months, with another $20 million authorized.
U.S. presidents have served as honorary chairman of People • Stock price implies 7% trailing FCF yield, 9x
to People, including President George W. Bush. trailing P/E and 10x forward P/E.
Since 1963, the company has organized programs for
400,000+ students, adults and athletes. In 2007, 50,000+ INVESTMENT RISKS & CONCERNS
“delegates” traveled to 44 countries. The company acquired • Hurt by weak dollar and high fuel prices, as
education website BookRags for $18 million in May 2008. travel abroad has become less affordable. The
company has “seen enrollments begin to slow.”
SELECTED OPERATING DATA • Dependent on agreements with People to People,
YTD which expire in 2010 but may be extended through
FYE December 31 2005 2006 2007 9/30/08 2020 at the company’s option. Ambassadors has the
Traveling delegates 37,800 43,075 52,661 38,930 exclusive right to conduct programs for K-12
Change (y-y) 22% 14% 22% -22%
% of revenue by travel destination: students using the People to People name, and the
Europe 46% 43% 50% 54% non-exclusive right to conduct programs for
1
South Pacific
2
30% 26% 21% 15% professionals, college students, and athletes.
Asia 11% 13% 12% 12%
• EBIT margins of 40%+ may not be sustainable.
U.S. 12% 13% 15% 16%
Other 1% 5% 2% 3% The margins are significantly higher than those of
1
Primarily Australia and New Zealand. most other travel-related firms. The company’s
2
Primarily China. margin profile depends on its ability to market the
student programs as highly reputable and selective.
INVESTMENT HIGHLIGHTS • Marketing practices might be construed as
• Competitive edge due to association with People misleading. Direct mail materials may give
to People, 41 years of travel experience, and prospective participants the impression that the
academic credit granted for the programs by high company is a non-profit affiliated with the U.S.
schools and colleges. The company also benefits government. Participation in the programs may be
from the perception that its programs improve less selective than assumed by some students.
students’ chance of admission to top colleges.
• Academically accredited since 2004 through MAJOR HOLDERS
Northwest Association of Accredited Schools. Chairman Ueberroth 4% │ CEO Thomas 5% │ Other
The company’s Washington School of World insiders <1% │ Punch Card 12% │ Morgan Stanley 10% │
Studies has granted close to 140,000 academic and Schroder 7% │ Eaton Vance 6% │ Timucuan 5%
service-learning credits to students since inception.
• Marketing under People to People name, with RATINGS
heavy emphasis on White House connections. VALUE Intrinsic value materially higher than market value?
Ambassadors operates the travel programs in the MANAGEMENT Capable and properly incentivized?
background, benefiting from the unique credibility FINANCIAL STRENGTH Solid balance sheet?
bestowed on the programs by People to People. MOAT Able to sustain high returns on invested capital?
• Strong reputation. While results have faltered EARNINGS MOMENTUM Fundamentals improving?
recently, Ambassadors remains the envy of its MACRO Poised to benefit from economic and secular trends?
peers, with little direct competition. Lower-end EXPLOSIVENESS 5%+ probability of 5x upside in one year?
competitors include EF Tours and World Stride.
THE BOTTOM LINE

Ambassadors has achieved impressive growth and returns on capital over a long period of time due to a unique affiliation
with the non-profit People to People (contracted through 2020). Recent results have suffered due to a confluence of factors,
including higher overseas travel costs and missteps in marketing execution. Longer term, the growth opportunity may be
limited, as the company may find it difficult to enroll meaningfully more than 50,000 student travelers annually. As a result,
we do not believe the share price is sufficiently low to offset near-term execution risks and long-term market saturation risks.
American Eagle Outfitters (NYSE: AEO) Pittsburgh, PA, 412-432-3300

Services: Retail (Apparel), Member of S&P MidCap 400 http://www.ae.com


per share data) 2/2/02 2/1/03 1/31/04 1/29/05 1/28/06 2/3/07 2/2/08 8/2/08 8/4/07 8/2/08
Revenue 1,372 1,383 1,435 1,881 2,322 2,794 3,055 3,069 703 689
Gross profit 547 541 550 878 1,078 1,340 1,423 1,361 317 289
EBIT 167 159 133 363 459 587 599 514 123 89
Net income 106 88 60 213 294 387 400 344 81 60
Diluted EPS 0.48 0.46 0.38 0.99 1.26 1.70 1.82 1.61 0.37 0.29
Cash from ops 175 122 204 378 466 749 464 489 92 90
Capex 119 79 78 97 82 226 250 288 55 84
Free cash flow 56 43 126 281 384 523 214 201 37 6
Total current assets 377 427 531 865 1,077 1,189 1,021 859 1,074 859
Total assets 674 741 932 1,329 1,606 1,980 1,868 1,945 1,837 1,945
Short-term debt 4 4 5 0 0 0 0 75 0 75
Long-term debt 19 16 14 0 0 0 0 0 0 0
Common equity 502 578 637 964 1,156 1,417 1,341 1,405 1,375 1,405
EBIT/capital employed 64% 55% 41% >100% >100% >100% >100% 65% n/m n/m
$40
$35
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • Strong management. Chairman Jay Schottenstein

American Eagle Outfitters (AEO) sells its own brand of (53; owns 7% of AEO) has been with AEO and
laidback clothing for 15-25 year-olds, providing quality predecessors since 1980. CEO James O’Donnell
merchandise at affordable prices. The collection includes (67; owns 1.5% of AEO) joined the company in
jeans and graphic Ts as well as accessories, outerwear, and 2000. The team has grown the business profitably.
footwear. AEO operates 875 stores in the U.S. and 76 in • Repurchased no shares YTD, $438 million in
Canada. AEO also markets a girls’ underwear collection, FY08, $154 million in FY07 and $172 million in
aerie, available in 81 standalone and AE stores. Martin + FY06. Chairman Schottenstein bought one million
Osa, a concept targeting 28-40 year-olds, offers Refined shares at $23-24 last year.
Casual clothing and accessories in 22 Martin + Osa stores. • Stock price implies 11% trailing FCF yield, 6x
trailing P/E and 7x forward P/E.
SELECTED OPERATING DATA
3
FYE February 1 2006 2007 2008 1H09 INVESTMENT RISKS & CONCERNS
Same store sales growth +16% +12% +1% -7%
Stores (period end)
1
869 911 987 1,054 • Missed fashion cycle in women’s jeans (~15% of
Net sales per gross sq. ft. $471 $524 $517 n/a sales), causing women’s comp store sales to decline
Net sales per selling sq. ft. $577 $642 $638 n/a 16% in 2Q09 while men’s comps rose 2%. 3Q09
Gross sq. ft. (period end) (mn) 4.8 5.2 5.7 6.1 SSS declined 7% (vs. 3% drop in 3Q08), with EPS
Square footage growth 5% 8% 10% 14%
2
Internet sales ($mn) $127 $188 $243 n/a
guidance revised from $0.31-0.36 to $0.30. Chief
Internet sales growth 72% 48% 29% n/a merchandising officer McGalla resigned in August.
% of sales by merchandise group: • Challenging retail environment. The company
Men’s 35% 35% 37% n/a targets 15-25 year-olds, a demographic whose
Women’s (incl. intimates) 60% 60% 59% n/a
Footwear 5% 5% 4% n/a discretionary spending may decrease significantly in
% of sales by geography: the current downturn. AEO has a conservative
U.S. 92% 92% 91% n/a inventory position and expense controls in place to
Foreign 8% 8% 9% n/a mitigate the negative impact of lower spending.
1
Store breakdown as of August 2: 951 AE, 81 aerie, and 22 Martin + Osa.
2
AEO Direct (includes ae.com, aerie.com, and martinandosa.com). • aerie success uncertain; Martin + Osa may shut
3
The company has released the following data for the first three quarters of down. Management may opt to close Martin + Osa
FY09, i.e., through October 30, 2008: sales up 1%, SSS down 7%.
in Q1 CY09 if sales per sq. ft. do not improve.
INVESTMENT HIGHLIGHTS COMPARABLE PUBLIC COMPANY ANALYSIS
• Ranked top two clothing brand by teenagers. Top ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
competitors include Abercrombie (higher price ANF 1,548 1,350 .4x 0.9x 5x 6x
points), Aéropostale (lower price points) and Gap. ARO 1,070 999 .6x 4.4x 7x 7x
• Strong new store economics. Based on AEO data, GPS 8,217 6,725 .4x 1.9x 9x 8x
a new AE store requires investment of $630K and JCG 701 687 .5x 3.3x 8x 7x
generates first-year four-wall profit of $661K (27% PSUN 80 89 .1x 0.2x 41x 9x
of sales), a pre-tax ROI of 105%. New store size is AEO 1,828 1,523 .5x 1.3x 7x 7x
6,000 sq. ft., with $410 sales per sq. ft. in year one.
• Strong remodeling economics, with payback MAJOR HOLDERS
period of 16 months. Data on 57 remodeled stores Chairman Schottenstein 7% │ CEO O’Donnell 1% │ Other
shows sales and profit increases of 30-40%.
insiders 5% │ Wellington 6% │ Lone Pine 6%
• Expects to grow square footage 12% in 2008. Net
new store targets: 40 AE, 76 aerie, 9 Martin + Osa. RATINGS
• Expects to have 115 aerie stores at yearend 2008, VALUE Intrinsic value materially higher than market value?
up from 39 at yearend 2007. The concept has shown MANAGEMENT Capable and properly incentivized?
“strong initial productivity” and is profitable. FINANCIAL STRENGTH Solid balance sheet?
• Website sales grew 29% to $243 million in 2007. MOAT Able to sustain high returns on invested capital?
The company is targeting $500 million by 2010. EARNINGS MOMENTUM Fundamentals improving?
• Launched children’s brand at 77kids.com, with MACRO Poised to benefit from economic and secular trends?
stores planned for 2010. The new brand, 77kids, EXPLOSIVENESS 5%+ probability of 5x upside in one year?
offers on-trend, high-quality clothing for ages 2-10.
THE BOTTOM LINE

American Eagle is a well-managed retailer with a strong brand and good alignment of interests (insiders own 12%; chairman
Schottenstein bought one million shares at $23-24 last year). While investors are acutely aware of the macro headwinds
facing the average AEO customer, the market is not giving AEO credit for continuing to deliver strong returns on capital
invested in AE stores. AEO shares offer a rare opportunity to buy a great company with no net debt at a small premium to
tangible book. We value AEO at $17-27 per share, based on a range of 6x trailing EBIT to 8x estimated normalized EBIT.
…additional insight into AEO: REVENUE, PRODUCTIVITY AND PROFIT MARGINS

AEO – Revenue, Gross Profit and EBIT, FY 1994-2008
WHAT ARE THE SHARES WORTH?
The company has moved from microcap to near-midcap status over
• We value AEO at $17-27 per share, based on the the past fifteen years as the American Eagle brand has gained in
valuation analysis summarized below. We note that polularity, with revenue growing nearly twenty-fold from $169 million
the company has roughly $400-500 million in in FY93 to $3 billion in FY08. Gross profit and operating income have
excess marketable assets; however, the vast increased even more dramatically during the same period.
majority of value resides in the capitalized earnings $3,500mn
of the core American Eagle retail business. $3,000mn
$2,500mn
American Eagle — Valuation Summary $2,000mn
($ in millions, except per share data) Low High $1,500mn
Value Value $1,000mn
1
Value of excess marketable assets: $500mn
Cash and equivalents $353 $353
Short-term investments 27 27 $0mn
Long-term investments 309 309 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08
Notes payable (75) (75)
Net cash and investments $614 $614 Revenue Gross Profit EBIT
2
Cash needed to run business (200) (100) Source: Company, The Manual of Ideas.
Total $414 $514
3 AEO – Y-Y Revenue Growth, FY 1994-YTD 2008
Value of startup concepts:
aerie, Martin + Osa, 77kids $0 $206 The company has posted remarkably strong growth for more than a
decade, driven by an ability to reinvest capital at high rates of return.
Value of AE core business: Even so, growth has not been smooth, with multi-year cycles of
Estimated LTM EBIT ex. startup concepts 500 relatively stagnant results, followed by years of rapid growth.
Fair value multiple of LTM EBIT 6x 50%
Estimated EBIT power in 2-3 years 600
Fair value multiple of EBIT power 8x 40%
Total $3,000 $4,800
30%
Estimated fair value of AEO $3,414 $5,520
per share $17 $27 20%
1
Based on balance sheet values as of August 2, 2008. 10%
2
Represents MOI estimate.
3
Represents MOI estimate. On the low end, the concepts are conservatively 0%
worth zero. On the high end, we value 77kids at zero, while ascribing $2 million
of business value to each of aerie and Martin + Osa’s 103 stores.
-10%
Source: Company filings, The Manual of Ideas estimates and analysis.
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
WHY THE SHARES MAY BE MISPRICED Source: Company, The Manual of Ideas.
• Indiscriminate selling of retailers. With consumer

spending hurt by the real estate downturn, lower AEO – Sales per Average Gross Square Foot, FY 2000-08
credit availability and rising unemployment, it is Sales productivity has roughly doubled since 1995, albeit along an
uneven path. Sales per square foot declined in the early part of this
impossible to predict how weak consumer spending decade, only to rebound strongly since 2005. Perhaps the most
may get and when it may rebound. As a result, significant risk to the bullish thesis on AEO is the possibility of sales
many investors prefer to stay on the sidelines or to productivity falling sharply once again in coming years.
sell short U.S. retailer stocks. However, American $550
Eagle stands out due to its strong market position,
$500
strong management, excellent returns on capital,
$450
and a rock-solid financial position. While near-term
results are likely to continue to be affected by macro $400
weakness, we have little doubt that the company’s $350
earning power will be restored — and will grow — $300
once consumer spending turns the corner. $250
• Core AE store profitability modestly higher than $200
suggested by overall EPS, as new concepts are still 95 96 97 98 99 00 01 02 03 04 05 06 07 08
losing money. As a result, the market is valuing
core AE earnings at a slightly lower multiple than Source: Company, The Manual of Ideas.
may be apparent.
AEO – Gross and Operating Margins, FY 1995-2008 • Women’s business: “has been very challenging;”
The company has achieved record margins in recent years, reflecting “denim business has been the one category that has
the operating leverage inherent in same-store sales growth. Profit hurt us;” “changes that we’ve made in fashion have
margins remained quite strong even in years, such as 2003-04, in
definitely started to resonate with the customer;”
which revenue growth ground to a halt.
“we have not held our position of strength… in
50% denim, and the whole denim assortment is not a
40%
catastrophe. We just have a few styles, and they did
not resonate very well with the customer and there
30% were a couple of misses, to be honest with you. We
have addressed those, and we expect to be in a very
20% strong denim position, trend-wise for holiday this
10% year;” “very encouraged by spring ’09;” “not…
writing off holiday ‘08”
0% • Men’s business: “has been good”
95 96 97 98 99 00 01 02 03 04 05 06 07 08 • Accessories business: “have struggled with
Source: Company, The Manual of Ideas. accessories for some time now, and although we’ve
had periodic improvements, …the category is not
where we want it to be”
AEO CORE STORE METRICS • Direct business (aeo.com, etc.): “continues to
A new American Eagle store generates a “four-wall” demonstrate strength;” “increase in conversion as
return on invested capital of 91% in year one, based on well as an increase in unique site visits;” “direct to
our calculations and data provided by the company. consumer processing costs per unit declined by over
Company data is based on 40 stores opened since early 2006. 25% [in FQ3];” “ship to 62 countries;” “continuing
We note that four-wall returns for new stores opened in the to see the global appetite for our brand grow”aerie:
current economic environment are likely significantly lower “performing well;” “stores are ramping up ahead of
than the return shown here. Nonetheless, we believe the our plan;” “really been turning on over the last
company can sustain reasonable returns on capital in a quarter… very pleased with the performance;”
difficult economy, with returns like to rebound substantially “undies have taken off… strong bra performance;”
when consumer spending trends improve. “AUR is somewhat lower than the AE brand”
• Martin + Osa: “continue to see an improvement;”
New American Eagle Stores – First-Year Economics “our targets for the brand to reach an annual run rate
New AE store size 6,000 square feet of $375 per square foot, and a four wall break even
Investment to open new store
1
$730,000 in the fourth quarter of this year, are the parameters
Sales per square foot $410 for keeping the business ongoing”
Sales $2,460,000
• New stores: “profitable in their very first year;”
Four-wall profit margin 27%
Four-wall profit $664,200 “running out of new store locations, so I expect over
Pre-tax return on investment 91% the next handful of years, two to three years, to see
1
Includes opening inventory of ~$100K but excludes tennant allowances. our new store opening cadence probably get
Source: The Manual of Ideas, American Eagle. somewhere around 15 to 20 stores, and we’re going
to cap out at approximately 1,100 [AE] stores”
• Relief from landlords? “very definitely;” “between
MANAGEMENT’S VIEW OF BUSINESS 35 and 45 stores [come up for lease renewal] a year”
CEO O’Donnell and CFO Hilson provided the following • Share repurchases: “…as auction rates loosen up,
commentary on the 2Q09 earnings call on August 26: we will continue to evaluate share repurchase. We
• Operating environment: “store traffic and still have our authorization out there. So it’s really
consumer demand have been down compared to dependent on the auction rate market.”
prior years;” “traffic… has been relatively choppy” • Chief merchandising officer replacement: “very
• Promotional front: “we do expect… third quarter pleased at the caliber of individuals we’re speaking
markdowns to be higher than last year” with;” “I would think that we would have someone
• Management focus: “managing the business identified, and hopefully announced by year’s end”
conservatively, with tight inventories, and we
continue to pursue expense opportunities” RECOMMENDED READING
• AE brand: “strong, well positioned, and top of • Value Investors Club write-ups dated November 2,
mind with our 15 to 25-year-old customers” 2007 and July 7, 2008.
AmerisourceBergen Corp. (NYSE: ABC) Chesterbrook, PA, 610-727-7000

Health Care: Biotechnology & Drugs, Member of S&P 500 http://www.amerisourcebergen.com


per share data) 9/30/02 9/30/03 9/30/04 9/30/05 9/30/06 9/30/07 9/30/08 9/30/08 9/30/07 9/30/08
Revenue 45,235 49,584 53,121 54,577 61,203 65,672 70,190 70,190 16,293 17,158
Gross profit 2,025 2,226 2,166 1,980 2,232 2,219 2,047 2,047 502 527
EBIT 718 882 877 525 749 789 828 828 177 203
Net income 345 441 468 265 468 469 251 360 88 115
Diluted EPS 1.58 1.95 2.06 1.37 2.26 2.53 2.89 2.89 0.62 0.73
Cash from ops 536 355 825 1,527 807 1,208 737 737 128 514
Capex 64 91 189 203 113 111 137 137 32 57
Free cash flow 472 264 636 1,323 694 1,097 600 600 95 457
Cash & investments 663 800 871 1,316 1,329 1,108 878 878 1,108 878
Intangible assets 2,205 2,391 2,448 2,432 2,589 0 0 0 2,743 0
Total assets 11,213 12,040 11,654 11,381 12,784 12,310 12,153 12,153 12,310 12,153
Short-term debt 61 61 281 1 2 1 2 2 1 2
Long-term debt 1,757 1,723 1,157 952 1,094 1,227 1,187 1,187 1,227 1,187
Common equity 3,316 4,005 4,339 4,280 4,141 3,100 2,710 2,710 3,100 2,710
EBIT/capital employed 37% 43% 41% 33% 72% >100% >100% >100% n/m n/m
$60
$50
$40
$30
$20
$10
$0
BUSINESS OVERVIEW INVESTMENT RISKS & CONCERNS

AmerisourceBergen is a large drug wholesaler. Services • Low-margin business. The company achieves
range from pharmacy automation and pharmaceutical pharmaceutical distribution operating margins of
packaging to reimbursement and pharmaceutical consulting. less than 1.5%, leaving it with little maneuvering
All continuing operations are reported in the Pharmaceutical room should the cost of doing business rise quickly.
Distribution segment, which includes AmerisourceBergen Gross margin has eroded due to competitive
Drug Corporation (ABDC), AmerisourceBergen Specialty pressure, from 5.42% in FY01 to 3.38% in FY08.
Group (ABSG) and the AmerisourceBergen Packaging • Integration of acquisitions. AmerisourceBergen
Group (ABPG). The company spun off the PharMerica has spent close to $700 million on the purchase of
Long-Term Care business in July 2007, combining it with several businesses in the past three years, including
Kindred HealthCare’s institutional pharmacy to create Trent, Asenda, Rep-Pharm, Health Advocates,
PharMerica Corp. (NYSE: PMC). AmerisourceBergen’s top Bellco Health, NMCR, IgG America, AMD,
ten customers account for one-third of operating revenue. Xcenda, and Brecon. While these purchases have
improved AmerisourceBergen’s market position,
SELECTED OPERATING DATA they also raise execution and integration risks.
FYE September 30 2006 2007 2008 • Goal of 15% long-term EPS growth aggressive.
1
Pharmaceutical distribution data: AmerisourceBergen targets revenue growth at
Revenue growth 13% 17% 7%
EBIT growth 21% 13% 15%
market rates while aiming for faster EPS growth,
EBIT margin 1.15% 1.12% 1.19% driven by margin expansion and share repurchases
1
Pharmaceutical distribution accounts for 99% of revenue. (30%+ of FCF to be returned to shareholders). Few
companies achieve 15% EPS growth over the long
INVESTMENT HIGHLIGHTS term, and we are skeptical that AmerisourceBergen
• Industry expected to grow in mid single digits in can deliver on this goal. However, the company
the U.S. in coming years, despite likely slower does not need to grow EPS anywhere close to its
growth in FY09. Growth drivers include an aging goal in order to justify the current valuation.
population, new drugs, increased use of generics,
and increased use of drug therapies. COMPARABLE PUBLIC COMPANY ANALYSIS
• Achieved respectable performance in FY08, due ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
to slight share gains, “excellent contribution” from CAH 12,978 16,070 .2x 7.9x 9x 8x
the PRxO Generics program, a diverse mix, and cost MCK 9,643 10,315 .1x 5.1x 9x 8x
control. The company reported growth in operating OMI 1,622 1,805 .3x 4.2x 17x 15x
revenue of 7% and growth in diluted EPS from PSSI 1,040 1,248 .6x 5.4x 18x 15x
continuing operations of 14% in FY08. EBIT ABC 4,751 5,062 .1x 1.8x 10x 9x
margin expanded by 7 bps. FCF was $600 million,
while share repurchases amounted to $680 million. MAJOR HOLDERS
• Sold underperforming workers’ comp business. CEO Yost 1% │ Other insiders 2% │ AXA 12% │ Goldman
The company sold PMSI in the June quarter, Sachs 10% │ State Street 6% │ Pzena 6% │ Vanguard 6%
recording a $222 million non-cash charge.
• Guiding for revenue growth of 1-3% and EPS RATINGS
growth of 7-12% in FY09 against a backdrop of VALUE Intrinsic value materially higher than market value?
low single digit market growth. Management will MANAGEMENT Capable and properly incentivized?
focus on expense management, EBIT margin FINANCIAL STRENGTH Solid balance sheet?
expansion, and FCF generation ($460-535 million). MOAT Able to sustain high returns on invested capital?
• Authorized $500 million buyback in November; EARNINGS MOMENTUM Fundamentals improving?
to spend $350 million in next twelve months. MACRO Poised to benefit from economic and secular trends?
• Stock price implies 13% trailing FCF yield, 10x EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE

AmerisourceBergen is not cheap enough to warrant serious consideration. The company operates in a steady-as-you-go
business that is neither likely to deliver impressive rewards nor result in permanent loss of capital. The question becomes
whether the opportunity cost of capital is too great to tie it up in shares of the company. Given some of the other ideas on the
magic formula list, we believe the answer is yes.
Bare Escentuals, Inc. (Nasdaq: BARE) San Francisco, CA, 415-489-5000

Services: Retail (Specialty Non-Apparel) http://www.bareescentuals.com

Insider buys (last six months): 1 LT EPS growth 13.9% 18.3% 9 P / tangible book n/m

per share data) 12/31/03 1/2/05 1/1/06 12/31/06 12/30/07 9/28/08 9/30/07 9/28/08
Revenue 95 142 259 395 511 554 127 130
Gross profit 64 102 185 282 363 400 91 95
EBIT 22 17 61 133 169 181 39 39
Net income 12 (1) 24 50 88 100 21 23
Diluted EPS 0.17 (0.01) 0.34 0.65 0.95 1.08 0.22 0.25
Cash from ops 7 13 40 30 97 59 24 5
Capex 0 2 8 14 26 33 8 11
Free cash flow 6 11 33 16 71 26 15 (5)
Total assets n/a 64 95 156 224 273 214 273
Long-term debt n/a 81 377 322 247 227 265 227
Common equity n/a (49) (327) (229) (105) (25) (132) (25)
EBIT/capital employed n/a 60% >100% >100% >100% >100% n/m n/m
$50
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • Large opportunity in “extension” markets, with

Bare Escentuals is a prestige beauty brand and a leader in only 2% share of $4.9 billion U.S. color market and
mineral-based cosmetics. It makes branded cosmetics, skin 1% share of $7.8 billion U.S. skin care market.
care and body care and professional skin care. Distribution • To grow distribution to 786 U.S. doors by yearend
consists of infomercials, home shopping TV, specialty 2008, up from 559 in 2007 (potential of 2,300).
beauty retailers, Bare boutiques, spas and salons, and online. • International only 8% of revenue, but Bare is
pursuing growth in Europe, Japan, and Canada.
SELECTED OPERATING DATA • Bare Escentuals was the top-selling cosmetics
YTD brand at specialty retailers Sephora and Ulta in
FYE December 31 2005 2006 2007 9/30/08
% of revenue by distribution channel and segment: 2005, 2006 and 2007. The company has strong
Retail – infomercial 37% 33% 25% 19% brand awareness and consumer loyalty.
Retail – boutiques 14% 14% 17% 20% • No-celebrity marketing lowers cost. Bare spends
Total retail 51% 47% 41% 39%
7-8% of sales on ads and promotion, while L’Oreal
Wholesale – premium 19% 28% 32% 32%
Wholesale – shopping TV 15% 13% 12% 12% and Estee Lauder spend ~30% and ~25% each.
Wholesale – spas and salons 9% 8% 11% 12% • Guidance for 10% revenue and EPS growth in
Wholesale – international 6% 4% 3% 4% 2008, with guidance lowered from 20-25% to 15-
Total wholesale 49% 53% 59% 61%
Revenue growth by distribution channel and segment:
20% in July and to 10% in late October.
Retail – infomercial 77% 33% -2% -18% • Stock price implies 6% trailing FCF yield, 4x
Retail – boutiques 51% 58% 53% 39% trailing P/E and 4x forward P/E.
Total retail growth 69% 40% 14% 4%
Wholesale – premium 253% 121% 49% 11%
Wholesale – shopping TV 39% 31% 22% 22%
Wholesale – spas and salons 27% 38% 71% 26% • Are mineral-based cosmetics a fad? Bare’s
Wholesale – international 71% 11% 7% 29% explosive growth in an emerging category suggests
Total wholesale growth 84% 65% 43% 17% that the company has benefited from the “in” factor.
Total revenue growth 83% 52% 30% 12%
Gross margin by distribution channel: • Aggressive long-term growth targets. Even if
Retail 77% 80% 80% 80% Bare performs well, it may not meet its long-term
Wholesale 65% 64% 65% 67% targets of 20-25% sales and 25% EPS growth.
Total gross margin 71% 72% 71% 72%
EBIT margin by distribution channel and corporate overhead:
• Management turnover in several high-level
Retail 31% 36% 35% 33% positions may heighten growth and execution risks.
Wholesale 57% 60% 59% 61%
Corporate -14% -13% -16% -18% COMPARABLE PUBLIC COMPANY ANALYSIS
Total EBIT margin 30% 35% 33% 32% ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
U.S. 94% 96% 92% 88% AVP 9,605 11,048 1.0x 13.8x 11x 11x
International 6% 4% 8% 12% EL 5,884 6,987 .9x 3.4x 13x 12x
1
Revenue concentration by major customer: RDEN 390 816 .7x 3.4x 9x 8x
Customer A 15% 13% 12% 12% REV 424 1,691 1.2x n/m 10x 8x
Customer B <10% 13% 13% 12%
Customer C <10% 14% 16% 15% BARE 407 629 1.1x n/m 4x 4x
1
Top three customers are QVC, Sephora, Ulta.
MAJOR HOLDERS
INVESTMENT HIGHLIGHTS CEO Leslie Blodget 6% │ Other insiders 7% │ Berkshire P.
• 74% of target consumers are aware of mineral 20% │ Capital World 10% │ Artisan 5% │ Thornburg 5%
makeup, but only 23% of those have tried it. 45%
of consumers say they are likely to try mineral RATINGS
makeup in the next year, according to Bare. VALUE Intrinsic value materially higher than market value?
• bareMinerals core foundation products offer MANAGEMENT Capable and properly incentivized?
healthy, lightweight alternative to conventional FINANCIAL STRENGTH Solid balance sheet?
liquid- or cream-based cosmetics while providing MOAT Able to sustain high returns on invested capital?
light to maximum coverage for all skin types. EARNINGS MOMENTUM Fundamentals improving?
• 12% share of $3.6 billion U.S. facial makeup MACRO Poised to benefit from economic and secular trends?
market. Bare continues to gain share. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE

Revenue growth has slowed sharply this year, crawling to a 3% rate in Q3. Nonetheless, we expect the top and bottom lines
to grow in 2009. We do have some concerns regarding the long-term growth of the minerals-based cosmetics category, and
we are unsure whether the company can maintain EBIT margin around 30%. However, the adverse implications of these
long-term issues should not be overweighted in light of continued growth and a valuation of less than 5x 2009E earnings.
Bare shares may be too cheap to ignore.
Biovail Corporation (USA) (NYSE: BVF) Mississauga, ON, Canada, 905-286-3000

Health Care: Biotechnology & Drugs http://www.biovail.com

52-week range: $6.65 - $17.29 Latest Ago Ests P/E FYE 1/0/00 n/a
Market value: $1.4 billion This quarter n/a n/a n/a P/E FYE 12/30/00 n/a
Enterprise value: $1.1 billion Next quarter n/a n/a n/a P/E FYE 12/30/01 n/a
Shares out: 158.7 million FYE 1/0/00 n/a n/a n/a EV / LTM revenue 1.5x
Ownership Data FYE 12/30/00 n/a n/a n/a EV / LTM EBITDA 10.0x
Insider ownership: 10% FYE 12/30/01 n/a n/a n/a EV / LTM EBIT 17.3x
Insider buys (last six months): 0 LT EPS growth n/a n/a n/a P / tangible book 4.3x
# of institutional owners: 255 n/a n/a n/a LTM pre-tax ROC 35%

per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 583 788 812 879 938 1,068 843 780 189 181
Gross profit 457 623 680 657 737 857 619 572 138 134
EBIT 172 134 18 221 313 239 188 66 61 48
Net income 87 88 (27) 160 246 212 196 48 66 48
Diluted EPS 0.58 0.55 (0.17) 1.04 1.61 1.35 1.22 0.30 0.41 0.31
Cash from ops 284 334 282 277 498 522 341 177 43 (62)
Capex 72 437 279 28 64 45 35 38 11 4
Free cash flow 212 (103) 3 249 434 477 306 139 33 (66)
Total current assets 577 322 413 315 688 1,058 707 416 615 416
Intangible assets 653 1,183 1,150 1,078 1,011 798 731 846 755 846
Total assets 1,332 1,834 1,923 1,711 2,037 2,192 1,782 1,501 1,712 1,501
Short-term debt 13 123 59 34 24 11 0 0 0 0
Long-term debt 34 625 764 446 413 399 0 0 0 0
Total liabilities 205 988 1,041 657 808 890 484 337 332 337
Common equity 1,126 846 882 1,054 1,228 1,302 1,298 1,164 1,379 1,164
EBIT/capital employed >100% 99% 8% 80% >100% >100% >100% 35% n/m n/m
$70
$60
$50
$40
$30
$20
$10
$0
BUSINESS OVERVIEW • In process of closing Puerto Rico manufacturing

Biovail is a specialty pharma company. Its core competency facilities. The closures are expected to be completed
lies in developing and manufacturing products incorporating within two years and are intended to reduce the cost
oral drug-delivery technologies. Therapeutic areas include structure. Biovail also plans to close its R&D
central nervous system disorders, pain management, and facility in Dublin, Ireland. The closure of these the
cardiovascular disease. Branded products include Wellbutrin facilities “will result in a reduction of headcount of
for the treatment of depression, Ultram/ Ralivia for moderate about 300 employees – representing approximately
to moderately severe chronic pain, Zovirax for herpes, and 20% of Biovail’s total headcount – without any
Cardizem/ Tiazac for hypertension and angina. anticipated impact to the … existing revenue base.”
• Recently hired new CFO, VP of medical and
SELECTED OPERATING DATA scientific affairs, VP of neurologic and psychiatric
YTD development, and chief scientific officer.
FYE December 31 2005 2006 2007 9/30/08
Revenue growth 7% 14% -21% -10%
• Stock price implies 10% trailing FCF yield and
% of revenue by therapeutic area: 29x trailing P/E.
1
Cardiovascular 41% 33% 35% n/a
2
Central nervous system
3
44% 47% 32% n/a INVESTMENT RISKS & CONCERNS
Antiviral 10% 11% 17% n/a
Pain
4
0% 5% 10% n/a • Generic competition to 300mg Wellbutrin XL
Total product sales 95% 96% 95% 94% since December 2006. With financials negatively
R&D revenue 3% 2% 3% 3% impacted, Biovail reduced its cost structure by
Royalty and other 2% 2% 2% 2% restructuring U.S. operations, among other actions.
% of product revenue by drug:
Wellbutrin XL 40% 44% 27% 19% • Sales to fall for “several quarters,” due to generic
Ultram ER 0% 5% 11% 12% competition to 150mg Wellbutrin XL (since June 1).
Zovirax 11% 11% 18% 20% • On-going business challenges include intellectual
Cardizem 7% 6% 9% 6%
property protection, increasing competition for
Legacy 15% 14% 17% 21%
Generic 15% 14% 11% 11% Biovail’s marketed and pipeline products, and
Biovail Canada, other 12% 7% 8% 10% greater scrutiny of clinical trials by drug regulators.
% of revenue by customer: • “Additional charges to earnings” likely over next
GSK 38% 42% 25% n/a
McKesson 14% 12% 20% n/a
several quarters due to strategic repositioning.
Teva 15% 12% 11% n/a • “Does not anticipate meaningful revenue” from
OMI 0% 5% 10% n/a development pipeline until 2010-11.
Cardinal Health 6% 6% 10% n/a • Covenants restrict buyback to $50 million a year.
Other customers 27% 23% 24% n/a
Canada 12% 8% 9% n/a COMPARABLE PUBLIC COMPANY ANALYSIS
U.S. 87% 90% 90% n/a ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
Other countries 1% 1% 1% n/a LLY 36,451 34,944 1.7x 3.2x 8x 7x
1
Cardiovascular includes Cardizem, Tiazac, Vasotec, Vaseretic, Isordil,
Glumetza; bioequivalent versions of Cardizem CD, Procardia XL, Adalat CC.
TEVA 35,015 36,420 3.4x 7.8x 15x 14x
2
Central nervous system products consist of Wellbutrin, Zyban, and Ativan. WPI 2,470 2,946 1.2x 3.9x 12x 11x
3
Antiviral products consist of Zovirax.
4
Pain management products consist of Ultram and Ralivia. BVF 1,360 1,134 1.5x 4.3x n/a n/a
INVESTMENT HIGHLIGHTS MAJOR HOLDERS

• New strategic focus targets specialty central Insiders <1% │ Eugene Melnick 12%
nervous system (CNS) disorders, includes M&A
pursuit. The shift, announced in May, was needed RATINGS
given changes in the global pharma market, VALUE Intrinsic value materially higher than market value?
including “heightened cost-containment pressures MANAGEMENT Capable and properly incentivized?
and intellectual-property regulations, and shorter FINANCIAL STRENGTH Solid balance sheet?
product lifecycles.” Biovail is reviewing in- MOAT Able to sustain high returns on invested capital?
licensing and acquisition deals, including “a number EARNINGS MOMENTUM Fundamentals improving?
of private and public pharmaceutical companies MACRO Poised to benefit from economic and secular trends?
active in the specialty CNS market.” Biovail plans EXPLOSIVENESS 5%+ probability of 5x upside in one year?
to spend $600 million on CNS R&D through 2012.
THE BOTTOM LINE

Biovail is a company in transition. With revenue continuing to decline due to generic competition to the top-selling
Wellbutrin depression drug, Biovail has embarked on a new strategy to focus on specialty central nervous system disorders.
Executing on this strategy poses a number of risks and will likely involve acquisitions. As a result, it is too difficult to
anticipate the future course of Biovail’s financial performance, and we are inclined to pass.
Boeing Company (NYSE: BA) Chicago, IL, 312-544-2000

Capital Goods: Aerospace and Defense, Member of S&P 500 http://www.boeing.com


per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 58,198 53,831 50,256 51,400 53,621 61,530 66,387 65,722 16,517 15,293
Gross profit 9,110 8,027 6,106 7,432 8,637 11,093 12,985 12,314 3,310 2,752
EBIT 3,586 3,426 398 2,007 2,812 3,014 5,830 5,426 1,499 1,147
Net income 2,827 492 718 1,872 2,572 2,215 4,074 3,791 1,114 695
Diluted EPS 3.41 2.84 0.85 2.24 3.19 2.84 5.26 5.07 1.43 0.95
Cash from ops 3,735 2,336 2,776 3,504 7,000 7,499 9,584 3,133 3,329 (442)
Capex 6,089 1,001 836 1,246 1,547 1,681 1,731 1,678 417 422
Free cash flow (2,354) 1,335 1,940 2,258 5,453 5,818 7,853 1,455 2,912 (864)
Cash & investments 633 2,333 4,633 3,523 5,966 6,386 9,308 4,777 9,464 4,777
Intangible assets 6,447 3,888 2,948 2,903 2,799 4,745 5,174 5,738 4,846 5,738
Total assets 48,978 52,342 52,986 56,224 59,996 51,794 58,986 56,519 54,787 56,519
Short-term debt 1,399 1,814 1,144 1,321 1,189 1,381 762 390 1,025 390
Long-term debt 10,866 12,589 13,299 10,879 9,538 8,157 7,455 7,217 7,555 7,217
Common equity 10,825 7,696 8,139 11,286 11,059 4,739 9,004 8,714 6,406 8,714
EBIT/capital employed 65% 63% 7% 62% n/m n/m n/m n/m n/m n/m
$120
$100
$80
$60
$40
$20
$0

Boeing is the leading aerospace company and a manufacturer • Machinists’ strike and supplier issues on galleys
of commercial jets and military aircraft. Boeing also makes for wide-body planes reduced commercial airplane
rotorcraft, electronic and defense systems, missiles, satellites, deliveries by 35 units and EPS by $0.60 in Q3,
launch vehicles and advanced info and communication causing Q3 EPS to decline to $0.94 from $1.43 y-y.
systems. Boeing also operates NASA’s Space Shuttle and • Suspended guidance due to strike. Management
International Space Station. The company is one of the had previously guided for revenue of $67-68 billion
largest U.S. exporters in terms of sales and employs more in 2008 and $72-73 billion in 2009; and EPS of
than 160,000 people. Boeing was founded in 1916. $5.70-5.85 in 2008 and $6.80-4.70 in 2009. Cash
Boeing has acquired or merged with a number of aerospace from operations is expected to be more than $2.5
pioneers, including McDonnell Douglas, Hughes Space & billion in 2008 and more than $6 billion in 2009.
Communications, and Rockwell’s space/defense business. • Engineers and technical workers may strike.
Boeing is engaged in contentious contract
SELECTED OPERATING DATA negotiations with unions representing both groups.
YTD • Expects defense spending growth to moderate,
FYE December 31 2005 2006 2007 9/30/08 remains focused on keeping individual programs
% of revenue by segment:
Commercial Airplanes 40% 46% 50% 49% operationally healthy and relevant.
Integrated Defense Systems 58% 53% 48% 50% • “May need to finance some deliveries in 2009,”
Boeing Capital & Other 2% 1% 1% 1% reversing policy of not providing manufacturer
EBIT margin by segment: financing from 2006-08. The company has made
Commercial Airplanes 7% 10% 11% 9%
Integrated Defense Systems 13% 9% 11% 10% backstop commitments for 3% of the commercial
Overall EBIT margin
1
5% 6% 9% 9% backlog associated with deliveries through 2019.
Contractual backlog ($bn): • High oil prices may reduce demand for
Commercial Airplanes $124 $174 $255 $276 commercial airplanes. A mitigating factor is the
Integrated Defense Systems $37 $42 $42 $73
Total backlog $161 $217 $297 $349 fact that 70% of airplane sales (by value) go to
∆ backlog 53% 35% 37% 18% customers outside of the U.S., and global demand
% of revenue by geography: for commercial aviation remains strong.
U.S. 71% 63% 59% n/a • May be exposed to deferral or cancellation of
Canada & Latin America 3% 3% 5% n/a
Asia & Oceania 18% 20% 23% n/a scheduled new deliveries.
EMEA 9% 14% 13% n/a
1
Includes Boeing Capital & Other and unallocated corporate expenses. Does COMPARABLE PUBLIC COMPANY ANALYSIS1
not include $571 million expense related to DoJ settlement in 2006. ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
ERJ 2,591 2,626 .4x 1.2x 5x 4x
INVESTMENT HIGHLIGHTS LMT 28,948 30,219 .7x n/m 9x 9x
• Largest aerospace/defense company, competing NOC 13,189 16,117 .5x n/m 8x 7x
in near-duopolistic commercial aircraft market RTN 19,838 19,350 .8x 19.1x 12x 10x
against Europe’s Airbus. Key defense competitors BA 30,076 32,906 .5x 10.1x 9x 6x
include Lockheed Martin, Northrop and Raytheon. 1
Boeing’s primary direct competitor is Europe’s privately-held Airbus.
• Backlog amounts to 5+ years of revenue. Backlog
stood at a record $349 billion on September 30,
MAJOR HOLDERS
reflecting strong near-term demand and a strike-
related delivery pushout. Commercial deliveries of Insiders <1% │ BofA 8% │ State Street 4% │ Cap Re 4%
325 aircraft decreased 1% YTD versus the same
period a year ago due to the machinists’ strike.
RATINGS
VALUE Intrinsic value materially higher than market value?
• First flight of 787 in 2009, with deliveries likely in
MANAGEMENT Capable and properly incentivized?
2010 (pushed back from 4Q08 and 3Q09), with net
FINANCIAL STRENGTH Solid balance sheet?
orders for 895 airplanes from 58 customers.
MOAT Able to sustain high returns on invested capital?
• Repurchased 35 million shares for $2.6 billion EARNINGS MOMENTUM Fundamentals improving?
YTD; pays annual dividends of $1.60 per share. MACRO Poised to benefit from economic and secular trends?
THE BOTTOM LINE

Boeing is a unique company in terms of scale of operations and delivery capabilities, with a sustainable competitive moat.
The company will continue to win a large share of business in aerospace and defense, so the key question might be how
demand in those markets will evolve over time. While Boeing’s backlog is at a record high and covers more than five years
of trailing revenue, aviation will undoubtedly be affected by weaker consumer spending and high oil prices. Despite these
risks, Boeing shares might be too cheap to ignore.
Barrett Business Services, Inc (Nasdaq: BBSI) Vancouver, WA, 360-828-0700

Services: Business Services http://www.barrettbusiness.com


per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 139 109 123 195 231 259 289 298 83 78
Gross profit 18 15 21 35 46 56 59 53 19 15
EBIT (4) (2) 3 12 19 23 23 10 9 1
Net income (2) (1) 2 7 13 16 17 8 6 1
Diluted EPS (0.26) (0.16) 0.24 0.79 1.21 1.40 1.44 0.70 0.54 0.06
Cash from ops 6 (1) 7 13 25 15 17 18 3 7
Capex 0 0 0 2 10 2 4 1 3 0
Free cash flow 5 (1) 7 11 15 14 13 17 (0) 7
Total assets 53 47 59 80 144 162 173 180 177 180
Short-term debt 4 4 0 0 0 0 0 0 0 0
Long-term debt 1 1 0 1 1 0 0 0 0 0
Common equity 31 29 31 39 86 104 114 111 114 111
EBIT/capital employed -34% -19% 40% >100% >100% >100% >100% 80% n/m n/m
$35
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • HR function becoming more critical, complex.

BBSI provides human resource (HR) management solutions Employment regulations have grown 60% over the
to small and medium-sized businesses primarily in the past couple of decades, and small businesses spend
Western U.S. BBSI derives 85% of revenue from up to 25% of time on HR paperwork. Homeland
professional employer organization (PEO) contracts and 15% security concerns have also increased HR burdens.
of revenue from temporary/ supplemental staffing, with 50% • Organic and acquired growth. BBSI intends to
gross margins in each segment. The HR industry ($170 expand the geographic footprint by following the
billion size) breaks down into 35% PEO, 52% temporary/ expansion pattern of key clients. Recent staffing
supplemental, and 13% search and placement. BBSI target acquisitons also contribute to growth.
clients in the PEO segment are businesses with 20 to 200 • Hands-on client approach. BBSI serves each
employees; in the staffing segment, the company targets client from a nearby branch office. Offices provide
large employers with seasonal fluctuations. BBSI operates both HR and risk management professionals.
out of 45 branch offices in ten states. • Experienced management. Each top executive has
at least a dozen years industry experience, with
BBSI PEO SERVICES (85% of revenue)—VALUE PROPOSITION CEO Bill Sherertz in the industry for 37 years.
• Strong balance sheet, with $51 million of cash and
1
HR responsibilities without BBSI:
Payroll Human Employee Safety Workers’ investments and no debt as of September 30.
Admin Resources Benefits Services Comp
• Shares trade at 16% trailing FCF yield, 14x
Report Hours Advertising 401(k) OSHA Insurance
Compute W/H Recruiting Cafeteria Plan Federal & State
Compliance
Fraudulent Claims trailing P/E and 9x forward P/E.
Deductions Screening Credit Unions Large Premium
Environmental Regs Deposits
Garnishments References Health Insurance
Safety Training Costly Premiums
Issue Checks
Direct Payroll
Hiring
Job Descriptions
COBRA
Claims Safety Manuals Claims
Management
Deposit Management Safety Walk-
Federal, multi-
state P/R tax
Reviews
I-9
Rate
Negotiation
Throughs
Job-site Visits
Loss Runs
• Operates in cyclical business, the recurring
compliance
Account
Reconciliation
W-4
ADA
Regulatory
Compliance
Supervisor Training
Safety Meetings
revenue nature of PEO contracts notwithstanding.
Reports
FMLA
DOL
Supplemental
Life Hazard Training
Accident
• BBSI’s workers’ comp loss reserves may be
Vacation Pay Disability
Sick Pay
INS
Employee
Dental
Investigation
inadequate to cover claims. The company may
Check Delivery Vision
Cost Accounting
Manuals
Written EAP suffer from adverse developments related to medical
W-2s Warnings
New Hire
Reporting
Workplace
Conduct
ERISA
HIPAA and administrative costs, inflation, and legislation.
Terminations
Unemployment
• M&A integration. BBSI has acquired three firms
Claims
Supplemental with combined sales of $60 million since mid-2007
Staffing
1
(5 offices in Utah, 2 in Colorado, 2 in Arizona).
HR responsibilities with BBSI:
Payroll
Admin
Human
Resources
Employee
Benefits
Safety
Services
Workers’
Comp
Report Hours New Employee Safety Meetings Report
Reporting
OSHA
Incidents to
BBSI
ASF 410 221 .1x 2.0x 9x 9x
Reviews
Written KELYA 432 433 .1x 0.7x 15x 24x
Warnings
Disciplinary MAN 2,166 2,506 .1x 1.9x 6x 9x
Notices
BBSI 108 57 .2x 1.7x 10x 9x
• Outsourcing HR function allows clients to reduce MAJOR HOLDERS
the liability of being an employer, focus on the core CEO Sherertz 26% │ Other insiders 2% │ Royce 13% │
business, develop a “just-in-time” workforce, and Manulife 8%
improve efficiencies. BBSI addresses workplace
safety, lowers workers’ comp premiums, recruits RATINGS
and screens employees, manages turnover, handles VALUE Intrinsic value materially higher than market value?
employee claims, implements benefit programs, and MANAGEMENT Capable and properly incentivized?
complies with regulatory filing requirements. FINANCIAL STRENGTH Solid balance sheet?
• Recurring revenue stream. PEO contracts are MOAT Able to sustain high returns on invested capital?
annual with automatic renewals (30-day EARNINGS MOMENTUM Fundamentals improving?
cancellation). BBSI has a 90% client retention rate. MACRO Poised to benefit from economic and secular trends?
EXPLOSIVENESS 5%+ probability of 5x upside in one year?
1
Source: BBSI.
THE BOTTOM LINE

BBSI is one of several HR services companies currently on the magic formula list, a sign of the market’s pessimism
regarding the economic outlook. We believe investors misperceive BBSI, however, as only 15% of revenue comes from
staffing, while 85% comes from HR outsourcing (professional employer organization contracts), a business that is
characterized by recurring revenue and, in the case of BBSI, 90% client retention. The PEO business deserves a meaningfully
higher multiple than a traditional staffing business, which is why we view BBSI as quite attractive at current prices.
Broadridge Financial Solutions (NYSE: BR) LAKE SUCCESS, NY, 516-472-5400

Services: Business Services, Member of S&P MidCap 400 http://www.broadridge.com

Enterprise value: $1.6 billion Next quarter 0.26 0.28 3 P/E FYE 6/30/11 n/a
Insider ownership: 0% FYE 6/30/11 n/a n/a 0 EV / LTM EBIT 4.7x

per share data) 6/30/04 6/30/05 6/30/06 6/30/07 6/30/08 9/30/08 9/30/07 9/30/08
Revenue 1,526 1,717 1,933 2,138 2,208 2,229 451 472
Gross profit 393 444 500 550 601 594 117 109
EBIT 250 274 303 321 326 349 59 58
Net income 146 165 167 197 192 192 36 36
Diluted EPS 1.06 1.20 1.30 1.42 1.36 1.35 0.26 0.25
Cash from ops n/a 8 426 161 482 116 120 (246)
Capex n/a 39 41 38 47 43 6 3
Free cash flow n/a (31) 385 123 436 73 114 (249)
Cash & investments n/a n/a 90 155 232 493 113 493
Total current assets n/a n/a 1,406 1,960 2,079 2,942 1,845 2,942
Intangible assets n/a n/a 537 512 514 520 517 520
Total assets n/a n/a 2,135 2,678 2,834 3,691 2,575 3,691
Short-term debt n/a n/a 116 109 0 238 109 238
Total current liabilities n/a n/a 990 1,429 1,525 2,479 1,375 2,479
Long-term debt n/a n/a 0 618 448 324 533 324
Total liabilities n/a n/a 1,092 2,147 2,088 2,921 2,010 2,921
Preferred stock n/a n/a 0 0 0 0 0 0
Common equity n/a n/a 1,043 531 746 769 565 769
EBIT/capital employed n/a n/a 58% 59% 67% 85% n/m n/m
$30
$25
$20
$15
$10
$5
$0
Jan 00 Jan 00 Jan 00 Jan 00 Jan 00 Jan 00 Jan 00 Jan 00 Oct 07 Oct 08
BUSINESS OVERVIEW • Highly recurring revenue, as illustrated by fact

Broadridge provides technology outsourcing to the financial that FY08 revenue was $2.2 billion while closed
services industry and operates in three segments: Investor sales were “only” $149 million (up 19% y-y).
Communication Solutions processes and distributes proxy • CEO Richard Daly (55) has led Broadridge for
materials to equity and mutual fund investors and facilitates 12+ years, including a decade during which the
related vote processing. Securities Processing Solutions company was ADP’s Brokerage Services Group.
offers real-time transaction processing that automates the • Guiding for 0-3% revenue growth and non-
securities transaction lifecycle, including order capture and GAAP EPS of $1.45-1.55 in FY09 vs. $1.42 in
execution, trade confirmation, settlement, and accounting. FY08, representing earnings growth of 2-9%. The
Clearing and Outsourcing Solutions provides securities guidance assumes EBIT margin of 15.9-16.8%,
clearing, operations outsourcing, and margin lending. versus 16.2% in FY08, and 143 million shares out.
Seasonality is strongest in FQ4 (June), when the company • Boosted quarterly dividend from $0.06 to $0.07
processes and distributes the most proxy materials. FQ4 per share in August, and authorized repurchase of
typically accounts for roughly one-half of annual EPS. two million shares, albeit in order to “offset any
With operations dating back to 1962, the company is the share dilution” related to stock compensation.
former brokerage services division of ADP. Broadridge was • Anticipates to become “more acquisitive” and to
spun off in an IPO in March 2007. look for acquisitions with “an international focus.”
• Stock price implies 5% trailing FCF yield, 8x
SELECTED OPERATING DATA trailing P/E and 8x forward P/E.
FYE June 30
1
2006 2007 2008 1Q09 INVESTMENT RISKS & CONCERNS
Investor communication 71% 72% 72% 67%
• Weakness in customer base. Broadridge derives
Securities processing 25% 24% 24% 28% the vast majority of revenue from financial services
Clearing & outsourcing 4% 4% 4% 5% clients, including brokerage firms and banks.
Revenue growth by segment: • FY09E EPS weighted to second half. “As a result
Securities processing 6% 4% 1% 7%
of the timing of expense buildups” in FY08, the
Clearing & outsourcing 31% 16% 2% -6% company expects EPS to decline in 1H09 and
Total revenue growth
2
13% 11% 3% 5% increase in 2H09, “with a strong exit rate.”
Pre-tax margin by segment: • Financial services consolidation could result in
Securities processing 28% 29% 27% 28%
clients moving more operations in-house. The
Clearing & outsourcing -31% -13% -5% -13% company’s top five clients comprised 22% of
Other & currency -1% -2% -3% 0% revenue in FY08 (largest client was 5-6% of sales).
Total pre-tax margin 16% 15% 15% 12%
Total EBIT margin 16% 16% 16% 11%
U.S. 89% 89% 88% n/a ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
Canada, U.K., other 11% 11% 12% n/a DST 1,748 2,927 1.3x 6.6x 9x 8x
1
Excludes "other" and foreign exchange. FIS 3,011 5,392 1.4x n/m 10x 9x
2
FY08 revenue grew faster than segment revenue due to currency and other.
BR 1,570 1,639 .7x 6.3x 8x 7x
• Large-scale operations. In FY08, Broadridge MAJOR HOLDERS
processed 74% of the outstanding shares in the U.S. CEO Daly <1% │ Other insiders 2% │ Barclays 6% │ Blue
in the performance of its proxy services; distributed Ridge 5% │ Ziff 5%
over one billion investor communications in paper
or electronic form; and processed $3 trillion daily in RATINGS
fixed income trades for large banks. VALUE Intrinsic value materially higher than market value?
• Investor communication business (72% of FY08 MANAGEMENT Capable and properly incentivized?
revenue) leads industry in proxy solutions such as FINANCIAL STRENGTH Solid balance sheet?
“notice and access.” FY09 product opportunities MOAT Able to sustain high returns on invested capital?
include “investor mailbox” and “investor network.” EARNINGS MOMENTUM Fundamentals improving?
The company expects this segment to grow 2-4% in MACRO Poised to benefit from economic and secular trends?
FY09, with fee-only revenue growth of 5-9%. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE

Broadridge shares many operating characteristics with its former parent, ADP, including highly recurring, predictable
revenue streams and sustainably high returns on capital. Unfortunately, the company lacks meaningful opportunities for high-
ROIC reinvestment in its current businesses, as it is already a market share leader. While acquisitions are likely to generate
EPS accretion, they will also involve risks. As a result, Broadridge is interesting but no “slam dunk.”
BSQUARE Corporation (Nasdaq: BSQR) Bellevue, WA, 425-519-5900

Technology: Software & Programming http://www.bsquare.com

Market value: $30 million This quarter n/a n/a n/a P/E FYE 12/30/00 n/a
Enterprise value: $20 million Next quarter n/a n/a n/a P/E FYE 12/30/01 n/a
# of institutional owners: 42 n/a n/a n/a LTM pre-tax ROC >100%

per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 62 38 38 39 43 50 59 64 14 16
Gross profit 29 7 6 9 10 12 16 18 4 4
EBIT (17) (49) (6) (1) (2) (1) 2 4 0 1
Net income (10) (74) (14) (7) (1) (1) 3 4 0 1
Diluted EPS (1.20) (5.73) (0.49) (0.08) (0.14) (0.05) 0.27 0.37 0.03 0.11
Cash from ops 3 (36) (17) (2) (2) 0 4 4 1 0
Capex 5 2 0 1 1 0 1 1 0 0
Free cash flow (2) (38) (17) (3) (2) 0 3 3 1 0
Total assets 116 54 30 19 20 20 25 28 24 28
Short-term debt 0 0 0 0 0 0 0 0 0 0
Long-term debt 0 0 0 0 0 0 0 0 0 0
Common equity 99 33 19 13 12 12 17 20 15 20
EBIT/capital employed -143% -729% -224% -56% -291% -90% >100% >100% n/m n/m
$250
$200
$150
$100
$50
$0
BUSINESS OVERVIEW • Brian Crowley (47) became CEO in 2003 after

BSQUARE provides engineering services and production- serving as VP of product development for a year.
ready software to the smart device market. Its software He was previously VP of engineering and VP of
enables manufacturers of personal navigation devices, point- marketing at DataChannel, and served in various
of-sale terminals, handheld data terminals and smart phones roles at other technology companies.
to get to market more quickly and cost effectively. • Posted solid Q3 and guided for 5-10% sequential
revenue growth in Q4. Service revenue rose 60%
SELECTED OPERATING DATA y-y in Q3, driven in part by 70-person incremental
YTD staffing on a project with Ford. Excluding Ford, the
FYE December 31 2005 2006 2007 9/30/08
% of revenue by type:
company did see “some softness in demand.”
Third-party software
1
67% 61% 58% 55% • NOL of $65+ million, with entire $30 million
Proprietary software 6% 5% 7% 5% deferred tax asset off the balance sheet.
Service 27% 34% 35% 40% • Stock price implies 9% trailing FCF yield and 8x
Revenue growth by type:
Third-party software
1
11% 6% 13% 6%
trailing P/E (no EPS estimates available).
Proprietary software -2% -1% 62% -18%
Service 11% 44% 24% 25% INVESTMENT RISKS & CONCERNS
• Dependent on Microsoft’s success in operating
North America 95% 95% 94% 91% systems for smart devices. The vast majority of
Asia and other 5% 5% 6% 9% BSQUARE’s business is tied to adoption of the
Gross margin by type: Windows operating system by device makers. If
Software 21% 21% 25% 22% Windows’ market share declines, BSQUARE would
Service 29% 31% 29% 33%
Total gross margin 23% 24% 27% 26% be negatively affected. The company must also
1
The resale of Microsoft Embedded operating systems and related products maintain its OEM distribution deal with Microsoft.
accounts for substantially all third-party software revenue. • Windows-based embedded software market is
competitive. Participants include engineering
INVESTMENT HIGHLIGHTS service firms such as Intrinsyc, Vanteon, Teleca,
• Focuses on smart devices that run on Microsoft and Wipro; ODMs, particularly in Taiwan; contract
Windows operating systems, i.e., Windows CE, manufacturers; and Microsoft Embedded operating
Windows XP Embedded and Windows Mobile. system distributors such as Arrow and Avnet.
• Acquisition of rights to Adobe Flash technology
from NEC enables the company to support COMPARABLE PUBLIC COMPANY ANALYSIS
customers who are using Flash in non-Windows ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
operating systems such as Linux or Symbian. ARW 1,737 2,752 .2x 1.0x 5x 7x
• Software and engineering services address device AVT 2,263 3,095 .2x 1.1x 6x 6x
life cycle, including design, development, WIT 10,345 10,211 2.2x 6.7x 13x 11x
customization, quality assurance, and deployment. BSQR 30 20 .3x 1.5x n/a n/a
Customers include OEMs, ODMs, silicon vendors,
peripheral vendors, and enterprises that develop, MAJOR HOLDERS
market and distribute smart devices. CEO Crowley 3% │ Other insiders 8% │ S Squared 10% │
• Itends to grow proprietary software revenue Bjurman Barry 10% │ H Partners 9% │ RenTech 6%
through product development and royalty-bearing
service contracts. Proprietary software enjoys gross RATINGS
margins of close to 90%, while third-party software VALUE Intrinsic value materially higher than market value?
is associated with gross margins in the mid teens. MANAGEMENT Capable and properly incentivized?
• Positive business trend due to new service deals, FINANCIAL STRENGTH Solid balance sheet?
including a large non-Microsoft deal. The company MOAT Able to sustain high returns on invested capital?
has also scored several SDIO (secure digital input EARNINGS MOMENTUM Fundamentals improving?
output) design wins, with royalties tied to customer MACRO Poised to benefit from economic and secular trends?
shipments. In addition, customer interest in OMAP EXPLOSIVENESS 5%+ probability of 5x upside in one year?
technology should result in incremental revenue.
Services backlog and pipeline remain strong.
THE BOTTOM LINE

BSQUARE has historically sold Windows software and related services to smart device manufacturers, carving out a niche
with attractive growth. More recently, the company has emphasized development of proprietary software, the sale of which
carries ~90% gross margins versus mid teens margins for the resale of Microsoft software. Proprietary software revenue is a
small part of the mix, but is growing and driving overall margin expansion. BSQUARE’s market value does not give the
company credit for the value of the proprietary software income stream, in our view.
Cadence Design Systems, Inc. (Nasdaq: CDNS) San Jose, CA, 408-943-1234
Technology: Software & Programming, Member of S&P MidCap 400 http://www.cadence.com

Market value: $1.0 billion This quarter -$0.11 -$0.11 9 P/E FYE 12/31/09 65.5x
Enterprise value: $864 million Next quarter -0.06 -0.04 7 P/E FYE 12/31/10 11.2x

per share data) 12/29/01 12/28/02 1/3/04 1/1/05 12/31/05 12/30/06 12/29/07 6/28/08 6/30/07 6/28/08
Revenue 1,430 1,288 1,120 1,198 1,329 1,484 1,615 1,476 391 330
Gross profit 1,076 1,010 903 971 1,098 1,257 1,401 1,256 339 270
EBIT 240 161 (26) 100 108 181 315 179 73 17
Net income 141 60 (18) 75 49 143 296 179 60 5
Diluted EPS 0.55 0.23 (0.07) 0.25 0.16 0.46 1.00 0.61 0.20 0.02
Cash from ops 411 348 171 373 426 421 402 340 101 77
Capex 154 125 112 62 72 68 82 107 18 36
Free cash flow 257 223 59 311 355 354 321 233 84 40
Cash & investments 275 396 418 593 895 958 1,078 889 1,149 889
Intangible assets 426 883 1,190 1,191 1,387 1,391 1,443 1,426 1,361 1,426
Total assets 1,730 2,427 2,818 2,990 3,401 3,443 3,871 3,626 3,764 3,626
Short-term debt 1 2 0 0 32 28 230 230 0 230
Long-term debt 2 53 420 420 548 730 500 500 730 500
Total liabilities 609 783 1,246 1,290 1,557 1,744 1,791 1,698 1,712 1,698
Common equity 1,121 1,644 1,572 1,700 1,845 1,699 2,080 1,929 2,052 1,929
EBIT/capital employed 78% 54% -8% 30% 45% >100% >100% 67% n/m n/m
$40
$35
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • 12% workforce and opex cuts to save $150+

Cadence provides electronic design automation (EDA) million (2H08 expected charge of $65-70 million).
software and services to assist in the design, verification, and • Net stock repurchases of $455 million from 2005-
preparation of semiconductors for manufacturing. Solutions 07, with $900 million authorized as of mid-August.
include digital design (convert high-level IC specification • CEO Mike Fister (53) joined in 2004 from Intel,
into physical blueprint); custom design for ICs designed at where he had served from 1987, most recently as
the transistor level; system interconnect; functional GM of enterprise platforms. William Porter (53)
verification (ensures correctness of high-level logical design joined Cadence in 1994 and became CFO in 1999.
specification); and design for manufacturing (ensures that • Stock price implies 23% trailing FCF yield, 6x
ICs will be manufacturable with high yields). trailing P/E and 66x forward P/E.
SELECTED OPERATING DATA INVESTMENT RISKS & CONCERNS

YTD
FYE December 31 2005 2006 2007 9/30/08
1 • Q3 results postponed due to premature revenue
% of revenue by type: recognition in 1H08 (will require restatement).
Products 64% 66% 68% n/a • Guiding for non-GAAP EPS of $0.01-0.05 and
Maintenance 26% 25% 24% n/a GAAP loss of $0.50-0.54 per share on revenue of
Services 9% 9% 8% n/a
$1.1 billion (down 30% y-y) in 2008. Driving the
Products 17% 15% 12% n/a decline in operating performance are a challenging
Maintenance 157% 4% 5% n/a business environment and a shift to ratable licenses.
Services -62% 7% -7% n/a • Transition to 90% ratable license mix will hurt
∆ revenue 11% 12% 9% n/a
near-term revenue, due to revenue recognition
∆ backlog (period end) 6% 6% 5% n/a
% of revenue by product group: over time rather than up front (as is the case with
Functional verification 21% 24% 24% n/a perpetual licenses). Ratable licenses will result in
Digital IC design 28% 24% 27% n/a more predictable revenue and earnings over time.
Custom IC design 25% 27% 27% n/a
System interconnect design 8% 9% 8% n/a
• Offered $1.6 billion for Mentor in June; quit
Design for manufacturing 9% 7% 6% n/a pursuit in August. Cadence cited the ability to
Services and other 9% 9% 8% n/a offer a broader portfolio as rationale for the $16 per
% of revenue by geography: share cash offer. Cadence withdrew the bid after
Americas 48% 54% 48% n/a being rebuffed and upped its buyback plan by $500
EMEA 18% 19% 18% n/a
Japan and Asia 34% 27% 34% n/a million. (Mentor recently traded at $5 per share.)
EBIT margin 9% 15% 20% n/a
D&A as % of revenue 14% 10% 8% n/a COMPARABLE PUBLIC COMPANY ANALYSIS
Capex as % of revenue 6% 5% 5% n/a ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
1
The 10-Q for Q3 was not filed on time due to an accounting restatement.
LAVA 94 126 .8x n/m n/m 6x
MENT 494 599 .7x 2.7x 11x 6x
SPSS 441 284 .9x 3.4x 13x 12x
• A leading provider of EDA solutions in major
CDNS 1,023 864 .6x 2.0x 393x 66x
horizontals, including systems, semiconductors,
and silicon (ASIC vendors, foundries, FPGA firms).
• Cadence solutions help semiconductor makers MAJOR HOLDERS
address two key trends: increasing silicon capacity CEO Fister 2% │ Other insiders 2% │ Franklin 10% │
(Moore’s Law) and the convergence of multiple Wellington 9% │ Barclays 7% │ Lord Abbett 7%
applications in a wide range of digital devices.
• Target verticals are computers, communications
RATINGS
and consumer electronics. These industries VALUE Intrinsic value materially higher than market value?
globally account for 75% of electronics equipment MANAGEMENT Capable and properly incentivized?
revenue and 90% of semiconductor revenue. FINANCIAL STRENGTH Solid balance sheet?
• Projecting cash from operations of $175 million
EARNINGS MOMENTUM Fundamentals improving?
in 2008 and $250 million in 2009. Cash flow
MACRO Poised to benefit from economic and secular trends?
metrics are particularly relevant in the short term, as
Cadence is moving to a higher ratable license mix,
which is affecting GAAP-basis comparisons.
THE BOTTOM LINE

Cadence is one of a handful of companies with strong positions in EDA software, a niche segment of the semiconductor
industry. Cadence is impacted by the cyclical nature of spending by semiconductor makers, occasionally offering investors an
opportunity to buy into this high-ROIC business at a low multiple of cycle-average earnings. We like the company’s share
repurchase program and believe it adds more value than a purchase of Mentor would have done. The shares appear attractive.
CF Industries Holdings, Inc. (NYSE: CF) Deerfield, IL, 847-405-2400

Basic Materials: Chemical Manufacturing, Member of S&P 500 http://www.cfindustries.com

Insider buys (last six months): 5 LT EPS growth 3.5% n/a 1 P / tangible book 1.8x

per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 1,014 1,370 1,651 1,968 2,033 2,757 3,702 583 1,021
Gross profit 28 34 216 209 147 670 1,098 151 121
EBIT (19) (6) 148 110 71 602 1,021 138 103
Net income (28) (18) 68 (39) 33 373 630 87 47
Diluted EPS (0.51) (0.33) 1.23 (0.66) 0.60 6.57 10.98 1.52 0.82
Cash from ops 77 137 344 137 204 690 800 201 97
Capex 26 29 34 69 59 105 139 38 39
Free cash flow 51 108 311 68 144 585 662 163 59
Cash & investments n/a 169 419 217 326 861 1,152 730 1,152
Total current assets n/a 526 799 553 633 1,279 2,042 1,139 2,042
Intangible assets n/a 1 1 1 1 1 1 1 1
Total assets n/a 1,405 1,557 1,228 1,290 2,013 3,019 1,825 3,019
Short-term debt n/a 39 20 0 0 0 0 0 0
Total current liabilities n/a 350 435 341 353 629 960 564 960
Long-term debt n/a 255 239 4 4 5 5 5 5
Total liabilities n/a 671 769 472 523 826 1,322 797 1,322
Preferred stock n/a 734 734 0 0 0 0 0 0
Common equity n/a (1) 53 756 767 1,187 1,696 1,028 1,696
EBIT/capital employed n/a -1% 22% 18% 12% >100% >100% n/m n/m
$200
$180
$160
$140
$120
$100
$80
$60
$40
$20
$0
Jan 00 Jan 00 Jan 00 Jan 00 Jan 00 Jan 00 Oct 05 Oct 06 Oct 07 Oct 08
BUSINESS OVERVIEW • Repurchased $500 million of stock in Q4 (8.5

CF provides nitrogen/phosphate fertilizers and operates the million at $59 per share), reducing shares by 15%.
largest nitrogen fertilizer complex in North America. It also • Net cash of $1.3 billion as of September 30. The
conducts phosphate mining and manufacturing in Central company has generated LTM FCF of $503 million.
Florida. It distributes fertilizer products through terminals • Stock price implies 21% trailing FCF yield, 5x
and warehouses in the Midwest. 100% of nitrogen and 75%- trailing P/E and 4x forward P/E.
80% of phosphate fertilizer output is sold in the U.S.
SELECTED OPERATING DATA • At cyclical peak? CF is a commodity producer
YTD
FYE December 31 2005 2006 2007 9/30/08
dependent on the gap between fertilizer prices and
% of revenue by segment: input costs. Selling prices have benefited from
Nitrogen 77% 75% 74% 66% transitory factors, including a Chinese export tax,
Phosphate 23% 25% 26% 34% Ethanol demand, and a lack of capacity. In Q3,
Revenue growth by segment: nitrogen volumes fell 5% and phosphate fell 8%.
Nitrogen 15% 1% 34% 34%
Phosphate 16% 11% 40% 95% • Future of Ethanol may depend mostly on
Total revenue growth 17% 3% 36% 50% political winds, a risky prospect for the fertilizer
% of revenue by product type: industry. Ethanol has driven recent corn demand.
Ammonia 22% 22% 20% 13%
Urea 32% 32% 32% 32%
• Input price risk. While CF sells forward 70%+ of
UAN
1
22% 21% 21% 21% nitrogen fertilizer production and hedges natural gas
DAP
2
18% 20% 21% 29% costs, hedging is a temporary reprieve. Sulfur costs
3
MAP 5% 5% 5% 5% have jumped, putting phosphate margins at risk.
Gross margin by segment:
Nitrogen 11% 6% 22% 26%
• U.S. comparative advantage hardly in fertilizers.
Phosphate 8% 10% 31% 39% Countries with unskilled labor and stranded natural
Total gross margin 11% 7% 24% 30% gas resources ought to produce nitrogen fertilizers.
DD&A as % of revenue 5% 5% 3% 3% • Explosive stock price fed hubris. An investor
Capex as % of revenue 4% 3% 4% 4%
asserted, “maybe the first time in a long time you
U.S. 83% 82% 84% n/a are going to be able to make money through the
Canada 10% 10% 10% n/a cycle…” CF CEO: “I wish I was as confident as you
Export 7% 8% 6% n/a are that we will be profitable through the cycle.”
% of revenue by customer:
CHS 29% 26% 24% n/a
Growmark 13% 12% 10% n/a COMPARABLE PUBLIC COMPANY ANALYSIS
ConAgra 8% 11% 9% n/a ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
Others 50% 51% 57% n/a AGU 5,157 7,534 .8x 2.9x n/a n/a
1
Urea ammonium nitrate. 2 Diammonium phosphate. 3 Monoammonium ph. MON 40,603 40,806 3.6x 8.6x 16x 14x
MOS 14,425 13,725 1.1x 2.5x 3x 3x
INVESTMENT HIGHLIGHTS POT 21,064 23,575 2.6x 4.1x n/a n/a
• Fertilizer demand driven by Ethanol production TRA 1,665 1,535 .6x 1.8x 3x 4x
and grain demand. CF’s nitrogen fertilizer ASP CF 3,126 1,978 .5x 1.8x 4x 4x
rose 65% and phosphate fertilizer ASP rose 138% in
Q3. A likely increase in spring 2009 corn acreage
MAJOR HOLDERS
bodes well for near-term (nitrogen fertilizer) prices.
CEO Wilson 2% │ Other insiders <1% │ Goldman Sachs
• Extensive U.S. Corn Belt distribution system,
9% │ Wellington 6% │ D.E. Shaw 5% │ Barclays 5%
with 26% market share of nitrogen and 19% share
of phosphate fertilizers. CF is self-sufficient in
RATINGS
phosphate rock, with 24 years of proven reserves.
• Planned capex: (1) gasification at Donaldsonville MANAGEMENT Capable and properly incentivized?
would reduce natural gas dependence by utilizing FINANCIAL STRENGTH Solid balance sheet?
low-cost petcoke/coal ($1+ billion cost); (2) early- MOAT Able to sustain high returns on invested capital?
stage development of nitrogen complex in Peru EARNINGS MOMENTUM Fundamentals improving?
($1+ billion); (3) extract uranium from phosphate MACRO Poised to benefit from economic and secular trends?
fertilizer production at Plant City ($200+ million) EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE

CF was a phenomenal buy in 2005 when David Einhorn purchased a large stake following a broken IPO. While shares have
declined precipitously from their high and trade at a low multiple of estimated 2009 earnings, we are not convinced they offer
compelling value. If CF reports a loss in the down-cycle, the shares might trade down to book value or below, implying a
potentially unsatisfactory return from current levels.
Coach, Inc. (NYSE: COH) New York, NY, 212-594-1850

Consumer Cyclical: Apparel/Accessories, Member of S&P 500 http://www.coach.com


per share data) 6/29/02 6/28/03 7/3/04 7/2/05 7/1/06 6/30/07 6/28/08 9/27/08 9/29/07 9/27/08
Revenue 719 953 1,321 1,652 2,035 2,613 3,181 3,257 677 753
Gross profit 483 677 990 1,268 1,582 2,023 2,407 2,447 518 558
EBIT 134 244 405 536 715 993 1,147 1,142 239 234
Net income 86 147 238 359 494 664 783 774 155 146
Diluted EPS 0.24 0.39 0.62 0.86 1.19 1.69 2.17 2.21 0.41 0.44
Cash from ops 108 226 359 476 596 781 923 878 122 77
Capex 43 62 74 95 133 141 175 182 39 46
Free cash flow 65 165 286 381 463 641 749 697 83 31
Cash & investments 94 229 434 383 538 1,186 699 410 1,235 410
Total current assets 288 449 706 709 975 1,740 1,386 1,211 1,861 1,211
Total assets 441 618 1,044 1,370 1,627 2,450 2,274 2,111 2,655 2,111
Short-term debt 34 27 2 12 0 0 0 0 0 0
Long-term debt 4 4 3 3 3 3 3 2 3 2
Common equity 260 427 782 1,056 1,189 1,910 1,516 1,351 1,982 1,351
EBIT/capital employed 84% >100% >100% >100% >100% >100% >100% >100% n/m n/m
$60
$50
$40
$30
$20
$10
$0
Jan 00 Oct 00 Oct 01 Oct 02 Oct 03 Oct 04 Oct 05 Oct 06 Oct 07 Oct 08
BUSINESS OVERVIEW • One of the best managements in retail. CEO Lew

Coach is a leading American marketer of handbags (62% of Frankfort (61) has been with Coach for 25+ years
FY08 sales), women’s and men’s accessories (29%), and and has built an impressive track record.
related products (9%). Coach is sold through company- • Repurchased 40 million shares for $1.3 billion
owned stores (80% of sales) and department stores (20%). (average price of $34 per share) in FY08, and
U.S. and Japan account for 75% and 19% of global sales, another 11 million shares at $29 per share in 1Q09.
respectively. The business model features 74% gross margin • Stock price implies 13% trailing FCF yield, 7x
and 34% operating margin (based on FY09 guidance). The trailing P/E and 7x forward P/E.
compay operates on a June fiscal year end, with strongest
seasonality in FQ2. Coach was founded in 1941. INVESTMENT RISKS & CONCERNS
• Slowdown. FY09 guidance calls for revenue of $3.5
SELECTED OPERATING METRICS billion (+10% y-y) and EPS of $2.25 (+10% y-y),
1
FYE June 30 2006 2007 2008 2009E
sharp deceleration from 20% constant-currency
Revenue growth 23% 28% 22% 10%
Recurring EPS growth 38% 42% 22% 10% revenue growth and 17% EPS growth in FY08.
North America metrics: • “Very difficult” environment. Management has
2
Retail stores 218 259 297 +40 noted “weak traffic trends” in retail and department
Change (y-y) 13% 19% 15% 13% stores. The company may experience a reversal of
3
Factory stores 86 93 102 +6
Change (y-y) 5% 8% 10% 6% the trend of higher-end consumers buying more
Same-store sales growth 22% 10% 3-4% handbags per year than in the past. While pricing
Japan metrics:
4
actions may prevent a reversal, they will hurt gross
Locations 118 137 149 +10-15 margin. Rising input costs are another concern.
Change (y-y) 15% 16% 9% -3%
Sales growth
5
19% 14% 5-10% • Fashion risk. The company is exposed to changing
Sales growth by channel: fashion trends. Inventory levels appear adequate.
6
Direct to consumer
7
23% 30% 21% n/a • Highly relevant today, but does it have Tiffany-
Indirect 23% 20% 25% n/a
1 like staying power? A high-end jewelry brand may
Based on company guidance provided on October 21.
2
Avg. square footage of North American retail stores was 2,678 in FY08. have a longer “shelf life” than a similar brand in
3
4
Avg. square footage of North American factory stores was 4,053 in FY08. handbags. Coach’s growth also raises the concern of
Avg. square footage of Japanese locations was 1,745 in FY08.
5
Based on constant-currency sales results. brand overexposure (management believes North
6
7
Direct includes retail and factory stores in N.A./Japan (80% of FY sales). American can “easily support” 500 stores).
Indirect includes U.S. and international wholesale (20% of FY sales).

INVESTMENT HIGHLIGHTS ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
• Leading U.S. fine accessories brand. Coach has ANN 363 256 .1x 0.7x 8x 10x
grown quickly by combining luxury and relative KCP 152 79 .2x 0.8x n/m 37x
affordability in handbags and other accessories. RL 4,160 4,090 .8x 3.4x 10x 10x
• Gaining market share in all geographies. Coach TIF 2,519 3,006 1.0x 1.4x 7x 7x
enjoys #1 position in U.S., with bag sales recently COH 5,296 4,889 1.5x 4.9x 7x 7x
growing 15% vs. 5% for the category. Coach is #2
in Japan with 13% share (up 200 bps y-y).
MAJOR HOLDERS
• Attractive store economics. New retail and factory
CEO 3% │ Other insiders 1% │ Barclays 5% │ Jennison 2%
stores have payback periods of less than two years
│ Glenview 1% │ Gardner Lewis 1% │ Highside 1%
and less than one year, respectively.
• Growing aggressively in Greater China. Coach RATINGS
expects to open 50 new locations over the next five VALUE Intrinsic value materially higher than market value?
years, aiming to boost sales from $30 million (3% MANAGEMENT Capable and properly incentivized?
market share) to $250 million (10% share) by FY13. FINANCIAL STRENGTH Solid balance sheet?
Strategy will be dilutive by $0.03-$0.04 in FY09. MOAT Able to sustain high returns on invested capital?
• Flexible sourcing model. Production is outsourced, EARNINGS MOMENTUM Fundamentals improving?
with no vendor providing more than 13% of units. MACRO Poised to benefit from economic and secular trends?
New designs can be sourced quickly: 68% of FY08 EXPLOSIVENESS 5%+ probability of 5x upside in one year?
sales came from same-year product introductions.
THE BOTTOM LINE

Coach combines a number of attractive attributes, including best-in-class management, a distinctive brand, excellent unit
economics, and a P/E multiple near the bottom of the company’s historical range. We are concerned, however, that Coach’s
industry-leading margins have not yet been “stress-tested” for a range of adverse economic and competitive scenarios.
COMSYS IT Partners, Inc. (Nasdaq: CITP) Houston, TX, 713-386-1400

Services: Business Services http://www.comsys.com

Enterprise value: $153 million Next quarter 0.09 0.14 2 P/E FYE 12/31/10 n/a

per share data) 12/31/01 12/31/02 12/28/03 1/2/05 1/1/06 12/31/06 12/30/07 9/28/08 9/30/07 9/28/08
Revenue 732 387 333 437 662 737 743 734 187 184
Gross profit 192 95 81 106 157 179 185 181 47 45
EBIT (58) (2) 1 (9) 20 31 43 36 13 9
Net income (67) (193) (57) (55) 2 21 33 26 10 6
Diluted EPS (62.90) (47.84) 0.00 (14.20) 0.14 1.10 1.66 1.27 0.48 0.30
Cash from ops 56 49 22 (14) 15 47 59 46 27 4
Capex 3 4 3 2 8 3 3 7 0 2
Free cash flow 53 45 19 (16) 7 44 56 39 27 2
Total assets 634 247 168 323 367 375 403 457 384 457
Short-term debt 1 39 47 8 5 5 5 1 5 1
Long-term debt 234 180 423 156 137 94 67 69 68 69
Common equity 298 (52) (373) 36 71 95 145 165 135 165
EBIT/capital employed -79% -3% 3% -39% 52% 98% >100% 85% n/m n/m
$30
$25
$20
$15
$10
$5
$0
Jan 00 Jan 00 Jan 00 Jan 00 Jan 00 Oct 04 Oct 05 Oct 06 Oct 07 Oct 08
BUSINESS OVERVIEW • Organic growth complements M&A, with new

Comsys is the 6th-largest IT staffing company in the U.S. offices opened in San Antonio, San Diego, North
with 52 offices. Service offerings include contingent and L.A., Cincinnati, and San Juan in recent years.
direct hire placement of IT professionals (76% of revenue) as • NOL of roughly $200 million should shield
well as a wide range of technical services and solutions company from income taxes for many years.
addressing requirements across the enterprise (19% of • Stock price implies 46% trailing FCF yield, 3x
revenue). Tapfin Process Solutions (5% of revenue) delivers trailing P/E and 10x forward P/E.
critical management solutions across the resource spectrum
from contingent workers to outsourced services. Comsys was INVESTMENT RISKS & CONCERNS
formed via the merger of Comsys Holding and Venturi • In the eye of the storm? Comsys’ IT staffing
Partners in 2004. CEO Larry Enterline (55) was formely services are highly cyclical and may suffer major
CEO of Venturi Partners. The company has 5,000 demand erosion in the current downcycle.
consultants and a proprietary database of 650,000 candidates. • Revenue likely down 3% and EPS down 39-42%
in 2008, with guided revenue of $719-724 million
SELECTED OPERATING METRICS and EPS of $0.96-1.01 ($0.12-0.17 in Q4).
YTD
FYE December 31 2006 2007 2008 9/30/08 • 30% of revenue from financial services, making
∆ revenue 51% 11% 1% -2% Comsys vulnerable to declines in IT spending.
∆ consultants (period end) 2% 0% 0% -5% • Acquired six businesses since Venturi merger in
Selected items as % of revenue: 2004; appears likely to continue pursuing accretive
EBIT 3.4% 4.7% 5.8% 4.6%
D&A 1.4% 1.2% 0.9% 1.1%
deals (SVP David Kerr was an M&A partner at
Capex 1.1% 0.4% 0.4% 0.9% KPMG). While Comsys focuses on tuck-in deals,
integration is a risk in staffing. In 2005, gross profit
INVESTMENT HIGHLIGHTS was impacted by integration-related disruptions.
• $23 billion IT staffing industry has experienced • Moderate returns associated with M&A. Prices
high single-digit growth in recent years. The paid imply moderate ROIC from acquisitions.
industry remains fragmented, with top ten players • No tangible book, with equity of $165 million and
holding 44% share. Comsys is #6, behind intangibles of $188 million as of September 30,
TEKsystems (Allegis Group), Volt Services, Ajilon implying limited downside protection.
(Adecco), Sapphire (Vedior), and MPS; and ahead
of Kforce, Sapient, Robert Half, and Spherion. COMPARABLE PUBLIC COMPANY ANALYSIS
• Favorable long-term prospects of IT staffing. ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
Drivers include need for productivity improvement, CDI 199 123 .1x 0.8x 8x 11x
fast pace of technological change, transitional KFRC 262 278 .3x 3.4x 10x 14x
nature of assignments, strong value proposition of MAN 2,166 2,506 .1x 1.9x 6x 9x
“expertise on demand,” and changing industries. MPS 578 523 .2x 2.3x 8x 15x
RHI 2,762 2,392 .5x 3.3x 11x 25x
• Diverse capabilities in staffing (76% of revenue),
SFN 140 211 .1x 0.5x 9x 12x
including project management, business analysis,
network infrastructure services, application CITP 84 153 .2x n/m 4x 10x
development, and quality assurance and testing.
• Branch office-driven structure, with localized MAJOR HOLDERS
P&L accountability, sales and recruiting teams. CEO Enterline 2% │ Other insiders 8% │ Amalgamated
• Managed solutions (19% of revenue) complement Gadget 20% │ Wachovia 18% │ Barclays 6% │ Links 6%
staffing and serve to entrench Comsys with clients.
Solutions provided through six specialized RATINGS
practices, including ERP and business intelligence. VALUE Intrinsic value materially higher than market value?
• Process solutions (5% of revenue) enable clients to MANAGEMENT Capable and properly incentivized?
outsource business processes related to resource FINANCIAL STRENGTH Solid balance sheet?
fulfillment. Comsys is a leading provider of MOAT Able to sustain high returns on invested capital?
recruitment process outsourcing (RPO) in the EARNINGS MOMENTUM Fundamentals improving?
Northeastern U.S., and the fifth-largest provider of MACRO Poised to benefit from economic and secular trends?
vendor management services (VMS) in the U.S. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE

Comsys has performed well in recent years, growing both organically and via M&A while expanding operating margins and
benefiting from large NOL carryforwards. Unfortunately, the company’s gains appear reversible due to an absence of
sustainable competitive advantage and a tough operating environment for IT staffing. Given the company’s lack of tangible
book value, we view the prospective risk-reward tradeoff as unfavorable.
CTC Media, Inc. (Nasdaq: CTCM) Moscow, Russia, 7-495-785-6333

Services: Broadcasting & Cable TV http://www.ctcmedia.ru


per share data) 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 96 156 238 371 472 615 94 143
Gross profit 89 146 225 355 453 585 89 135
EBIT 36 63 90 154 193 259 24 51
Net income 5 26 31 86 136 171 17 21
Diluted EPS 0.10 0.30 0.37 0.69 0.86 1.08 0.11 0.13
Cash from ops 20 33 39 117 158 152 21 27
Capex 3 6 6 4 6 11 1 2
Free cash flow 18 28 33 113 152 142 20 25
Total assets n/a 293 274 485 695 1,112 624 1,112
Long-term debt n/a 20 37 0 0 57 0 57
Common equity n/a 175 179 421 612 723 530 723
EBIT/capital employed n/a 97% >100% >100% >100% >100% n/m n/m
$35
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • CTC is fourth most-watched channel in Russia,

CTC Media is a TV broadcaster in Russia. It owns the CTC with 9% audience share, behind Channel One
TV network, whose signal is carried by 350 affiliate stations, (21%), Rossiya (18%) and NTV (13%).3 The
including 21 owned stations; the Domashny TV network, company’s Channel 31 is the second most-watched
whose signal is carried by 230 affiliate stations, including 13 channel in Kazakhstan, behind Channel One.3
owned stations; and the smaller DTV television network. The • Revenue up 46% YTD, driven by (1) higher ad
company also owns two production firms and operates rates, due to a decrease in broadcast ads permitted in
Channel 31 in Kazakhstan and a TV company in Uzbekistan. Russia effective January; (2) acquisitions, including
DTV in April and regional stations in 2H07; and (3)
SELECTED OPERATING DATA appreciation of the ruble, which has added 760 bps
YTD to growth YTD. Organic revenue is up 36% YTD.
FYE December 31 2005 2006 2007 9/30/08
1 • Guiding for revenue growth of 33-40% to $630-
CTC network 71% 71% 68% 67% 660 million in 2008. Adjusted EBITDA margin is
CTC station group 22% 20% 20% 15% expected to range from 40-44%. Previous guidance
Domashny network 4% 6% 8% 10% called for revenue growth of 38-48% to $650-500
Domashny station group 3% 3% 4% 3%
Revenue growth by segment:
million and adjusted EBITDA margin of 42-46%.
CTC network 46% 57% 21% 39% • Stock price implies 21% trailing FCF yield, 4x
CTC station group 37% 44% 29% 17% trailing P/E and 4x forward P/E.
Domashny network nm 121% 89% 78%
Domashny station group 163% 49% 51% 6%
EBIT margin by segment: • Reduction in 2008 guidance on October 30 reflects
CTC network 50% 53% 52% 48% “unfavorable macroeconomic outlook in Russia.”
CTC station group 54% 64% 59% 58%
Domashny network -78% -22% 14% 24%
• Political risk related to Russia, including fragile
Domashny station group -83% -82% -46% 7% state of media independence. It is conceivable the
Production and other -3% -5% -6% -5% government could drastically reshape the Russian
Total EBIT margin 38% 42% 41% 38% media landscape in the future, hurting shareholders.
Selected items as % of revenue:
Capex 3% 1% 1% 1%
• Strategic shareholder control. Top holders include
D&A 6% 5% 6% 2% Modern Times Group (40%), Alfa Group (26%) and
Acquisitions of media rights 41% 36% 37% 46% Access Industries (6%), leaving a float of 28%. U.S.
Amortization of media rights 33% 34% 35% 38% minority shareholders may have little recourse in
1
YTD revenue breakdown does not show contribution from Channel 31
(acquired in February), DTV (April), and production companies Costafilm and
the case of potential abuses by majority holders.
Soho Media (April), which combined accounted for 6% of YTD revenue.
INVESTMENT HIGHLIGHTS ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
• $9 billion Russian advertising market (6th-largest CETV 689 1,559 1.5x n/m n/a n/a
in Europe), up from $1 billion in 2000 (20th). Ad EVC 61 416 1.9x n/m n/m 10x
spending is expected to grow 26% (in dollars) in TV 8,480 8,490 2.4x 3.5x 11x 10x
2008, with TV ads growing 32%.2 Ad spending is CTCM 677 747 1.2x n/m 4x 4x
0.8% of Russian GDP, compared to 0.9% in the EU.
Russian TV CPM is $2, versus $9 in Germany. MAJOR HOLDERS
• Strong six-year track record, having grown from a Insiders 67% (including MTG Russia 39% and Alfa CTC
single free-to-air channel to a public company with 26%) │ Access Industries 6% │ FMR 6%
five channels in three countries and production
assets (25% of fall ‘08 programming produced in- RATINGS
house). The company continues to grow at or above VALUE Intrinsic value materially higher than market value?
the growth rate of the Russian advertising market. MANAGEMENT Capable and properly incentivized?
• Anton Kudryashov (40) became CEO in August, FINANCIAL STRENGTH Solid balance sheet?
replacing Alexander Rodnyansky who remains MOAT Able to sustain high returns on invested capital?
president. Kudryashov was one of the founding EARNINGS MOMENTUM Fundamentals improving?
partners of Moscow-based Renaissance Capital. MACRO Poised to benefit from economic and secular trends?
2
Source: Russian Assoc. of Comm. Agencies, Video Int’l, Company. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
3
Source: TNS Gallup Media, Company.
THE BOTTOM LINE

CTC Media has been a solid performer in the Russian media market, having shown explosive growth due to Russian ad
spending growth, strong execution and multiple acquisitions. We have little reason to doubt that the company will continue to
execute skillfully, but we are mindful of the risk of investing in a media firm in a country with little media independence. In
addition, minority shareholders may also be exposed to potential non arms-length transactions by insiders.
Darling International Inc. (NYSE: DAR) Irving, TX, 972-717-0300

Consumer Non-Cyclical: Food Processing, Member of S&P SmallCap 600 http://www.darlingii.com

Insider buys (last six months): 0 LT EPS growth n/a n/a 0 P / tangible book 2.3x

per share data) 12/29/01 12/28/02 1/3/04 1/1/05 12/31/05 12/30/06 12/29/07 9/27/08 9/29/07 9/27/08
Revenue 243 261 323 320 309 407 645 835 172 236
Gross profit 58 68 78 82 67 86 162 222 41 59
EBIT 5 21 27 31 16 19 81 137 21 37
Net income (12) 8 18 14 8 5 46 83 12 23
Diluted EPS (0.71) 0.18 0.28 0.22 0.12 0.07 0.56 1.01 0.15 0.28
Cash from ops 6 34 28 38 25 29 66 93 14 25
Capex 9 13 12 14 22 12 16 27 5 8
Free cash flow (4) 21 16 24 3 17 50 66 9 17
Total assets 159 163 175 183 191 321 351 413 340 413
Short-term debt 120 8 8 5 5 5 6 5 5 5
Long-term debt 0 69 57 50 45 78 38 35 50 35
Common equity (10) 36 55 67 74 151 201 273 184 273
EBIT/capital employed 6% 27% 33% 36% 18% 16% 53% 83% n/m n/m
$20
$18
$16
$14
$12
$10
$8
$6
$4
$2
$0
BUSINESS OVERVIEW • Pays for roughy 55% of raw material volume

Darling provides rendering, recycling and recovery services based on published finished product prices.
to the food industry. It operates in two segments: Remaining volume is either fixed price, free of cost
Rendering collects and processes animal by-products from to Darling, or generates revenue to the company.
butchers, grocery stores, food service, and meat processors, Darling sells finished products worldwide.
converting these by-products into oils and proteins used by • Demand for protein meal and oil remain strong,
the agricultural, leather and oleo-chemical industries. continuing a favorable outlook for Darling.
Restaurant Services collects used cooking oil from food • Well positioned to capitalize on biofuel adoption.
service establishments and recycles it into products such as Darling supplies 13% of U.S. fats and greases, a
high-energy animal feed and industrial oil. The segmet also lower-cost feedstock than vegetable oils.
provides grease trap servicing and includes the NSC • Randy Stuewe (45) joined as chairman and CEO
subsidiary. NSC schedules services such as fat and bone and in 2003, after serving as ConAgra EVP for six years
used cooking oil collection as well as trap cleaning. and in various roles with Cargill for twelve years.
YTD
FYE December 31 2005 2006 2007 9/30/08 INVESTMENT RISKS & CONCERNS
% of revenue by segment: • Dependent on finished product prices, which rose
Rendering 64% 70% 73% 73%
Restaurant services 36% 30% 27% 27% more than 50% in 2007 and are up substantially in
Revenue growth by segment: 2008. The finished product commodities include
Rendering na 46% 64% 41% meat and bone meal (MBM), bleachable fancy
Restaurant services na 8% 42% 41% tallow (BFT) and yellow grease (YG); their prices
Total revenue growth -4% 32% 59% 40%
EBIT margin by segment:
are quoted daily on the Jacobsen index.
Rendering 10% 11% 17% 20% • Vulnerable to increases in natural gas and diesel
Restaurant services 13% 11% 19% 18% fuel prices. The company consumes natural gas to
Corporate -8% -9% -11% -11% operate boilers to generate steam to heat raw
D&A as % of revenue 5.1% 5.1% 3.6% 2.6% materials. It also consumes diesel fuel to operate
Capex as % of revenue 6.9% 2.9% 2.4% 3.2% tractors and trucks used to collect raw materials.
% of revenue by geography: • CEO Stuewe sold one-quarter of holdings in May
Domestic 75% 72% 73% n/a at ~$14.50 per share, representing his first sale of
International 25% 28% 27% n/a
stock in more than five years.
• By-product recycling is critical to food supply Darling does not have direct public comps. Private comps in
chain. Meat packers, poultry processors and retail rendering and restaurant services are Baker Commodities in
stores generate 50 billion pounds annually of the West and Griffin Industries in Texas and the Southeast.
inedible by-products, which need to be disposed of Restaurant Technologies competes in restaurant services.
in an environmentally sound way. Macro factors
include finished product prices, energy costs and MAJOR HOLDERS
raw material supply (number of cattle slaughtered
CEO Stuewe 1% │ Other insiders 3% │ Goldman Sachs 7%
grows at a low- to mid-single digit annual rate).
│ Fidelity 7% │ Barclays 6%
• Food industry by-products have wide range of
uses. Tallow (animal fat) can be recycled into soap, RATINGS
bio-fuels, pet food, and animal feed; meat and bones VALUE Intrinsic value materially higher than market value?
into hog food, poulty feed and pet food; grease into MANAGEMENT Capable and properly incentivized?
animal feed and bio-fuels; and hides into leather. FINANCIAL STRENGTH Solid balance sheet?
• Largest U.S. provider of rendering, recycling MOAT Able to sustain high returns on invested capital?
and recovery, with network of 39 processing EARNINGS MOMENTUM Fundamentals improving?
facilities and 38 reload/transfer stations nationwide. MACRO Poised to benefit from economic and secular trends?
Darling operates a fleet of 1,000 trucks to collect EXPLOSIVENESS 5%+ probability of 5x upside in one year?
raw materials from 115,000 supplier locations.
THE BOTTOM LINE

Darling operates a mundane business that has seen revenue and EBIT explode over the past couple of years due to price
increases for the finished products it sells (meat and bone meal, bleachable fancy tallow and yellow grease). While it is
impossible to judge how product prices may evolve, the company operates in a capital-intensive business that should see
returns on capital return to “normal” over time. This could happen either through input price increases or declines in selling
prices due to capacity expansion in the industry. Either way, we believe the shares do not offer sufficient value.
DepoMed, Inc. (Nasdaq: DEPO) Menlo Park, CA, 650-462-5900

Health Care: Biotechnology & Drugs http://www.depomedinc.com

52-week range: $1.57 - $4.52 Latest Ago Ests P/E FYE 12/31/08 n/m
Market value: $84 million This quarter -$0.26 -$0.26 1 P/E FYE 12/31/09 n/m
Enterprise value: $19 million Next quarter -0.25 n/a 1 P/E FYE 12/31/10 n/m
Shares out: 51.0 million FYE 12/31/08 -0.52 -0.65 1 EV / LTM revenue 0.6x
Ownership Data FYE 12/31/09 -0.85 -0.85 1 EV / LTM EBITDA n/a
Insider ownership: 12% FYE 12/31/10 -0.50 -0.50 1 EV / LTM EBIT 1.0x
# of institutional owners: 142 10/30/08 -$0.12 -$0.15 LTM pre-tax ROC n/m

per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 4 2 1 0 4 10 66 31 53 14
Gross profit 0 0 0 0 4 8 63 26 52 12
EBIT (14) (10) (29) (26) (26) (42) 48 19 44 (1)
Net income (18) (14) (30) (27) (25) (40) 49 20 44 (1)
Diluted EPS (1.72) (0.92) (1.23) (0.78) (0.64) (0.97) 1.05 0.41 0.92 (0.01)
Cash from ops (12) (4) (33) (23) 29 (28) 15 31 10 9
Capex 1 1 1 3 1 1 0 0 0 0
Free cash flow (14) (5) (34) (26) 28 (29) 15 30 10 9
Total assets 9 23 48 23 66 53 81 97 56 97
Short-term debt 1 0 0 0 0 0 0 3 0 3
Long-term debt 6 9 10 10 0 0 0 7 0 7
Preferred stock 12 12 12 12 12 12 12 12 12 12
Common equity (14) (6) 23 (4) (5) (39) 34 31 8 31
EBIT/capital employed n/m n/m n/m -8767% n/m n/m n/m n/m n/m n/m
$16
$14
$12
$10
$8
$6
$4
$2
$0

Depomed is a specialty pharma company with two approved • Losing money in recurring operations. Depomed
products on the market and other product candidates in the has appeared as cheap on an earnings basis due to
pipeline. GLUMETZA is approved for use in adults with non-recurring gains. The company expects to
type 2 diabetes and promoted by Santarus in the U.S. continue to post adjusted operating losses in the
ProQuin XR is approved in the U.S. for the once-daily foreseeable future.
treatment of uncomplicated urinary tract infections and is • Failed Phase 3 trial for Gabapentin GR.
being marketed by Watson Pharma. Product candidate Depomed announced in July 2007 that the drug
Gabapentin GR is currently in clinical development for the candidate failed to meet the primary efficacy
treatment of neuropathic pain and menopausal hot flashes. endpoint in a trial for postherpetic neuralgia (PHN).
• New GLUMETZA partner yet to be identified. A
DRUG PIPELINE OVERVIEW promotion agreement with King Pharmaceuticals
Preclinical Ph. 1 Ph. 2 Ph. 3 Marketed
GLUMETZA1 U.S. / Canada
was terminated in October 2007, following a
Proquin XR 2
U.S. strategic shift by King. Depomed has yet to identify
Gabapentin GR3 Phase 3 ongoing a new marketing partner for GLUMETZA.
Gabapentin GR4 Phase 3 ongoing
Omeprazole GR5 • Limited in-house sales and marketing resources.
Levodopa6 Proof of concept The company has engaged a contract sales
Undisclosed7 organization to promote GLUMETZA on a
1
For Type 2 diabetes. Canadian rights held by Biovail.
2
For uncomplicated urinary tract infections. Sold in U.S. and Europe. temporary basis, as Depomed has no sales force and
3
4
For postherpetic neuralgia.
6
limited marketing and sales staff.
For menopausal hot flashes. For Parkinson’s disease.
5
For nighttime acid breakthrough. 7
Two undisclosed compounds. • Dependent on Watson Pharma for ProQuin XR.
Depomed depends on Watson to successfully
INVESTMENT HIGHLIGHTS promote the drug. The company’s prior marketing
• Differentiated drug delivery technology. The partner for ProQuin XR, Esprit Pharma, was unable
company utilizes proprietary AcuForm delivery to successfully commercialize the drug.
technology to improve existing oral medications, • Should not be on “Magic Formula” list. Depomed
allowing for extended, controlled release of became an MF selection due to one-time items. It
medications to the upper gastrointestinal tract. has recorded $42 million of termination fees and
Benefits include convenience of once-daily litigation settlement proceeds over the past year.
administration, improved treatment tolerability and
enhanced compliance and efficacy. COMPARABLE PUBLIC COMPANY ANALYSIS
• Litigation-tested IP. DepoMed’s AcuForm patents ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
expire in 2016-21, with numerous applications BMY 38,651 37,475 1.8x 5.6x 12x 10x
pending. The company has won two separate TEVA 35,015 36,420 3.4x 7.8x 15x 14x
settlements amounting to a total of $28 million. DEPO 84 19 .6x 2.7x n/m n/m
• Superior development model. AcuForm provides
new chemical entity (NCE)-like differentiation to MAJOR HOLDERS
existing pharmaceuticals (KCEs). Development CEO Smith <1% │ Other insiders 5% │ Third Point 15% │
timeframes and costs range from 4-6 years and $20- Tang 10% │ JP Morgan 10% │ Biovail 10% │ Polygon 6%
$40 million vs. 8+ years and $1+ billion for NCEs.
• GLUMETZA targets large market. Metformin for RATINGS
diabetes is 5th most prescribed U.S. drug with 49 VALUE Intrinsic value materially higher than market value? N/A
million transcriptions. Depomed has so far targeted MANAGEMENT Capable and properly incentivized?
only 13K out of 73K metforming prescribers. FINANCIAL STRENGTH Solid balance sheet?
• Strong cash position. Depomed had net cash of MOAT Able to sustain high returns on invested capital?
$76 million as of September 30, 2008, providing EARNINGS MOMENTUM Fundamentals improving?
ample liquidity to pursue pipeline development. MACRO Poised to benefit from economic and secular trends?
• Stock price implies 36% trailing FCF yield and EXPLOSIVENESS 5%+ probability of 5x upside in one year?
4x trailing P/E (forward loss projected).
THE BOTTOM LINE

Depomed’s reported profitability depends entirely on one-time gains. The company therefore fails to meet a basic
requirement for consideration as an investment prospect in the context of the magic formula screen — ongoing operating
profitability. While Depomed’s two approved drugs and drug pipeline may have significant embedded value, we have no
basis on which to make such a judgment. As a result, we pass.
Dell Inc. (Nasdaq: DELL) Round Rock, TX, 512-338-4400

Technology: Computer Hardware, Member of S&P 500 http://www.dell.com

Shares out: 1,958.4 million FYE 1/31/09 1.36 1.41 15 EV / LTM revenue 0.2x

per share data) 2/1/02 1/31/03 1/30/04 1/28/05 2/3/06 2/2/07 2/1/08 8/1/08 8/3/07 8/1/08
Revenue 31,168 35,404 41,444 49,121 55,788 57,420 61,133 64,146 14,776 16,434
Gross profit 5,507 6,349 7,552 9,018 9,891 9,516 11,671 11,674 2,951 2,827
EBIT 1,789 2,844 3,544 4,206 4,382 3,070 3,440 3,323 902 819
Net income 1,246 2,122 2,645 3,018 3,602 2,583 2,947 2,845 746 616
Diluted EPS 0.46 0.80 1.01 1.18 1.47 1.14 1.31 1.34 0.33 0.31
Cash from ops 3,797 3,538 3,670 5,821 4,751 3,969 3,949 3,446 1,853 1,108
Capex 303 305 965 515 747 896 831 631 293 142
Free cash flow 3,494 3,233 2,705 5,306 4,004 3,073 3,118 2,815 1,560 966
Intangible assets 0 0 0 0 0 155 2,428 2,534 163 2,534
Total assets 13,535 15,470 19,311 23,215 23,252 25,635 27,561 28,407 28,054 28,407
Short-term debt 0 0 0 0 65 188 225 129 328 129
Long-term debt 520 506 505 505 625 569 362 1,840 378 1,840
Common equity 4,694 4,873 6,280 6,485 4,047 4,439 3,829 2,906 6,044 2,906
EBIT/capital employed n/m n/m n/m n/m n/m n/m n/m n/m n/m n/m
$70
$60
$50
$40
$30
$20
$10
$0
BUSINESS OVERVIEW • Michael Dell returned as CEO in January 2007.

Dell is the #1 supplier of PCs in the U.S. and the #2 supplier • Strong balance sheet, with $7 billion of net cash.
globally, behind HP. Product categories include desktop PCs, • Bought $2.5 billion of stock in 1H09. Michael Dell
servers, networking, software, mobility, peripherals, and has purchased ~$200 million in recent months.
storage. The company was founded in 1984 by Michael Dell. • Stock price implies 13% trailing FCF yield, 8x
YTD INVESTMENT RISKS & CONCERNS
FYE February 1 2006 2007 2008 8/1/08
% of revenue by product group: • Weakness in U.K., southern Europe, select Asian
Desktop PCs 39% 35% 32% 30% countries, U.S. (SMB, government). Enterprise,
Mobility 26% 27% 29% 30% servers, storage remain resilient while “client” has
Software and peripherals 15% 16% 16% 17%
Servers and networking 10% 10% 11% 10%
weakened. Dell is a year into a three-year, $3 billion
Enhanced services 8% 9% 9% 9% cost reduction program, with most reductions tied to
Storage 3% 4% 4% 4% new products (7 introduced so far, 17 remaining).
Revenue growth by product group: • Consumer EBIT margin less than 1%, vs. 5-6%
Desktop PCs 2% -8% -1% -3%
Mobility 20% 8% 13% 24%
at HP (might include some printing). Dell believes it
Software and peripherals 26% 8% 10% 17% can achieve “reasonable” profitability. Retail is not
Servers and networking 12% 7% 12% 4% yet profitable, with Dell present in 15,000 stores.
Enhanced services 35% 20% 5% 13% The company likely needs more scale in retail.
Storage 38% 21% 8% 13%
Total revenue growth 14% 3% 6% 10% • Direct model is evolving as Dell enters storefronts
% of revenue by segment: and as notebooks gain share versus desktops
Americas — Business 51% 51% 51% n/a (customers may want to “touch” notebooks before
Americas — Consumer 14% 12% 10% n/a purchasing). Warranty is a high-margin business in
EMEA 23% 24% 25% n/a
Asia Pacific and Japan 12% 13% 14% n/a
which Dell’s “attach rate” is below average.
EBIT margin by segment: • European margins have not met expectations, but
Americas — Business 10.4% 8.1% 8.2% n/a margins may bounce back in next two quarters.
Americas — Consumer 5.7% 1.9% -0.9% n/a • EMC partnership may be impacted by Dell’s
EMEA 6.8% 4.3% 6.6% n/a
Asia Pacific and Japan 8.0% 4.5% 5.5% n/a purchase of EqualLogic, though Dell management
Total EBIT margin 7.9% 5.3% 5.6% 5.3% remains “committed” to both offerings.
• CTO Kevin Kettler is leaving in January after 13
INVESTMENT HIGHLIGHTS years with Dell; a marketing VP left in November.
• Continues to gain market share. Dell grew unit
volumes in the high teens in 1H09, roughly 1.5x the COMPARABLE PUBLIC COMPANY ANALYSIS
industry growth rate. While growth slowed in 3Q09, 08 09
($mn) MV EV EV/Rev P/TB
P/E P/E
management expects continued market share gains.
CAJ 37,390 29,926 .7x 1.2x 10x 10x
• Turnaround progressing; more work remains. In HPQ 74,600 69,972 .6x 6.3x 8x 8x
Q3, the company attained its goal of reducing IBM 107,920 132,577 1.3x 19.2x 9x 9x
headcount by 8,900. COGS are still too high, with SNE 21,193 20,396 .2x 0.7x 12x 9x
management focused on reducing product costs as
DELL 21,327 14,263 .2x 57.3x 8x 8x
more efficiently produced products come to market.
• Pursuing five key growth initatives: enterprise,
notebook, consumer, SMB, and emerging countries. MAJOR HOLDERS
Dell’s growth is outpacing the industry in each area. Michael Dell 11% │ Other insiders <1% │ Southeastern 7%
• Focused on growing higher-margin services
(~10% of revenue), both organically and through RATINGS
digestable acquisitions; a large combination, such as VALUE Intrinsic value materially higher than market value?
HP/EPS, appears unlikely. Dell uses the client MANAGEMENT Capable and properly incentivized?
business as an “achor tenant,” allowing it to win FINANCIAL STRENGTH Solid balance sheet?
incremental services business over time. MOAT Able to sustain high returns on invested capital?
• Maintains strong cash cycle dynamics (-29 days),
though retail presence has increased inventory.
THE BOTTOM LINE

Dell is a global technology products leader with capable, properly incentivized management. The company is addressing
challenges in the consumer business amid slowing growth and greater competition. Some have questioned Dell’s direct
model, and the company has felt a need to partner with retailers to expand distribution. Nonetheless, we like the company’s
long-term focus (no quarterly guidance), strong FCF generation, share buybacks, insider buying, and cost leadership.
Deluxe Corporation (NYSE: DLX) Shoreview, MN, 651-483-7111

Consumer Non-Cyclical: Office Supplies, Member of S&P MidCap 400 http://www.deluxe.com


per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 1,278 1,284 1,242 1,567 1,716 1,640 1,606 1,529 389 366
Gross profit 825 848 816 1,031 1,108 1,026 1,020 953 245 226
EBIT 302 345 319 348 305 198 268 221 61 30
Net income 186 214 193 198 158 101 144 118 32 14
Diluted EPS 2.69 3.36 3.49 3.93 3.10 1.95 2.76 2.24 0.62 0.27
Cash from ops 271 257 182 311 174 239 245 212 73 79
Capex 29 41 22 44 56 41 32 37 6 7
Free cash flow 242 216 160 268 118 198 212 176 67 72
Total assets 538 669 563 1,499 1,426 1,267 1,211 1,252 1,450 1,252
Short-term debt 151 2 214 290 264 439 69 112 327 112
Long-term debt 10 307 381 954 903 577 775 774 776 774
Total liabilities 459 605 861 1,678 1,508 1,333 1,170 1,188 1,426 1,188
Common equity 79 64 (298) (179) (82) (66) 41 65 25 65
EBIT/capital employed >100% >100% >100% >100% >100% >100% >100% >100% n/m n/m
$60
$50
$40
$30
$20
$10
$0
BUSINESS OVERVIEW • Price increase in Financial Services will go into

Deluxe operates in three segments: Small Business Services effect in Q4. The company is also cutting costs.
sells business checks, printed forms, promotional products, • CEO Lee Schram (46) joined Deluxe in 2006
and marketing materials to small businesses. Financial from NCR, where he had served as SVP of the
Services sells personal and business checks and stored value retail solutions division. CFO Richard Greene (43)
gift cards to financial institutions. Direct Checks sells joined Deluxe in 2006 from Tyco, where he had
personal and business checks directly to consumers. Checks been CFO of the plastics and adhesives segment.
and related services were two-thirds of revenue in 2007. • Stock price implies 32% trailing FCF yield, 5x
FYE December 31 2005 2006 2007 9/30/08
% of revenue by segment: • Guiding for revenue decline of 6-7% and EPS
Small business services 54% 59% 58% 58% decline of 21-25% for full-year 2008, significantly
Financial services 31% 28% 28% 29% worse than previous EPS guidance. Management
Direct checks 14% 13% 13% 13% expects 2008 revenue of $1.5 billion and EPS of
Small business services 51% 4% -3% -6% $2.07-2.17. In January, management had provided
Financial services -19% -15% 0% -5% EPS guidance of $3.00-3.20. The company has
Direct checks -14% -14% -1% -10% blamed economic softness for the weak outlook.
Total revenue growth 10% -4% -2% -6% • Paper checks headed for obsolescence. Adoption
1
Small business services 11% 9% 14% 13% of payment cards and online bill-payment is slowly
Financial services 22% 10% 16% 17% but surely obsoleting checks, both at the point of
Direct checks 32% 31% 30% 29% sale and as a means of bill payment. Two-thirds of
Total EBIT margin 18% 12% 17% 16% Deluxe revenue comes from checks, with another
D&A as % of revenue 6% 5% 4% 4%
Capex as % of revenue 3% 3% 2% 2% one-quarter also related to various printed products.
% of revenue by product type: Deluxe’s two primary check printing competitors
Checks and related services 65% 64% 65% n/a merged in 2007 and now operate as Harland Clarke.
Other printed products 22% 23% 24% n/a • Potential for bad capital allocation as “cash cow”
Accessories and promotional 8% 8% 8% n/a
Packaging supplies and other 5% 5% 3% n/a business declines and management attempts to
% of revenue by geography: reignite growth. Deluxe faces a dilemma:
U.S. 97% 96% 96% n/a maximize FCF and pay it out, or invest in growth
Canada 3% 4% 4% n/a capex and acquisitions that may offset the decline in
1
Excludes YTD restructuring and impairment charges of $33 million.
checks. The company currently pays a $1 annual
dividend while pursuing acquisitions. Management
INVESTMENT HIGHLIGHTS has stressed the importance of “transformational
• Leading provider of paper checks. With 33 billion efforts.” Capex is estimated at $30 million in 2008.
checks written annually (including checks converted
to ACH), they still account for 35% of non-cash MAJOR HOLDERS
payments in the U.S., down from 45% in 2004. CEO Schram 1% │ Other insiders 1% │ Barclays 12%
Check volume is declining at a mid-single digit rate.
• Recent tuck-in acquisitions include PartnerUp, RATINGS
Hostopia, Logo Mojo, and Johnson Group. VALUE Intrinsic value materially higher than market value?
Deluxe is attempting to shift from traditionally MANAGEMENT Capable and properly incentivized?
mature, print-related markets to business services FINANCIAL STRENGTH Solid balance sheet?
markets. Despite the decline in checks, management MOAT Able to sustain high returns on invested capital?
remains committed to “sustainable top and bottom EARNINGS MOMENTUM Fundamentals improving?
line growth for Deluxe in the medium term.” MACRO Poised to benefit from economic and secular trends?
• C$124 million Hostopia deal, announced in June, EXPLOSIVENESS 5%+ probability of 5x upside in one year?
adds web services offerings and a web-enabled
platform to launch additional business services.
THE BOTTOM LINE

Deluxe faces an irreversible long-term decline in the usage of paper checks. As a leading provider of checks, the company
has done a good job limiting annual revenue erosion to the low- to mid-single digits and maintaining fairly robust margins.
We believe shareholder value may be maximized through larger dividend payments or share repurchases rather than the
“transformation” undertaken by management. The company runs the risk of making acquisitions primarily as a way of
stemming revenue declines rather than putting capital to optimal use. For instance, we are unconvinced that Deluxe is in the
best position to maximize the opportunity of a business social networking company such as PartnerUp, which Deluxe
recently acquired. With insiders owning only 2% of Deluxe, their interests may not be aligned with those of shareholders.
Diamond Mgt. & Technology (Nasdaq: DTPI) Chicago, IL, 312-255-5000

Services: Business Services http://www.diamondconsultants.com


per share data) 3/31/02 3/31/03 3/31/04 3/31/05 3/31/06 3/31/07 3/31/08 9/30/08 9/30/07 9/30/08
Revenue 203 152 119 162 164 190 205 190 51 46
Gross profit 49 24 30 59 46 50 57 47 14 11
EBIT (146) (198) (0) 25 10 10 16 6 5 2
Net income (134) (360) (5) 33 (11) 31 21 16 2 1
Diluted EPS (4.34) (6.95) 0.05 1.09 0.06 0.21 0.33 0.16 0.09 0.02
Cash from ops (46) (22) 8 33 12 22 26 24 4 5
Capex 7 2 1 2 2 3 3 3 1 1
Free cash flow (53) (24) 7 31 10 19 23 21 3 5
Total assets 401 110 123 154 128 121 92 87 114 87
Short-term debt 0 0 0 0 0 0 0 0 0 0
Long-term debt 0 0 0 0 0 0 0 0 0 0
Common equity 375 72 81 118 92 96 75 71 92 71
EBIT/capital employed -648% -1598% -8% >100% >100% >100% >100% 47% n/m n/m
$120
$100
$80
$60
$40
$20
$0
BUSINESS OVERVIEW • Repurchased $11 million of stock in 1H09, $52

Diamond is a management and technology consulting firm million in FY08, $36 million in FY07, and $34
whose teams work across functional boundaries to help million in FY06.
clients leverage IT. The company serves clients in six • Stock price implies 21% trailing FCF yield, 25x
verticals: financial services, insurance, healthcare, telecom, trailing P/E and 33x forward P/E.
public sector, and enterprise. The enterprise practice includes
the manufacturing, retail, distribution, travel, and packaged INVESTMENT RISKS & CONCERNS
goods industries. Diamond generated 91% of revenue in • Results down sharply in 1H09, driven by more
North America in FY08. Diamond was founded in 1994. cautious client spending. The company is guiding
In 2006, the company sold operations in Barcelona, Dubai, for FQ3 revenue of $39-41 million (down 12-17%
Madrid, Munich, Paris, and Sao Paulo, while retaining y-y), EPS of $0.01-0.02 and FCF of $4-6 million.
consulting practices in North America, the U.K., and India. • Absence of long-term contracts. Clients may
typically cancel use of Diamond without penalty
SELECTED OPERATING DATA and, “in some circumstances,” with little notice.
FYE March 31 2006 2007 2008 1H09 • 22% annualized attrition. Diamond’s voluntary
Consultants (avg) 428 474 509 503 and involuntary attrition of consulting staff was
Fees per consultant $339K $356K $358K $316K
Utilization rate 63% 63% 62% 63% 16% and 6%, respectively, in FY08. This implies a
Voluntary attrition
1
17% 18% 16% 17% total staff turnover every 4-5 years, on average.
1
Total attrition 23% 22% 22% 34% • Top competitors generally have scale advantages.
∆ net revenue 0% 16% 8% -15% Technology-oriented professional services firms
∆ gross profit -21% 9% 13% -33%
Gross margin 32% 30% 31% 24%
include Accenture, CSC, EDS, and IBM. Diamond
% of revenue by client type: also competes against management consulting firms
New clients
2
24% 12% 14% 6% such as A. T. Kearney, Bain, BCG, and Booz.
Existing clients 76% 88% 86% 94% • Typical professional services risks. Diamond’s
Top 5 clients / revenue 39% 39% 37% n/a
% of revenue by industry or major client:
key assets “walk out the door” every evening. In
Goldman Sachs 13% 13% 12% addition, the firm must maintain a certain utilization
Other financial services 24% 19% 18% } 29% rate of consulting staff in order to remain profitable.
Insurance 22% 26% 23% 23%
Healthcare 15% 19% 21% 19%
Enterprise 13% 13% 17% 22%
08 09
Telecommunications 9% 6% 6% 4% ($mn) MV EV EV/Rev P/TB
Public sector 4% 4% 3% 3% P/E P/E
% of new client revenue by industry:
2 BE 13 703 .2x n/m n/m n/m
Financial services 32% 37% 20% 26% ACN 20,919 17,304 .7x 12.3x 10x 9x
Insurance 22% 7% 12% 19% CSC 4,322 7,354 .4x 7.7x 7x 6x
Healthcare 17% 22% 19% 5% IBM 107,920 132,577 1.3x 19.2x 9x 9x
Enterprise 22% 12% 44% 39%
Telecommunications 5% 10% 2% 4% ICFI 266 353 .5x n/m 10x 13x
Public sector 2% 12% 3% 7% DTPI 101 54 .3x 1.4x 57x 33x
∆ diluted shares out (avg) -4% -2% -8% -18%
1
Represents attrition of consulting staff only.
2
New clients are defined as clients that generated revenue in the current MAJOR HOLDERS
period but were absent from the prior period. CEO Gutstein 2% │ Other insiders 15% │ Fidelity 16% │
Artisan 13% │ BlackRock 10% │ Luther King 6%
• Serves c-level executives of large companies. Fees RATINGS
are sourced from clients’ operating and IT budgets. VALUE Intrinsic value materially higher than market value?
A senior partner is assigned revenue and profit MANAGEMENT Capable and properly incentivized?
responsibility for each vertical. FINANCIAL STRENGTH Solid balance sheet?
• Long-tenured management. Adam Gutstein (45) MOAT Able to sustain high returns on invested capital?
joined Diamond in 1994 and became CEO in 2006. EARNINGS MOMENTUM Fundamentals improving?
He was previously with Andersen (now Accenture). MACRO Poised to benefit from economic and secular trends?
Karl Bupp (46) joined Diamond in 1994 and EXPLOSIVENESS 5%+ probability of 5x upside in one year?
became CFO in 1998. He was previously with MCI.
THE BOTTOM LINE

Diamond is a recognized player in the high-end IT consulting industry. While profitability has been wiped out by lower client
spending, the company is likely to restore prior profit levels when demand returns. Diamond also is likely to capture long-
term growth opportunities in the industry, driven by continued adoption of IT within large enterprises. Management has
shown a desire to return value to shareholders through repurchases, and we believe the shares deserve attention.
DISH Network Corp. (Nasdaq: DISH) Englewood, CO, 303-723-1000

Services: Broadcasting & Cable TV http://www.dishnetwork.com


per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 4,001 4,821 5,739 7,159 8,447 9,819 11,090 11,587 2,794 2,937
Gross profit 1,438 1,884 2,251 2,677 3,797 4,439 5,008 5,070 1,267 1,195
EBIT 212 (238) 708 703 1,167 1,217 1,573 1,939 397 418
Net income (216) (415) 225 215 1,515 608 756 861 200 92
Diluted EPS (0.45) (0.86) 0.46 0.46 3.22 1.37 1.68 1.89 0.44 0.20
Cash from ops 490 67 576 1,001 1,774 2,279 2,617 2,546 707 484
Capex 638 436 322 981 1,541 1,396 1,542 1,259 330 316
Free cash flow (148) (369) 254 21 233 883 1,075 1,287 377 168
Intangible assets 696 696 725 980 975 946 1,321 685 915 685
Total assets 6,520 6,261 7,585 6,029 7,410 9,769 10,087 7,177 9,746 7,177
Short-term debt 15 388 1,438 34 37 1,039 1,551 1,008 48 1,008
Long-term debt 5,707 5,359 5,499 5,758 5,899 5,929 4,575 4,973 6,086 4,973
Common equity (778) (1,176) (1,033) (2,078) (867) (219) 640 (2,130) 460 (2,130)
EBIT/capital employed 19% -24% 77% 56% 56% 45% 56% >100% n/m n/m
$80
$70
$60
$50
$40
$30
$20
$10
$0

DISH Network provides satellite television in the U.S., • Lost 10,000 subscribers in Q3 due to “weak
offering hundreds of channels, digital video recording and economic conditions, aggressive promotional
HDTV. The company began subscription TV services in offerings by our competition, our relative discipline
1996 and had 14 million subscribers at yearend 2007. DISH in the amount of discounted programming or
utilizes a satellite fleet that enables it to offer 2,700 video and equipment we currently offer, the heavy marketing
audio channels, including local programming. of HD service by our competition, the growth of
On January 1, 2008, DISH spun off technology and certain fiber-based pay TV providers, signal theft and other
infrastructure assets into EchoStar Corporation (SATS). forms of fraud, and operational inefficiencies.”
• Opex grew faster than revenue in Q3, as SAC and
SELECTED OPERATING DATA retention costs rose. Increased upgrades are likely to
YTD continue at least through 1H09.
FYE December 31 2005 2006 2007 9/30/08 • AT&T deal to terminate on January 31. AT&T
Selected growth rates:
Subscriber revenue 19% 17% 13% 8%
accounted for 17% of gross subscriber additions
ARPU 6% 8% 5% 6% YTD. The one million subscribers acquired through
Subscribers (average) 13% 10% 7% 3% AT&T may churn faster than others.
Subscribers (period end) 10% 9% 5% 1% • Competition from DirecTV and cable.
Subscriber acq. cost (SAC) 13% -1% -4% 10%
Selected items as % of subscriber revenue: • Net debt of $4.3 billion, purchase obligations of
Subscriber gross profit 49% 49% 49% 49% $1.5 billion, satellite obligations of $924 million.
SAC 19% 17% 15% 14%
EBIT 15% 13% 15% 18% LIQUIDITY SNAPSHOT1
D&A 10% 12% 12% 9%
Balance sheet items ($mn) 12/31/07 9/30/08
Capex 19% 15% 14% 10%
Cash and ST investments ST $2,788 $1,537
FCF 3% 9% 11% 11%
LT cash and investments LT 173 176
DISH Network subscriber data (mn, except if stated otherwise):
Capital leases, mortgages, notes ST (50) (12)
Subscribers (period end) 12.0 13.1 13.8 13.8
3% convertible note due 2010/11 ST (525) (25)
Subscribers (average) 11.5 12.6 13.4 13.8 1
5 3/4% senior notes due 2008 ST (1,000) (972)
Gross additions 3.4 3.5 3.4 2.3
6 3/8% senior notes due 2011 LT (1,000) (1,000)
Net additions 1.1 1.1 0.7 0.0
Monthly churn 1.65% 1.64% 1.70% 1.86%
Monthly ARPU ($) 58 63 66 69
7% senior notes due 2013 LT (500) (500)
SAC ($) 693 686 656 715
7 3/4% senior notes due 2015 LT (0) (750)
SAC / ARPU (months) 11.9 10.9 10.0 10.4
Capital leases, mortgages, notes LT (550) (223)
Net cash and investments ($3,165) ($4,268)
INVESTMENT HIGHLIGHTS 1
Redeemed $972 million of notes on October 1.
• Positioned as low-cost provider of multi-channel
pay TV services, competitive on price and COMPARABLE PUBLIC COMPANY ANALYSIS
programming versus cable television providers and ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
DirecTV. Subscriber growth is driven by equipment DTV 21,678 24,540 1.3x 25.1x 15x 12x
subsidies and promotional pricing on programming. DISH 4,918 9,466 .8x n/m 5x 5x
• Utilizes twelve satellites in geostationary orbit
22,300 miles above the equator, five of which are MAJOR HOLDERS
owned by DISH, six are leased from EchoStar and Class A common shares (209 million out): CEO Ergen 50%
one is leased from a third party. │ Other insiders 8% │ Fairholme 10% │ Barclays 8% │
• Purchased 700 MHz spectrum for $712 million in Dodge & Cox 6%; Class B common shares (238 million
an FCC auction in March. The acquired spectrum out): CEO Ergen 87% │ Other insiders 11%
covers 76% of the U.S. population.
• Chairman and CEO Charlie Ergen (54) is a well- RATINGS
respected satellite entrepreneur who has led DISH VALUE Intrinsic value materially higher than market value?
since co-founding it with James DeFranco in 1980. MANAGEMENT Capable and properly incentivized?
DeFranco (55) serves as EVP of marketing and FINANCIAL STRENGTH Solid balance sheet?
sales. CFO Bernard Han (43) joined in 2006 from MOAT Able to sustain high returns on invested capital?
Northwest Airlines, where he had served as CFO. EARNINGS MOMENTUM Fundamentals improving?
• Stock price implies 26% trailing FCF yield, 6x MACRO Poised to benefit from economic and secular trends?
trailing P/E and 5x forward P/E. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE

While DISH continues to generate strong free cash flow, the weak economy has negatively affected gross subscriber
additions and boosted churn. We find the company’s balance sheet a bit precarious given the difficulty of predicting
consumer spending. We can see a scenario in which equity value continues to erode due to claims by creditors.
Double-Take Software, Inc. (Nasdaq: DBTK) Southborough, MA, 877-335-5674

Technology: Software & Programming http://www.doubletake.com


per share data) 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 24 30 41 61 83 95 21 24
Gross profit 19 26 36 53 75 85 19 22
EBIT (8) (7) (4) 7 17 18 5 4
Net income (16) (15) (12) (1) 20 14 3 3
Diluted EPS (0.77) (0.75) (0.58) (0.03) 0.87 0.60 0.14 0.11
Cash from ops (4) (1) 4 14 21 25 4 5
Capex 1 1 1 2 2 3 1 1
Free cash flow (5) (2) 3 12 18 22 4 5
Total assets n/a 13 19 77 115 124 99 124
Common equity n/a (43) (54) 45 76 85 67 85
EBIT/capital employed n/a n/m n/m n/m n/m n/m n/m n/m
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • Guiding for revenue growth of 16-18%, non-

Double-Take provides data protection software and is the GAAP EBIT growth of 7-11% and non-GAAP
leading supplier of replication software for Microsoft server EPS decline of 36-38% in 2008 (down from prior
environments. It has 15,000 customers and generates roughly guidance for revenue growth of 23-25%, EBIT
70% of revenue from resellers such as Dell. growth of 14-16% and EPS decline of 32-34%).
• Software industry veteran Dean Goodermote
SELECTED OPERATING DATA (54) became CEO in 2005. VP of Engineering
YTD Robert Beeler (42) has been with the company since
FYE December 31 2005 2006 2007 9/30/08
the initial release of Double-Take software in 1995.
Software 64% 63% 59% 54% CFO Craig Huke (46) joined the company in 2003
Maintenance and services 36% 37% 41% 46% after serving in CFO roles at two technology firms.
Revenue growth by type: • Stock price implies 14% trailing FCF yield, 12x
Software 31% 47% 28% 11%
Maintenance and services 46% 55% 50% 34%
∆ revenue 36% 49% 36% 20%
∆ deferred revenue
1
51% 54% 38% 19% INVESTMENT RISKS & CONCERNS
% of revenue by geography: • Missed Q3 revenue guidance by 7% due to license
North America 77% 71% 65% 63% push-outs. The miss was most pronounced in the
EMEA 18% 26% 32% 31%
Asia Pacific 6% 3% 3% 5% U.S. Management expects weak IT spending to
Revenue growth by geography: persist, noting that “investors should not expect the
North America 45% 38% 25% 23% growth rate that they have seen from us in the past.”
EMEA 11% 121% 69% 15%
• ~70% of revenue from resellers such as Dell and
Asia Pacific 30% -14% 24% 24%
% of revenue by customer: another 15-20% of revenue from distributors/OEMs.
Dell 19% 20% 18% n/a • Strategic bet on Microsoft technology may make
Sunbelt Software Distribution 13% 13% 12% 12% it difficult to expand into large enterprises, many of
Next three largest customers 31% 14% 15% n/a
Other indirect customers 30% 47% 48% n/a
which still rely heavily on Unix-based systems.
Direct sales 7% 6% 7% 11% • Primary competitors include EMC (Legato),
1
At period end. Neverfail, Symantec (Veritas) and CA (XOsoft).

• Leader in $700 million Windows replication ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
software market, expected to grow to $1.2 billion BMC 4,691 4,077 2.2x n/m 11x 10x
in 2011, a 21% CAGR.1 Replication software is CA 8,821 8,660 2.0x n/m 11x 10x
expected to reach $4.3 billion in 2011, while the EMC 20,367 17,950 1.2x 3.9x 13x 12x
broader storage software market is $10 billion. FALC 126 79 .9x 2.0x 17x 12x
• Sells primarily to SMB market. Growth in data SYMC 10,208 10,003 1.6x n/m 9x 8x
creation and collection, new regulations and the DBTK 156 88 .9x 2.6x 12x 11x
threat of disruption from disasters have increased
data protection requirements for many businesses. MAJOR HOLDERS
• Double-Take software continuously replicates CEO Goodermote 3% │ Other insiders 17% │ ABS Capital
changes made to application data on a primary 15% │ Copper Rock 7% │ Oberweis 6%
server to a duplicate server located on- or off-site.
The company’s software was first released in 1995. RATINGS
• $8 million TimeSpring acquisition (December VALUE Intrinsic value materially higher than market value?
2007) enables data recovery from almost any point MANAGEMENT Capable and properly incentivized?
in time from a repository located on- or off-site. FINANCIAL STRENGTH Solid balance sheet?
• $10 million emBoost acquisition (July 2008) MOAT Able to sustain high returns on invested capital?
enables assignment and re-assignment of workloads EARNINGS MOMENTUM Fundamentals improving?
to any Windows or Linux physical servers or MACRO Poised to benefit from economic and secular trends?
desktops or a virtual machine in their environment. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
1
Source: Company, IDC.
THE BOTTOM LINE

Double-Take is an attractively priced, growing software company in the data storage industry, which enjoys favorable long-
term trends due to the explosion of digital data and rising concerns about data protection. However, the company has a
comparatively narrow product offering, and it could become marginalized. We are reminded of companies such as
StorageNetworks and McData, both of which were too narrowly focused to survive as independent firms. As a result,
Double-Take may realize shareholder value through a sale to a larger competitor. We note that the company’s top customer,
Dell, has stated a strategic interest in growing its software and services revenue as a percentage of overall revenue.
Dynacq Healthcare, Inc. (Nasdaq: DYII) Houston, TX, 713-378-2000

Health Care: Healthcare Facilities http://www.dynacq.com


per share data) 8/31/01 8/31/02 8/31/03 8/31/04 8/31/05 8/31/06 8/31/07 5/31/08 5/31/07 5/31/08
Revenue 44 65 90 39 42 36 43 60 13 14
Gross profit 29 40 59 18 19 18 22 32 7 6
EBIT 14 26 36 (6) (3) (4) 4 15 3 2
Net income 8 15 21 (2) (5) (6) 4 15 3 1
Diluted EPS 0.51 0.96 1.27 (0.30) (0.20) (0.21) 0.24 0.62 0.16 0.07
Cash from ops 3 12 16 12 5 (3) 6 21 (0) 9
Capex 1 4 17 5 4 0 1 1 0 0
Free cash flow 2 8 (2) 7 1 (3) 5 20 (1) 9
Total assets 36 54 88 83 73 71 79 85 74 85
Short-term debt 0 0 7 7 5 6 8 1 8 1
Long-term debt 1 0 0 0 0 0 1 0 1 0
Common equity 28 47 65 63 59 54 59 70 55 70
EBIT/capital employed 57% 95% 86% -11% -7% -13% 13% 59% n/m n/m
$35
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • Difference between gross billed charges and net

Dynacq manages acute care hospitals that provide bariatric, revenue. The company had gross billed charges of
orthopedic, neuro-spine, and other specialized surgeries. The $100 million in the nine months ended May 31, yet
hospitals include operating rooms, pre- and post-op space, it recorded net revenue of only $49 million. The
ICUs, nursing units, and diagnostic facilities, as well as delta represents a “contractual allowance,” which
adjacent buildings that lease space to physicians. Dynacq Dynacq estimates based on subjective and hard-to-
owns a hospital in Pasadena, TX (near Houston) and another follow criteria. The allowance as a percentage of
in Garland, TX (near Dallas). Most surgeries are covered by gross billings has a large impact on profitability and
workers’ comp or out-of-network commercial insurance. The has exhibited large volatility. For example, the
company participates minimally in managed care contracts. allowance was 51% for the nine months ended May
Dynacq sold a hospital in Baton Rouge, LA in FY08 and a 31, yet it rose to 61% for the quarter ended May 31.
surgery center in West Houston, TX in FY07. • Low visibility into capital dealings. The company
formed Dynacq Huai Bei Healthcare (DHBH) as a
SELECTED OPERATING DATA Chinese corporation. The company recently
YTD capitalized DHBH with $10 million, making it
FYE August 31 2005 2006 2007 5/31/08 potentially difficult for shareholders to “follow the
Calculation of net revenue: money” now that it is at the Chinese subsidiary
Gross billed charges $100 $87 $96 $100
Contractual allowance 58 51 53 51 level. In July, the company sold its interest in a
Net revenue $42 $36 $43 $49 property owned by a Chinese joint venture company
Net revenue growth 6% -14% 19% 54% (DeAn) for $4.6 million. It is unclear whether the
Allowance percentage 58% 59% 55% 51% company obtained fair market value in the sale. The
% of net patient revenue by facility:
Pasadena facility 72% 57% 38% n/a JV management contract was to be transferred to
Garland facility 27% 43% 62% n/a DHBH. We cannot ascertain the rationale for these
dealings and find them murky.
INVESTMENT HIGHLIGHTS • COO Alan Beauchamp resigned in July. He was
• Contractual allowance declined from FY05- not immediately replaced.
FY07, boosting revenue and returning Dynacq to
profitability. The allowance fell from 58% in FY05 COMPARABLE PUBLIC COMPANY ANALYSIS
to 51% in the first nine months of FY08, though it ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
rose to 61% in the quarter ended May 31. AMSG 685 854 1.4x n/m 14x 13x
• Strong balance sheet, with $34 million of net cash CYH 1,721 10,287 1.0x n/m 8x 7x
and $4 million of net assets held for sale on May 31. HMA 439 3,558 .8x n/m 4x 4x
LPNT 1,233 2,695 1.0x n/m 9x 9x
• Repurchased 280,000 shares at average cost of
MDTH 151 207 .3x 0.5x 8x 6x
$5.60 per share from March through July.
RHB 262 302 .4x 3.9x 15x 12x
UHS 1,977 2,913 .6x 2.4x 10x 10x
5x trailing P/E (no EPS estimates available).
THC 931 5,150 .6x n/m n/m 98x
INVESTMENT RISKS & CONCERNS DYII 53 22 .4x 0.8x n/a n/a
• Moved corporate domicile from Delaware to

Nevada in August 2007. It is unclear why the MAJOR HOLDERS
company chose to reincorporate in Nevada. The CEO Chan 54% │ Other insiders 5%
company indemnifies directors against damages for
breach of their fiduciary duty and advance expenses RATINGS
“to the full extent permitted by Nevada law.” VALUE Intrinsic value materially higher than market value?
• Uncertainty regarding recoveries on accounts MANAGEMENT Capable and properly incentivized?
receivable in Medical Dispute Resolution (MDR) FINANCIAL STRENGTH Solid balance sheet?
process. The company has attempted to collect on MOAT Able to sustain high returns on invested capital?
MDR accounts receivable and has recorded a total EARNINGS MOMENTUM Fundamentals improving?
of $20 million in settlements for service dates MACRO Poised to benefit from economic and secular trends?
ranging from 2001-2005. It is impossible to predict EXPLOSIVENESS 5%+ probability of 5x upside in one year?
the level of future MDR process recoveries.
THE BOTTOM LINE

Dynacq is a cheap company by almost any measure, with significant excess cash and real estate assets. However, operating
performance is exceedingly difficult to analyze due to major accounts receivable reserves and reimbursement issues. In
addition, we dislike the company’s murky dealings in China, including the movement of cash to Chinese subsidiaries.
EarthLink, Inc. (Nasdaq: ELNK) Atlanta, GA, 404-815-0770

Technology: Computer Services http://www.earthlink.net

Price: $6.36 (as of 11/14/08) Month # of P/E FYE 12/31/07 n/m

per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 1,245 1,357 1,402 1,382 1,290 1,301 1,216 1,022 298 231
Gross profit 735 813 883 951 923 878 788 642 192 144
EBIT (367) (161) (67) 111 165 96 48 208 (5) 59
Net income (371) (168) (67) 111 143 5 (135) 153 (79) 55
Diluted EPS (2.73) (1.11) (0.42) 0.70 1.02 0.19 (0.45) 1.72 (0.39) 0.49
Cash from ops 47 19 102 188 189 115 89 209 21 67
Capex 110 54 40 32 41 48 61 17 22 2
Free cash flow (63) (35) 61 156 148 68 28 192 (1) 64
Total assets 1,183 1,024 827 806 749 968 735 823 843 823
Short-term debt 12 3 1 0 0 0 0 0 0 0
Long-term debt 2 1 0 0 0 259 259 259 259 259
Common equity 851 692 544 548 522 459 262 412 325 412
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • Founder Sky Dayton retired from Board in

EarthLink is a U.S. Internet service provider (ISP) operating October. Rolla Huff (51) joined EarthLink as CEO
in two segments: Consumer Services provides Internet access in June 2007. He was previously CEO of Mpower.
and value-added services to individuals. Business Services • Gain “flexibility to pursue strategic alternatives”
provides Internet access and value-added services to by terminating convert hedge in September.
businesses and communications carriers. • Solid balance sheet, with $226 million of net cash.
• Large NOL, with $678 million of federal and $291
SELECTED OPERATING DATA million of state loss carryforwards at yearend 2007.
YTD
FYE December 31 2005 2006 2007 9/30/08
• Repurchased 3.8 million shares for $32 million
% of revenue by type of service: YTD. $169 million remained authorized at Q3-end.
Access 94% 91% 89% 89% • Stock price implies 28% trailing FCF yield, 4x
Value-added services 6% 9% 11% 11% trailing P/E and 5x forward P/E.
Consumer services 95% 88% 84% 82%
Business services 5% 12% 16% 18% INVESTMENT RISKS & CONCERNS
Revenue growth by segment: • Business in runoff? Revenue has declined, and
Consumer services n/a -7% -10% -23% management appears focused on maximizing cash
Business services n/a 130% 18% -6%
Total revenue growth -7% 1% -7% -21%
flow from existing subscribers while keeping
EBIT margin by segment: reinvestment modest. The company has returned
Consumer services 15% 14% 19% 40% cash to shareholders through large buybacks.
Business services 68% 14% 7% 14% • Internet access a commodity. While EarthLink
provides value-added services, commoditized dial-
Subscriber growth (period end): up and broadband Internet access account for close
Dial-up consumers -8% -8% -20% -33% to 90% of revenue. Declining consumer access
Broadband consumers 17% 14% -42% -14% pricing reflects the commodity nature of the service.
Businesses 10% 39% -13% -15%
Total subscriber growth -1% 0% -27% -27% • Stopped investing in Helio in 2007, after capital
Consumer subscribers (mn)
1
5.2 5.1 4.3 3.3 contributions of $210 million. Helio, a JV with SK
Consumer monthly ARPU ($)
2
20 19 20 21 Telecom, is a U.S. mobile virtual network operator.
Consumer net churn 4.6% 4.6% 5.2% 4.6% EarthLink owned 31% of Helio at yearend 2007.
1
Business subscribers (mn) 0.2 0.2 0.2 0.2
Business monthly ARPU ($) 38 64 77 81
Business net churn
2
2.6% 2.8% 2.6% 2.8% COMPARABLE PUBLIC COMPANY ANALYSIS
1
Represents period-average subscribers. 08 09
2
Churn rate for 2007 excludes impact of loss of Embarq-related subscribers. P/E P/E
LVLT 1,402 7,578 1.7x n/m n/m n/m
INVESTMENT HIGHLIGHTS MSFT 178,445 159,698 2.6x 9.2x 10x 9x
• Reduced back-office costs and new subscriber Q 4,936 18,405 1.4x 14.3x 7x 7x
marketing due to declining sales and changes in the S 6,571 25,095 .7x n/m 29x n/m
Internet access industry. EarthLink now focuses on T 162,942 238,122 1.9x n/m 10x 9x
maximizing income from more tenured subscribers. VZ 85,215 128,316 1.3x n/m 12x 11x
YHOO 14,994 11,780 1.6x 2.1x 26x 23x
• Aims to retain subscribers and grow business
services through New Edge, a CLEC that provides ELNK 689 501 .5x 3.6x 3x 5x
secure managed data networks and dedicated
Internet access. EarthLink acquired New Edge for MAJOR HOLDERS
$109 million and 1.7 million shares in 2006. CEO Huff 1% │ Other insiders 2% │ Steel Partners 11% │
• Raised guidance in July and again in October, Sterling 10% │ Coghill 9% │ Artisan 6% │ Barclays 5%
driven by better-than-expected passive subscriber
additions, lower churn and reduced opex. RATINGS
Management is guiding for adjusted EBITDA of VALUE Intrinsic value materially higher than market value?
$290-300 million, FCF of $270-290 million and MANAGEMENT Capable and properly incentivized?
income from continuing operations of $200-210 FINANCIAL STRENGTH Solid balance sheet?
million in 2008. Preliminary 2009 guidance calls for MOAT Able to sustain high returns on invested capital?
adjusted EBITDA of $210-225 million, FCF of EARNINGS MOMENTUM Fundamentals improving?
$180-205 million, and income from continuing MACRO Poised to benefit from economic and secular trends?
operations of $135-155 million. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE

EarthLink is a “cash cow” offering commoditized Internet access to consumers and businesses. Management has made a
strategic decision to cut backend costs and marketing expenses in order to maximize FCF generated by existing customers.
The shares deserve a look, but investors should make conservative assumptions about future ARPU and churn.
eBay Inc. (Nasdaq: EBAY) San Jose, CA, 408-376-7400

Services: Retail (Specialty Non-Apparel), Member of S&P 500 http://www.ebay.com


per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 749 1,214 2,165 3,271 4,552 5,970 7,672 8,686 1,889 2,118
Gross profit 614 1,000 1,749 2,657 3,734 4,713 5,909 6,532 1,443 1,557
EBIT 124 350 628 1,059 1,442 1,423 613 2,248 (938) 524
Net income 90 250 442 778 1,082 1,126 348 1,943 (936) 492
Diluted EPS 0.08 0.21 0.34 0.57 0.78 0.79 0.25 1.46 (0.69) 0.38
Cash from ops 252 480 874 1,285 2,010 2,248 2,641 2,991 630 693
Capex 57 139 365 293 338 515 454 535 119 150
Free cash flow 195 341 509 993 1,672 1,732 2,187 2,456 510 543
Total current assets 884 1,469 2,146 2,911 3,183 4,971 7,123 6,008 6,362 6,008
Intangible assets 199 1,736 1,993 3,073 6,943 7,227 6,853 6,640 6,823 6,640
Total assets 1,679 4,040 5,820 7,991 11,789 13,494 15,366 14,240 14,787 14,240
Short-term debt 16 3 3 124 0 0 200 0 0 0
Total current liabilities 180 386 647 1,085 1,485 2,518 3,100 2,855 3,273 2,855
Long-term debt 12 14 125 0 0 0 0 0 0 0
Total liabilities 249 484 924 1,263 1,741 2,589 3,661 3,547 3,914 3,547
Common equity 1,429 3,557 4,896 6,728 10,048 10,905 11,705 10,694 10,873 10,694
EBIT/capital employed 90% >100% >100% >100% >100% >100% >100% >100% n/m n/m
$70
$60
$50
$40
$30
$20
$10
$0
BUSINESS OVERVIEW • Acqusitions of Bill Me Later and two classifieds

eBay enables person-to-person ecommerce and provides websites in Denmark for $1.3 billion in October
technology-driven services. It operates in three segments: suggest continued M&A appetite, despite
Marketplaces facilitates commerce through eBay.com and perception that the company may have overpaid in
other online platforms, including classifieds sites, Half.com, the $2.6 billion acquisition of Skype in 2005. Other
Rent.com, Shopping.com, and StubHub. Payments consists acquisitions included Shopping.com for $634
of payment platform PayPal. Communications consists of million in 2005 and PayPal for $1.5 billion in 2002.
VoIP service provider Skype. Seasonality is strongest in Q4. • Guiding for revenue growth of 11-13% and non-
GAAP EPS growth of 10-12% in 2008, with
SELECTED OPERATING DATA expected revenue of $8.53-8.68 billion, GAAP EPS
YTD of $1.32-1.34 and non-GAAP EPS of $1.69-1.71.
FYE December 31 2005 2006 2007 9/30/08
• John Donahoe succeeded long-time CEO Meg
Marketplaces 77% 73% 70% 66% Whitman in March. Donahoe previously served as
Payments 23% 24% 25% 27% president of eBay Marketplaces for three years.
Communications 1% 3% 5% 6% Prior to eBay, he was a managing director at Bain.
Marketplaces 36% 24% 24% 12%
• Repurchased $5.3 billion of stock since program
Payments 47% 40% 34% 31% inception in 3Q06, including $2.2 billion in 2008.
Communications nm 686% 96% 52% • Stock price implies 16% trailing FCF yield, 8x
Total revenue growth 39% 31% 29% 18% trailing P/E and 7x forward P/E.
Marketplaces 43% 42% 44% 43%
Payments 29% 23% 20% 20% INVESTMENT RISKS & CONCERNS
Communications
1
-4% -14% 12% 20% • Core eBay.com marketplace may have reached
Total EBIT margin
1
32% 24% 26% 25%
steady-state growth phase, with Marketplaces
% of revenue by geography: revenue up only 4% to $1.4 billion in Q3 on a 1%
U.S. 54% 52% 49% 47% decline in gross merchandise volume to $14 billion.
Germany 16% 15% 13% Interestingly, revenue equals 10% of gross volume,
U.K.
Rest of world
13%
17%
13%
20%
14%
24%
}
53% not an insignificant “toll” levied on eBay users.
Marketplaces segment — growth of selected metrics: • Sensitive to consumer spending, as most items
Active users 28% 14% 2% 3% bought and sold on eBay are discretionary items. In
Number of listings 33% 26% -1% 18% addition, PayPal’s performance correlates with
Gross merchandise volume 30% 18% 13% 7% ecommerce spending at online merchants.
Payments segment — growth of selected metrics:
Active registered accounts 39% 20% 16% 19%
Net total payment volume 45% 37% 33% 32% COMPARABLE PUBLIC COMPANY ANALYSIS
Communications segment — growth of selected metric: ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
Registered users nm 129% 61% 51% AMZN 17,904 16,015 .9x 8.4x 29x 26x
1
Excludes $1.4 billion goodwill impairment in 2007.
GOOG 97,580 83,168 4.0x 4.5x 16x 14x
YHOO 14,994 11,780 1.6x 2.1x 26x 23x
EBAY 15,783 12,139 1.4x 3.9x 7x 7x
• Online auctions leader; operates market-leading
eBay website, with 14% share of global ecommerce
and 85 million active users. The company enjoys MAJOR HOLDERS
high barriers to entry due to network effects. CEO Donahoe <1% │ Other insiders 16% │ Barclays 5% │
• PayPal payment volume and revenue up 28% Legg Mason 4%
and 27%, respectively, in Q3. Recently launched
merchant services deals include Walmart.com, RATINGS
American Eagle and OfficeMax. PayPal accounts VALUE Intrinsic value materially higher than market value?
for more than 8% of global ecommerce payments. MANAGEMENT Capable and properly incentivized?
• Skype has grown to 13 million concurrent users
at certain peak times, with 370 million total
registered users. Skype-to-Skype minutes grew 63%
to 16 billion in Q3, while revenue increased 46%.
THE BOTTOM LINE

eBay has grown over the years to include not only the flagship ecommerce community but also online payments and
communications innovators PayPal and Skype. Merchandise volume growth has acquired a cyclical component as the
company has grown larger, with volume stagnating recently due to the weak economy. Despite the slowdown in growth,
however, eBay remains a business with high returns on capital and high barriers to entry. We consider the shares attractive.
EMCOR Group, Inc. (NYSE: EME) Norwalk, CT, 203-849-7800

Capital Goods: Construction Services, Member of S&P SmallCap 600 http://www.emcorgroup.com


per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 3,420 3,968 4,500 4,698 4,593 4,902 5,927 6,872 1,501 1,720
Gross profit 392 483 478 443 485 552 703 880 169 224
EBIT 89 116 46 42 75 112 200 288 55 79
Net income 50 63 21 33 60 87 127 172 38 49
Diluted EPS 0.85 1.02 0.32 0.53 0.93 1.30 1.86 2.56 0.55 0.72
Cash from ops 81 155 (2) 44 145 210 259 326 70 89
Capex 18 16 18 16 12 20 22 32 5 9
Free cash flow 63 139 (20) 28 133 190 238 294 66 80
Total assets 1,350 1,759 1,795 1,818 1,779 2,089 2,872 3,047 2,844 3,047
Short-term debt 1 134 140 81 1 1 4 4 3 4
Total current liabilities 854 1,180 1,179 1,162 1,045 1,208 1,514 1,600 1,492 1,600
Long-term debt 1 1 1 1 1 1 224 197 299 197
Total liabilities 928 1,269 1,274 1,256 1,164 1,379 1,987 2,036 2,019 2,036
Common equity 422 490 521 562 615 710 885 1,011 824 1,011
EBIT/capital employed 41% 48% 15% 13% 24% 43% 81% >100% n/m n/m
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • Facilities services mitigate cyclicality, as margins

EMCOR provides mechanical and electrical construction, are less volatile and inversely related to construction
energy infrastructure and facilities services to commercial, margins. Demand for facilities services rose in Q3.
industrial, utility and institutional customers. The company’s • $455 million Ohmstede deal should be accretive
systems create facility environments. Domestic electrical and in 2008. Ohmstede provides maintenance, repair
mechanical construction accounted for 64% of revenue in and manufacturing to Gulf Coast refineries and
2007, of which 68% was related to new construction and petrochemical firms (2008E revenue: $300 million).
32% to renovation and retrofit. EMCOR has 30,000 • Service work 35% of revenue in 2008E vs. 25%
employees and 170 locations in the U.S., Canada and U.K. in 2003. Facilities services represent higher-margin
recurring revenue not entirely reflected in backlog.
SELECTED OPERATING DATA • Stock price implies 33% trailing FCF yield, 5x
YTD trailing P/E and 5x forward P/E.
FYE December 31 2005 2006 2007 9/30/08
% of revenue by geographic segment:
U.S. electrical services 27% 26% 24% 25% INVESTMENT RISKS & CONCERNS
U.S. mechanical services 36% 37% 40% 36% • Q3-end backlog of $4.4 billion fell 1% y-y and
U.S. facilities services 15% 17% 18% 22%
Canada services 7% 6% 6% 6%
down 5% from the record level at the end of Q2.
U.K. services 15% 14% 12% 10% • Cyclical construction business: “customers may
Revenue growth by geographic segment: delay or cancel new projects…, especially with
U.S. electrical services -1% 5% 12% 27% respect to more profitable private sector work…”
U.S. mechanical services -6% 9% 29% 10%
U.S. facilities services 8% 22% 26% 59% • Input prices. EMCOR uses copper and steel in
Canada services 22% -13% 28% 28% construction and facilities services. Gas prices affect
U.K. services -1% 0% 7% 4% its fleet of 7,500 vehicles. Most contracts “do not
∆ revenue 0% 7% 21% 23% allow [EMCOR] to adjust our prices… increases in
∆ organic revenue 15% 12%
material or fuel costs could reduce… profitability.”
EBIT margin by geographic segment:
U.S. electrical services 6.5% 3.7% 6.2% 5.9% • Fixed-price contracts account for a “significant”
U.S. mechanical services 1.2% 4.5% 5.8% 4.0% portion of revenue, exposing the company to
U.S. facilities services 3.0% 4.0% 4.2% 7.4% inaccurate cost assessments and cost overruns.
Canada services -2.3% 0.1% 1.8% 2.6%
U.K. services 1.1% 1.0% -1.8% 2.0% • 73% of workforce unionized.
Corporate and other -1.0% -1.2% -1.0% -1.0%
Total EBIT margin 1.6% 2.3% 3.4% 3.9% COMPARABLE PUBLIC COMPANY ANALYSIS
D&A as % of revenue 0.4% 0.3% 0.3% 0.4% ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
Capex as % of revenue 0.3% 0.4% 0.4% 0.5%
FIX 280 193 .1x 1.6x 6x 7x
IESC 105 73 .1x 0.7x n/a n/a
INVESTMENT HIGHLIGHTS JCI 9,124 12,684 .3x 4.4x 8x 7x
• Complexity of electrical and mechanical systems LII 1,271 1,531 .4x 3.6x 9x 9x
drives industry growth. U.S. non-residential PWR 2,786 2,932 .8x 3.3x 16x 11x
construction spending, a proxy for EMCOR’s EME 904 763 .1x 5.4x 5x 5x
markets, rose 16% to $630 billion in 2007.1
• Leader in core businesses: electrical, mechanical,
MAJOR HOLDERS
and int’l construction; strong in growth businesses:
CEO MacInnis 3% │ Other insiders 5% │ Bank of New
top three in commercial and top ten in government
York 6% │ Freiss 5%
facilities services, #1 non-OEM mechanical/ mobile
services provider, #2 non-OEM fire protection
RATINGS
provider, #1 in industrial heat exchangers.
• Benefits from increased energy services demand, MANAGEMENT Capable and properly incentivized?
including utility generation, distributed generation, FINANCIAL STRENGTH Solid balance sheet?
refinery/ oil & gas, and energy efficiency. MOAT Able to sustain high returns on invested capital?
• Guiding for revenue growth of 15-18% and EPS EARNINGS MOMENTUM Fundamentals improving?
growth of 31-36% in 2008, with estimated revenue MACRO Poised to benefit from economic and secular trends?
of $6.8-7.0 billion and EPS of $2.48-2.58. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
1
Source: EMCOR, United States Census Bureau.
THE BOTTOM LINE

EMCOR has many things going for it, including strong positions in attractive markets and positive operating momentum,
driven by organic and acquisition-related revenue growth, margin expansion, and near-record backlog. Faster-growing
facilities services revenue mitigates some of the cyclicality of the construction-related businesses. However, we remain
unconvinced that the company has done away with the cyclicality of the overall business. As a result, we worry that recent
margin expansion may be reversible and that the company could see lower earnings in a prolonged downturn.
Emulex Corporation (NYSE: ELX) Costa Mesa, CA, 714-662-5600

Technology: Semiconductors http://www.emulex.com


per share data) 6/30/02 6/29/03 6/27/04 7/3/05 7/2/06 7/1/07 6/29/08 9/28/08 9/30/07 9/28/08
Revenue 255 308 364 376 403 470 488 483 117 112
Gross profit 132 196 221 221 239 275 301 303 68 70
EBIT (104) 99 (499) 105 61 44 66 63 13 9
Net income (96) 66 (532) 72 41 29 (7) (10) 10 8
Diluted EPS (1.18) 0.79 (6.47) 0.80 0.46 0.34 (0.09) (0.13) 0.12 0.09
Cash from ops 89 107 79 151 111 130 142 89 45 (8)
Capex 10 19 51 17 52 13 28 30 6 8
Free cash flow 80 88 28 135 59 117 114 59 39 (16)
Total assets 1,207 1,190 973 802 860 660 699 640 641 640
Short-term debt 0 0 0 0 235 0 0 0 0 0
Long-term debt 345 209 525 233 0 0 0 0 0 0
Common equity 823 902 393 478 557 582 576 549 566 549
EBIT/capital employed -157% >100% -469% 85% 55% 37% 62% 48% n/m n/m
$120
$100
$80
$60
$40
$20
$0
BUSINESS OVERVIEW • Strong balance sheet, with $294 million of cash

Emulex provides storage networking products, based on and short-term investments and no debt.
proprietary ASICs, in two primary categories: • M&A: CEO McCluney wants to “take advantage of
Host server products (HSPs) include host bus adapters our opportunities to grow through diversification.”
(HBAs) based on fibre channel technology, and converged • $140 million repurchase authorized in August.
network adapters (CNAs) based on fibre channel over • Stock price implies 10% trailing FCF yield and
ethernet (FCoE) technology. HBAs enable servers to 9x forward P/E (trailing GAAP EPS loss reported).
efficiently connect to storage area networks (SANs) by
offloading data processing tasks from the server. CNAs INVESTMENT RISKS & CONCERNS
efficiently move data between ethernet-based local area • Guiding for 2Q09 revenue decline of 11-15% and
networks (LANs) and fibre channel-based SANs. non-GAAP EPS decline of 32-41%, following
Embedded storage products (ESPs) include storage switches, revenue drop of 5% and EPS drop of 19% in 1Q09.
bridges, routers, and input/output controllers (IOCs) • Growing competition, including the mid-2007
deployed inside arrays, tape libraries, and other storage. HBA market entry by Brocade and the increasing
Emulex typically experiences modest seasonality, with lower prominence of iSCSI HBA vendors, such as
sequential revenue growth in FQ1 and FQ3. Broadcom, Intel, and Mellanox. Emulex’s ESPs
compete against LSI, Maxim, and PMC-Sierra.
SELECTED OPERATING DATA • Large customer concentration, with investors
FYE June 30 2006 2007 2008 1Q09 heavily focused on OEM share gains and losses.
% of revenue by segment: • Marketing head Michael Smith left Emulex in
Host server products 85% 76% 72% 73% July. He was not immediately replaced.
Embedded storage products 15% 23% 28% 27%
• Technology evolution. Storage has evolved, driven
Host server products 6% 5% -1% -9% by the decline of SCSI technology, the rise of fibre
Embedded storage products 21% 82% 25% 8% channel, and the market entry of Cisco, which has
Total revenue growth 7% 17% 4% -5% pushed iSCSI as a fibre channel alternative. Emulex
U.S. 55% 47% 40% 36%
benefited from the decline of SCSI but stands to
Pacific Rim 13% 17% 26% 29% lose if fibre channel declines. We are reminded of
Europe and ROW 32% 36% 34% 35% Adaptec, whose HBA fortunes fell along with SCSI.
Revenue by customer:
IBM 29% 25% 28% 29% COMPARABLE PUBLIC COMPANY ANALYSIS
EMC 23% 18% 18% 13%
HP 10% 13% 15% 16% ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
Info X 21% 17% 14% <10% BRCD 1,417 912 .6x 1.8x 6x 6x
Others 17% 27% 25% >32% BRCM 7,852 5,605 1.2x 3.0x 9x 11x
CSCO 97,853 77,961 1.9x 4.8x 12x 11x
INVESTMENT HIGHLIGHTS QLGC 1,387 1,006 1.5x 2.5x 9x 9x
• Number-two provider of fibre channel HBAs, LSI 2,013 1,554 .6x 2.9x 7x 8x
ranking behind Qlogic in quasi-duopolistic market ELX 593 299 .6x 1.5x 9x 8x
(Brocade’s mid-2007 market entry may adversely
affect competitive dynamics). The market for host MAJOR HOLDERS
server products has grown along with the adoption CEO McCluney 1% │ Other insiders 7% │ Wellington 9%
of storage area networks as a means of accessing │ Primecap 8% │ Invesco 6% │ Vanguard 6%
enterprise data. HBA market growth is also heavily
influenced by server shipments, which have slowed. RATINGS
• Strong proprietary technology. Emulex’s fibre VALUE Intrinsic value materially higher than market value?
channel development efforts began in 1992. The MANAGEMENT Capable and properly incentivized?
company has 500 engineers and owns significant IP. FINANCIAL STRENGTH Solid balance sheet?
• James McCluney (57) joined Emulex as COO MOAT Able to sustain high returns on invested capital?
and became CEO in 2006. He was previously CEO EARNINGS MOMENTUM Fundamentals improving?
of Vixel, which Emulex acquired in 2003. Former MACRO Poised to benefit from economic and secular trends?
Emulex CEO Folino remains executive chairman. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE

Emulex has produced strong cash flows due to the duopolistic nature of the fibre channel HBA market, in which it has
competed almost exclusively against Qlogic. However, the mid-2007 market entry of fibre channel SAN vendor Brocade
may alter the competitive landscape. In addition, fibre channel itself may be under threat from iSCSI (favored by Cisco) and
other technologies. Meanwhile, growth in Emulex’s core HBA segment has ground to a halt due to slow growth in enterprise
server shipments. These strategic growth and profitability challenges cause us to stay away.
Energen Corporation (NYSE: EGN) Birmingham, 205-326-2700

Utilities: Natural Gas Utilities, Member of S&P MidCap 400 http://www.energen.com


per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 144 669 842 937 1,128 1,394 1,435 1,545 276 330
Gross profit 45 287 400 443 544 719 783 1,226 160 206
EBIT 11 134 218 245 316 477 522 577 99 131
Net income 4 69 111 128 173 274 309 336 58 73
Diluted EPS 0.06 1.04 1.54 1.74 2.35 3.73 4.28 4.66 0.80 1.01
Cash from ops 21 214 243 291 335 483 484 553 100 138
Capex 38 166 179 178 231 302 374 438 97 136
Free cash flow (16) 47 64 113 104 181 110 115 3 2
Total assets 1,240 1,643 1,778 2,182 2,618 2,837 3,080 3,258 2,864 3,258
Short-term debt 40 136 21 145 168 158 144 23 98 23
Long-term debt 544 513 553 613 683 583 562 562 563 562
Common equity 474 583 699 804 893 1,202 1,379 1,637 1,364 1,637
EBIT/capital employed 45% >100% n/m n/m n/m >100% >100% >100% n/m n/m
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
BUSINESS OVERVIEW • Cohesive management team. Each executive

Energen develops domestic, onshore reserves of natural gas, officer has been with the company for at least five
oil and natural gas liquids (NGL), with 3P reserves of 3.6 years. Chairman and CEO James McManus II (49)
Tcfe. It is also the top distributor of natural gas in Alabama. has been with the company since 1986.
• Guiding for 2008 EPS of $4.35-$4.55, up 2-6%
SELECTED OPERATING DATA from 2007 EPS of $4.28. Management has guided
YTD for 2009 EPS of $3.70-$4.10 (down 6-19%). 2009
FYE December 31 2005 2006 2007 9/30/08
guidance assumes hedge position covering 62% of
Oil and gas operations 47% 52% 58% 59% production, prices for unhedged natural gas, oil and
Natural gas distribution 53% 48% 42% 41% NGL of $7 per Mcf, $70 per barrel and $0.91 per
Revenue growth by segment: gallon, respectively, among other assumptions.1
Oil and gas operations 29% 38% 13% 16%
Natural gas distribution 14% 11% -8% 2%
• Hedges cover 73% of Q4 and 62% of 2009 oil
Total revenue growth 20% 24% 3% 10% and gas production, mitigating the near-term
EBIT margin by segment: impact of recent declines in oil and gas prices.
Oil and gas operations 46% 55% 55% 54% • Paying dividends at annual rate of $0.48 per share.
Natural gas distribution 12% 11% 12% 14%
Total EBIT margin 28% 34% 36% 37% • Stock price implies 6% trailing FCF yield, 6x
Capex to D&A (or DD&A) by segment: trailing P/E and 7x forward P/E.
1
Oil and gas operations 4.0x 2.7x 3.3x 3.0x
2
Natural gas distribution 1.7x 1.7x 1.2x 1.2x INVESTMENT RISKS & CONCERNS
Oil and gas operations — % of revenue by type:
Natural gas 69% 60% 60% 58% • Utility revenue and EBIT up despite reduced
Oil 22% 25% 30% 31% customer usage. The latter “remains a concern” and
NGL 7% 7% 8% 8% could cause segment results to deteriorate.
Other 1% 8% 1% 2%
3 • 59% of YTD revenue from cyclical oil and gas
Oil and gas operations — growth of production volumes:
Natural gas (MMcf) 7% 3% 2% 5% operations. While the company has benefited from
Oil (MBbl) -3% 10% 6% 4% prices materially exceeding operating costs in recent
NGL (MMgal) 3% 8% 1%
4
-9% years, there is no reason to believe the company can
Oil and gas operations — growth of proved reserves: sustain superior returns on capital in this segment.
Natural gas (MMcf) 6% 2% 2% n/a
Oil (MBbl) 38% 0% 0% n/a
NGL (MBbl) -8% -8% 7% n/a COMPARABLE PUBLIC COMPANY ANALYSIS
Oil and gas operations — revenue per unit of production: ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
Natural gas (per Mcf) $7.81 $6.53 $6.45 $8.22 DUK 19,789 32,652 2.5x 1.2x 13x 12x
Oil (per barrel) $51.61 $59.88 $67.17 $73.69
PXD 2,621 5,350 2.2x 0.8x 5x 5x
NGL (per gallon) $0.74 $0.80 $0.98 $1.06
Natural gas distribution — % of revenue by customer type: SO 27,273 45,741 2.7x 2.0x 15x 14x
Residential 64% 64% 64% 62% EGN 2,037 2,609 1.7x 1.2x 7x 7x
Commercial, industrial 28% 27% 27% 27%
Transportation, other 8% 8% 9% 11%
Natural gas distribution — growth of delivery volumes (MMcf): MAJOR HOLDERS
Residential -3% -9% -7% 0% CEO McManus II <1% │ Other insiders 1% │ Vanguard 5%
Commercial, industrial 1% -10% -6% 0% │ JP Morgan 5% │ Barclays 5%
Transportation -8% 2% 1% -6%
1
In 2007, oil and gas capex was $379 million, versus D&A of $114 million.
2
In 2007, gas distribution capex was $59 million, versus D&A of $47 million. RATINGS
3
4
2007 production included 64,300 MMcf of natural gas and 3,879 MBbl of oil. VALUE Intrinsic value materially higher than market value?
2007 reserves included 1.1mn MMcf of natural gas and 74,625 MBbl of oil.
• Oil and gas operations performing well, driven by EARNINGS MOMENTUM Fundamentals improving?
higher sales prices and volumes. Production in the MACRO Poised to benefit from economic and secular trends?
San Juan Basin has benefited from new drilling and EXPLOSIVENESS 5%+ probability of 5x upside in one year?
continued development of Fruitland Coal properties.
1
• Exploring Alabama shales with Chesapeake, with Guidance does not include potential property acquisitions, Alabama shales
exploration or stock repurchases, nor does it include a potential impairment
three test wells drilled and gas encountered in each of capitalized unproved leasehold related to Alabama shales ($41 million).
well. The companies are working on “completion
techniques” to determine if the gas from Alabama
shale formations can be produced economically.
THE BOTTOM LINE

Energen is highly dependent on commodity price levels and, as such, not a magic formula company with sustainably high
returns on capital. Nonetheless, the shares are quite attractive from a valuation perspective and may be considered by
investors with a view on a potential rebound in oil and gas prices.
First Advantage Corporation (Nasdaq: FADV) St. Petersburg, FL, 727-214-3411

Services: Business Services http://www.fadv.com


per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 243 319 420 517 629 798 843 791 209 188
Gross profit 164 206 268 324 398 508 561 527 141 121
EBIT 30 48 58 72 97 119 118 103 34 22
Net income 16 29 38 42 58 66 138 128 19 13
Diluted EPS 0.38 0.67 0.79 0.85 1.08 1.13 2.10 2.02 0.32 0.21
Cash from ops 1 6 2 59 71 93 135 78 40 36
Capex 6 6 4 11 22 32 40 38 9 8
Free cash flow (5) (1) (2) 48 50 61 94 41 31 28
Total assets 62 164 285 431 986 1,090 1,232 1,181 1,152 1,181
Short-term debt 1 1 7 20 38 21 18 11 19 11
Long-term debt 1 1 14 86 182 180 14 40 152 40
Common equity 53 146 239 288 583 675 884 906 756 906
EBIT/capital employed >100% >100% >100% >100% >100% >100% >100% 68% n/m n/m
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
Jan 00 Jan 00 Jan 00 Jan 00 Oct 03 Oct 04 Oct 05 Oct 06 Oct 07 Oct 08
BUSINESS OVERVIEW • Divestitures “almost over.” In Q2, the company

First Advantage provides risk mitigation in six segments: sold First Advantage Investigative Services and
Lender Services offers mortgage-related credit reporting. Credit Management Solutions. In 4Q07, it sold US
SEARCH.com (previously in data services). Also in
Data Services includes transportation credit reporting, supply
4Q07, the company sold a portion of its shares in
chain theft mitigation, and criminal records reselling.
DealerTrack, realizing a gain of $97 million.
Dealer Services serves auto dealers with consumer credit • Guiding for EPS decline of 44-48% in 2008, with
reports, credit automation software and lead generation. estimated EPS of $1.10-1.18 versus $2.10 in 2007.
Employer Services offers background screening, tax • Anand Nallathambi (46) became CEO in 1Q07
incentive services, occupational health, and hiring solutions. upon the resignation of John Long. Nallathambi has
Multifamily Services provides resident screening and been president since 2005. His previous experience
software, including background and eviction searches. includes a position as group president at First
Investigative and Litigation Support Services includes American Corp., the company’s parent.
surveillance, field interviews, and computer forensics. • Stock price implies 6% trailing FCF yield, 6x
FYE December 31 2005 2006
1
2007 9/30/08 • Mortgage industry and labor market weakness
% of service revenue by segment: have negatively affected the lender services,
Lender services 29% 24% 19% 19%
Data services 13% 17% 15% 16%
employer services and data services segments. The
Dealer services 17% 16% 14% 13% company is pursuing “aggressive cost reduction.”
Employer services 25% 26% 30% 30% • Controlled by First American, which owns 80%
Multifamily services 11% 9% 9% 11% of the economics and 98% of the voting power via
Investigative services 6% 8% 13% 12%
Service revenue growth by segment:
ownership of the Class B common stock.
Lender services 25% 5% -14% -18% • M&A strategy, with 13 acquisitions since 2006.
Data services 22% 68% -6% -8% While each deal has been fairly small, the large
Dealer services 41% 23% -6% -11% number of deals heightens integration risk.
Employer services 25% 36% 19% -5%
Multifamily services 17% 9% 5% 2% • Efforts to protect consumer privacy due to rising
Investigative services 34% 71% 67% 20% identity theft could hurt the company by limiting
Total revenue growth 27% 28% 6% -6% access to data and the ability to distribute data.
Lender services 29% 31% 22% 18%
Data services 37% 31% 28% 20% COMPARABLE PUBLIC COMPANY ANALYSIS
Dealer services 14% 13% 13% 15% ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
Employer services 9% 10% 12% 8% ADP 17,837 1,561 .1x 3.7x 15x 13x
Multifamily services 25% 22% 26% 31% EFX 2,972 4,211 2.1x n/m 10x 9x
Investigative services 6% 19% 35% 37%
Corporate and other -4% -5% -6% -5% FIC 650 1,034 1.4x n/m 8x 7x
Total EBIT margin 17% 16% 15% 13% FADV 715 720 .9x 10.8x 13x 13x
Domestic 98% 97% 89% 88%
International 2% 3% 11% 12% MAJOR HOLDERS
1
Service revenue excludes reimbursables. Class A Common (12 million shares out): First American
82% │ CEO Nallathambi 1% │ Other insiders 1% │
INVESTMENT HIGHLIGHTS Experian 6% │ Pequot 4% │ Maverick 2%; Class B
• Top three in core segments, with 4,800 employees Common (48 million shares out): First American 100%
and 90,000 customers. In credit screening, the
company has high market share in small global RATINGS
markets with low growth, focusing on scale and VALUE Intrinsic value materially higher than market value?
cash generation. In employment screening, the MANAGEMENT Capable and properly incentivized?
company seeks to grow its share of a large global FINANCIAL STRENGTH Solid balance sheet?
market with manifold growth opportunities. MOAT Able to sustain high returns on invested capital?
• Proprietary engine draws on many data sources, EARNINGS MOMENTUM Fundamentals improving?
including external data and customers’ internal data, MACRO Poised to benefit from economic and secular trends?
utilizing technology to standardize and present data. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE

First Advantage operates a non capital-intensive, highly profitable business. Unfortunately, the company’s target markets are
going through a severe downturn that is expected to cause a steep drop in earnings this year. While brightspots remain (e.g.,
investigative services), we are not convinced the shares offer sufficient value to compensate for end market weakness.
Forest Laboratories, Inc. (NYSE: FRX) New York, NY, 212-421-7850

Health Care: Biotechnology & Drugs, Member of S&P 500 http://www.frx.com


per share data) 3/31/02 3/31/03 3/31/04 3/31/05 3/31/06 3/31/07 3/31/08 9/30/08 9/30/07 9/30/08
Revenue 1,602 2,246 2,680 3,160 2,962 3,442 3,836 3,948 919 993
Gross profit 1,231 1,741 2,072 2,472 2,311 2,696 3,036 3,122 729 788
EBIT 470 821 937 1,185 870 709 1,210 1,218 278 315
Net income 338 622 736 839 709 454 968 962 225 244
Diluted EPS 0.91 1.66 1.95 2.25 2.08 1.41 3.06 3.10 0.71 0.80
Cash from ops 427 728 628 871 561 888 1,192 1,141 252 232
Capex 68 124 134 109 56 30 450 36 8 13
Free cash flow 359 605 494 763 505 858 742 1,104 243 219
Total assets 1,952 2,918 3,863 3,705 3,120 3,653 4,525 4,698 4,048 4,698
Short-term debt 0 0 0 0 0 0 0 0 0 0
Long-term debt 0 0 0 0 0 0 0 0 0 0
Common equity 1,625 2,352 3,256 3,132 2,698 3,025 3,715 3,865 3,294 3,865
EBIT/capital employed >100% >100% >100% >100% 86% 73% >100% >100% n/m n/m
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
BUSINESS OVERVIEW • Chairman and CEO Howard Solomon (80) has

Forest Labs provides branded and generic prescription and been a director since 1964 and CEO since 1977.
non-prescription drugs. The company’s central nervous President and COO Lawrence Olanoff (56) has been
system (CNS) franchise accounted for 90% of revenue in with the company for more than a dozen years.
FY08. The company markets products through an in-house • Share repurchases. The company bought back 8.9
salesforce numbering 2,700 people (52% of workforce). million shares for $356 million in FY08, and 10.1
million shares for $332 million so far in FY09.
FYE March 31 2006 2007 2008 1H09 trailing P/E and 6x forward P/E.
% of revenue by therapeutic class:
1
CNS 86% 88% 90% 90%
Cardiovascular, other 14% 12% 10% 10% INVESTMENT RISKS & CONCERNS
Revenue growth by therapeutic class:
1
• Dependent Lexapro and Namenda (66% and 24%
CNS -8% 16% 12% 9% of FY08 revenue, respectively). A Lexapro-related
Cardiovascular, other -14% -1% -6% -3%
Total revenue growth -8% 14% 10% 8% patent was upheld in 2007 by a Court of Appeals,
% of revenue by major line item: and the company is pursuing an infringement suit
Lexapro 67% 66% 65% 64% against a generic maker seeking FDA approval of a
Namenda 18% 21% 24% 26% generic alternative to Lexapro. Forest Labs is also
Contract revenue 4% 6% 6% 6%
All other 11% 8% 5% 5%
suing multiple manufacturers who are seeking FDA
2 approval to market generic versions of Namenda.
McKesson 35% 37% 38% n/a • Dependent on in-licensing and acquisition of new
Cardinal Health 26% 27% 30% n/a products. The company concedes that its pipeline
AmeriSource Bergen 20% 13% 15% n/a
Other 19% 23% 17% n/a “is currently dependent on the licensing and
% of revenue by geography: acquisition of new product opportunities.”
U.S. 98% 98% 98% n/a • FDA approval of milnacipran delayed. Contrary
U.K. and Ireland 2% 2% 2% n/a to management expectations, the FDA has not yet
1
Central nervous system franchise; includes Lexapro, Celexa, and Namenda.
2
The named major customers act as wholesale distributors. acted on the NDA for milnacipran. The company
still expects favorable action “in the near future.”
• Key products: Lexapro (65% of revenue), a COMPARABLE PUBLIC COMPANY ANALYSIS
08 09
selective serotonin reuptake inhibitor for major ($mn) MV EV EV/Rev P/TB
P/E P/E
depression and generalized anxiety disorder; GSK 94,416 106,982 3.1x 80.2x 10x 10x
Namenda (24% of revenue), an N-methyl-D- LLY 36,451 34,944 1.7x 3.2x 8x 7x
aspartate antagonist for moderate to severe MRK 57,781 57,872 2.4x 3.3x 8x 8x
Alzheimer’s disease; and Bystolic (since January NVO 36,226 35,046 4.7x 6.9x 18x 18x
2008), a novel beta-blocker for hypertension. NVS 110,839 113,506 2.7x 3.8x 13x 12x
• Bystolic received FDA approval in December SNY 82,566 89,716 2.5x n/m 8x 7x
2007 and is being marketed for the treatment of PFE 109,775 99,330 2.0x 4.1x 7x 7x
hypertension. Bystolic is a novel beta-1 selective FRX 6,923 5,033 1.3x 2.1x 7x 6x
beta-blocker. It has received five years of marketing
exclusivity under Hatch-Waxman. MAJOR HOLDERS
• Late-stage pipeline has two compounds under CEO Solomon 2% │ Other insiders <1% │ Wellington 14%
FDA review: milnacipran for the treatment of │ Capital Group International 11% │ Clearbridge 10% │
fibromyalgia and Lexapro for the additional Barclays 10% │ Vanguard 10% │ Fairholme 6%
indication in the treatment of adolescent depression.
The company has also reported positive clinical RATINGS
results for three other late-stage pipeline products. VALUE Intrinsic value materially higher than market value?
• Guiding for FY09 adjusted EPS of $3.30-3.40 MANAGEMENT Capable and properly incentivized?
(excluding charge related to termination of AZOR FINANCIAL STRENGTH Solid balance sheet?
co-promotion), compared to FY08 adjusted EPS of MOAT Able to sustain high returns on invested capital?
$3.55. The company expects to spend $100 million EARNINGS MOMENTUM Fundamentals improving?
in development milestones in FY09. MACRO Poised to benefit from economic and secular trends?
THE BOTTOM LINE

Forest Labs has a strong central nervous system franchise, powered by patented drugs Lexapro and Namenda. While Lexapro
is by far the larger product based on revenue, the success of Namenda has driven recent growth. Lexapro remains crucial,
however, with generic challenges being fought by the company in courts. The shares offer an enticing risk-reward tradeoff.
Foster Wheeler Ltd. (Nasdaq: FWLT) Clinton, NJ, 908-730-4000

Capital Goods: Construction Services http://www.fwc.com


per share data) 12/28/01 12/27/02 12/26/03 12/31/04 12/30/05 12/29/06 12/28/07 9/26/08 9/28/07 9/26/08
Revenue 3,324 3,531 3,724 2,661 2,200 3,495 5,107 6,681 1,300 1,718
Gross profit 160 105 284 261 346 508 744 863 198 229
EBIT (213) (360) (110) (232) (70) 344 530 621 165 149
Net income (336) (525) (157) (285) (110) 262 394 505 129 128
Diluted EPS (82.29) (91.49) (38.27) (28.92) (1.18) 1.86 2.72 3.47 0.89 0.88
Cash from ops (89) 160 (62) (31) 51 264 425 591 110 163
Capex 34 53 13 10 11 30 51 80 21 20
Free cash flow (123) 107 (75) (41) 40 233 374 511 89 143
Cash & investments 224 345 378 317 351 611 1,049 1,309 860 1,309
Total current assets 1,754 1,330 1,174 1,040 852 1,390 2,044 2,427 1,851 2,427
Total assets 3,326 2,842 2,507 2,178 1,895 2,566 3,249 3,638 3,036 3,638
Short-term debt 726 46 21 35 22 22 19 20 25 20
Total current liabilities 2,214 1,450 1,350 1,252 998 1,248 1,524 1,605 1,433 1,605
Long-term debt 313 1,078 1,012 535 294 182 186 204 175 204
Common equity (48) (781) (872) (526) (341) 64 574 956 442 956
EBIT/capital employed -48% -167% n/m n/m n/m n/m n/m n/m n/m n/m
$200
$180
$160
$140
$120
$100
$80
$60
$40
$20
$0
BUSINESS OVERVIEW • Strategy: grow organically and via “bolt on” M&A;
Foster Wheeler is an engineering and construction contractor leverage strong position in refining, delayed coking,
and power equipment supplier that operates in two segments: LNG and circulating fluidized-bed boilers; pursue
The Engineering & Construction (E&C) Group builds “clean coal” and renewable technologies.
processing facilities for the oil and gas, power and other • E&C outlook: Key markets “very robust”; expects
industries. Services include front-end design; engineering, strong 2H08 orders; Q3-end backlog up 7% y-y.
procurement, construction; and project management. • Power outlook: Global demand may offset delays
The Power Group provides steam generating and auxiliary in N.A. prospects; Q3-end backlog up 5% y-y.
equipment for power stations and industrial facilities. • Authorized $750 million buyback in September,
with $338 million used to buy 10.5 million shares.
FYE December 31 2005 2006 2007 9/30/08
% of revenue by segment: INVESTMENT RISKS & CONCERNS
E&C 67% 63% 72% 75%
Power 33% 37% 28% 25% • Power group profit may be pressured. According
Revenue growth by segment: to the company, “EBITDA growth in 2009 will
E&C -12% 51% 66% 50% depend on how the N.A. market develops and on
Power -26% 75% 12% 27% our continued success booking jobs outside N.A.”
∆ revenue -17% 59% 46% 43%
∆ new orders 71% 18% 82% -19%
4 • Dependent on demand from oil and gas, refining,
∆ revenue ex. flow-through
1
na 56% 27% 17% chemical and power industries, all of which
∆ backlog ex. flow-through
2
37% 17% 30% 6% exhibit cyclicality in their spending on large-scale
engineering and construction projects.
3
EBITDA margin by segment (GAAP basis):
E&C 11% 15% 14% 11%
Power 15% 7% 10% 15%
• Fixed-price deals account for ~20% of revenue,
Corporate and other -12% -1% -1% -1% exposing the company to the risk of cost overruns.
Total EBITDA margin 0% 11% 12% 11% • Long-term liabilities include $254 million pension
% of revenue by industry: liability and $334 million asbestos liability.
Power generation 42% 38% 28% 24%
Oil refining 20% 20% 28% 23%
• Present value of asbestos liability is difficult to
Oil and gas 15% 19% 18% 27% estimate. The company has recorded a GAAP
Chemical / petrochemical 10% 11% 20% 23% liability based on forcasted claims through 2022.
Other 13% 11% 7% 4% • CEO Ray Milchovich to retire in 2009.
% of E&C revenue by geography:
North America 4% 6% 7% n/a
South America 2% 3% 2% n/a COMPARABLE PUBLIC COMPANY ANALYSIS
Europe 46% 28% 23% n/a ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
Asia 11% 14% 22% n/a ABB 24,883 20,057 .6x 2.9x 6x 6x
Middle East 19% 21% 27% n/a
JEC 3,796 3,299 .3x 2.8x 8x 8x
Other 18% 28% 19% n/a
% of Power revenue by geography: FLR 6,485 4,418 .2x 2.4x 10x 9x
North America 51% 58% 49% n/a MDR 1,778 952 .1x 1.3x 3x 4x
South America 2% 4% 5% n/a FWLT 2,667 1,581 .2x 3.2x 5x 5x
Europe 26% 30% 34% n/a
Asia 19% 7% 11% n/a
Middle East 2% 0% 0% n/a MAJOR HOLDERS
Other 0% 0% 0% n/a Insiders <1% │ T Rowe 9%
1
Revenue excluding flow-through costs (“Foster Wheeler scope”) was $3.6
billion in 2007 and $3.0 billion in the first nine months of 2008.
2
3
Backlog ex. flow-through costs was $3.2 billion (+6% y-y) at September 30. RATINGS
EBITDA margins are materally higher on a “Foster Wheeler scope” basis.
4
New orders on a “Foster Wheeler scope” basis are up 1% YTD.
MANAGEMENT Capable and properly incentivized? n/a1
INVESTMENT HIGHLIGHTS FINANCIAL STRENGTH Solid balance sheet?
• Industry leader with 14,000 people: Technically
advanced provider of large-scale engineering and
construction services; leader in combustion and
steam generation technology for the power industry.
1
The company is looking for a new CEO to replace Ray Milchovich.
THE BOTTOM LINE

Foster Wheeler has executed well in recent years, benefiting from global growth and strength in energy-related industries.
The company has a rock-solid balance sheet and has embarked on a $750 million buyback. The shares price in a sharp near-
term downturn in business, even as the company may grow revenue and income in 2009. Investors should monitor the so-
called “scope” backlog in order to gauge the company’s resilience in a weaker operating environment.
Gannett Co., Inc. (NYSE: GCI) McLean, VA, 703-854-6000

Services: Printing & Publishing, Member of S&P 500 http://www.gannett.com

Ownership Data FYE 12/31/09 2.60 3.01 11 EV / LTM EBITDA -6.6x
Insider ownership: 1% FYE 12/31/10 2.58 3.32 4 EV / LTM EBIT -5.0x
Institutional ownership: 95% Date Actual Estimate LTM EBIT yield -20%
# of institutional owners: 953 10/24/08 $0.76 $0.75 LTM pre-tax ROC -42%

per share data) 12/30/01 12/29/02 12/28/03 12/26/04 12/25/05 12/31/06 12/30/07 9/28/08 9/30/07 9/28/08
Revenue 6,300 6,422 6,616 7,284 7,435 7,848 7,440 6,929 1,799 1,637
Gross profit 3,024 3,168 3,206 3,507 3,440 3,477 3,275 2,941 773 652
EBIT 1,590 1,926 1,946 2,113 1,977 1,905 1,651 (1,135) 389 259
Net income 831 1,160 1,211 1,317 1,245 1,161 1,056 (1,696) 234 158
Diluted EPS 3.12 4.31 4.38 4.84 4.82 4.81 4.17 (7.45) 1.01 0.69
Cash from ops 1,319 1,032 1,481 1,586 1,432 1,480 1,345 1,259 213 238
Capex 325 275 281 280 263 201 171 182 34 46
Free cash flow 994 757 1,200 1,306 1,169 1,279 1,174 1,078 179 192
Total assets 13,096 13,733 14,706 15,421 15,743 16,224 15,888 13,419 16,058 13,419
Short-term debt 0 0 0 0 0 0 0 0 0 0
Total current liabilities 1,128 959 962 1,006 1,096 1,117 962 1,207 959 1,207
Long-term debt 5,080 4,547 3,835 4,608 5,438 5,210 4,098 3,908 4,418 3,908
Common equity 5,736 6,912 8,423 8,164 7,571 8,382 9,017 6,606 8,977 6,606
EBIT/capital employed 67% 77% 71% 72% 66% 62% 55% -42% n/m n/m
$100
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
BUSINESS OVERVIEW • Recent brightspots include higher political

Gannett is the top U.S. newspaper publisher, with 85 daily advertising in broadcasting segment, positive results
papers (paid circulation of 6.9 million, including USA Today from Captivate, and growth in online revenue.
of 2.3 million) and 900 non-daily publications. Newsquest is • Part-owner with Hearst, NY Times and Tribune
the second-largest regional newspaper publisher in the U.K., of quadrantOne, a national digital ad network that
with 17 paid daily and 300 non-daily publications. Gannett reaches 70 million unique visitors and covers 29 of
also operates 23 TV stations reaching 20 million U.S. top 30 designated market areas (DMAs).
households. The Captivate subsidiary delivers news and ads • Dividends and buybacks have returned $6.2 billion
on elevator video screens. Gannett websites attract ~26 to holders since 2000. Gannett pays dividends at an
million unique visitors monthly, reaching 16% of the U.S. annual rate of $1.60 per share. The company
Internet audience. The company was founded in 1906. repurchased 4.6 million shares for $215 million in
2007 and 2.1 million shares for $73 million YTD.
SELECTED OPERATING DATA • Stock price implies 58% trailing FCF yield and
YTD 3x forward P/E (trailing GAAP EPS loss reported).
FYE December 31 2005 2006 2007 9/30/08
Advertising 68% 67% 66% 65% INVESTMENT RISKS & CONCERNS
Circulation
1
17% 16% 17% 18% • “Difficult and volatile” economy hurting results.
Broadcasting 10% 11% 11% 11%
All other 5% 6% 6% 5%
Gannett pre-announced lower Q2 earnings in July
Growth of revenue by type: and wrote off nearly $3 billion of intangibles and
Advertising 7% 4% -6% -12% newspaper PP&E. Q3 revenue fell 9% despite
Circulation
1
4% 3% -2% -3% Olympics and political advertising, as publishing
Broadcasting -10% 16% -8% -3% has seen lower demand for real estate classifieds in
All other 13% 10% 5% -8%
Total revenue growth 5% 6% -5% -9% the U.S. and U.K. The company is also facing
% of revenue by segment: “significantly” higher newsprint prices.
Publishing
1
90% 89% 89% 89% • Secular decline of newspaper industry. Gannett is
Broadcasting 10% 11% 11% 11%
dealing with the same adverse trends that its
Publishing
2
26% 23% 21% 17% traditional competitors are also forced to address.
Broadcasting
1
42% 44% 40% 39% While most newspaper companies have responded
Corporate -1% -1% -1% -1% to the industry’s secular decline by acquiring digital
Total EBIT margin 27% 24% 22% 19% assets, it is not at all clear that such acquisitions will
2
Capex as % of revenue 4% 3% 2% 2% result in competitive advantage and add value.
U.S. 84% 85% 84% n/a COMPARABLE PUBLIC COMPANY ANALYSIS
Foreign 16% 15% 16% n/a ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
1 2
Includes Captivate. Excludes asset impairment charges.
MNI 135 2,198 1.1x n/m 2x 3x
NWS.A 19,419 27,408 .8x n/m 7x 6x
INVESTMENT HIGHLIGHTS NYT 1,055 2,136 .7x 17.6x 10x 12x
• Aggressive digital strategy, including PointRoll, a
GCI 1,859 5,645 .8x n/m 2x 3x
provider of online marketing. Gannett also owns
stakes in CareerBuilder for job ads and Classified
Ventures for auto and real estate ads. In late 2007, MAJOR HOLDERS
Gannett and Tribune created a 50/50 JV, Metromix, CEO Dubow <1% │ Other insiders 1% │ Brandes 11% │
an online entertainment model for local properties AXA 5%
that will be networked for national ad opportunities.
Gannett also acquired HighSchoolSports.net, a RATINGS
digital content site serving high school audiences. VALUE Intrinsic value materially higher than market value?
• Recently acquired Tribune and McClatchy’s MANAGEMENT Capable and properly incentivized?
minority interests in ShopLocal, the top marketing FINANCIAL STRENGTH Solid balance sheet?
and database services company for most major U.S. MOAT Able to sustain high returns on invested capital?
retailers. Gannett intends to pursue synergies
between ShopLocal and PointRoll in order to create
an end-to-end solution for retailers.
THE BOTTOM LINE

Gannett is a company in harvesting mode. While newspaper publishing and broadcasting are still throwing off strong cash
flow, long-term trends are negatively impacting Gannett’s business. Given the emergence of highly decentralized, user-driven
content creation on the Internet (e.g., blogs, YouTube), Gannett will find it difficult to become a force in digital content.
These negatives and $4 billion of net debt notwithstanding, we believe the shares are simply too cheap to dismiss.
Garmin Ltd. (Nasdaq: GRMN) Camana Bay, Cayman Islands, 345-640-9050

Technology: Scientific & Technical Instruments http://www.garmin.com


per share data) 12/29/01 12/28/02 12/27/03 12/25/04 12/31/05 12/30/06 12/29/07 9/27/08 9/29/07 9/27/08
Revenue 369 465 573 763 1,028 1,774 3,180 3,663 729 870
Gross profit 198 255 331 411 535 882 1,463 1,632 342 386
EBIT 131 177 227 271 338 555 907 939 214 214
Net income 113 143 179 206 311 514 855 882 194 171
Diluted EPS 0.52 0.66 0.82 0.94 1.43 2.35 3.89 4.08 0.88 0.82
Cash from ops 130 162 174 209 247 362 682 639 134 233
Capex 27 12 33 78 27 93 157 143 18 34
Free cash flow 103 150 141 131 220 269 525 496 116 199
Total assets 539 706 857 1,117 1,362 1,897 3,292 3,015 2,646 3,015
Short-term debt 4 0 0 0 0 0 0 0 0 0
Long-term debt 28 20 0 0 0 0 0 0 1 0
Common equity 454 603 750 936 1,157 1,558 2,351 2,140 1,985 2,140
EBIT/capital employed 91% >100% >100% >100% 92% >100% 99% 88% n/m n/m
$140
$120
$100
$80
$60
$40
$20
$0
Jan 00 Jan 00 Oct 01 Oct 02 Oct 03 Oct 04 Oct 05 Oct 06 Oct 07 Oct 08

Garmin provides navigation devices and applications enabled • ASP declines have approximated 25% recently
by GPS technology. Products serve auto, mobile, wireless, and are expected to do so through yearend 2008.
outdoor recreation, marine, aviation, and OEM applications. Offsetting the declines are unit volume increases,
No customer accounts for 10% or more of revenue. component cost reductions, and greater efficiency.
Inflation could make lower costs tough to sustain.
SELECTED OPERATING DATA • Marine and aviation segments have slowed due to
YTD higher fuel prices and economic weakness.
FYE December 31 2005 2006 2007 9/30/08
Revenue by segment: • $8 billion Nokia acquisition of Navteq, which
Auto / mobile 39% 61% 74% 70% supplies digital map data for vehicle navigation and
Outdoor / fitness 23% 16% 11% 13% location-based services to Garmin under a deal that
Aviation 22% 13% 9% 10% runs through 2019. Garmin renewed the Navteq deal
Marine 15% 9% 6% 7%
Revenue by geography:
in late 2007 and abandoned a proposal to buy
North America 64% 62% 65% 64% Navteq competitor Tele Atlas. Nokia competes with
Europe 31% 33% 30% 31% Garmin, calling into question the long-term viability
Asia 5% 5% 5% 4% of Garmin’s Navteq partnership.
Units shipped (mn) 3.0 5.4 12.3 10.6
Change (y-y) 31% 78% 128% 55%
• €3 billion TomTom acquisition of Tele Atlas. Top
Revenue per unit ($) 339 329 259 231 Garmin competitor TomTom took control of Tele
Change (y-y) 3% -3% -21% -20% Atlas in June 2008. This deal puts both major
providers of digital map data—Navteq and Tele
INVESTMENT HIGHLIGHTS Atlas—into the hands of Garmin competitors.
• Leader in personal navigation devices (PNDs), • Dependence on Global Positioning System (GPS).
with 55% market share in North America and 20% GPS is a satellite-based navigation and positioning
share in Europe (#2 behind TomTom). Industry system consisting of a constellation of orbiting
shipments have slowed sharply after growing 100% satellites operated by the U.S. Department of
in the U.S. and 40% in Europe earlier this year. Defense. The DoD does not currently charge for
• Deals with auto makers and car rental firms have access to the satellite signals, but it is conceivable
boosted Garmin’s market presence. The company the government could decide to do so in the future.
has deals with Ford, Honda, and Volvo, as well as
National Car Rental and Alamo Car Rental. COMPARABLE PUBLIC COMPANY ANALYSIS1
• Acquisitions of European distributors have ($mn) MV EV EV/Rev P/TB
08 09
P/E P/E
doubled Garmin’s European share since early 2007.
MOT 9,247 6,288 .2x 1.0x 68x 29x
• Planned nüvifone launch in 2009. The nüvifone is NOK 47,854 44,007 .6x 10.3x 6x 7x
a mobile device that seeks to integrate the RIMM 22,620 21,052 2.5x 5.7x n/a n/a
navigation and communication experience.
TOM2.AS 762 2343 1.2x n/m 3x 4x
• Leading-edge proprietary technology, protected
GRMN 3,856 3,317 .9x 2.0x 5x 6x
by more than 330 U.S. patents and 190 U.S. patent 1
TomTom and privately-held Magellan, Mio, Navigon are closest comps.
applications pending; and more than 40 foreign
patents and 32 foreign patent applications pending.
MAJOR HOLDERS
• Units, revenue, and EBIT up 55%, 25% and 5%,
CEO Min Kao 20% │ Other insiders 26% │ Cap Re 5%
respectively, YTD. Growth continues to be driven
primarily by the auto/mobile and outdoor/fitness RATINGS
segments, while the marine segment has lagged.
• Guiding for 2008 revenue of $3.6 billion (+13%), MANAGEMENT Capable and properly incentivized?
down from prior guidance of $3.9 billion (+23%), FINANCIAL STRENGTH Solid balance sheet?
with EPS of $3.78 (excluding forex translation). MOAT Able to sustain high returns on invested capital?
• Repurchased $625 million of stock YTD. EARNINGS MOMENTUM Fundamentals improving?
THE BOTTOM LINE

Garmin is the worldwide leader in personal navigation devices, ahead of Dutch provider TomTom, which has a leveraged
balance sheet and is struggling. Garmin continues to grow revenue, and while unit growth has slowed, the market for
personal navigation devices continues to benefit from consumer adoption. Profits have stagnated due to rapid ASP erosion;
however, price declines appear likely to moderate, enabling the company to continue reasonably strong performance even in
a weak economic environment. We believe the stock has been “orphaned” as momentum investors have fled. We value
Garmin at $35-65 per share, based on a range of 10x estimated 2009 earnings to 10x estimated normalized earnings.
…additional insight into GRMN: GARMIN VERSUS TOMTOM – PND UNIT SHIPMENTS
2004 2005 2006 2007
WHAT ARE THE SHARES WORTH? PND unit sales (mn):
Garmin 2.3 3.0 5.4 12.3
• We value Garmin at $35-65 per share, based on TomTom 0.2 1.7 4.7 9.6
the valuation analysis summarized below. The wide Relative market shares:
range of fair value reflects (1) the difficulty of Garmin 90% 64% 54% 56%
TomTom 10% 36% 46% 44%
balancing the potential earnings impact of the
Source: Garmin, TomTom, The Manual of Ideas.
current slowdown and the continued positive long-
term growth outlook for personal navigation TOP COMPETITOR TOMTOM – SNAPSHOT
devices; and (2) the virtually impossible task of
• TomTom is #1 PND supplier in Europe (45%
predicting the multiple of earnings Garmin will
market share) and #2 globally. It derives more
deserve in the future. We reflect this dual challenge
than three-quarters of revenue from Europe, with
in fairly conservative assumptions.
the rest primarily from North Amrica. TomTom was
founded in 1991, went public in 2005 (Amsterdam:
Garmin — Valuation Summary
TOM2.AS), and has ~3,500 employees today.
($ in millions, except per share data) Low High
Value Value
• Explosive growth from 2002-07, with revenue up
Value of excess marketable assets:
1 from €8 million to €1.7 billion and net income up
Cash and equivalents $522 $522 from €1 million to €317 million over the period.
Marketable securities 18 18 • Q3 pro forma revenue down 12% sequentially
Long-term marketable securities 309 309
Net cash and investments $849 $849
and down 10% y-y. Favorable sequential but
Cash needed to run business
2
(200) (100) unfavorable y-y ASP trends are evident from the
Total $649 $749 fact that TomTom shipped 2.5 million PND units in
Q3, down 18% sequentially and up 17% y-y.
Value of core business: • Guiding for 2008 PND market size of 18 million
2009 estimated EPS ex. interest income 3.15
Fair value multiple of 2009E adjusted EPS 10x units in Europe and 18 million units in North
Estimated EBIT power in 2-3 years 1,600 America, down from TomTom previous market
Fair value multiple of EBIT power 8x guidance for 20 million units in each market.
Total $6,552 $12,800 TomTom expects to comprise 12-13 million of the
estimated 36 million units sold globally, resuling in
Estimated fair value of GRMN $7,201 $13,549
per share $35 $65
estimated revenue of €1.6-1.7 billion to TomTom,
1
Based on balance sheet values as of September 27, 2008. with 40% gross and 20% operating margins.
•
2
Represents MOI estimate. Acquired digital mapping provider Tele Atlas for
€3 billion in August, creating a strategic challenge
for Garmin, which relies on mapping data provided
WHY THE SHARES MAY BE MISPRICED
by Navteq, which Nokia acquired for $8 billion.
• Turnover in “style” of shareholder base. While
• Weak balance sheet, with negative tangible book,
only a year ago Garmin was a favorite “momentum
$263 million of cash and $1.6 billion of debt.
stock,” it now attracts investors who are both
comfortable with a projected earnings decline and
TomTom Stock Performance Since IPO
willing to own a business experiencing rapid
technological change. In other words, the shares € 80
may not have found a natural “home” yet, but we € 70
believe they are now moving into the sweetspot of € 60
“magic formula” and low P/E investors. € 50
€ 40
€ 30
€ 20
€ 10
€0
May-05 May-06 May-07 May-08
Source: TomTom, The Manual of Ideas.
SHIPMENT VOLUME AND ASP TRENDS • Q3 review—outdoor fitness: 35% revenue growth,
• Unit shipments grew 128% in 2007 on a 21% helped by market share gains
decline in ASPs. Unit growth slowed to 55% in the • Q3 review—aviation: +9%, “as shipments to OEM
first nine months of 2008, while ASPs eroded 20%. offset weakness in portable and retrofit markets”
• Q3 review—marine: 8% revenue decline, as higher
Garmin—Unit Shipments and ASPs, 2000-08 YTD fuel prices have weakened marine industry; gaining
14mn units $400 per unit share in OEM and dealer-installed markets
12mn units • Q3 review—by geography: 29% North American
10mn units $300 per unit revenue growth, 9% European revenue growth, 21%
8mn units Asian revenue decline; Asia down due to “timing of
$200 per unit several sales programs… we do continue to expect
6mn units
4mn units $100 per unit
healthy double-digit growth in our APAC markets”
2mn units • 2008 guidance: revised down – “some markets are
0mn units $0 per unit slowing,” “weaker international currencies add
00 01 02 03 04 05 06 07 ytd additional pressure on our revenues and margins;”
expect revenue of $3.6 billion (+13%), 24% EBIT
Unit Shipments Revenue per Unit
margin and EPS of $3.78 (flat y-y) including gain
Note: YTD data is for the nine months ended September 30, 2008. on TeleAtlas shares (based on 19% tax rate)
Source: Company, The Manual of Ideas.
• 2009 outlook: market will be “different, with higher
Garmin—Unit Growth and ASP Changes, 2001-08 YTD penetration rates as we go into the year, but still unit
growth and less ASP decline;” ASP may erode less
140% 30% due to (1) already low prices and (2) already thin
120% 20% margins realized by competitors, leaving limited
100% 10% room for price cuts; U.S. PND unit growth: “not
80%
0%
prepared to give 2009 guidance, but… do not see
60% any reason why we shouldn’t see at least 20% unit
40% -10% growth;” PND margin may see “slight reduction…
20% -20% should still see [PND] margins of about 30%”
0% -30% • ASP dynamics: -17% in Q3; ASP stable or up y-y
01 02 03 04 05 06 07 ytd in outdoor fitness, aviation and marine; PND ASP
Unit Grow th (left axis) ASP Change (right axis) decline continues “in line with our earlier forecast”
Note: YTD data is for the nine months ended September 30, 2008.
• Inventory: to fall $150 million in Q4; at Q3-end,
Source: Company, The Manual of Ideas. inventory was “more lean as retailers look to reduce
their… exposure and delay cash expenditures”
• nüvifone: on track for 1H09 launch; signed deals
MANAGEMENT’S VIEW OF BUSINESS “with some key carriers” (including carrier
Notes from 3Q08 earnings call on October 29: subsidies); breadth and depth of LBS capabilities
• Business environment: “the reason we had to drop are “superior to any other device on the market;”
our numbers from our earlier guidance was October; expects to be competitive versus Apple and RIM in
we definitely saw a slowdown;” in PND market, features and pricing; gross margin should be 30-
Europe has slowed “more dramatically” than U.S.; 35%; one million units shipped in first twelve
PND remains “hot category— it will still be one of months after release would be “acceptable”
the pushes for the holiday season when you look at • PND market size and growth: U.S. and Europe are
shelf space and number of SKUs;” “very strong 20 million units each, with 60% growth in North
promotional emphasis for PNDs for the holidays” America and 20% in Europe; while growth is down,
• Q3 review: 19% revenue growth on 43% shipment “the PND market is still growing at a healthy pace
growth and 17% ASP decline; “solid” growth in in comparison to other categories;” at Q3-end,
automotive and outdoor fitness; gross margin North American penetration is in mid teens while
eroded 260 bps y-y, but “exceeded our earlier Europe is above 20%; mix of new to replacement
expectations as ASP declines moderated and price sales is 80%/20% (replacement sales expected to
reductions were largely offset by lower product increase as market matures); average life of PND
cost;” gross margin eroded 150 bps sequentially but device is 3-5 years (likely to come down with price)
would have been “nearly flat” excluding currency; • Garmin PND market share: grew to 54% in North
EPS down 2% assuming constant currency rates America and >20% in Europe in Q3
• Q3 review—automotive and mobile: 21% revenue • Share repurchases: bought back 14.7 million
growth, driven by “strong” unit growth and shares for $624 million YTD; authorized additional
“moderating” price declines; Garmin has top three $300 million on October 29
PNDs and seven of top ten PNDs in the U.S. • Miscellaneous: employs 1,700+ engineers globally
Hansen Natural Corporation (Nasdaq: HANS) Corona, CA, 951-739-6200

Consumer Non-Cyclical: Beverages (Non-Alcoholic), Member of S&P MidCap 400 http://www.hansens.com


per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 81 92 110 180 349 606 905 1,026 247 285
Gross profit 29 33 44 83 183 317 468 526 128 149
EBIT 6 5 10 34 104 159 231 267 73 82
Net income 3 3 6 20 63 98 149 177 46 52
Diluted EPS 0.04 0.04 0.07 0.22 0.65 0.99 1.51 1.80 0.46 0.54
Cash from ops 5 3 6 20 55 76 136 182 38 63
Capex 1 1 3 1 2 5 7 7 2 3
Free cash flow 5 2 3 19 52 72 129 174 36 60
Total assets 39 41 48 82 164 308 545 640 508 640
Short-term debt 0 0 0 0 1 0 1 1 1 1
Long-term debt 6 4 0 0 0 0 0 0 0 0
Common equity 25 28 35 59 126 225 422 514 370 514
EBIT/capital employed 38% 33% 56% >100% >100% >100% >100% >100% n/m n/m
$80
$70
$60
$50
$40
$30
$20
$10
$0
BUSINESS OVERVIEW • Stock price implies 7% trailing FCF yield, 14x

Hansen markets and distributes “alternative” non-alcoholic trailing P/E and 12x forward P/E.
beverages. The company has two segments, Direct Store
Delivery (DSD), whose principal products comprise energy INVESTMENT RISKS & CONCERNS
drinks (~90% of revenue), and Warehouse, whose principal • Consumer spending weakness in “convenience
products comprise juice-based and soda beverages. DSD store cold drink channels, where the vast majority of
sells through exclusive distributors whereas Warehouse energy drinks are sold.” Hansen has also noted a
products directly to retailers. The company outsources “decline in store traffic primarily in the convenience
manufacturing to third-party bottlers and contract packers. and gas sector especially in Southern California.”
Seasonality is strongest in Q2 and Q3. • Margin impact of higher raw materials costs. The
Hansen dates back to the 1930s when Hubert Hansen started company has absorbed significant increases in the
selling fresh juices in L.A. California still accounts for close cost of PET plastic bottles, aluminum cans, glucose,
to 30% of sales, which the U.S. accounts for roughly 95%. high fructose corn syrup, milk, cream and juice
concentrates over the past couple of years. This
SELECTED OPERATING DATA inflation has negatively affected gross margins.
YTD • Highly competitive beverage industry, with
FYE December 31 2005 2006 2007 9/30/08 several large and many small companies competing
Revenue by type of customer: for shelf space and consumer mindshare: Red Bull,
Grocery, specialty, wholesale 19% 12% 8% 9%
Club, drug, mass merchandise 11% 14% 14% 15%
Sobe, Snapple Elements, Arizona, Fuse, Coca-Cola,
Full service distributors 65% 69% 73% 72% PepsiCo, Cadbury Schweppes, Tree Top, Ocean
Health food distributors 3% 2% 2% 2% Spray, Jones Soda, Clearly Canadian, Crystal
Other 2% 3% 3% 2% Geyser, Kern’s, V8, Mott’s, and others.
Dr Pepper Snapple Group 18% 19% 16% 16%
• Tough Q4 comp. Hansen raised prices on January
Wal-Mart (incl. Sam’s Club) <10% 12% 12% 11% 1, 2008. 7-8% of 4Q07 sales were attributable to
stocking up in advance of the increases. As a result,
INVESTMENT HIGHLIGHTS sales growth may be challenged in 4Q08.
• $26 billion alternative beverage market up 11%
in 2007, outpacing beverage industry growth. COMPARABLE PUBLIC COMPANY ANALYSIS
08 09
• Continued strong performance of Monster brand ($mn) MV EV EV/Rev P/TB
P/E P/E
despite weakness in ready-to-drink beverage DPS 4,455 7,838 1.4x n/m 9x 9x
category. Hansen continues to gain share, driven by JSDA 13 -2 -.1x 0.6x n/m n/m
Monster Energy and Java Monster drinks. KFT 40,313 60,169 1.4x n/m 14x 14x
• Continuous innovation. Hansen frequently brings KO 104,156 107,596 3.3x 9.5x 14x 14x
new and improved products to market. While some PEP 83,123 89,004 2.1x 9.7x 15x 14x
of those new introductions flop, others generate HANS 2,344 2,074 2.0x 4.8x 14x 12x
high returns on capital (e.g., Java Monster).
• Anheuser-Busch, PepsiCo distribution deals. MAJOR HOLDERS
Hansen has transitioned most of its full-service CEO Sacks, CFO Schlosberg 19% (combined) │ Other
distributors to the the AB system, while PepsiCo insiders 3% │ Brandon LP 9% │ Hilrod Holdings 6% │
has become the exclusive distributor for Canada. Artisan 7% │ Franklin 6%
• Entrepreneurial management. CEO Rodney
Sacks (58) and CFO Hilton Schlosberg (55) RATINGS
engineered the 1992 purchase of Hansen and have VALUE Intrinsic value materially higher than market value?
grown it in impressive fashion since then. MANAGEMENT Capable and properly incentivized?
• Repurchased 1.7 million shares for $50 million FINANCIAL STRENGTH Solid balance sheet?
($29 per share) in the first nine months of 2008. MOAT Able to sustain high returns on invested capital?
• Solid balance sheet, with $271 million in cash and EARNINGS MOMENTUM Fundamentals improving?
short-term investments, $110 million in auction-rate MACRO Poised to benefit from economic and secular trends?
securities, and no debt as of September 30. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE

Hansen is hardly unknown to investors given the stock’s meteoric rise in 2006-07 and subsequent sharp decline. The shares
were a “valuation short” in the $50+ range and have fallen primarily due to a “normal” slowdown in the growth rate. As the
shareholder base has turned over, Hansen has not yet found an institutional home. However, the shares ought to appeal to
investors looking for growth at a reasonable price. While input costs are going up, Hansen should grow EBIT via volume and
price increases. We like the large ownership position by top management.
Heidrick & Struggles (Nasdaq: HSII) Chicago, IL, 312-496-1200

Services: Business Services, Member of S&P SmallCap 600 http://www.heidrick.com


per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 488 377 341 398 433 502 648 665 170 165
Gross profit 153 108 94 126 138 150 201 195 56 50
EBIT (73) (52) (22) 29 22 50 80 69 25 21
Net income (43) (40) (81) 82 39 34 57 43 16 14
Diluted EPS (2.52) (2.22) (4.43) 4.11 1.98 1.81 2.97 2.40 0.84 0.80
Cash from ops (21) 6 10 26 33 100 106 59 63 61
Capex 24 5 6 6 6 6 8 10 3 3
Free cash flow (45) 1 5 20 27 94 98 49 60 58
Total assets 411 368 304 421 411 513 617 559 587 559
Short-term debt 3 1 1 0 0 0 0 0 0 0
Long-term debt 2 0 0 0 0 0 0 0 0 0
Common equity 230 200 126 216 238 264 310 302 311 302
$80
$70
$60
$50
$40
$30
$20
$10
$0
BUSINESS OVERVIEW • Kevin Kelly (42) became CEO in 2006 after

Heidrick & Struggles is a global executive search firm. It has serving in various roles at H&S since 1997,
400 consultants and provides search services on a retained including as president of EMEA and Asia. Eileen
basis, recruiting senior executives whose first-year base Kamerick (49) joined the company as CFO in 2004.
salary and bonus averaged $345K in 2007. Clients include • Strong balance sheet, with $183 million of cash
Fortune 1000 and major non-U.S. companies, middle market and no debt as of September 30.
and emerging growth firms, governmental, educational and • Share repurchases. The company spent $37
non-profit organizations. H&S dates back to 1953. million on buybacks in 2005, $52 million in 2006,
H&S charges executive search fees equal to one-third of a $69 million in 2007, and $47 million YTD.
placement’s first-year cash compensation (includes salary • Stock price implies 14% trailing FCF yield, 9x
and bonus). The company compensates its consultants in trailing P/E and 14x forward P/E.
cash, with a 15%-20% three-year deferred bonus. Comp is
based on revenue generation and firm-building behaviors. INVESTMENT RISKS & CONCERNS
• Executive search remains sensitive to economic
SELECTED OPERATING DATA conditions. Revenue growth has slowed to 3%
YTD YTD, with revenue down 3% in Q3. While Asian
FYE December 31 2005 2006 2007 9/30/08
revenue continues strong growth, it accounted for
% of net revenue by segment:
Americas 58% 55% 54% 51% only 16% of overall revenue YTD. Meanwhile,
Europe 33% 34% 33% 32% economic weakness in the U.S. and Europe
Asia Pacific
1
10% 10% 13% 16% translated into flat U.S. revenue in Q3 and a 17%
Net revenue growth by segment: constant-currency revenue decline in Europe.
Americas 11% 11% 26% -3%
Europe 4% 22% 27% 2% • Financial services practice generated 33% of
Asia Pacific 25% 25% 59% 33% revenue in 2007. Other industries contributed to
1
Total net revenue growth 10% 16% 30% 3% revenue as follows: 21% industrial, 18% consumer,
EBIT margin by segment: 10% technology, 9% health care, and 11% other.
Americas 21% 20% 20% 16%
Europe 6% 9% 15% 13% • Financial services revenue down YTD, with U.S.
Asia Pacific 26% 27% 20% 19% and European weakness offsetting strength in Asia.
Corporate -6% -7% -6% -5% The company has also seen revenue in the U.S.
2
consumer sector under pressure.
Revenue per consultant ($mn) 1.3 1.3 1.5 1.5
Average fee per search ($K) 97 101 115 118
1
Net revenue excludes reimbursables. COMPARABLE PUBLIC COMPANY ANALYSIS
2
Excludes restructuring costs of $0.4 million in 2006 and $22.5 million in 2005. ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
HHGP 111 67 .1x 0.8x 24x 108x
INVESTMENT HIGHLIGHTS KFY 553 344 .4x 1.6x 10x 10x
• $10 billion executive search industry is MPS 578 523 .2x 2.3x 8x 15x
fragmented and consists of several thousand firms. RHI 2,762 2,392 .5x 3.3x 11x 25x
Top firms include Korn/Ferry, H&S, Spencer HSII 347 164 .2x 1.8x 9x 14x
Stuart, Russell Reynolds, and Egon Zehnder.
• Favorable secular trends include globalization, MAJOR HOLDERS
shorter executive tenures, stricter corporate CEO Kelly <1% │ Other insiders 3% │ Royce 11% │ W.
governance requirements, and demand for ancillary Blair 10% │ Kornitzer 9% │ Barclays 8% │ NFJ 6%
services such as Board and leadership assessment.
• Competitive advantage due to brand reputation RATINGS
and focus on top-level search. H&S has been in VALUE Intrinsic value materially higher than market value?
executive search for more than five decades and has MANAGEMENT Capable and properly incentivized?
built a strong reputation. The company’s focus on FINANCIAL STRENGTH Solid balance sheet?
top-level services gives it access to key decision MOAT Able to sustain high returns on invested capital?
makers, increased potential for recurring EARNINGS MOMENTUM Fundamentals improving?
engagements, higher fees per search, enhanced MACRO Poised to benefit from economic and secular trends?
brand visibility, and a global footprint. The high- EXPLOSIVENESS 5%+ probability of 5x upside in one year?
end focus also allows H&S to hire and retain talent.
THE BOTTOM LINE

Heidrick & Struggles trades materially below “replacement value,” as it would be exceedingly difficult to replicate the firm’s
strong reputation. The shares should deliver an above-average return over a five-year period. However, it is impossible to
judge when the company will resume meaningful growth, and it is conceivable that revenue could decline materially in a
global recession. As a result, the risk-reward is somewhat less favorable than that of our top ten magic formula selections.
Grand Cayman, Cayman Islands, 310-410-

Herbalife Ltd. (NYSE: HLF) 9600
Consumer Non-Cyclical: Personal & Household Products http://www.herbalife.com


per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 1,020 1,094 1,159 1,310 1,567 1,886 2,146 2,424 530 602
Gross profit 779 858 924 1,040 1,251 1,505 1,707 1,948 424 486
EBIT 69 67 107 139 219 257 313 357 78 89
Net income 43 23 37 (14) 93 143 192 241 48 58
Diluted EPS 1.36 0.46 0.69 (0.27) 1.28 1.92 2.63 3.60 0.67 0.89
Cash from ops 96 66 94 80 143 184 271 278 67 80
Capex 11 7 14 23 32 63 42 80 10 31
Free cash flow 85 59 81 57 112 122 229 198 57 49
Cash & investments n/a 66 151 202 88 154 187 149 161 149
Total current assets n/a 205 278 370 300 456 487 509 475 509
Intangible assets n/a 527 520 497 449 425 422 421 422 421
Total assets n/a 856 904 949 838 1,017 1,067 1,144 1,045 1,144
Short-term debt n/a 19 72 120 10 6 5 12 4 12
Total current liabilities n/a 198 276 372 286 324 376 408 356 408
Long-term debt n/a 322 253 366 253 180 361 314 230 314
Total liabilities n/a 664 666 884 669 663 885 869 750 869
Preferred stock n/a 0 0 0 0 0 0 0 0 0
Common equity n/a 191 238 64 169 354 182 275 295 275
EBIT/capital employed n/a >100% n/m n/m n/m >100% >100% >100% n/m n/m
$60
$50
$40
$30
$20
$10
$0
BUSINESS OVERVIEW • Healthy distributor organization. Enrollment of

Herbalife is a network marketing company that sells weight- new sales leaders, and subsequent progression of
management, nutritional supplements and personal care those new recruits up the “organizational” ladder
products intended to support a healthy lifestyle. Products are continues to grow at double-digit rates. Earnings
sold in 66 countries through 1.8 million distributors. potential for top performers is strong, with more
Global retail sales were $3.5 billion in 2007, consisting of than 1,000 distributors likely earning $1+ million.3
distributor allowances of $1.4 billion and net sales of $2.1 • Management experienced in consumer branding.
billion. Variable expenses were 73% of net sales (36% CEO Michael Johnson (53) joined Herbalife in 2003
royalties, 21% product costs, 16% distributor-facing costs); after 17 years at Walt Disney, mostly recently as
“fixed” costs amounted to 18% of net sales (12% overhead, President of Walt Disney International.
5% tax, 1% interest), resulting in a 9% net income margin. • Repurchased $94 million of stock YTD and $366
million in 2007. The annual dividend is $0.80/share.
FYE December 31 2005 2006 2007 9/30/08
Growth in “sales leaders” 10% 29% 9% 12%
Retention
1
40% 42% 43% 41%
% of revenue by geography: • Multi-level marketing, built on a network of 1.8
U.S. 18% 18% 20% 20% million independent distributors, of which roughly
Mexico 14% 20% 17% 16% 400K are “sales leaders” who have made it their
Others 68% 62% 63% 64%
Revenue growth by geography:
business to sell Herbalife products. The company
U.S. 13% 19% 24% 19% retains ~40% of sales leaders each year, with new
Mexico 114% 70% -1% 4% recruitment crucial to network growth. If recruiting
Others 11% 10% 16% 21% falters or retention declines, business would suffer.
EBIT margin by geography: • Competitors include direct selling firms NuSkin,
U.S. 42% 42% 38% 42% Nature’s Sunshine, Alticor/Amway, Melaleuca,
Mexico 44% 44% 41% 43% Avon, Oriflame and Mary Kay, as well as retail
Others 45% 45% 47% 49% establishments Weight Watchers, Jenny Craig,
Corporate -30% -30% -30% -32%
Total EBIT margin 14% 14% 15% 15% General Nutrition, Wal-Mart, and retail pharmacies.
% of revenue by product line:
Weight management 63% 63% 63% 63% COMPARABLE PUBLIC COMPANY ANALYSIS
Targeted nutrition 19% 19% 20% 21% ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
Energy and fitness 4% 4% 4% 4%
AVP 9,605 11,048 1.0x 13.8x 11x 11x
Outer nutrition 10% 8% 7% 6%
Literature and other 5% 5% 6% 6% MTEX 89 55 .2x 1.3x n/a n/a
% of revenue by geographic region: NUS 682 767 .6x 6.1x 10x 8x
North America 19% 19% 20% 21% USNA 541 558 1.3x 14.4x 16x 14x
Mexico & Central America 14% 20% 18% 17%
South America 10% 12% 14% 15% HLF 1,121 1,298 .5x n/m 5x 5x
EMEA 35% 29% 26% 25%
1
Asia Pacific 22% 20% 21% 23% MAJOR HOLDERS
Measured annually after January re-qualification.
CEO Johnson 3% │ Other insiders 2% │ Bank of New York
6% │ Times Square 5% │ GS Investment Strategies 5%
• 80% of revenue outside of North America due to RATINGS
worldwide distribution network. VALUE Intrinsic value materially higher than market value?
• Key strategies: (1) Move from monthly supply MANAGEMENT Capable and properly incentivized?
model to “Daily Method of Operation” (DMO) in FINANCIAL STRENGTH Solid balance sheet?
order to improve stickiness and drive volume. (2) MOAT Able to sustain high returns on invested capital?
Develop unique science-based products using safe EARNINGS MOMENTUM Fundamentals improving?
ingredients. (3) Make distributors more productive MACRO Poised to benefit from economic and secular trends?
through training and infrastructure support. (4) EXPLOSIVENESS 5%+ probability of 5x upside in one year?
Drive growth from under-penetrated markets. (5) 3
Manual of Ideas estimate, based on company disclosure that supervisors on
Build awareness of and affinity for Herbalife brand. “President’s Team” earn $500K in multi-level fees and that an additional 2x
is earned systemwide on the 50% retail discount afforded supervisors.
THE BOTTOM LINE

We are not fans of multi-level marketing companies, as they often add value neither to their customers nor their long-term
shareholders. However, Herbalife stands out positively due to its focus on improving people’s health and, more importantly,
its exceptionally strong profitability and growth profile. The company appears to have ample high-ROIC reinvestment
opportunities left, and management execution has been solid. We view the shares as undervalued at only 5x 2009E EPS.
Herman Miller, Inc. (Nasdaq: MLHR) Zeeland, MI, 616-654-3000

Consumer Cyclical: Furniture & Fixtures, Member of S&P MidCap 400 http://www.hermanmiller.com


per share data) 6/1/02 5/31/03 5/29/04 5/28/05 6/3/06 6/2/07 5/31/08 8/30/08 9/1/07 8/30/08
Revenue 1,469 1,337 1,338 1,516 1,737 1,919 2,012 2,000 492 479
Gross profit 440 424 416 490 575 646 699 694 168 162
EBIT (80) 48 61 122 158 198 247 250 54 57
Net income (56) 23 42 68 99 129 152 152 34 33
Diluted EPS (0.74) 0.31 0.59 0.96 1.45 1.98 2.56 2.63 0.54 0.60
Cash from ops 55 145 83 109 150 138 214 186 32 4
Capex 52 29 27 35 51 41 41 40 9 8
Free cash flow 2 116 56 74 100 96 173 146 23 (4)
Total assets 788 757 715 708 668 666 783 775 664 775
Short-term debt 19 26 23 21 10 10 9 6 40 6
Long-term debt 222 209 193 181 176 173 376 376 174 376
Common equity 263 191 195 171 138 155 23 51 126 51
EBIT/capital employed -21% 15% 26% 58% 83% 100% >100% >100% n/m n/m
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • Design innovator with 200+ patents; partners with

Herman Miller operates in two segments: North American designers and pays them royalties. Past successes,
Furniture provides furniture for office and healthcare such as the Stumpf-designed Aeron chair, may be
environments. The segment also includes owned contract repeatable, though timing of “hits” is unpredictable.
furniture dealers. Non-North American Furniture provides • Distribution: 250 independent, 50 certified dealers.
furniture for work-related settings outside of North America. • Targeting 13% EBIT margin (12.3% in FY08). It
70% of sales are made through the company’s dealer has eliminated 150 positions and may cut more.
distribution network, with the remainder made directly to end • Most executives tenured for at least a decade.
users (governments account for 20-25% of sales). Emblematic of the culture, CEO Brian Walker (46)
calls staff “employee-owners.”
SELECTED OPERATING DATA • Repurchased $250+ million in FY08 and ~$60
FYE May 31 2006 2007 2008 1Q09
million YTD. Shares are down ~25% since FY03.
Furniture – N.A. 83% 81% 81% 83% • Stock price implies 19% trailing FCF yield, 6x
Furniture – ROW
1
12% 15% 16% 15% trailing P/E and 7x forward P/E.
Other 4% 4% 3% 3%
Revenue growth by segment: INVESTMENT RISKS & CONCERNS
Furniture – N.A. 15% 8% 5% -3%
Furniture – ROW 13% 28% 16% -4% • Orders weakened in September and October to
1
Other
2
18% 6% -32% 8% $34 million per week vs. $41 million in FQ1. The
∆ revenue 15% 10% 5% -3% company plans to cut costs by $60 million per year,
3
∆ orders 15% 11% 2% 11%
4 with related charges of $10 million in FQ3.
∆ backlog 4% 21% -1% 19%
EBIT margin by segment: • U.S. industry orders and shipments expected to
Furniture – N.A. 10% 10% 12% 12% decline 6.5% and 9.7%, respectively, in CY08,
Furniture – ROW
1
7% 10% 15% 9% according to trade association BIFMA. In CY09, it
Other 5% 10% 7% 14% expects both orders and shipments to drop 6.3%.
% of revenue by product type: • Beginning to feel effects of commodity price
Office furniture systems 31% 29% 29% n/a inflation. The company implemented a price
Seating 24% 25% 24% n/a increase in August in order to defend margins. The
Freestanding & storage 16% 15% 15% n/a
5 extent of the effect of input cost pressures is likely
Other
6
10% 9% 8% n/a to become evident over the next few quarters.
Revenue growth by product type: • Office furniture demand sensitive to general
Office furniture systems 8% 7% 3% n/a corporate profitability, white-collar employment,
Seating 21% 14% 2% n/a
Freestanding & storage 16% 4% 3% n/a
new office construction rates, and vacancy rates.
5
Other
6
4% 2% -5% n/a COMPARABLE PUBLIC COMPANY ANALYSIS
1
Consists of residential furniture business and Convia, and unallocated items. ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
2
The weakening of the dollar added $27 million to revenue in FY08, and the
Brandrud acquisition added another $7 million; offsetting these benefits was an HNI 532 862 .3x 5.7x 9x 10x
OEM deal expiration that contributed $20 million in FY07 and zero in FY08. SCS 827 956 .3x 1.4x 7x 8x
3
A price increase in early August resulted in pulled ahead orders of ~$35
million in 1Q09. Order growth would have been 3% without this effect. MLHR 784 1,002 .5x n/m 7x 7x
4
Backlog of unfilled orders was $286 million as of May 31, 2008.
5
The company does not disclose international product line information.
6
Consists of miscellaneous and uncategorized product and service sales. MAJOR HOLDERS
CEO Walker 1% │ Other insiders 3% │ Columbia Wanger
INVESTMENT HIGHLIGHTS 11% │ Ariel 10% │ Barclays 8% │ Morgan Stanley 7%
• Third-largest player in U.S. office furniture
industry with 12% share, behind Steelcase (17%) RATINGS
and HNI (16%), and ahead of Haworth (8%) and VALUE Intrinsic value materially higher than market value?
Knoll (7%). In 1986, HMI had 7% share, Steelcase MANAGEMENT Capable and properly incentivized?
21%, HNI 7%, Haworth 4%, and Knoll 2%. FINANCIAL STRENGTH Solid balance sheet?
• Targets furniture segments with $13 billion in MOAT Able to sustain high returns on invested capital?
size and $7 billion in growth potential, driven by EARNINGS MOMENTUM Fundamentals improving?
new channels, geographies, and products. The MACRO Poised to benefit from economic and secular trends?
Convia offering adds another $8 billion opportunity. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE

Herman Miller is no ordinary furniture maker. In a commoditized industry, the company has proven it can innovate product
design, generating above-average growth and superior ROIC. While the company faces cost pressures, the market may be
giving it too little credit in terms of pricing power and commitment to shareholder value. The company has optimized the
capital structure via debt-financed share repurchases. If we were to own a furniture maker, this would be it.
Hurco Companies, Inc. (Nasdaq: HURC) Indianapolis, IN, 317-293-5309

Technology: Scientific & Technical Instruments http://www.hurco.com

Ownership Data FYE 12/30/00 n/a n/a n/a EV / LTM EBITDA n/a

per share data) 10/31/01 10/31/02 10/31/03 10/31/04 10/31/05 10/31/06 10/31/07 7/31/08 7/31/07 7/31/08
Revenue 92 71 76 100 126 149 188 227 49 57
Gross profit 23 16 21 30 43 53 71 85 19 21
EBIT (1) (7) 2 9 17 23 31 38 8 9
Net income (2) (8) 1 6 16 16 21 25 5 6
Diluted EPS (0.28) (1.48) 0.08 1.04 2.60 2.42 3.24 3.84 0.80 0.90
Cash from ops (4) 6 2 7 12 14 14 2 4 6
Capex 2 2 1 2 3 3 5 6 1 2
Free cash flow (5) 4 1 5 9 11 10 (3) 3 4
Total assets 66 57 58 73 94 126 164 185 154 185
Short-term debt 0 1 1 0 0 0 0 0 0 0
Long-term debt 12 8 9 4 4 4 0 0 0 0
Common equity 36 28 29 39 59 75 98 119 92 119
EBIT/capital employed -2% -23% 8% 32% 54% 62% 72% 68% n/m n/m
$70
$60
$50
$40
$30
$20
$10
$0
BUSINESS OVERVIEW • New manufacturing facility in China produces

Hurco an industrial technology firm that provides castings and components, but can be expanded to
computerized machine tools to companies in the metal include sub-assembly operations.
working industry. It also provides computer control systems • May consider “opportunistic” M&A, “consistent
and software products, which are integrated into the with our strategic focus on expanding our product
company’s machine tools. Hurco was founded in 1968. line and entering new markets.”
• Two-thirds of revenue outside U.S. The overseas
SELECTED OPERATING DATA1 exposure has benefited revenue growth, but may
YTD hurt reported results when the dollar strengthens.
FYE October 31 2005 2006 2007 7/31/08
% of revenue by type: • Michael Doar (52) became chairman and CEO in
Machine tools 86% 87% 88% 89% 2001 after spending more than a decade as a senior
Service and other 14% 13% 12% 11% executive at Ingersoll Milling Machine Company.
Revenue growth by type: James Fabris (56) became president and COO of
Machine tools 28% 20% 29% 30%
Service and other 14% 8% 14% 16%
Hurco at the same time as Doar became CEO.
Revenue growth 26% 18% 27% 28% • Stock price implies 4x trailing P/E (no EPS
2
Order growth 19% 26% 29% 20% estimates available).
Americas 34% 33% 27% 20%
Europe 59% 59% 66% 74%
Asia and other 7% 9% 7% 6% • Will North America sales rebound (down 19% in
Revenue growth by geography: FQ3)? “In spite of adverse economic conditions [in
Americas 40% 13% 3% -7% the U.S.], I believe we may see increased activity in
Europe 23% 18% 43% 40%
Asia and other 0% 49% 7% 52% the near future due to our new product introductions
1
Hurco typically converts backlog into revenue within 60 days. As a result, and the timing of our industry’s largest trade show.”
backlog is not a useful indicator of future performance.
2
North America accounted for 18% of FQ3 revenue.
FY07 orders benefited by $12 million, or 7.5%, due to currency changes.
• Raw materials price inflation has “significantly
INVESTMENT HIGHLIGHTS affected” the machine tool industry, according to
Hurco. FQ3 gross margin fell to 36% from 38% a
• Leader in interactive computer control systems
year earlier due to rising input costs.
for manufacturing automation in metal parts
• Highly cyclical machine tool industry. Demand
industry. Hurco pioneered conversational software
trends can change abruptly across geographies.
for use on machine tools and has concentrated on
user-friendly systems that can be operated by skilled
and unskilled tool operators. The company’s control
systems enable operators on the production floor to
ATU 933 1,385 .8x n/m 7x 7x
quickly create a program for machining a part from
HDNG 66 80 .2x 0.3x 13x 12x
a blueprint or computer-aided design file.
KMT 1,288 1,700 .6x 1.9x 7x 7x
• Continued strong demand in European markets,
HURC 110 77 .3x 1.0x n/a n/a
“particularly in Germany and the United Kingdom.”
The company is also benefiting from continued
expansion into Eastern European markets. European MAJOR HOLDERS
revenue grew 30% in the July quarter (FQ3). CEO Doar <1% │ Other insiders 5% │ Systematic 7% │
• Strong growth in Asia due to robust demand, Royce 6%
FQ3 Asian revenue up 49% y-y.
• Weaker dollar benefited FQ3 sales growth by RATINGS
fourteen percentage points in Europea and Asia. VALUE Intrinsic value materially higher than market value?
• Introduced 14 new machines in September, MANAGEMENT Capable and properly incentivized?
representing Hurco’s largest product introduction to FINANCIAL STRENGTH Solid balance sheet?
date. A marketing focus has been the company MOAT Able to sustain high returns on invested capital?
software technology. Hurco’s 5-axis technology is EARNINGS MOMENTUM Fundamentals improving?
critical to mature markets such as North America. MACRO Poised to benefit from economic and secular trends?
THE BOTTOM LINE

Hurco is a cheap company that has benefited greatly from the boom in industrial production. It derives two-thirds of revenue
outside the U.S., with dollar depreciation a meaningful driver of double-digit growth. However, as the dollar stabilizes or
strengthens and global growth slows, Hurco’s positive trend is likely to be slowed or reversed (Americas revenue is down 9%
YTD). Hurco continues to operate in a cyclical industry, making it difficult to estimate “normalized” earnings.
iBasis, Inc. (Nasdaq: IBAS) Burlington, MA, 781-505-7500

Services: Communications Services http://www.ibasis.net

Enterprise value: $122 million Next quarter n/a n/a 0 P/E FYE 12/31/10 30.7x
Insider buys (last six months): 1 LT EPS growth n/a n/a 0 P / tangible book n/m

per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 110 165 655 715 790 814 939 1,228 216 338
Gross profit 8 22 96 78 119 106 91 132 16 32
EBIT (133) (46) 67 46 61 62 25 13 6 1
Net income (191) (122) 43 28 41 43 16 7 4 3
Diluted EPS (9.91) (3.75) 1.07 0.69 1.01 1.06 0.33 0.09 0.10 0.05
Cash from ops (82) (45) (3) (7) 53 33 58 59 37 16
Capex 35 5 5 3 5 4 10 16 3 3
Free cash flow (117) (49) (8) (11) 48 29 49 43 33 13
Total assets 329 99 68 88 106 233 660 659 145 659
Short-term debt 26 5 2 2 2 0 1 1 1 1
Long-term debt 171 94 66 66 2 0 25 31 0 31
Common equity 87 (34) (42) (24) 39 24 335 321 40 321
EBIT/capital employed -81% -48% >100% >100% >100% >100% n/m n/m n/m n/m
$300
$250
$200
$150
$100
$50
$0
Jan 00 Sep 00 Sep 01 Sep 02 Sep 03 Oct 04 Oct 05 Oct 06 Oct 07 Oct 08
iBasis is a wholesale carrier of international long distance trailing P/E and 31x forward P/E.
(24 billion minutes last year) and a provider of retail prepaid
calling and enhanced services for mobile operators. INVESTMENT RISKS & CONCERNS
Customers include KPN, Verizon, Vodafone, China Mobile, • Challenging conditions in wholesale (due to
Skype, Telecom Italia, and Telefonica. In October 2007, calling card market decline) and retail. The
iBasis “acquired” KPN Global Carrier Services to create the company has guided for capex of $15-16 million in
#3 carrier of international voice traffic, and KPN became a 2008 and “modest” revenue growth in 2009.
51% owner of iBasis. In April 2008, iBasis acquired TDC’s • Pro forma revenue down 8% in Q3. iBasis grew
international voice business. iBasis was founded in 1996. revenue, adjusted for the KPN deal, in the low
single digits in 1H08 but saw it fall 8% in Q3. Pro
SELECTED OPERATING DATA forma minutes were down 6% in Q3.
YTD
FYE December 31 2005 2006 2007 9/30/08
• KPN integration and control risks. iBasis plans to
% of revenue by segment: spend $12 million in 2008 and $5 million in 2009 to
Wholesale trading
1
81% 82% 97% 93% achieve $20 million of annualized synergies. The
Retail 19% 18% 3% 7% net impact will be FCF-negative in 2008 and FCF-
Revenue growth by segment: positive in 2009, with the first full year of benefits
Wholesale trading 39% 33% 119% n/a
Retail 90% 30% -73% n/a in 2010. In addition to integration risks, investors
Total revenue growth 46% 33% 84% 74% need to weigh KPN’s majority ownership of iBasis.
Gross margin by segment: Obviously, KPN’s interests are not perfectly aligned
Wholesale trading 12% 12% 10% 10% with those of minority shareholders.
Retail 17% 15% 14% 13%
Total gross margin 13% 12% 10% 10% • Low-margin, “commodity” business. International
1
Includes outsourcing revenue. wholesale voice is a behind-the-scenes business in
which cost is a key driver. iBasis may enjoy some
INVESTMENT HIGHLIGHTS scale advantages, but it also suffers from a lack of
• Cost leader. iBasis is the wholesale long distance true differentiation (low-teens gross margin).
market share leader in multiple countries and • ROIC may not be sustained. iBasis operates in a
operates one of the largest VoIP networks. Scale niche in which returns are likely to erode over time.
allows iBasis to offer cost-attractive routes.
• Transformative KPN deal in October 2007. COMPARABLE PUBLIC COMPANY ANALYSIS
iBasis’ combination with KPN Global Carrier 08 09
P/E P/E
Services has increased minutes by 70%, revenue by LVLT 1,402 7,578 1.7x n/m n/m n/m
100%+, and EPS by ~200%. iBasis has gained a S 6,571 25,095 .7x n/m 29x n/m
strong footprint in Europe and expects to achieve T 162,942 238,122 1.9x n/m 10x 9x
$20 million of annual cost synergies by Q2 2009. VZ 85,215 128,316 1.3x n/m 12x 11x
• KPN has raised iBasis’ stature, affording it new
IBAS 153 122 .1x n/m 43x 31x
opportunities, such as marketing services to mobile
operators in Asia and Latin America.
• $10 million acquisition of TDC Wholesale (April
MAJOR HOLDERS
2008) adds $80 million in incremental revenue. CEO Gneezy 2% │ Other insiders 2% │ KPN 53%
TDC outsources non-Nordic voice traffic to iBasis.
iBasis believes that other international wholesale RATINGS
carriers may also decide to outsource traffic to the VALUE Intrinsic value materially higher than market value?
1
company due to low margins and capital needs. MANAGEMENT Capable and properly incentivized?
• Still mostly unknown on Wall Street. iBasis
moved to the OTC following the Internet bubble
and returned to the Nasdaq in mid-2006.
• Repurchase $15 million of stock YTD.
• CEO Ofer Gneezy (56) co-founded iBasis in 1996. 1
Two starts due to KPN control and low insider ownership.
Previously, he served as CEO of a predecessor to
Acuity Imaging, an industrial automation company.
THE BOTTOM LINE

iBasis is still under the radar of most investors, despite having positively transformed itself over the past year. The KPN deal
has improved the company’s market position and business prospects. However, we doubt the sustainability of above-average
returns on capital in the wholesale international voice business. As a result, we do not find the shares sufficiently compelling.
ICF International, Inc. (Nasdaq: ICFI) Fairfax, VA, 703-934-3000

Services: Business Services http://www.icfi.com


per share data) 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 146 140 177 331 727 722 199 176
Gross profit 55 56 71 114 195 233 51 61
EBIT 6 7 6 23 71 59 20 13
Net income 2 3 2 12 41 32 11 7
Diluted EPS 0.22 0.30 0.21 1.10 2.72 2.12 0.74 0.45
Cash from ops 12 3 2 18 46 26 5 9
Capex 2 1 1 2 4 10 1 6
Free cash flow 10 2 1 16 42 16 4 3
Total assets n/a 94 151 216 393 410 303 410
Long-term debt n/a 17 54 0 47 90 0 90
Common equity n/a 48 53 114 165 195 154 195
EBIT/capital employed n/a 51% 27% 86% >100% >100% n/m n/m
$40
$35
$30
$25
$20
$15
$10
$5
$0

ICF International provides consulting and IT services, • High dependence on government. While ICFI
addressing the program life cycle, from analysis and design aims to grow commercial revenue, government
through implementation and improvement. ICFI was bought clients accounted for 92% of revenue in 2007. If the
by current management and private equity in 1999. The Road Home contract is excluded, government
company made two acquisitions in 2005 and went public in clients accounted for three-quarters of revenue.
2006. ICFI was founded in 1969 and has 3,000 employees. • Louisiana contract accounted for 63% of
revenue in 2007; declined to 34% in 3Q08. ICFI
SELECTED OPERATING DATA won the Road Home deal in 2006 and manages a
YTD program to help homeowners and landlords of small
FYE December 31 2005 2006 2007 9/30/08
% of revenue by market:
rental properties affected by Hurricane Katrina by
Energy and climate change 20% 12% 8% 10% providing compensation for property repair. The
Environment, infrastructure 35% 17% 9% 24% contract has a stated term of three years, but ICFI
Health and human services 17% 53% 75% 57% has earned revenue faster than projected. Only $30-
Homeland security, defense 28% 18% 8% 9%
60 million of revenue appears likely in 2009.
Revenue growth by market:
Energy and climate change 21% 12% 46% 24% • Louisiana deal “one-time” boost; total revenue
Environment, infrastructure 1% -9% 16% 197% expected to decline ~20% in 2009 even as non-
Health and human services 35% 483% 211% -26% Road Home revenue may rise 15%. While Road
Homeland security, defense 87% 20% -2% 11%
∆ revenue 27% 87% 119% -1%
Home is accounted for as a continuing operation,
∆ backlog (period end) 69% 328% -15% 3% the unusually large deal size means that the revenue
% of revenue by client: lost when the deal ends will not be fully replaced.
U.S. federal government 72% 49% 27% 35% • Highly competitive market. Competitors include
U.S. state and local gov’t 9% 40% 65% 48% Abt Associates, BearingPoint, Booz Allen, CRA,
Domestic commercial 14% 7% 6% 12%
International 5% 4% 2% 5% Lockheed Martin, L-3, Navigant, Northrop
% of revenue by contract type: Grumman, PA Consulting, SAIC, SRA, and Westat.
Time and materials 42% 46% 55% 68% • Numerous acquisitions raise question about
Fixed price 24% 34% 36% 21%
organic growth prospects. ICFI has bought a
Cost based 34% 20% 9% 11%
% of revenue by contract role: number of professional services organizations in
Prime contractor 86% 89% 94% n/a recent years, including Synergy, Caliber, Z-Tech,
Subcontractor 14% 11% 6% n/a SH&E, Jones & Stokes, and others.

• Strategy: win more end-to-end assignments; layer ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
higher-margin commercial engagements onto stable ACN 20,919 17,304 .7x 12.3x 10x 9x
government contracts; maintain tight cost structure; NCI 832 1,101 1.3x n/m 20x 16x
and continue strategic acquisition program. SAI 3,607 4,035 .4x 8.0x 17x 15x
• Long-standing client relationships. ICFI has ICFI 266 353 .5x n/m 10x 13x
served government agencies, including the DoD,
EPA, HHS, and DOT, for 10-30 years or longer. MAJOR HOLDERS
• Won three-year, $900 million Louisiana Road CEO Kesavan 2% │ Other insiders 51% (includes CM
Home contract in 2006, the largest reconstruction Equity Partners 49%)
program in U.S. history. (See Risks for more info.)
• Strong energy practice, with 20+ years of RATINGS
experience in power, fuels, climate policy, and VALUE Intrinsic value materially higher than market value?
energy efficiency. Clients include utilities, E&P and MANAGEMENT Capable and properly incentivized?
independent power firms, and government agencies. FINANCIAL STRENGTH Solid balance sheet?
• 42% of consultants have post-graduate degrees. MOAT Able to sustain high returns on invested capital?
320 employees hold a federal security clearance. EARNINGS MOMENTUM Fundamentals improving?
Turnover is 11%. Senior staff tenure is ~12 years. MACRO Poised to benefit from economic and secular trends?
THE BOTTOM LINE

ICFI joined the magic formula list due to profits from the Louisiana Road Home contract, which accounted for 63% of
revenue in 2007. While other revenue is growing, the impending completion of Road Home is likely to have a negative
impact on profitability in 2009 and beyond. Road Home may appropriately be viewed as a non-recurring item, suggesting
that the company should not have qualified for inclusion on the magic formula list.
Iconix Brand Group, Inc. (Nasdaq: ICON) New York, NY, 212-730-0030
Consumer Cyclical: Apparel/Accessories, Member of S&P SmallCap 600 http://www.iconixbrand.com

Enterprise value: $1.1 billion Next quarter 0.31 0.33 3 P/E FYE 12/31/10 n/a
Institutional ownership: n/a Date Actual Estimate LTM EBIT yield 13%
# of institutional owners: n/a 11/3/08 $0.30 $0.28 LTM pre-tax ROC >100%

per share data) 1/31/02 1/31/03 1/31/04 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 101 157 131 69 30 81 160 210 43 55
Gross profit 31 41 27 13 0 0 0 0 0 0
EBIT (2) (1) (8) 3 15 54 122 147 29 36
Net income (2) (4) (11) 0 16 33 64 72 17 18
Diluted EPS (0.12) (0.17) (0.45) 0.01 0.46 0.72 1.04 1.18 0.28 0.30
Cash from ops 0 (10) 11 5 16 29 84 88 22 26
Capex 3 2 0 0 1 1 0 5 0 0
Free cash flow (2) (12) 11 5 15 29 84 84 22 25
Total assets 51 103 75 60 217 696 1,336 1,385 1,237 1,385
Short-term debt 14 24 15 3 14 22 53 63 26 63
Long-term debt 1 29 25 20 85 141 650 610 616 610
Common equity 24 29 19 24 101 466 528 599 507 599
EBIT/capital employed -10% -4% -41% >100% n/m >100% >100% >100% n/m n/m
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • Non-U.S. (licensing) revenue growing quickly,

Iconix owns a portfolio of 17 consumer brands, which it but accounted for only 6% of revenue in 2007.
licenses directly to retailers, wholesalers and suppliers for Iconix recently formed a JV to target China.
apparel, accessories, footwear, beauty, and home products. • To meet “low end” of guidance for 2008 growth
Iconix supports the brands with marketing. Licensees pay of 34-37% in revenue and 11-15% in EPS, i.e.,
minimum guaranteed royalties. Target, Kohl’s and Kmart revenue of $215-220 million (>70% guaranteed
were 14%, 8% and 6% of revenue, respectively, in 2007. minimums), EPS of $1.15-1.20 and FCF of $120+
million in 2008 (see Risks below regarding FCF).
SELECTED OPERATING DATA • Guiding for 2009 revenue of $225-235 million,
YTD EPS of $1.20-1.30 and FCF of $114-118 million.
FYE December 31 2005 2006 2007 9/30/08
Revenue growth
1
186% 168% 98% 44% • Stock price implies 16% trailing FCF yield, 7x
% of revenue by category: trailing P/E and 7x forward P/E.
Direct-to-retail license 43% 43% 34% 25%
Wholesale license 50% 54% 65% 72% INVESTMENT RISKS & CONCERNS
2
Other (commissions) 7% 3% 2% 3%
% of revenue by geography: • Net debt limits strategic flexibility and may
U.S. 98% 96% 94% 92% depress earnings in weak economy. The company
Other 2% 4% 6% 8% had $673 million of debt and $110 million of cash
1
The 2005 number reflects growth in licensing and commission revenue only. as of September 30, raising the risk of distress.
GAAP revenue fell 56% in 2005, as Iconix transitioned to a licensing model.
2
Includes Bright Star, which earns commissions for arranging footwear • Guidance lowered. In May, Iconix provided 2008
production for mass market and discount retailers. Inconix holds no inventory. revenue guidance of $250-260 million. In June, it
lowered guidance due to the absence of M&A and,
BRAND ACQUISITIONS SINCE 2004 apparently, due to a weak retail outlook.
Year Brand
2004 Badgley Mischka
• FCF, as calculated by company, may overstate
2005 Joe Boxer; Rampage “owner earnings.” Iconix expects 2008 FCF of
2006
1
2
Mudd; London Fog; Mossimo; Ocean Pacific/OP
3
$120+ million, with $5 million of capex and $50
2007 Danskin and Rocawear; Official-Pillowtex brands; Starter million of non-cash items. Iconix does not include
4
2008 Waverly
1
In 2006, the company acquired ~$60 million in annual royalty streams.
M&A in capex, but inclusion may be appropriate.
2
In 2007, the company acquired ~$115 million in annual royalty streams. Management’s FCF calculation may overstate the
3
4
Iconix acquired Starter for $60 million (2008E royalties of $18 million). cash that can be paid out without hurting prospects.
Acquired in October for $26 million.

• Brand ownership and licensing model with low
CHKE 138 122 3.1x 7.8x 9x 9x
capital intensity and no inventory risk. Iconix
GPS 8,217 6,725 .4x 1.9x 9x 8x
enjoys high ROC, although incremental capital is
JNY 527 1,110 .3x 1.2x 7x 7x
invested at lower returns due to acquisitions.
ICON 508 1,098 5.2x n/m 8x 7x
Minimum royalties and low overhead help Iconix to
maintain EBIT profitability in a difficult economy.
• Direct-to-retail model provides retailers with MAJOR HOLDERS
proprietary brands, resulting in premium shelf CEO Cole 6% │ Other insiders 2% │ Fred Alger 9% │
space. DTR deals include Walmart (OP, Starter, Baron 6%
Danskin), Target (Mossimo, Fieldcrest),
Sears/Kmart (Cannon, Joe Boxer), Kohls RATINGS
(Candie’s), and Bed Bath & Beyond (Royal Velvet). VALUE Intrinsic value materially higher than market value?
• Acquisitions key to growth, with brand strength MANAGEMENT Capable and properly incentivized?
and future royalties among the key M&A criteria. FINANCIAL STRENGTH Solid balance sheet?
• Organic growth opportunities in 2009 include the MOAT Able to sustain high returns on invested capital?
company’s Wal-Mart brands and the Cannon launch
at Sears and Kmart (the Cannon brand was acquired
as part of the Official-Pillowtex purchase in 2007).
THE BOTTOM LINE

Iconix makes for a difficult judgment call. The company owns a portfolio of attractive brands and operates a model with low
capital intensity and high returns. However, we are concerned that it has overleveraged in pursuit of acquisition-driven
growth. Deterioration in retail sales, coupled with tight credit, may put the company in distress, potentially leaving equity
holders with little value. While more than 70% of Iconix’s 2008 revenue guidance is backed by minimum royalties, the
company’s negotiating leverage and licensing opportunities are likely to diminish in a weak economy. In such a scenario,
Iconix may have to put acquisitions on hold, and it may struggle to satisfy creditors. We view the shares as too speculative.
infoGROUP Inc (Nasdaq: IUSA) Omaha, NE, 402-593-4500

Services: Printing & Publishing http://www.infogroup.com

Enterprise value: $494 million Next quarter n/a n/a 0 P/E FYE 12/31/10 n/a
# of institutional owners: 233 10/27/08 -$0.07 $0.16 LTM pre-tax ROC >100%

per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 289 303 311 345 383 435 689 746 185 182
Gross profit 208 218 224 242 275 318 413 432 113 104
EBIT 40 55 49 41 58 65 87 41 31 (9)
Net income 5 20 20 18 32 33 41 20 17 (9)
Diluted EPS 0.10 0.40 0.38 0.33 0.58 0.60 0.73 0.24 0.30 (0.15)
Cash from ops 55 53 57 72 86 60 74 51 32 12
Capex 8 5 7 7 12 21 21 29 5 10
Free cash flow 46 48 50 65 75 38 52 22 27 2
Total assets 419 393 366 509 544 750 813 836 803 836
Short-term debt 20 26 17 34 6 5 5 3 5 3
Long-term debt 206 164 123 162 142 255 278 310 296 310
Common equity 96 118 146 172 198 234 269 249 249 249
EBIT/capital employed 65% 96% >100% >100% n/m >100% >100% >100% n/m n/m
$20
$18
$16
$14
$12
$10
$8
$6
$4
$2
$0
BUSINESS OVERVIEW • Founder Vinod Gupta ousted in August. Gupta

infoGROUP (formerly infoUSA) provides business and had been chairman and CEO since founding the
consumer databases for sales leads and mailing lists, company in 1972. The resignation followed on the
database marketing services, data processing services and heels of shareholder litigation, an SEC investigation
sales solutions. The company was founded in 1972 and (outcome still pending) and a Board review. The
operates in three segments: latter “determined that various related party
The Data Group consists of National Accounts, OneSource, transactions, expense reimbursements, and
Database License, and the Small and Medium Sized Business corporate expenditures were excessive.” Gupta
Group. The segment bears the compilation and verification agreed to return $9 million. Board members Bill
costs of the company’s proprietary databases. Fairfield and Bernard Reznicek assumed the CEO
and chairman roles, respectively. IUSA shares rose
The Services Group provides customer data management and
19% on the day of Gupta’s resignation.
brokerage services, e-mail marketing, and catalog marketing.
The Marketing Research Group provides customer surveys, trailing P/E and 5x forward P/E.
opinion polling, and other market research for business
(Opinion Research division) and government (Macro Int’l INVESTMENT RISKS & CONCERNS
division). The segment also includes Guideline, NWC, and • Management turnover. Major governance
Northwest, which are research companies acquired in 2007. deficiencies cascaded into major management
changes this year, affecting the chairman, CEO and
SEGMENT BREAKDOWN CFO roles. Ultimately, however, the changes may
YTD
FYE December 31 2005 2006 2007 9/30/08 have alleviated a major investor concern.
% of revenue by segment: • Direct marketing faces a number of headwinds
Data Group 76% 69% 48% 42% that require infoGROUP to adapt. The industry has
Services Group 24% 28% 20% 22% come under scrutiny by consumer groups and
1
Marketing Research Group 0% 3% 32% 36%
2 regulators. Internet-based services have made data
Data Group n/a 3% 10% -4% more widely available and more easily accessible.
Services Group
1
n/a 32% 13% 22% • Risks relating to M&A strategy. The company has
Marketing Research Group n/a n/m n/m 30%
made 35+ acquisitions since 1996 and intends to
EBIT margin by segment: continue looking for strategic opportunities.
Data Group 21% 22% 27% 22%
Services Group 23% 24% 25% 18% COMPARABLE PUBLIC COMPANY ANALYSIS
Marketing Research Group n/a 3% 5% 5% ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
Corporate -7% -7% -6% -12%
Total EBIT margin 15% 15% 13% 3% ACXM 529 1,028 .8x n/m 10x 9x
1
Established in 2006 with acquisition of Opinion Research Corp. DNB 3,921 4,555 2.7x n/m 14x 12x
2
2005 segment growth unavailable due to redefinition of segments. HHS 317 591 .5x n/m 5x 6x
VCI 53 1,158 .5x n/m 2x 2x
INVESTMENT HIGHLIGHTS IUSA 192 494 .7x n/m 12x 5x
• Data Group owns 12 proprietary marketing
databases, including information on tens of MAJOR HOLDERS
millions of businesses and executives, and 200+ Founder and former CEO Vinod Gupta 40% │ Other insiders
million consumers. Its Internet-based services, 3% │ Cardinal 6% │ Burgundy 5% │ Columbia Wanger 4%
including Salesgenie.com and Credit.net, tap into
these databases, which are compiled by 800 people. RATINGS
• Services Group helps direct marketing firms VALUE Intrinsic value materially higher than market value?
enhance the value of their own data with services MANAGEMENT Capable and properly incentivized?
such as list management and list brokerage, data FINANCIAL STRENGTH Solid balance sheet?
processing, and Yesmail email marketing services. MOAT Able to sustain high returns on invested capital?
• Marketing Research Group leverages a global EARNINGS MOMENTUM Fundamentals improving?
data collection network to perform surveys and MACRO Poised to benefit from economic and secular trends?
other research services for clients. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE

infoGROUP is a company in transition. With founder and long-time CEO Vinod Gupta gone, the company is likely to
refocus on shareholder value. However, the management change occurred rather abruptly in August, and it is unclear whether
new CEO Bill Fairfield is up to the task. As a result, infoGROUP appears somewhat directionless. Nonetheless, the low
equity valuation (5x 2009E EPS) and non capital-intensive model make it an interesting company to watch.
Jackson Hewitt Tax Service Inc (NYSE: JTX) Parsippany, NJ, 973-630-1040
Services: Personal Services http://www.jacksonhewitt.com

# of institutional owners: 250 9/4/08 -$0.69 -$0.69 LTM pre-tax ROC >100%

per share data) 4/30/02 4/30/03 4/30/04 4/30/05 4/30/06 4/30/07 4/30/08 7/31/08 7/31/07 7/31/08
Revenue 157 172 206 233 275 293 279 277 6 4
Gross profit 120 118 142 162 197 208 177 173 (9) (14)
EBIT 70 67 70 87 102 116 67 65 (30) (31)
Net income 43 41 43 50 58 65 32 32 (20) (21)
Diluted EPS 1.13 1.10 1.15 1.32 1.59 1.93 1.09 1.12 (0.65) (0.72)
Cash from ops 14 64 64 115 113 80 34 44 (46) (36)
Capex 23 5 4 5 11 9 6 6 1 1
Free cash flow (9) 59 60 110 102 71 28 38 (47) (37)
Total assets n/a 662 726 675 588 574 600 583 558 583
Long-term debt n/a 0 0 175 50 127 231 281 210 281
Common equity n/a 612 655 396 388 304 237 213 246 213
EBIT/capital employed n/a >100% >100% >100% n/m n/m n/m >100% n/m n/m
$40
$35
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • Bought 3.5 million shares for $99 million in FY08
Jackson Hewitt is the second-largest paid tax return preparer and 4.4 million shares for $142 million in FY07.
in the U.S., behind H&R Block. The company has a branded • Stock price implies 11% trailing FCF yield, 11x
network of 5,763 franchised and 1,000 company-owned trailing P/E and 7x forward P/E.
offices. The network provides income tax return preparation,
electronic filing services, and refund anticipation loans. INVESTMENT RISKS & CONCERNS
Filers earning less than $30,000 accounted for 67% of unit • Weak FY08 tax season, with returns prepared by
volume in FY08 (compared to 50% nationwide). Jackson Jackson Hewitt down 7%, driven by the lack of an
Hewitt was spun off from Cendant in an IPO in 2004. early-season product, brand damage from DOJ
lawsuitss, and greater compliance requirements.
SELECTED OPERATING DATA1 • Brand damage from settled DOJ lawsuits against
FYE April 30 2006 2007 2008
a franchisee for fraudulent tax return preparation.
% of revenue by segment: • Terminated CEO Lister on heels of IRS and DOJ
Franchise operations 74% 73% 69% settlements in 2007, promoting Michael Yerington
Company-owned offices 26% 27% 31% from COO to CEO and Mark Heimbouch from CFO
Revenue growth by segment: to COO. Daniel O’Brien joined as CFO in January
Franchise operations 20% 4% -10%
Company-owned offices 14% 12% 8% 2008, while Heimbouch resigned in October.
Total revenue growth 18% 6% -5% • Refund anticipation loans (RALs) are short-term
EBIT margin by segment: loans with a high implied interest rate. In January
Franchise operations 62% 61% 53%
Company-owned offices 17% 19% 6%
2008, the IRS issued an advance notice of proposed
Corporate and other -12% -10% -15% rulemaking (ANPRM) regarding the use of tax
Total EBIT margin 38% 39% 24% return information for the marketing of RALs.
% of franchise revenue by type: • Franchise renewals coming up in 2009-10. 93% of
Royalty 37% 39% 40%
Marketing 17% 17% 18%
franchisees opted to renew their ten-year deals in
RALs
2
37% 38% 37% the last renewal cycle in 1999-2000. One-third of
Other 9% 6% 5% franchise deals will be up for renewal in the next
Frachised offices (period end) 5,379 5,778 5,763 two years (no renewals prior to April 15, 2009).
Company offices (period end) 643 723 1,000
Total tax returns prepared (mn) 3.66 3.65 3.39
• Competition from H&R Block, Liberty Tax and
Avg revenue per tax return ($) $178 $192 $192 alternatives, including Intuit’s TurboTax software
1
Q1 FY09 data not shown, as it is not meaningful due to seasonality. and the Free File Alliance, an IRS consortium.
2
Includes revenue from refund anticipation loans and other financial products. • Highly seasonal business presents hiring and space
utilization challenges. There were 7,700 seasonal
INVESTMENT HIGHLIGHTS hires in company-owned offices in FY08, compared
• Prepared 3.4 million tax returns in FY08, or 4% to a year-round base of 430 employees.
of returns prepared by a paid preparer. The paid
preparer market is fragmented and stagnantes due to COMPARABLE PUBLIC COMPANY ANALYSIS
competition from software alternatives. Jackson ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
Hewitt may grow by taking share from CPAs. HRB 5,801 6,588 1.5x n/m 11x 9x
• Franchisees pay marketing fees of 6% of revenue JTX 339 620 2.2x n/m 8x 7x
and royalties of 15% of revenue (12% for
territories sold before mid-year 2000). Franchisees
MAJOR HOLDERS
also pay a $2 fee to Jackson Hewitt for each tax
CEO Yerington <1% │ Other insiders 2% │ Invesco 15% │
return filed electronically. 20% of franchisees
Shamrock 9% │ Cap Re 8% │ Cardinal 6% │ Ziff 5%
earned revenue of more than $1 million in FY08.
• 35% of 5,100 total territories remain available RATINGS
for sale (~60,000 people per territory). 78% of new
territories were sold to existing franchisees in FY08.
• Existing territories under-penetrated. In FY08, FINANCIAL STRENGTH Solid balance sheet?
31% of territories reached a target of 3+ offices per MOAT Able to sustain high returns on invested capital?
territory. The company had 2.1 offices per territory. EARNINGS MOMENTUM Fundamentals improving?
• 28% of offices have been in existence for three MACRO Poised to benefit from economic and secular trends?
years or less. As offices mature to 7+ years, their EXPLOSIVENESS 5%+ probability of 5x upside in one year?
number of tax returns prepared more than doubles.
THE BOTTOM LINE

Jackson Hewitt plays in a stagnant market and has suffered from bad execution. However, if the company can return to its
historical pattern of gaining share versus CPAs, it should be able to grow modestly for many years to come. Improved
execution during the FY09 tax season, including a more aggressive early-season strategy, could restore profit growth.
KBR, Inc. (NYSE: KBR) Houston, TX, 713-753-3011

Capital Goods: Construction Services, Member of S&P MidCap 400 http://www.kbr.com


per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 4,795 5,125 8,863 11,906 9,291 8,805 8,745 10,584 2,177 3,018
Gross profit 64 (93) 14 (265) 433 372 520 766 167 199
EBIT 26 (182) (64) (357) 385 152 294 470 102 144
Net income (8) (92) (133) (303) 240 168 302 302 63 85
Diluted EPS (0.13) (0.94) (1.04) (2.31) 1.36 0.39 1.08 1.58 0.35 0.44
Cash from ops 0 n/a (899) (61) 527 931 248 77 (222) 285
Capex 0 n/a 63 74 76 57 43 38 9 11
Free cash flow 0 n/a (962) (135) 451 874 205 39 (231) 274
Cash & investments n/a n/a n/a 234 394 1,410 1,861 1,110 1,795 1,110
Total current assets n/a n/a n/a 3,732 3,510 3,898 4,056 3,659 4,020 3,659
Intangible assets n/a n/a n/a 288 285 251 251 753 251 753
Total assets n/a n/a n/a 5,487 5,182 5,414 5,203 5,323 5,177 5,323
Short-term debt n/a n/a n/a 18 16 0 0 0 0 0
Total current liabilities n/a n/a n/a 2,967 2,566 2,983 2,623 2,630 2,609 2,630
Long-term debt n/a n/a n/a 42 792 0 0 0 0 0
Total liabilities n/a n/a n/a 4,675 3,926 3,620 2,936 3,046 3,058 3,046
Preferred stock n/a n/a n/a 0 0 0 0 0 0 0
Common equity n/a n/a n/a 812 1,256 1,794 2,267 2,277 2,119 2,277
EBIT/capital employed n/a n/a n/a -35% 38% 42% n/m >100% n/m n/m
$50
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • $550 million BE&K acquisition grows Services.

KBR is an engineering, construction and services company The July deal re-establishes KBR as a domestic
supporting the energy, petrochemicals, government, and civil contractor and maintenance services provider. The
infrastructure sectors. It operates in four segments, with few integration is “going extremely well,” with “strong
projects typically accounting for a large portion of revenue. contributions” in new awards and financial results.
Government and Infrastructure (G&I) supports the military • Management has expressed optimism in KBR’s
mission cycle. In civil infrastructure, it operates in waste and ability to execute and deliver positive results.
water treatment, transportation, and facilities maintenance, • CEO Bill Utt (51) joined KBR in 2006 after six
providing program management and other services. years as CEO of SUEZ Energy N.A. CFO Kevin
Upstream constructs energy and petrochemical projects, DeNicola joined KBR in June 2008 from Lyondell
including technically complex projects in remote locations. Chemical, where spent six years as CFO.
Expertise includes LNG and GTL gas monetization facilities, • Stock price implies 2% trailing FCF yield, 8x
refineries, oil and gas production facilities, and pipelines. trailing P/E and 7x forward P/E.
Services provides construction and industrial services. INVESTMENT RISKS & CONCERNS
Other includes Downstream, Technology, and Ventures. • 50% of revenue from Iraq and Kuwait in 2007.
Halliburton (NYSE: HAL) sold stock in KBR for $17 per The rate of spending in those regions has decreased
share in an IPO in November 2006, and divested its entire already, partly due to a new competitively bid,
stake in April 2007. KBR sold its 51% interest in European multiple service provider LogCAP IV contract,
naval dockyard DML for $345 million in June 2007. which replaced the previous LogCAP III contract.
• U.S. government was 62% of revenue in 2007,
SELECTED OPERATING DATA exposing KBR to a drop in revenue if U.S. agencies
YTD materially alter their contract award criteria, or if
FYE December 31 2005 2006 2007 9/30/08
KBR is suspended or debarred from contracting
Revenue growth -17% -5% -1% 29%
% of revenue by segment: with U.S. agencies due to potential consequences of
G&I
1
79% 74% 70% 63% ongoing investigations into the company’s conduct.
Upstream 12% 19% 22% 23% • Dependent on capex by oil and gas companies in
Services 3% 4% 4% 9%
Other 6% 3% 5% 5%
Upstream, Services, and Other business units.
EBIT margin by segment: • Formal SEC investigation and DOJ criminal
G&I
1
4% 5% 5% 5% investigation into “improper payments” that may
Upstream 9% 2% 10% 11% have been made to government officials in Nigeria.
Services 14% 14% 17% 7%
Other 22% -12% 4% 12%
Unallocated -3% -3% -2% -2% COMPARABLE PUBLIC COMPANY ANALYSIS
Total EBIT margin 3% 2% 4% 5% ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
% of revenue by geography: FLR 6,485 4,418 .2x 2.4x 10x 9x
U.S. 14% 15% 11% n/a JEC 3,796 3,299 .3x 2.8x 8x 8x
Iraq and Kuwait 59% 52% 50% n/a
Other 28% 33% 39% n/a SAI 3,607 4,035 .4x 8.0x 17x 15x
% of G&I revenue by sub-segment: URS 2,292 3,234 .4x n/m 10x 9x
U.S. Gov’t – Middle East 81% 81% 78% 79% KBR 2,118 1,008 .1x 1.4x 8x 7x
U.S. Gov’t – Americas 14% 13% 12% 9%
International operations 5% 6% 10% 12%
% of upstream revenue by sub-segment: MAJOR HOLDERS
Gas monetization 34% 60% 74% 78% CEO Utt <1% │ Other insiders <1% │ Cap Re 12% │
Offshore 47% 23% 18% 18% Tontine 11% │ Fidelity 9%
Other 19% 18% 8% 4%
1
Government and infrastructure.
RATINGS
INVESTMENT HIGHLIGHTS VALUE Intrinsic value materially higher than market value?
• “Go to” contractor for U.S. government, other MANAGEMENT Capable and properly incentivized?
large buyers of engineering and construction FINANCIAL STRENGTH Solid balance sheet?
services. KBR has proven expertise in executing MOAT Able to sustain high returns on invested capital?
large-scale projects in far-flung places. EARNINGS MOMENTUM Fundamentals improving?
• Q3-end backlog of $15 billion, up 27% y-y,
provides several quarters of visibility.
THE BOTTOM LINE

KBR has benefited hugely from the U.S. presence in Iraq, with 50% of 2007 revenue derived from Iraq and Kuwait. As a
result, it is impossible to predict a reasonable EPS range over the next few years. A sharp drop in revenue from Iraq could
have a disproportionate impact on earnings. The current valuation does not adequately compensate for this risk.
Kenexa Corporation (Nasdaq: KNXA) Wayne, PA, 610-971-9171

Services: Business Services http://www.kenexa.com


per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 32 34 46 66 112 182 206 47 54
Gross profit 24 25 34 47 80 131 147 33 38
EBIT (1) 1 4 10 19 31 30 8 8
Net income (1) (11) (5) (35) 16 24 22 7 5
Diluted EPS (0.21) 0.00 (0.85) (3.06) 0.78 0.93 0.94 0.27 0.24
Cash from ops 2 3 10 17 19 39 41 11 9
Capex 2 1 1 4 5 13 22 3 5
Free cash flow 0 3 9 13 14 26 19 8 4
Cash & investments n/a 3 10 44 43 96 26 114 26
Total current assets n/a 12 20 59 87 139 80 166 80
Intangible assets n/a 9 9 9 166 184 206 166 206
Total assets n/a 25 33 74 268 348 344 364 344
Total current liabilities n/a 10 14 23 75 57 58 56 58
Long-term debt n/a 51 59 0 45 0 0 0 0
Total liabilities n/a 61 73 23 120 60 66 58 66
Common equity n/a (44) (50) 51 147 288 277 306 277
EBIT/capital employed n/a 22% >100% n/m n/m >100% >100% n/m n/m
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • Rudy Karsan (50) co-founded Kenexa’s

Kenexa provides web-enabled human capital management predecessor in 1987. He has served as CEO of the
services, including applicant tracking, onboarding, company since 1991 and as chairman since 1997.
recruitment process outsourcing, employment branding, • Repurchased $30 million of stock YTD and $25
skills and behavioral assessments, structured interviews, million in 2007.
performance management, multi-rater feedback surveys, • Stock price implies 15% trailing FCF yield, 6x
employee engagement surveys, and HR analytics. trailing P/E and 5x forward P/E.
Kenexa started as a provider of recruiting services in 1987. It
offered its first automated talent management system in INVESTMENT RISKS & CONCERNS
1993. The company has acquired 28 businesses since 1994. • Lowered 2008 guidance in November to revenue
growth of 12-13% (down from 24-26%) and non-
SELECTED OPERATING DATA GAAP EPS growth of 11-14% (vs 31-34%). Kenexa
YTD expects revenue of $204-206 million (high-70s
FYE December 31 2005 2006 2007 9/30/08 percentage from subscriptions), non-GAAP EBIT of
Subscription 78% 81% 82% 79% $37 million and non-GAAP EPS of $1.29-1.32.
Other 22% 19% 18% 21% • M&A integration. The company has completed 27
Revenue growth by type: acquisitions since 1994. More recently, Kenexa
Subscription 40% 77% 64% 14% acquired BrassRing for $118 million, Gantz Wiley
Other 47% 48% 54% 35%
∆ revenue 42% 71% 62% 18%
for $7 million, Knowledge Workers for $3 million,
1
89% 148% 12% 11% Psychometrics for $8 million and Webhire for $34
% of revenue by geography: million in 2006; HRC Human Resources Consulting
U.S. 90% 90% 85% 75% for $4 million and StraightSource for $12 million in
International 10% 10% 15% 25% 2007; and Quorum for $20 million in 2008.
1
Reflects changes in period-end deferred revenue.
• Competitors include point solution providers
INVESTMENT HIGHLIGHTS Authoria, iCIMS, Integrated Performance Systems,
InScope, PeopleClick, Kronos, Pilat HR, Previsor,
• Positioned in Gartner’s leaders quadrant in a
Vurv, SHL Group, SuccessFactors, and Taleo; ERP
recent research report on e-recruitment software.
software vendors Oracle (PeopleSoft), SAP, Siebel,
• Focuses on talent acquisition and employee
and Lawson; and, to a lesser extent, employment
performance management, unlike vendors that
process outsourcing service providers Accolo,
provide broad suites of human capital management
Gallup, Hyrian, and Recruitment Enhancement.
software. The company has developed vertical-
specific software for financial services, hospitality, COMPARABLE PUBLIC COMPANY ANALYSIS
retail, manufacturing, pharma, and other industries. ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
• Targeting large- and medium-sized organizations LWSN 642 529 .6x n/m 11x 9x
with complex needs in talent acquisition and ORCL 87,110 85,326 3.7x n/m 11x 10x
employee performance management. Kenexa uses a SAP 41,890 39,852 2.8x 119x 14x 13x
direct sales force comprised of inside sales, telesales
KNXA 126 100 .5x 1.8x 4x 5x
and field sales personnel (150 total sales reps).
• Subscriptions provide recurring revenue stream,
with clients typically entering into multi-year deals. MAJOR HOLDERS
Renewal rates for on-demand talent acquisition and CEO Karsan 5% │ Other insiders 2% │ Columbia Wanger
performance management solution contracts have 12% │ Artisan 7% │ Gund Gordon 7%
been running at more than 90%. Subscriptions
accounted for 82% of revenue in 2007. RATINGS
• Offers core software on demand, reducing the cost VALUE Intrinsic value materially higher than market value?
and risk associated with deploying traditional
enterprise applications.
• Low-cost development center in India, founded in
2003 and now employing close to 200 software
developers. The latter cost the company 70% less
per developer than do U.S.-based employees.
THE BOTTOM LINE

Kenexa operates a non capital-intensive business providing on-demand recruiting and performance management software to
large and mid-sized firms. The company has strong recurring revenue characteristics and has managed to create value
through a string of acquisitions. However, we note Kenexa’s high reliance on acquired growth and the fact that acquisitions
make it difficult to assess the underlying performance of the business. We are on the sidelines despite a low valuation.
KHD Humboldt Wedag (NYSE: KHD) Hong Kong SAR, China, 60-4-683-8286
Capital Goods: Construction & Agricultural Machinery http://www.khdhumboldt.com

Enterprise value: -$118 million Next quarter 0.47 0.47 1 P/E FYE 12/31/10 7.7x
Shares out: 30.5 million FYE 12/31/08 2.12 2.15 2 EV / LTM revenue -0.2x
Insider ownership: 22% FYE 12/31/10 1.18 n/a 1 EV / LTM EBIT -1.4x

per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 214 284 410 187 384 459 580 638 150 194
Gross profit 66 99 76 31 52 72 86 116 21 37
EBIT 44 47 50 15 31 43 53 86 15 32
Net income 43 51 49 37 25 30 34 70 12 31
Diluted EPS 1.60 1.85 1.79 0.47 1.01 1.04 1.42 2.31 0.64 1.01
Cash from ops 65 21 37 60 67 43 130 114 35 (23)
Capex 0 0 0 2 3 3 4 3 (0) 1
Free cash flow 65 21 37 58 65 40 127 111 35 (24)
Total assets 395 447 405 604 610 748 789 848 717 848
Short-term debt 0 0 9 27 5 6 0 0 0 0
Long-term debt 98 69 27 14 6 16 14 13 12 13
Common equity 246 285 218 269 285 319 307 352 293 352
EBIT/capital employed 33% 32% 69% n/m 52% >100% n/m n/m n/m n/m
$50
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • Backlog amounts to 2.3 years of LTM revenue,

KHD operates in two segments: Industrial Plant Engineering providing several quarters of visibility.
and Equipment Supply provides technologies, equipment, • Holds 471 patents, including innovations in kiln
and engineering for cement, coal, and minerals processing. design, pyro processing, calciners, coolers, grinding
The segment also builds plants that produce clinker, cement, technologies, and separators and roller presses.
clean coal, and minerals. Resource Property consists of a • Chairman Michael Smith (59) has a history of
mining sublease on which the Wabush iron ore mine is shareholder value creation. Smith’s M&A,
situated that commenced in 1956 and expires in 2055. corporate finance and global taxation background
The company spun off Mass Financial, representing KHD’s have benefited investors, as he has created value
former financial services and merchant banking business, in through various entities over the years, including
January 2006. KHD completed several other strategic actions MFC Bancorp, Mass Financial, Sasamat Capital,
subsequent to the Mass Financial spin-off. Cathay Merchant Group, and Blue Earth Refineries.
• KHD owns non-core assets, including an ore mine
SELECTED OPERATING DATA royalty interest (LTM income of $27 million);
YTD preferred shares of Mass Financial of $86 million;
FYE December 31 2005 2006 2007 9/30/08 and (3) net cash and equivalents of $395 million.
∆ revenue 120% 28% 44% 14%
∆ order intake n/a 55% 19% 28%
∆ order backlog (period end) n/a 70% 38% 39% trailing P/E and 5x forward P/E.
Industrial plant engineering
2
1
100% 100% 100% 100% INVESTMENT RISKS & CONCERNS
Iron ore mine royalty 0% 0% 0% 0%
• Q3 orders down 65% y-y due to “delays in project
% of pre-tax income by segment:
Industrial plant engineering
1
84% 95% 93% 85% awards by customers revisiting their financing
Iron ore mine royalty
2
14% 12% 25% 27% alternatives in light of credit market dynamics.”
Corporate and other 2% -7% -18% -13% • Downturn expected to persist. According to KHD,
% of industrial plant engineering revenue by customer group:
Cement 90% 84% 89% 86%
“Many of our customers are facing liquidity
Coal and minerals 10% 16% 11% 14% problems. Some have approached us to discuss
% of industrial plant engineering revenue by geography: renegotiating contracts… we should expect some
Americas 7% 19% 20% n/a projects to be delayed, others cancelled and a
Asia 21% 26% 34% n/a decrease in the number of project opportunities.”
Europe and Russia 23% 18% 21% n/a
Middle East 42% 34% 21% n/a • Outlook scrapped: “…we are not in a position at
Africa and other 6% 4% 4% n/a this time to confirm our guidance on earnings and
1
2
Includes industrial plant engineering and equipment supply. order intake for 2008 which we gave [on April 2]”
KHD has a royalty interest in the Wabush iron ore mine. “Income from interest
in resource property” is earned from an unincorporated JV operating in • Tax rate likely to increase over time. Smart tax
Canada. KHD does not report any revenue related to this JV. planning and NOLs have historically kept KHD’s
tax rate in a range of 5-10%. Management expects
INVESTMENT HIGHLIGHTS the rate to increase to about 20% going forward.
• Third-largest player with 20% global market
share, based on new contracted cement kiln MAJOR HOLDERS
capacity, behind Danish firm FL Smidth (29%) and Chairman Smith <1% (may own more through various
Chinese firm Sinoma (28%), and ahead of German vehicles) │ CEO Busche <1% │ Peter Kellogg 21% (long-
firm Polysius (part of ThyssenKrupp). Unlike time association with Smith) │ Fidelity 6% │ Apis 5%
cement manufacturers, KHD is a service provider
operating under an asset-light business model. RATINGS
• Low exposure to U.S., which represented 6% of VALUE Intrinsic value materially higher than market value?
KHD backlog going into 2008. The Middle East, MANAGEMENT Capable and properly incentivized?
where cement consumption is growing 10-15%, was FINANCIAL STRENGTH Solid balance sheet?
33% of backlog. Asia, where consumption is MOAT Able to sustain high returns on invested capital?
growing 10%+, accounted for 29% of backlog. EARNINGS MOMENTUM Fundamentals improving?
Russia and Eastern Europe, where consumption is MACRO Poised to benefit from economic and secular trends?
growing 10-15%, represented 29% of backlog. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE

KHD is a rare cyclical magic formula stock we find compelling. The business has existed for more than a century, and KHD
is a proven innovator. Growth exploded in recent years, as cement plant engineering services and equipment experienced
strong global demand. Chairman Michael Smith has a proven track record of efficient capital allocation. The market is
myopically focused on the outlook for cement engineering while completely ignoring KHD’s excess assets. We value KHD
at $25-37 per share, based on a sum-of-the-parts valuation analysis that considers the company’s $481 million in net cash,
investments and Mass Financial preferred shares; the Wabush iron ore interest; and the core cement engineering business.
…additional insight into KHD: OVERVIEW OF SELECTED OPERATING DATA

KHD – Engineering Revenue and Backlog, 2005-YTD’08
The company has grown cement plant engineering revenue rapidly in
• We value KHD at $25-37 per share, based on the recent years, with backlog reaching $1.1 billion as of September 30.
sum-of-the-parts valuation summarized below. While the large backlog bodes well for near-term revenue, KHD saw
• In addition to strong upside potential, we note a sharp decline in Q3 order intake, and management expects that
some customers will seek to delay or cancel projects.
significant downside protection, with estimated
excess cash and investments of $331-381 million. $600mn $1.2bn
Our calculation of excess assets conservatively $1.0bn
excludes $100-150 million, which we estimate is $400mn $0.8bn
needed to run the core cement engineering business. $0.6bn
$200mn $0.4bn
KHD — Sum-of-the-Parts Valuation Summary $0.2bn
($ in millions, except per share data) Low High $0mn $0.0bn
Value Value
1 05 06 07 YTD YTD
Value of excess net assets:
Cash and equivalents $373 $373 Engineering Revenue (left axis) 07 08
Short-term cash deposits 27 27 Backlog (right axis)
Securities 9 9
Notes: Engineering revenue equals total revenue, as iron ore income is
Restricted cash 31 31
accounted for below the revenue line. Backlog represents period-end backlog.
Preferred shares of Mass Financial 86 86 YTD represents period from January 1 through September 30.
Long-term debt (13) (13) Source: Company, The Manual of Ideas.
Pension liability (32) (32)
2
(150) (100)
KHD – Engineering Income and Margin, 2005-YTD’08
Total $331 $381 Engineering pre-tax margin has expanded since 2005, causing
income growth to outstrip revenue growth over the same time period.
Value of iron ore interest: Margins may get squeezed going forward, as the company attempts
LTM earnings to KHD $27 to keep customers from postponing or cancelling projects.
Fair value multiple of LTM earnings 5x $75mn 15%
Annualized Q3 earnings to KHD $35
Fair value multiple of ann. Q3 earnings 5x $60mn
Total $133 $175 10%
$45mn
Value of cement engineering business: $30mn
5%
LTM pre-tax segment income 85
$15mn
LTM corporate/other expenses (12)
3
LTM net interest income (13) $0mn 0%
Fair value multiple of LTM pre-tax income 5x 05 06 07 YTD YTD
Annualized Q3 pre-tax segment income 145
Annualized Q3 corporate/other expenses (11) Engineering Income (left axis) 07 08
3
Annualized Q3 net interest income (16) Engineering Margin (right axis)
Fair value multiple of ann. Q3 income 5x
Notes: Income and margin represent pre-tax segment income and margin;
Total $296 $593 corporate and other expenses are excluded from segment income. YTD
represents period from January 1 through September 30.
Estimated fair value of KHD $759 $1,148 Source: Company, The Manual of Ideas.
per share $25 $37
1
Based on balance sheet values as of September 30, 2008. KHD – Iron Ore Royalty Income, 2005-YTD’08
2
MOI estimate of cash needed to run engineering business; reflects deferred
revenue liability, which could become cash-draining amid order slowdown. The company’s income from an interest in the Wabush iron ore mine
3
A portion of net interest income is subtracted from segment income to reflect has grown as iron ore prices have risen, with YTD income reaching
the separate consideration of excess assets in our valuation analysis. $22 million and Q3 income reaching $9 million.
$30mn
WHY THE SHARES MAY BE MISPRICED $20mn
• Investors not looking beyond current slowdown
in cement engineering business. KHD’s earnings $10mn
report on November 12 spooked investors due to a
$0mn
65% y-y drop in Q3 order intake and concerns about
05 06 07 YTD YTD
potential order cancellations. While the Q3 result
07 08
represents a sharp reversal from earlier strength in
orders, investors are myopically focusing on the Notes: YTD represents period from January 1 through September 30.
current woes of cement engineering business,
ignoring (1) the long-term earning power of the
engineering business, (2) very large excess assets,
and (3) the valuable Wabush iron ore interest.
MANAGEMENT’S VIEW OF BUSINESS • KHD participates in royalty interest in Wabush

Notes from 3Q08 earnings call on November 12: iron ore mine sublease, which expires in 2055.
• Operating environment: “rapidly changing;” • Description of Wabush mine, adopted from
expects credit shortage to negatively impact global Cleveland Cliffs (CLF) 10-K dated February 29:
construction and infrastructure markets; past trend “The mine and concentrator are located in Wabush,
of robust demand growth to “moderate;” customers Labrador, Canada, and the pellet plant is located in
facing “unprecedented” challenges; some customers Pointe Noire, Quebec. The Wabush mine has been
have approached KHD to renegotiate contracts; in operation since 1965. Over the past five years,
customer capex spending likely to decline; KHD the mine has produced 3.8-5.2 million tons of iron
“should expect some projects to be delayed, some ore pellets annually. CLF own 27% of Wabush,
projects to be cancelled, and a general decrease in ArcelorMittal subsidiary Dofasco owns 29% and
the number of project opportunities” U.S. Steel Canada owns 45%.” In March, Dofasco
• Management response to weak environment: sued U.S. Steel Canada and CLF to compel them to
changing focus from “business growth” to complete the sale of their interests to Dofasco.
“sustaining equity” during uncertainty; expects to • Holder of royalty interest receives royalties from
develop plan to cut costs by yearend (will present an unincorporated JV that operates the mine.
plan to shareholders); a key objective is to preserve The JV pays a royalty that was set in 1987 at a base
cash by operating in cash flow-neutral way rate of C$1.685 per ton, with escalations as defined
(“excluding working capital movements”) by agreement. In 2005, KHD sued the JV
• Q3 review: order intake down 65% due to project participants for alledged underpayment of royalties.
award delays (55% of orders from Middle East, • Demand for iron ore is driven by raw material
23% from Russia and Eastern Europe) – intake requirements of integrated steel producers.
weakened progressively throughout Q3; backlog of Demand for blast furnace steel is cyclical and
$1.1 billion at Q3-end (39% from Russia and influenced by macroeconomic factors.
Eastern Europe, 27% from Asia, 26% from Middle
East) – initial assessment is that backlog solidity is Wabush Iron Ore Mine
“reasonable” (but also “dynamic” and “changing”) 2005 2006 2007
Iron ore shipments (mn tons) 4.9 4.1 4.8
• Outlook: “not in position to confirm” prior
Pre-tax income to KHD ($mn) 4.3 6.4 16.6
guidance for earnings and order intake; “don’t have
a feel” for how quickly business may pick up again
Major Iron Ore Producers
• Balance sheet: majority of cash is held in Austrian 1Q08
banks with strong credit ratings (government has Production Market
1
announced intention to support banks if necessary); URL (mn tons) Share
largest portion of cash is denominated in euros; Vale do Rio vale.com 83 42%
$100 million set aside in dollars for business growth Rio Tinto riotinto.com 37 19%
• M&A strategy: “hesitant” to spend cash BHP Billiton bhpbilliton.com 28 14%
Kumba kumba.co.za 8 4%
• Iron ore: income up due to price increases; mine
LKAB lkab.com 6 3%
output has been relatively consistent in recent years 2
Others -- 36 18%
• Investment in Mass Financial preferred shares: Source: EconStats, The Manual of Ideas.
negotiating with Mass to distribute to KHD 1
Represents approximate share of ocean trade in iron ore.
2
shareholders a portion or all of KHD’s interest in Represents estimates.
Mass by way of newly created common shares in
Mass; mechanism will likely be conversion of a Iron Ore Prices, 1976-20081
($ per ton)
portion of KHD shares held into shares of Mass
$140
ROYALTY INTEREST IN WABUSH IRON ORE MINE $120
(0% of 2007 revenue, 25% of pre-tax income) $100
• KHD’s income from Wabush mine correlates $80
$60
closely with iron ore prices. As prices have risen,
$40
KHD’s income from its interest in Wabush has
$20
increased, from $4 million in 2005 to $6 million in
$0
2006 and $17 million in 2007. For an excellent
1976 1984 1992 2000 2008
primer on iron ore supply, demand and pricing
drivers, see the April 2008 letter by the chairman Source: EconStats, CVRD, Wall Street Journal, steel producers.
1
and president of Leucadia National (NYSE: LUK): Represents Brazil-to-Europe prices. Contracts are generally made in the
spring/early summer between iron ore and steel producers. Prices shown
http://tinyurl.com/moi14 (pages 2-4). are prices arranged at the beginning of May of each year. They represent
price of fines, i.e., the most heavily-traded category of iron ore.
King Pharmaceuticals, Inc. (NYSE: KG) Bristol, TN, 423-989-8000

Health Care: Biotechnology & Drugs, Member of S&P 500 http://www.kingpharm.com

Insider buys (last six months): 0 LT EPS growth -13.0% n/a 2 P / tangible book 1.2x

per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 872 1,088 1,493 1,304 1,773 1,989 2,137 1,751 545 388
Gross profit 686 797 1,107 952 1,450 1,569 1,570 1,324 347 287
EBIT 343 275 152 (41) 180 403 228 352 (78) 123
Net income 218 182 92 (160) 118 289 183 258 (41) 85
Diluted EPS 0.93 0.69 0.40 (0.21) 0.48 1.19 0.75 1.05 (0.17) 0.34
Cash from ops 280 345 430 299 520 466 673 n/a 174 n/a
Capex 40 74 51 55 53 72 149 n/a 72 n/a
Free cash flow 239 271 379 244 466 394 524 n/a 103 n/a
Cash & investments 925 816 146 359 525 1,004 1,366 1,304 1,079 1,304
Total current assets 1,238 1,262 970 1,127 1,248 1,674 1,820 1,700 1,655 1,700
Intangible assets 1,038 1,232 1,674 1,407 1,088 973 910 785 962 785
Total assets 2,507 2,751 3,202 2,924 2,965 3,330 3,427 3,512 3,378 3,512
Short-term debt 1 1 0 0 345 0 0 0 0 0
Long-term debt 346 345 345 345 0 400 400 400 400 400
Total liabilities 598 820 1,197 1,075 992 1,041 916 779 920 779
Common equity 1,908 1,931 2,005 1,849 1,973 2,289 2,511 2,733 2,459 2,733
EBIT/capital employed >100% 88% 47% -12% 47% >100% 74% 99% n/m n/m
$50
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • CEO and CFO with company since ‘04 and ‘05,
King is a vertically integrated branded pharma company. It respectively. Prior to joining King, CEO Brian
develops novel prescription pharma products and Markison (48) spent 22 years at Bristol-Myers
technologies that complement its focus in specialty-driven Squibb (most recently as president of the oncology
markets, particularly neuroscience, hospital and acute care. business). CFO Joseph Squicciarino (51) was
The company’s leading brands include Avinza CII, a once- previously North America CFO at Revlon.
daily morphine treatment for chronic pain; Skelaxin, for • Cash of $1.3 billion, student loans of $344 million
relief from discomfort associated with acute musculoskeletal (at fair value), and debt of $400 million.
conditions; Thrombin-JMI, which aids in controlling • Launched $1.4 billion Alpharma (ALO) tender
bleeding during surgery; Altace, an ACE inhibitor; Sonata in September ($37 per share, >50% premium) and
CIV, one of three approved non-benzodiazepine treatments signed confidentiality agreement in October.
for insomnia; and Levoxyl, for the treatment of thyroid Alpharma’s Board has called the offer inadequate.
disorders. The Meridian Auto-Injector segment consists of • Stock price implies 9x trailing P/E and 12x
EpiPen—a prefilled, pen-like device that allows a patient or forward P/E.
caregiver to automatically inject a precise drug dosage—and
nerve gas antidotes King provides to the U.S. Military. INVESTMENT RISKS & CONCERNS
• Revenue down 24% and adjusted EBIT down
SELECTED OPERATING DATA 32% YTD, primarily due to earlier-than-
YTD expected generic competition for Altace.
FYE December 31 2005 2006 2007 9/30/08
Following the Circuit Court’s decision in September
Revenue by segment:
Branded pharma 87% 87% 87% 81% 2007 invalidating King’s Altace patent, generic
Meridian Auto-Injector 7% 8% 9% 14% competition entered the market in December 2007.
Royalty revenue 4% 4% 4% 5% In response, King eliminated 20% of its workforce.
Contract and other 1% 1% 1% 0%
• New branded competition. King’s bovine
Branded pharma revenue by therapeutic area:
Neuroscience 28% 29% 34% 44% thrombin product, Thrombin-JMI, faces new
Hospital 16% 16% 16% 20% competition in 2008 from Omrix and Zymogenetics.
Acute care 5% 4% 4% 0% • Sales concentration. 75% of gross sales were
Cardiovascular 49% 48% 44% 21%
Other 3% 3% 3% 15%
attributable to McKesson (35%), Cardinal/ Bindley
Branded pharma revenue by drug: (27%), and AmerisourceBergen (13%) in 2007.
Skelaxin 22% 24% 24% 34%
Avinza 0% 0% 6% 10% COMPARABLE PUBLIC COMPANY ANALYSIS
Thrombin-JMI 14% 14% 14% 20% ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
Levoxyl 9% 6% 5% 5%
Altace 36% 38% 35% 16% BAX 37,210 38,439 3.1x 7.5x 18x 16x
Other branded pharma 18% 17% 16% 15% ELN 3,186 4,452 4.7x n/m n/m n/m
HSP 4,791 6,665 1.8x 19.7x 12x 11x
INVESTMENT HIGHLIGHTS PFE 109,775 99,330 2.0x 4.1x 7x 7x
• Recent positives include Q3 prescription growth of WYE 45,457 42,795 1.8x 3.0x 10x 9x
8% for Avinza (10% of YTD branded pharma KG 2,376 1,472 .8x 1.2x 8x 12x
revenue, up from 5% a year ago). Thrombin-JMI
has also performed well YTD, growing to 20% of MAJOR HOLDERS
branded pharma revenue, up from 14%. Merdian CEO Markison <1% │ Other insiders 1% │ Lord Abbett 9%
Auto-Injector revenue has increased 17% YTD. │ Barclays 7% │ Vanguard 5%
• May submit three New Drug Applications by the
end of this year. King partner Pain Therapeutics RATINGS
submitted an NDA for Remoxy (long-acting oral VALUE Intrinsic value materially higher than market value?
1
oxycodone) to the FDA in June. An FDA advisory MANAGEMENT Capable and properly incentivized?
committee reviewed the NDA on November 13. FINANCIAL STRENGTH Solid balance sheet?
King and partner Acura Pharma plan to submit an MOAT Able to sustain high returns on invested capital?
NDA for Acurox (oxycodone HCl/niacin) this year EARNINGS MOMENTUM Fundamentals improving?
(positive top-line data from the pivotal Phase III MACRO Poised to benefit from economic and secular trends?
clinical trial reported in June). King also expects to EXPLOSIVENESS 5%+ probability of 5x upside in one year?
file an NDA for Corvue soon. 1
The company has put in place numerous takeover provisions.
THE BOTTOM LINE

King is a company in transition, as its best-selling drug Altace has encountered generic competition, causing revenue and
profits to decline in 2008, and likely in 2009. The shares are not cheap enough to make us overlook weak performance. As
the above comp table shows, investors can own Pfizer at a lower multiple of earnings, a far preferable choice, in our view.
Korn/Ferry International (NYSE: KFY) Los Angeles, CA, 310-552-1834

Services: Business Services, Member of S&P MidCap 400 http://www.kornferry.com


per share data) 4/30/02 4/30/03 4/30/04 4/30/05 4/30/06 4/30/07 4/30/08 7/31/08 7/31/07 7/31/08
Revenue 407 339 351 476 552 689 836 857 196 218
Gross profit 107 92 106 158 179 197 237 238 59 61
EBIT (106) (13) 16 66 76 82 92 91 25 24
Net income (98) (24) 5 39 59 56 66 65 17 16
Diluted EPS (2.62) (0.63) 0.13 0.90 1.32 1.24 1.46 1.45 0.36 0.36
Cash from ops (60) 22 30 88 75 102 110 94 (73) (89)
Capex 9 4 2 8 11 14 17 17 3 3
Free cash flow (68) 19 28 80 63 88 93 77 (77) (92)
Total assets 378 369 398 534 636 762 880 803 713 803
Short-term debt 52 5 0 0 0 0 0 0 0 0
Long-term debt 2 51 55 56 56 0 0 0 0 0
Common equity 179 167 181 253 324 433 496 513 454 513
EBIT/capital employed -205% -36% >100% n/m n/m n/m n/m >100% n/m n/m
$50
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • Beneficiary of globalization. Korn/Ferry generates

Korn/Ferry is a global executive search firm. Clients include an increasing portion of business internationally,
many of the world’s largest companies, governments and with fees outside of North America amounting to
nonprofits. Three-quarters of recruitment assignments are on 45% of total executive recruitment fees in FY08.
behalf of clients who have used Korn/Ferry in the past three The company is not a newcomer to global markets,
years. In FY08, assignments by industry were as follows: having established offices in Europe, Asia and Latin
27% industrial, 20% financial services, 17% consumer, 16% America in 1972, 1973 and 1974, respectively.
technology, and 20% other. 61% of FY08 assignments were • $377 million of cash, investments and similar assets
to fill a Board level, CEO, CFO or other senior executive and no debt as of July 31.
position. In 1998, the company expanded into middle • Repurchased $64 million of stock in FY08 and
management with the launch of Futurestep, an outsourced another $2 million in 1Q09.
recruiting subsidiary. Korn/Ferry was founded in 1969. • Stock price implies 14% trailing FCF yield, 8x
FYE April 30 2006 2007 2008 1Q09 INVESTMENT RISKS & CONCERNS
Consultants (period end) 507 601 684 n/a
% of revenue by type: • Highly sensitive to employment trends. The
Executive recruitment fees 82% 82% 81% 80% company’s revenue and profitability would suffer
Futurestep fees 13% 12% 13% 14% materially in a global downturn.
Reimbursements 5% 5% 5% 5%
• Modest barriers to entry. While the company’s
Executive recruitment fees 14% 25% 20% 9% strong reputation gives it an edge executive
Futurestep fees 30% 23% 29% 22% recruitment at the highest levels is a relationship-
Total fee revenue 16% 25% 21% 11% driven rather than a brand-driven business.
% of executive recruitment fees by geography:
North America 57% 58% 55% 54%
• “People business,” ie, limited scalability. While
EMEA 26% 26% 27% 30% Futurestep makes the company’s model more
Asia Pacific 13% 13% 14% 12% scalable, Korn/Ferry still largely depends on the
South America 4% 3% 4% 4% “production” of its consultants. Qualified people are
EBIT margin by type: not easy to hire and retain, and they may demand an
Executive recruitment 22% 20% 18% 18%
Futurestep 5% 9% 8% 9% increasing share of profits in good times.
Corporate -5% -6% -5% -5%
Total EBIT 14% 12% 11% 11% COMPARABLE PUBLIC COMPANY ANALYSIS1
INVESTMENT HIGHLIGHTS HHGP 111 67 .1x 0.8x 24x 108x
• Top-notch reputation. Korn/Ferry leads the HSII 347 164 .2x 1.8x 9x 14x
executive search industry and focuses on positions MPS 578 523 .2x 2.3x 8x 15x
with comp of $150K+. Strong reputational capital RHI 2,762 2,392 .5x 3.3x 11x 25x
allows it to operate as a retained rather than a KFY 553 344 .4x 1.6x 10x 10x
contingency firm. Retained firms typically earn a 1
Non-public comps include Egon Zehnder, Russell Reynolds, Spencer Stuart.
one-time fee equal to one-third of annual cash comp
without regard to whether a positon has been filled. MAJOR HOLDERS
• Futurestep’s focus on mid-level recruitment adds Chairman Reilly 1% │ CEO Burnison <1% │ Other insiders
a scalable, technology-driven business model to 2% │ Royce 11% │ T Rowe 10% │ Fiduciary 6% │
Korn/Ferry. Futurestep fees grew 29% in FY08. Kornitzer 5%
• Building “talent management solutions” firm.
While search fees still dominate, Korn/Ferry also RATINGS
helps clients “develop, retain and reward their VALUE Intrinsic value materially higher than market value?
talent,” thereby providing value beyond recruitment. MANAGEMENT Capable and properly incentivized?
• Experienced management. Chairman Paul Reilly FINANCIAL STRENGTH Solid balance sheet?
(54) was previously CEO of KPMG Int’l, while MOAT Able to sustain high returns on invested capital?
CEO Gary Burnison (47) held high-level positions EARNINGS MOMENTUM Fundamentals improving?
at Guidance, Jefferies, and KPMG Peat Marwick. MACRO Poised to benefit from economic and secular trends?
THE BOTTOM LINE

Korn/Ferry operates a non capital-intensive business and enjoys strong reputation that should allow it to win high-margin
search assignments from the most desirable clients for a long time to come. The company also has a long runway of
international growth ahead of it. While near-term earnings may suffer, the Korn/Ferry franchise should accrete value at a
satisfactory rate over time. We find the shares interesting but not compelling, as earnings may yet surprise on the downside.
Lam Research Corporation (Nasdaq: LRCX) Fremont, CA, 510-572-0200

Technology: Semiconductors, Member of S&P MidCap 400 http://www.lamrc.com

Market value: $2.2 billion This quarter -$0.04 $0.25 17 P/E FYE 6/30/10 14.6x
Enterprise value: $1.5 billion Next quarter -0.08 0.30 15 P/E FYE 6/30/11 9.0x

per share data) 6/30/02 6/29/03 6/27/04 6/26/05 6/25/06 6/24/07 6/29/08 9/28/08 9/23/07 9/28/08
Revenue 943 755 936 1,503 1,642 2,567 2,475 2,231 685 440
Gross profit 266 304 431 764 827 1,305 1,173 1,013 344 183
EBIT (120) (5) 111 388 405 795 509 328 198 17
Net income (90) (8) 83 297 335 686 439 300 149 9
Diluted EPS (0.71) (0.06) 0.59 2.09 2.33 4.85 3.47 2.37 1.18 0.07
Cash from ops 22 69 157 426 367 824 590 411 222 43
Capex 11 12 24 23 42 60 77 78 14 15
Free cash flow 11 57 133 403 325 764 514 333 208 28
Cash & investments 874 507 430 809 1,050 671 1,059 1,059 911 1,059
Total current assets 1,355 873 896 1,245 1,706 1,416 1,918 1,808 1,579 1,808
Total assets 1,632 1,198 1,199 1,449 2,327 2,102 2,807 2,685 2,289 2,685
Short-term debt 315 5 3 0 0 0 30 30 0 30
Long-term debt 360 332 10 0 350 250 276 269 250 269
Total liabilities 957 549 386 382 919 925 1,028 924 898 924
Common equity 675 649 813 1,067 1,409 1,176 1,779 1,761 1,391 1,761
EBIT/capital employed -45% -2% 66% >100% >100% >100% >100% 96% n/m n/m
$70
$60
$50
$40
$30
$20
$10
$0
BUSINESS OVERVIEW • $250 million share repurchase authorized.

Lam Research supplies wafer fabrication equipment to the • Stock price implies 15% trailing FCF yield, 8x
semiconductor industry. The company’s etch systems shape trailing P/E and 138x forward P/E.
the microscopic conductive and dielectric layers into circuits
that define a chip’s final use and function. Lam also offers INVESTMENT RISKS & CONCERNS
single-wafer clean technologies which allow customers to • Weak wafer fab equipment spending, with 1Q09
implement customized yield-enhancing solutions. revenue down 36% . A prolonged supply/demand
Founded in 1980, Lam acquired SEZ in March 2008. SEZ imbalance in memory continues, with spending
supplies single-wafer wet clean technology. down 35-40% y-y. The company sees limited near-
term capacity expansion in memory or foundry
SELECTED OPERATING DATA segments. According to Lam, while lower capital
FYE June 30 2006 2007 2008 1Q09 intensity benefits the industry in the long term,
∆ revenue 9% 56% -4% -36% “significant December quarter uptick in shipments
1
∆ backlog (period end) 48% 23% -36% n/a for Lam appears less likely.”1 The company is
U.S. 14% 16% 17% 15% responding by restructuring the Clean Product
Europe 13% 9% 10% 10% Group, with targeted annual savings of up to $40
Taiwan 17% 22% 20% 14% million, and by pursuing other cost savings.
Korea 22% 21% 22% 27% • Competition. An investor presentation by CFO
Japan 22% 14% 18% 17%
Other Asia 12% 18% 12% 17% Martin Anstice in September listed “continued Etch
% of revenue by customer: market share defense” as a near-term focus,
Samsung Electronics 15% 14% 19% n/a suggesting that management may be concerned
Toshiba 12% <10% 13% n/a about threats to Lam’s share. Primary competitors in
Hynix Semiconductor <10% 14% <10% n/a
1
Backlog of $410 million as of June 30, 2008, one-sixth of trailing revenue.
the etch market are Tokyo Electron and Applied
Materials. The primary competitor in the single-
INVESTMENT HIGHLIGHTS wafer wet clean market is Dainippon Screen Mfg.
• Market share leader in plasma etch. Lam has held • Revenue primarily from high-priced systems
#1 share for six years and now has a larger piece of ranging in price up to $6 million per unit. This may
the market than the next two competitors combined. increase cyclicality and volatility of results.
Lam also offers an expanded product portfolio
beyond etch integrated processing solutions. COMPARABLE PUBLIC COMPANY ANALYSIS
• SEZ acquisition targets single-wafer clean
AMAT 13,725 11,827 1.5x 2.3x 13x 9x
market. SEZ’s proprietary Spin-Processor
KLAC 3,067 2,505 1.1x 1.7x 36x 14x
technology forms part of Lam’s equipment portfolio
VECO 148 176 .4x 1.3x 9x 16x
for wafer cleaning. As half of the wafer cleaning
steps in a fab immediately follow an etch process, LRCX 2,248 1,488 .7x 1.6x 138x 15x
management views SEZ as highly complementary.
• Stephen Newberry (54) became CEO in 2005 MAJOR HOLDERS
after serving as COO for seven years. Prior to CEO Newberry <1% │ Other insiders 1% │ Fidelity 14% │
joining Lam, Newberry spent 17 years at Applied Wellington 11% │ AllianceBernstein 7% │ Cap Re 6%
Materials, serving most recently as Group VP of
Global Operations. Executive chairman James RATINGS
Bagley (69) previously served as Lam’s CEO. Prior VALUE Intrinsic value materially higher than market value?
to joining Lam, Bagley was CEO of OnTrack MANAGEMENT Capable and properly incentivized?
Systems, which Lam acquired in 1997. Bagley had FINANCIAL STRENGTH Solid balance sheet?
also spent 15 years at Applied Materials, serving in MOAT Able to sustain high returns on invested capital?
roles including COO and vice chairman. CFO EARNINGS MOMENTUM Fundamentals improving?
Martin Anstice (41) joined Lam in 2001, following MACRO Poised to benefit from economic and secular trends?
13-year tenure as a finance executive at Raychem. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
• Strong balance sheet, with $1.1 billion of cash and 1
The outlook presented in this paragraph was adopted from an investor
short-term investments and $300 million of debt. presentation by CFO Martin Anstice on September 16, 2008.
THE BOTTOM LINE

Lam is dealing with a sharp downturn in wafer fab equipment spending. The company is highly dependent on the memory
market, which continues to suffer from oversupply. As a result, management has been forced to take restructuring charges as
part of an effort to cut costs. While the shares may be worth a look due to their low valuation and a $250 million buyback
authorization, it is extremely difficult to predict how deteriorating industry conditions will impact near-term results.
LCA-Vision Inc. (Nasdaq: LCAV) Cincinnati, OH, 513-792-9292

Health Care: Healthcare Facilities, Member of S&P SmallCap 600 http://www.lasikplus.com

Shares out: 18.5 million FYE 12/31/08 -0.17 0.29 7 EV / LTM revenue 0.1x
Ownership Data FYE 12/31/09 -0.17 0.27 7 EV / LTM EBITDA 1.3x

per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 68 62 81 120 177 239 293 241 75 37
Gross profit 21 21 34 56 88 118 146 107 39 12
EBIT (8) (4) 7 18 35 41 46 7 14 (6)
Net income (23) (4) 7 32 23 28 33 6 10 (5)
Diluted EPS (1.34) (0.24) 0.44 1.53 1.07 1.34 1.64 0.30 0.51 (0.25)
Cash from ops (2) 6 13 30 40 52 55 26 8 4
Capex 7 2 5 7 11 10 29 30 6 1
Free cash flow (9) 4 7 23 29 42 26 (3) 3 3
Total assets 43 40 90 130 181 190 180 172 185 172
Short-term debt 0 0 0 1 2 3 4 7 4 7
Long-term debt 0 0 0 0 1 2 2 15 3 15
Common equity 38 32 79 112 127 109 94 91 100 91
EBIT/capital employed -39% -24% 54% 97% >100% >100% >100% 16% n/m n/m
$70
$60
$50
$40
$30
$20
$10
$0
BUSINESS OVERVIEW • Unlevered balance sheet, with $67 million of cash

LCA-Vision provides laser vision correction under the and short-term investments and $23 million of debt.
LasikPlus brand in 77 fixed-site vision correction centers, • Repurchased 1.6 million shares for $45 million in
primarily in the U.S. The centers employ laser technologies 2007, but has put buybacks on hold in 2008.
to correct nearsightedness, farsightedness and astigmatism, • Stock price implies -5% trailing FCF yield and
with independent, board-certified ophthalmologists 13x trailing P/E (forward loss projected).
performing procedures. Most patients receive the LASIK
procedure, which was first performed in 1997. The company INVESTMENT RISKS & CONCERNS
has performed one million procedures since 1991. • Procedure volume down 52% in Q3, due to fewer
pre-op appointments booked by prospective patients
SELECTED OPERATING DATA and weak show rates, though the latter improved
YTD
FYE December 31 2005 2006 2007 9/30/08
modestly from Q2. Average price per procedure
Laser procedures (‘000) 142 185 192 96 declined ~$100 from Q2 to Q3 due to aggressive
Revenue per procedure ($) 1,246 1,290 1,523 1,787 discounting. Many patients view laser vision
Revenue ($mn)
1
177 239 293 171 correction as a discretionary procedure, making
Deferred revenue ($mn) 32 50 42 27 volume dependent on the state of the economy.
∆ procedures 48% 30% 4% -37%
∆ revenue per procedure -1% 4% 18% 22%
• Suffered operating losses in past six months due
∆ revenue 47% 35% 22% -23% to lower procedure volume. The company laid off
1
nm 57% -16% -36% 25% of staff in Q3, following major layoff earlier in
Vision correction centers na na 72 77 the year; changed the workforce mix toward part-
Centers with IntraLase na na 45 “most” time staff; cut advertising expenses nearly in half;
1
At period end.
and put new center openings on hold.
INVESTMENT HIGHLIGHTS • Recent management turnover, including abrupt
departures of CFO in June and CMO in July. Each
• 170 million Americans require eyeglasses or
position continues to lack a permanent replacement.
contact lenses to correct vision problems. More
• FDA Ophthalmic Devices Panel in April 2008
than six million laser vision correction procedures
and negative media coverage of laser vision
have been performed in the U.S. since FDA
correction have hurt procedure growth.
approval in 1995 (1.4 million procedures in 2007).
Laser vision correction is typically a private pay
procedure performed on an outpatient basis.
• #1 or #2 provider along with TLC Vision. The
AMSG 685 854 1.4x n/m 14x 13x
two market leaders compete in a fragmented market,
NOVA 84 180 1.3x n/m 10x 9x
with more than 50% still served by local providers.
TLCV 13 106 .4x n/m n/a n/a
• Offers two procedures: PRK (old) and LASIK
LCAV 73 32 .1x 0.8x n/m n/m
(new). PRK/surface ablation involves removing
cells covering the cornea. LASIK, which accounts
for most of LCA’s procedures, involves creating a MAJOR HOLDERS
corneal flap that remains hinged to the eye. CEO Straus <1% │ Other insiders 2% │ Lord Abbett 13% │
Recovery from LASIK is more rapid than from Royce 11% │ Tremblant 8% │ HWP 7% │ Barclays 6% │
PRK; the latter can take several days or longer. Michael Roth 6% │ Morgan Stanley 5%
Each procedure takes about 30 minutes to complete.
• Rolled out new LASIK technology, IntraLase, to RATINGS
vast majority of vision centers. 74% of procedures VALUE Intrinsic value materially higher than market value?
performed in 3Q08 utilized IntraLase. MANAGEMENT Capable and properly incentivized?
• Steven Straus (51) became CEO in 2006. He had FINANCIAL STRENGTH Solid balance sheet?
previously served in various roles with MSO
Medical, Titan Health and TLC Vision.
• Main competitor TLC Vision on the ropes due to
excessive financial leverage.
THE BOTTOM LINE

LCA Vision faces challenges it may or may not overcome. In the short term, weak consumer spending has crushed procedure
volume and swung the company to operating losses. Recent CFO and CMO departures have raised questions regarding
strategy and execution. Longer term, it is unclear how widely laser vision correction will be adopted. There is some evidence
that consumers have become concerned about the safety and efficacy of the procedures, prodded by media reports of long,
painful recoveries and little vision improvement in some cases. If the company succeeds in returning to profitable growth,
shareholders should be amply rewarded. It is questionable, however, whether the company will be able to do so.
Lear Corporation (NYSE: LEA) Southfield, MI, 248-447-1500

Consumer Cyclical: Auto & Truck Parts, Member of S&P MidCap 400 http://www.lear.com

Market value: $108 million This quarter -$0.61 $0.17 9 P/E FYE 12/31/09 n/m
Ownership Data FYE 12/31/09 -0.39 1.86 11 EV / LTM EBITDA 6.1x

per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/27/08 9/29/07 9/27/08
Revenue 13,625 14,425 15,747 16,960 17,089 17,839 15,995 14,829 3,575 3,134
Gross profit 1,035 1,260 1,346 1,402 736 928 1,149 919 267 129
EBIT 97 481 534 564 (1,129) (653) 323 313 60 (77)
Net income 26 13 381 422 (1,382) (708) 242 25 41 (98)
Diluted EPS 0.40 4.47 5.31 5.65 (20.57) (10.35) 3.09 0.31 0.52 (1.27)
Cash from ops 830 545 586 676 561 285 467 393 62 41
Capex 267 273 376 429 568 348 202 222 46 38
Free cash flow 563 273 211 247 (8) (62) 265 171 16 3
Total assets 7,579 7,483 8,571 9,944 8,288 7,851 7,800 7,655 7,945 7,655
Short-term debt 193 41 21 668 33 65 110 43 116 43
Long-term debt 2,294 2,133 2,057 1,867 2,243 2,435 2,345 2,297 2,352 2,297
Common equity 1,559 1,662 2,258 2,730 1,111 602 1,091 1,132 933 1,132
EBIT/capital employed 10% 45% 41% 34% -75% -59% 31% 30% n/m n/m
$80
$70
$60
$50
$40
$30
$20
$10
$0

Lear supplies automotive parts in two segments: Seating • Q3-end net debt of $1.8 billion, making Lear
includes seat systems and components. Electrical and dependent on the continued confidence of lenders.
electronic includes electrical distribution systems and • Conditions “extremely challenging,” with 2008
electronic products, primarily wire harnesses; junction boxes industry production at the lowest level in more than
terminals and connectors, electronic control modules, and in- a decade. In North America, production was down
vehicle audio and entertainment systems. Lear has 91,000 17% in Q3, with Lear’s top fifteen platforms down
employees at 215 facilities in 35 countries. 33%. European industry production was down 3%,
In 2006/07, Lear divested its interior segment. Lear also with Lear’s top five customers down 8%. Buying
contributed its European and North American interior patterns are shifting away from SUVs. Financial
businesses to joint ventures with WL Ross and Franklin distress is rising within the supply chain.
Mutual in exchange for minority equity stakes. • 49% of revenue from GM and Ford, with
“classic” Ford and GM accounting for 42% of
SELECTED OPERATING DATA revenue, and Saab, Volvo, Jaguar and Land Rover
YTD generating 7% of revenue. In addition to the usual
FYE December 31 2005 2006 2007 9/30/08 risks of customer concentration, Lear also faces
Seating 65% 65% 76% 79%
risks relating to GM and Ford’s financial distress.
Electrical and electronic 17% 17% 19% 21% • Weak electrical and electronic business (~20% of
1
Interior 18% 18% 4% 0% revenue). Non-GAAP segment margin declined
Revenue growth by selected segment: from 7.4% in 2005 to 3.6% in 2007, driven by
Seating -2% 5% 5% -5%
Electrical and electronic 10% 1% 3% 0%
“fierce” global competition. Lear is restructuring
Total revenue growth 1% 4% -10% -10% this segment, with the goal of achieving a low-cost
EBIT margin by segment: global footprint, capitalizing on new technologies,
Seating 3% 5% 6% 4% and developing system integration capabilities.
Electrical and electronic 6% 3% 1% 3%
Interior
1
-6% -6% 1% n/a
• Prices of key raw materials, including hot-rolled
Total EBIT margin
2
1% 2% 4% -1% steel, copper, crude oil, and foam chemicals, are still
% of revenue by geography: high. (Lear lowered exposure to resins and supplier
U.S. 37% 37% 28% n/a issues with the divestiture of the interior business.)
Canada 8% 8% 7% n/a
Germany 12% 11% 15% n/a
Mexico 9% 10% 10% n/a COMPARABLE PUBLIC COMPANY ANALYSIS
Other countries 34% 34% 40% n/a ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
1
Divested European and North American interior businesses in October 2006 DAN 105 1,256 .1x 0.1x n/m 2x
and March 2007, respectively, in transactions involving WL Ross and Franklin.
2
Includes unallocated corporate expenses. JCI 9,124 12,684 .3x 4.4x 8x 7x
MGA 2,925 1,213 .0x 0.4x n/a n/a
INVESTMENT HIGHLIGHTS VC 61 1,493 .1x n/m n/m n/m
• #2 globally in seating systems, generating sales of LEA 108 1,925 .1x n/m 1x n/m
more than $12 billion (~80% of revenue) in a $50
billion market. Lear is #2 in North America and #3 MAJOR HOLDERS
in Europe, and is a leader in China and India. CEO Rossiter <1% │ Other insiders 1% │ Icahn 16%
• Electrical distribution systems revenue of more (apparently sold out recently) │ Barclays 10% │ Pzena 9%
than $2 billion. The company is #3 in North │ Vanguard 8%
America and #4 in Europe in wire harnesses.
• Electronic products revenue of $900 million. Lear RATINGS
is a leader in junction box technology and a niche VALUE Intrinsic value materially higher than market value?
player in electronic modules, wireless products, MANAGEMENT Capable and properly incentivized?
premium audio/video and tire pressure monitoring. FINANCIAL STRENGTH Solid balance sheet?
• New operating structure aligns Lear with global MOAT Able to sustain high returns on invested capital?
strategies of major customers and allows it to access EARNINGS MOMENTUM Fundamentals improving?
lowest-cost manufacturing and sourcing options. MACRO Poised to benefit from economic and secular trends?
• Stock price implies 5x trailing P/E. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE

While Lear has one of the strongest auto parts franchises in the world, it has struggled mightily with large exposure to
financially troubled North American auto makers. Nonetheless, Lear has the strategy and execution in place that could enable
it to survive the auto industry downturn and emerge with the equity intact. As a result, the shares represent an interesting
opportunity for risk-seeking investors who can get comfortable with Lear’s financial position and liquidity. The CEO
recently purchased shares in the open market, a step he might not have taken if a bankruptcy filing were imminent.
Lincare Holdings Inc. (Nasdaq: LNCR) Clearwater, FL, 727-530-7700

Health Care: Healthcare Facilities, Member of S&P MidCap 400 http://www.lincare.com


per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 812 961 1,147 1,269 1,267 1,410 1,596 1,662 408 406
Gross profit 689 816 976 1,084 1,013 1,094 1,206 1,259 307 311
EBIT 240 320 389 456 352 347 383 401 99 93
Net income 135 190 232 273 214 213 226 237 59 56
Diluted EPS 1.23 1.73 2.19 2.60 2.06 2.16 2.58 3.07 0.66 0.76
Cash from ops 234 288 371 419 370 329 406 423 135 128
Capex 74 83 128 90 111 106 143 162 30 53
Free cash flow 160 205 243 330 259 223 263 261 105 75
Intangible assets 696 806 946 1,039 1,150 1,204 1,208 1,214 1,203 1,214
Total assets 1,071 1,199 1,432 1,721 1,681 1,775 1,928 1,935 1,799 1,935
Short-term debt 98 54 66 68 14 71 288 73 408 73
Long-term debt 126 156 321 275 275 275 550 550 0 550
Total liabilities 332 342 584 555 543 665 1,195 1,038 763 1,038
Common equity 739 856 848 1,166 1,138 1,111 734 897 1,036 897
EBIT/capital employed 78% 100% >100% >100% 90% 85% 93% 100% n/m n/m
$50
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • Repurchased 18 million shares for $673 million

Lincare is a leading provider of oxygen and other respiratory in 2007 and has bought back $35 million YTD.
therapy services to home patients in the U.S. Customers • Stock price implies 14% trailing FCF yield, 8x
suffer from chronic obstructive pulmonary disease (COPD), trailing P/E and 11x forward P/E.
such as emphysema, chronic bronchitis or asthma. Lincare
serves 700,000 customers through 1,000 operating centers. INVESTMENT RISKS & CONCERNS
• Medicare price reductions have negatively
SELECTED OPERATING DATA affected growth. Lincare has reported 5% GAAP
YTD revenue growth and 10% “internal” growth YTD,
FYE December 31 2005 2006 2007 9/30/08
∆ operating centers 10% 11% 4% 4%
with the difference due to Medicare pricing.
∆ customers 18% 7% 4% n/a • Reimbursement pressure. Lincare depends heavily
∆ revenue 0% 11% 13% 5% on Medicare reimbursement, with Medicare Part B
% of revenue by product category: providing coverage for durable medical equipment
Oxygen and other therapy 91% 92% 92% 92% (DME). Two-thirds of Lincare’s customers have
Home medical equipment 9% 8% 8% 8%
Revenue by payor: primary coverage under Medicare Part B. Recent
Medicare and Medicaid 67% 67% 64% n/a legislation, including the SCHIP Extension Act of
Private insurance 26% 26% 29% n/a 2007, the Deficit Reduction Act (DRA) of 2005 and
Direct payment 7% 7% 7% n/a the Medicare Prescription Drug, Improvement, and
Rental 71% 70% 67% n/a
Modernization Act of 2003, contain provisions that
Sale 29% 30% 33% n/a directly impact reimbursement for the primary
respiratory and other DME products provided by
INVESTMENT HIGHLIGHTS Lincare. SCHIP reduced Medicare reimbursement
• $6 billion home respiratory market growing 6%. amounts for covered Part B drugs as of April 1,
The market size estimate includes home oxygen 2008. DRA provisions will impact reimbursement
equipment and respiratory therapy services. Growth for oxygen equipment beginning in 2009.
drivers include an increasing number of COPD • Regulatory pressure on Medicare-covered
patients and a trend toward home treatment due to oxygen equipment rentals. DRA changes
lower cost than acute care. 16 million Americans reimbursement from monthly payment for as long
have been disgnosed with COPD. as the equipment is in use by a beneficiary to a
• Lincare’s share of fragmented home respiratory capped rental contract whereby payment for oxygen
services market has grown from 11% in 1997 to equipment may not extend for more than 36 months.
25% in 2007. The market includes 2,000 regional
and local providers. Local competitors’ share COMPARABLE PUBLIC COMPANY ANALYSIS
declined from 61% to 45%, and national ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
competitors’ share rose from 28% to 30% during the AMED 1,365 1,719 1.7x n/m 16x 13x
same period. The industry is consolidating, with GTIV 686 885 .7x n/m 16x 15x
local players disadvantaged by regulatory changes. NHC 545 614 1.0x 1.7x n/a n/a
• Growth strategy includes organic and acquired LNCR 1,862 2,452 1.5x n/m 8x 11x
growth, supported by proprietary, integrated IT
systems and scale-advantaged, efficient operations. MAJOR HOLDERS
The company made 67 acquisitions from 2003-07 CEO Byrnes 4% │ Other insiders 3% │ Fidelity 15% │
for $459 million, or 1.4x acquired revenue. Barclays 7% │ JP Morgan 6%
Lincare’s customers have grown from 400K in 2002
to 700K in 2007, while operating centers have RATINGS
grown from 642 in 2002 to 1,019 in 2007. VALUE Intrinsic value materially higher than market value?
• Experienced management. Lincare executive team MANAGEMENT Capable and properly incentivized?
members have an average of 18 years of experience. FINANCIAL STRENGTH Solid balance sheet?
95% of Lincare’s 140 area managers have managed MOAT Able to sustain high returns on invested capital?
local Lincare sales efforts. 95% of the company’s EARNINGS MOMENTUM Fundamentals improving?
34 billing managers have been promoted within. MACRO Poised to benefit from economic and secular trends?
THE BOTTOM LINE

Lincare has gained significant market share in the home respiratory market over the past decade. The company has executed
fairly well, leveraging both organic and acquisition-driven growth to boost the number of operating centers from 642 in 2002
to 1,019 in 2007. In late 2007, Lincare took on debt to boost an already large share repurchase program, with a total of $673
million repurchased in 2007. We are cautious on the shares despite these apparent positives, as the company faces a myriad
of reimbursement issues that could negatively affect long-term profitability.
Lorillard Inc. (NYSE: LO) Greensboro, NC, 877-703-0386

Consumer Non-Cyclical: Tobacco, Member of S&P 500 http://www.lorillard.com


per share data) 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 3,256 3,348 3,568 3,755 3,969 4,072 1,044 1,125
Gross profit 1,363 1,382 1,454 1,595 1,662 1,702 430 472
EBIT 903 1,001 1,084 1,241 1,274 1,280 348 382
Net income 582 642 706 826 898 841 244 237
Diluted EPS 3.35 3.69 4.06 4.75 5.16 4.85 1.40 1.37
Cash from ops n/a 0 820 778 882 894 414 468
Capex n/a 0 31 30 51 44 15 17
Free cash flow n/a 0 789 748 831 850 399 451
Cash & investments n/a n/a 0 1,527 1,210 1,208 0 1,208
Total current assets n/a n/a 0 2,115 2,103 1,943 0 1,943
Intangible assets n/a n/a 0 0 0 0 0 0
Total assets n/a n/a 0 2,759 2,600 2,346 0 2,346
Short-term debt n/a n/a 0 0 0 0 0 0
Total current liabilities n/a n/a 0 1,151 1,188 1,233 0 1,233
Long-term debt n/a n/a 0 0 0 0 0 0
Total liabilities n/a n/a 0 1,464 1,587 1,621 0 1,621
Preferred stock n/a n/a 0 0 0 0 0 0
Common equity n/a n/a 0 1,295 1,013 725 0 725
EBIT/capital employed n/a n/a n/m n/m n/m n/m n/m n/m
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
Jan 00 Jan 00 Jan 00 Jan 00 Jan 00 Jan 00 Jan 00 Jan 00 Jan 00 Oct 08

Lorillard is the third-largest cigarette maker and the oldest • Significant and uncertain legal liabilities.
continuously operating tobacco firm in the U.S. Lorillard’s Lorillard is a defendant in thousands of lawsuits.
flagship brand, Newport, is a menthol-flavored premium Provisions have been recorded in cases with
cigarette brand and the top selling menthol and second estimable liability only, with large contingent
largest selling cigarette in the U.S. Lorillard manufactures all exposures. Lorillard already pays $1+ billion per
of its products at its Greensboro, NC facility. Lorillard was year in settlement costs that reduce gross profit.
founded in 1760 and separated from Loews in June 2008. • Stated long-term goals may prove unrealistic.
Management aims for long-term revenue growth of
SELECTED OPERATING METRICS 3-4%, EPS growth of 5-7%, and a dividend yield of
YTD ~5%, resulting in a targeted annual equity return of
FYE December 31 2005 2006 2007 9/30/08
Unit volume (bn) 35.2 36.1 35.8 +1.4%
10-12%. This assumes continuing market share
Market share… gains and accretive stock repurchases.
…of total U.S. market 9.2% 9.6% 10.0% 11.0% • No international exposure. Lorillard sold the
…of premium segment 12.3% 12.7% 13.0% n/a international rights to its brands in 1977.
…of menthol segment 31.5% 32.2% 32.9% 34.6%
• Possibility of regulatory action on menthol. Some
public health agencies have expressed concerns that
mentholated cigarettes may pose greater health risks
• Strong U.S. market position. Newport (94% of than other cigarettes, as smokers tend to inhale more
Lorillard’s volume and sales) is the #1 menthol and deeply. A menthol ban appears unlikely, however.
#2 overall brand cigarette in the $50 billion U.S.
• Move to greater taxation may curtail demand.
market (behind Philip Morris and RAI). The
Federal and state excise taxes have trended higher
“Newport pleasure” theme has existed for 35 years.
over the years. In April 2008, New York State
• Gaining share in mature, competitive industry. almost doubled the excise tax per pack to $2.75.
Newport has grown to 33% of menthol cigarettes in
• Lack of reinvestment opportunities. The U.S.
the U.S., while menthol’s share of cigarettes
tobacco industry faces a declining long-term trend,
shipped has grown from 26% to 28% over five
and Lorillard is unlikely to find ways to reinvest
years. In addition, the premium segment has grown
capital at high rates. The company is returning most
from 68% to 73% of cigarettes, while Lorillard has
free cash flow via share repurchases and dividends.
captured a larger portion of the premium segment.
• Modest growth despite declining industry trend. COMPARABLE PUBLIC COMPANY ANALYSIS
Lorillard projects annual revenue growth of 3-4% in ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
2009-12, despite 3-4% industry unit declines. BTI 49,894 60,945 3.6x n/m 12x 11x
• Industry-leading profitability. Lorillard generates ITYBY 23,500 30,971 1.7x n/m 10x 9x
more than $36 of operating income per 1,000 units PM 77,705 86,049 1.4x n/m 12x 11x
shipped, better than any of its U.S. competitors. RAI 12,530 14,620 1.6x n/m 9x 9x
• Still under-represented in Western U.S. Newport LO 10,215 9,007 2.2x 14.1x 12x 11x
has 17% share of the menthol segment in 23
Western states, trailing Marlboro Menthol (23%),
MAJOR HOLDERS
Kool/ Salem (21%) and Discount Menthol (24%).
Insiders <1% │ BofA 5% │ Ameriprise 4% │ NWQ 4%
• High-margin business; strong FCF generation,
with LTM FCF of $850 million. The company
RATINGS
expects to maintain operating margins in the 32-
33% range over the next few years.
• Repurchased 5.9 million shares for $400 million FINANCIAL STRENGTH Solid balance sheet?
($68 per share) from July through October. MOAT Able to sustain high returns on invested capital?
• Seasoned management team. Lorillard executives EARNINGS MOMENTUM Fundamentals improving?
have been with the company for a long time and MACRO Poised to benefit from economic and secular trends?
appear focused on long-term shareholder value. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE

Lorillard lacks a key attribute of a compelling magic formula selection — an ability to reinvest at least some FCF at the high
ROIC that landed it on the list in the first place. As a domestic-only tobacco maker, Lorillard operates in a slowly but steadily
declining market. This puts it in cash harvest mode despite the modest growth exhibited by Newport in recent years.
Manitowoc Company, Inc. (NYSE: MTW) Manitowoc, WI, 920-684-4410

Capital Goods: Construction & Agricultural Machinery, Member of S&P 500 http://www.manitowoc.com


per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 984 1,356 1,468 1,845 2,254 2,933 4,005 4,405 925 1,107
Gross profit 271 321 317 376 422 647 912 1,025 212 244
EBIT 111 115 66 104 124 288 489 589 106 (58)
Net income 46 (21) 4 39 66 166 337 412 76 (26)
Diluted EPS 0.45 0.40 0.08 0.35 0.48 1.33 2.62 2.09 0.56 (0.29)
Cash from ops 107 95 151 57 107 294 238 359 56 (5)
Capex 29 33 32 43 55 68 120 163 22 30
Free cash flow 78 62 119 14 52 227 119 195 34 (35)
Total assets 1,081 1,577 1,603 1,928 1,962 2,220 2,869 3,376 2,591 3,376
Short-term debt 42 43 25 72 19 4 13 251 10 251
Total current liabilities 296 460 545 653 690 935 1,075 1,383 1,036 1,383
Long-term debt 447 624 567 512 474 264 218 202 263 202
Common equity 264 295 298 519 543 775 1,350 1,561 1,059 1,561
$60
$50
$40
$30
$20
$10
$0
BUSINESS OVERVIEW • 80% of Foodservice revenue from renovation

Manitowoc, founded in 1902, operates in two segments: and replacement, with 20% from new locations.
The crane group (88% of revenue) provides lifting • $2.7 billion cash acquisition of Enodis, completed
equipment for the global construction industry. in October, positions Manitowoc in hot foodservice
The foodservice group (12% of revenue) makes ice/beverage and food retail equipment. Post-Enodis, Foodservice
dispensers, ice-cube and commercial refrigeration machines. accounts for ~37% of revenue, up from 12%. The
deal is expected to be accretive to EPS in 2009, with
SELECTED OPERATING DATA $80 million of annual synergies by 2011.
YTD • Expects EPS to grow 18-21% to $3.15-3.25 in
FYE December 31 2005 2006 2007 9/30/08 2008, down from previous guidance of $3.30-$3.40.
Crane 72% 76% 81% 89% INVESTMENT RISKS & CONCERNS
Foodservice 18% 14% 11% 11%
Marine
1
10% 10% 8% 0% • Enodis more than triples Foodservice Group,
Revenue growth by segment: raising integration risks. The deal also leverages the
Crane 30% 37% 45% 28% balance sheet at a time when end markets may be
Foodservice 6% 4% 6% 3%
slowing. The company won Enodis in an auction vs.
EBIT margin by segment: Illinois Tool Works and may have overpaid.
Crane 7% 13% 14% 15% • 91% of Crane revenue from new cranes, with 9%
Foodservice 14% 14% 14% 15% from parts and service, making the company
vulnerable to a slowdown in capital spending.
% of revenue by geography: • Soft residential and commercial construction, as
Americas 56% 57% 53% n/a well as “challenges” in customer and project
EMEA 37% 35% 37% n/a financing affecting Crane group. Management also
Asia and Oceania 8% 8% 10% n/a
1 noted “slower demand” for lower capacity tower
The marine group (8% of revenue in 2007) is being sold for $120 million
(yearend close expected; will result in estimated $0.60 per share after-tax cranes in Western Europe, even as demand for
gain). The marine group is treated as a discontinued operation in 2008. mobile telescopic and other cranes remains “brisk.”
• Rising materials costs. Manitowoc faces rising
INVESTMENT HIGHLIGHTS steel, copper and other materials prices, and higher
• World-leading industrial brands. Crane: transportation and energy costs. Margins have so far
Manitowoc: high-capacity, lattice-boom crawler not been materially affected by these cost increases.
cranes; Potain: top-slewing and self-erecting tower
cranes; Grove: mobile telescopic cranes; National COMPARABLE PUBLIC COMPANY ANALYSIS
Crame: boom trucks. Foodservice: Manitowoc: #1 ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
ice-cube machines in U.S., #1 ice-machines in CAT 22,296 54,322 1.1x 3.2x 6x 7x
China; Servend: #1 ice/beverage dispenser in U.S.; DE 14,429 34,173 1.3x 2.4x 7x 6x
Kolpak: #1 walk-in refrigerator/freezer in U.S. HIT 15,445 36,368 .3x 0.9x n/a n/a
• 56% of Crane revenue from Europe and Asia. TEX 1,150 2,231 .2x 0.9x 2x 3x
Global construction market is expected to grow MTW 902 974 .2x 1.0x 2x 2x
from $6 trillion in 2008 to $13 trillion in 2016, with
international outpacing U.S. growth by 2-to-1.1 MAJOR HOLDERS
• U.S. construction exposure lower than appears. CEO Tellock <1% │ Other insiders 3% │ Fidelity 6% │
While residential and commercial construction Vanguard 5%
accounts for one-third of Crane revenue, the U.S.
accounts for only one-fifth of that one-third. RATINGS
• Crane backlog up 26% y-y to $3.3 billion as of VALUE Intrinsic value materially higher than market value?
September 30, down slightly from June 30. MANAGEMENT Capable and properly incentivized?
• Crane revenue up 28% YTD, driven by global FINANCIAL STRENGTH Solid balance sheet? 1
infrastructure and energy development. EBIT MOAT Able to sustain high returns on invested capital?
margin has been in the mid teens. EARNINGS MOMENTUM Fundamentals improving?
1
Source: Company, Global Insights. 1
Pro forma for Enodis acquisition.
THE BOTTOM LINE

Manitowoc would be more enticing without Enodis. The large Foodservice deal not only suggests that high-ROIC
reinvestment opportunities are scarce, but it adds a number of new risks to the investment thesis. Additionally, while near-
term earnings momentum remains positive, the Crane Group looks vulnerable to a slowdown in global demand. Such a
change would be particularly damaging were it to occur in tandem with increases in key materials costs.
McGraw-Hill Companies, Inc. (NYSE: MHP) New York, NY, 212-512-2000

Services: Printing & Publishing, Member of S&P 500 http://www.mcgraw-hill.com


per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 4,475 4,708 4,890 5,251 6,004 6,255 6,772 6,509 2,188 2,049
Gross profit 2,465 2,693 2,872 3,204 3,687 3,868 4,245 3,999 1,421 1,301
EBIT 661 921 990 1,175 1,364 1,418 1,663 1,391 739 646
Net income 377 577 688 756 844 882 1,014 824 452 390
Diluted EPS 0.96 1.47 1.79 1.96 2.21 2.40 2.94 2.57 1.34 1.23
Cash from ops 1,100 1,142 1,382 1,064 1,560 1,509 1,717 1,354 688 677
Capex 440 375 361 387 395 426 545 461 143 92
Free cash flow 659 768 1,021 676 1,165 1,083 1,172 893 546 585
Total assets 5,161 5,032 5,365 5,841 6,396 6,043 6,357 6,533 6,525 6,533
Short-term debt 223 119 26 5 3 2 0 307 1,331 307
Long-term debt 834 459 0 1 0 0 1,197 1,198 0 1,198
Common equity 1,854 2,166 2,557 2,985 3,113 2,680 1,607 1,633 1,730 1,633
EBIT/capital employed >100% >100% >100% >100% >100% >100% n/m >100% n/m n/m
$80
$70
$60
$50
$40
$30
$20
$10
$0
BUSINESS OVERVIEW • Education segment benefits from “robust” state

McGraw-Hill, founded in 1888, provides info services in the new adoption market in 2008, with McGraw-
financial, education and business data markets. Brands Hill’s elementary to high school business expected
include Standard & Poor’s, McGraw-Hill Education, to capture one-third of this year’s state spend of
BusinessWeek, and J.D. Power and Associates. $900-$950 million (up 10-16% y-y).
• Guiding for non-GAAP EPS of $2.63-$2.65 in
SELECTED OPERATING DATA 2008 (down 11-12%), driven by weakness in
YTD Financial Services, slowing growth in Education,
FYE December 31 2005 2006 2007 9/30/08
and slightly better growth in Information & Media.
McGraw-Hill Education 12% -6% 7% -1% • Stock price implies 12% trailing FCF yield, 9x
Financial Services 17% 14% 11% -12% trailing P/E and 9x forward P/E.
Information & Media 16% 6% 4% 5%
Total revenue growth 14% 4% 8% -5%
McGraw-Hill Education 45% 40% 40% 43% • Revenue and EBIT down due to weakness in
Financial Services 40% 44% 45% 41% Financial Services: segment revenue is down 15%
Information & Media 16% 16% 15% 16% YTD, accompanied by EBIT margin contraction of
McGraw-Hill Education 15% 13% 15% 16%
606 bps. S&P Credit Market Services transaction
Financial Services 42% 44% 45% 41% revenue has dropped 54% YTD.
Information & Media
1
7% 5% 6% 8% • S&P ratings business: Temporary setback or
Total EBIT margin 23% 23% 25% 23% permanent impairment of franchise value?
U.S. 78% 76% 74% n/a S&P’s ratings business has struggled due to the
Europe 13% 14% 15% n/a downturn in credit markets. S&P’s structured credit
Asia 6% 6% 6% n/a ratings are perceived to have failed investors, and
Rest of world 4% 4% 5% n/a the rating methodology and business model have
1
Includes adjustments for unallocated and other expenses.
come under scrutiny. A key criticism is that S&P
generates revenue from issuers rather than investors
who rely on the ratings. While there is no imminent
• Leading brands: Standard & Poor’s, McGraw- move to force S&P to fundamentally change its
Hill, Newsweek, JD Power and Associates. The business model, such a change could have a
branded franchises have wide-moat characteristics. significant negative impact on franchise value.
S&P credit ratings are—next to ratings provided by
Moody’s and Fitch—a key input into investors’ COMPARABLE PUBLIC COMPANY ANALYSIS
credit analysis processes, enabling the company to ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
extract high-margin revenue from issuers seeking to MCO 4,635 5,588 3.0x n/m 11x 11x
access the capital markets. JD Power and Associates PSO 7,105 9,804 1.5x n/m 9x 9x
enjoys a strong reputation with consumers.
MHP 7,347 8,366 1.3x n/m 9x 9x
McGraw-Hill Education and Newsweek are highly
respected franchises in their respective markets.
• Financial Services bright spots mitigate sharp MAJOR HOLDERS
decline in credit ratings business. Investment CEO McGraw III 2% │ Other insiders 1% │ T Rowe 10%
Services (roughly 30% of Financial Services
revenue) posted top-line growth of 3% YTD and RATINGS
14% in Q3, driven by “solid gains” in index services VALUE Intrinsic value materially higher than market value?
and Capital IQ (subscriber base is growing ~20% MANAGEMENT Capable and properly incentivized?
and now approaches 2,500 clients). AUM in ETFs FINANCIAL STRENGTH Solid balance sheet?
1
that track S&P indices rose 7% y-y to $224 billion MOAT Able to sustain high returns on invested capital?
as of September 30 (S&P receives AUM-based EARNINGS MOMENTUM Fundamentals improving?
payments). The company also receives a royalty MACRO Poised to benefit from economic and secular trends?
each time an exchange-traded derivative based on EXPLOSIVENESS 5%+ probability of 5x upside in one year?
1
an S&P index is traded. Such trading volume grew The company’s moat may have narrowed a bit recently as a result of the
company’s failure to accurately rate structured credit risks.
27% y-y to 3.7 million contracts in Q3.
THE BOTTOM LINE

McGraw-Hill is one of the widest-moat companies on the magic formula list. Unfortunately, its issuer-dependent credit
ratings business and recent failure to properly evaluate structured credit risks have left it exposed to serious criticism and
perhaps adverse regulatory action. Such action would negatively impact S&P’s earnings power, potentially impairing the
long-term franchise value of the credit ratings business. However, the shares may be cheap enough to offset the negatives of
significantly lower demand for structured credit ratings and potential regulatory action.
Medicis Pharmaceutical (NYSE: MRX) Scottsdale, AZ, 602-808-8800

Health Care: Biotechnology & Drugs, Member of S&P MidCap 400 http://www.medicis.com


per share data) 6/30/02 6/30/03 6/30/04 6/30/05 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 213 248 304 366 165 393 457 516 111 115
Gross profit 177 209 257 308 140 347 401 474 92 105
EBIT 70 78 47 89 17 (93) 91 68 20 (14)
Net income 50 51 31 58 52 (48) 70 42 17 (15)
Diluted EPS 0.80 0.91 0.52 0.82 0.74 (0.88) 1.08 0.61 0.26 (0.26)
Cash from ops 74 85 128 130 148 (41) 159 72 49 (8)
Capex 20 83 89 6 1 7 40 13 3 3
Free cash flow 54 2 39 124 147 (48) 119 59 45 (10)
Total assets 876 933 1,078 1,043 1,146 1,123 1,213 971 1,162 971
Short-term debt 0 0 0 0 0 169 284 0 0 0
Long-term debt 400 400 453 453 453 284 169 169 453 169
Common equity 429 461 555 486 544 476 583 607 588 607
EBIT/capital employed >100% >100% 78% >100% n/m n/m n/m n/m n/m n/m
$50
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0

Medicis operates in two specialty pharma segments: • Solodyn patent suit, generic competition from
The dermatological segment targets acne and non-acne Impax. In January 2008, Impax filed an
treatment. Acne products include Dynacin, Plexion, Solodyn, Abbreviated New Drug Application (ANDA)
Triaz, and Ziana. Non-acne products include Loprox, seeking FDA approval for a generic version of
Omnicef, Perlane, Restylane, and Vanos. Seasonality: Acne Solodyn. Impax also filed suit seeking a declaration
revenue bumps up in Q3 due to back-to-school sales. that Medicis’s Solodyn patent is invalid.
The non-dermatological segment includes products for the • Competitors for prescription dermatological
treatment of urea cycle disorder, and contract revenue. products include Allergan, Galderma, J&J, Sanofi-
Product lines include Ammonul and Buphenyl. The segment Aventis, Stiefel Labs and Warner Chilcott. The
also includes contract revenue associated with licensing primary facial aesthetics competitor is Allergan.
agreements and authorized generics. The FDA approved Allergan’s Juvéderm in mid-
2006 (marketed since early 2007).
SELECTED OPERATING DATA • High dependence on wholesalers. McKesson
YTD accounted for 52% and Cardinal accounted for 17%
FYE December 31 2005 2006 2007 9/30/08 of revenue in 2007. McKesson is the sole distributor
% of revenue by product type: of Restylane and Perlane.
Acne dermatological 32% 41% 53% 61%
Non-acne dermatological 49% 51% 38% 30%
• FDA approval risks. Medicis has developed and
Non-dermatological
1
19% 9% 9% 10% licensed potential pharmaceutical compounds and
Revenue growth by product type: agents, which must go through the FDA approval
Acne dermatological products n/a 40% 52% 46% process. In January 2008, the FDA stated that, upon
Non-acne dermatological n/a 16% -13% -14%
1 a preliminary review of Medicis’s BLA for the
Non-dermatological n/a -49% 22% 37%
Total revenue growth n/a 11% 16% 20% botulinum toxin type A, Reloxin, in aesthetics, the
1
Includes contract revenue. FDA had determined not to accept the BLA for
filing because it was not sufficiently complete.
INVESTMENT HIGHLIGHTS • 11.7 million stock options outstanding at average
• $6 billion market for dermatological pharma in exercise price of $28 (as of yearend 2007). While
the U.S. Nearly 12 million cosmetic procedures almost all of the options are underwater, they equal
were performed in the U.S. in 2007, including 21% of basic shares outstanding.
nearly 10 million non-surgical procedures.
• Growth strategy: promote brands, develop new COMPARABLE PUBLIC COMPANY ANALYSIS
products and extensions, enter into collaborations, ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
and acquire products. Medicis recently entered the ACL 25,386 23,666 3.8x 6.9x 14x 13x
international aesthetic market with LipoSonix. It AGN 10,837 11,423 2.6x 23.2x 14x 13x
will introduce Reloxin in 1Q09, pending approval. ELN 3,186 4,452 4.7x n/m n/m n/m
• Medicis has obtained or licensed U.S. patents SNY 82,566 89,716 2.5x n/m 8x 7x
covering Triaz and Restylane (expire in 2015), a MRX 638 500 1.0x 2.3x 9x 8x
patent covering Solodyn Tablets (2018), two patents
covering Ziana Gel (2015, 2020), and three patents MAJOR HOLDERS
covering Vanos Cream (2021). CEO Shacknai 5% │ Other insiders 3% │ BlackRock 11% │
• Strong growth of acne revenue, from $98 million Cap Re 9% │ Vissium 8% │ Fidelity 8% │ Morgan Stanley
in 2005 to $246 million in 2007, driven by Solodyn 8% │ T Rowe 6% │ Merrill Lynch 6% │ Susquehanna 5%
(approved in 2Q06) and Ziana (approved in 4Q06).
Acne revenue amounted to $230 million in the first RATINGS
nine months of 2008, up 46%, driven by Solodyn. VALUE Intrinsic value materially higher than market value?
• Guiding for revenue growth of 11-12% in 2008, MANAGEMENT Capable and properly incentivized?
with revenue of $506-511 million and non-GAAP FINANCIAL STRENGTH Solid balance sheet?
EPS of $1.36-$1.39. The company had $307 million MOAT Able to sustain high returns on invested capital?
of cash and $170 million of debt at the end of Q3. EARNINGS MOMENTUM Fundamentals improving?
THE BOTTOM LINE

Medicis is a cheap company with strongly positive current operating momentum and a strong balance sheet. The company
competes in the market for the treatment of dermatological and aesthetic conditions, a segment benefiting from favorable
long-term demand trends. The key risk investors should evaluate carefully in this otherwise attractive situation is the near-
term prospect of generic competition to SOLODYN, Medicis’s top-selling dermatological product.
MEMC Electronic Materials (NYSE: WFR) St. Peters, MO, 636-474-5000

Technology: Semiconductors, Member of S&P 500 http://www.memc.com


per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 618 687 781 1,028 1,107 1,541 1,922 2,115 473 546
Gross profit (51) 174 233 370 367 689 1,001 1,105 239 270
EBIT (219) 65 143 199 257 558 850 943 200 228
Net income (523) (22) 117 226 249 369 826 694 152 183
Diluted EPS (7.51) (0.17) 0.53 1.02 1.10 1.61 3.56 3.00 0.65 0.80
Cash from ops (33) 76 99 258 321 528 917 756 267 115
Capex 50 22 67 146 163 148 276 346 71 73
Free cash flow (83) 54 31 112 158 379 641 410 195 42
Cash & investments 107 166 131 92 154 586 1,316 1,120 1,213 1,120
Total current assets 264 364 365 409 436 900 1,590 1,429 1,473 1,429
Total assets 549 632 727 1,028 1,148 1,766 2,887 2,985 2,513 2,985
Short-term debt 76 124 72 43 18 5 5 6 5 6
Long-term debt 149 161 59 116 35 29 26 25 28 25
Common equity (25) (25) 194 443 711 1,167 2,035 2,080 1,678 2,080
EBIT/capital employed -104% 30% 52% 45% 46% 90% >100% >100% n/m n/m
$120
$100
$80
$60
$40
$20
$0

MEMC provides silicon wafers for semiconductor and solar trailing P/E and 4x forward P/E.
applications. It has global R&D and manufacturing facilities.
Customers include semi device and solar cell makers. INVESTMENT RISKS & CONCERNS
MEMC sells wafers from 100-300mm and intermediate • Expects Q4 revenue to drop 2-11% to $475-525
products such as polysilicon and silane gas. The company million, down from prior guidance for growth of
has 200+ U.S. and 450+ foreign patents. Samsung and Yingli 1-12%. The company expects gross margin of 48%
Green Energy each accounted for 10%+ of revenue in 2007. and opex of $27 million (lower than previous
Texas Pacific Group acquired the company from E.ON in estimate of $41 million due to forfeiture of options).
2001 and sold its stake in several transactions through 2007. • Weak semiconductor application demand due to
customers reducing inventory. Solar demand has
SELECTED OPERATING DATA been “healthy,” although management stated on
YTD November 17 that macro weakness is increasingly
FYE December 31 2005 2006 2007 9/30/08 having a “negative effect” on solar as well.
Change in wafer ASPs -3% 10% -41% -41%
% of revenue by product type:
• Nabeel Gareeb resigned as CEO on October 30
Wafers 90% 81% 78% n/a after six years with MEMC. Director Marshall
Excess polysilicon raw material 10% 19% 22% n/a Turner has stepped in until a new CEO is hired.
% of revenue by geography: • Unanticipated events can affect production. In
U.S. 31% 34% 24% n/a
China 3% 14% 21% n/a
Q2, a premature failure of a heat-exchanger at the
Korea 17% 12% 16% n/a Merano, Italy facility reduced polysilicon output by
Taiwan 20% 18% 17% n/a 5%, causing Q2 results to miss guidance. The
Other 29% 22% 22% n/a number of adverse events has increased as MEMC
has expanded and ramped up production capacity.
INVESTMENT HIGHLIGHTS • Dependent on demand in semiconductor device
• 18% CAGR in silicon wafer shipments from and solar industries. Weak end-market demand
1990-2007, driven by growth in semiconductor puts pressure on MEMC to cut prices and capacity.
units and solar megawatts. The wafer market is • Competitors include Shin-Etsu Handotai, SUMCO,
expected to grow from $10 billion (80/20 semi/solar Siltronic, BP Solar, Evergreen Solar, Kyocera, REC
split) in 2005 to $32 billion (45/55) in 2010. Semi Group, Sanyo, Sharp, and SolarWorld.
devices and solar cells are made from wafers.
• Capital-intensive yet high-ROIC business. COMPARABLE PUBLIC COMPANY ANALYSIS
MEMC operates several production facilities with ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
8,000MT of targeted annual polysilicon capacity. BRCM 7,852 5,605 1.2x 3.0x 9x 11x
Net PP&E was $976 million as of September 30. FSLR 9,470 8,913 8.8x 7.0x 30x 16x
Capex was $276 million in 2007 and $242 YTD. MRVL 3,550 2,983 .9x 2.7x 7x 8x
• $15-18 billion of contracts in place. In July, SPWRA 2,193 2,322 1.8x 2.9x 11x 8x
MEMC amended a ten-year solar wafer deal with STP 1,660 2,548 1.5x 2.0x 7x 5x
Conergy, reducing volume from $7-8 billion to $4 WFR 3,443 2,354 1.1x 1.7x 4x 4x
billion. MEMC also announced a $3-3.5 billion ten-
year “take-or-pay” solar wafer deal with Tainergy. MAJOR HOLDERS
Customers make deposits in advance of deliveries. Insiders <1% │ AXA 6% │ Cap Re 4% │ Barclays 4%
• Wafer volume drives revenue growth, with
volume increases driven by new wafers and higher RATINGS
shipments of existing wafers. Prices declined 41% VALUE Intrinsic value materially higher than market value?
in 2007 due to a mix shift, with new 156mm wafers MANAGEMENT Capable and properly incentivized?
depressing the average price, while existing wafers FINANCIAL STRENGTH Solid balance sheet?
and intermediate products realized higher prices. MOAT Able to sustain high returns on invested capital?
• Strong balance sheet, with $1.3 billion of net cash EARNINGS MOMENTUM Fundamentals improving?
and investments as of September 30. MACRO Poised to benefit from economic and secular trends?
• Repurchased four million shares for $270 million EXPLOSIVENESS 5%+ probability of 5x upside in one year?
since May 2007 on total authorization of $1 billion.
THE BOTTOM LINE

MEMC is a technology company tapping into long-term semiconductor industry growth and global adoption of solar cells.
Shares have declined as the outlook for semi cap equipment makers has deteriorated and management has slashed guidance
(the CEO resigned in late October). We believe momentum-oriented investors have overreacted to the slowdown in growth.
While semi cap equipment is highly cyclical, solar represents a major secular growth opportunity, one the market is currently
ignoring. We value MEMC at $30-36 per share, based on a range of 6x trailing EBIT to 10x estimated 2009 EPS.
…additional insight into WFR: REVENUE AND MARGIN ANALYSIS

WFR – Revenue, Gross Profit and EBIT, 1996-07
MEMC results have exhibited significant historical volatility, reflecting
• We value MEMC at $30-36 per share, based on the cyclical nature of the semiconductor capital equipment industry.
the valuation analysis summarized below. The However, as MEMC’s sales into the solar market have grown, MEMC
company has $1.3-1.4 billion in excess investments, has added a strong secular growth component to its operating profile.
providing meaningful downside protection and an $2,000mn
opportunity to increase intrinsic value per share
through stock repurchases. While earnings from the $1,500mn
company’s business are difficult to predict, MEMC $1,000mn
should remain profitable even in a weaker macro
$500mn
environment. Shares appear grossly undervalued,
even at multiples that do not reflect the company’s $0mn
long-term growth prospects. -$500mn
96 97 98 99 00 01 02 03 04 05 06 07
MEMC Electronic Materials — Valuation Summary
Revenue Gross Profit EBIT
($ in millions, except per share data) Low High
Value Value Source: Company, The Manual of Ideas.
1
Cash and equivalents $932 $932 WFR – Y-Y Revenue Growth, 1997-YTD’08
Short-term investments 187 187
Long-term investments 318 318 MEMC’s highly volatile growth profile reflects the cyclicality of the
Long-term debt 30 30 semiconductor capital equipment industry. However, even as many
Net cash and investments $1,468 $1,468 cap equipment makers are posting revenue declines in 2008, MEMC
2
(200) (100) has managed to continue growing. While the company is still
Total $1,268 $1,368 exposed to cyclicality, it should also continue to benefit from secular
growth in the solar industry.
Value of core business: 40%
LTM EBIT 943
30%
Fair value multiple of LTM EBIT 6x
2009 estimated EPS ex. interest income 3.00 20%
Fair value multiple of 2009E adjusted EPS 10x 10%
Total $5,659 $6,840
0%
Estimated fair value of WFR $6,927 $8,208 -10%
per share $30 $36 -20%
1
Based on balance sheet values as of September 30, 2008.
2
Represents MOI estimate. -30%
YTD
97
98
99
00
01
02
03
04
05
06
07
WHY THE SHARES MAY BE MISPRICED Source: Company, The Manual of Ideas.
• Investors may overestimate cyclicality. While
MEMC remains a cyclical business, investors may WFR – Gross and EBIT Margin, 1996-YTD’08
not be giving the company enough credit for its MEMC’s profit margins have risen in recent years to levels that are
strong market position in solar applications. The unlikely to be sustained through the downcycle in the semiconductor
capital equipment industry. However, the company may be in a
solar market appears likely to continue strong position to maintain respectable margins due to continued strength in
secular growth, mitigating the negative impact of solar applications.
the traditional semiconductor downcycle.
60%
• Departure of momentum investors over the past
40%
year, as the notion that MEMC can continue strong
growth unaffected by traditional semiconductor 20%
cyclicality has been exposed as a myth. The shares 0%
have until recently remained too expensive for value -20%
investors. The latter may also be uncomfortable -40%
owning a company with a moat that depends to a -60%
large degree on continued technology leadership.
YTD
96
97
98
99
00
01
02
03
04
05
06
07
• Unexpected hit from hurricane Ike. The company

lost fifteen days of production at its Pasadena EBIT Margin Gross Margin
factory, forcing a downward revision to Q3 Source: Company, The Manual of Ideas.
estimates. While this is obviously a short-term
issue, it seems that it affected some investors’
willingness to own the shares during Q3.
MANAGEMENT’S VIEW OF BUSINESS • Pricing: spot poly prices “stayed pretty healthy” in
Notes from 3Q08 earnings call with CEO Gareeb and CFO Q3; no clear indications on Q4 pricing yet (spot
Hannah on October 23: poly sales occur in last month of the quarter);
• Operating environment: solar application demand majority of contracts will come up for price
continues to be “healthy;” semiconductor renegotiation in December (pricing likely to depend
application demand is “weak, mostly due to on customer consumption expectations for February
customer inventory reduction efforts in light of and March
uncertain macro economic conditions” (result: • Potential customer issue (Gintech) [raised in
“significant sequential reduction in semiconductor Q&A]: $3-4 billion deal with Gintech, which may
wafer demand”); “while it takes quite a bit more have difficulty funding capacity expansion, but has
polysilicon to make up the equivalent revenue by so far paid MEMC “on time;” this is a potential
producing wafers for solar applications, our revenue risk rather than receivables risk, as Gintech
increased polysilicon production capability has deposited cash with MEMC; if customers such
demonstrated in [Q3] and our market positioning as Gintech are unable to pay the company, MEMC
should allow us to show continued sequential would keep deposits (triple digit millions in the case
growth in [Q4] while improving our margin profile” of largest customers—included in liability section of
• 1H08: polysilicon production was negatively balance sheet, plus off-balance-sheet letters of
impacted due to technical issues related to Pasadena credit), look to sell poly in spot market and enter
expansion in Q1 and equipment failures in Q2 into new long-term deals (current prices are “way
• Q3: Revenue of $546 million came in above post- higher” than prices specified in certain long-term
hurricane guidance of $530 million ± $10 million, arrangements)
due to “rapid ramp following the hurricane;” quarter • Competitive position: industry-leading asset
included four weeks of impacted production; turnover; “continued growth in spite of the sharp
Pasadena factory did incur “any significant physical inventory corrections in the semiconductor
or structural damage;” delivered “significant” application market in [1H08] highlights the benefits
quantity of short-term wafers (spot production) of MEMC’s unique positioning as a vertically
• Q4 outlook: operations have returned to pre- integrated wafer supplier to multiple markets,
hurricane levels; expect revenue of $540-600 especially as we achieved a significant milestone of
million (sequential growth of up to 10%), gross having revenue generated by solar applications
margin “over 50% in spite of reduced utilization of exceeding $1 billion in 2008, in spite of our spot
our manufacturing facilities and price reductions,” polysilicon sales declining as a percentage of sales;”
and opex of $41 million; semiconductor wafer [analyst question:] competitors such as GCL have
demand expected to decline 20-30% sequentially, difficulty raising capital—is potential effect of this
with pricing down mid to high single digits; revenue factored into guidance? [answer:] no
growth expectation noteworthy because the • Share repurchases: bought back 2.5 million shares
company needs to sell twice as much poly for solar in Q3; more than $500 million remains on $1 billion
application as it does for semiconductor application total repurchase authorization
in order to generate equivalent revenue (revenue • Potential acquisitions: some competitors getting
guidance would have been $590-650 million weaker; “keeping our eyes wide open;” “want to
assuming constant mix between semiconductor and stay in our core competency of making wafers”
solar); revenue guidance includes 2-3 weeks of • Wafer gross margin profile (from highest to
production “buffer” lowest gross margin): (1) short-term spot poly, (2)
• 2008: Revenue related to solar application expected short-term 156 millimeter wafer, (3) longer term
to exceed $1 billion for the first time; capex 156 millimeter wafers and 300 millimeter wafers,
expected to be 15% of less of revenue (4) 200 millimeter and smaller diameter wafers
• Production capacity: key driver of revenue; first • Miscellaneous: pension obligation was fully funded
step is adding capacity in manufacturing facilities, as of September 30
second step is utilizing such capacity (typically
ramped up over 3-6 month period); currently
installed capacity should allow company to achieve
quarterly revenue of $800-900 million based on
traditional semiconductor/solar mix, or revenue of
$720-810 million based on expected Q4 mix; these
run rates might be achievable by 2Q09 (important:
company is not giving 2009 guidance at this time)
Meredith Corporation (NYSE: MDP) Des Moines, IA, 515-284-3000

Services: Printing & Publishing, Member of S&P 500 http://www.meredith.com


per share data) 6/30/02 6/30/03 6/30/04 6/30/05 6/30/06 6/30/07 6/30/08 9/30/08 9/30/07 9/30/08
Revenue 988 1,080 1,162 1,217 1,562 1,616 1,587 1,553 404 370
Gross profit 554 615 659 694 905 953 902 871 228 197
EBIT 118 162 192 228 267 288 242 218 61 37
Net income 91 (4) 104 129 145 162 135 120 33 19
Diluted EPS 1.79 1.59 2.00 2.50 2.87 3.44 2.82 2.53 0.69 0.41
Cash from ops 137 161 163 171 194 211 256 239 62 45
Capex 23 27 25 24 29 43 30 35 4 10
Free cash flow 113 134 139 147 165 168 226 204 58 35
Intangible assets 939 913 897 935 1,333 1,330 1,382 1,381 1,322 1,381
Total assets 1,460 1,432 1,466 1,491 2,041 2,090 2,060 2,059 2,086 2,059
Short-term debt 19 23 95 144 65 112 86 140 135 140
Long-term debt 385 375 225 125 515 375 410 325 325 325
Total liabilities 953 934 856 840 1,343 1,257 1,272 1,276 1,274 1,276
Common equity 508 498 610 652 698 833 788 783 813 783
EBIT/capital employed 70% 95% >100% >100% >100% >100% >100% 99% n/m n/m
$70
$60
$50
$40
$30
$20
$10
$0

Meredith is the leading media and marketing company • Short- and long-term headwinds. Meredith is
serving American women. Meredith has a broad media being impacted by weakness in ad spending (60% of
footprint: National brands, including Better Homes and revenue; declining 18% y-y) and higher paper costs
Gardens, Parents, Ladies’ Home Journal, Family Circle, (+20% y-y). Longer term, the company faces
American Baby, Fitness and More, generate of $1 billion and challenging print magazine subscription trends.
reach 75 million unduplicated women each month. Local • M&A strategy may not deliver value. Meredith’s
brands, including 12 TV stations that reach 10% of U.S. acquisitions have aimed to generate growth outside
households, generate revenue of $350 million. Online and magazines and TV. However, the company’s
diversified businesses, including 40+ websites, broadband acquisitions of interactive marketing agencies may
video, integrated marketing and brand licensing, generate ultimately not deliver as much value as expected.
$250 million in high-margin revenue. Advertising revenue Interactive agencies typically thrive due to the
comprises 60% of total company revenue. efforts of key employees. Leading-edge creativity
may be difficult to maintain in a large company.
SELECTED OPERATING DATA • Limited reinvestment opportunities. Meredith has
FYE June 30 2006 2007 2008 1Q09 spent $1.2 billion on M&A, $600 million on share
Publishing
1
80% 78% 80% 81% repurchases and $200 million on dividends over the
Broadcasting
2
20% 22% 20% 19% past decade. The spending exceeds FCF of $1.1
Publishing segment data:
3
billion, implying some leveraging of the balance
Revenue growth 37% 2% 0% -9% sheet. The M&A activity, buybacks and dividends
4
EBIT growth 22% 3% -2% -40%
EBIT margin
4
17% 17% 17% 11%
suggest that the company has limited high-ROIC
Broadcasting segment data: reinvestment opportunities in the core business.
Revenue growth
5
2% 10% -8% -7% This lowers Meredith’s appeal as an MF selection.
6
EBIT growth 3% 20% -26% -21%
6
EBIT margin 28% 31% 25% 16%
Unallocated overhead -2% -2% -2% -2%
1
Advertising comprised 51% of publishing revenue in FY08. ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
2
3
Advertising comprised 97% of broadcasting revenue in FY08. DM 107 277 1.6x n/m 6x 4x
Includes growth from acquisitions related to Meredith Integrated Marketing.
4 MSO 215 165 .5x 4.1x 65x 13x
Excludes $25 million FY08 charge related to book publishing business.
5
FY08 revenue growth was 0% if political ad revenue is excluded. PRM 61 287 1.0x n/m 2x 2x
6
Political ad revenue declined from $33 million in FY07 to $5 million in FY08. RUK 8,626 8,626 2.8x 11.0x 11x 10x
MDP 727 1,163 .7x n/m 7x 6x
• Profitable media assets, with stable of brands
MAJOR HOLDERS
targeting American women. While most assets are
Meredith has 37.0 million common shares and 9.2 million
in slow-growing magazine publishing and local TV,
Class B shares outstanding. Holders of the common shares
the company continues to generate strong EBIT.
and the Class B shares are entitled to one and ten votes per
• Growing online and video portfolio. Meredith’s
share, respectively. The common shares trade publicly, while
40+ websites attract 20 million unique visitors and
the Class B shares are controlled by the Meredith family.
deliver 170 million page views per month, driving
ad revenue and boosting magazine subscriptions. Economic ownership: Insiders 15% │ Select Equity Group
• High-margin brand licensing opportunities. The 7% │ Eminence Capital 5% │ T. Rowe 5%
company has signed recent licensing deals with
Wal-Mart, Realogy and Universal Furniture. RATINGS
• Fast-growing custom marketing business. VALUE Intrinsic value materially higher than market value?
*
Meredith Integrated Marketing (MIM) has been MANAGEMENT Capable and properly incentivized?
transformed via five acquisitions from a custom FINANCIAL STRENGTH Solid balance sheet?
publisher to a full-service interactive marketing MOAT Able to sustain high returns on invested capital?
firm. This non-ad revenue stream has grown at a EARNINGS MOMENTUM Fundamentals improving?
five-year CAGR of 25% to $150 million in FY08. MACRO Poised to benefit from economic and secular trends?
• Stock price implies 28% trailing FCF yield, 6x *
The dual-class share structure serves to entrench insiders.
THE BOTTOM LINE

Meredith is a relatively cheap company with few attractive reinvestment opportunities in the core magazine publishing and
local television businesses. Potential growth will likely be driven by M&A, with FCF redeployment at rates of return dictated
by future acquisition multiples. This seems to imply unspectacular long-term returns for equity holders.
Mesabi Trust (NYSE: MSB) New York, NY, 615-835-2749

Financial: Misc. Financial Services

Insider buys (last six months): 3 LT EPS growth n/a n/a n/a P / tangible book n/m
# of institutional owners: 63 n/a n/a n/a LTM pre-tax ROC n/m

per share data) 1/31/02 1/31/03 1/31/04 1/31/05 1/31/06 1/31/07 1/31/08 7/31/08 7/31/07 7/31/08
Revenue 4 5 7 14 22 18 19 33 4 17
Gross profit 0 0 0 0 0 0 0 0 0 0
EBIT 4 5 7 13 21 17 18 33 4 17
Net income 4 5 7 13 21 17 18 33 4 17
Diluted EPS 0.28 0.36 0.52 0.99 1.58 1.31 1.39 2.48 0.32 1.26
Cash from ops 4 5 7 10 20 21 18 28 4 13
Capex 0 0 0 0 0 0 0 0 0 0
Free cash flow 4 5 7 10 20 21 18 28 4 13
Total assets 2 4 5 8 11 5 9 20 7 20
Short-term debt 0 0 0 0 0 0 0 0 0 0
Long-term debt 0 0 0 0 0 0 0 0 0 0
Common equity 0 0 0 0 0 0 0 0 0 0
$35
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • Mesabi has no officers or directors and is

Mesabi, formed in 1961, derives leasehold royalty income overseen by four trustees, including an SVP of
from outsourced iron ore mining. The trust has interests in corporate trust services at U.S. Bank, a retired
leases and the Mesabi Land Trust. Trustee activities are mining geologist, a partner in the law firm of
limited to collecting income, paying expenses, distributing Oppenheimer Wolff, and a private investor.
income to unitholders, and protecting the assets held. The • Distributes income to shareholders on quarterly
trust has no employees but engages consultants to monitor basis, driven by iron ore royalties received.
the amount and sale price of iron ore products shipped from • Stock price implies 24% trailing FCF yield and
Silver Bay, Minnesota, based on information provided by 4x trailing P/E (no EPS estimates available).
CCI/Northshore (NYSE: CLF), the lessee/ operator of the
Mesabi lands. Royalties payable to the trust by CCI are based INVESTMENT RISKS & CONCERNS
on the amount and price of iron ore shipped. The trust is • Results highly correlated with volatile iron ore
organized as a pass-through vehicle for income tax purposes. prices, which have recently reached historic highs.1
The trust is likely to terminate in several decades based on a • Does not operate iron ore mines and has little
formula specified in the trust agreement. control over CCI’s activities. Northshore has
power to decide capex and production levels. The
SELECTED OPERATING DATA trust relies on data provided by CCI in order to
FYE January 31 2006 2007 2008 1H09
Selected growth rates:
determine royalties in any given period.
Revenue 59% -17% 5% 232% • CCI decides portion of operations on Mesabi
Net income per unit 60% -17% 6% 244% lands versus government or other lands. If CCI
Distributions per unit 99% 5% -16% 215% opted to produce more on lands other than Mesabi
Royalties – amended leases 98% 97% 97% n/a
lands, royalties would likely decrease. In CY07,
Royalties – Peters Lease 2% 2% 3% n/a 88% of CCI’s Northshore production was on
Trust expenses as % of revenue 4% 4% 3% 2% Mesabi lands, down from 91% in CY06.
Net income as % of revenue 96% 96% 97% 98% • CCI derives 80%+ of North American iron ore
Distributions as % of net income 97% 122% 97% 73%
revenue from five customers. In some cases, CCI
is the sole supplier of iron ore pellets to its
INVESTMENT HIGHLIGHTS customers. As sales volume depends on customer
• Royalty income and distributions to unitholders requirements, it can fluctuate wildly.
driven by (1) shipment volume of iron ore pellets,
(2) pricing of iron ore sales, and (3) the percentage COMPARABLE PUBLIC COMPANY ANALYSIS
of iron ore pellet shipments from Mesabi Trust ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
lands rather than from other Northshore lands. BHP 90,825 97,229 1.6x 2.4x 5x 5x
• Shipment volume of iron ore pellets varies based CLF 2,301 2,336 .7x 1.5x 3x 2x
on customer delivery schedules, iron ore industry RIO 60,543 74,198 1.9x 1.6x 4x 5x
conditions, and weather on the Great Lakes. RTP 54,488 96,684 2.2x 6.6x 5x 7x
• Prices under contracts between CCI and its MSB 117 103 3.1x n/m n/a n/a
customers are subject to adjustment based on
multiple price and inflation index factors. MAJOR HOLDERS
• Majority of income derived from base overriding Insiders <1% │ RenTech 8% │ Tontine 7%
royalties, which roughly range from 2.5% of gross
proceeds for the first one million tons of iron ore RATINGS
shipped annually, to 6% of gross proceeds for VALUE Intrinsic value materially higher than market value?
shipments in excess of 4 million tons. MANAGEMENT Capable and properly incentivized? n/a
• Other income sources are royalty bonuses, fee FINANCIAL STRENGTH Solid balance sheet?
royalties, and minimum advance royalties. MOAT Able to sustain high returns on invested capital?
Bonuses are earned when iron ore is sold at prices EARNINGS MOMENTUM Fundamentals improving?
above a threshold price. Fee royalties are relatively MACRO Poised to benefit from economic and secular trends?
minor and relate to the so-called Peters Lease. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
Minimum advance royalties specify a minimum 1
For iron ore price trends, see analysis of KHD in this issue of the MOI.
royalty amount that is payable regardless of volume.
THE BOTTOM LINE

Mesabi Trust is a limited-purpose pass-through vehicle with an economic interest in iron ore mining operations. The trust has
no employees and is a passive recipient of royalty income driven by iron ore prices and volumes shipped by Cleveland-Cliffs
(NYSE: CLF), the lessee/operator of the Mesabi lands. The trust distributes virtually all income, providing unitholders with
an attractive current yield. However, given Mesabi’s unmitigated exposure to iron ore prices and third party-run operations,
an investment should only be considered by investors with a favorable outlook regarding iron ore prices.
Microsoft (Nasdaq: MSFT) Redmond, WA, 425-882-8080

Technology: Software & Programming, Member of S&P 500 http://www.microsoft.com


per share data) 6/30/02 6/30/03 6/30/04 6/30/05 6/30/06 6/30/07 6/30/08 9/30/08 9/30/07 9/30/08
Revenue 28,365 32,187 36,835 39,788 44,282 51,122 60,420 61,719 13,762 15,061
Gross profit 22,666 26,128 30,239 33,757 36,632 40,429 48,822 49,948 11,087 12,213
EBIT 3,952 8,395 8,952 14,409 16,064 18,499 22,180 22,204 5,834 5,927
Net income 5,355 7,531 8,168 12,254 12,599 14,065 17,681 17,765 4,289 4,373
Diluted EPS 0.48 0.69 0.75 1.12 1.20 1.42 1.87 1.90 0.45 0.48
Cash from ops 14,509 15,797 14,626 16,605 14,404 17,796 21,612 19,104 5,878 3,370
Capex 770 891 1,109 812 1,578 2,264 3,182 3,450 510 778
Free cash flow 13,739 14,906 13,517 15,793 12,826 15,532 18,430 15,654 5,368 2,592
Total assets 67,646 81,732 94,368 70,815 69,597 63,171 72,793 65,117 65,645 65,117
Short-term debt 0 0 0 0 0 0 0 1,975 0 1,975
Long-term debt 0 0 0 0 0 0 0 0 0 0
Common equity 52,180 64,912 74,825 48,115 40,104 31,097 36,286 33,594 32,135 33,594
$70
$60
$50
$40
$30
$20
$10
$0
BUSINESS OVERVIEW • FY09 (June) guidance for double-digit growth:

Microsoft, founded in 1975, is the world’s largest software Revenue of $65-66 billion (up 7-10% y-y), EBIT of
firm. It operates in five segments: Client (Windows OS), $24-26 billion (up 8-13%), and EPS of $2-2.10 (up
Server and Tools (Windows & SQL Server), Online Services 7-12%). Revenue growth by segment is expected to
(MSN), Microsoft Business (Office, Project, Visio, be 2-6% in Client, 15-17% in Server & Tools, 10-
Exchange, Live Meeting), and Entertainment and Devices 13% in Online Services, 12-13% in the Business
(Xbox, Zune, Windows Mobile, Windows Embedded). Division, and -3%-flat in Entertainment.
• Cheaper than EBIT-to-EV yield suggests. As
SELECTED OPERATING DATA MSN and Xbox are still roughly breaking even,
FYE June 30 2006 2007 2008 1Q09 their value is not reflected in the EBIT-to-EV yield
Client 30% 29% 29% 28%
metric. As a result, investors should value MSN and
Server & Tools 21% 22% 22% 23% Xbox based on metrics other than trailing earnings.
Online Services Business 6% 5% 5% 5% • Stock price implies 9% trailing FCF yield, 11x
Microsoft Business Division 33% 33% 32% 33% trailing P/E and 10x forward P/E.
Entertainment and Devices 9% 11% 12% 12%
Client 10% 15% 13% 2% INVESTMENT RISKS & CONCERNS
Server & Tools 16% 15% 18% 17% • Competitive threats from Google, open source
Online Services Business -2% 6% 32% 15% software, SaaS, etc. Microsoft is aggressively trying
Microsoft Business Division 9% 13% 15% 20%
Entertainment and Devices 38% 26% 34% -6% to win business away from Google and appears to
∆ revenue 11% 15% 18% 9% be the front runner on a competitive deal to supply
1
19% 16% 21% 16% search and advertising on Verizon mobile phones.
EBIT margin by segment: • Lower-than-expected demand for Vista, Office or
Client 79% 77% 77% 73%
Server & Tools 33% 33% 35% 32%
Xbox 360 could significantly slow top-line growth.
Online Services Business 5% -25% -38% -68% • Pursuit of Yahoo may reflect limited high-ROC
Microsoft Business Division 67% 66% 65% 66% reinvestment opportunities and concerns regarding
Entertainment and Devices -27% -32% 5% 7% Google. Microsoft does not plan to rebid for Yahoo.
Total EBIT margin 37% 36% 37% -7%
Other countries 37% 39% 41% n/a 08 09
Revenue growth by geography: P/E P/E
U.S. 10% 12% 15% n/a GOOG 97,580 83,168 4.0x 4.5x 16x 14x
Other countries 14% 21% 24% n/a ORCL 87,110 85,326 3.7x n/m 11x 10x
1
Represents y-y change in period-end deferred (unearned) revenue. Deferred
YHOO 14,994 11,780 1.6x 2.1x 26x 23x
revenue was $13.5 billion at 1Q09-end, equal to one-fifth of annual revenue.
MSFT 178,445 159,698 2.6x 9.2x 10x 9x
• Parlayed ownership of PC operating systems into MAJOR HOLDERS
leadership in enterprise software, Internet services, Bill Gates 9% │ Steve Ballmer 4% │ Other insiders <1% │
and gaming. The company now generates almost as Barclays 4% │ State Street 3% │ Cap Re 3%
much EBIT from business software as it does from
Windows OS. While MSN online services and RATINGS
Xbox are not yet contributing to profitability, they VALUE Intrinsic value materially higher than market value?
have the potential to become major profit drivers. MANAGEMENT Capable and properly incentivized?
• Sales, EBIT, EPS up 18%, 21%, 32% in FY08. FINANCIAL STRENGTH Solid balance sheet?
Performance drivers included Windows Vista, MOAT Able to sustain high returns on invested capital?
Office 2007, server software, and Xbox 360. EARNINGS MOMENTUM Fundamentals improving?
• Authorized $40 billion repurchase in September; MACRO Poised to benefit from economic and secular trends?
has returned $115 billion to shareholders through EXPLOSIVENESS 5%+ probability of 5x upside in one year?
buybacks and dividends in the last five years.
THE BOTTOM LINE

Microsoft is quite possibly the world’s best business, as reflected by the company’s global ubiquity, virtually unassailable
market position in operating systems, strong management, and ability to generate enormous profits while employing no
capital in the business. While Microsoft is cheap based on 10x estimated FY09 headline EPS, the undervaluation becomes
even more apparent if one considers the fact that the company’s balance sheet remains highly deleveraged and that valuable
businesses, such as MSN and Xbox, are not yet contributing to headline EPS. We value Microsoft at $41-54 per share, based
on the sum-of-the-parts valuation analysis summarized on the next page. Our estimate ascribes no value to the company’s
recently announced $40 billion stock repurchase plan, which should be highly accretive to EPS.
…additional insight into MSFT: POTENTIAL EPS ACCRETION FROM SHARE REPURCHASES
• We estimate EPS accretion of $0.11-$0.13 over
WHAT ARE THE SHARES WORTH? the next twelve months (NTM), assuming $40
• We value Microsoft at $41-54 per share, based on billion spent on incremental share repurchases and
the sum-of-the-parts valuation analysis summarized an average price paid of $26-30 per share.
below. Upside to our value estimate could come • Microsoft treasurer George Zinn: “…strong
from share repurchases and better-than-expected credit quality coupled with investors’ current
performance of the Xbox and MSN.com businesses. appetite for high quality paper provides a unique
• Deserves premium valuation due to defensible opportunity for the company to establish its first-
moat and stability of earnings and free cash flow. ever commercial paper program and enhance its
capital structure.” (September 22, 2008)
Microsoft — Sum-of-the-Parts Valuation Summary1 • The following analysis shows EPS accretion
($ in millions, except per share data) Low High sensitivity to various assumptions of repurchase
2
Value Value amount and purchase price per share.
Cash and equivalents $9,004 $9,004
Short-term investments 11,718 11,718
NTM Shares Repurchased
Long-term investments 4,381 4,381 ($ and shares in millions, except per share data)
Short-term debt 1,975 1,975 NTM Repurchase Amount
Price paid
Net cash and investments $27,078 $27,078 per share
3 $20,000 $40,000 $60,000
Cash needed to run business (2,000) (1,000)
Total $25,078 $26,078 $20.00 1,000 2,000 3,000
$22.00 909 1,818 2,727
Value of Client:
$24.00 833 1,667 2,500
LTM EBIT 12,856 12,856
Fair value multiple of LTM EBIT
4
9x 12x $26.00 769 1,538 2,308
Total $115,704 $154,272 $28.00 714 1,429 2,143
Value of Business Division: $30.00 667 1,333 2,000
LTM EBIT 12,904 12,904 $32.00 625 1,250 1,875
5
Fair value multiple of LTM EBIT 8x 10x $34.00 588 1,176 1,765
Total $103,232 $129,040
Value of Server and Tools:
LTM EBIT 22,642 22,642 NTM Weighted-Average Shares Outstanding1,2
6
Fair value multiple of LTM EBIT 8x 10x ($ in millions, except per share data)
Total $181,136 $226,420
Price paid NTM Repurchase Amount
Value of Entertainment and Devices:
per share $20,000 $40,000 $60,000
LTM revenue 8,025 8,025
Fair value multiple of LTM EBIT
7
1x 3x $20.00 8,880 8,380 7,880
Total $8,025 $24,075 $22.00 8,925 8,471 8,016
Value of Online Services Business: $24.00 8,963 8,547 8,130
LTM revenue 3,313 3,313 $26.00 8,995 8,611 8,226
8
Fair value multiple of LTM EBIT 2x 5x $28.00 9,023 8,666 8,309
Total $6,626 $16,565 $30.00 9,047 8,713 8,380
Value Offset of Corporate Overhead: $32.00 9,068 8,755 8,443
LTM operating loss (6,847) (6,847) $34.00 9,086 8,792 8,498
Fair value multiple of LTM loss 8x 10x 1
Based on 9.4 billion diluted shares outstanding currently.
Total ($54,776) ($68,470) 2
Assumes weighted average repurchase date six months from today.
Estimated fair value of MSFT $385,025 $507,980

per share $41 $54
1
Does not include incremental value of $40 billion buyback plan.
NTM EPS Accretion From Incremental Buybacks3,4
2
Based on balance sheet values as of September 30, 2008. ($ in millions, except per share data)
3
4 Price paid NTM Repurchase Amount
Multiples reflect near-monopoly status and 14% FY08 EBIT growth.
5
Multiples reflect very strong margin profile and 15% FY08 EBIT growth. per share $20,000 $40,000 $60,000
6
Multiples reflect strong margin profile and 26% FY08 EBIT growth. $20.00 $0.09 $0.20 $0.31
7
Multiples reflect strong Xbox market position and 34% FY08 revenue growth.
8
Multiples reflect large online opportunity and 32% FY08 revenue growth. $22.00 $0.08 $0.17 $0.27
Source: Company filings, The Manual of Ideas estimates and analysis. $24.00 $0.07 $0.15 $0.24
$26.00 $0.06 $0.13 $0.21
WHY THE SHARES MAY BE MISPRICED $28.00 $0.06 $0.12 $0.19
• Viewed as unexciting by many technology $30.00 $0.05 $0.11 $0.17
investors, despite 18% revenue growth in FY08. $32.00 $0.05 $0.10 $0.15
• Headline earnings ignore value of Xbox and $34.00 $0.04 $0.09 $0.14
3
MSN businesses, making a sum-of-the-parts Assumes 2.0% interest rate and 40% effective tax rate.
4
Assumes NTM net income of $20.0 billion (prior to lost interest income).
valuation analysis necessary to judge fair value.
MANAGEMENT’S VIEW OF BUSINESS • 1Q09 review—Business Division: revenue up

Notes from 1Q09 call with CFO Liddell on October 23: 20%, 400 bps above guidance; business revenue
• Macroeconomic environment… “clearly grew 16%, driven by “strong sales of enterprise
weakened throughout the quarter;” deterioration in agreements and Client access license suites”
spending “has continued into October” • 1Q09 review—Entertainment & Devices: revenue
• Management focus: (1) maintain total-ownership- down 6%, exceeded high end of guidance; difficult
cost leadership of software; (2) improve operating comp due to year-ago launch of Halo 3 was
efficiency, including opex reduction of $400-500 mitigated by stronger Xbox 360 console sales (units
million (lower headcount, lower marketing, lower of 2.2 million grew 20% y-y and outperformed PS3
capex); invest in “strategic opportunities,” including sales by 100,000+ units); Xbox Live membership of
expansion in emerging markets 14+ million has roughly doubled in each of past two
• Market share: “continue to forecast outgrowing the years; segment EBIT margin expanded by 100+ bps
market regardless of the economic conditions” • Impact of netbooks on Windows licenses: “too
• FY09 guidance—revenue: $64.9-66.4 billion, up early to determine the extent to which the new
7-10%; “still foresee an increase in demand for our netbooks segment is cannibalizing the traditional
products and the potential to drive revenue and consumer PC market sales or simply capturing a
[EPS] growth from high single to low double-digits new market opportunity, so we believe that there are
for this financial year;” at top end, guidance likely aspects of both;” revenue realization from
assumes “mild recession” and “relatively modest netbooks is “lower than we traditionally get from
growth rate for all IT-based products;” at bottom the consumer segment… it does impact our overall
end, assumes “deeper recession” and “end-season revenue per license”
lower growth for IT;” revenue growth guidance by • Change in ability to forecast Client segment
segment: Client up 2-6% (assumes PC unit growth results due to greater segmentation of PC
of 8-12%, with 6-12% in 2H09), Server & Tools up market: “you have quite different dynamics in the
15-17% (driven by Server platform), Business business market, the consumer, non-netbooks
Division up 12-13% (driven by Office, SharePoint, market, the consumer netbooks market and the
Dynamics and Unified Communications), Online up emerging country version of all of those as well;
10-13% (assumes online ad growth of 15%), quite different growth rates, quite different
Entertainment Devices down 3% or flat (due to realizations and quite different dynamics driving
Xbox 360 pricing cuts, offset by unit volume that; so it becomes, if you like more complicated
growth); unearned revenue at end of FY09 expected from a forecasting point of view but a more
to be up 2-5% y-y interesting marketplace”
• FY09 guidance—EBIT: $24.4-25.5 billion • Share repurchases and dividends: Authorized
• FY09 guidance—EPS: $2-2.10; assumes effective new $40 billion program; repurchased 223 million
tax rate of 26.5% (150 bps lower than previous shares for $6 billion in 1Q09; accretion from
expectations) buybacks will be partially offset by lower
• 1Q09 review: revenue, EBIT and EPS met or investment income (not only as a result of cash
exceeded high end of guidance despite a “very spent on repurchases but also as a result of a lower
challenging environment;” unearned revenue at yield on the investment portfolio)
quarter end was up 16% y-y • Currency impact on revenue: 1/3 of revenue is in
• 1Q09 review—Client: revenue up 2%, 400 bps dollars in North America; 1/3 is in dollars but sold
below guidance; drivers: PC unit growth was 10- internationally (mainly OEM sales); 1/3 is sold in
12%, but growth of traditional PCs was several local currency internationally; FY09 revenue should
percentage points below expectations, offset by not be impacted materially by currency swings as
growth in low-end netbook segment (traditional PC company is “pretty much fully hedged”
growth in mature markets was flat to low single • M&A strategy: “continue to be a net acquirer of
digit, while emerging markets showed double-digit businesses,” with focus on small and medium-sized
growth across all segments); OEM revenue was companies (did not discuss Yahoo)
down 1% even as licenses grew 8%; commercial • Miscellaneous: issued commercial paper at interest
and retail licensing grew 20% cost of less than 1%
• 1Q09 review—Server & Tools: revenue up 17%;
annuity licensing grew faster than non-annuity,
boosting quarter-end unearned revenue 28%;
consulting and support services revenue up
19%
• 1Q09 review—Online: revenue up 15%; ad
revenue grew 15% (search ads outperformed display
ads)
REVENUE, PRODUCTIVITY AND PROFIT MARGINS MSFT – EBIT Margin, FY 2000-Q1 2009
After fluctuating significantly during and after the Internet bubble,
MSFT – Revenue and EBIT, FY 2000-2008 Microsoft’s operating margins have stabilized in the 35-40% range in
Microsoft has posted steady revenue growth even as operating recent years. Competitive and economic pressures are exerting
income has experienced some volatility, particularly in the years downward pressure on margins, while margin expansion in the Xbox
following the bursting of the Internet bubble. and MSN businesses could lead to overall margin expansion.
$75bn 50%
Revenue
EBIT
$50bn 40%
$25bn
30%
$0bn
20%
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
1Q09
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
MSFT – Y-Y Revenue Growth, FY 2001-2009E
The company has posted steady though unspectacular growth this MSFT – Revenue by Geography, FY 2002-2008
decade, helped by emerging businesses such as Xbox and MSN. International revenue has grown steadily, both in absolute terms and
Management is guiding for 7-10% revenue growth in FY09. as a percentage of overall revenue. International revenue grew from
$8 billion in FY02 to $24 billion in FY08, a 20% CAGR.
20%
100%
15% 29%
80% 31% 32% 36% 37% 39% 41%
10%
60%
5% 40%
0% 20% U.S. Other Countries
FY09E
1Q09
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
0%
FY02
FY03
FY04
FY05
FY06
FY07
FY08
MSFT – Y-Y EPS Growth, FY 2001-2009E
EPS growth has been volatile this decade, driven by major new
product releases and investments in emerging businesses. While
EPS declined 6% y-y in 1Q09, management is guiding for full-year
fiscal 2009 EPS growth of 7-12%. The company has quite a bit of
latitude in influencing FY09 EPS due to the large size and accretive
nature of the share repurchase plan announced in September.
60%
45%
30%
15%
0%
-15%
-30%
FY09E
1Q09
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
SEGMENT #1: CLIENT • Revenue primarily from online ads and

(29% of FY08 revenue, 77% EBIT margin) secondarily from subscriptions and transactions
• Comprises Windows OS, including Vista, XP, related to paid services, as well as ancillary services.
Media Center, and Tablet PC Edition. The segment • Competitors include AOL, Google and Yahoo,
leads the ongoing development of Windows and whose Internet search and media properties connect
manages relationships with PC makers. users and advertisers. Google leads in online ad
• Key revenue driver is worldwide PC shipments, revenue related to search and syndication.
with OEMs accounting for 80% of revenue. • Launched new releases of Windows Live and
• Competitors include Unix and Apple’s operating adCenter in FY08. It also acquired aQuantive, a
system. Linux is available for free under a general next-generation advertiser and publisher solution.
public license, with variants sold by HP, IBM and
Sun. Apple has gained share, particularly in the U.S. SEGMENT #4: BUSINESS
consumer segment where it has benefited from the (32% of FY08 revenue, 65% EBIT margin)
enormous success of the iPod and iPhone. • Includes Microsoft Office, Project, Visio,
• Released Windows Vista in FY07, with advances SharePoint Server, Exchange Server, Live Meeting,
in security, digital media, and user interfaces. Tellme, and other business software.
• 90%+ of revenue from Office system offerings,
SEGMENT #2: SERVER AND TOOLS with growth driven by new Office features and new
(22% of FY08 revenue, 35% EBIT margin) offerings in areas such as content management,
• Includes Windows Server operating system, collaboration, and unified communications.
Microsoft SQL Server, Microsoft Enterprise • 80% of revenue from businesses, 20% from
Services, Visual Studio, System Center products, consumers. Businesses buy Office through volume
Forefront security products, and Biz Talk Server. licensing, with revenue driven by the number of
• Revenue from multi-year licensing deals (45% of workers using Office (not highly correlated with PC
revenue), fully packaged product and transactional shipments). Consumers buy products through OEMs
volume licensing programs (25%), OEM licenses in connection with new PC shipments.
(10%), and services (20%). • Competitors to Office system products include
• Competitors in server operating systems include Apple, Corel (WordPerfect), Google (Apps), IBM
(1) vertically integrated computer makers such as (Smartsuite, Notes, Workplace), Novell, Oracle,
HP, IBM, Sun, which sell versions of Unix along Red Hat, and Sun. OpenOffice.org provides a free
with hardware; (2) companies such as Novell and cross-platform application. Web-based offerings
Red Hat, which provide versions of Linux; and (3) such as AjaxWrite, gOffice, iNetOffice, SimDesk,
server virtualization providers such as VMware. ThinkFree, and wikiCalc also compete with Office.
• Competitors in enterprise-wide computing However, the alternatives generally lack rich
include (1) companies that provide J2EE-compliant functionality and are marketed with low-priced PCs.
solutions, including IBM and Sun; (2) server • Competitors to business management products
application providers such as CA, IBM and Oracle; (Microsoft Dynamics) include Intuit and Sage in
(3) open source software, including Linux, Apache, the SMB market, and Oracle and SAP in the
MySQL, and PHP; and (4) Java middleware, enterprise market. These competitors have much
including JBoss, Geronimo and Spring Framework. greater market share and stronger product offerings
• Other competitors include (1) System Center than do competitors in the Office market segments.
competitors HP, BMC, CA, and IBM; (2) Forefront
competitors McAfee, Symantec and Trend Micro; SEGMENT #5: ENTERTAINMENT AND DEVICES
(3) Adobe, BEA, Borland, IBM, Oracle, Sun, and (12% of FY08 revenue, 5% EBIT margin)
the Eclipse open source project, which compete • Includes Xbox 360 console and games, Zune,
against Microsoft products for software developers. Mediaroom, mice and keyboards, Windows Mobile
• Released new versions of Windows Server and software, and Windows Embedded device OS.
Visual Studio in FY08; plans to release new • Competitors to Xbox video game consoles
version of SQL Server in FY09. Windows Server include Sony’s PlayStation and Nintendo’s Wii.
includes virtualization technologies that compete Zune competes with Apple’s iPod. Windows
with VMware’s software offerings. Mobile software Apple, Nokia, Openwave, Palm,
Qualcomm, RIM, and Symbian.
SEGMENT #3: ONLINE SERVICES BUSINESS • Released Xbox 360 in 2005, while Nintendo and
(5% of FY08 revenue, -38% EBIT margin) Sony released new versions of their consoles in
• Consists of MSN online portals, Live Search, an 2006. The console life cycle averages 5-7 years.
online advertising platform for web publishers and
advertisers, Hotmail email, instant messaging, and
AvenueA Razorfish media agency services.
Monster Worldwide, Inc. (NYSE: MWW) New York, NY, 212-351-7000

Services: Business Services, Member of S&P 500 http://www.monster.com


per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 875 667 552 594 818 1,080 1,324 1,401 330 332
Gross profit 538 376 276 343 487 684 827 860 203 196
EBIT 144 (8) (19) 70 141 226 219 193 51 63
Net income 69 (535) (109) 59 98 37 146 141 33 43
Diluted EPS 0.83 (0.15) (0.20) 0.36 0.72 1.16 1.15 1.07 0.26 0.36
Cash from ops 191 (15) 17 93 209 268 269 305 73 92
Capex 57 39 19 13 36 56 64 88 11 21
Free cash flow 134 (53) (2) 80 173 213 205 217 62 71
Total current assets 1,006 809 567 704 773 1,124 1,185 1,109 1,133 1,109
Total assets 2,206 1,631 1,122 1,555 1,679 1,970 2,078 2,203 2,022 2,203
Short-term debt 67 86 38 29 31 23 0 247 2 247
Long-term debt 9 3 2 34 16 0 0 0 0 0
Total liabilities 977 817 654 775 745 860 961 1,126 859 1,126
Common equity 1,229 813 468 780 933 1,110 1,117 1,077 1,163 1,077
EBIT/capital employed n/m -31% n/m n/m n/m n/m n/m n/m n/m n/m
$100
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
BUSINESS OVERVIEW • Strong balance sheet, with $392 million of net

Monster is the leading global job search website. It connects cash and short-term investments and $94 million of
employers with job seekers, and has a local presence in key illiquid auction rate securities as of September 30.
markets in North America, Europe and Asia. • Strong ability to throw off cash as it grows, due
to negative working capital position. Monster had
SELECTED OPERATING DATA deferred revenue of $412 million at the end of Q3.
YTD • Repurchased $128 million of stock YTD,
FYE December 31 2005 2006 2007 9/30/08
following $252 million buyback in 2007.
Careers – North America 64% 59% 52% 48% • Stock price implies 15% trailing FCF yield, 11x
Careers – International 23% 27% 36% 43% trailing P/E and 11x forward P/E.
Internet advertising, fees 13% 14% 12% 9%
Careers – North America 29% 26% 7% -6%
Careers – International 69% 64% 59% 31% • North America careers revenue down 6% YTD
Internet advertising, fees 41% 39% 2% 0% and 11% in Q3. While the company grew North
America careers revenue 7% in 2007, economic
Careers – North America 33% 35% 32% 28% weakness has had a more pronounced impact YTD.
Careers – International -4% 6% 11% 16% Internet advertising and fees have been flat.
Internet advertising, fees 31% 30% 8% 8% • Global slowdown could have material negative
Corporate -7% -5% -6% -9%
impact on results. Despite declining U.S. revenue,
% of revenue by geography: Monster has posted respectable performance YTD
U.S. 76% 71% 62% 55% due to double-digit overseas growth. If the global
International 24% 29% 38% 45% economy enters recession, Monster would suffer.
Revenue growth by geography: • Highly competitive, evolving market. Monster
U.S. 30% 27% 6% -6%
International 70% 66% 58% 31% competes against a wide range of online and offline
providers of job search services. Online competitors
INVESTMENT HIGHLIGHTS include Yahoo, Craigslist, Careerbuilder, among
• Monster is the leader in online job search, having others. Future competition could come from best-in-
defined the industry for much of the past decade. class technology firms such as Google.
The Monster brand enjoys strong global awareness.
• Revenue up 8% and deferred revenue down 5%,
driven by strong international growth (helped by
KFRC 262 278 .3x 3.4x 10x 14x
foreign currency gains), offset by U.S. weakness.
MPS 578 523 .2x 2.3x 8x 15x
• International accounted for 48% of Q3 careers
RHI 2,762 2,392 .5x 3.3x 11x 25x
revenue, up from 26% in CY05. The company has
YHOO 14,994 11,780 1.6x 2.1x 26x 23x
become less dependent on U.S. revenue, enabling it
MWW 1,432 1,040 .7x 4.3x 8x 11x
to grow despite domestic economic weakness, and
to benefit from foreign currency appreciation.
Monster owns 44.5% of ChinaHR, China’s second- MAJOR HOLDERS
largest online career marketplace. Monster holds the Common (118 million shares out): CEO Iannuzzi <1% │
#1 or #2 position in several other overseas markets, Other insiders 1% │ T Rowe 15% │ Morgan Stanley 7% │
including the U.K., South Korea, and India. Cap Re 6% │ Fidelity 6% │ Andrew McKelvey 4%; Class B
• $73 million Trovix acquisition in July added Common (5 million shares out): Andrew McKelvey 100%
intelligent search technology, aiming to provide
targeted matches to employers and job seekers. RATINGS
• Chairman and CEO Salvatore Iannuzzi (54) VALUE Intrinsic value materially higher than market value?
joined Monster in 2007. Previously, he spent three MANAGEMENT Capable and properly incentivized?
months at Motorola and three years at Symbol FINANCIAL STRENGTH Solid balance sheet?
Technologies, where he rose to CEO. CFO Timothy MOAT Able to sustain high returns on invested capital?
Yates (60) also joined Monster in 2007. Iannuzzi EARNINGS MOMENTUM Fundamentals improving?
and Yates have prior experience working together. MACRO Poised to benefit from economic and secular trends?
THE BOTTOM LINE

Monster offers an opportunity to buy a global leader in a growth industry at a value price. While Monster’s business has
slowed due to U.S. weakness, the company’s brand name and global franchise remain strong. Monster is likely to continue to
take share from newspapers and other offline job search providers. With a strong balance sheet, the company has the ability
to take advantage of the current downturn to make tuck-in acquisitions and repurchase shares.
Mosaic Company (NYSE: MOS) Plymouth, MN, 800-918-8270

Basic Materials: Chemical Manufacturing http://www.mosaicco.com


per share data) 5/31/03 5/31/04 5/31/05 5/31/06 5/31/07 5/31/08 8/31/08 8/31/07 8/31/08
Revenue 1,663 2,374 4,397 5,306 5,774 9,813 12,132 2,003 4,323
Gross profit 159 178 526 637 926 3,161 4,287 522 1,649
EBIT 72 77 319 102 651 2,804 3,904 449 1,549
Net income 54 72 159 (133) 420 2,083 2,962 306 1,185
Diluted EPS 0.21 0.29 0.47 (0.35) 0.95 4.67 6.64 0.69 2.65
Cash from ops 40 122 332 294 708 2,547 2,670 438 562
Capex 119 162 255 404 292 372 477 82 187
Free cash flow (80) (41) 77 (110) 416 2,175 2,193 356 375
Cash & investments n/a 10 245 173 421 1,961 2,190 639 2,190
Total current assets n/a 669 1,728 1,583 1,956 4,810 6,177 2,170 6,177
Intangible assets n/a 0 2,160 2,347 2,284 1,875 1,808 2,207 1,808
Total assets n/a 1,871 8,412 8,723 9,164 11,820 13,010 9,313 13,010
Total current liabilities n/a 458 1,153 1,129 1,630 2,186 2,640 1,604 2,640
Long-term debt n/a 351 2,464 2,388 1,818 1,375 1,311 1,586 1,311
Total liabilities n/a 1,028 5,198 5,192 4,980 5,089 5,342 4,765 5,342
Common equity n/a 842 3,214 3,531 4,184 6,731 7,668 4,548 7,668
EBIT/capital employed n/a 7% 11% 2% 13% 54% 71% n/m n/m
$180
$160
$140
$120
$100
$80
$60
$40
$20
$0
BUSINESS OVERVIEW INVESTMENT HIGHLIGHTS

Mosaic provides fertilizers and operates in three segmets. • World’s largest producer of phosphate fertilizer
The phosphates segment produces phosphate fertilizer and and largest U.S. producer of phosphate animal feed
phosphate-based animal feed ingredients. ingredients, with 15% of global production and 59%
of U.S. production of phosphate fertilizer in FY08.
The potash segment produces potash sold principally as
fertilizer but also for use in non-agricultural applications. • World’s third-largest producer of potash,
accounting for 14% of global production and 38%
The offshore segment provides phosphate-, potash- and of North American production, with mines in
nitrogen-based crop nutrients and animal feed ingredients. Saskatchewan, Canada, New Mexico and Michigan.
Mosaic was formed in 2004 through the merger of IMC and • Large producer and distributor of blended
the fertilizer business of Cargill (owns 64% of Mosaic). fertilizers in Brazil, with operations and strategic
investments in this key agricultural market.
SELECTED OPERATING DATA • CEO Jim Prolopanko (55) joined Mosaic as
FYE May 31 2006 2007 2008 1Q09 COO in 2006. He had been at Cargill since 1978.
1
Phosphates 56% 53% 56% 56% • Stock price implies 15% trailing FCF yield, 5x
Potash 21% 24% 22% 21% trailing P/E and 3x forward P/E.
Offshore 23% 22% 22% 23%
Revenue growth by segment: INVESTMENT RISKS & CONCERNS
Phosphates 45% 3% 78% 119%
Potash 35% 28% 52% 137% • Impact of capacity increases on selling prices
Offshore 2% 9% 64% 111% question of “when” rather than “if.” With prices
Total revenue growth 21% 9% 70% 116% for phosphate and potash fertilizers exploding in
Gross margin by segment:
CY07-08, producers have announced capacity
Phosphates 8% 13% 36% 39%
Potash 30% 28% 38% 52% expansion plans. Phosphate rock producers, who
Offshore 4% 6% 12% 17% sell to non-integrated fertilizer firms, may also boost
Total gross margin 12% 16% 32% 38% capacity. Finally, Chinese exports of phosphate
2
EBIT margin by segment: fertilizers have risen, though recent government
Phosphates 5% 10% 34% 37%
Potash 27% 25% 35% 49% action has sought to keep more fertilizer in China.
Offshore -2% 0% 8% 15% While it may take a couple of years for capacity to
Total EBIT margin 7% 11% 29% 36% catch up with demand, it appears likely that selling
Capex as % of revenue 8% 5% 4% 4% prices will decline materially at some point.
U.S. 30% 33% 33% 27% COMPARABLE PUBLIC COMPANY ANALYSIS
Brazil 14% 15% 17% 18% ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
India 13% 10% 14% 24% AGU 5,157 7,534 .8x 2.9x n/a n/a
Other 43% 42% 35% 32%
CF 3,126 1,978 .5x 1.8x 4x 4x
% of revenue by product:
Phosphate fertilizer 52% 48% 51% n/a MON 40,603 40,806 3.6x 8.6x 16x 14x
Potash fertilizer 18% 22% 21% n/a POT 21,064 23,575 2.6x 4.1x n/a n/a
Blends 13% 15% 17% n/a TRA 1,665 1,535 .6x 1.8x 3x 4x
Other 16% 15% 12% n/a
MOS 14,425 13,725 1.1x 2.5x 3x 3x
Change in sales volume:
Phosphates 15% -12% 2% -7%
Potash 19% 22% 8% -9% MAJOR HOLDERS
Change in average selling price:
3 Insiders <1% │ Cargill 64% │ Fidelity 4%
DAP 10% 8% 94% 149%
4
MOP na 3% 24% 198%
K-Mag
5
na 0% 57% 138% RATINGS
Change in average price paid for key raw materials: VALUE Intrinsic value materially higher than market value?
Ammonia 13% -3% 22% 75% MANAGEMENT Capable and properly incentivized?
Sulfur 9% -14% 197% 674%
1
Excludes eliminations. In FY08, these items amounted to -$369 million.
2
Excludes phosphates restructuring losses in FY06-08 ($18 million in FY08). MOAT Able to sustain high returns on invested capital?
3
Represents diammonium phosphate fertilizer (FOB plant/mine). EARNINGS MOMENTUM Fundamentals improving?
4
Represents muriate of potash (FOB plant/mine).
5
Represents double sulfate of potash magnesia (FOB plant/mine). MACRO Poised to benefit from economic and secular trends?
THE BOTTOM LINE

Mosaic’s profit exploded in FY08 and is likely to increase again in FY09. Consensus estimates put the stock at only 3x FY09
EPS. While this valuation alone may justify investment, recent growth has been driven entirely by selling price increases
(volumes have declined). It is impossible to estimate cycle-average earnings with any conviction, and we would not be
surprised to see the stock trade below book value at the trough of the next downcycle.
Net 1 Ueps Technologies (Nasdaq: UEPS) Johannesburg, South Africa, 27-11-343-2000

Technology: Computer Services http://www.net1ueps.co.za


per share data) 6/30/02 6/30/03 6/30/04 6/30/05 6/30/06 6/30/07 6/30/08 9/30/08 9/30/07 9/30/08
Revenue 52 75 131 176 196 224 254 262 60 68
Gross profit 38 49 92 126 146 170 187 190 45 49
EBIT 13 19 36 71 90 97 110 112 26 27
Net income 9 13 13 45 59 64 87 95 18 26
Diluted EPS 0.27 0.37 0.38 0.80 1.03 1.11 1.50 1.65 0.31 0.45
Cash from ops 12 18 42 38 76 66 119 46 40 (33)
Capex 2 7 3 3 2 4 4 6 1 3
Free cash flow 10 11 39 35 74 62 115 39 40 (36)
Total assets n/a 98 153 182 270 376 454 588 417 588
Long-term debt n/a 0 0 0 0 4 4 5 4 5
Common equity n/a 71 96 137 209 281 340 358 305 358
EBIT/capital employed n/a >100% >100% >100% >100% >100% >100% >100% n/m n/m
$70
$60
$50
$40
$30
$20
$10
$0
Jan 00 Jan 00 Sep 01 Sep 02 Sep 03 Oct 04 Oct 05 Oct 06 Oct 07 Oct 08
BUSINESS OVERVIEW • Selected by Central Bank of Ghana as country’s

Net 1 provides a proprietary universal electronic payment common electronic payment platform. Net 1 also
system (UEPS) to the underbanked in developing economies. provides a customized banking and payment system
It operates in four segments, primarily in South Africa: to a government-affiliated consortium in Iraq.
The transaction-based activities segment earns fee income • Expanding into Namibia and Botswana through
from a state welfare distribution service in South Africa, and JVs that operate smart card-based systems; and
transaction processing for retailers, utilities and banks. into Colombia and Vietnam to operate virtual top-
The smart card accounts segment derives revenue from a up solutions for mobile prepaid airtime vending.
fixed monthly fee for the provision of smart card accounts. • BGS acquisition accelerates entry into Russia.
Net 1 acquired 80% of BGS for €72 million and
The financial services segment provides short-term loans on 40K shares in August. BGS’ largest customer and
a principal basis and life insurance on an agency basis. It 20%-owner is Sberbank, the largest bank in Russia.
generates interest income and initiation and services fees. • Authorized $50 million buyback two weeks ago.
The hardware, software and technology segment derives • Guiding for 15% adjusted EPS growth in FY09.
revenue from sales of hardware, SIM cards, cryptography, • Stock price implies 6% trailing FCF yield, 6x
SIM card licenses, and hardware rentals to merchants. trailing P/E and 5x forward P/E.
FYE June 30 2006 2007 2008 1Q09
% of revenue by segment: • Two-thirds of revenue affected by South African
Transaction processing 60% 62% 60% 59% tender. The South African Social Security Agency
Smart card accounts 18% 15% 14% 13% recently conducted a tender for the distribution of
Financial services 8% 5% 3% 3% welfare grants. Net 1 filed proposals in May 2007.
Technology sales 14% 17% 22% 25%
In November 2008, SASSA terminated the tender
Transaction processing 13% 19% 10% 6% process without any awards. As a result, Net 1
Smart card accounts 4% -5% 4% -6% retained contracts with five provincial governments
Financial services -20% -30% -27% -18% through March 31, 2009 – and probably beyond.
However, the long-term outcome remains unclear.
Transaction processing 52% 57% 55% 54% COMPARABLE PUBLIC COMPANY ANALYSIS
Smart card accounts 45% 45% 45% 45% ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
Financial services 43% 30% 23% 18%
DFS 4,545 -4,076 -1.6x 0.8x 6x 8x
Corporate -6% -3% -2% -4% GPN 2,948 2,871 2.1x 37.5x 15x 14x
Total EBIT margin 46% 43% 43% 40% MA 18,569 15,833 3.3x 16.1x 16x 14x
1
Total net income margin 30% 28% 34% 39% TSS 2,393 2,348 1.2x 4.9x 9x 9x
1
Includes foreign exchange gains and losses and other transitory items. V 45,825 42,105 6.7x 38.8x 20x 17x
UEPS 641 509 1.9x 4.2x 6x 5x
• UEPS could enable four billion people with
MAJOR HOLDERS
limited bank access to transact electronically.
Four million out of 18 million unbanked South CEO Belamant 4% │ Other insiders 1% │ Brait S.A. 16% │
Africans receive welfare on Net 1 smart cards. General Atlantic 11%
• UEPS uses smart cards that operate in real-time
RATINGS
but offline, unlike prevalent systems that require
immediate network access. UEPS users can transact
in remote areas when a portable smart card reader is
available. UEPS can also be used for banking,
health care, money transfers, voting, and ID.
• CEO Serge Belamant (54) and CFO Herman MACRO Poised to benefit from economic and secular trends?
Kotze (38) have been with the company or EXPLOSIVENESS 5%+ probability of 5x upside in one year?
predecessors since 1989 and 2000, respectively.
THE BOTTOM LINE

Net 1 has developed an electronic payment solution for the underbanked in developing countries. The company’s system
addresses the needs of four billion people, an enormous addressable market. While Net 1 faces the long-term risk of losing
government-related revenue in South Africa (two-thirds of revenue), a competitive bidding process was terminated in early
November, with Net 1 retaining all contracts on existing terms. Revenue and earnings continue to grow despite global macro
weakness. We value the company at $20-30 per share, based on a range of 10x trailing EBIT to 15x forward EPS.
…additional insight into UEPS: REVENUE AND MARGIN ANALYSIS

UEPS – Revenue, Gross Profit and EBIT, FY 2000-08
Net 1 has performed well over the past six years, as its proprietary
• We value Net 1 at $20-30 per share, based on the payment system has enjoyed greater acceptance in South Africa and,
valuation analysis summarized below. We believe a more recently, in Ghana and Iraq. Net 1 derived two-thirds of revenue
mid teens multiple of after-tax income is justified in from contracts with South African provincial governments in 2007.
the case of Net 1 due to the recurring revenue nature $300mn
of the company’s business, high returns on capital $250mn
and continued growth in revenue and profits.
$200mn
Net 1 UEPS — Valuation Summary $150mn

($ in millions, except per share data) Low High $100mn
Value Value $50mn
1
Cash and equivalents $246 $246 $0mn
Short-term loan facility ($110) ($110) 00 01 02 03 04 05 06 07 08
Net cash and equivalents $136 $136
Cash needed to run business2 ($100) ($50)
Total $36 $86 Source: Company, The Manual of Ideas.
Value of core business: UEPS – Y-Y Revenue Growth, FY 2001-1Q09

LTM EBIT $112
Fair value multiple of LTM EBIT 10x Net 1 has reported revenue growth in the low to mid teens since
Estimated NTM EPS ex. interest income $1.90 FY06, as its relationships with South African provincial governments
Fair value multiple of NTM adjusted EPS 15x have matured while transaction volumes have continued to increase.
Total $1,118 $1,682 The company’s recent expansion beyond South Africa, including the
acquisition of BGS in Russia in August 2008, may accelerate growth.
Estimated fair value of UEPS $1,154 $1,767 80%
per share $20 $30
1
60%
2
Represents MOI estimate. 40%
20%
WHY THE SHARES MAY BE MISPRICED 0%
• Stigma against financial services-related -20%
companies targeting low-income consumers. At
-40%
first glance, Net 1 appears to be exposed to a highly
1Q09
01
02
03
04
05
06
07
08
undesirable consumer demographic in South Africa
and other countries. However, Net 1’s main clients
are South African governmental entities, and the Source: Company, The Manual of Ideas.
company is not exposed to the credit risk of

consumers using Net 1-processed payment cards. UEPS – Gross and EBIT Margin, FY 2000-1Q09
Net 1 is not a lender but a pure-play payment Net 1 has enjoyed strong gross and operating margins throughout
this decade. EBIT margin has surpassed 40% in recent years, a level
processor with an attractive recurring revenue that will be difficult to maintain over a long period of time. However,
model. We believe the market may be missing this any margin erosion appears likely to occur slowly and to be more
important feature of the company’s model. than offset by increases in revenue.
• Undue fear of potential loss of South African 80%
contracts. We believe much of the uncertainty
related to the company’s contracts for the 60%
distribution of welfare grants was lifted on
40%
November 6 when the company announced that the
government has decided to terminate the related 20%
competitive tender process. The market may not yet
have appropriately digested this positive news. 0%
1Q09
00
01
02
03
04
05
06
07
08
EBIT Margin Gross Margin
UPDATE ON SOUTH AFRICAN CONTRACTS FOR • South Africa welfare payment business:
DISTRIBUTION OF WELFARE GRANTS (two-thirds of revenue) “anticipate beneficiary growth of approximately 6%
• Contracted with five provincial governments per annum” (growth is “fairly lumpy”)
covering total of four million beneficiaries. In • BGS: “core business consists of developing and
1998, Net 1 acquired four of the contracts, which integrating smart card-based offline and online
were originally awarded from 1992-97. Net 1 was financial transaction systems;” “customers in
awarded an additional contract in 2002. It Russia, Ukraine, Uzbekistan, India and Oman;”
implemented smart cards from 2000-04 and rolled “emphasis on significantly expanding the
out merchant acquiring capability in 2004-05. application of our technology in the Russian
• 45% share of distribution of welfare grants in Federation and the CIS Republics”
South Africa. Main competitors are the South • Wage payment system in partnership with
African Post Office and the formal banking sector. Grindrod Bank: “target markets for the wage
• South African tender concluded without new payment system are the un-banked and under-
awards in November 2008. The South African banked wage earners in South Africa, estimated at
Social Security Agency (SASSA) recently five million people;” in 1Q09, signed deal with
conducted a competitive tender that could have largest security and guarding services provider in
displaced Net 1 from one or more of its five South Africa, with 20,000 employees (expects to
contracts. However, Net 1 announced on November complete enrollment of all employees 3Q09-end)
3 that SASSA had decided to make no awards, to • Ghana: continued delivery of POS devices and
terminate the procurement process, and to defer a smart cards under Bank of Ghana deal in 1Q09
decision about commencing a fresh tender process. • Iraq: first transaction in August; project is pilot
• All five contracts expire in March 2009. Net 1 with 100K beneficiaries (40K issued payment cards
stated the following in a press release on November so far); to earn “ongoing transaction and license
6: “We believe that SASSA’s statement to defer a fees, as well as payments for the provision of
decision about commencing a fresh tender process outsourcing services and the sale of hardware”
will necessitate a further extension of our current • VTU technology and business model: VTU
contracts. The terms and conditions of our current (virtual top up) technology “enables prepaid cell
service level agreements will probably remain users to purchase additional airtime simply, securely
unchanged during any extension period.” and conveniently through the distribution of airtime
value from a vendor’s cellular handset to that of the
MANAGEMENT’S VIEW OF BUSINESS customer;” “derive revenue from the sale of VTU
Notes from 1Q09 earnings release dated November 6: licenses to mobile operators and we have recently
• Operating environment: Net 1 performing well established VTU businesses in Colombia and
despite “disruptions in the financial markets and Vietnam, where we are minority shareholders”
concerns about a weakening global economy;” “do • Sales process: sales cycles are “unpredictable and
not share the prevailing negative global sentiment often stretch over a period of years. It is therefore
towards emerging markets as our technology is particularly difficult to provide clear short term
focused on these territories and remains in demand, visibility on our international prospects and the
especially when the weaknesses of traditional specific product, application or business model that
banking systems have become patently clear” will ultimately be implemented in a specific
• 1Q09 review: “very pleased” with results country…;” sales and marketing teams focus on
• FY09 guidance: maintain 15% fundamental EPS specific regions of Africa, the Middle East and
growth outlook on constant currency basis; GAAP Central and Eastern Europe; “plan to introduce
EPS growth to “exceed 25% on a constant currency dedicated teams for South America and Asia…”
basis as a result of the change in tax rates and the • New patents: “application… will allow any mobile
foreign exchange gains on a short-term investment” phone user to effect payments that are generally
• Strategy: “…focused on the globalization of our referred to as “card not present” payments
technology by following a disciplined approach to completely securely, through the utilization of a
new markets, through careful evaluation of new once off, disposable, virtual credit or debit card”
opportunities. Where we believe it makes sense, we • Proposed abolishment of secondary taxation on
will use partnerships or make acquisitions to companies in South Africa: secondary taxation
accelerate our entry into new markets. may be phased out in 2010; “expect the proposed
• South Africa tender cancellation: “SASSA may replacement of STC with a dividend tax to reduce
decide to extend our current contracts on a short our current fully distributed rate of 34.55% to 28%.
term renewal basis. We have the capacity to operate Under US GAAP, we apply the fully distributed tax
this business without compromising our high rate of 34.55% to our deferred taxation assets and
service levels regardless of the period, or frequency, liabilities; not yet determined if Net 1 would qualify
of any extension periods granted.” for treaty relief available to foreign shareholders
New Frontier Media, Inc. (Nasdaq: NOOF) Boulder, CO, 303-444-0900

Services: Broadcasting & Cable TV http://www.noof.com


per share data) 3/31/02 3/31/03 3/31/04 3/31/05 3/31/06 3/31/07 3/31/08 9/30/08 9/30/07 9/30/08
Revenue 52 37 43 46 47 63 56 57 12 13
Gross profit 27 19 26 31 33 44 38 38 9 9
EBIT 1 (5) 12 16 16 19 13 12 3 2
Net income (1) (12) 11 11 11 12 9 8 2 1
Diluted EPS (0.03) (0.56) 0.50 0.48 0.48 0.51 0.36 0.32 0.09 0.06
Cash from ops 6 0 14 15 12 19 8 13 (0) 2
Capex 3 1 1 1 1 2 3 4 1 1
Free cash flow 3 (1) 13 14 11 17 6 9 (1) 1
Total assets 48 35 45 60 87 88 84 79 79 79
Short-term debt 5 1 1 0 0 0 0 0 0 0
Long-term debt 1 1 0 0 1 0 0 0 0 0
Common equity 34 22 37 54 71 72 66 65 67 65
EBIT/capital employed 12% -88% >100% >100% >100% >100% 89% >100% n/m n/m
$14
$12
$10
$8
$6
$4
$2
$0
BUSINESS OVERVIEW • Broad cable and satellite TV distribution. NOOF

New Frontier Media (NOOF) produces and distributes adult has agreements with nine of the ten largest U.S.
programming in three segments: cable MSOs, DISH Network, and DirecTV,
Transactional TV delivers nine adult-themed pay-per-view enabling it to reach 175 million households.
(PPV) networks via cable and satellite in the U.S., reaching • Testing Direct-to-Consumer IPTV set-top box in
175 million network homes. NOOF also provides video-on- U.K. Beta customers are online and test marketing
demand (VOD) content on cable and satellite, reaching 33 has begun. Results are expected by the end of FY09.
million homes. It is the exclusive distributor of Penthouse • Entrepreneurial management. Chairman and
television in the U.S. It owns thousands of hours of digital CEO Michael Weiner (65) co-founded NOOF in
content and has license deals with 130 movie studios. The 1995 and has turned it into one of the most
segment earns a contractual percentage of the retail price. profitable producers of adult movie programming.
Film Production makes adult movies distributed on premium • Repurchased 2.6 million shares (11%) from Steel
channels such as Cinemax and Showtime, and erotic event Partners on November 13 at $1.55 per share in
programming distributed on cable and satellite. NOOF’s EPS-accretive transaction. NOOF had bought back
Lightning Entertainment Group represents independent $4 million in 1H09 and $6 million in FY07-08.
mainstream film producers. The Film Production segment • Stock price implies 22% trailing FCF yield, 6x
was formed in 2006 when NOOF acquired MRG. The trailing P/E and 5x forward P/E.
segment licenses owned content under arrangements that
provide either for a one-time fee or a revenue split. INVESTMENT RISKS & CONCERNS
Direct-to-Consumer provides content through NOOF’s • DirecTV (15% of revenue) – termination or
websites, which charge users a monthly membership fee. renegotiation? The deal was to auto-renew for one
year to mid-October 2009 on existing terms for
SELECTED OPERATING DATA three channels, if they achieved predetermined
FYE March 31 2006 2007 2008 1H09 revenue targets by October 2008. The targets were
% of revenue by segment: not met, giving DirecTV an opening to renegotiate
PPV -- Cable / DBS 49% 42% 37% 38% or remove one or more NOOF channels.
VOD 35% 28% 34% 41% • Concentrated third-party distribution. The
1
C-Band and Other 8% 4% 2% 2%
Transactional TV (total) 92% 75% 73% 81% company generated 59% of FY08 revenue from
Film Production
2
3% 22% 23% 16% Comcast, DISH, DirecTV, and Time Warner. These
Direct-to-Consumer 5% 4% 3% 3% operators have the right to terminate deals with
Revenue growth by segment: NOOF on relatively short notice without penalty.
PPV -- Cable / DBS -4% 15% -22% -2%
VOD 4% 10% 6% 16%
C-Band and Other -3% -26% -54% -56% COMPARABLE PUBLIC COMPANY ANALYSIS
Transactional TV (total) -1% 10% -13% 4% ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
Film Production n/a >100% -4% 2% PLA 55 142 .5x n/m n/m 12x
Direct-to-Consumer -7% -8% -22% 0%
Total revenue growth 1% 35% -12% 4% PRVT 83 88 3.3x 1.8x n/a n/a
EBIT margin by segment: NOOF 41 26 .5x 1.3x 7x 5x
Transactional TV 53% 59% 52% 52%
Film Production -17% 16% 17% 0%
Direct-to-Consumer 16% -30% 0% -133% MAJOR HOLDERS
Corporate -15% -16% -19% -21% CEO Weiner 2% │ Other insiders 5% │ Fidelity 16% │
Total EBIT margin 34% 31% 23% 16% Royce 11% │ RenTech 8%
Comcast 12% 14% 18% 22%
DISH 35% 21% 14% 14% RATINGS
Time Warner 14% 12% 14% 14% VALUE Intrinsic value materially higher than market value?
2
DirecTV 0% 13% 13% 15% MANAGEMENT Capable and properly incentivized?
The company ceased offering C-Band services in FQ3 2008.
1
FY08 Film Production consists of owned content revenue of $8.1 million
(62%), repped content revenue of $2.0 million (15%), and other revenue. MOAT Able to sustain high returns on invested capital?
INVESTMENT HIGHLIGHTS MACRO Poised to benefit from economic and secular trends?
• Outperforming Playboy, which has suffered from EXPLOSIVENESS 5%+ probability of 5x upside in one year?
poor execution under CEO Christie Hefner.
THE BOTTOM LINE

NOOF is unreasonably cheap in light of solid profitability, high returns on capital, share repurchases, and capable
management. The company recently purchased more than 11% of stock from Steel Partners at a below-market price, likely
generating EPS accretion and increasing intrinsic value per share. The risk-reward tradeoff appears compelling.
NutriSystem Inc. (Nasdaq: NTRI) Horsham, PA, 215-706-5300

Services: Personal Services, Member of S&P SmallCap 600 http://www.nutrisystem.com

# of institutional owners: n/a 10/22/08 $0.45 $0.48 LTM pre-tax ROC >100%

per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 24 28 23 38 210 566 777 710 188 163
Gross profit 11 10 8 16 102 295 413 359 100 83
EBIT 0 2 (3) 2 35 133 163 97 35 22
Net income 1 2 1 1 21 85 104 60 22 14
Diluted EPS 0.02 0.08 0.03 0.03 0.61 2.31 2.98 1.91 0.64 0.45
Cash from ops 0 3 (2) 3 16 67 108 69 38 25
Capex 0 0 1 1 5 6 19 15 5 3
Free cash flow 0 3 (2) 2 11 61 89 54 34 22
Total assets 6 8 14 18 107 198 199 174 203 174
Short-term debt 0 0 0 0 0 0 0 0 0 0
Long-term debt 0 0 0 0 0 0 0 0 0 0
Common equity 4 5 9 12 79 145 142 128 153 128
EBIT/capital employed 14% >100% -86% 50% >100% >100% >100% >100% n/m n/m
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
Jan 00 Sep 00 Sep 01 Sep 02 Sep 03 Oct 04 Oct 05 Oct 06 Oct 07 Oct 08

NutriSystem provides weight management products. It offers • Guiding for revenue drop of 10-11% in 2008, due
an auto-delivery weight loss program based on portion- to “weaker than anticipated demand.” The company
controlled, lower Glycemic Index prepared meals (~$300 per expects adjusted EBITDA of $105-110 million.
28-day supply). The meals are shelf stable at room • Value proposition debatable. While NutriSystem
temperature. There is no membership fee. Q1 and Q4 are the is not expensive at $10 per day, consumers may be
seasonally strongest and weakest quarters, respectively. able to purchase higher-quality food for the same
price from a source that incurs lower customer-
SELECTED OPERATING DATA acquisition and shipping costs (local grocery store).
YTD • Risky 1Q09 frozen food launch, as higher shipping
FYE December 31 2005 2006 2007 9/30/08
% of revenue by channel: costs may amplify value proposition concerns. The
Direct 90% 93% 94% 93% launch also gives some credence to claims that
QVC and other 10% 7% 6% 7% NutriSystem’s shelf-stable meals lack taste.
Revenue growth by channel: • New customers cancel after about ten paid weeks
Direct 515% 178% 38% -10%
QVC and other 194% 88% 25% -9% (only two shipping cycles). Product returns are not
∆ revenue 454% 169% 37% -10% negligible. There is also the industry issue that
∆ new customers 571% 130% 20% n/a successful customers no longer need the company,
1
∆ revenue / customer 18% 4% 3% n/a while failures have little motivation to stick with it.
Direct channel metrics: • NutriSystem may be more discretionary than
New customers ('000) 347 798 954 n/a
Marketing ($mn) 47 116 175 148 typical diet spending, due to shipping costs.
Marketing / new customer ($)
1
136 146 184 n/a • Gross margin impacted by rising input costs.
Revenue / customer ($) 605 632 648 n/a While management claims some pricing power,
1
Based on nine-month trailing revenue (as tracked by the company).
elasticity of demand might be high in a recession.
• Near-term initiatives pressure margins. The
company is implementing a supply chain
• $60 billion U.S. diet market, with 58% of people optimization effort that requires up-front expense.
overweight or obese and 99 million dieting in 2007. The frozen food rollout is also likely to elevate cost.
NutriSystem’s database still only includes five
• CEO/CFO turnover in past year raises execution
million current and past customers. 20% of revenue
risks, particularly in current macro environment.
comes from customer reactivation and 30% from
male dieters (seniors are also a growth segment). COMPARABLE PUBLIC COMPANY ANALYSIS
Global sales are a longer-term opportunity. ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
• High-ROIC, direct-to-consumer model. The WTW 2,048 3,632 2.4x n/m 10x 9x
company has no locations and generates 94% of DIET 68 73 2.5x n/m n/m n/m
revenue from the direct channel. Having outsourced
NTRI 391 333 .5x 3.2x 7x 7x
meal production and fulfillment, NutriSystem has
become a capital-lite branding and marketing firm.
• NutriSystem brand has benefited from hundreds of MAJOR HOLDERS
millions spent on marketing and advertising over Insiders 9% │ Legg Mason 10% │ Fidelity 8% │ Mazama
the years. The company has perfected a model of 6% │ Citigroup 7% │ Bridger 5%
efficient marketing across multiple channels, with
each marketing dollar generating $4-$5 in sales. RATINGS
• Low working capital has kept FCF roughly in VALUE Intrinsic value materially higher than market value?
line with net income despite explosive growth in MANAGEMENT Capable and properly incentivized?
recent years. NutriSystem has generated FCF of $88 FINANCIAL STRENGTH Solid balance sheet?
million YTD, supporting stock repurchases ($60
million YTD) and an annualized dividend of $0.70.
THE BOTTOM LINE

NutriSystem may be too cheap to ignore. However, concerns regarding the value proposition to the customer, coupled with
near-term input-cost and demand-side pressures, give us pause. We can envision a scenario in which NutriSystem’s carefully
finessed, marketing-driven model breaks down. If the company is forced to raise prices to offset input cost increases and to
support the upcoming frozen food launch at the same time as the buying power of the customer base diminishes, NutriSystem
may find profit margins squeezed into oblivion. While the company will likely retain some profitable distribution channels,
total profit dollars may be insufficient to justify a meaningfully higher valuation.
NVIDIA Corporation (Nasdaq: NVDA) Santa Clara, CA, 408-486-2000

Technology: Semiconductors, Member of S&P 500 http://www.nvidia.com


per share data) 1/27/02 1/26/03 1/25/04 1/30/05 1/29/06 1/28/07 1/27/08 10/26/08 10/28/07 10/26/08
Revenue 1,370 1,909 1,823 2,010 2,376 3,069 4,098 4,146 1,116 898
Gross profit 519 582 525 648 910 1,301 1,869 1,582 516 368
EBIT 242 144 37 95 337 454 836 367 248 57
Net income 177 91 49 89 301 449 798 375 236 62
Diluted EPS 0.34 0.18 0.09 0.17 0.55 0.76 1.31 0.61 0.38 0.11
Cash from ops 161 265 50 132 446 573 1,270 n/a 401 n/a
Capex 97 63 128 67 80 131 188 n/a 70 n/a
Free cash flow 64 202 (78) 65 367 442 1,083 n/a 330 n/a
Cash & investments 791 1,028 604 670 950 1,118 1,810 1,305 1,853 1,305
Total assets 1,503 1,617 1,399 1,664 1,955 2,675 3,748 3,649 3,475 3,649
Short-term debt 4 6 4 1 0 0 0 0 0 0
Total current liabilities 434 379 334 421 439 639 967 1,005 856 1,005
Long-term debt 306 305 1 0 0 0 0 0 0 0
Total liabilities 739 684 348 443 459 668 1,130 1,162 997 1,162
Common equity 764 933 1,051 1,221 1,496 2,007 2,618 2,487 2,478 2,487
EBIT/capital employed >100% >100% 19% 27% 92% >100% >100% 64% n/m n/m
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • Entrepreneurial management. Jen-Hsun Huang

NVIDIA, founded in 1993, is a leader in graphics chips and (44) co-founded NVIDIA in 1993 and has served as
operates in four segments: CEO since inception. He holds a Stanford M.S.E.E.
The Graphic Processing Unit (GPU) Business serves the • Repurchased $124 million of stock in 1H09; $1.5
entertainment and consumer market with GeForce products billion remains authorized.
for desktops and notebooks; also includes memory products. • Stock price implies 0% trailing FCF yield, 12x
The Professional Solutions Business (PSB) serves the design trailing P/E and 11x forward P/E.
and visualization market with Quadro products, and the high-
performance computing market with Tesla products. INVESTMENT RISKS & CONCERNS
• Significant deterioration in Q3, with revenue
The Media and Communications Processor (MCP) Business
down 20% y-y. On a YTD basis, notebook GPU,
includes nForce core logic and motherboard GPU products.
MCP and PSB have performed reasonably well,
The Consumer Products Business (CPB) is comprised of offset by weakness in the desktop GPU business.
GoForce and APX products that support handheld devices, • Constant threat of new technologies. NVIDIA is
including PMPs, PDAs, and cellular phones. CPB also the largest supplier of AMD 64 chipsets with 60%
includes license, royalty, other revenue related to video game share in 4Q07. A decline in demand for those
consoles and other digital consumer electronics devices. chipsets as a result of competition could have a
large impact on results. In addition, Intel is working
SELECTED OPERATING DATA on a multi-core architecture code-named Larrabee.
YTD
FYE January 31 2006 2007 2008 7/31/08
• Competition from “platform solutions.” AMD
% of revenue by segment: has announced a platform solution, and Intel has
GPU 59% 56% 61% 59% achieved success with the Centrino platform. If Intel
PSB 16% 15% 14% 19% and AMD integrate a CPU and GPU on the same
MCP 15% 22% 17% 18%
CPB 10% 8% 6% 4%
chip (e.g., AMD’s Fusion processor project),
Revenue growth by segment: NVIDIA may be unable to compete. NVIDIA
GPU 5% 21% 47% 13% claims, however, that platform solutions are
PSB 114% 21% 29% 43% unlikely to meet users’ performance needs.
MCP 666% 88% 7% 17%
CPB -12% 1% 8% -40%
Total revenue growth 18% 29% 34% 15% COMPARABLE PUBLIC COMPANY ANALYSIS
EBIT margin by segment: ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
GPU 15% 22% 29% 11% AMD 1,479 5,372 .8x 8.7x n/m n/m
PSB 47% 47% 52% 51% BRCM 7,852 5,605 1.2x 3.0x 9x 11x
MCP 9% 12% 8% -29%
CPB 19% 18% 11% -13% INTC 74,086 64,238 1.6x 2.2x 12x 13x
All Other -5% -9% -7% -8% MRVL 3,550 2,983 .9x 2.7x 7x 8x
Total EBIT margin 14% 15% 20% 2% QCOM 54,531 48,120 4.3x 4.1x 16x 13x
% of revenue by geography: STM 6,626 7,582 .7x 1.0x 12x 11x
Taiwan 48% 36% 32% 32%
TXN 20,885 18,892 1.4x 2.3x 10x 12x
China 17% 21% 31% 31%
Other Asia Pacific 11% 18% 16% 17% NVDA 3,991 2,686 .6x 2.0x 9x 11x
U.S. and Americas 16% 14% 11% 9%
Europe 9% 10% 11% 10%
MAJOR HOLDERS
CEO Huang 5% │ Other insiders 2% │ AXA 9% │ Barclays
6% │ Primecap 5% │ Jennison 4%
• NVIDIA, Intel each claim top spot in graphics
chips, based on diverging definitions of the market. RATINGS
According to Intel, Intel and NVIDIA had 42% and VALUE Intrinsic value materially higher than market value?
33% of the PC graphics market in 4Q07, up from MANAGEMENT Capable and properly incentivized?
31% and 23% in 4Q05 (losers were AMD and Via). FINANCIAL STRENGTH Solid balance sheet?
Meanwhile, NVIDIA points to total GPU shipments MOAT Able to sustain high returns on invested capital?
of 366 million, of which NVIDIA GPUs account for EARNINGS MOMENTUM Fundamentals improving?
59% and Intel IGPs account for 41%. NVIDIA also MACRO Poised to benefit from economic and secular trends?
claims to be preferred by gamers, with 62% market EXPLOSIVENESS 5%+ probability of 5x upside in one year?
share, versus 31% for AMD and 3% for Intel.
THE BOTTOM LINE

NVIDIA shares represent an enticing opportunity, as the company is the clear leader in graphics chips, a large and growing
market. While challenges from Intel and AMD should be evaluated carefully, NVIDIA GPUs appear likely to retain their
performance advantage. The company is pursuing a highly accretive share buyback, amplifying the upside potential.
Pacer International, Inc. (Nasdaq: PACR) Concord, CA, 877-917-2237

Transportation: Misc. Transportation http://www.pacer-international.com


per share data) 12/28/01 12/27/02 12/26/03 12/31/04 12/30/05 12/29/06 12/28/07 9/19/08 9/21/07 9/19/08
Revenue 1,671 1,608 1,669 1,808 1,860 1,888 1,969 2,124 489 556
Gross profit 231 245 268 284 316 318 301 323 74 82
EBIT 51 73 67 87 93 118 93 110 23 29
Net income 7 25 31 47 51 68 54 69 13 20
Diluted EPS 0.28 0.74 0.82 1.24 1.34 1.80 1.51 1.99 0.38 0.59
Cash from ops 22 29 60 44 82 67 108 84 31 22
Capex 15 9 3 5 5 4 14 26 1 6
Free cash flow 7 20 57 40 77 63 94 58 30 17
Total assets 633 618 595 606 590 565 574 614 560 614
Short-term debt 2 6 0 19 0 3 13 2 10 2
Long-term debt 396 250 214 154 90 59 64 44 74 44
Common equity 3 181 216 265 307 337 303 340 288 340
EBIT/capital employed 63% 81% 64% 72% 88% >100% >100% >100% n/m n/m
$40
$35
$30
$25
$20
$15
$10
$5
$0

Pacer is an asset-light transportation firm. Two segments: trailing P/E and 6x forward P/E.
Intermodal (80% of revenue) facilitates the movement of
freight by trailer or container using two or more modes of INVESTMENT RISKS & CONCERNS
transportation. It consists of the Stacktrain, Cartage and Rail • Management sees “tough economic period” in Q4
Brokerage operations, and provides services to transportation and “well into 2009.”
intermediaries, beneficial cargo owners and international • Logistics segment posted slight loss YTD due to
shipping companies who utilize intermodal transportation. excess capacity, declining prices and higher fuel
Logistics (20% of revenue) provides truck brokerage, truck costs. The truck services sub-segment incurred
transport, supply chain services, freight forwarding, ocean higher claims and bad debts due to bankruptcies.
shipping and warehousing, and distribution services. • Cyclical shipping volumes in transportation and
logistics industries. Pacer’s asset-light model does
Big Lots, C.H. Robinson, GE, Sony, Union Pacific, Toyota
not insulate it from factors affecting pricing and
and Conagra accounted for 19% of revenue in 2007.
expenses. Pacer claims it retains volumes in
downcycles and benefits from increased use of
YTD
Stacktrain at the expense of long-haul trucking.
FYE December 31 2005 2006 2007 9/30/08 • Dependent on rail, truck, ocean transportation
% of revenue by segment: services and equipment provided by third parties.
Intermodal 75% 79% 80% 78% Pacer has experienced shortages in the past, mostly
Logistics 25% 21% 20% 22%
in the October/November peak season. Pacer has
Intermodal 5% 6% 5% 10% contracts with Union Pacific (thru 2011), CSX (thru
Logistics -2% -13% 1% 15% 2014), and KCSM in Mexico (thru 2012).
Total revenue growth 3% 1% 4% 11% • Competitors include Union Pacific, CSX, J.B. Hunt
Domestic 89% 89% 88% 90%
and Hub Group, C.H. Robinson, Exel, Alliance
Foreign
1
11% 11% 12% 10% Shippers, Burlington Northern, and the supply chain
Revenue growth by geography: solutions divisions of Ryder and Menlo Worldwide.
Domestic 2% 1% 3% 12% • $400+ million in lease commitments, the majority
Foreign 11% 7% 12% 5%
of which relate to railcars, containers and chassis.
Intermodal 8% 9% 7% 8% An undisclosed portion can be terminated each year.
Logistics 1% 0% 1% 0% • Management owns only 1% of the company.
1
Foreign revenue is generated by the logistics segment, with the exception of
Mexico, where the majority of revenue is generated by the Stacktrain operation. ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
EXPD 6,506 5,809 1.0x 4.9x 22x 20x
INVESTMENT HIGHLIGHTS HUBG 1,002 938 .5x 15.9x 16x 15x
• Good business in capital-intensive industry. JBHT 3,114 3,803 1.0x 6.4x 15x 14x
Pacer’s non-asset-based strategy limits capex and UNP 29,160 36,765 2.1x 1.9x 13x 11x
reduces working capital through deals with carriers PACR 359 395 .2x 6.9x 6x 6x
and equipment providers. The strategy gives Pacer
access to freight terminals and facilities and control MAJOR HOLDERS
over transportation-related equipment. CEO Uremovich <1% │ Other insiders 1% │ Royce 9% │
• Competitive advantages: ability to pass volume Barclays 8% │ Invesco 6% │ Cardinal 6%
ratet savings to customers; cross-selling; flexibility
to tailor services in changing freight market. RATINGS
• Recently reorganized intermodal segment to VALUE Intrinsic value materially higher than market value?
reflect our strategy of placing additional emphasis MANAGEMENT Capable and properly incentivized?
on retail customers and door-to-door services. FINANCIAL STRENGTH Solid balance sheet?
• Long-term deal with APL improves Pacer’s MOAT Able to sustain high returns on invested capital?
bargaining power with railroads, as APL freight EARNINGS MOMENTUM Fundamentals improving?
moves from the West Coast to the Midwest, while MACRO Poised to benefit from economic and secular trends?
domestic freight typically moves the other way. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE

Pacer is a cheap, asset-light business in an otherwise capital-intensive industry. While some asset-light logistics companies,
such as Expeditors International (EXPD), have performed extremely well over the long term, we believe the model has
matured and is fundamentally less attractive than it has been in the past. As a result, investors should investigate the
sustainability of the company’s superior returns on capital. That said, the shares are enticing at 6x estimated 2009 EPS.
Perini Corporation (NYSE: PCR) Framingham, MA, 508-628-2000

Capital Goods: Construction Services http://www.perini.com


per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 1,553 1,085 1,374 1,842 1,734 3,043 4,628 5,304 1,243 1,413
Gross profit 58 59 70 92 70 169 249 285 64 86
EBIT 30 26 30 49 8 71 141 168 34 52
Net income 24 21 50 35 5 41 97 111 24 34
Diluted EPS 1.04 0.91 2.10 1.39 0.20 1.54 3.54 3.78 0.87 1.01
Cash from ops (24) (4) 43 60 30 117 282 131 32 (42)
Capex 5 5 5 5 12 22 24 55 5 38
Free cash flow (29) (8) 37 55 18 95 258 75 27 (80)
Total assets 501 402 565 654 915 1,196 1,654 3,384 1,575 3,384
Short-term debt 10 0 1 1 16 15 7 21 8 21
Total current liabilities 393 266 400 430 653 884 1,233 1,747 1,184 1,747
Long-term debt 8 12 9 9 40 34 13 49 15 49
Total liabilities 422 316 445 480 732 952 1,286 2,038 1,241 2,038
Common equity 79 87 121 174 183 244 368 1,346 334 1,346
EBIT/capital employed 50% 36% 38% 72% 10% 84% n/m >100% n/m n/m
$80
$70
$60
$50
$40
$30
$20
$10
$0
BUSINESS OVERVIEW • #1 builder in hotel, motel and convention center

Perini, dating back to 1894, is a construction firm offering market, and 7th-largest contractor in U.S. general
diversified general contracting, construction management building market, based on 2007 revenue, according
and design-build services. It operates in three segments: to industry publication Engineering News-Record.
The building segment focuses on large, complex projects in • $8 billion backlog provides near-term visibility.
the hospitality and gaming, entertainment, educational, Three-quarters of the backlog are cost-plus projects.
transportation, corrections, healthcare, and tech markets. • Authorized $100 million buyback in November.
The civil segment focuses on public works construction in the • Stock price implies 10% trailing FCF yield, 4x
northeastern and mid-Atlantic U.S., including the repair, trailing P/E and 5x forward P/E.
replacement and reconstruction of the public infrastructure.
The management services segment provides construction,
• Major CEO conflicts of interest. Chairman and
design-build and maintenance to the military and government
CEO Ronald Tutor (67) is also CEO and primary
agencies as well as surety companies and large corporations.
owner of construction firm Tutor-Saliba. The firms
participate in JVs and have a management deal
YTD
under which Perini pays Tutor-Saliba $1 million per
FYE December 31 2005 2006 2007 9/30/08 year. In January, the Tutor-Saliba acquired a firm
% of revenue by segment: that has $64 million in subcontracts with Perini.
Building 68% 83% 92% 93% • Merger with Tutor-Saliba may benefit CEO at
Civil 16% 9% 5% 5%
Management services 16% 8% 3% 3% expense of Perini. The companies closed the deal
Revenue growth by segment: in September after successfully fighting a suit by
Building -9% 113% 69% 22% shareholders. The deal gives T-S 45% of the
Civil 100% 2% -16% 5% combined firm (it appears T-S accounted for less
Management services -32% -11% -41% -5%
∆ revenue -6% 76% 52% 20%
than 20% of combined backlog at yearend 2007).
∆ new business awarded >500% -58% 4% 76% • 3% of revenue generated 35% of EBIT in 2007—
∆ backlog (period end) >500% 7% -10% 7% contribution may not be sustainable, as it
EBIT margin by segment: represents very high-margin projects outside the
Building 2.5% 2.4% 3.0% 3.0% U.S., including in Afghanistan and Iraq.
Civil -9.8% 0.6% -5.5% 7.0%
Management services 6.9% 13.9% 34.1% 22.1% • Las Vegas exposure. Hospitality and gaming were
Corporate -0.8% -0.8% -0.5% -0.4% 67% of building segment revenue in 2007.
Total EBIT margin 0.5% 2.3% 3.0% 3.3% • Building services competitors: Balfour Beatty,
U.S. 89% 95% 97% n/a
Gilbane, Huntcor, James B. Pirtle, Marnell-Carrao,
Foreign 11% 5% 3% n/a McCarthy Suffolk, Skanska, Taylor, and Turner.
% of EBIT by geography:
Foreign 86% 31% 30% n/a
1 All of the competitors listed above are privately held firms,
% of revenue by client source:
Private owners 69% 82% 86% n/a except Balfour Beatty, which is listed on the London Stock
State, local governments 19% 13% 11% n/a Exchange. More info is available at www.balfourbeatty.com
Federal governmental 12% 5% 3% n/a
% of building segment revenue by end market (excludes “other”): MAJOR HOLDERS
Hospitality and gaming 65% 55% 67% n/a
Education facilities 9% 6% 7% n/a CEO Tutor 43%
Healthcare facilities 10% 20% 14% n/a
1
Office/industrial buildings 4% 9% 9% n/a RATINGS
Revenue related to MGM Mirage projects in Las Vegas, primarily the VALUE Intrinsic value materially higher than market value?
CityCenter project, accounted for 32% of Perini revenue in 2007.
• Perini has completed a number of milestone
projects in its 100+ year history, including the
Prudential Center in 1963, section two of the Trans-
Alaska Pipeline in 1976, and Mohegan Sun in 2002.
THE BOTTOM LINE

Perini is cheap based on guidance for EPS of $2.80-3.00 in 2009 (down from earlier guidance of $4.00-$4.20). Backlog could
drop sharply as the company completes projects awarded in 2005 (new business awarded annually since 2006 has been
running at less than one-half of backlog). The company’s aggressive prior guidance may have been partly motivated by the
need to make a strong argument for the merger with Tutor-Saliba. The deal, which gives Tutor-Saliba and Perini CEO
Ronald Tutor de facto control of the combined firm, does not pass the “smell test.”
Pre-Paid Legal Services, Inc. (NYSE: PPD) Ada, OK, 580-436-1234

Services: Personal Services, Member of S&P SmallCap 600 http://www.prepaidlegal.com


per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 304 351 361 386 423 444 457 466 115 117
Gross profit 75 95 106 116 114 142 149 163 35 40
EBIT 41 55 61 62 55 80 85 100 18 24
Net income 27 36 40 41 36 52 51 57 12 14
Diluted EPS 1.28 1.82 2.27 2.48 2.29 3.51 3.88 4.69 0.88 1.23
Cash from ops 38 52 52 47 50 54 67 64 13 17
Capex 8 15 27 11 15 9 6 7 1 1
Free cash flow 30 37 25 36 35 45 61 57 11 15
Total assets 86 97 131 146 165 189 168 164 176 164
Short-term debt 0 2 19 18 16 19 18 25 18 25
Long-term debt 0 9 26 29 25 75 56 43 61 43
Common equity 42 35 30 31 51 31 18 26 29 26
EBIT/capital employed n/m >100% >100% >100% >100% >100% >100% >100% n/m n/m
$80
$70
$60
$50
$40
$30
$20
$10
$0
BUSINESS OVERVIEW • Repurchased $400 million of shares since 1999,

PPD’s plans (“memberships”) provide legal services in a reducing shares out from 25 million to 12 million.
manner similar to medical plans. Benefits include preventive • Stock price implies 14% trailing FCF yield and
services, motor vehicle legal defense, trial defense and IRS 8x trailing P/E (no EPS estimates available).
audit services for an average monthly membership fee of
$21. In 2007, provider law firms received 2.2 million calls INVESTMENT RISKS & CONCERNS
from members needing legal services. 25% of memberships • Relatively high membership base turnover. PPD
are employee group memberships, provided by companies as has 1.5% share of addressable households, while
part of their fringe benefits. PPD dates back to 1969 when another 6% have previously purchased but no
founder and current CEO Harland Stonecipher was involved longer own memberships (roughly 10 million
in a collision that resulted in large uncovered legal fees. households are former members). It is difficult to
assess whether the turnover has been due to a weak
SELECTED OPERATING DATA value proposition. PPD markets to former members
YTD and typically reinstates 75K-85K of them each year.
FYE December 31 2005 2006 2007 9/30/08
% of revenue by type: • Value proposition? PPD allows members to access
Membership fees 92% 93% 94% 94% a network of provider law firms under contract with
Associate services and other 8% 7% 6% 6% PPD. Providers are paid a monthly fixed fee on a
Revenue growth by type: capitated basis to render services to local members.
Membership fees 10% 6% 4% 3%
Associate services and other 12% -7% -7% -3% As the payments do not vary based on the type of
∆ revenue 10% 5% 3% 3% benefits utilized, the deals help PPD manage claims
∆ memberships (period end) 6% 0% 2% 0% risk. However, the arrangement also disincentivized
∆ annual membership fee 5% 2% 2% 1% providers from prioritizing member claims.
∆ new members recruited 12% -13% 0% -9%
• PPD’s multi-level marketing scheme encourages
1
Persistency 72% 71% 73% n/a
∆ sales associates recruited 125% -29% -14% -20%
individuals to sell memberships and recruit their
1
Persistency measures the number of memberships in force at the end of a own sales teams. 75% of members have been
year as a percentage of the total of (i) memberships in force at the beginning of recruited by the multi-level salesforce (25% are
such year, plus (ii) new memberships sold during such year.
employee group memberships). The utilization of
multi-level marketing may limit scalability, as many
INVESTMENT HIGHLIGHTS potential members may not want to buy through
• Legal “insurance” still developing. While legal such a channel. PPD may also encounter difficulty
service plans are a $4 billion industry in Europe, the recruiting salespeople. The number of “vested”
plans are not widely accepted in the U.S. PPD’s 1.6 sales associates declined from 468K in 2005 to
million members represent 1.5% of the addressable 442K in 2007, with new associate recruitments
market of 110 million “middle” market households. down from 242K in 2005 to 149K in 2007.
• Identity Theft Shield (IDT) taps into growing • Competitors include Hyatt Legal Plans (MetLife),
consumer anxiety. The company began offering ARAG North America, National Legal Plan, and
IDT in 3Q03 for $9.95 per month if added to a legal Legal Services Plan of America (GE Financial).
membership, or separately for $12.95 per month.
Benefits include a credit report and score, related MAJOR HOLDERS
instructional guides, and credit report monitoring. Chairman Stonecipher 7% │ Thomas Smith 27% │ Other
Active stand-alone IDT memberships grew 28% in insiders 1% │ RenTech 8% │ GSAM 7% │ Barclays 6%
2007 to 83K. IDT services are provided by Kroll.
• Low working capital, as membership fees are RATINGS
received in advance (“deferred revenue and fees”). VALUE Intrinsic value materially higher than market value?
• Improved terms with business partners. Over the MANAGEMENT Capable and properly incentivized?
past eighteen months, PPD has negotiated better FINANCIAL STRENGTH Solid balance sheet?
terms with Kroll, lower bank service fees, and MOAT Able to sustain high returns on invested capital?
reduced interest rates on Wells Fargo financing. EARNINGS MOMENTUM Fundamentals improving?
• $34 million company-owned office complex in MACRO Poised to benefit from economic and secular trends?
Ada, Oklahoma was constructed in 2004. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE

PPD is a company with a theoretically appealing value proposition. Unfortunately, the company has not yet found the right
formula to grow membership beyond the current 1.5% of addressable households. PPD’s multi-level marketing strategy may
present a hurdle to widespread adoption of the pre-paid legal service. We recognize that it would be exceedingly difficult to
revamp the sales strategy due to the risk for significant transitional channel conflict. As a result, PPD may be stuck in a
strategy that could keep it a marginal provider of legal services for a long time.
Precision Castparts Corp. (NYSE: PCP) Portland, OR, 503-417-4800

Capital Goods: Construction - Supplies and Fixtures, Member of S&P 500 http://www.precast.com


per share data) 3/31/02 3/30/03 3/28/04 4/3/05 4/2/06 4/1/07 3/30/08 9/28/08 9/30/07 9/28/08
Revenue 2,448 1,809 1,913 2,900 3,480 5,319 6,852 7,138 1,719 1,820
Gross profit 550 417 428 654 795 1,299 1,870 1,991 465 501
EBIT 179 229 199 365 511 914 1,463 1,614 354 403
Net income 42 124 118 (2) 351 633 987 1,071 235 269
Diluted EPS 0.78 1.42 1.10 1.83 2.56 4.42 6.88 7.46 1.67 1.89
Capex 124 61 56 61 95 221 226 n/a 54 n/a
Free cash flow 187 190 87 296 136 645 687 n/a 140 n/a
Total current assets 879 786 1,189 1,213 1,234 2,037 2,372 2,728 2,259 2,728
Intangible assets 994 990 1,408 1,581 1,660 2,099 2,338 2,336 2,164 2,336
Total assets 2,565 2,467 3,756 3,625 3,750 5,259 6,050 6,421 5,603 6,421
Short-term debt 205 160 253 44 69 554 20 20 171 20
Total current liabilities 727 625 914 780 768 1,658 1,205 1,282 1,337 1,282
Long-term debt 697 531 823 799 594 319 335 305 723 305
Common equity 952 1,062 1,715 1,780 2,141 2,836 4,045 4,351 3,109 4,351
$180
$160
$140
$120
$100
$80
$60
$40
$20
$0
BUSINESS OVERVIEW • Contractual pass-through of raw material price

Precision Castparts operates in three segments: increases helps offset rising costs. The company
Investment Cast Products manufactures investment castings has escalation clauses for nickel and other metals in
for aircraft engines, IGT engines, airframes, armaments, “certain long-term contracts,” and employs price-in-
medical prostheses, and other industrial applications. effect metal pricing to lock-in alloy production cost.
Forged Products consists of the forging operations of • Acquisitions have contributed to growth, and the
Wyman-Gordon and the nickel-based alloys and superalloy company continues to pursue deals.
production of SMC, acquired in Q1 FY07. • Chairman and CEO Mark Donegan (51) has been
with the company for more than 15 years.
Fastener Products produces fasteners, fastener systems and • Stock price implies 0% trailing FCF yield, 7x
components for critical applications in the aerospace, trailing P/E and 6x forward P/E.
automotive and industrial machinery markets.
FYE March 31 2006 2007 2008 1H09 • Four-fifths of revenue from cyclical aerospace
% of revenue by segment: and power generation markets. Commercial
Investment cast products 45% 33% 32% 33% aerospace depends on new aircraft demand. Military
Forged products 26% 44% 46% 44% aerospace depends on government funding. Power
Fastener products 29% 23% 22% 23%
generation demand depends on economic strength.
Investment cast products na 11% 24% 16% • Hurt by Boeing strike, with orders pushed out.
Forged products na 163% 35% 1% • Dependent on Boeing 787 and Airbus A380
Fastener products na 20% 25% 14% programs as major component supplier. The 787 is
∆ revenue 22% 53% 29% 8%
∆ backlog (period end) 32% 54% 26%
expected to move into production later in 2009.
EBIT margin by segment: • Management turnover, including departure of
Investment cast products 20% 22% 24% 25% forged products president Ayers in July and the
Forged products 13% 17% 22% 21% retirement of CFO Larsson at the end of CY08.
Fastener products 17% 21% 25% 28%
Corporate -1% -2% -1% -1% • Competitors include Alcoa and Ladish in cast
Total EBIT margin 16% 18% 22% 23% products. Forged product comps inlude Ladish,
D&A as % of revenue 2.7% 2.1% 1.9% 2.0% Fortech and Thyssen in aerospace turbines; Alcoa
Capex as % of revenue 2.7% 4.1% 3.3% 2.9% and Schultz in structural products; Vallourec/
% of revenue by market area:
Aerospace 59% 53% 55% n/a
Mannesmann and Sumitomo in energy; and
Power generation 18% 21% 24% n/a Allegheny, Carpenter and Haynes in nickel alloys.
Industrial and automotive 23% 26% 21% n/a Fastener comps include Alcoa, LISI, McKecknie.
U.K. 10% 14% 13% n/a
Other 4% 6% 7% n/a ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
% of revenue by 10%+ customer: AA 8,675 18,028 .6x 0.9x 7x 11x
1
GE 17% 12% 12% n/a ATI 2,041 2,285 .4x 0.9x 4x 5x
1
Other key customers include United Technologies and Rolls Royce. CRS 704 632 .2x 1.0x 5x 4x
LDSH 241 351 .8x 1.2x 7x 6x
PCP 7,674 7,585 1.1x 3.8x 7x 6x
• Cast products performing well, driven by “robust”
aerospace demand, OEM and aftermarket shipments
MAJOR HOLDERS
and industrial gas turbine (IGT) growth. Product
lines are well-positioned on aerospace production CEO Donegan <1% │ Other insiders 1% │ Cap Re 6%
programs; IGT volume is near all-time highs. There
is “continued [margin] upside going forward.”
RATINGS
• Forged products stagnating, reflecting steady
aerospace component demand, strong seamless pipe
sales and lower selling prices of external alloy sales.
Sales of nickel alloy mill forms are improving.
• Fastener products growing in mid teens, driven MACRO Poised to benefit from economic and secular trends?
by strong sales of critical aerospace fasteners, EXPLOSIVENESS 5%+ probability of 5x upside in one year?
partially offset by lower automotive fastener sales.
THE BOTTOM LINE

Precision Castparts has been hurt by the Boeing strike but should benefit when the 787 moves into production later in 2009.
Backlog continues to be strong, but performance may deteriorate as aerospace and power generation feel the effects of the
weak economy. As a result, it is extremely difficult to judge how earnings may evolve over the next couple of years.
Premier Exhibitions (Nasdaq: PRXI) Atlanta, GA, 404-842-2600

Services: Recreational Activities http://www.prxi.com


per share data) 2/28/02 2/28/03 2/29/04 2/28/05 2/28/06 2/28/07 2/29/08 8/31/08 8/31/07 8/31/08
Revenue 3 3 3 7 13 30 62 64 16 15
Gross profit 3 3 3 4 10 22 41 35 12 7
EBIT (7) (1) (1) (2) 3 12 18 5 8 1
Net income (7) (1) (1) (2) 5 7 12 4 6 1
Diluted EPS (0.40) (0.04) (0.06) (0.12) 0.19 0.24 0.37 0.10 0.17 0.03
Cash from ops (0) 3 (1) (0) 2 12 17 7 5 (1)
Capex 0 1 0 1 2 2 5 11 2 5
Free cash flow (0) 2 (1) (1) 0 9 12 (4) 3 (6)
Total assets 9 8 7 10 22 35 51 53 50 53
Short-term debt 0 0 0 0 1 0 0 0 0 0
Long-term debt 0 0 0 0 0 0 0 0 0 0
Common equity 7 7 6 7 20 33 47 46 46 46
EBIT/capital employed -277% -79% -440% -444% 83% >100% >100% 29% n/m n/m
$20
$18
$16
$14
$12
$10
$8
$6
$4
$2
$0
BUSINESS OVERVIEW • 16% holder Mark Sellers demands firing of CEO

Premier develops touring, museum-quality exhibitions Arnie Geller due largely to poor performance.
presented in museums, exhibition centers, and other venues. • Repurchased $7 million of stock in FY08.
The exhibitions, including Bodies…The Exhibition and • Stock price implies negative trailing FCF yield,
Titanic: The Artifact Exhibition, have attracted 20 million 8x trailing P/E and 4x forward P/E.
visitors. Since 1994, Premier subsidiary RMS Titanic has
been Salvor-in-Possession of the wreck of the Titanic, as INVESTMENT RISKS & CONCERNS
ordered by a federal district court. RMS has conducted • Performing “well below” expectations, with sharp
multiple expeditions, recovering 5,500 artifacts. declines in per-venue gross margin, sharp rise in
Revenue sources include exhibition ticket sales, merchandise opex and weak international results from Bodies.
sales, licensing activities, and sponsorship agreements. • Resignations of CEO Eskowitz and legal counsel
Wainger in August. Arnie Geller (66), who served
SELECTED OPERATING DATA as CEO prior to Eskowitz, was reappointed CEO.
FYE February 28 2006 2007 2008 1H09 The changes followed a demand for two Board seats
% of revenue by theme: by 16% shareholder Mark Sellers. (Premier
Bodies 37% 72% 81% 67%
Titanic 63% 28% 19% <33%
1 appointed a new CFO, Bud Ingalls, in February.)
% of revenue by type: • May not retain Titanic Salvor-in-Possession
Exhibition 94% 96% 96% 85% rights indefinitely. While the U.S. Court of
Merchandise and other 6% 4% 4% 15% Appeals for the Fourth Circuit in 2006 recognized
U.S. 80% 96% 79% n/a Premier’s exclusive right to recover objects from
International 20% 4% 21% n/a the Titanic site, the same court left Premier with
1
Titanic accounted for the vast majority of non-Bodies revenue in 1H09. non-exclusive rights to photograph and film the
wreck site. In order for Premier to maintain Salvor-
INVESTMENT HIGHLIGHTS in-Possession status, it “must maintain a presence
• Bodies attended by more than five million over the wreck site as interpreted by the courts.” In
visitors since FY05, including in New York, Las addition, an international treaty that does not
Vegas, San Diego, Prague, and Sao Paulo. In FY08, recognize Premier’s Salvor-in-Possession rights was
Premier presented 15 separate human anatomy signed by the U.K. in 2003 and the U.S. in 2004.
exhibitions at 28 venues. The exhibitions include The treaty has yet to take effect, however, as the
displays of dissected human bodies kept from U.S. has not enacted implementing legislation.
decaying through a process known as plastination. • Bodies comprised 81% of revenue in FY08. The
The 2005 acquisition of Exhibitions International exhibitions have several competitors. In addition, in
gave Premier multi-year licenses and exhibition May, Premier settled an NYAG inquiry into the
rights to multiple human anatomy exhibitions. sourcing of specimens, allowing the company to
• Exclusive right to recover objects from the operate the exhibition without interruption.
Titanic due to Salvor-in-Possession status. Public
interest in the Titanic story remains strong 96 years MAJOR HOLDERS
after she set sail, and Premier’s Titanic exhibitions CEO Geller 10% │ Other insiders 3% │ Mark Sellers 16% │
have attracted audiences in 60+ venues worldwide. GSAM 8% │ W. & J. Gasparrini 8% │ Morgan Stanley 7%
In 1993, Premier acquired Titanic Ventures, which
started exploring the Titanic wreck site in 1987. RATINGS
• New exhibitions include Dialog in the Dark VALUE Intrinsic value materially higher than market value?
(“world without sight”) and Sports Immortals MANAGEMENT Capable and properly incentivized?
(memorabilia). The exhibitions will be conducted FINANCIAL STRENGTH Solid balance sheet?
under long-term licensing deals and are expected to MOAT Able to sustain high returns on invested capital?
open in late FY09. Sports Immortals will present EARNINGS MOMENTUM Fundamentals improving?
sports memorabilia consisting of one million MACRO Poised to benefit from economic and secular trends?
artifacts from great athletes. Dialog in the Dark will EXPLOSIVENESS 5%+ probability of 5x upside in one year?
“provide insight and experience to the paradox of
learning to ‘see’ without the use of sight.”
THE BOTTOM LINE

Premier’s revenue has exploded in recent years due to the success of the Bodies exhibitions. The company has misstepped
recently, allowing the cost structure to get out of hand. However, with involvement by 16% holder Mark Sellers, Premier
should be able to improve execution. While the company may not remain salvor-in-possession of the Titanic wreck site in the
long term, it owns 2,000 recovered artifacts, appraised at $46 million but on the books for only $3 million. We value Premier
at $1.50-7.50 per share, reflecting earnings uncertainty. At the low end, we ascribe zero value to the company’s ongoing
business, zero value to the company’s net cash position of $9 million, and $46 million of value to the Titanic assets.
…additional insight into PRXI: REVENUE AND MARGIN ANALYSIS

Premier – Revenue, Gross Profit and EBIT, 1Q04-2Q09
“Our existing exhibitions continue to attract strong
Premier scaled up dramatically from “startup mode” in FY04, as the
attendance and our new exhibitions have the potential to Titanic and Bodies exhibitions came to market. The company lost its
achieve blockbuster results in the coming years. We are cost discipline in 2H08, with gross and operating profits declining
keenly focused on improving our core businesses, dramatically even as revenue remained fairly stable. In a November
streamlining our overhead cost structure and increasing 2008 letter to the board, major shareholder Mark Sellers decried the
bloated cost structure and large payouts to executives.
shareholder value.”
—Arnie Geller, Chairman and CEO $20mn
WHAT ARE THE SHARES WORTH? $15mn
• We estimate value at $1.50-7.50 per share. $10mn

• On the low end, we ascribe zero value to the
company’s ongoing business, zero value to the $5mn
company’s net cash position of $9 million, and $46
$0mn
million of value to the Titanic assets (equal to
1Q04 1Q05 1Q06 1Q07 1Q08 1Q09
appraised value of 2,000 artifacts owned by -$5mn
Premier; includes neither >$100 million appraised Net Revenue Gross Profit EBIT
value of additional artifacts nor the value of
potential future recoveries).
• On the high end, we estimate fair value at 15x Premier – Y-Y Revenue Growth, 1Q05-2Q09
normalized earning power of $0.50 per share. While
Premier showed explosive revenue growth without the need for
our estimate of earning power is highly subjective, significant capital investment from FY05-08. Revenue has stagnated
we believe it is reasonably conservative considering recently, as some exhibitions have concluded while new ones have
the significant unrealized potential of the company’s yet to ramp up. However, with Dialog, Sports Immortals and Star Trek
in the pipeline — and the possibility of improved international
new exhibitions, including Dialog, Sports Immortals
execution of Bodies — Premier has a clear path to restoring growth.
and Star Trek. We note that the company achieved
EPS of $0.17 in 2Q08 (quarter ended August 31, 250%
2007) before earnings declined sharply due to poor 200%
execution. 2Q08 results were achieved based solely
150%
on the Bodies and Titanic exhibitions. With other
exhibitions in the pipeline, it is conceivable the 100%
company could surpass $0.17 per quarter in the next 50%
1-3 years (assuming strong management execution).
As a result, our estimate of normalized EPS may 0%
ultimately prove conservative. -50%
• Premier shares are difficult to value given the 1Q05 1Q06 1Q07 1Q08 1Q09
significant disparity between current earnings and
likely earning power. With earnings highly sensitive
not only to opex discipline but also to the ramp-up Premier – Gross and EBIT margin, 1Q04-2Q09
and execution of new exhibitions, it is impossible to
Gross margins have declined in recent quarters, as the company has
project income with any certainty. However, with shifted to operating more self-run venues (six in FQ2 versus three in
activist shareholder involvement and asset the year-ago period). Even so, gross margin has declined below the
protection in the form of Titanic artifacts, the company’s target for well north of 50%. EBIT margins have
downside appears to be reasonably protected. As a deteriorated even more dramatically in recent quarters, reflecting a
bloated cost structure, including extremely generous executive pay.
result, we find the shares less speculative than might
be assumed given the difficulty of projecting EPS. 100%
50%
0%
-50%
1Q04 1Q05 1Q06 1Q07 1Q08 1Q09
WHY THE SHARES MAY BE MISPRICED EXHIBITIONS OVERVIEW

• Value of Titanic assets not reflected on balance Exhibition Timeline Comments
sheet. The company’s ownership of 2,000 Titanic Titanic Named salvor-in- 2,000 artifacts carried at $3
artifacts is reflected in a $3 million balance sheet (6 current possession in 1994 million but appraised at
asset even as the collection has been appraised at exhibitions) $46 million; seeking
salvage award on 3,500
$46 million. In addition, the company has not additional artifacts,
reflected any value for additional artifacts that are appraised at >$100 million;
the subject of litigation (appraised at >$100 additional value in potential
million), nor for the potential value of future future recoveries
recoveries from the Titanic shipwreck site. As we Bodies Signed deal for first Accounted for 81% of
approach the 100-year anniversary of the sinking of (11 current exhibition in 2004 revenue in FY08
the Titanic in 2012, these assets may become even exhibitions)
more highly prized.
Star Trek Opened in June in Exclusive rights to present
• Loss of investor confidence, due to history of (1 current San Diego; looking exhibition worldwide; no
disappointing investor expectations and lavishing exhibition) for second venue capital investment required
excessive pay on senior executives. Investors appear with 50/50 split of profits
to have “written off” Premier, as the company has
Dialog in Announced in Sold out events in >20
repeatedly ratcheted down expectations and failed to the Dark February; opened countries in Europe, Asia,
execute in line with its potential. (1 current August 30 in South America
• Market’s misjudgment of Mark Sellers’ exhibition) Atlanta; second
location under
intentions and staying power. Sellers owns 16% of review
Premier and has come into the spotlight due to a
Wall Street Journal article highlighting his hedge Sports Signed long-term >1 million artifacts from
fund’s recent rocky performance (despite solid Immortals licensing deal in worlds of baseball, football,
March 2008; goal is basketball, hockey, tennis,
performance since inception). Some market to open at least one golf, Olympics
participants may have mistakenly assumed that new exhibition by
Sellers may be forced to exit his 16% position in the end of FY09
Premier. However, Sellers appears not to be at risk
of near-term redemptions and appears likely to see
this investment through to an acceptable conclusion.
We view Sellers as a capable, committed holder
who is likely to serve as a positive catalyst.
MANAGEMENT’S VIEW OF BUSINESS • Legal issue with regard to ownership of Titanic:

Notes from FQ2 earnings call on October 8: “we have the unfettered right to… ownership [of
• State of company: “these are very troubled times, 1,800 objects]”; Norfolk federal district court “is
but if any company should know about navigating now dealing with us on a salvage award for the
in treacherous waters, it should be this company, other two-thirds of 5,500 objects that have not been
and I can assure you that we’ve got a firm hand on awarded yet;” “the court will either have to award
the rudder and we’re proceeding very carefully” us money or the artifacts” (“no matter what happens
• FQ2 review: 6% revenue decline on 15% or how that award is ultimately determined, it will
attendance drop for Bodies and Titanic (despite not effect the 1,800 objects that we all ready own”)
increase in Bodies exhibitions from 11 to 19; • Star Trek: “sales team has been communicating
“venue days of operation” were up 48%); average with museums who have reacted very positively to
daily attendance per venue was down 40% to 704 wanting a Star Trek exhibition” – “over a dozen
attendees; several international exhibitions lost have expressed high interest” in U.S.
money; “while we are disappointed with our • Dialog in the Dark: “receiving the best reactions;”
financial results for Q2 and the YTD results, we are “will be around for many years in [five] permanent
pleased by the progress we are achieving and have locations” in major U.S. markets; to benefit strongly
achieved over the past several months toward both from “word of mouth;” attendance could reach
expansion and diversification of the company’s “7.5” on a scale on which Bodies reaches “10” –
revenue and the right sizing of the company’s potential less than Bodies due to less efficient space
organizational structure” utilization (Bodies can handle up to 20,000 people
• Outlook: does not provide specific guidance; FY09 per day in a space that would handle only 2,000
“will be year of transition, but hopefully continued people per day for Dialog, as latter requires people
growth;” “suspect that we will see… the Bodies to move through sequentially in groups of ten)
exhibitions begin to do well, and as our new product • Sports Immortals: still being developed; “holding
proves its capabilities, we’ll see our revenues and back from moving into the Luxor [in Las Vegas]…
our profits move where they should be” until we prove that we have [a] hit;” could
• Pricing: “may” lower ticket prices eventually generate as much traffic as Bodies
• Key initiatives: (1) stringent cost controls – will see • Geller on CEO role: “I didn’t come back to the
unspecified benefit of headcount reductions in FQ3 company just to spend a couple of months and try to
and beyond; (2) Star Trek exhibition: licensing patch this company together; I’ve come back with
relationship, opened on June 21, “off to a promising the major commitment of being here and staying
start;” (3) Dialog in the Dark: opened at end of here;” “bringing this company back today to where
August, “attendance has been slow to ramp up,” it was is not a daunting task; it’s not a difficult task;
remains “very optimistic about the opportunity” all of our product is excellent product”
• Bodies: 62% of revenue in FQ2, down from 68% • Self-run venues: FY08 shift to operating more self-
last year; “Bodies is certainly our biggest run venues (six in FQ2 versus three a year ago)
disappointment… over this past immediate period” impacts cost of sales and gross margin – self-run
– “reason for the disappointment for the most part is venues require more revenue than do partnered
the international activity,” where it works with local venues to break even; targeting margins of 50%+
partners; “Bodies exhibitions… are as important and • Balance sheet: cash down to $9.2 million due to
as successful in their appeal to the general public EBIT decline, MGR purchase and initiation of
throughout the world now as they were when we capital projects, including Luxor, Dialog and Sports
first introduced them, and two excellent examples of • Capex: $3.5 million in FQ2 (versus $700K a year
that are two exhibitions that just recently closed, ago) – $1.8 million at Luxor, $900K at Dialog in the
one in Kansas City where our Bodies exhibition Dark, and $400K at Sports and Mortals; expects
achieved attendance of approximately 250,000 higher capex in 2H09 – $10 million at Luxor, $2-4
people, and at the same time, Cincinnati was doing million at Dialog, $2-4 million at Sports and
an excellent job at Union Station where we sold Mortals, and $1-2 million of maintenance capex
over 300,000 tickets;” opportunity to develop • Liquidity: $10 million line of credit with Bank of
“large” market for corporate training programs America was fully available at FQ2-end, with
• Titanic: continue to do “well;” opening exhibition option to increase to $25 million (BofA must
in Milwaukee – Titanic has never been to consent); may draw on line toward the end of FQ4
Milwaukee but company expects several hundred to meet growth capex requirements outlined above
thousand in ticket sales due to popularity of venue; • Business model comment: “investment costs for
100-year anniversary coming up in 2012, with new exhibitions are all based upon trial and success
opportunities in exhibitions, expeditions and before rollout; so when we open up a second, third
merchandising from 2011 through 2013 or fourth exhibition, that’s because we know that
we’ve already proven its ability for success”
“We like stocks that generate high returns

on invested capital where there is a strong
likelihood that it will continue to do so. For
example, the last time we bought Coca-
The Only
Cola, it was selling at about 23 times
earnings. Using our purchase price and
today’s earnings, that makes it about 5
times earnings. It’s really the interaction of
Investment
capital employed, the return on that capital,
and future capital generated versus the
purchase price today.”
–Warren Buffett
That’s “All the world is a laboratory to the

inquiring mind.”
Guaranteed –Martin Fischer
to Succeed
“The search for truth is more precious than
its possession.”
–Albert Einstein
—or Your “It’s what you learn after you know it all
that counts.”
–Harry Truman
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PRIMEDIA Inc. (NYSE: PRM) Norcross, GA, 678-421-3000

Services: Printing & Publishing http://www.primedia.com

Enterprise value: $287 million Next quarter n/a n/a 0 P/E FYE 12/31/10 n/a

per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 1,378 1,341 974 804 307 308 315 301 80 76
Gross profit 1,048 1,050 760 641 274 278 286 277 73 70
EBIT (651) (39) 104 114 32 34 31 50 2 13
Net income (1,174) (647) (3) 22 565 38 491 15 394 12
Diluted EPS (31.80) (6.84) (2.34) (1.81) (2.31) (1.48) (1.26) 0.53 (0.82) 0.20
Cash from ops (101) 50 63 45 (12) 38 (46) (12) (11) 14
Capex 61 39 40 35 30 27 20 12 4 2
Free cash flow (162) 11 24 10 (43) 11 (66) (24) (15) 12
Intangible assets 2,030 1,324 1,179 1,146 995 862 156 154 158 154
Total assets 2,731 1,836 1,636 1,559 1,390 1,254 257 270 282 270
Short-term debt 8 8 22 25 8 6 5 3 5 3
Long-term debt 1,946 1,728 2,037 2,111 1,457 1,317 248 246 248 246
Total liabilities 2,649 2,395 2,649 2,704 1,961 1,778 401 394 411 394
Preferred stock 685 630 165 0 0 0 0 0 0 0
Common equity (603) (1,189) (1,178) (1,145) (572) (523) (144) (124) (129) (124)
EBIT/capital employed n/m n/m n/m n/m n/m 62% 75% n/m n/m n/m
$250
$200
$150
$100
$50
$0
BUSINESS OVERVIEW • EBIT of $31 million YTD, up from $18 million in

PRIMEDIA publishes and distributes ad-supported print and year-ago period, driven by move of HQ from NYC
online consumer guides for the apartment leasing and new to Atlanta, opex reductions, improved distribution,
home sale segments of residential real estate. The guides are and exit from two Auto Guide markets.
provided for free to end users. In 2007, it distributed 38 • New CEO Charles Stubbs (35) joined PRIMEDIA
million guides to 60,000 locations through DistribuTech, in April 2008 from Yellowpages.com, which he had
which also distributes 2,000 third-party publications. built into a cohesive brand and Top 30 Internet site.
PRIMEDIA owns websites associated with its print guides, • Reduced corporate overhead to $12 million run
as well as Rentals.com, the leading paid listings website for rate, down from $29 million in 2007. The company
residential real estate rentals. The company monetizes visits has moved headquarters from New York to Atlanta.
to the sites through ad formats such as cost per lead, cost per • Stock price implies negative trailing FCF yield,
impression, cost per click, cost per action, and flat fees. 3x trailing P/E and 2x forward P/E.

YTD • New Homes (16% of revenue) and DistribuTech
FYE December 31 2005 2006 2007 9/30/08
1 (18% of revenue) continue to face pressure from
Advertising – apartments
2
71% 67% 66% 68% the depression in real estate. New Homes revenue is
Advertising – new homes
3
11% 15% 16% 14% down 18% YTD, while DistribuTech revenue has
4
Distribution
1
18% 18% 18% 18% declined 4%. The company is “aggressively
Revenue growth by type: pursuing operating efficiencies.”
2
Advertising – apartments n/a -5% 0% 2%
Advertising – new homes
3
n/a 36% 10% -18% • Weak, albeit improved balance sheet. PRIMEDIA
Distribution
4
n/a 0% 3% -4% had net debt of $226 million at September 30, down
1
Total revenue growth 7% 0% 2% -2% from net debt of $1.2 billion at June 30, 2007. Debt
Revenue reclassified to exclude Enthusiast Media and Auto Guides. has been reduced by proceeds from the divestiture
2
Consists of Apartment Guide, ApartmentGuide.com and Rentals.com.
3
Consists of New Home Guide and NewHomeGuide.com businesses. of Enthusiast Media. PRIMEDIA continues to pay a
4
Consists of PRIMEDIA's distribution arm, DistribuTech. quarterly dividend of ~$3 million ($0.07 per share).
GEOGRAPHIC SCOPE OF PRIMEDIA PRINT PRODUCTS COMPARABLE PUBLIC COMPANY ANALYSIS
4
North- South- Mid- West Totals
1 2 3 ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
east east west
Apartments 23 21 14 19 77 LEDR 58 -4 n/m 0.8x n/m n/m
New homes 6 17 6 5 34 MOVE 155 211 .8x 2.7x n/m 8x
5
DistribuTech 6,646 3,956 4,007 5,285 19,894 TREE 21 -5 n/m 0.3x n/m n/m
1
Major markets include Washington, D.C., Philadelphia, Baltimore, Chicago.
2
Major markets include Atlanta, Tampa, Orlando, Miami, Charlotte. PRM 61 287 1.0x n/m 2x 2x
3
Major markets include Dallas-Fort Worth, Houston, Austin, Kansas City.
4
Major markets include Phoenix, Las Vegas, L.A., San Francisco, Denver.
4
Represents number of DistribuTech’s exclusive retail distribution locations. MAJOR HOLDERS
Insiders 3% │ KKR 40% │ Glenview 8% │ Marathon 8% │
INVESTMENT HIGHLIGHTS Amber 7%
• Completed major divestitures, reduced debt and
refocused on Consumer Guides for real estate. RATINGS
The company sold Enthusiast Media to Source VALUE Intrinsic value materially higher than market value?
Interlink for $1.2 billion in 2007. In July 2008, it MANAGEMENT Capable and properly incentivized?
discontinued Auto Guides. It now focuses on print FINANCIAL STRENGTH Solid balance sheet?
and online guides for U.S. residential real estate. MOAT Able to sustain high returns on invested capital?
• Apartment Guide business (68% of revenue) EARNINGS MOMENTUM Fundamentals improving?
continues to grow revenue and customer count. MACRO Poised to benefit from economic and secular trends?
Management sees new growth possibilities in this EXPLOSIVENESS 5%+ probability of 5x upside in one year?
segment, particularly online. According to CEO
Stubbs, “there is a meaningful opportunity … [to]
expand our portfolio of product offerings…”
THE BOTTOM LINE

PRIMEDIA has restructured and strengthened the balance sheet in the midst of a depression in residential real estate, the
company’s sole remaining market. New CEO Charles Stubb appears focused on the right priorities — continuing to improve
operating efficiency while positioning the company for strong online growth when the real estate market turns. PRIMEDIA
finally appears able to handle its financial leverage, even in the current downturn. As a result, value accretion to equity
holders could be swift when investors perceive the real estate market to have stabilized. Current macro weakness provides a
compelling opportunity for investors to buy a restructured business at a great price.
Questcor Pharmaceuticals, Inc. (Nasdaq: QCOR) Union City, CA, 510-400-0700

Health Care: Biotechnology & Drugs http://www.questcor.com

Insider buys (last six months): 0 LT EPS growth 18.0% n/a 1 P / tangible book 12.5x

per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 6 15 14 18 14 13 50 95 15 24
Gross profit 4 12 11 15 11 10 45 88 13 22
EBIT (9) (2) (3) (0) (2) (11) 22 60 9 15
Net income (9) (3) (6) (2) 5 (10) 37 52 8 9
Diluted EPS (0.28) (0.07) (0.14) (0.03) 0.10 (0.18) 0.51 0.72 0.12 0.13
Cash from ops (5) (2) (3) 2 1 (10) 10 72 (4) 24
Capex 0 0 15 0 2 4 0 0 0 0
Free cash flow (5) (2) (18) 2 (1) (14) 10 72 (4) 24
Total assets 15 13 23 28 31 30 78 70 34 70
Short-term debt 5 0 0 4 0 0 0 0 0 0
Long-term debt 0 3 3 2 0 0 0 0 0 0
Preferred stock 5 5 13 13 5 5 5 0 5 0
Common equity (0) 1 2 4 11 16 57 47 21 47
EBIT/capital employed n/m n/m -314% -20% n/m n/m >100% >100% n/m n/m
$9
$8
$7
$6
$5
$4
$3
$2
$1
$0
BUSINESS OVERVIEW • Don Bailey (62) became CEO in late 2007. He

Questcor is a specialty pharma company that markets Acthar, negotiated a change-of-control provision in June.
an injectable drug approved for the treatment of certain Questcor is still formulating a long-term strategy.
disorders with an inflammatory component, including • YTD FCF of $54 million, with $46 million spent to
exacerbations associated with MS. Acthar’s primary but not repurchase common and preferred stock.
indicated-for use is treating patients with infantile spasms • Stock price implies 14% trailing FCF yield, 11x
(IS), a rare form of refractory childhood epilepsy. Questcor trailing P/E and 16x forward P/E.
expects to resubmit an Acthar supplemental New Drug
Application (sNDA) for IS to the FDA during 2008. The INVESTMENT RISKS & CONCERNS
company is also developing QSC-001, a unique orally • Off-label: Acthar not indicated for primary use.
disintegrating tablet formulation for the treatment of pain. The FDA has approved Acthar, but not for IS, the
Seasonality of Acthar for IS: Q1: 15% below annual average; disease for which the drug is primarily prescribed.
Q3: 12% above average; Q2 & Q4: slightly above average. Questcor is prohibited from promoting the use of
Acthar in IS. It is unclear when/whether FDA
SELECTED OPERATING DATA approval of Acthar for IS might be forthcoming.
YTD
FYE December 31 2005 2006 2007 9/30/08
• Lack of patent protection. Acthar, which Questcor
% of revenue by therapeutic area: acquired from Aventis in 2001, dates back to 1952
Neurology 59% 100% 100% 100% and has no patent protection. Questcor claims that
1
Gastroenterology, other 41% 0% 0% 0% Acthar would be “very difficult” to reproduce.
Neurology revenue growth 3% 52% 289% 201%
• Looming competitive threats. Vigabatrin is
CuraScript 0% 0% 80% n/a already approved in Canada and under FDA review
Wholesaler A 35% 36% 7% n/a for treatment of IS. Other potentially competitive
Wholesaler B 29% 28% 6% n/a drugs include Synacthen and Ganaxolone.
Wholesaler C 23% 27% 3% n/a
Others 13% 9% 4% n/a
• Net revenue about 30% below gross revenue, due
1
Questcor divested related product lines in October 2005. to Medicaid rebates and government-related
chargebacks. It is unclear how this may evolve.
• New Acthar strategy has been huge success. The COMPARABLE PUBLIC COMPANY ANALYSIS
08 09
strategy, launched in August 2007, has boosted ($mn) MV EV EV/Rev P/TB
P/E P/E
insurance coverage of Acthar for IS to 95%. Acthar ENZN 172 311 1.6x n/m n/m n/m
sales have grown to $68 million YTD, up 210% NVS 110,839 113,506 2.7x 3.8x 13x 12x
from $22 million in the first nine months of 2007. SNY 82,566 89,716 2.5x n/m 8x 7x
• Acthar is well-regarded for IS. While no drug is TRMS 49 12 .4x 1.3x 6x 6x
approved in the U.S. for treatment of IS, Acthar has VPHM 921 502 2.2x 2.0x 12x 22x
40% market share and is considered by many child QCOR 529 489 5.1x 12.5x 18x 16x
neurologists as the standard-of-care in IS.
• Expects to resubmit Acthar IS to the FDA by
MAJOR HOLDERS
yearend. Having already received orphan
CEO Bailey 1% │ Other insiders 10% │ P. Cavazza 11% │
designation for IS, FDA approval may give Acthar
Tang 9% │ Black Horse 7% │ Visium 5% │ Broadwood 5%
for IS 7-year exclusivity. Approval would also
allow Questcor to advertise Acthar for IS.
RATINGS
• Acthar may develop other therapeutic uses, VALUE Intrinsic value materially higher than market value?
including among a subset of MS patients who do MANAGEMENT Capable and properly incentivized?
not respond to or tolerate IV corticosteroids. FINANCIAL STRENGTH Solid balance sheet?
• QSC-001 addresses large market with 120 MOAT Able to sustain high returns on invested capital?
million prescriptions annually. This orally EARNINGS MOMENTUM Fundamentals improving?
disintegrating tablet for patients who have difficulty MACRO Poised to benefit from economic and secular trends?
swallowing will begin pivotal trials in 2Q09. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE

In a little more than a year, Questcor has transformed from a money-losing company teetering on the verge of bankruptcy to a
highly profitable leader in the treatment of infantile spasms (IS). The company revamped its pricing and go-to-market
strategy and appointed a new CEO in mid-2007. Questcor now focuses on the commercialization of Acthar for IS. As Acthar
is currently approved for uses other than treatment of IS, the company is not allowed to promote the product in its core
market. Questcor expects to resubmit an application for Acthar IS this year. The shares offer an enticing risk-reward tradeoff.
RadioShack Corporation (NYSE: RSH) Fort Worth, TX, 817-415-3011

Services: Retail (Technology), Member of S&P 500 http://www.radioshackcorporation.co…


per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 4,776 4,577 4,649 4,841 5,082 4,778 4,252 4,330 960 1,022
Gross profit 2,297 2,238 2,316 2,435 2,267 2,129 2,026 2,008 468 477
EBIT 329 459 496 560 350 157 382 386 77 85
Net income 162 259 299 337 267 73 237 231 46 50
Diluted EPS 0.85 1.45 1.77 2.08 1.81 0.54 1.74 1.77 0.34 0.39
Cash from ops 776 522 652 353 363 315 379 289 111 54
Capex 139 107 190 229 171 91 45 56 13 20
Free cash flow 637 415 462 123 192 224 334 233 98 35
Total assets 2,245 2,228 2,244 2,517 2,205 2,070 1,990 2,246 1,874 2,246
Short-term debt 106 36 77 56 41 195 61 36 39 36
Long-term debt 565 591 541 507 495 346 348 726 344 726
Preferred stock 65 0 0 0 0 0 0 0 0 0
Common equity 714 728 769 922 589 654 770 785 702 785
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
BUSINESS OVERVIEW • Fresh management, with ties to Kmart. Prior to

RadioShack is a consumer electronics retailer operating from joining RadioShack as chairman and CEO in 2006,
neighborhood and mall locations. It has 6,000 company- Julian Day (55) served as COO of Kmart, CFO and
operated stores and dealer outlets in the U.S. and 700 non- COO of Sears, and a director of Sears Holdings.
RadioShack branded wireless phone kiosks. Stores are Bryan Bevin (45), EVP of Store Operations, joined
located in major malls and strip centers, as well as individual in January 2008 from Blockbuster. James Gooch
storefronts. Each location carries both private label and third- (40), who joined as CFO in 2006, has prior
party branded electronics products, including mobile phones, experience as controller of Kmart. Peter Whitsett
flat panel TVs, wireline phones, DVD players, computers, (42), joined as Chief Merchandising Officer in late
digital cameras, etc. Company-operated kiosks are primarily 2007, having served in a similar role at Kmart.
inside Sam’s Club locations, and stand-alone Sprint Nextel • Stock price implies 19% trailing FCF yield, 5x
kiosks in malls. Seasonality is strongest during the Q4 trailing P/E and 6x forward P/E.
holiday shopping season, accompanied by a pre-seasonal
inventory buildup. The company was founded in 1967. INVESTMENT RISKS & CONCERNS
• Sales trends slowed in September, following
SELECTED OPERATING DATA strength in July and August. Management expects
YTD the “challenging” retail environment to continue.
FYE December 31 2005 2006 2007 9/30/08
Comparable sales growth +0.9% -5.6% -8.2% +3.4% • Results have benefited from digital-to-analog TV
% of revenue by segment: converter sales. The transition of broadcast signals
Company-operated stores 88% 85% 86% 86% to digital only is scheduled to take place in 1Q09.
Kiosks 5% 7% 7% 7%
• Competition from other electronics retailers and
Other 7% 7% 7% 7%
Revenue growth by segment: discounters, including Walmart and Best Buy,
Company-operated stores 0% -9% -11% 4% which have gained share against RadioShack. The
Kiosks 370% 30% -13% -5% company’s wireless phone kiosks compete against
Other 8% 6% -11% -2% providers such as AT&T and Sprint Nextel.
Total revenue growth 5% -6% -11% 3%
Number of locations at period end: • Commoditization due to Internet-based price
Company-operated stores
1
4,972 4,467 4,447 4,435 discovery. While some consumers may value the
Dealer/franchise outlets
2
1,711 1,596 1,484 1,407 service of RadioShack, many turn to the Internet to
Kiosks 777 772 739 685 save money on big-ticket items. Some may come to
Company-operated stores 20% 17% 21% 19% a store to get educated but ultimately buy online.
Kiosks -5% -7% 5% 2%
Other 10% 0% 17% 15% COMPARABLE PUBLIC COMPANY ANALYSIS
Unallocated -11% -11% -10% -10% ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
BBY 9,096 11,242 .3x 4.5x 8x 9x
% of revenue by product category:
Wireless 34% 35% 33% 33%
3 CONN 188 141 .2x 0.6x 5x 5x
3
Accessories 20% 23% 24% 28% GME 3,811 3,817 .5x 6.2x 9x 8x
3
Personal electronics 15% 16% 15% 14% HGG 159 276 .2x 1.8x 6x 6x
3
Modern home 13% 13% 13% 11%
3 RSC 69 58 .2x 0.3x n/a n/a
Other 17% 14% 14% 13%
1
Average store size: 2,527 sq. ft. RSH 1,207 1,145 .3x 1.5x 6x 6x
2
Average store size: 99 sq. ft.
3
MAJOR HOLDERS
INVESTMENT HIGHLIGHTS CEO Day 1% │ Other insiders 1% │ Invesco 11% │
• Comparable sales grew 7% in Q2 and 8% in Q3, Barclays 11% │ BlackRock 9% │ GSAM 7% │ Janus 7%
driven by digital-to-analog TV converters, GPS
devices, video gaming, prepaid wireless phones and RATINGS
AT&T post-paid business, partially offset by weak VALUE Intrinsic value materially higher than market value?
Sprint post-paid business. Comps would have been MANAGEMENT Capable and properly incentivized?
up 4% in Q3 excluding Sprint and converter sales. FINANCIAL STRENGTH Solid balance sheet?
• Repurchased 8.7 million shares for $24 per share MOAT Able to sustain high returns on invested capital?
in 2007 and virtually no shares YTD. EARNINGS MOMENTUM Fundamentals improving?
THE BOTTOM LINE

RadioShack’s performance has improved following comparable sales declines in 2006 and 2007. The balance sheet has
strengthened due to continued strong FCF, allowing the company to continue a fairly aggressive share buyback program. The
stock is cheap on current and prospective earnings, making it an interesting selection. We note, however, that consumer
electronics retailing remains a business in which high returns on capital may not be sustainable in the long term.
R.G. Barry Corp. (Nasdaq: DFZ) Pickerington, OH, 614-864-6400

Consumer Cyclical: Footwear http://www.rgbarry.com


per share data) 12/28/02 1/3/04 1/1/05 12/31/05 7/1/06 6/30/07 6/28/08 9/27/08 9/29/07 9/27/08
Revenue 119 123 104 98 29 105 110 103 32 26
Gross profit 41 43 37 43 12 42 45 41 14 10
EBIT (12) (8) (19) 8 (4) 12 14 10 6 2
Net income (12) (22) (20) 8 (4) 25 10 7 4 1
Diluted EPS (0.85) (1.97) (2.05) 0.76 (0.42) 2.46 0.92 0.67 0.35 0.10
Cash from ops (6) (3) (3) 6 (2) 16 9 10 (17) (16)
Capex 2 2 0 1 0 1 2 2 0 1
Free cash flow (8) (5) (3) 6 (2) 16 7 8 (17) (17)
Total assets 88 61 39 42 40 64 68 75 64 75
Short-term debt 4 6 7 3 3 2 2 2 2 2
Long-term debt 6 2 1 1 0 0 0 0 0 0
Common equity 47 25 5 11 9 36 46 47 40 47
EBIT/capital employed -24% -18% -61% 36% -20% 60% 62% 24% n/m n/m
$14
$12
$10
$8
$6
$4
$2
$0
BUSINESS OVERVIEW • CEO Greg Tunney (47) joined R.G. Barry in

R.G. Barry provides accessory footwear (mostly wholesale), 2006 from Phoenix Footwear, where he served as
including slippers, sandals, fashion items, and slipper socks. COO for seven years. Tunney also spent six years as
The company sold its European operations in July 2007 and national sales manager of Brown Shoe.
now focuses on North America. Manufacturing is outsourced • Stock price implies 14% trailing FCF yield, 8x
to China and Vietnam. Roughly 70% of sales are recorded in trailing P/E and 8x forward P/E.
the second half of each calendar year.
SELECTED OPERATING DATA • Management expects “approximately flat” sales
FYE June 28 2006 2007 2008 1Q09 in FY09, despite 20% FQ1 revenue decline (should
Revenue growth n/a 8% 4% -20%
Backlog growth
1
n/a 51% 10% n/a be recovered in FQ2, based on shipments to retailers
Revenue by customer: since the end of FQ1, open orders and retail sell-
Wal-Mart 35% 33% 37% n/a through). Gross margin erosion is likely in FY09.
J.C. Penney 11% 11% 11% n/a • Retailers are delaying or reducing orders; retail
Revenue by type:
Owned brands 94% 85% 89% n/a
space is being downsized, partly due to bankruptcies
Licensed brands 4% 3% 1% n/a among mid-tier department stores.
1
Private label programs 2% 12% 10% n/a • Cost of materials, labor and energy is pressuring
Based on backlog as of September 1st of each year. margins, as company has little pricing power.
Management believes the pressure to be temporary
INVESTMENT HIGHLIGHTS and gross margin to return to 40% in FY10.
• Transitioned business model in FY04, from • Globalization and retail consolidation have hurt
manufacturer of footwear to distributor of goods accessory footwear makers. These factors have
purchased from third-party manufacturers. increased competition in the marketplace and put
• Flagship slipper brand, Dearfoams, dominates significant pressure on industry margins. For
multiple retail channels. The slippers retail for $5- example, the merger of Sears and Kmart negatively
30 per pair and are often purchased as gifts during affected the long-term prospects of Footstar.
the holiday shopping season. • $12 million pension obligation exceeds $7 million
• Terrasoles and Superga brands received “good of net cash and investments as of September 30.
reception” at consumer level in FY08. R.G. Barry
expects Terrasoles eco-friendly hybrid footwear and COMPARABLE PUBLIC COMPANY ANALYSIS
licensed Superga canvas/active fashion footwear to ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
show “healthy” growth in FY09. Terrasoles upper BWS 316 402 .2x 0.9x 9x 8x
materials include recycled micro fleece and mesh, DECK 793 725 1.3x 2.7x 9x 7x
as well as organic materials such as bamboo. They PXG 3 13 .2x 0.2x n/m n/m
retail for $49-59 and are sold mainly in specialty TBL 593 528 .4x 1.2x 13x 14x
chain stores, independent shoe stores, and WWW 926 933 .8x 2.2x 10x 9x
department stores. Superga products retail for $80- DFZ 56 49 .5x 1.2x 8x 6x
180 and are sold in mid-range and premier
department stores and better footwear stores. MAJOR HOLDERS
• FY09 Nautica and My College Footwear brand CEO Tunney <1% │ Other insiders 12% │ Ergates 11% │
launches may balance out seasonal and Nicusa 6% │ Zeff 5%
demographic aspects of business. The company
foresees “modest” first-year performance from RATINGS
licensed Nautica slippers and accessories and VALUE Intrinsic value materially higher than market value?
NCAA-licensed My College Footwear. Nautica MANAGEMENT Capable and properly incentivized?
products (launched in the September quarter) retail FINANCIAL STRENGTH Solid balance sheet?
for $36-48 and are sold through upper-tier MOAT Able to sustain high returns on invested capital?
department and specialty stores. EARNINGS MOMENTUM Fundamentals improving?
• Looking for “category-appropriate” acquisitions MACRO Poised to benefit from economic and secular trends?
that will add revenue, be accretive to earnings, and EXPLOSIVENESS 5%+ probability of 5x upside in one year?
continue to mitigate the seaonality of the business.
THE BOTTOM LINE

R.G. Barry operates in an extremely difficult business. The long-term structure of the wholesale accessory footwear industry
has changed for the worse due to globalization and retailer consolidation. The industry also suffers from short-term
challenges, both on the revenue and cost side. As a result, while the company has executed well over the years and remains
profitable even in the current difficult environment, we are skeptical that it can grow shareholder value at an acceptable rate.
Robert Half International Inc. (NYSE: RHI) Menlo Park, CA, 650-234-6000
Services: Business Services, Member of S&P 500 http://www.rhi.com


per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 2,453 1,905 1,975 2,676 3,338 4,014 4,646 4,831 1,179 1,160
Gross profit 1,017 715 727 1,056 1,373 1,694 1,978 2,035 501 484
EBIT 196 4 12 235 392 466 490 476 122 110
Net income 121 2 6 141 238 283 296 290 74 66
Diluted EPS 0.67 0.01 0.04 0.79 1.36 1.65 1.81 1.86 0.46 0.43
Cash from ops 276 161 113 162 328 376 411 434 76 96
Capex 85 47 37 33 62 80 84 76 17 17
Free cash flow 191 114 76 129 266 296 327 358 59 79
Total current assets 686 646 699 916 1,017 1,112 1,060 1,132 1,100 1,132
Total assets 994 938 986 1,199 1,319 1,459 1,450 1,524 1,488 1,524
Short-term debt 0 0 0 0 0 0 0 0 0 0
Long-term debt 3 2 2 2 3 4 4 4 4 4
Common equity 806 745 789 912 971 1,043 984 1,039 983 1,039
EBIT/capital employed 63% 1% 4% 86% >100% >100% >100% >100% n/m n/m
$50
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • Astute management. We believe current leadership

Robert Half is a staffing firm and owns Protiviti, a consulting deserves significant credit for smart strategic
and internal audit firm. Staffing divisions provide temporary decisions such as the acquisition of franchisees post
(Accountemps), full-time and project personnel in finance 1986 and the hiring of 700 former Andersen staff.
and accounting, temporary admin support (OfficeTeam), and • Stock price implies 13% trailing FCF yield, 10x
professionals in IT, legal, advertising, marketing and web trailing P/E and 25x forward P/E.
design (Creative Group). The company has 400 locations and
15,300 employees, including 3,300 in Protiviti. RHI placed INVESTMENT RISKS & CONCERNS
257,000 temporary employees with clients in 2007. • Sensitive to economic conditions. Clients’ staffing
RHI was founded in 1948. Prior to 1986, the company needs are cyclical, with non-farm payrolls and the
franchised offices providing finance personnel. Current unemployment rate key indicators of demand. In
management subsequently acquired the franchised locations. Q3, clients “became increasingly cautious with their
In 2002, RHI hired 700 professionals from the internal audit hiring actions as the quarter progressed.”
and risk consulting practice of Arthur Andersen. These • Revenue down 2%, EPS down 6% in Q3 after
professionals formed the base of the Protiviti subsidiary. years of consistent growth.
• Low barriers to entry. Competition for both clients
SELECTED OPERATING DATA and candidates is stiff in the staffing services
YTD business, and reputation of the service provider is
FYE December 31 2005 2006 2007 9/30/08 only one factor driving engagement wins.
% of revenue by segment: • Reliance on short-term contracts. Long-term
Temporary staffing 79% 78% 79% 79%
Permanent staffing 7% 8% 10% 10% deals are not a significant part of RHI’s staffing
Risk consulting 14% 14% 12% 12% business, making operating results less predictable.
Revenue growth by segment: • Limited reinvestment opportunities? RHI has
Temporary staffing 21% 19% 16% 5% spent more than $1 billion on buybacks and more
Permanent staffing 61% 53% 32% 8%
Risk consulting 36% 13% 2% 5% than $150 million on dividends in three years.
EBIT margin by segment: COMPARABLE PUBLIC COMPANY ANALYSIS
Temporary staffing 9% 10% 10% 10% ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
Permanent staffing 21% 22% 19% 16%
Risk consulting 18% 11% 4% 1% KELYA 432 433 .1x 0.7x 15x 24x
Total EBIT margin 11% 11% 10% 10% MAN 2,166 2,506 .1x 1.9x 6x 9x
D&A as % of revenue 2% 2% 2% 2% SFN 140 211 .1x 0.5x 9x 12x
Capex as % of revenue 2% 2% 2% 2%
RHI 2,762 2,392 .5x 3.3x 11x 25x
MAJOR HOLDERS
• Staffing remains stable, helped by continued
CEO Messmer, Jr. 3% │ Other insiders 7% │ Barclays 13%
growth in international operations. International,
│ Fidelity 10% │ Cap Re 6%
which accounts for 30% of staffing revenue, grew
15% in Q3. Staffing revenue remains at near-record
RATINGS
levels, with permanent placement fairly stable and
technology staffing still growing modestly.
• Sarbanes-Oxley has boosted demand for skilled FINANCIAL STRENGTH Solid balance sheet?
professionals in accounting and finance. Since MOAT Able to sustain high returns on invested capital?
these industry segments are a large part of RHI’s EARNINGS MOMENTUM Fundamentals improving?
business, the company benefits from the trend MACRO Poised to benefit from economic and secular trends?
toward better corporate governance and internal EXPLOSIVENESS 5%+ probability of 5x upside in one year?
control over financial reporting.
• Impressive long-term shareholder value creation.
$1 invested in RHI stock on June 30, 1986, was
worth $51 at yearend 2007, a 20% CAGR.
THE BOTTOM LINE

Robert Half’s current management, led by chairman and CEO Harold Messmer, Jr., has delivered impressive performance
over the past twenty years. The company continues to perform reasonably well in the face of economic headwinds, though a
prolonged global downturn would undoubtedly impact profitability. With foreign revenue outpacing domestic growth and
now accounting for more than 20% of total revenue, we believe RHI may offset U.S. weakness with better performance
abroad. The shares are fairly attractive but not yet compelling.
Rockwell Automation (NYSE: ROK) Milwaukee, WI, 414-382-2000

Technology: Electronic Instruments & Controls, Member of S&P 500 http://www.rockwellautomation.com


per share data) 9/30/02 9/30/03 9/30/04 9/30/05 9/30/06 9/30/07 9/30/08 9/30/08 9/30/07 9/30/08
Revenue 3,776 3,992 4,411 4,112 4,556 5,004 5,698 5,698 1,371 1,484
Gross profit 1,186 1,311 1,563 1,664 1,900 2,097 2,343 2,343 574 590
EBIT 229 298 438 630 736 789 809 877 231 177
Net income 122 286 415 540 607 1,488 578 578 165 126
Diluted EPS 1.18 1.48 1.85 2.39 2.94 3.53 3.90 3.89 1.07 0.87
Cash from ops 437 435 623 665 424 452 591 591 189 245
Capex 100 108 98 103 122 131 151 151 49 48
Free cash flow 337 327 525 562 302 321 440 440 140 196
Intangible assets 1,124 1,138 1,135 1,119 820 1,102 1,166 1,166 1,102 1,166
Total assets 4,006 3,940 4,213 4,525 4,735 4,546 4,594 4,594 4,546 4,594
Short-term debt 162 9 0 1 219 521 100 100 521 100
Total current liabilities 966 776 864 941 1,293 1,745 537 537 1,745 537
Long-term debt 767 764 758 748 748 406 904 904 406 904
Common equity 1,609 1,587 1,861 1,649 1,918 1,743 1,689 1,689 1,743 1,689
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
BUSINESS OVERVIEW • Delivered 9% local currency revenue growth,

Rockwell Automation provides industrial automation power, 11% non-GAAP EPS growth and 24% ROIC in
control and information solutions to manufacturers. Its FY08, with non-U.S. revenue reaching 50% of total
industrial automation brands include Allen-Bradley controls revenue. Rockwell achieved greater penetration in
and services and Rockwell Software factory management process industries and strong growth in solutions
software. The company operates in two segments: businesses, continuing to diversify the revenue base.
Architecture & Software contains the control and information • Seasoned management team. Keith Nosbusch (56)
architecture capable of connecting customers’ entire has been with the company for a decade and has
manufacturing enterprise. Control Products & Solutions served as CEO since 2004.
provides intelligent motor control and industrial control • Repurchased $359 million of stock and paid $170
products and services. Rockwell employs 20,000 people. million in dividends in FY08, following $1.5 billion
As of September 30, 2007, Rockwell operated 53 plants, repurchase and $185 dividend payments in FY07.
mainly in North America. It had 267 sales and administrative • Stock price implies 12% trailing FCF yield, 7x
offices and 26 warehouses and other facilities. Floor space trailing P/E and 7x forward P/E.
was 10.2 million square feet (24% owned, 76% leased).
Rockwell has divested a number of businesses over the INVESTMENT RISKS & CONCERNS
years: sold aerospace and defense businesses to Boeing in • Softness in U.S. and Europe; customers operate
1996; sold FirstPoint in 2004; sold ElectroCraft in 2006; sold largely in cyclical industries. According to
50% stake in Rockwell Scientific Company in 2006; sold management, “macro-economic conditions in
Power Systems to Baldor for $1.8 billion in January 2007. Europe and the U.S. are weakening.” The company
has “begun to see a change in buying behavior by
In order to gauge the health of Rockwell’s U.S. served
some of our customers in consumer related
markets, investors may track Industrial Equipment Spending
industries, including project delays and curtailed
(BEA), Capacity Utilization (Fed), and Manufacturing
capital spending.”
Purchasing Managers’ Index (Institute for Supply Mgmt).
• Legal contingencies. The company’s activities
SELECTED OPERATING DATA expose it to a variety of legal claims. Ongoing legal
FYE September 30 2006 2007 2008 proceedings are detailed in Rockwell’s 10-K.
Revenue growth 11% 10% 14%
Organic revenue growth 10% 6% 5% COMPARABLE PUBLIC COMPANY ANALYSIS
Capex as % of D&A 127% 139% 111% ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
ABB 24,883 20,057 .6x 2.9x 6x 6x
Architecture & Software 45% 44% 42%
Control Products & Solutions 55% 56% 58% EMR 25,917 28,658 1.2x 10.2x 11x 11x
% of revenue by geography: SI 47,003 52,151 .6x 3.1x 9x 7x
U.S. 57% 54% 50% ROK 3,797 4,219 .7x 7.3x 7x 7x
Canada 7% 7% 7%
EMEA 18% 21% 23%
Asia Pacific 11% 12% 13% MAJOR HOLDERS
Latin America 6% 7% 7% CEO Nosbusch 1% │ Other insiders 1% │ Neuberger 9% │
Architecture & Software 26% 26% 24%
Cap Re 5% │ Vanguard 4% │ Barclays 4% │ MFS 3%
Control Products & Solutions 14% 14% 13%
Corporate and D&A -2% -2% -2% RATINGS
Total EBIT margin 17% 18% 16% VALUE Intrinsic value materially higher than market value?
• Demand for Rockwell’s products and services MOAT Able to sustain high returns on invested capital?
has benefited from customer investments in EARNINGS MOMENTUM Fundamentals improving?
manufacturing capacity, needs for greater MACRO Poised to benefit from economic and secular trends?
productivity, and global industrial production. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
• Transforming itself from “U.S.-based hardware
company to global technology-driven enterprise.”
The FY07 sale of Power Systems fits into this shift.
THE BOTTOM LINE

Rockwell is a leader in industrial automation and has benefited from global growth. With roughly one-half of revenue now
coming from outside the U.S., the company appears appropriately diversified given the slowing U.S. economy. However, we
note that Rockwell could see a lag effect of weaker consumer spending as customers begin to delay capital spending. As a
result, we do not view the shares as sufficiently cheap to warrant purchase.
Seagate Technology (Nasdaq: STX) Grand Cayman, Cayman Islands, 831-438-6550

Technology: Computer Storage Devices http://www.seagate.com


per share data) 6/28/02 6/27/03 7/2/04 7/1/05 6/30/06 6/29/07 6/27/08 10/3/08 9/28/07 10/3/08
Revenue 6,087 6,486 6,224 7,553 9,206 11,360 12,708 12,456 3,285 3,033
Gross profit 1,593 1,727 1,459 1,673 2,137 2,185 3,205 2,921 809 525
EBIT 374 691 444 722 874 614 1,376 1,060 396 80
Net income 153 641 529 707 840 913 1,262 967 355 60
Diluted EPS 0.36 1.36 1.06 1.41 1.60 1.56 2.36 1.81 0.64 0.12
Cash from ops 905 882 635 1,428 1,457 943 2,538 2,088 754 304
Capex 540 516 605 691 1,008 906 930 1,060 150 280
Free cash flow 365 366 30 737 449 37 1,608 1,028 604 24
Intangible assets 6 0 0 3 2,782 2,488 2,463 2,443 2,496 2,443
Total assets 3,095 3,517 3,942 5,244 9,544 9,472 10,120 10,168 10,065 10,168
Short-term debt 2 4 4 4 330 330 360 660 330 660
Long-term debt 749 745 739 736 640 1,733 1,670 1,370 1,734 1,370
Common equity 641 1,316 1,855 2,541 5,212 4,737 4,586 4,645 4,880 4,645
EBIT/capital employed 69% >100% 41% 52% 56% 28% 52% 40% n/m n/m
$35
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • Experienced management. CEO William Watkins

Seagate provides hard disc drives for applications including (55), COO David Wickersham (52), CFO Charles
enterprise, desktop, mobile computing, and electronics. Pope (53), Chief Sales & Marketing Officer Brian
Seagate also provides online backup to through EVault Dexheimer (45), and CTO Robert Whitmore (46)
(acquired in FY07). Seasonality is weakest in FQ4 (June). have each been at Seagate for more than a decade.
• Repurchased 65 million shares for $1.5 billion in
SELECTED OPERATING DATA FY08, and 62 million shares for $1.5 billion in
FYE June 30 2006 2007 2008 1Q09 FY07. No shares were bought back in 1Q09.
Unit shipments (mn) 119 159 183 48
Change (y-y) 21% 34% 15% 2%
Avg sales price per unit $78 $71 $68 $62 trailing P/E and 5x forward P/E.
Change (y-y) 1% -9% -4% -10%
1
Programs / gross sales 7% 9% 9% 12% INVESTMENT RISKS & CONCERNS
Unit shipments by segment (mn):
Enterprise
2,3
14 17 20 5 • Guiding for revenue decline of 11-17% and non-
Mobile
2,4
12 19 27 10 GAAP EPS decline of 70-75% in Q4 CY08, due to
2,5
Desktop
2,6
74 98 111 28 “challenging macro-economic environment.”
Consumer 18 25 25 5
• Unit prices fell 9% and 4% in FY07 and FY08
Unit shipment growth by segment:
Enterprise
2,3
6% 17% 22% 13% (price per unit of storage capacity fell even more);
Mobile
2,4
118% 56% 38% 24% manufacturers routinely discount to gain share.
2,5
Desktop
2,6
19% 33% 13% -3% Inventory obsolescence is also a major risk.
Consumer 8% 40% -3% -16%
• Derives two-thirds of revenue from OEMs,
% of revenue by channel:
OEM
7
72% 64% 67% 66% including HP, Dell, Sony, EMC, and IBM. Deals
Distributors 25% 30% 26% 27% typically have 12-36 month terms and do not have
Retail 3% 6% 7% 7% minimum purchase requirements.
% of revenue by country:
8 • Competition from disc drive makers Western
U.S. 31% 29% 31% n/a
Netherlands 23% 23% 29% n/a
8 Digital and GS Magicstor, and captive producers
Singapore 38% 38% 39% n/a
8
such as Fujitsu, Samsung, Hitachi, and Toshiba.
8
1
Other 8% 10% 2% n/a Flash memory products also compete with Seagate.
Sales programs are recorded as contra revenue. 2 Denotes unit shipments.
3
FY08 unit growth driven by server virtualization; STX gained share; unit
• Raw materials price inflation. Seagate’s new
growth and improved product mix were partially offset by price erosion. perpendicular recording technology utilizes
4
FY08 growth driven by notebook sales; STX lost share (industry grew 45%); ruthenium, a precious metal the price of which has
Unit gains, favorable mix were offset by “particularly pronounced” price erosion.
5
FY08 growth driven by proliferation of digital content; STX maintained share; increased significantly in the past couple of years.
unit growth and favorable product mix were offset by price erosion.
6
FY08 decline due to 36% drop in gaming units, partially offset by 33% gain in
DVR shipments. Some new gaming platforms do not utilize a disc drive. COMPARABLE PUBLIC COMPANY ANALYSIS
7
HP and Dell accounted for 16% and 11% of FY08 revenue, respectively. ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
8
1Q09 revenue by geography: North America: 27%, Europe: 29%, Asia 44%.
EMC 20,367 17,950 1.2x 3.9x 13x 12x
QTM 36 413 .4x n/m 2x 1x
INVESTMENT HIGHLIGHTS TDK 4,304 3,727 .4x 0.7x 17x 13x
• Growing demand for data storage, driven by WDC 2,980 2,272 .3x 1.1x 4x 4x
applications such as digital photos, video and music. STX 2,378 3,255 .3x 1.1x 5x 3x
• Growing demand for disc drives, driven by a
proliferation of enterprise data, mobile computing,
MAJOR HOLDERS
and consumer electronics. Desktop demand has
CEO Watkins 1% │ Other insiders 3% │ Franklin 12% │
moderated due to a shift toward mobile computing.
Capital International 7%
• Scale leader status gives Seagate a manufacturing
and R&D advantage in the disc drive business. It
RATINGS
has ~5,000 patents issued and ~2,000 pending.
• Disc drive industry consolidation, driven by high MANAGEMENT Capable and properly incentivized?
capex requirements and scale advantages: Maxtor/ FINANCIAL STRENGTH Solid balance sheet?
Quantum, 2001; IBM/ Hitachi their disc drive MOAT Able to sustain high returns on invested capital?
businesses, 2002; Seagate/ Maxtor, 2006; TDK/ EARNINGS MOMENTUM Fundamentals improving?
Alps, 2007; Western Digital/ Komag, 2007. MACRO Poised to benefit from economic and secular trends?
THE BOTTOM LINE

Seagate is the market share and technology leader and arguably the best-managed company in the disc drive industry. The
shares are highly attractive at 3x FY09E earnings. While Seagate operates in a fairly capital-intensive business that has seen
irrational price competition, the company is far from a commodity manufacturer and should not trade at 1.1x tangible book.
Sierra Wireless, Inc. (Nasdaq: SWIR) Richmond, BC, Canada, 604-231-1100

Technology: Communications Equipment http://www.sierrawireless.com


per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 62 77 102 211 107 221 440 570 112 137
Gross profit 15 8 41 84 38 69 123 158 33 38
EBIT (27) (38) 2 28 (40) 6 39 49 12 10
Net income (24) (42) 2 25 (37) 10 33 40 9 7
Diluted EPS (1.50) (2.56) 0.12 0.96 (1.44) 0.38 1.16 1.25 0.33 0.23
Cash from ops (21) (5) 14 28 (17) (8) 49 72 14 23
Capex 14 4 6 9 10 11 12 22 3 7
Free cash flow (35) (8) 8 18 (28) (19) 37 50 12 16
Total assets 111 71 176 216 174 212 385 429 273 429
Short-term debt 1 4 2 1 1 1 0 0 1 0
Long-term debt 1 0 0 0 0 1 1 0 0 0
Common equity 90 49 144 174 138 153 295 322 200 322
EBIT/capital employed -79% -163% 19% >100% -484% 25% 86% >100% n/m n/m
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
BUSINESS OVERVIEW • Growing across geographies. YTD revenue is up

Sierra Wireless provides modems and software to connect to 39% in the Americas, 7% in Europe, 85% in Asia.
mobile broadband networks. The company targets enterprise, • Authorized plan to repurchase 5% of stock. The
consumer, OEM, vertical industry, and machine-to-machine company may purchase 1.6 million shares over the
(M2M) markets. It provides professional services in wireless next year in accordance with Canadian laws.
design, integration and carrier certification. Revenue breaks • Stock price implies 21% trailing FCF yield and
down into PC adapter products (AirCard and USB solutions), 6x trailing P/E (no EPS estimates available).
embedded module solutions, and mobile and M2M. The
margin profile reflects gross margin of ~28% and EBIT INVESTMENT RISKS & CONCERNS
margin of ~9%. Sierra is dual-listed on Nasdaq and the TSE. • “Short term view is cautious.” Management has
pointed to erosion in sales of embedded modules to
SELECTED OPERATING DATA PC OEMs, and economic uncertainty as factors
YTD
FYE December 31 2005 2006 2007 9/30/08
impacting the business. Q3 results fell short of
% of revenue by product: expectations due to a missed product launch with a
AirCards 70% 71% 71% 71% large wireless operator.
Embedded modules 13% 24% 21% 23% • Concentration of distribution channels. AT&T
Mobile and M2M 13% 3% 6% 5%
Other 4% 2% 2% 1%
and Sprint accounted for a combined 44% of
Revenue growth by product: revenue in 2007. Other wireless carriers represented
AirCards -40% 109% 99% 41% 16% of revenue, and OEMs comprised 20%.
Embedded modules -80% 281% 74% 56% • Acquisitive. Sierra bought AirLink for $12 million
Mobile and M2M 32% -52% 298% 43%
Total revenue growth -49% 107% 99% 43%
and 1.3 million shares in 2007, and announced but
% of revenue by geography: terminated a purchase of CradlePoint in April 2008
Americas 69% 64% 69% 69% (consideration would have been $22 million and
EMEA 12% 17% 12% 9% 463K shares). Sierra sold 3.8 million shares for $22
Asia Pacific 19% 19% 19% 22%
per share in October 2007, generating $80+ million
% of revenue by distribution channel:
Wireless carriers 47% 49% 60% 60% for “future acquisitions” and other uses.
PC OEM 6% 13% 12% 14%
Other OEM 8% 12% 8% 8% COMPARABLE PUBLIC COMPANY ANALYSIS
Resellers 38% 25% 20% 18% ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
ADCT 708 705 .5x 1.4x 6x 8x
INVESTMENT HIGHLIGHTS ADTN 837 739 1.5x 2.3x 11x 11x
• Positive operating trend. Revenue and EBIT are NVTL 138 12 .0x 0.7x 24x 12x
up 43% and 41%, respectively, YTD. The AirLink PWAV 79 371 .4x n/m 6x 15x
acquisition (closed in May 2007) and an expansion SWIR 244 42 .1x 0.9x n/a n/a
of distribution and OEM channels have driven
growth in PC cards and embedded modules.
MAJOR HOLDERS
• Leader in wireless for mobile and M2M. The
CEO Cohenour <1% │ Other insiders <1% │ Acuity
company’s core competencies are in airlink
Investment 13% │ Philippe Laffont 10% │ Manulife 6%
innovation, software, integration and certification.
• Focused on fast-growing market segments. RATINGS
Sierra’s target markets—PC adapters and embedded VALUE Intrinsic value materially higher than market value?
solutions for mobile computing, and machine-to- MANAGEMENT Capable and properly incentivized?
machine communications—are projected to grow at FINANCIAL STRENGTH Solid balance sheet?
a CAGR of more than 30% over the next several MOAT Able to sustain high returns on invested capital?
years to more than $20 billion.1 EARNINGS MOMENTUM Fundamentals improving?
• New products and upgrades. PC adapters: MACRO Poised to benefit from economic and secular trends?
AirCard (2H08), Compass USB modems (3Q08); EXPLOSIVENESS 5%+ probability of 5x upside in one year?
embedded modules: new modules slated for 2H08.
1
Source: Sierra Wireless, ABI Research.
THE BOTTOM LINE

Sierra Wireless deserves a closer look despite questions regarding the long-term sustainability of its wireless technology
advantage and some concern regarding high-ROIC reinvestment opportunities. On the positive side, the company operates in
high-growth market segments that can support revenue increases for many years to come. The company has so far
successfully translated revenue growth into FCF growth, and we are cautiously optimistic it can do so in coming years. At a
trailing FCF yield of 21% and a large net cash position, the shares strike us as too cheap to ignore.
Sigma Designs (Nasdaq: SIGM) Milpitas, CA, 408-262-9003

Technology: Computer Peripherals http://www.sigmadesigns.com


per share data) 1/31/02 1/31/03 1/31/04 1/31/05 1/28/06 2/3/07 2/2/08 8/2/08 8/4/07 8/2/08
Revenue 13 18 31 31 33 91 221 258 43 58
Gross profit 6 10 19 22 21 44 113 130 22 30
EBIT (10) (6) 2 (0) (5) 6 57 63 9 13
Net income (10) (6) 2 (0) (2) 6 70 73 9 10
Diluted EPS (0.64) (0.37) 0.07 (0.01) (0.07) 0.24 2.46 2.41 0.32 0.35
Cash from ops (4) (5) 1 2 1 9 40 42 7 (6)
Capex 0 1 0 1 1 3 8 14 0 3
Free cash flow (4) (5) 1 1 1 6 33 28 6 (9)
Total assets 26 21 30 35 40 76 380 318 96 318
Short-term debt 12 12 0 0 0 0 0 0 0 0
Long-term debt 0 0 0 0 0 0 0 0 0 0
Common equity 12 6 26 29 31 53 346 290 74 290
EBIT/capital employed -55% -34% 13% -6% -89% 93% >100% >100% n/m n/m
$80
$70
$60
$50
$40
$30
$20
$10
$0
BUSINESS OVERVIEW • Founder and CEO Thinh Tran (54) has been
Sigma Designs is a fabless provider of highly integrated SoC with Sigma since 1982. CFO Thomas Gay (59)
solutions used to deliver multimedia entertainment in the joined the company in 2007 after spending ten years
home. The SoCs are a component of consumer applications as CFO of Catalyst Semiconductor. Head of sales
such as IPTV and HD-DVD. The SoCs are used in leading Silvio Perich (60) has served in this role since 1985.
IPTV set-top box makers, including Cisco/SFA, Motorola, • Liquid balance sheet, with $121 million of cash
Netgem, and UTStarcom. Set-top boxes utilizing the and short-term securities, $59 million of long-term
company’s SoCs are deployed by AT&T, BT, Deutsche marketable securities, and no debt as of August 2.
Telekom, Freebox, and other global carriers. The company’s • Repurchased 4.2 million shares for $86 million
products are also used by consumer electronics providers, ($20.50 per share) under current authorization.
such as D-Link, Netgear, Panasonic, Pioneer, Sharp, Sony, • Stock price implies 12% trailing FCF yield, 4x
and Toshiba in applications such as HD-DVD players. trailing P/E and 5x forward P/E.

FYE January 31 2006 2007 2008 1H09
• FQ3 revenue to fall 20% sequentially, with FQ4
SoCs 85% 95% 98% 99% revenue to be flat to down 10% from FQ3. States
Other 15% 5% 2% 1% management: “The slowing of the world-wide
% of revenue by target market: economy has significantly impacted our customer’s
IPTV 58% 67% 74% 80% business strategy, particularly in the IPTV market.”
HD-DVD and similar 34% 27% 22% 14%
HDTV 2% 2% 2% 0% • Emerging threats from Broadcom and ST Micro
Other 6% 4% 2% 6% in core IPTV market. While Sigma has a large
Revenue growth by target market: installed base in IPTV SoCs, Broadcom and ST are
IPTV 6% 221% 167% 64%
HD-DVD and similar 8% 120% 99% -12%
now targeting IPTV. They are expected to ship little
HDTV 120% 108% 119% -80% volume in 2008 but pose a threat for 2009.
Other -19% 58% 28% 371% • High customer concentration. MTC Singapore,
Total revenue growth 6% 174% 143% 46% Uniquest, and Macnica accounted for 23%, 19%
Asia 82% 53% 69% 53%
and 12%, respectively, of revenue in FY08. Sigma
Europe 6% 36% 26% 41% has experienced turnover among top customers.
North America, other 12% 11% 5% 6%
% of revenue by customer: COMPARABLE PUBLIC COMPANY ANALYSIS
MTC Singapore <10% <10% 23% 22% ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
Cisco Systems <10% <10% <10% 23%
Uniquest 26% 17% 19% <10% ADI 5,603 4,321 1.7x 2.7x 11x 12x
Macnica <10% <10% 12% <10% BRCM 7,852 5,605 1.2x 3.0x 9x 11x
Freebox <10% 20% <10% <10% IFX 2,077 2,596 .4x 0.8x 55x n/m
STM 6,626 7,582 .7x 1.0x 12x 11x
INVESTMENT HIGHLIGHTS TXN 20,885 18,892 1.4x 2.3x 10x 12x
• Leader in digital media processor SoCs for set- SIGM 232 111 .4x 0.9x 5x 5x
top boxes in fast-growing IPTV market (Microsoft
Mediaroom and Linux platforms), and one of the MAJOR HOLDERS
leaders in SoCs for HD-DVD players. CEO Tran 4% │ Other insiders 2% │ Royce 9% │ Coatue
• Six-month revenue of $115 million (up 46% y-y), 8% │ Steelhead 6% │ Vanguard 4% │ Barclays 4%
non-GAAP EPS of $0.93 (up 16% y-y), and
GAAP EPS of $0.57 (up 9% y-y), driven primarily RATINGS
by strong growth in the IPTV market. The company VALUE Intrinsic value materially higher than market value?
excludes stock comp, in-process R&D and other MANAGEMENT Capable and properly incentivized?
items from the calculation of non-GAAP EPS. FINANCIAL STRENGTH Solid balance sheet?
• Growth initiatives: (1) working on Blu-ray designs MOAT Able to sustain high returns on invested capital?
and “gaining ground” with Asian manufacturers; (2) EARNINGS MOMENTUM Fundamentals improving?
completing new chipsets; and (3) pursuing revenue MACRO Poised to benefit from economic and secular trends?
streams in HDTV, Ultra-wideband connectivity and EXPLOSIVENESS 5%+ probability of 5x upside in one year?
cable-based IPTV set-top boxes, and growing the
company’s presence in VXP video processors.
THE BOTTOM LINE

Sigma has delivered strong results in the past two years by riding the growth of IPTV and HD-DVD. However, margins have
come under pressure, and management has significantly lowered the near-term outlook. Impending IPTV competition from
Broadcom and ST Microelectronics is another big unknown. Sigma derives three-quarters of revenue from the IPTV market,
making its ability to fend off competitors crucial to any long investment thesis.
Spark Networks (AMEX: LOV) Beverly Hills, CA, 323-658-3000

Services: Personal Services http://www.spark.net

Insider buys (last six months): 3 LT EPS growth n/a n/a n/a P / tangible book n/m

per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 10 16 37 65 66 69 65 60 16 14
Gross profit 0 0 0 0 0 0 0 0 0 0
EBIT (7) (1) (11) (12) (1) 7 4 10 2 3
Net income (8) (1) (11) (12) (1) 7 9 12 2 2
Diluted EPS (0.47) (0.03) (0.57) (0.51) (0.06) 0.21 0.31 0.45 0.06 0.08
Cash from ops (2) 2 3 (2) 4 13 15 16 4 5
Capex 2 2 3 6 1 1 1 1 0 1
Free cash flow (4) 0 (0) (7) 3 13 14 15 4 4
Total assets 17 18 17 27 49 52 44 42 38 42
Short-term debt 0 0 0 1 10 1 0 3 0 3
Long-term debt 0 0 0 1 1 0 0 0 0 0
Common equity 15 14 5 11 25 38 31 24 25 24
$9
$8
$7
$6
$5
$4
$3
$2
$1
$0
BUSINESS OVERVIEW MARKET SEGMENTATION—PERSONALS WEBSITES1

Spark provides online personals services. The company’s U.S. general Growth verticals Dominant
market vertical
websites, including JDate.com and AmericanSingles.com, Spark sites 2
AmericanSingles BlackSingles JDate
enable adults to meet online. Members pay a monthly fee to Competitors2 Match, eHarmony BlackDatingNetwork eHarmony
communicate with each other (company’s primary source of Growth rate Flat High potential Slow and
steady
revenue). Subscription programs auto-renew monthly until Operational Significant Spending into growth Dominance
canceled. More than 90% of revenue comes from the U.S. mode spending to keep while generating = high
subscribers acceptable profit margins
Win back Low Medium High
SELECTED OPERATING DATA customers
YTD Contribution 45-50% 40-45% 90-92%
FYE December 31 2005 2006 2007 9/30/08 margin
1 2
Growth of average paying subscribers:
1 Source: Company, The Manual of Ideas. Selected sites only.
Jewish networks na 11% 0% -2%
General market networks na -17% -39% -46% • Strong FCF, with recurring subscription revenue
Other affinity networks na 200% 26% 3% and negative working capital. An NOL of ~$40
Total subscriber growth -5% 10% -9% -13%
% of revenue by segment: million shields the company from income taxes.
Jewish networks 45% 47% 52% 58% • Repurchased 10 million shares, i.e., close to one-
General market networks 48% 37% 24% 15% third of shares outstanding, since July 2007.
Other affinity networks 4% 14% 20% 23%
Offline and other businesses 2% 2% 4% 4%
Revenue growth by segment: 7x trailing P/E (no EPS estimates available).
Jewish networks na 9% 4% 3%
General market networks na -20% -38% -49% INVESTMENT RISKS & CONCERNS
Other affinity networks na 252% 37% 4%
Offline and other businesses na -4% 75% -2% • AmericanSingles.com a lost cause? General
Total revenue growth 1% 5% -5% -10% Market Networks revenue fell from $32 million in
Contribution margin by segment: 2005 to $16 million in 2007 and $6 million YTD.
Jewish networks 87% 86% 90% 93% • Could generic sites such as Match.com threaten
General market networks 44% 46% 46% 54%
Other affinity networks 51% 49% 41% 43% JDate over time? While JDate has strong brand
Offline and other businesses 12% 7% 41% 48% recognition among Jewish singles, Match has more
Unallocated -64% -55% -62% -56% tech resources, a larger ad budget, and more users.
EBIT margin -1% 10% 6% 18% Similarly, social networking sites such as MySpace
1
The company has close to 200,000 paying subscribers.
and Facebook could become future competitors.
INVESTMENT HIGHLIGHTS • Potential threat from free personals sites, such as
OkCupid, DateHookup, ChristianDatingForFree.
• 30 million people visit a personals site per month,
out of a target market of 100 million U.S. singles.
Spark runs religious sites such as JDate, ethnic sites MV EV EV/Rev P/TB 08 P/E 09 P/E
($mn)
such as BlackSingles, international sites such as
IACI 2,235 867 .3x 1.2x 53x 16x
JDate.co.il, and the generic site AmericanSingles.
YHOO 14,994 11,780 1.6x 2.1x 26x 23x
• JDate is leading personals site for Jewish singles
LOV 65 61 1.0x n/m n/a n/a
and most valuable Spark asset. JDate has 400K
members out of 1.8 million single Jews in the U.S.
Paid subscribers comprise only 4% of the target MAJOR HOLDERS
audience. JDate has strong brand recognition, with CEO Berger 2% │ Other insiders 2% │ Great Hill 36% │
80% of traffic “organic” (direct to site). JDate also Cap Re 10% │ Alon Carmel 10% │ Moab 7%
has desirable demographics and strong user metrics.
• Management aims to grow value by growing RATINGS
Other Affinity Networks, maximizing “yield” from VALUE Intrinsic value materially higher than market value?
Jewish Networks, optimizing marketing spend, MANAGEMENT Capable and properly incentivized?
adding ad revenue streams, and reducing overhead. FINANCIAL STRENGTH Solid balance sheet?
• Adam Berger (44) has been chairman and CEO MOAT Able to sustain high returns on invested capital?
since 2007. Previously, he spent seven years as EARNINGS MOMENTUM Fundamentals improving?
CEO of WeddingChannel.com, growing the site and
ultimately selling it to The Knot for ~$80 million.
THE BOTTOM LINE

Spark’s JDate.com dating site for Jewish singles is a unique and valuable property; however, we are skeptical that the
company can find similar success in other religious or ethnic verticals. The online dating market has become very crowded
and competitive, with JDate’s success largely due to its first-mover advantage (site dates back to 1997). Unless one believes
that the company can successfully grow beyond JDate, the stock remains unexciting even at the current low valuation.
SPSS (Nasdaq: SPSS) Chicago, IL, 312-651-3000

Technology: Software & Programming, Member of S&P SmallCap 600 http://www.spss.com

# of institutional owners: n/a 11/4/08 $0.55 $0.44 LTM pre-tax ROC n/m

per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 174 209 208 224 236 262 291 309 72 75
Gross profit 153 185 192 210 220 243 273 288 68 69
EBIT (34) (17) 0 7 28 34 50 52 13 13
Net income (26) (17) 9 6 16 15 34 38 8 11
Diluted EPS (1.90) (0.99) 0.53 0.31 0.85 0.73 1.65 1.97 0.41 0.55
Cash from ops 14 (1) 22 12 52 48 85 79 17 17
Capex 33 24 12 15 17 17 19 20 5 7
Free cash flow (20) (25) 10 (2) 35 31 66 58 12 10
Total assets 252 214 229 235 272 333 501 488 488 488
Short-term debt 1 3 3 3 3 0 0 0 0 0
Long-term debt 0 6 6 3 1 0 150 150 150 150
Common equity 133 102 120 129 164 217 209 213 218 213
EBIT/capital employed -116% -75% 1% >100% n/m n/m n/m n/m n/m n/m
$60
$50
$40
$30
$20
$10
$0
BUSINESS OVERVIEW • Investors may under-appreciate underlying

SPSS provides analytics software, with “predictive analytics” growth, as revenue has grown more slowly than
technology improving processes by providing “forward license revenue. Consistent double-digit license
visibility” for business decisions. SPSS was founded in 1968. growth reflects strong adoption of SCSS software.
YTD
FYE December 31 2005 2006 2007 9/30/08
License 46% 48% 49% 47% • “Very challenging economic times” and dollar
Maintenance 43% 42% 41% 43% appreciation have hurt YTD results. License sales in
Services 11% 10% 10% 10% Europe and Japan have not met expectations. Sales
License 12% 16% 15% 5%
in northern Europe have been affected by a lack of
Maintenance 5% 7% 8% 13% sales capacity, an issue the company is addressing.
Services -14% 4% 5% 6% • Primary worldwide competitor in each target
Total revenue growth 5% 11% 11% 8% market is the well-respected and larger SAS
Selected items as % of revenue:
EBIT 12% 13% 17% 16%
Institute (>$2 billion revenue). SPSS also competes
D&A 7% 6% 6% 7% against NCR, Fair Isaac and Oracle.
Capex -3% -2% -2% -2% • Recently updated poison pill. The company has a
Capitalized software -4% -5% -5% -5% shareholder rights plan in place that discourages the
U.S. 44% 42% 41% 40% acquisition of more than 15% of SPSS shares
Europe 42% 43% 44% 44% without the company’s approval.
Pacific Rim 15% 15% 15% 16%
INVESTMENT HIGHLIGHTS ($mn) MV EV EV/Rev P/TB
08 09
P/E P/E
• $3 billion market growing in low teens. SPSS
FIC 650 1,034 1.4x n/m 8x 7x
targets advanced analytics ($1.5 billion, growing at
MSFT 178,445 159,698 2.6x 9.2x 10x 9x
10%) and CRM analytic applications ($1.5 billion,
MSTR 422 295 .8x 3.7x 10x 10x
growing at 13%). SPSS has less than 10% share.
ORCL 87,110 85,326 3.7x n/m 11x 10x
• Predictive Analytics software improves processes
SAP 41,890 39,852 2.8x 119.0x 14x 13x
by providing visibility for key decision makers and
SPSS 441 284 .9x 3.4x 13x 12x
automating decisions to meet business goals. SCSS
claims that Predictive Analytics ads significantly
more value than business intelligence software. MAJOR HOLDERS
• Customer list includes 95% of Fortune 1000, all CEO Noonan 3% │ Other insiders 2% │ T Rowe 11% │
major countries, all U.S. State governments, every Barclays 7% │ AXA 6% │ State Street 6% │ Brown 6% │
branch of the U.S. Military, all top U.S. universities Ellington 6% │ Daruma 5%
and 75% of top European universities.
• Steady margin improvement from 2004-07. SPSS RATINGS
achieved EBIT margins of 3% in 2004, 12% in VALUE Intrinsic value materially higher than market value?
2005, 13% in 2006, and 17% in 2007. MANAGEMENT Capable and properly incentivized?
• Repurchased $28 million of stock YTD and $72 FINANCIAL STRENGTH Solid balance sheet?
million in 2007. MOAT Able to sustain high returns on invested capital?
• Low-cost $150 million convert due 2012, with a
conversion price of $47 per share and a fixed
interest rate of 2.5%.
• Guiding for revenue growth of 4-6% and EPS
growth of 15-20% in 2008, with expected revenue
of $302-308 million, non-GAAP EPS of $1.90-1.98.
THE BOTTOM LINE

SPSS is a compelling magic formula selection. The impressive client roster, including 95% of the Fortune 1000, highlights
SPSS’s advantage in predictive analytics software. This niche market appears to have better long-term characteristics than
most other software segments, which tend to undergo rapid change and attract vicious competition. SPSS’s primary
competitor, the SAS Institute, has been a solid performer for many years, and we believe SPSS could achieve similar success.
Syneron Medical (Nasdaq: ELOS) Yokneam Illit, Israel, 972-4-909-6200

Health Care: Medical Equipment & Supplies http://www.syneron.com


per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 1 12 35 58 87 117 141 139 33 29
Gross profit 0 10 31 51 76 99 114 108 26 22
EBIT (1) 2 8 26 39 35 25 24 6 2
Net income (1) 2 9 27 41 40 31 26 8 2
Diluted EPS (0.24) 0.10 0.42 1.14 1.48 1.44 1.12 0.94 0.28 0.08
Cash from ops (1) 2 14 23 31 37 48 43 7 0
Capex 0 0 0 1 1 1 2 2 1 0
Free cash flow (1) 2 14 22 30 36 46 41 7 (0)
Total assets n/a 9 27 110 170 225 269 290 266 290
Long-term debt n/a 0 0 0 0 0 0 0 0 0
Common equity n/a 5 13 94 145 194 231 254 233 254
EBIT/capital employed n/a >100% n/m n/m >100% >100% 98% 70% n/m n/m
$50
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • Signed development and supply deal with P&G

Syneron provides aesthetic medical products based on in early 2007, with goal of commercializing home-
proprietary Electro-Optical Synergy (Elos) technology, use devices and topical compositions for better skin
which uses electrical and optical energy. The products are appearance. P&G will buy the devices exclusively
sold to physicians and target non-invasive procedures, from Syneron and sell them on a co-branded basis.
including hair removal, wrinkle reduction, treatment of • Repurchased 590,000 shares for $9.1 million
superficial vascular and pigmented lesions, and treatment of under $50 program authorized in November 2007.
leg veins. Syneron has an installed base of 10,000 products. • Stock price implies 19% trailing FCF yield, 8x
FYE December 31 2005 2006 2007 9/30/08
2 • Slowdown: “Doctors are postponing decisions to
North America 62% 57% 57% 52% make new capital equipment purchases and credit
Other 38% 43% 43% 48% terms have tightened significantly.”
Revenue growth by geography:
• Gross margin in high 70s, roughly 20 points
North America 67% 22% 21% -7%
Europe 30% 53% 20% 4% above industry average, may not be sustained.
Total revenue growth 51% 34% 21% -2% Competitors include public companies Candela,
% of revenue by type: Cutera, Cynosure, Thermage, and Palomar Medical,
Product 93% 94% 91% n/a and private companies Lumenis Sciton, Reliant
1
Service 7% 6% 9% n/a
1
Service revenue should increase over time as the installed base grows.
Technologies, UltraShape, and Alma Lasers.
2
In 2007, 57% of revenue came from North America, 23% from Europe, 16% • Subject to FDA regulation. Before a new Syneron
from Asia Pacific, and 4% from Israel and other countries.
device can be marketed in the U.S., it generally
must receive 510(k) clearance, which usually lasts
INVESTMENT HIGHLIGHTS 3-12 months. Syneron must also comply with the
• 20% global share in aesthetic medical products, a FDA’s Quality System Regulation, which covers
market with favorable long-term trends. Syneron various aspects of bringing products to market.
focuses on the growth segments of aesthetic • CEO Gerstel, CFO Tenenbaum own <1% of
medicine of body shaping and skin rejuvenation. Syneron, while chairman Eckhouse owns 9%.
• Innovative Elos technology. Approaches that rely
solely on optical energy limit the safety and efficacy COMPARABLE PUBLIC COMPANY ANALYSIS
of many procedures due to limited skin penetration ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
and unwanted epidermal absorption. Elos makes it CLZR 9 -18 n/m 0.1x n/m n/m
easier to target the tissue to be treated, and boosts CUTR 111 13 .1x 1.0x n/m 44x
safety through tracking of skin temperature. CYNO 107 35 .2x 0.8x 5x 5x
• Positive acceptance of minimally invasive PMTI 186 58 .6x 1.3x 102x 28x
LipoLite laser-assisted lipolysis product, which THRM 50 4 .1x 0.9x n/m 14x
was launched in February. Syneron delivered the ELOS 215 -4 n/m 0.9x 9x 11x
first units in Q2, with volume shipments in Q3.
• Adding recurring revenue stream to equipment MAJOR HOLDERS
sales business model. The LipoLite Energy Access Chairman Eckhouse 9% │ CEO, CFO and other insiders
Program (LEAP) charges physicians a subscription <1% │ Baupost 11% │ Brandywine 6% │ RenTech 5%
fee for laser-assisted lipolysis treatment, foregoing
up-front revenue for a more attractive stream over RATINGS
time. The company has also introduced a disposable VALUE Intrinsic value materially higher than market value?
element to Matrix RF (FDA approval pending). MANAGEMENT Capable and properly incentivized?
• Doron Gerstel (48) and Fabian Tenenbaum (34) FINANCIAL STRENGTH Solid balance sheet?
became CEO and CFO, respectively, in 2007. MOAT Able to sustain high returns on invested capital?
Gerstel was previously president of Syneron N.A. EARNINGS MOMENTUM Fundamentals improving?
and Operations VP at Lumenis (formerly ESC MACRO Poised to benefit from economic and secular trends?
Medical, founded by Syneron chairman Eckhouse). EXPLOSIVENESS 5%+ probability of 5x upside in one year?
• $219 million of net cash and liquid investments.
THE BOTTOM LINE

Syneron offers innovative products in the growing global market for aesthetic medical procedures. Investors appear to be
ignoring the company’s earning power and emerging growth prospects, including new recurring revenue opportunities related
to the LipoLite Energy Access Program and a potentially meaningful partnership with P&G. We value Syneron at $14-18 per
share, based on a sum-of-the-parts analysis that considers the company’s $219 million in net cash and investments and values
the aesthetic products business based on a range of 8x trailing EBIT to 8x estimated normalized EBIT.
…additional insight into ELOS: REVENUE AND MARGIN ANALYSIS

ELOS – Revenue, Gross Profit and EBIT, 2001-07
Syneron posted explosive growth until recently, with revenue
• We value Syneron at $14-18 per share, based on increasing from virtually zero in 2001 to more than $140 million in
the sum-of-the-parts analysis presented below. 2007, driven by rapid adoption of proprietary Elos aesthetic medical
• Upside may come from share repurchases and products. The company showed strong operating leverage in the first
half of the decade, but EBIT has eroded since 2006.
higher earning power than estimated. Earnings
upside could come from the LipoLite Energy $150mn
Access Program and the partnership with P&G.
• Downside appears protected due to $8 per share $100mn
in net cash and liquid investments. While markets
can be irrational, a profitable, high-ROIC business
$50mn
should not trade at a negative enterprise value.
Syneron — Sum-of-the-Parts Valuation Overview $0mn

($ in millions, except per share data) Low High 01 02 03 04 05 06 07
Value Value
1 Revenue Gross Profit EBIT
Value of excess liquid assets:
Cash and equivalents $21 $21 Source: Company, The Manual of Ideas.
Short-term marketable securities 99 99
Long-term marketable securities 98 98
ELOS – Y-Y Revenue Growth, 2002-YTD’08
2
(20) (10) The company grew revenue more than twenty-fold in 2002 and
Total $199 $209 doubled it again in 2003. While growth has steadiy decelerated over
the past six years, it remained quite strong until recently. YTD
revenue has declined 2%, with Q3 revenue down 14% due to doctors
Value of aesthetic products business:
increasingly postponing capital equipment purchases.
LTM EBIT 24
Fair value multiple of LTM pre-tax income 8x
Estimate of normalized EBIT 35 90%
Fair value multiple of normalized EBIT 8x
Total $194 $280 70%
50%
Estimated fair value of ELOS $393 $489
per share $14 $18 30%
1
2
Represents MOI estimate. 10%
-10%
WHY THE SHARES MAY BE MISPRICED
YTD
02
03
04
05
06
07
• Near-term business momentum has been
negative, giving investors little to get excited about.
While most investors may agree that Syneron is
ELOS – Gross and EBIT Margin, 2001-YTD’08
undervalued at a market value roughly equal to net
The value of Syneron’s proprietary technology is evident in the high
cash and investments, few investors consider a gross margins the company has posted since ramping up sales in
strong balance sheet sufficient reason to invest. 2001. While gross margin declined to 77% YTD and 75% in Q3, it
Syneron shares may remain undervalued until the remains at a level that allows the company to maintain bottom-line
company gives investors reason to like the business profitability despite a sharp slowdown in sales.
again. Catalyst could include adoption of the 100%
LipoLite Energy Access Program or positive news
80%
related to the partnership with P&G.
• Low-conviction selling? Some value funds may 60%
have followed highly respected Baupost Group into 40%
Syneron without developing a level of conviction
20%
that would help them stick with the company
through a period of weak fundamentals. 0%
•
YTD
01
02
03
04
05
06
07
Adopted “poison pill” on November 11, a move

that both signals the Board’s concern about a EBIT Margin Gross Margin
potential hostile takeover bid and antagonizes
shareholders who may want the company to operate Source: Company, The Manual of Ideas.
under threat of a takeover, thereby putting more

pressure on the incumbent Board to perform.
MANAGEMENT’S VIEW OF BUSINESS • Inlight acquisition (announced November 4):

Notes from Q3 earnings call dated November 11: small U.S.-based laser technology company;
• Operating environment: “facing major innovative design will provide “cutting-edge
macroeconomic and industry challenges;” lower clinical results at significantly lower cost than
consumer confidence has negatively affected existing fractional laser technology;” Syneron made
doctors’ decisions to purchase capital equipment; “relatively small [undisclosed] investment” –
credit tightening has made financing for equipment provides Syneron complementary technology that
“more difficult;” industry consolidation is “more will allow company to launch new product platform
relevant” than in the past (will “definitely” happen with “minimal” lead time, i.e., in 1Q09, and
in 2009) – some competitors have “real challenges, generate incremental source of revenue
and it has to do with the amount of cash they have;” • Procter & Gamble partnership: “going accotrding
most weakness in U.S. and Western Europe to plan;” “feel very strongly about the relationship
• Q3 review: revenue down 14%; diversified and how it is moving forward”
globally, with 53% of revenue from North America • Other activities: pursuing joint ventures, including
and 47% from various international markets; 75% in China and South America
gross margin; “overall stable ASP;” 7% GAAP and
10% non-GAAP EBIT margin, respectively
• Outlook: “cautious… until we see a clear sign of
recovery;” sees “slight decrease in ASP;” expects
Western European weakness to be partially offset
by other international markets
• Cost reduction: taking steps to reduce cost
structure, “recognizing potentially protracted nature
of slowdown”: downsizing office in Canada (to
result in 11% reduction in North American
headcount, mostly in back office and support
functions); “rationalizing” overhead in Europe –
expects $5 million of savings in 2009; will evaluate
additional cost reduction opportunities
• Business model-related comments: cost side:
utilizes flexible OEM production model that reduces
capital outlay and overhead; sales side: “exploring
ways to introduce a new business model” to enable
doctors to access Syneron devices at “relatively low
initial cost while still generating good levels of
profitability for Syneron”
• LEAP: Syneron had previously introduced LipoLite
Energy Access Program (LEAP) subscription
program; doctors obtain LipoLite for $30K instead
of >$100K – when initial energy allocation is
depleted, doctors buy additional energy packets
from Syneron; other new products also have
recurring revenue components; “overall feedback
we’re getting, mainly from existing customers…
[has been] very positive;” “very pleased” with effort
• R&D: plans to use financial resources to continue
investing in R&D (“essential for bringing products
to market more quickly”); goal is to advance
product pipeline in body shaping and facial
applications
Take-Two Interactive Software (Nasdaq: TTWO) New York, NY, 646-536-2842

Technology: Software & Programming, Member of S&P SmallCap 600 http://www.take2games.com


per share data) 10/31/01 10/31/02 10/31/03 10/31/04 10/31/05 10/31/06 10/31/07 7/31/08 7/31/07 7/31/08
Revenue 451 795 1,034 1,128 1,201 1,038 982 1,507 206 434
Gross profit 145 295 396 378 415 212 247 540 38 174
EBIT 25 123 163 97 38 (187) (126) 132 (57) 59
Net income (7) 72 98 62 35 (185) (138) 105 (59) 52
Diluted EPS (0.03) 1.21 1.51 0.91 0.50 (2.60) (1.93) 1.35 (0.81) 0.67
Cash from ops 27 145 81 21 40 43 (64) 277 (59) 282
Capex 13 24 46 64 91 25 27 14 4 4
Free cash flow 14 121 35 (44) (51) 18 (91) 263 (62) 278
Total assets 360 491 707 945 935 869 831 1,093 758 1,093
Short-term debt 54 0 0 0 0 0 0 0 0 0
Long-term debt 0 0 0 0 0 0 18 0 11 0
Common equity 220 356 534 636 686 550 471 666 453 666
EBIT/capital employed 17% 98% >100% 41% 13% -74% -72% >100% n/m n/m
$35
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • Strong balance sheet, with $339 million cash and
Take-Two provides interactive gaming software. The no debt as of July 31.
company develops software for leading consoles, including • Stock price implies 31% trailing FCF yield, 8x
Sony’s PlayStation, Microsoft’s Xbox, Nintendo’s Wii, and trailing P/E and 8x forward P/E.
for the PC. Flagship titles include Grand Theft Auto and Sid
Meier’s Civilization. The company distributes proprietary INVESTMENT RISKS & CONCERNS
and third-party products to retailers in North America. Wal- • Turnover, restructurings. The incumbent Board
Mart, GameStop and Best Buy accounted for 15%, 13% and was defeated in March 2007, resulting in removal of
12% of revenue, respectively, in FY07 (top five were 51%). the CEO and subsequent resignation of the CFO. In
2Q07, Take-Two hired ZelnickMedia to provide
SELECTED OPERATING DATA management services. The company has incurred
YTD various charges, with more expected in FQ4.
FYE October 31 2005 2006 2007 7/31/08
% of revenue by segment: • Electronic Arts (ERTS) dropped hostile tender in
Publishing 71% 73% 71% 81% September, with TTWO shares falling 24% to $17.
Distribution 29% 27% 29% 19% The companies had signed a confidentiality deal,
Gross margin by segment: but Take-Two had called EA’s $26 per share offer
Publishing 45% 25% 32% 44%
Distribution 9% 9% 9% 9% inadequate. Take-Two remains “actively engaged in
Total GM 35% 20% 25% 37% discussions with other parties in the context of our
Revenue growth by segment: formal process to consider strategic alternatives.”
Publishing 11% -12% -8% 109% • Cyclical, hit-driven business. The video game
Distribution -3% -19% 2% 5%
Revenue growth 7% -14% -5% 76% software industry, while growing in the long term,
% of publishing segment revenue by product platform: has exhibited strong cyclicality due to major
Xbox 360 0% 23% 30% 42% hardware transitions. Demand for prior-generation
PlayStation 3 0% 0% 10% 33% software declined in 2007 due to the adoption of
Wii 0% 0% 5% 8%
PlayStation / PS 2 59% 30% 26% 8% next-generation platforms such as Xbox 360. In
PSP 6% 18% 10% 4% addition, Take-Two is highly dependent on “hit”
PC 11% 17% 14% 3% titles, such as Grand Theft Auto IV or Civilization.
Xbox and other 23% 12% 6% 2% • Litigation. The Grand Theft Auto franchise has
% of distribution segment revenue by type:
Hardware 25% 40% 43% 42% come under fire from consumer groups and
Software 75% 60% 57% 58% government officials as too violent. At this time,
% of revenue by geography: litigation does not appear to pose a material threat.
International 32% 31% 25% 41%
08 09
INVESTMENT HIGHLIGHTS ($mn) MV EV EV/Rev P/TB
P/E P/E
• $9 billion video game software market growing ATVI 13,989 11,053 6.9x 5.4x 18x 15x
at 10-15%, with significant volatility in the annual ERTS 6,559 4,094 .9x 2.5x 17x 11x
growth rate caused by new console introductions. KNM 2,942 2,759 .9x 2.2x 10x 11x
For example, the company Xbox-related revenue SNE 21,193 20,396 .2x 0.7x 12x 9x
declined from $163 million in FY05 to $13 million TTWO 835 496 .3x 2.5x 5x 8x
in FY07, while Xbox 360-related revenue grew
from zero in FY05 to $206 million in FY07. More MAJOR HOLDERS
than half of all Americans claim to play games. CEO Feder <1% │ Other insiders 1% │ Oppenheimer 23%
• FY08 revenue growth driven by Grand Theft │ Fidelity 14% │ UniCredito 11% │ Legg Mason 10%
Auto IV. The game, released in April, set an
industry sales record, with six million units sold RATINGS
through in the first week at a retail value of $500+ VALUE Intrinsic value materially higher than market value?
million (>10 million units have sold through YTD). MANAGEMENT Capable and properly incentivized?
• Raised FY08 guidance, lowered FQ4 guidance, FINANCIAL STRENGTH Solid balance sheet?
after strong FQ3. Management expects FQ4 MOAT Able to sustain high returns on invested capital?
revenue of $285-335 million and non-GAAP EPS of EARNINGS MOMENTUM Fundamentals improving?
$0.01-$0.05, implying FY08 revenue of $1.50-$1.55 MACRO Poised to benefit from economic and secular trends?
billion and non-GAAP EPS of $2.08-2.12. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE

Take-Two owns several video game franchises, most notably Grand Theft Auto. While the business is hit-driven and depends
on new hardware launches by Microsoft, Sony and Nintendo, Take-Two’s core franchises are strong enough to achieve repeat
blockbuster sales. The shares sold off precipitously following EA’s tender withdrawal and are now cheap at 8x FY09E EPS.
Tempur-Pedic International (NYSE: TPX) Lexington, KY, 800-878-8889

Consumer Cyclical: Furniture & Fixtures http://www.tempurpedic.com

# of institutional owners: n/a 10/16/08 $0.32 $0.32 LTM pre-tax ROC 59%

per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 222 298 479 685 837 945 1,107 1,028 294 253
Gross profit 114 150 255 361 424 461 535 461 142 106
EBIT 30 40 83 146 186 199 244 176 68 43
Net income 12 17 38 75 99 112 142 98 39 24
Diluted EPS 1.52 2.14 0.39 0.73 0.97 1.28 1.74 1.29 0.49 0.32
Cash from ops 20 35 47 77 102 166 126 165 56 73
Capex 35 11 33 39 87 38 17 17 4 2
Free cash flow (16) 24 14 38 15 128 109 149 52 71
Total assets 177 449 620 640 702 726 806 782 774 782
Short-term debt 11 14 11 9 31 20 0 0 0 0
Long-term debt 95 182 366 281 314 342 602 519 556 519
Preferred stock 12 148 0 0 0 0 0 0 0 0
Common equity 17 3 123 214 226 213 48 84 28 84
$40
$35
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • Thomas Bryant (60) became CEO in 2006 after

Tempur-Pedic provides premium branded mattresses and five years with Tempur-Pedic. He was previously
pillows in two segments: Domestic consists of two U.S. CEO of Stairmaster. Other senior executives joined
factories and a distribution subsidiary. International consists the company in the past two to five years.
of a factory in Denmark and distribution subs. • Commencing “most extensive new product
launch” in company history, with new and
SELECTED OPERATING DATA upgraded products slated for launch globally.
YTD • Stock price implies 30% trailing FCF yield, 5x
FYE December 31 2005 2006 2007 9/30/08
Domestic 64% 66% 66% 63%
International 36% 34% 34% 37% INVESTMENT RISKS & CONCERNS
Revenue growth by geography: • Guiding for revenue and EPS decline of 14-16%
Domestic 25% 16% 17% -15%
International 18% 8% 18% 2% and 43-48%, respectively, in 2008, with estimated
Total revenue growth 22% 13% 17% -10% revenue of $930-950 million and EPS of $0.90-1.00,
EBIT margin by geography: reflecting “the most challenging… environment in
Domestic 18% 19% 19% 9% memory.” Management reduced guidance when it
reported Q3 results in October. Retail partners have
Revenue growth by channel:
1,2 reported store traffic “down sharply” in 2008,
Retail 31% 19% 21% -8% average selling prices have trended lower, and
Direct 4% -17% -7% -38% trends have weakened in several European markets.
Healthcare -2% -2% 12% 3%
Third party -1% 12% 3% 2% • Net debt of $431 million at Q3-end. The company
Revenue growth by product:
3 has eliminated dividends and is reducing expenses
Mattresses 31% 15% 18% -11% and working capital. The goal is to “operate without
Pillows -9% 0% 12% -9% risk of breaching our credit facility covenants even
Other 27% 16% 18% -3%
U.S. door count
4
n/a 6,050 6,350 6,800
if the market continues to deteriorate.”
International door count
5
n/a 4,450 4,990 5,100 • Inflationary cost environment. The company has
1
Products are sold through four distribution channels in each geographic experienced margin compression due in part to the
segment: retail (furniture, specialty, and department stores), direct (direct rising cost of chemicals and proprietary additives.
response and Internet), healthcare (chiropractors, medical retailers, hospitals),
and third-party distributors in countries with no owned subsidiaries.
2
In 2007, the company derived 83% of revenue from the retail channel, 7% COMPARABLE PUBLIC COMPANY ANALYSIS
from direct, 5% from healthcare, and 5% from third-party distribution.
3
In 2007, the company derived 69% of revenue from mattresses, 13% from ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
pillows, and 18% from other products (foundations, adjustable beds, etc.).
4
ETH 438 561 .6x 1.6x 12x 9x
The company plans to increase door count to 7,000-8,000 "over time"; the
ZZ 212 961 .6x n/m 5x 5x
total available market is estimated at 10,000 stores.
5
The company has identified 7,000 international stores as appropriate targets. SCSS 23 77 .1x 1.5x n/m n/m
TPX 503 934 .9x n/m 7x 8x
• $13 billion global mattress market, with 22 MAJOR HOLDERS
million mattress unit sold in the U.S., and a similar CEO Bryant 1% │ Other insiders 2% │ Invesco 25% │
number of mattresses sold outside the U.S., in Amvescap 15% │ TA Associates 7% │ State Street 6% │
2007.1 In addition, domestic pillow sales were $1.1 Friedman Fleischer 6% │ Munder 5%
billion, with roughly equivalent international sales.
• Leader in growing specialty mattress category, RATINGS
which comprises non-innerspring mattresses, VALUE Intrinsic value materially higher than market value?
including foam mattresses, airbeds, and waterbeds. MANAGEMENT Capable and properly incentivized?
• Comfort and health advantages over standard FINANCIAL STRENGTH Solid balance sheet?
bedding products. The company uses temperature- MOAT Able to sustain high returns on invested capital?
sensitive material that has a high density and EARNINGS MOMENTUM Fundamentals improving?
conforms to the body to reduce neck and back pain. MACRO Poised to benefit from economic and secular trends?
The company holds 70 U.S. and foreign patents. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
1
Source: Tempur-Pedic, International Sleep Products Association (ISPA).
THE BOTTOM LINE

Tempur-Pedic is a wide-moat business with strong brand equity, pricing power, industry-leading cost structure, high returns
on capital, and favorable long-term growth prospects. We believe investors underestimate the variability of the company’s
cost structure and the company’s ability to service its debt in a difficult market environment. The discretionary nature of
Tempur-Pedic’s high-ticket products makes the stock an easily conceptualized short. The high short interest could, however,
result in explosive stock price upside once the market refocuses on the company’s significant normalized earnings power. We
value Tempur-Pedic at $11-18 per share, based on 7x trailing EBIT and 12x estimated normalized EPS.
…additional insight into TPX: • Debt covenant worries. Investors may be overly
concerned about the potential for Tempur-Pedic to
WHAT ARE THE SHARES WORTH? bust debt-related covenants. The company took on
• We value Tempur-Pedic at $11-18 per share, debt to recapitalize the balance sheet, spending
based on the valuation analysis summarized below. more than $500 million on share repurchases from
• Our estimate is supported by an analysis of free 2005-07. Tempur-Pedic reduced debt by $38
cash flow. FCF per share should exceed EPS by up million in Q3 and is repatriating cash from overseas.
to $0.25 due to D&A significantly exceeding capex. The company must maintain a ratio of funded debt
FCF may be ~$1.15 per share in 2009, implying an to trailing EBITDA of not more than 3x. The ratio
FCF yield of 6-11% based on our valuation range. stood at 2.45x at the end of Q3. Trailing EBITDA
and funded debt are likely to decline going forward.
Tempur-Pedic — Valuation Summary With debt expected to be cut materially in the near
($ in millions, except per share data) Low High term, the company appears highly likely to stay
Value Value within the boundary of 3x debt to EBITDA.
1
Negative value of net debt:
Cash and equivalents $88 $88
Long-term debt (519) (519)
Total ($431) ($431)
REVENUE AND MARGIN ANALYSIS
TPX – Revenue, Gross Profit and EBIT, 2000-07
Value of core business:
LTM EBIT $176 Tempur-Pedic posted strong growth through 2007, benefiting from a
Fair value multiple of LTM EBIT 7x virtuous cycle of a differentiated product, high-return marketing
Estimated normalized EPS power $2.00 expenditures, increasing brand recognition, market share gains, high-
Fair value multiple of EPS power 12x margin revenue, low working capital and capex requirements, and
Total $1,234 $1,800 increasing cash flow available for sales and marketing.
$1,200mn
Estimated fair value of TPX $802 $1,369
per share $11 $18
$1,000mn
1
Based on balance sheet values as of September 27, 2008. $800mn
2
Source: Company filings, The Manual of Ideas estimates and analysis. $600mn
$400mn
$200mn
WHY THE SHARES MAY BE MISPRICED $0mn
• Fundamental underappreciation of company’s 00 01 02 03 04 05 06 07
superior operating model. Tempur-Pedic is the
lowest-cost producer in the mattress industry, with
efficient production, low inventory requirements, Source: Company, The Manual of Ideas.
and low overall capital intensity. This, coupled with
strong brand recognition and preference by higher- TPX – Y-Y Revenue Growth, 2000-YTD’08
end consumers, should enable the company to The company posted annual growth rates of 30-60% in the first half
sustain superior returns on capital. of the decade, with growth slowing from 2005-07 due to greater scale
and market penetration. The YTD sales decline of 10% has primarily
• Large short interest; sellers may underestimate been caused by weak consumer spending. We do not believe the
company’s ability to remain profitable. Tempu- YTD result signals a departure from the company’s long-term growth
Pedic fits the typical target profile of many short trend and expect Tempur-Pedic to resume growth when the
macroeconomic outlook improves.
sellers: the company sells big-ticket consumer items
dependent on discretionary spending. With pricing 70%
squeezed both on the input and output sides, 60%
management lowering guidance, and net debt of 50%
$431 million, momentum appears to be favoring the 40%
short sellers’ thesis. 19 million of 75 million 30%
outstanding shares were sold short as of October 28 20%
(stock was until recently on NYSE list of Reg SHO 10%
threshold securities). The short sellers’ aggressive 0%
stance against Tempur-Pedic has not only depressed -10%
the shares, but also opened the door to a massive 00 01 02 03 04 05 06 07 YTD
short squeeze if/when their thesis is proven wrong.
TPX – Gross and EBIT margin, 2000-YTD’08 • Tempur-Pedic brand: “spent over $600 million
Tempur-Pedic has maintained operating margin well above 10% building the brand during the last six years;” “trend
throughout this decade. While EBIT margin is down this year from toward the Tempur material is a very long-running
2007, it remains above 10% despite the YTD decline in sales. We
trend;” “the fundamental, long-term demand is as
believe this attests to the company’s variable cost structure and
superior operating model. The company appears poised to maintain strong as it ever was”
profitability even if sales continue to decline in a weak economic • Long-term initiatives: (1) “Historically we were a
environment. We estimate long-term EBIT margin at roughly 20%. direct response company. Today we predominantly
60% sell through retail. …program currently underway to
50% streamline our distribution network.” (2) “broaden
and strengthen our [mattress] product line… meet
40%
the needs of premium consumers that we don’t
30% currently address.” (3) improve gross margin.
20% • Input price inflation: raw material costs were “up
10% substantially” y-y… “coping with cost increases in
0% the vicinity of the mid-20%;” chemical cost
00 01 02 03 04 05 06 07 YTD increases “hit us a little harder than we [thought]…
expecting that chemicals will continue to be high;”
“significant cost pressure in the last quarter around
Source: Company, The Manual of Ideas. diesel pricing… seeing some relief there so our
freight cost is coming down” in Q4 versus Q3
• Would you go below $1,500 for a queen set?
MANAGEMENT’S VIEW OF BUSINESS “while I will never say never, at the moment we see
CEO Sarvary and CFO Williams provided the following no need for that;” “we are a premium product”
commentary on the 3Q08 earnings call on October 16: • Market share: based on Q2 ISPA data, the
• Q3 performance: “sales and earnings in line with company gained share (Q3 data not yet
our expectations” available)European business: “…we saw some
• Q4 outlook: “Given the extraordinary events of weakness in certain countries and we saw it
recent weeks, the company now believes fourth spreading as the year progressed. In the third quarter
quarter sales and earnings will fall below prior we saw it spread even further. So basically now the
expectations;” projecting Q4 sales decline of 30%; entire European continent is suffering to some
“Christmas has always been a little bit seasonally degree in terms of the economic weakness.”
slower for the mattress business… we’re not • Asian business: “continues to perform very well”
expecting any dramatic change, certainly not for the • Marketing budget: “our anticipation is to maintain
upside, this quarter” this 9% to 10% range, in a normal period, but we
• Operating environment: “most challenging may move it from period to period, especially in
economic environment in memory… no reason to environments like this”
assume this will improve in the short term”
• Inventory: “We have wrung out the inventory out
of the system at this stage.”
• Production volume: “we were running productions
significantly less than sales to bleed out the
inventory;” “overall production volume is not
dramatically different” in Q4 than in Q3
• Debt reduction: repatriating $140 million from
overseas; suspending dividend; “generated
substantial benefit from working capital” and
“reduced debt by $38 million” in Q3; $640 million
credit facility in place, with “quite attractive” terms;
intends to “de-leverage our domestic business while
modestly leveraging our international business,
thereby allowing for more rapid overall debt
reduction;” “developing a lot of breathing room
on… covenants”
TheStreet.com (Nasdaq: TSCM) New York, NY, 212-321-5000

Technology: Computer Services http://www.thestreet.com

Enterprise value: $19 million Next quarter -0.02 0.07 4 P/E FYE 12/31/10 16.7x
# of institutional owners: 186 10/29/08 -$0.04 $0.06 LTM pre-tax ROC >100%

per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 15 21 25 31 34 51 65 75 16 17
Gross profit (1) 9 14 19 21 32 40 43 10 8
EBIT (32) (10) (1) 3 5 11 13 7 3 (1)
Net income (29) (9) (4) (2) 0 13 29 6 20 (1)
Diluted EPS (1.14) (0.38) (0.04) 0.14 0.22 0.47 0.99 0.19 0.67 (0.04)
Cash from ops (24) (4) (1) 3 1 16 13 13 2 2
Capex 2 1 1 1 1 2 5 6 1 2
Free cash flow (25) (4) (1) 2 1 14 8 7 1 (0)
Total assets 47 39 37 40 43 65 176 180 103 180
Short-term debt 0 0 0 0 0 0 0 0 0 0
Long-term debt 0 0 0 0 0 0 0 0 0 0
Common equity 37 29 26 25 27 44 153 156 84 156
EBIT/capital employed n/m n/m n/m n/m n/m n/m n/m >100% n/m n/m
$80
$70
$60
$50
$40
$30
$20
$10
$0
BUSINESS OVERVIEW • YouTube content licensing creates ad-supported

TheStreet.com is a web-centric financial media company channel, which generates no material revenue but
offering free and subscription content. The company has will be monetized through Google’s ad programs.
expanded its network of media properties through organic • CEO Thomas Clarke (51) joined in 1999. He
growth and acquisitions. Properties include TheStreet.com, previously led a Knight-Ridder sub. Co-founder Jim
RealMoney.com, Stockpickr.com, BankingMyWay.com, Cramer (58) became chairman in October.
MainStreet.com, Rate-Watch.com, and Promotions.com. • Strong balance sheet, with $80 million of net cash.
TheStreet.com, launched in 1996 by Jim Cramer, pioneered The company has not repurchased shares recently.
investment-related subscription content on the Internet. • Stock price implies 7% trailing FCF yield, 17x
FYE December 31 2005 2006 2007 9/30/08
Unique monthly visitors (mn) 3.0 4.4 5.8 7.2 • Dependent on consumer interest in stock market,
% of revenue by type: which in turn depends heavily on the performance
Paid services — subscription 68% 66% 52% 42% of major market indices. A protracted bear market
Paid services — syndication 3% 4% 7% 15% may lessen consumer interest in financial content,
Advertising — financial 23% 22% 19% 19%
Advertising — non-financial 6% 8% 15% 13% adversely affecting subscription and ad revenue.
Interactive marketing
1
-- -- 8% 11% • Financial sector accounts for one-half of ad
Revenue growth by type: revenue, or roughly one-fifth of total revenue.
Paid services — subscription 3% 45% 2% -10%
Paid services — syndication -9% 67% 123% 243%
Financial firms’ advertising budgets are likely to
Advertising — financial n/a 48% 9% 15% decline materially due to industry weakness.
Advertising — non-financial n/a 119% 132% 20% • Jim Cramer is significant driver of subscription
∆ revenue 10% 51% 29% 22% revenue. The company and Cramer extended his
2
∆ pro forma revenue n/a 37% 9% -2% contract in July. Under the amended deal, Cramer
∆ unique visitors per month n/a 47% 32% 29%
∆ deferred rev. (period end) 36% 28% 28% 19%
may terminate his contract in January 2010.
% of ad revenue from top 5 33% 34% 28% 26%
1
Attributable to Promotions.com (acquired in August 2007). COMPARABLE PUBLIC COMPANY ANALYSIS
2
Assumes that all companies acquired in recent years have been part of ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
TheStreet.com throughout the period shown.
EDGR 25 25 1.3x n/m n/m n/m
JRJC 176 90 2.1x 2.5x 10x 6x
INVESTMENT HIGHLIGHTS MORN 1,414 1,104 2.2x 5.5x 16x 15x
• Refocused on consumer market in 2005, with goal RATE 558 517 3.4x 8.7x 19x 16x
of becoming destination for “all things money.” Ad YHOO 14,994 11,780 1.6x 2.1x 26x 23x
revenue from non-financial firms has grown rapidly
TSCM 97 19 .3x 1.0x 29x 53x
since then. The company anticipates the revenue
mix to continue shifting toward marketing services,
including ad revenue and interactive marketing MAJOR HOLDERS
revenue. The latter is generated by Promotions.com, CEO Clarke 3% │ Chairman Cramer 12% │ Other insiders
which creates promotional ad campaigns. 5% │ Technology Crossover 14% │ Columbia Wanger 10%
• Redesigned TheStreet.com website in early 2008 │ Independence Investments 7% │ Guardian Life 6% │
and launched MainStreet.com in February. The UBS 5% │ North Pointe 5%
latter is a free site that features general news articles
with a tie to various personal finance topics. RATINGS
• M&A has boosted growth, with GAAP revenue
growth of 29% vs. organic growth of 9% in 2007.
Since 2006, the company has acquired Weiss (fund
and other ratings) for $3 million, Stockpickr.com
(stock portfolios) for $3 million, Promotions.com
for $21 million, and BankingMyWay.com and Rate-
Watch.com for $25 million.
THE BOTTOM LINE

TheStreet.com has succeeded in becoming a widely read online alternative or complement to publications such as Investor’s
Business Daily and Barron’s. The company has benefited both from Jim Cramer’s popularity and from a model that has
thrown off enough FCF to enable it to make several acquisitions. TheStreet.com retains a strong balance sheet, with more
than two-thirds of market value in cash. It is unclear how the company will deploy the cash, though it appears likely it may
seek additional acquisitions. We view the shares as undervalued, but investors should gain comfort around prospective uses
of the cash and the risk of Jim Cramer ending his contract in early 2010.
Thomas & Betts Corporation (NYSE: TNB) Memphis, TN, 901-252-8000

Technology: Electronic Instruments & Controls, Member of S&P MidCap 400 http://www.tnb.com


per share data) 12/30/01 12/29/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 1,498 1,346 1,322 1,516 1,695 1,869 2,137 2,505 553 666
Gross profit 318 332 352 431 500 569 661 786 171 208
EBIT (145) 31 82 144 204 246 289 351 82 101
Net income (146) (53) 43 93 113 175 183 297 51 62
Diluted EPS (2.39) (0.14) 0.73 1.57 1.86 2.85 3.13 5.14 0.88 1.11
Cash from ops 101 80 97 64 193 221 261 184 74 2
Capex 39 24 29 25 37 44 41 44 9 11
Free cash flow 62 57 68 39 157 177 221 139 65 (9)
Total assets 1,762 1,620 1,783 1,756 1,920 1,830 2,568 2,595 1,997 2,595
Short-term debt 54 65 133 3 151 1 116 152 116 152
Long-term debt 618 560 552 543 387 387 695 513 273 513
Total liabilities 1,078 996 1,051 854 868 762 1,339 1,224 837 1,224
Common equity 683 624 731 902 1,053 1,068 1,229 1,371 1,160 1,371
EBIT/capital employed -27% 6% 16% 30% 44% 51% 47% 55% n/m n/m
$70
$60
$50
$40
$30
$20
$10
$0
BUSINESS OVERVIEW • Guiding for GAAP EPS of $5.35-5.45 in 2008,

Thomas & Betts designs and manufactures industrial including $1.50 gain on the $300 million Leviton
products. The company operates in three segments: sale in June, and $0.13 legal settlement gain.
Electrical provides electrical connectors and components for • Dominic Pileggi (56) became CEO in 2004 and
electrical, utility and communications applications. The chairman in 2006. He has been with the company
segment experiences modest seasonality, with sales strongest for most of the past thirty years. CFO Kenneth
during the construction season in Q2 and Q3. Fluke joined the company in 2000 from Goodyear.
Steel Structures provides highly engineered tubular steel • Repurchased $333 million of stock in 2006-07,
transmission and distribution poles. but has not bought back any shares in 2008, despite
a declining stock price and a remaining
HVAC provides heating and ventilation products for authorization on 2.8 million shares.
commercial and industrial buildings. • Stock price implies 12% trailing FCF yield, 4x
YTD
% of revenue by segment: • Headline growth overstates underlying results.
Electrical 81% 81% 83% 86% While the company achieved 24% revenue growth
Steel structures 11% 12% 11% 9%
HVAC 8% 7% 7% 5%
YTD, revenue before acquisitions and currency
Revenue growth by segment: gains grew in the low single digits.
Electrical 10% 10% 17% 29% • Cyclical business, electrical product demand driven
Steel structures 33% 19% 3% -2% by the construction market, industrial production
HVAC 8% 3% 6% 2%
levels and spending by utilities for replacements,
EBIT margin by segment: expansion and efficiency improvements.
Electrical 15% 16% 17% 20% • May not be able to pass through price increases
Steel structures 18% 16% 17% 18% of energy and raw materials (steel, aluminum,
HVAC 14% 15% 17% 17%
Corporate -3% -3% -3% -5%
copper, zinc, resins and rubber compounds).
Total EBIT margin 12% 13% 14% 14% • Recent acquisitions may prove to have been ill-
D&A as % of revenue 3% 3% 3% 3% timed, and integration may present challenges.
Capex as % of revenue 2% 2% 2% 2% • Net debt of $453 million could prove burdensome
U.S. 67% 66% 60% n/a if the business environment deteriorates sharply.
Canada 19% 19% 20% n/a
Europe 12% 11% 14% n/a COMPARABLE PUBLIC COMPANY ANALYSIS
Other 3% 4% 6% n/a 08 09
P/E P/E
INVESTMENT HIGHLIGHTS ABB 24,883 20,057 .6x 2.9x 6x 6x
• Market-leading products in electrical segment, BDK 2,373 3,658 .6x 9.3x 8x 9x
including fittings, fastenings, connectors, switch and CBE 5,498 6,443 1.0x 18.8x 7x 8x
outlet boxes, and metal framing. Target markets GE 168,144 700,506 3.8x 12.3x 8x 9x
include industrial MRO, commercial, utility and SI 47,003 52,151 .6x 3.1x 9x 7x
residential construction; project construction; TNB 1,168 1,630 .7x 8.8x 6x 6x
industrial OEMs; and communication companies.
• Expanded electrical capabilities with five MAJOR HOLDERS
acquisitions totaling $830 million in 2007-08, CEO Pileggi <1% │ Other insiders 1% │ Wachovia 7% │
including Lamson & Sessions ($450 million), GAMCO 7% │ Vanguard 6%
Joslyn and Power Solutions ($282 million), Homac
($75 million), and Drilling Technical ($23 million). RATINGS
• Industrial demand and commodity- and energy- VALUE Intrinsic value materially higher than market value?
related price increases are offsetting lower sales MANAGEMENT Capable and properly incentivized?
volumes in markets affected by the slowdown in FINANCIAL STRENGTH Solid balance sheet?
residential construction, such as retail, utility MOAT Able to sustain high returns on invested capital?
distribution and light commercial construction. The EARNINGS MOMENTUM Fundamentals improving?
electrical segment “performed very well” in Q3, MACRO Poised to benefit from economic and secular trends?
“offsetting higher commodity and energy costs.” EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE

Thomas & Betts enjoys a strong position in electrical connectors and components for industrial markets, but we do not
believe the company is diversified enough to withstand a severe downturn in cyclical end-markets. The company posted
EBIT losses of more than $100 million in each of 2000 and 2001, and we are concerned profits could decline once again.
Total System Services, Inc. (NYSE: TSS) Columbus, GA, 706-649-2310

Technology: Computer Services, Member of S&P 500 http://www.tsys.com


per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 892 955 1,054 1,187 1,603 1,787 1,806 1,904 458 500
Gross profit 391 424 502 595 828 912 838 860 212 228
EBIT 138 158 191 202 287 357 354 361 91 96
Net income 104 126 141 151 195 249 237 230 69 64
Diluted EPS 0.53 0.64 0.71 0.76 0.99 1.26 1.20 1.16 0.35 0.33
Cash from ops 91 198 266 368 241 386 335 367 128 105
Capex 88 81 190 116 76 52 106 119 23 26
Free cash flow 3 116 76 252 164 334 229 248 105 79
Total assets 657 780 1,001 1,282 1,411 1,634 1,479 1,587 1,827 1,587
Short-term debt 0 0 15 2 2 3 12 74 6 74
Long-term debt 0 0 30 5 4 4 257 189 74 189
Common equity 507 602 733 865 1,013 1,217 845 981 1,390 981
EBIT/capital employed 84% 97% 93% 88% >100% >100% 97% 86% n/m n/m
$40
$35
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • #2 provider of payment processing to merchants,

TSYS provides payment processing services to card issuers behind First Data but ahead of Global Payments.
and merchant acquirers. It operates in three segments: TSYS has 20% market share of card-accepting
Domestic-based Support Services includes payment merchant locations in the U.S. The company relies
processing and other services provided from within the U.S. heavily on bank relationships in merchant acquiring.
Clients include banks and other card-issuing organizations. • No longer controlled by Synovus. While TSYS
International-based Support Services includes payment has been public for many years, Synovus finally
processing and other services from outside the U.S. Clients gave up control in a spinoff at yearend 2007.
include banks and other card-issuing organizations. • Guiding for 5-7% net income growth in 2008,
despite an expectation of a “slow” holiday season.
Merchant Acquiring Services includes the operations of • Strong, steady management, led by chairman and
Vital, which began as a 50/50 JV with Visa in 1996. TSYS CEO Phil Tomlinson, who has been with TSYS
bought out Visa for $96 million in 2005. Clients include since 1982. CFO Jim Lipham and COO Troy
financial institutions and other merchant acquirers. Woods have been with TSYS for 20+ years each.
Seasonality is strongest during the holiday season in Q4. • Stock price implies 10% trailing FCF yield, 10x
TSYS began in 1959 as part of Columbus Bank & Trust. trailing P/E and 9x forward P/E.

YTD
FYE December 31 2005 2006 2007 9/30/08 • Risk of in-sourcing by large card issuers,
% of revenue before reimbursables by type: heightened by consolidation in banking industry.
Payment processing 67% 69% 67% 66% Large banks have at times opted to build processing
Merchant acquiring 18% 18% 18% 17% operations in-house. TSYS’ strong technology has
Other services 14% 13% 15% 17%
allowed it to make a strong outsourcing argument,
Revenue growth before reimbursables by type:
Payment processing 15% 14% -3% 3% but the case may become tougher as the largest card
Merchant acquiring 807% 10% -2% 1% issuers gain additional scale and can better amortize
Other services 6% 1% 18% 18% the large cost of internal technology development.
∆ revenue 35% 11% 0% 5%
1,2 • Payment card saturation. While credit, debit and
∆ AOF (average) 32% 4% -3% -10%
1,2
∆ AOF (period end) 22% -5% -10% 0% stored-value cards continue to gain share versus
Top 3 clients as % of revenue
3
36% 39% 32% n/a cash and checks, U.S. consumers already hold
% of revenue by geography (domicile of customer): multiple cards per person, on average. As a result,
North America 91% 89% 85% 83% growth may have to come from international clients.
Europe 8% 9% 12% 14%
Japan and other 1% 2% 3% 3%
% of revenue before reimbursables by segment: COMPARABLE PUBLIC COMPANY ANALYSIS1
Card issuer services – N.A. 73% 72% 67% 64% ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
Card issuer services – Global 10% 11% 17% 21% ADS 2,913 4,544 2.1x n/m 10x 9x
Merchant acquiring 17% 17% 16% 15% GPN 2,948 2,871 2.1x 37.5x 15x 14x
4
Card issuer services – N.A. 27% 29% 27% 28% HPY 561 667 .4x 130.5x 13x 11x
Card issuer services – Global 3% 7% 17% 19% TSS 2,393 2,348 1.2x 4.9x 9x 9x
Merchant acquiring 23% 31% 29% 26% 1
The company’s closest comp, First Data, was acquired by KKR in 2007.
1
Accounts on file. Represents payment card accounts owned by card-issuing
clients, for which transaction processing services are provided by TSYS. MAJOR HOLDERS
2
3
AOF refer to card issuer processing services only (not merchant processing). CEO Tomlinson 1% │ Other insiders 5% │ Synovus 13%
Includes Bank of America and Capital One, which accounted for 12% and
13%, respectively, of TSYS revenue in 2007.
4
Based on revenue before reimbursables; excludes spinoff-related expenses. RATINGS
INVESTMENT HIGHLIGHTS MANAGEMENT Capable and properly incentivized?
• #2 provider of processing services to card issuers. FINANCIAL STRENGTH Solid balance sheet?
While First Data remains the largest provider, MOAT Able to sustain high returns on invested capital?
TSYS’ card issuer processing technology has EARNINGS MOMENTUM Fundamentals improving?
allowed it to gain market share. At yearend 2007, MACRO Poised to benefit from economic and secular trends?
TSYS had U.S. processing market share of 42% in EXPLOSIVENESS 5%+ probability of 5x upside in one year?
consumer credit cards, 87% in Visa and MasterCard
commercial cards and 10% in retail cards.
THE BOTTOM LINE

TSYS is an obscure but steady business that extracts a small toll from purchases made with certain credit and debit cards. The
company touches various aspects of the payment card value chain, primarily serving card issuers and merchant acquirers. The
company should grow modestly for a long time, with little in the way of capital requirements. The shares deserve a look.
Travelzoo (Nasdaq: TZOO) New York, NY, 212-484-4900

Technology: Computer Services http://www.travelzoo.com

Enterprise value: $48 million Next quarter -0.03 0.03 2 P/E FYE 12/31/10 n/a
Shares out: 14.3 million FYE 12/31/08 -0.40 -0.33 2 EV / LTM revenue 0.6x
Ownership Data FYE 12/31/09 -0.06 0.27 2 EV / LTM EBITDA n/a
# of institutional owners: 81 10/27/08 -$0.13 -$0.09 LTM pre-tax ROC >100%

per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 6 10 18 34 51 70 79 81 20 19
Gross profit 6 9 18 33 50 69 77 78 20 18
EBIT 1 1 4 11 15 30 21 5 5 (0)
Net income 0 1 2 6 8 17 9 (4) 2 (2)
Diluted EPS 0.02 0.04 0.10 0.33 0.45 1.01 0.57 (0.28) 0.14 (0.13)
Cash from ops 1 1 2 5 8 17 10 (3) 1 (3)
Capex 0 0 0 10 0 0 1 3 0 2
Free cash flow 1 1 2 (6) 8 17 9 (6) 1 (5)
Total assets 2 3 7 43 56 44 37 35 37 35
Short-term debt 0 0 0 0 0 0 0 0 0 0
Long-term debt 0 0 0 0 0 0 0 0 0 0
Common equity 1 2 4 40 49 37 26 22 26 22
EBIT/capital employed n/m >100% >100% >100% >100% >100% >100% >100% n/m n/m
$120
$100
$80
$60
$40
$20
$0
BUSINESS OVERVIEW • Founded and managed by Bartel brothers.

Travelzoo’s free Internet media properties reach 12 million Chairman Ralph Bartel (42) founded Travelzoo in
consumers in the U.S., Europe and Asia. The properties 1998 and served as CEO until September 2008
include the Travelzoo website, the Top 20 list of weekly when Holger Bartel (41) assumed the role.
deals, email alerts, and a travel search engine. Travelzoo Previously, Holger oversaw Travelzoo’s operations
publishes offers from 900 advertisers, with Travelzoo deal in North America and worked at McKinsey.
experts reviewing offers to find the best travel deals. • Repurchased 1 million shares for $20 million in
2007, and 1 million shares for $29 million in 2006.
SELECTED OPERATING DATA • Material insider buying above current price.
YTD
Unpaid subscribers by geography (mn) (period end):
North America 9.4 10.2 11.0 11.1 • Global expansion may not work. Travelzoo is
Europe 0.3 0.7 1.4 2.1 losing money overseas as it attempts to scale. The
Asia Pacific -- -- 0.2 1.1 company’s model may not succeed abroad.
Unpaid subscriber growth by geography (mn) (period end):
• North America EBIT margin has declined from
Europe n/m 120% 111% 69% 47% in 2006 to 40% in 2007 and 32% YTD.
Asia Pacific n/m n/m n/m >999% • Dependent on ad revenue. Travelzoo may suffer if
∆ total subscribers 19% 12% 16% 17% travel declines due to economic weakness, high oil
∆ total revenue 51% 37% 14% 3%
prices, terrorist threats or other factors.
Average subscriber acquisition cost ($):
North America 2.66 2.10 3.16 4.03 • High ROIC has attracted new entrants, while
Europe 1.86 2.17 4.04 4.44 Google AdWords has lowered barriers to entry.
Asia Pacific n/a n/a 2.88 2.98 Sherman’s Travel is the #2 travel deals email
distribution company, with four million subscribers.
Europe 1% 5% 7% 12%
Asia Pacific 0% 0% 0% 1% COMPARABLE PUBLIC COMPANY ANALYSIS
EBIT margin by geography: 08 09
North America 32% 47% 40% 32% P/E P/E
Europe -148% -49% -89% -91% EXPE 2,238 2,723 .9x n/m 6x 6x
Asia Pacific n/a n/a n/m n/m GOOG 97,580 83,168 4.0x 4.5x 16x 14x
% of revenue by customer: MSFT 178,445 159,698 2.6x 9.2x 10x 9x
Travelport 12% 16% 15% 15% OWW 250 767 .9x n/m n/m n/m
Expedia <10% 14% 11% 11% PCLN 2,184 2,199 1.2x 13.5x 9x 9x
Sabre 15% <10% <10% <10% YHOO 14,994 11,780 1.6x 2.1x 26x 23x
TZOO 64 48 .6x 2.9x n/m n/m
• $1.3 billion in newspaper advertising by travel MAJOR HOLDERS
companies is moving to Internet. Travelzoo is Ralph Bartel 60% │ Holger Bartel 1% │ Other insiders <1%
well-positioned to benefit from this transition. The │ JP Morgan 10% │ Coatue 4%
company’s revenue increased from $18 million in
2003 to $79 million in 2007, a 34% CAGR. RATINGS
• Profitable, non-capital-intensive U.S. business. VALUE Intrinsic value materially higher than market value?
Travelzoo generated EBIT of $17 million in North MANAGEMENT Capable and properly incentivized?
America YTD, while employing minimal capital. FINANCIAL STRENGTH Solid balance sheet?
• Large global opportunity. Travelzoo is attempting MOAT Able to sustain high returns on invested capital?
to replicate worldwide the success it has had in the EARNINGS MOMENTUM Fundamentals improving?
U.S. Travelzoo entered the U.K. in 2005; Canada, MACRO Poised to benefit from economic and secular trends?
Germany and Spain in 2006; Australia, China, EXPLOSIVENESS 5%+ probability of 5x upside in one year?
France, Hong Kong, Japan, and Taiwan in 2007.
THE BOTTOM LINE

Travelzoo is a good business run by capable insiders who have loaded up on shares this year. The market values Travelzoo’s
international startup operations materially below zero even though the company has a proven model and management knows
Europe well (founder Ralph Bartel was educated in Germany and Switzerland). The downside appears limited as the Bartel
brothers are heavily incentivized to create shareholder value. If international operations do not achieve desired profitability,
management may shut them down and sell the U.S. business to a competitor such as Priceline.com. We value Travelzoo at
$25-26 per share, based on a probability-weighted scenario analysis that includes estimated ranges of annualized EBIT for
North America and the rest of the world.
…additional insight into TZOO: Estimated Enterprise Value

(based on various scenarios of normalized EBIT)
WHAT ARE THE SHARES WORTH? ($ in millions)
• We value Travelzoo at $25-26 per share, based on North America EBIT
a probability-weighted scenario analysis that ROW EV/EBIT $10 $20 $25 $30 $40
includes estimated ranges of annualized EBIT for EBIT Multiple 5x 8x 10x 12x 15x
North America and the rest of the world. -$20 5x -$50 $60 $150 $260 $500
• Normalized EBIT for North America and rest of -$10 5x $0 $110 $200 $310 $550
the world (ROW) are key valuation drivers. As $0 n/m $50 $160 $250 $360 $600
Travelzoo generates strong EBIT in North America $10 12x $170 $280 $370 $480 $720
while investing heavily in global expansion, we $20 15x $350 $460 $550 $660 $900
value the company on a sum-of-the-parts basis.
Travezoo is a non-capital-intensive business with
few excess assets, and the value of the enterprise Probability-Weighted Enterprise Value
depends on profit generation. While Travelzoo’s 12 (sum of probability-weighted contributions of scenarios)
million-strong subscriber base and brand name may ($ in millions)
have strategic value to an acquirer, we have not North America EBIT
used M&A transaction multiples in our analysis, as ROW $10 $20 $25 $30 $40
such a valuation might be too speculative. EBIT Probability 6% 25% 50% 15% 4%
• In North America, our most likely scenario (50% -$20 5% $0 $1 $4 $2 $1
probability) has Travelzoo roughly maintaining -$10 10% $0 $3 $10 $5 $2
normalized EBIT at approximately $25 million per $0 25% $1 $10 $31 $14 $6
year. We assign a fair value multiple of 10x in such $10 40% $4 $28 $74 $29 $12
a scenario. If EBIT declines, we anticipate multiple $20 20% $4 $23 $55 $20 $7
contraction due to likely business model concerns. Probability-weighted enterprise value: $344 million
If EBIT increases, we anticipate multiple expansion
due to likely renewed optimism regarding growth.
Our analysis conservatively assumes that EBIT Estimated Equity Value per Share
deterioration is more likely than EBIT growth. ($ and shares in millions, except per share data)
• In the rest of the world, our most likely scenario Probability-weighted enterprise value $344
(40% probability) has Travelzoo earning normalized Net cash $21
EBIT of $10 million, less than half the current Estimated equity value $365
North American EBIT run rate. This may be a fairly Shares outstanding 14.3
conservative assumption, as we see little reason why
Estimated equity value per share $25.52
Travelzoo’s international business, particularly in
Europe, could not emulate the success achieved in
the U.S. We have assigned a 5% probability to the
scenario that Travelzoo continues to suffer an
annualized operating loss of roughly $20 million
COMMENTS ON BUSINESS MODEL
internationally. The company is highly likely to take
decisive action to eliminate the operating loss even • Travelzoo employs virtually no capital in
if international growth does not materialize, as the running the business. The company has no
Bartel brothers own ~60% of Travelzoo shares. inventory cost, as its services are entirely web-
based. No elaborate infrastructure is required to
WHY THE SHARES MAY BE MISPRICED create the services, resulting in minimal PP&E
investment. The only major input is the time and
• Steady-state EBIT materially understated.
effort of Travelzoo employees, yet the company
Startup losses in Europe and Asia mask continued
does not depend on specific employees to maintain
strong U.S. profitability.
current operations (we do believe that the services
• High taxes lower net income yield. As U.S.
of the Bartel brothers are crucial to growing value
income is fully taxed and foreign losses generate no
over time). Enterprise value is embedded primarily
current tax benefit, effective tax rate is temporarily
in the Travelzoo consumer brand, an online
elevated, lowering the after-tax earnings yield.
distribution channel (including email), and a 12
million-strong subscriber base. With this
infrastructure in place, Travelzoo can maintain
current operations at low cost, creating a quasi-
recurring business model.
• Per-employee performance metrics are quite • A corollary of the previous point is that
impressive, as the following table shows. Per- Travelzoo is in a strong position to grow new-
employee results have declined primarily due to the country Top 20 lists from a low base. As the
startup of international operations. The company company launches new Top 20 lists, it has the
could boost per-employee performance substantially luxury of including deals without much regard for
if it opted to maintain rather than grow operations. capacity. As a result, the quality of the deals in
However, we believe investment in new country- startup countries may be higher than the quality of
specific Travelzoo websites will earn favorable risk- deals presented in the U.S. This quality advantage
adjusted returns for shareholders. may make it easier for Travelzoo to grow by word
of mouth in new countries, potentially helping to
YTD keep subscriber acquisition costs low. As a result,
($’000) 2005 2006 2007 9/30/08
investors may overestimate the difficulty Travelzoo
Revenue per employee 853 915 660 338
N.A. EBIT per employee 269 412 242 96 will encounter in scaling up new markets.
EBIT per employee 250 391 173 14
MANAGEMENT’S VIEW OF BUSINESS
• Advertiser-supported model, while highly Notes from 3Q08 earnings call on October 27:
profitable, creates perceived and real conflicts of • Operating environment: economy “definitely a
interest. Travelzoo makes money not from the challenging one” for advertisers; search volume and
consumers who rely on its media properties, but traffic to travel websites have been decreasing since
from travel companies who pay for inclusion in the September (even on seasonally adjusted basis);
company’s Top 20 list and other properties. While however, Travelzoo hotel business is doing “really,
Travelzoo claims that Top 20 deals are selected really well… seeing increased business there”
exclusively based on merit, there is a perceived and • Response to weak environment: Plans to cut costs
real risk that editorial decisions may be influenced in North America and “reduce the speed of our
by advertising revenue prospects. Most consumers investments in Asia Pacific and Europe;” strategy of
appear to be unaware that Travelzoo relies heavily developing global brand remains “unchanged”
on payments for deals included in the Top 20. • Q3 review: “unsatisfactory results” in North
However, it is conceivable that existing competitors America, “impacted more negatively than expected
or new entrants could expose this fact over time, by a weak economy;” European revenue up 62%
perhaps lessening the consumer appeal of (September best month ever: hotels and cruises
Travelzoo’s media properties. strong; number of search queries down); Asia
• Top 20 list may be less scalable than it appears. revenue of ~$200K; net loss widened due to
The Travelzoo model appears almost infinitely European and Asian losses – not tax deductible,
scalable: once the Top 20 list is created, there is no resulting in high effective tax rate; used $3.4 million
marginal cost of emailing the list to incremental of cash in operations; 207 employees at Q3-end
subscribers (leaving aside the cost of subscriber (104 in North America, 52 in Europe, 51 in Asia),
acquisition). However, the model contains a limit to up from 191 sequentially and up from 128 y-y
scalability: Consumers must be able to book the • Q4 outlook: does not provide guidance;
deals presented on the Top 20 list; if too many acknowledged travel weakness but argued that
consumers subscribe, too few may be able to benefit Travelzoo provides even more value to advertisers
from the deals presented. This may force the when it is difficult to move investory
company to forgo deals with low capacity in favor • International growth strategy: dates back to 2005;
of large-scale but potentially less-favorable deals. management still believes exansion will increase
For example, as the Top 20 list has grown to more shareholder value in the long term; international
than 10 million subscribers in the U.S., the company presence improves competitive position due to
has been forced to limit small deals on the list. As ability to (1) sell ad inclusions across different
the deals get bigger in terms of capacity, however, geographies and (2) perform local due diligence on
they may become less appealing. This dynamic puts quality and availability of travel deals (currently has
a natural limit on the size of the Top 20 subscriber producers and sales staff in 11 countries)
base in each country. An interesting way in which • Competitive landscape: no news; has faced new
the company appears to be trying to address this is competitors in North America during past few
by customizing the Top 20 list for different types of years; none of them have Travelzoo’s reach
subscribers (e.g., by residence location or travel • Travelzoo’s strengths: “push media,” such as Top
preference). This customization happens largely 20 weekly email, create demand that is incremental
behind the scenes, with users not explicitly asked to to “pull” demand, i.e., potential travelers proactively
state their preferences. Of course, the (potential) searching for travel deals online; SuperSearch
existence of customized Top 20 lists means that an product leverages more than 2.8 million ratings
aggregate of more than 20 deals are selected each from Travelzoo users
week, which may in turn dilute the quality of deals.
USA Mobility, Inc. (Nasdaq: USMO) Alexandria, VA, 866-662-3049

Services: Communications Services http://www.usamobility.com

Enterprise value: $156 million Next quarter n/a n/a 0 P/E FYE 12/31/10 12.7x
Ownership Data FYE 12/31/09 1.11 0.92 1 EV / LTM EBITDA -2.0x
Insider ownership: 1% FYE 12/31/10 0.75 0.55 1 EV / LTM EBIT -1.3x
# of institutional owners: 275 10/29/08 $0.35 $0.32 LTM pre-tax ROC -252%

per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 1,164 819 598 490 619 498 425 375 105 88
Gross profit 815 562 403 325 398 317 266 239 66 58
EBIT (1,425) 1,657 38 34 26 67 76 (124) 20 15
Net income (1,576) 1,656 13 12 13 40 (5) (212) 16 2
Diluted EPS (8.80) 8.92 0.65 0.58 0.47 1.46 (0.19) (7.72) 0.56 0.09
Cash from ops 47 207 181 114 139 147 114 108 28 31
Capex 110 84 25 19 14 21 18 19 5 6
Free cash flow (62) 122 156 95 126 126 96 89 24 25
Total assets 652 438 496 782 634 588 484 290 552 290
Short-term debt 67 55 20 48 0 0 0 0 0 0
Long-term debt 0 162 40 48 0 0 0 0 0 0
Total liabilities 2,309 320 169 226 101 112 111 112 115 112
Common equity (1,657) 118 326 556 533 476 374 178 438 178
EBIT/capital employed -320% >100% 16% 19% 18% 78% >100% -252% n/m n/m
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • Large NOL. USA Mobility has tax assets, both on
USA Mobility was formed in 2004 by the merger of Arch and off the balance sheet, available to offset future
(formerly Nasdaq: AWIN) and Metrocall (formerly Nasdaq: income taxes. As a result, the shares are even
MTOH), the two leading independent domestic paging firms. cheaper than the EBIT-to-EV yield may suggest.
USA Mobility focuses on the business-to-business market • Stock price implies 34% trailing FCF yield and
and supplies wireless connectivity to Fortune 1000 firms. 9x forward P/E (trailing GAAP EPS loss reported).
The company operates nationwide networks for one-way
paging and two-way messaging services. INVESTMENT RISKS & CONCERNS
• Revenue erosion due to decline of paging. The
SELECTED OPERATING DATA low cost of devices such as email-ready mobile
YTD phones and PDAs continues to impact paging. The
FYE December 31 2005 2006 2007 9/30/08
% of revenue by type: company has experienced revenue erosion in the
Paging services (one-way) 75% 74% 73% 73% mid teens, and declines are likely to continue. While
Paging services (two-way) 19% 19% 19% 18% ARPU has remained relatively steady, units in
Non-paging services 2% 2% 3% 3% service have declined to three million.
Products 4% 4% 5% 6%
Revenue growth by type: • Tenuous sustainability of EBITDA margin,
Paging services (one-way) 22% -20% -16% -15% which has risen to 33% YTD (up 200+ bps y-y),
Paging services (two-way) 32% -20% -17% -18% driven by large opex reductions. At some point, the
Non-paging services 318% -3% 8% -13% subscriber base may be insufficient to cover the
Products 33% -17% 3% -6%
∆ revenue 26% -20% -15% -15%
fixed cost of a nationwide paging network.
∆ blended ARPU -3% -3% -1% 0% • Implications of FCC’s Back-Up Power Order.
∆ one-way units
1
-22% -16% -15% -17% This Order, if and when effective, would “entail
1
∆ two-way units -15% -17% -14% -13% significant capital and operating costs” that would
% of paging units in service (period end) ('000): negatively affect FCF. USA Mobility is appealing
One-way 91% 91% 91% 91%
Two-way 9% 9% 9% 9% the Order and believes it is likely to prevail.
1
Represents y-y change in paging units at period end. • Potential for adverse change to Universal Service
Fund contribution requirement. The FCC is
INVESTMENT HIGHLIGHTS considering imposing a $1+ fee per assigned phone
• Expense reductions ahead of revenue erosion. number instead of the current revenue-based
The company’s top line is eroding in the mid teens methodology. Such a change would significantly
due to a secular decline in the paging market. increase the company’s contribution costs.
However, operating expenses have been reduced by • Lack of reinvestment opportunities. The company
200-300 bps faster, resulting in margin expansion. is returning cash via dividends (structured as return
• Healthcare represents 40% of customer base and of capital) and a $50 million buyback program
has experienced lower net unit loss rates than other initiated in August. Distributions have amounted to
vertical segments. As the contribution of healthcare $1.50 per share in 2005, $3.65 per share in 2006,
grows, subscriber losses may slow somewhat from $3.60 per share in 2007, and $1.15 per share YTD.
current annualized rates in the mid teens.
• Stated objective to maximize cash flow and return MAJOR HOLDERS
(most of) it to holders. The company generated $64 Insiders <1% │ David Abrams 15% │ Pamet 13% │
million of trailing EBIT and $89 million of FCF. Contrarian 9% │ Barclays 6%
• Guiding for revenue of $355-$360 million and
cash opex of $245-$250 million, with maintenance RATINGS
capex of $18-$20 million in 2008. VALUE Intrinsic value materially higher than market value?
• $104 million of cash and no debt as of September MANAGEMENT Capable and properly incentivized?
30. The company pays a dividend. FINANCIAL STRENGTH Solid balance sheet?
• Repurchased $35 million of stock at below-market MOAT Able to sustain high returns on invested capital?
price in private transaction in November. EARNINGS MOMENTUM Fundamentals improving?
THE BOTTOM LINE

USA Mobility should be valued on a “runoff” basis. Paging, which accounts for 90% of the company’s revenue, is a dying
market. Management appears to be aware of this fact and is running the company for maximum cash flow. The company’s
network rationalization program and other cost cutting measures have kept margins strong despite top-line erosion in the mid
teens. A program of dividends and share buybacks is returning excess cash to shareholders. Nonetheless, investors should
keep a watchful eye on management to ensure that cash is not sunk into revenue-diversifying projects that may ultimately
create little value. We note that insiders own less than 1% of the shares.
VAALCO Energy, Inc. (NYSE: EGY) Houston, TX, 713-623-0801

Energy: Oil & Gas Operations http://www.vaalco.com


per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 2 10 36 57 85 98 125 190 35 56
Gross profit 1 7 27 47 74 86 110 171 31 50
EBIT (2) 3 17 40 64 74 69 124 24 42
Net income (3) 1 9 23 29 40 19 39 9 22
Diluted EPS (0.15) 0.01 0.13 0.43 0.50 0.67 0.32 0.66 0.15 0.38
Cash from ops 3 1 23 23 36 62 43 87 1 10
Capex 7 16 2 15 13 33 15 21 2 11
Free cash flow (4) (15) 20 8 22 29 29 66 (1) (1)
Total assets 19 49 46 68 98 168 187 222 177 222
Short-term debt 0 3 4 2 0 0 0 0 0 0
Long-term debt 0 15 3 2 2 5 5 5 5 5
Common equity 10 15 24 48 78 122 142 172 141 172
EBIT/capital employed -69% 19% 86% >100% >100% >100% 98% >100% n/m n/m
$90
$80
$70
$60
$50
$40
$30
$20
$10
$0
Jun 99 Jun 00 Jun 01 Jun 02 Jun 03 Oct 04 Oct 05 Oct 06 Oct 07 Oct 08
BUSINESS OVERVIEW • Chairman and CEO Robert Gerry III (70) has
Vaalco Energy is an independent oil and gas exploration and served in those roles for more than ten years. In
production company. Vaalco seeks to increase reserves and October, Russell Scheirman (52) trasitioned into the
production, primarily in West Africa (Gabon and Angola) role of COO, having served as CFO for more than
and, more recently, in the North Sea. fifteen years. He was replaced by long-time Shell
finance executive Greg Hullinger (55).
FYE December 31 2005 2006 2007 9/30/08
Revenue by segment ($mn):
Gabon 85 98 125 153 INVESTMENT RISKS & CONCERNS
Angola 0 0 0 0 • Operations almost entirely offshore Gabon. The
North Sea 0 0 0 0 Gabon fields constituted almost 100% of production
Total revenue 85 98 125 153
Growth 50% 16% 27% 74% in 2007, with nearly 100% of net proved reserves
EBIT by segment ($mn) attributable to those fields. Vaalco’s results would
Gabon 67 81 90 121 suffer materially if mechanical problems, storms or
Angola 0 -1 -5 -1 other events affected its Gabon properties. The
North Sea 0 0 -8 -6
Corporate -4 -6 -9 -7
company has operated in Gabon since 1995 and
Total EBIT 64 74 69 107 believes it has good relations with the government.
Total EBIT growth 58% 17% -7% 108% • Spending heavily to replace reserves. Vaalco had
EBIT margin by segment: capex of $15 million and dry hole costs of $8
Gabon 79% 82% 72% 79%
million in 2007. The company has had capex of $16
Acreage leased (net) ('000) 501 1,015 1,069 n/a and dry hole costs of $6 million YTD.
Production (net) (BOPD) 4,488 4,258 4,819 n/a • Exploration risks. In March, shareholder Nanes
Sales price, BOE ($/unit) 52 63 71 107 Delorme asked the company in a letter put itself up
Production cost, BOE ($/unit) 6 8 9 10
Proved developed reserves:
for sale and to “[c]ease attempting to diversify away
Oil (MBbls) 6,620 4,691 4,506 n/a from the Company’s core geographical area in West
Gas (MMcf) 21 17 61 n/a Africa. The Company has been unwisely spending
Std meas., proved res. ($mn) 161 134 192 n/a cash on acquiring and drilling minor North Sea
interests that have been total exploration failures.”1
• All six producing wells located offshore Gabon COMPARABLE PUBLIC COMPANY ANALYSIS
(four in the Etame field, two in Avouma/Tchibala). ($mn) MV EV EV/Rev P/TB
08 09
• Seven development and exploration wells expose P/E P/E
Vaalco to 50+ million net barrels, eight times HES 18,107 20,659 .5x 1.6x 6x 9x
HNR 219 101 9.0x 0.8x 18x 9x
more than Vaalco’s 6.2 million barrels of proved
PXD 2,621 5,350 2.2x 0.8x 5x 5x
reserves. These seven wells include a development
XOM 374,784 346,614 .7x 3.0x 8x 10x
well in Ebouri field (oil production expected in
December at initial rate of 4,000-6,000 bpd); three EGY 256 157 .8x 1.5x 5x 8x
exploratory wells in Etame block (reserve potential
of 15+ million net barrels); two exploratory wells MAJOR HOLDERS
onshore Gabon in the Mutamba concession (drilling CEO Gerry III 5% │ CFO Scheirman <1% │ Other insiders
in first well expected in December 2008; reserve 1% │ Barclays 5% │ RenTech 5% │ Columbia Wanger 3%
potential of 30+ million net barrels); and one
exploratory well in Angola (drilling expected in RATINGS
1H09; reserve potential of 60+ million net barrels). VALUE Intrinsic value materially higher than market value?
• 25% stake in gas prospect in British North Sea. MANAGEMENT Capable and properly incentivized?
Vaalco is participating with Century Exploration on FINANCIAL STRENGTH Solid balance sheet?
the well, which has reserve potential of 60 Bcf. MOAT Able to sustain high returns on invested capital?
• Strong balance sheet, with net cash of $93 million. EARNINGS MOMENTUM Fundamentals improving?
• Repurchased $9 million of stock YTD and $2 MACRO Poised to benefit from economic and secular trends?
million in 2007. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
1
See exhibit to Schedule 13D filed with the SEC on March 12, 2008.
THE BOTTOM LINE

Vaalco has benefited from an increase in oil prices over the past few years, driving returns on capital materially above
sustainable levels. The company’s efforts to diversify away from Gabon are fraught with risks. The current share price
accurately compensates investors for Vaalco’s exploration risks and the inherent cyclicality of the oil business.
Value Line, Inc. (Nasdaq: VALU) New York, 212-907-1500

Financial: Investment Services http://www.valueline.com


per share data) 4/30/02 4/30/03 4/30/04 4/30/05 4/30/06 4/30/07 4/30/08 7/31/08 7/31/07 7/31/08
Revenue 87 82 85 85 85 84 83 82 21 20
Gross profit 79 73 76 76 78 77 76 76 19 19
EBIT 29 24 25 27 35 36 35 33 9 8
Net income 20 20 20 21 23 25 26 25 6 5
Diluted EPS 2.04 2.00 2.04 2.14 2.35 2.47 2.56 2.47 0.60 0.51
Cash from ops 20 17 8 37 19 25 20 21 6 6
Capex 2 2 2 2 1 1 1 1 n/a 0
Free cash flow 18 15 6 35 18 24 20 20 n/a 6
Total assets 269 247 267 99 119 129 138 137 133 137
Short-term debt 0 0 0 0 0 0 0 0 0 0
Long-term debt 0 0 0 0 0 0 0 0 0 0
Common equity 196 195 35 44 62 76 88 88 79 88
$80
$70
$60
$50
$40
$30
$20
$10
$0
BUSINESS OVERVIEW • Liquid balance sheet, with $15 million in cash and
Value Line dates back to 1931 and operates in two segments: $109 million in short-term investments on July 31.
Investment Periodicals, Publishing & Licensing produces $30 million of the liquid assets may be considered
investment-related periodicals (retail and institutional) and “float” from up-front subscription payments.
includes licensing fees for Value Line’s proprietary ranking • Stock price implies 6% trailing FCF yield and
system and trademarks. Investment Management advises the 13x trailing P/E (no EPS estimates available).
Value Line Funds and separate accounts.
The company owns a registered broker-dealer, Value Line INVESTMENT RISKS & CONCERNS
Securities, which distributes the Value Line Funds, a family • Publishing revenue in steady decline. Subscription
of no-load funds that charge rule 12b-1 marketing fees. revenue fell 4% in FY07 and 6% in FY08, with
print revenue down 7% in FY07 and 10% in FY08
SELECTED OPERATING DATA (electronic revenue grew 5% in each year).
FYE April 30 2006 2007 2008 1Q09 Circulation continues to decline, driven by
% of revenue by segment: competition from free and lower-cost Internet-based
Print 43% 41% 37% 35%
Electronic
1
13% 14% 15% 16%
research and no-cost brokerage firm research.
Total publishing 56% 55% 52% 51% • AUM may decline. AUM in Value Line Funds and
Licensing 6% 8% 9% 8% products managed by licensing customers may
Investment mgmt 38% 37% 40% 41% decline amid weak stock market performance.
Print -6% -7% -10% -10% • Investment profits may decline. Value Line earns
Electronic
1
0% 5% 5% 7% income from securities transactions involving $17
Total publishing -5% -4% -6% -6% million in trading securities and $92 million in
Licensing 97% 37% 3% 2% securities available for sale as of July 31. Such
Investment mgmt 2% -4% 5% 0%
∆ revenue 1% -2% -1% -3%
income may decline in a weak market environment.
2
-6% -9% -6% -10% • Low float and control by chairman and CEO
EBIT margin by segment: Jean Buttner (73). Buttner owns all of the voting
Publishing & licensing 38% 38% 37% 39% stock of Arnold Bernhard & Co., which owns 8.6
Investment mgmt 47% 51% 49% 33%
million, or 87% of Value Line’s shares outstanding.
AUM, Value Line Funds $3.8bn $3.8bn $3.8bn $3.7bn The company and Arnold Bernhard have also
AUM, licensing clients $6.3bn $6.4bn $6.3bn $5.5bn engaged in certain related-party transactions.
% of AUM, Value Line Funds by asset class (period end):
Equity funds 87% 87% 87% 87% COMPARABLE PUBLIC COMPANY ANALYSIS
Fixed income 8% 8% 7% 7%
08 09
Money market 4% 5% 6% 6% ($mn) MV EV EV/Rev P/TB
1 P/E P/E
Value Line derives 47% of electronic revenue from institutional accounts and
53% from retail subscribers. Institutional electronic revenue increased 23%, MHP 7,347 8,366 1.3x n/m 9x 9x
while retail revenue declined 7% in FY08. MORN 1,414 1,104 2.2x 5.5x 16x 15x
2
Represents y-y change in period-end deferred revenue (includes short-term
TRIN 14,881 22,186 2.0x n/m 10x 9x
and long-term deferred revenue liability).
TSCM 97 19 .3x 1.0x 29x 53x
INVESTMENT HIGHLIGHTS VALU 328 204 2.5x 3.8x n/a n/a
• Value Line Investment Survey is premier service,
published weekly and covering 1,700 stocks. MAJOR HOLDERS
• Serves as investment adviser to 14 mutual funds CEO Buttner 87% (via Arnold Bernhard & Co.) │ Other
with AUM of $3.7 billion as of July 31. The largest insiders <1% │
distribution channel for the Value Line Funds are
fund supermarket platforms run by Charles Schwab, RATINGS
TD Ameritrade, and National City Bank. VALUE Intrinsic value materially higher than market value?
• Earns high-margin fees from licensing trademarks MANAGEMENT Capable and properly incentivized?
and proprietary information for use in products such FINANCIAL STRENGTH Solid balance sheet?
unit investment trusts, annuity trusts, managed MOAT Able to sustain high returns on invested capital?
accounts, and ETFs. AUM of parties participating in EARNINGS MOMENTUM Fundamentals improving?
licensing programs was $5.5 billion as of July 31. MACRO Poised to benefit from economic and secular trends?
THE BOTTOM LINE

Value Line trades at a high single digit earnings yield, part of which is dividended out at an annual rate of $1.60 per share.
Retained cash has accumulated on the balance sheet, creating an inefficient capital structure. As the company is 87%-owned
by an affiliate of the CEO, shareholders have little leverage to compel the company to repurchase stock. Given an absence of
meaningful growth opportunities, we find Value Line a less-than-compelling investment. We question the wisdom of Value
Line remaining a public company and believe minority shareholders might be better off in a CEO-led buyout.
ValueClick, Inc. (Nasdaq: VCLK) Westlake Village, CA, 818-575-4500

Services: Advertising, Member of S&P MidCap 400 http://www.valueclick.com


per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 45 63 93 169 304 546 646 676 157 153
Gross profit 25 41 61 118 215 378 441 457 106 99
EBIT (13) (9) 7 36 64 102 110 75 26 (11)
Net income (7) (11) 10 31 41 63 71 55 17 2
Diluted EPS (0.19) (0.04) 0.13 0.37 0.45 0.62 0.70 0.56 0.17 0.02
Cash from ops (5) 2 16 47 61 114 143 143 18 32
Capex 2 3 4 6 9 10 9 11 1 2
Free cash flow (7) (2) 12 41 52 104 133 132 17 30
Total assets 191 264 323 385 721 793 1,011 800 855 800
Short-term debt 1 1 0 0 0 0 0 0 0 0
Long-term debt 1 1 0 0 0 0 0 0 0 0
Common equity 166 232 274 329 619 644 710 622 687 622
EBIT/capital employed -211% -99% 88% >100% >100% >100% n/m >100% n/m n/m
$40
$35
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • Growth strategy based on acquisition-driven and

ValueClick is an online marketing services firm that sells organic growth. While the company has indicated
targeted online ad campaigns to advertisers, generating leads, an interest in exploring M&A opportunities, it is
online sales and brand recognition. The company was also focused on new and upgraded products.
founded in 1998 and operates in four segments: • $119 million in cash and securities and no debt.
The Media segment’s ValueClick Media brand provides • Repurchased 12 million shares for $150 million
online display advertising and lead generation. YTD, 2.3 million shares for $44 million in 2007,
Affiliate Marketing’s Commission Junction brand allows and 33 million shares for $179 million before 2007.
advertisers to pay their own salesforce of online publishers. Despite the buybacks, average diluted shares grew
from 91 million in 2005 to 101 million in 2007.
Comparison Shopping operates PriceRunner in Europe and • Stock price implies 27% trailing FCF yield, 10x
Smarter.com and CouponMountain.com in the U.S. trailing P/E and 9x forward P/E.
Technology’s Mediaplex provides ad serving and tracking for
advertisers seeking to understand their online ad spending. INVESTMENT RISKS & CONCERNS
• Seeing weaker revenue trends than anticipated,
SELECTED OPERATING DATA with consumers taking less action on online
YTD
FYE December 31 2005 2006 2007 9/30/08
shopping sites, and advertisers holding sites to
% of revenue by segment: stricter performance objectives. The company has
Media 54% 70% 60% 48% responded with spending and headcount reductions.
Affiliate marketing 31% 21% 21% 18% • Guiding for revenue decline of 1%-2% to $633-
Comparison shopping 6% 5% 14% 28%
Technology 9% 5% 5% 6%
638 million in 2008. Management anticipates 2008
Revenue growth by segment: “adjusted” EBITDA of $161-164 million (25-26%
Media 157% 132% 1% -20% margin) and GAAP EPS of $0.55-0.56, lower than
Affiliate marketing 30% 17% 22% 9% previous guidance for EPS of $0.69-$0.71.
Technology 6% -5% 27% 21%
• M&A rollup strategy. ValueClick has completed
Total revenue growth 80% 79% 18% 7% numerous acquisitions in recent years, including
EBIT margin by segment: MeziMedia, Shopping.net, Fastclick, Webclients, E-
Media 23% 25% 22% 22% Babylon, Pricerunner, Commission Junction, etc.
Affiliate marketing 47% 52% 50% 48%
Technology 34% 30% 39% 41% COMPARABLE PUBLIC COMPANY ANALYSIS
Corporate and other -10% -11% -12% -19% ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
Total EBIT margin 21% 19% 17% 9% DRIV 865 565 1.4x 3.1x 13x 12x
% of revenue by geography: GOOG 97,580 83,168 4.0x 4.5x 16x 14x
U.S. 84% 87% 85% 83%
International 16% 13% 15% 17% MWW 1,432 1,040 .7x 4.3x 8x 11x
EBIT margin by geography: VCLK 495 406 .6x 5.2x 10x 9x
U.S. 23% 20% 18% 11%
MAJOR HOLDERS
INVESTMENT HIGHLIGHTS CEO Vadnais <1% │ Other insiders 1% │ Fidelity 15% │
Barclays 9%
• Leadership positions in core businesses that
benefit from long-term growth in online ads and
RATINGS
ecommerce. ValueClick is the leading independent
online display ad network, with 142 unique visitors
per month. The company is also the leading player
globally in online affiliate marketing.
• Multiple touch points allow ValueClick to engage EARNINGS MOMENTUM Fundamentals improving?
consumers more deeply than more narrowly- MACRO Poised to benefit from economic and secular trends?
focused alternatives. Each ValueClick technology EXPLOSIVENESS 5%+ probability of 5x upside in one year?
feeds into a common data platform and leverages
anonymous consumer data for enhanced targeting.
THE BOTTOM LINE

ValueClick is the kind of investment Warren Buffett might put in the “too difficult” pile. Not only does the company
compete in the fast-changing, technology-driven online advertising market, but it has also been cobbled together from various
acquisitions, making it difficult to judge organic growth and internal cohesiveness. We are concerned that the online ad space
remains a “wild west” of new media, with intrusive tactics still used by some players to capture consumers. We note that
ValueClick settled with the FTC in February regarding allegations of deceptive marketing. We have no basis on which to
judge the predictability or sustainability of ValueClick’s FCF, putting us on the sidelines.
Varian Semiconductor (Nasdaq: VSEA) Gloucester, MA, 978-282-2000

Technology: Semiconductors, Member of S&P SmallCap 600 http://www.vsea.com

Market value: $1.3 billion This quarter -$0.03 $0.11 11 P/E FYE 9/30/10 21.6x

per share data) 9/27/02 10/3/03 10/1/04 9/30/05 9/29/06 9/28/07 10/3/08 10/3/08 9/28/07 10/3/08
Revenue 335 363 530 601 731 1,055 834 834 299 142
Gross profit 139 151 240 269 310 489 396 396 142 64
EBIT 3 13 87 85 103 257 152 152 80 4
Net income 9 11 61 72 95 142 98 99 43 2
Diluted EPS 0.12 0.14 0.73 0.85 1.10 1.73 1.32 1.30 0.55 0.03
Capex 15 17 13 12 12 12 11 n/a 3 n/a
Free cash flow 139 (6) 24 19 61 129 97 n/a 22 n/a
Total assets 590 584 750 863 938 799 700 700 799 700
Short-term debt 6 6 4 0 1 1 1 1 1 1
Long-term debt 0 5 4 4 3 3 2 2 3 2
Common equity 436 474 576 689 755 566 515 515 566 515
$70
$60
$50
$40
$30
$20
$10
$0
BUSINESS OVERVIEW • PLAD plasma tool expands addressable market

Varian is a semiconductor capital equipment maker and the through creation of ultra high-dose segment, with
leading producer of ion implantation equipment. sales potentially surpassing $100 million in FY09.
• Little risk of commoditization, due to advances in
SELECTED OPERATING DATA implanter technology and changes in wafer and chip
FYE September 30 2006 2007 2008 size. Implantation has become a higher-value step in
North America 22% 22% 22%
semi production, giving Varian more pricing power.
Asia Pacific 67% 71% 70% • Gary Dickerson (50) joined Varian as CEO in
Europe 11% 7% 8% 2004, having served for ten years in roles at KLA-
Revenue growth by geography: Tencor, including as Group VP, EVP, and COO.
North America 20% 45% -21%
Asia Pacific 20% 53% -22%
• $209 million of net cash and short-term securities.
Europe 39% -10% -12% • Repurchased $179 million of stock in FY08, $427
∆ revenue 22% 44% -21% million in FY07 and $109 million in FY06.
∆ unit shipments of tools 33% 51% n/a • Stock price implies 0% trailing FCF yield, 13x
∆ deferred revenue (period end) 6% 10% -41%
trailing P/E (forward EPS estimate is $0.07).
Product 88% 91% 90%
Service 11% 8% 10% INVESTMENT RISKS & CONCERNS
Royalty 1% 1% 0% • Sharp drop-off in business, driven by drop in
% of shipments by market:
Memory 51% 70% n/a
capital spending, particularly by manufacturers of
Logic 19% 14% n/a DRAM devices. Revenue fell 37% and 52% y-y in
Foundry 30% 16% n/a the June and September quarter, respectively. The
% of shipments by wafer size: company expects to post a small loss in 1Q09.
300 mm 75% 91% n/a
200 mm 25% 9% n/a
• Cyclical business, dependent on semi makers’
Top 10 customers (% of revenue) 63% 72% n/a capacity investments, which exhibit large volatility
(particularly in the case of memory manufacturers).
VARIAN’S SHARE OF GLOBAL IMPLANTER MARKET1 • Axcelis may become strong competitor if bought.
Market Size Varian Market Share Sumitomo Heavy Industries made a hostile bid for
($ in millions) CY06 CY07 CY06 CY07 Axcelis in February, but shelved its proposal after
Medium current $414 $454 53% 57% Axcelis rejected a sweetened $616 million offer.
High current 720 672 46% 78%
High energy 230 147 17% 13%
Ultra high dose na 64 na 100% COMPARABLE PUBLIC COMPANY ANALYSIS
Overall $1,364 $1,337 43% 65% ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
1
Source: Garter Dataquest, VLSI Research, Company. ACLS 64 97 .3x 0.2x n/m n/m
AMAT 13,725 11,827 1.5x 2.3x 13x 9x
INVESTMENT HIGHLIGHTS KLAC 3,067 2,505 1.1x 1.7x 36x 14x
• #1 in $1 billion implantation equipment market, LRCX 2,248 1,488 .7x 1.6x 138x 15x
with share up from 43% in CY06 to 65% in CY07. VSEA 1,269 1,063 1.3x 2.5x 250x 22x
Varian has grown share—and is likely to continue
to do so—in the largest segments while maintaining
MAJOR HOLDERS
100% of the fast-growing, ultra high-dose market.
CEO Dickerson <1% │ Other insiders 2% │ Fidelity 15% │
• Gained high-current share due to industry shift
Wellington 9% │ Oppenheimer Funds 9% │ Turner 5%
from batch ion to single wafer implanters. Varian
began developing the technology in 1994, giving it
RATINGS
large lead over Applied Materials and Axcelis.
AMAT was effectively forced to exit the high-
current segment in 2007, with Varian benefiting.
• Large barriers to entry due to role of patents and MOAT Able to sustain high returns on invested capital?
technical expertise. Implanters weigh 20+ tonnes EARNINGS MOMENTUM Fundamentals improving?
and sell for roughly $4 million each. The industry MACRO Poised to benefit from economic and secular trends?
has seen no credible new entrants in decades. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE

Varian is the undisputed leader in a small but important segment of the semiconductor cap equipment industry. Several years
ago, the company positioned itself to take advantage of an industry shift to single wafer implanters. It gained market share as
a result and moved closer to a quasi-monopolic position (only remaining credible competitor is struggling Axcelis). The
implanter segment has high barriers to entry and should exhibit mid to high single-digit growth in the long term. While the
industry is undergoing a cyclical downturn, we believe Varian shares offer compelling value.
Verigy Ltd. (Nasdaq: VRGY) Singapore, Singapore, 65--675-2033

Technology: Semiconductors http://www.verigy.com/portal/page/p…


per share data) 10/31/03 10/31/04 10/31/05 10/31/06 10/31/07 7/31/08 7/31/07 7/31/08
Revenue 540 607 456 778 761 750 204 179
Gross profit 231 253 140 350 340 350 93 83
EBIT (25) 5 (105) 16 99 93 31 15
Net income (28) (8) (119) 0 97 96 30 18
Diluted EPS (0.56) (0.16) (2.38) 0.00 1.62 1.58 0.50 0.30
Cash from ops (29) 48 (74) 164 121 128 36 26
Capex 7 5 11 36 12 11 2 4
Free cash flow (36) 43 (85) 128 109 117 34 22
Total assets n/a 265 260 674 771 831 714 831
Common equity n/a 119 87 387 498 561 479 561
EBIT/capital employed n/a 6% -149% 32% >100% >100% n/m n/m
$35
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$20
$15
$10
$5
$0
BUSINESS OVERVIEW • Chairman and CEO Keith Barnes (56) joined

Verigy provides advanced test systems for the semiconductor Verigy in 2006. He had previously been CEO of
industry. The company offers a single platform for each of Electroglas and Integrated Measurement Systems.
the two categories of devices being tested: the 93K platform • Repurchased 637K shares for $15 million in FQ3
is designed to test System-on-a-Chip (SoC), System-in-a- under six million-share program authorized in April.
Package (SiP) and high-speed memory devices, while the • Stock price implies 18% trailing FCF yield, 7x
Versatest V5000 platform is designed to test memory trailing P/E and 22x forward P/E.
devices, including flash memory and multi-chip packages
containing a mix of memory devices. Verigy has so far sold INVESTMENT RISKS & CONCERNS
1,650 93K systems and 2,500 Versatest systems. Customers • Memory market has turned down, producing
include integrated device manufacturers (IDMs), test “very challenging” environment, partially offset by
subcontractors, and fabless design companies. Verigy “strong demand” for consumer mixed signal and
maintains a direct salesforce. It uses Flextronics and other Port Scale RF products.
contract manufacturers to produce the company’s systems. • Sharp revenue and profit drop expected in FQ4.
Verigy separated from Agilent (A) and went public in 2006. Verigy has provided guidance for the quarter ended
It has 1,600 employees. October 31st of $155-165 million in revenue (down
21-26% y-y) and $7-10 million in net income (down
SELECTED OPERATING DATA 69-78% y-y) (EPS of $0.12-$0.17). FQ4 net income
YTD
FYE October 31 2005 2006 2007 7/31/08
includes ~$4.5 million of stock comp expense.
% of revenue by type: • Cyclicality, inventory risk, and pricing pressure
1
Products: SoC etc. 59% 57% 44% 68% in industry with solid long-term growth. The
Products: Memory 19% 26% 37% 11% semiconductor industy continues to benefit from
Services 22% 17% 19% 22%
increased use of ICs in computing, electronics, and
Products: SoC etc.
1
-28% 66% -25% 74% other markets. Nonetheless, the industry has at
Products: Memory -33% 132% 38% -76% times been plagued by excess capacity resulting in
Services -5% 31% 11% 8% steep price declines and inventory writedowns.
Total growth -25% 71% -2% -2%
• Three customers comprised 44% of revenue in
U.S. 26% 31% 28% 15% FQ3. Two customers were 32% of FY07 revenue.
Singapore 39% 48% 56% 67% • Competitors include Advantest, Credence, LTX,
Japan 21% 10% 7% 9% Nextest, Teradyne, and Yokogawa. Verigy also
Rest of the world 14% 10% 9% 9%
Growth in period-end backlog:
2 competes with internal development by customers.
3
Product backlog n/a 52% -15% n/a
Services backlog
4
n/a 29% -2% n/a COMPARABLE PUBLIC COMPANY ANALYSIS
Total backlog n/a 42% -10% n/a ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
1
Also includes System-in-a-Package (SIP) and high-speed memory products.
2
Backlog was $224 million on October 31, 2007, or ~30% of annual revenue.
ATE 2,377 830 .7x 0.9x n/a n/a
3
Product backlog: systems under POs, to be delivered within six months. TER 686 378 .3x 0.8x 16x n/m
4
Services backlog outstanding orders for product support and services.
VRGY 646 261 .3x 1.2x 9x 22x
MAJOR HOLDERS
• Test equipment companies have ridden long-
term growth curve of semiconductor industry. CEO Barnes <1% │ Other insiders <1% │ Iridian 7% │
By detecting and sometimes repairing defects, test TCW 5% │ Clearbridge 5% │ Citadel 4%
equipment enables semi firms to improve yield.
RATINGS
• HP roots; scalable and flexible test solutions.
Verigy’s technology can be traced back to HP and
Agilent, from which Verigy separated in 2006. The
test platforms are scalable across frequency ranges,
pin counts and numbers of devices. This flexibility
allows for a single test system to test a wide range
of applications, providing Verigy with efficiencies
such as lower R&D costs and inventory risk.
THE BOTTOM LINE

Verigy trades at a low valuation but growth has ground to a halt due to memory market weakness. Assuming that top-line
growth resumes when end market conditions improve, and assuming that such improvement is a matter of months rather than
years, Verigy shares have substantial upside. The company has a rock-solid balance sheet and has authorized a program to
buy back up to 10% of shares outstanding (accretive to EPS). Verigy is interesting, but there are better opportunities.
Versant Corporation (Nasdaq: VSNT) Fremont, CA, 510-789-1500

Technology: Software & Programming http://www.versant.com


per share data) 10/31/01 10/31/02 10/31/03 10/31/04 10/31/05 10/31/06 10/31/07 7/31/08 7/31/07 7/31/08
Revenue 24 20 22 18 16 17 21 25 5 6
Gross profit 12 14 14 14 12 14 19 23 5 6
EBIT (7) (4) (3) (8) (16) 4 8 10 2 3
Net income (7) (3) (2) (12) (15) 4 8 9 2 3
Diluted EPS (5.94) (2.76) (1.75) (3.33) (4.23) 1.01 1.98 2.43 0.50 0.70
Cash from ops 0 1 (1) (7) 0 3 10 11 0 2
Capex 0 0 0 0 0 0 1 0 0 0
Free cash flow 0 1 (2) (7) 0 3 9 11 0 2
Total assets 15 12 11 33 16 20 31 40 28 40
Short-term debt 1 0 1 0 0 0 0 0 0 0
Long-term debt 0 0 0 0 0 0 0 0 0 0
Common equity 2 (1) (5) 23 9 14 23 33 20 33
$250
$200
$150
$100
$50
$0
BUSINESS OVERVIEW • Large recurring revenue stream, high switching

Versant, founded in 1988, provides object-oriented data costs. We estimate that two-thirds of revenue is of a
management software that companies use to solve complex recurring nature. Versant is deeply embedded into
data management and integration problems. The software is customer applications, making it difficult to switch.
used in strategic distributed applications, including network • Highly capable Jochen Witte (47) became CEO
modeling and management, fault diagnosis, fraud prevention, in 2005. Previously, he headed Versant’s European
service activation and assurance, and customer billing and operations and co-founded a firm that merged with
scheduling. Management is based in the U.S. and Germany, Versant in 2004. Since taking the helm, Witte has
while R&D activities are conducted in Germany and India. cut costs and focused on the database business.
The company targets the telecom, technology, defense, Financial results have improved dramatically.
financial, transportation, and health care industries. It sells • Strong balance sheet; large NOLs. Versant had
two types of perpetual licenses: Development licenses, sold $27 million of net cash as of July 31. It had federal,
on a per seat basis, authorize a customer to develop an state, and German NOLs of $80 million, $16
application that uses Versant software. Deployment licenses million, and $41 million as of October 31, 2007.
permit a customer to deploy an application it has developed • Stock price implies 19% trailing FCF yield and
under a development license. End-users typically buy 6x trailing P/E (no EPS estimates available).
deployment licenses based on the number of CPUs. VARs
and distributors purchase development licenses on a per seat INVESTMENT RISKS & CONCERNS
basis. In exchange for royalties, VARs are authorized to • Impact of weak economy, dollar appreciation.
sublicense deployment copies of Versant software. According to CEO Witte, “achieving our future
goals will become more challenging.”
SELECTED OPERATING DATA • Competition from relational database companies
YTD including Oracle, CA, Sybase, IBM, and Microsoft.
FYE October 31 2005 2006 2007 7/31/08
Versant also competes against object database firms
License 56% 51% 60% 64% such as Progress Software and Objectivity.
Maintenance 40% 40% 39% 35% • Small but growing object-oriented database
Prof. services 4% 9% 1% 1% market. The $70 million market size limits the
License -9% -4% 50% 32%
explosiveness of Versant’s growth potential.
Maintenance -7% 7% 22% 12% • Low insider ownership—particularly noteworthy
Prof. services -50% 153% -84% 7% given Versant’s small market capitalization.
Total growth -11% 6% 26% 24%
1
Gross margin by type:
License 97% 96% 99% 98%
Maintenance 77% 79% 82% 84% ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
Prof. services -42% 34% 54% 65% CA 8,821 8,660 2.0x n/m 11x 10x
Total GM 83% 83% 92% 93% BMC 4,691 4,077 2.2x n/m 11x 10x
% of revenue by geography: ORCL 87,110 85,326 3.7x n/m 11x 10x
Europe 64% 61% 50% 54% PRGS 829 599 1.2x 3.0x 11x 10x
Asia 2% 3% 4% 14% SY 2,025 1,924 1.7x 116.4x 12x 12x
2
∆ in shares out 14% 1% 3% 2% VSNT 54 27 1.1x 2.2x n/a n/a
1
Gross profit excludes intangibles amortization, which amounted to $237K in
each of the nine months ended July 31, 2007 and July 31, 2008.
2
Represents y-y change in average diluted shares outstanding. MAJOR HOLDERS
CEO Jochen Witte 2% │ Other insiders 2% │ RenTech 9%
• Object-oriented database management software RATINGS
has advantages over relational databases in VALUE Intrinsic value materially higher than market value?
meeting the data requirements of companies who MANAGEMENT Capable and properly incentivized?
use very large, changing bodies of complex data. FINANCIAL STRENGTH Solid balance sheet?
• Versant Object Database (VOD) cuts customers’ MOAT Able to sustain high returns on invested capital?
hardware costs and speeds development. VOD EARNINGS MOMENTUM Fundamentals improving?
sales account for almost all license revenue. Versant MACRO Poised to benefit from economic and secular trends?
also sells FastObjects software, added in 2004 via a EXPLOSIVENESS 5%+ probability of 5x upside in one year?
merger with CEO Witte’s former company.
THE BOTTOM LINE

Versant barely missed our Top 10 magic formula selections. It is a well-managed, growing company with strong niche
products in the database software market. We do not expect the company’s growth to fall off a cliff in the foreseeable future.
As a result, we view the shares as meaningfully undervalued at only 6x trailing EPS (even less on cash-adjusted basis).
Viacom, Inc. (NYSE: VIA.B) New York, NY, 212-258-6000

Services: Broadcasting & Cable TV, Member of S&P 500 http://www.viacom.com


per share data) 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 6,051 7,304 8,132 9,520 11,361 13,423 14,630 3,271 3,408
Gross profit 3,094 3,632 4,224 4,850 5,398 5,992 6,206 1,600 1,463
EBIT 1,738 2,002 2,283 2,359 2,767 2,936 3,026 815 689
Net income (319) 339 294 1,257 1,592 1,838 1,638 641 401
Diluted EPS 1.26 1.53 1.85 1.73 2.19 2.41 2.52 0.67 0.62
Cash from ops 1,601 1,911 1,984 1,636 2,270 1,776 1,293 298 617
Capex 122 114 141 193 209 237 324 67 53
Free cash flow 1,479 1,797 1,844 1,443 2,061 1,539 969 231 564
Cash & investments n/a 58 149 361 706 920 525 373 525
Total current assets n/a 3,213 2,626 3,513 4,211 4,833 4,169 3,590 4,169
Intangible assets n/a 10,242 10,517 10,732 11,954 12,059 12,149 11,899 12,149
Total assets n/a 22,304 18,441 19,116 21,797 22,904 22,815 21,370 22,815
Total current liabilities n/a 3,766 2,786 3,269 4,617 5,273 4,183 4,204 4,183
Long-term debt n/a 163 292 5,702 7,584 8,060 8,819 7,605 8,819
Total liabilities n/a 6,489 4,976 11,328 14,631 15,793 15,665 14,318 15,665
Common equity n/a 15,816 13,465 7,788 7,166 7,111 7,150 7,051 7,150
EBIT/capital employed n/a >100% >100% >100% >100% >100% >100% n/m n/m
$50
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • D&A exceeds capex. Viacom recorded D&A of $1

Viacom is a leading global entertainment content company. billion from 2005-07, with capex of $639 million.
It operates through two reporting segments: Media Networks, • Stock price implies 9% trailing FCF yield, 7x
which includes MTV Networks and BET Networks; and trailing P/E and 7x forward P/E.
Filmed Entertainment. Viacom engages audiences on TV,
motion picture and digital platforms through well-known INVESTMENT RISKS & CONCERNS
brands, including MTV, VH1, CMT, Nickelodeon, Comedy • Challenging ad revenue environment. While
Central, Spike TV, BET, Paramount Pictures, and Viacom has diverse revenue streams including
DreamWorks Pictures. Viacom’s reach includes 160 affiliate, ancillary and motion picture revenue,
channels and 340 online properties in 160 countries. MTV advertising accounts for one-third of revenue. This
Networks reaches 520 million households worldwide, while stream has weakened due to economic conditions.
BET reaches 88 million U.S. households. Paramount dates • TV may face newspaper-like risks in long term.
back to 1912, has a library of 3,500 motion pictures, and Video content is becoming increasingly popular
ranked #1 in domestic box office revenue in 2007. Viacom online due to the proliferation of broadband and
became a standalone company via a separation from the sites such as YouTube that allow anyone to share
former Viacom (now known as CBS Corp.) at yearend 2005. content. Consumers increasingly spend time online,
threatening TV’s still-strong market share position.
SELECTED OPERATING DATA • Hit-dependent motion picture business. While
YTD
FYE December 31 2005 2006 2007 9/30/08
Paramount is a leading franchise, results fluctuate
% of revenue by segment: based on the timing of “hit” movie releases.
Media Networks 70% 63% 60% 60% • Filmed Entertainment contributes little EBIT
Filmed Entertainment 30% 37% 40% 40% despite meaningful revenue. While this implies
Media Networks 39% 40% 38% 35%
margin upside, it also raises the question whether
Filmed Entertainment 2% 3% 2% 0% continued investment in the segment is justified or
% of revenue by component: whether alternatives should be explored.
Advertising 42% 38% 34% 32%
Feature film 30% 36% 39% 39% COMPARABLE PUBLIC COMPANY ANALYSIS
Affiliate fees 19% 18% 17% 19%
Ancillary 8% 9% 10% 11% ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
% of revenue by geography: DIS 38,427 50,065 1.3x 16.4x 10x 9x
U.S. 78% 76% 73% n/a DISCA 3,915 7,777 2.9x n/m 14x 13x
Europe 13% 15% 17% n/a NWS.A 19,419 27,408 .8x n/m 7x 6x
Other 9% 9% 10% n/a
TWX 32,825 66,762 1.4x n/m 8x 8x
VIA.B 10,295 18,722 1.3x n/m 7x 7x
• Business continues to perform. Viacom’s new
franchise, the top-selling Rock Band music video MAJOR HOLDERS
game, has had 18 million songs downloaded since Viacom has 57 million Class A common shares (one vote per
launch. Rock Band 2 should aid EPS growth in share) and 556 million Class B shares (non-voting)
2009. Paramount generated $1 billion in box office outstanding. Both classes of stock trade publicly, with the
receipts in record time in 2008, driven by Indiana Class A shares controlled by Sumner Redstone.
Jones, Kung Fu Panda, and Iron Man. Economic ownership: Sumner Redstone 12%│ Insiders
• Low double-digit EPS growth from 2008-10. other than Redstone <1% │ Franklin 7% │ Morgan Stanley
Management expects to deliver low double-digit 6% │ Wellington 6% │ NWQ 5% │ Barclays 5%
annual growth in diluted EPS from continuing
operations (2007 base year EPS was $2.36). RATINGS
• Seasoned management. Founder Sumner Redstone VALUE Intrinsic value materially higher than market value?
(84) remains executive chairman, with CEO MANAGEMENT Capable and properly incentivized?
Philippe Dauman (54) at the helm since 2006. FINANCIAL STRENGTH Solid balance sheet?
Dauman has been with Viacom for two decades. MOAT Able to sustain high returns on invested capital?
• Debt-financed buybacks optimize cap structure. EARNINGS MOMENTUM Fundamentals improving?
Viacom has $8.4 billion of net debt and has MACRO Poised to benefit from economic and secular trends?
repurchased $1.1 billion of stock so far this year. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
THE BOTTOM LINE

There is a lot to like: Tremendous global reach, brands with definitive staying power, shareholder-friendly management,
strong long-term prospects for EPS growth, efficient capital structure, and 9% trailing FCF yield. Viacom does face softer ad
spending and Internet-based competition, but those factors only explain the current stock price—they do not justify it.
ViroPharma (Nasdaq: VPHM) Exton, PA, 610-458-7300

Health Care: Biotechnology & Drugs, Member of S&P SmallCap 600 http://www.viropharma.com

Insider ownership: 1% FYE 12/31/10 0.10 -0.01 12 EV / LTM EBIT 5.0x

per share data) 12/31/01 12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 9/30/08 9/30/07 9/30/08
Revenue 3 6 2 22 132 167 204 230 51 66
Gross profit 0 0 0 21 114 148 195 221 49 63
EBIT (79) (49) (34) (12) 88 99 116 101 28 33
Net income (83) (16) (37) (20) 114 67 95 89 21 27
Diluted EPS (4.34) (1.11) (1.43) (0.73) 2.02 0.95 1.21 1.10 0.26 0.33
Cash from ops (39) (62) (34) (20) 72 95 123 122 40 41
Capex 5 4 1 1 0 2 9 2 0 2
Free cash flow (44) (66) (35) (21) 71 93 114 120 40 39
Total assets 266 174 134 178 436 430 776 855 744 855
Short-term debt 0 0 0 0 79 0 0 0 0 0
Long-term debt 180 135 128 190 0 0 250 250 250 250
Common equity 39 28 (8) (26) 327 412 497 574 471 574
EBIT/capital employed n/m n/m -3091% -289% >100% >100% >100% >100% n/m n/m
$120
$100
$80
$60
$40
$20
$0
BUSINESS OVERVIEW • Strong FCF from Vancocin sales, with related

ViroPharma develops products that address serious diseases gross margin in excess of 95%.
treated by physician specialists. The company • Stock price implies 13% trailing FCF yield, 11x
commercializes Vancocin, approved for oral administration trailing P/E and 22x forward P/E.
for treatment of antibiotic-associated pseudomembranous
colitis. ViroPharma focuses drug development activities in INVESTMENT RISKS & CONCERNS
infectious diseases including cytomegalovirus (CMV) and • One-drug company. ViroPharma depends on
non-toxigenic C. difficile (NTCD). Vancocin for all of its current revenue. The last core
patent protecting Vancocin expired in 1996.
DRUG PIPELINE OVERVIEW • Lev acquisition changes risk profile. ViroPharma
Preclinical Ph. 1 Ph. 2 Ph. 3 Marketed
spent a large portion of its enterprise value on the
ViroPharma
Vancocin
1 purchase of money-losing Lev.
Camvia
2
I I • EBIT decline due to increases in R&D and G&A.
3
Camvia I R&D spending is up 94% to $45 million while
4
NTCD
Antiviral
5 G&A expenses have risen 77% to $43 million YTD.
Lev Pharmaceuticals — acquisition pending The company attributes the increases to costs
1
Cinryze
6
associated with phase three of Camvia (maribavir),
Approved for oral administration for treatment of antibiotic-associated compensation costs related to European and
pseudomembranous colitis caused by Clostridium difficile and enterocolitis
caused by Staphylococcus aureus, including methicillin-resistant strains. Vancocin salesforce headcount, and marketing
2
3
Cambia (maribavir) targets CMV disease in Stem Cell Transplant (SCT). efforts. The opex jump reduced EBIT to $82 million
Cambia (maribavir) targets CMV disease in Solid Organ Transplant (SOT).
4
Non-toxigenic C. difficile (NTCD) to prevent recurrence of CD infection. in the first nine months of 2008, down 15% y-y.
5
6
Discovery of antiviral compounds targeting hepatitis C virus (partner: Wyeth). • Management changes, including appointment of
Replacement therapy for patients with HAE (hereditary angioedema).
Charles Rowland as CFO in October. He was
previously CFO of Endo Pharma. A new head of
medical affairs also joined ViroPharma in October.
• Approved Vancocin drives current business.
• Likely to drop off magic formula list due to Lev
ViroPharma generates substantially all sales from
acquisition, as the deal redeploys a large amount of
Vancocin for treatment of enterocolitis caused by S.
cash into an EBIT-negative business (ViroPharma
aureus and antibiotic associated pseudomembranous
had net cash of $418 million as of September 30).
colitis caused by C. difficile. ViroPharma acquired
U.S. rights to Vancocin from Eli Lilly for $116 COMPARABLE PUBLIC COMPANY ANALYSIS
million plus royalties in 2004. Vancocin grew to ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
$182 million in the past nine months, up 17% y-y.
ABII 2,424 1,780 5.2x 3.6x n/a n/a
• Large acquisition of Lev Pharma (OTC: LEVP), BRL 7,074 8,418 3.0x 16.7x 22x 17x
completed in October, adds Cinryze C1 esterase CBST 1,404 1,358 3.5x 11.1x 19x 14x
inhibitor (human), a late-stage product targeting TEVA 35,015 36,420 3.4x 7.8x 15x 14x
life-threatening hereditary angioedema (HAE) WPI 2,470 2,946 1.2x 3.9x 12x 11x
disease with limited treatment options (~10,000
VPHM 921 502 2.2x 2.0x 12x 22x
U.S. patient population; multi-hundred million
dollar market opportunity in acute and prophylaxis).
Lev met its primary endpoints in Phase III clinical MAJOR HOLDERS
trials for both the acute and prophylactic treatment CEO Milano <1% │ Other insiders 3% │ Baker Brothers
of HAE and expects to begin marketing Cinryze in 10% │ Barclays 6%
December. The FDA has granted seven years of
marketing exclusivity to Cinryze for HAE routine RATINGS
prophylaxis pursuant to the Orphan Drug Act. In the VALUE Intrinsic value materially higher than market value?
acquisition, ViroPharma is paying $443 million up MANAGEMENT Capable and properly incentivized?
front (82% cash, 18% stock), with contingent FINANCIAL STRENGTH Solid balance sheet?
consideration of another $175 million. MOAT Able to sustain high returns on invested capital?
THE BOTTOM LINE

ViroPharma fails to meet magic formula criteria when results are adjusted for the pending acquisition of Lev. An investment
in ViroPharma therefore becomes a judgment call on the prospective performance of Lev’s Cinryze, ViroPharma’s Vancocin,
and ViroPharma’s drug pipeline. We are not comfortable with such a judgment call in the face of reduced pro forma
profitability and, therefore, pass on the shares.
Western Digital Corp. (NYSE: WDC) Lake Forest, CA, 949-672-7000

Technology: Computer Storage Devices, Member of S&P MidCap 400 http://www.westerndigital.com


per share data) 6/28/02 6/27/03 7/2/04 7/1/05 6/30/06 6/29/07 6/27/08 9/26/08 9/28/07 9/26/08
Revenue 2,151 2,719 3,047 3,639 4,341 5,468 8,074 8,417 1,766 2,109
Gross profit 282 443 461 590 829 900 1,739 1,840 323 424
EBIT 51 187 154 195 366 415 1,006 1,105 135 234
Net income 65 182 150 196 395 564 867 1,009 69 211
Diluted EPS 0.28 0.89 0.69 0.90 1.76 2.50 3.84 4.46 0.31 0.93
Cash from ops 101 258 190 421 368 618 1,399 1,481 219 301
Capex 48 62 132 194 268 324 615 614 163 162
Free cash flow 53 196 58 227 100 294 784 867 56 139
Cash & investments 224 393 378 598 699 907 1,107 1,215 851 1,215
Total assets 637 866 1,159 1,589 2,086 2,901 4,875 5,092 4,374 5,092
Short-term debt 86 0 15 20 25 12 27 45 1,011 45
Total current liabilities 493 506 587 820 872 1,130 1,564 1,596 2,463 1,596
Long-term debt 0 0 53 33 19 10 482 462 7 462
Total liabilities 534 539 672 888 929 1,185 2,179 2,205 2,587 2,205
Common equity 103 327 488 700 1,157 1,716 2,696 2,887 1,787 2,887
EBIT/capital employed >100% n/m >100% >100% >100% 66% 80% 63% n/m n/m
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
BUSINESS OVERVIEW • Long-tenured management. CEO John Coyne (58)

Western Digital produces hard disc drives, which it markets has served in various roles at Western for 25 years.
to systems manufacturers, resellers, and retailers. The CFO Timothy Leyden (56) returned to Western in
products are used in PCs, notebooks, and enterprise 2007 and has been with the company for 20 years.
applications such as servers, workstations, network-attached • Strong balance sheet, with $1.2 billion of cash and
storage, and video surveillance equipment. The top ten $500 million of debt as of September 30.
customers accounted for 47% of revenue in FY08 (no • Repurchased 18 million shares for $284 million
customer was 10%+ of revenue). Western was founded in since 2005, including $36 million in 1Q09.
1970; it acquired competitor Komag for $1 billion in 2007. • Stock price implies 29% trailing FCF yield, 3x
FYE June 30 2006 2007 2008 1Q09 INVESTMENT RISKS & CONCERNS
1
Unit shipments (mn) 73 97 133 39
Change (y-y) 20% 32% 38% 34% • Declining average selling prices. ASP declines are
Net revenue ($mn) 4,341 5,468 8,074 2,109 a “fact of life” in the disc drive industry, and prices
Change (y-y) 19% 26% 48% 19% per unit of storage capacity are likely to continue to
2
ASP per unit ($) 59 57 59 53
Change (y-y) 0% -3% 4% -10%
decline. ASP declines are driven by factors such as
% of revenue by product – hard drives for… production cost decreases, excess capacity, excess
…non-desktop sources 29% 43% 56% 61% inventories, and attempts to gain market share.
…desktop computers 71% 57% 44% 39% • Meaningful degree of commoditization: “Hard
% of revenue by channel:
OEM
3
54% 48% 51% 56%
drives manufactured by different competitors are
Distributors 39% 36% 31% 26% highly substitutable due to the industry mandate of
Retailers (ie, branded) 7% 16% 18% 18% technical form, fit and function standards.”1
4
• Intense competition from ExcelStor, Fujitsu,
U.S. 32% 33% 24% n/a
Asia 36% 34% 41% n/a
4 Hitachi, Samsung, Seagate, and Toshiba.
4
EMEA 28% 29% 29% n/a
Other 4% 5% 5% n/a
4
1
FY08 growth driven by demand for hard drives and Western’s diversification ($mn) MV EV EV/Rev P/TB 08 P/E 09 P/E
into non-desktop markets, including mobile, electronics, enterprise, and
branded. Western shipped 37 million 2.5 inch drives to the mobile and branded EMC 20,367 17,950 1.2x 3.9x 13x 12x
markets in FY08, up from 12 million units in FY07. The company shipped 15 QTM 36 413 .4x n/m 2x 1x
million units to the DVR market in FY08, up from 10 million units in FY07. STX 2,378 3,255 .3x 1.1x 5x 3x
2
ASPs are based on sales of hard drives only.
3
Dell accounted for 12%, 10% and <10% of revenue in FY06, FY07 and FY08. TDK 4,304 3,727 .4x 0.7x 17x 13x
4
1Q09 revenue by geography: Americas 23%, EMEA 29%, Asia 48%.
WDC 2,980 2,272 .3x 1.1x 4x 4x
MAJOR HOLDERS
• Growing demand for data storage, driven by
CEO Coyne <1% │ Other insiders <1% │ AXA 12% │
applications such as digital photos, video and music.
Fidelity 6% │ LSV 5%
• Growing demand for disc drives, driven by a
proliferation of enterprise data, mobile computing, RATINGS
and consumer electronics. Desktop demand has VALUE Intrinsic value materially higher than market value?
moderated due to a shift toward mobile computing. MANAGEMENT Capable and properly incentivized?
• $1 billion Komag acquisition strengthens FINANCIAL STRENGTH Solid balance sheet?
Western’s competitive position against Seagate, MOAT Able to sustain high returns on invested capital?
which remains the hard disc drive industry leader. EARNINGS MOMENTUM Fundamentals improving?
Komag improves Western’s market share, MACRO Poised to benefit from economic and secular trends?
production efficiencies, and technology position. EXPLOSIVENESS 5%+ probability of 5x upside in one year?
• Disc drive industry consolidation, driven by high 1
Source: Western Digital 10-K for the fiscal year ended June 27, 2008.
capex requirements and scale advantages: Maxtor/
Quantum, 2001; IBM/ Hitachi their disc drive
businesses, 2002; Seagate/ Maxtor, 2006; TDK/
Alps, 2007; Western Digital/ Komag, 2007.
THE BOTTOM LINE

Western Digital joins close competitor Seagate as a magic formula selection. Both companies are attractively valued, trading
at mid single digit multiples of run-rate earnings. Western has a stronger balance sheet and, therefore, an ability to buy back
stock more aggressively. However, we view Seagate as the technology leader and more consistent performer. As a result, we
prefer Seagate over Western, though both companies deserve thorough investigation. In Western’s case, prospective investors
should gain comfort that the Komag acquisition added value and has been integrated successfully.
MOI Top Ten Lists

Top Ideas, Sorted by Category
Top 10 Companies With Hidden Assets Top 10 Heavily Shorted Stocks

Companies with assets that are unknown to or underappreciated by investors Companies with large reported short interests
Avistar, Cresud, KHD Humboldt Wedag, IDT, Chipotle, Fairfax Financial, Jefferies, Pzena
Playboy, Premier Exhibitions, Sonae, Steinway Investment, Tempur-Pedic, CompuCredit, Greenlight
Musical, Maui Land & Pineapple, Natuzzi Capital Re, Netflix, Sears Holdings, Sierra Wireless
Top 10 Super Investor Ideas Top 10 Bargains In Financial Sector

Companies owned by top investment managers Financial services companies, broadly defined
American Express, AmeriCredit, Austrian Post, American Express, AmeriCredit, Cowen, Jefferies,
Cresud, Fairfax Financial, Forest City Enterprises, Legg Mason, Fairfax, Greenlight Capital Re,
Microsoft, Pfizer, SFK Pulp Fund, Steak n Shake Nicholas Financial, Tree.com, Wells Fargo
Top 10 Stocks You’ve Never Heard Of Top 10 Foreign Companies Listed In U.S. or Canada
Companies that are unknown to most institutional investors Companies generating more than 50% of revenue outside the U.S.
Charles & Colvard, Belzberg Technology, Caldwell Belzberg Technologies, Brazil Fast Foods, Cresud,
Partners, Cimatron, Gravity, IDT, ITEX, McRae Cryptologic, Gravity, Indosat, Nippon Telephone,
Industries, Optimal Group, Strathmore Minerals Retail Holdings, SFK Pulp Fund, Sony
Top 10 End-Of-The-Year Tax Selling Bargains Top 10 Branded Businesses

Companies that may be under selling pressure for tax-planning reasons Companies that own widely recognized brands
Ambassadors International, Boyd Gaming, Gravity, American Eagle, American Express, Boeing,
IDT, Jamba, Pinnacle Airlines, Playboy, Premier Microsoft, New York Times, Playboy, Princeton
Exhibitions, Select Comfort, Travelzoo Review, Sony, Sotheby’s, Steinway Musical
Top 10 Leveraged Speculations Top 10 Renaissance Technologies Ideas

Indebted companies with favorable risk-reward tradeoffs Companies owned in size by the world’s top quantitative investment fund;
but also distinct possibility of permanent loss of capital number of shares held must have increased sequentially in order to qualify
AmeriCredit, Boyd Gaming, Forest City Enterprises, DISH Network, EarthLink, Forest Labs, Netflix,
Lear, Magna Entertainment, Office Depot, Select RadioShack, Stamps.com, Syneron Medical, Walter
Comfort, Sears Holdings, Servidyne, Sprint Nextel Industries, WellCare Health Plans, Wet Seal
Top 10 Explosive Stocks

De-leveraged companies with a 5% probability of 5x price gain in a year “Risk comes from not knowing what you’re doing.”
Avistar, Gravity, IDT, Jamba, Mace Security,
Premier Exhibitions, Select Comfort, Travelzoo, —Warren Buffett
Tree.com, UTStarcom
Top 10 Ideas For Activist Value Investors Top 10 Ideas For Nano Cap Investors
Companies typically meeting criteria favored by activists, including lack of
Companies with market value of less than $100 million
insider control, discount to intrinsic value, and recent underperformance
BSQUARE, Cimatron, IDT, ITEX, New Frontier
Adaptec, InfoSpace, Ingram Micro, Premier
Media, Playboy, Premier Exhibitions, Servidyne,
Exhibitions, Sierra Wireless, Target, Tech Data,
Travelzoo, Tree.com
USA Mobility, Versant, Yahoo
Top 10 Ideas For Deep Value Investors Top 10 Ideas For Micro Cap Investors
Companies meeting criteria favored by deep value investors, such as low Companies with market value of $100 million to $500 million
price-to-book, price-to-earnings and enterprise value-to-revenue multiples Boyd Gaming, Cresud, Diamond Management,
AmeriCredit, Cresud, EchoStar, KHD, IDT, Natuzzi, Greenlight Re, Harvest Natural Resources, KHD,
Office Depot, Sears Holdings, Syneron, UTStarcom Lear, Natuzzi, Syneron, UTStarcom
Top 10 Ideas For Cash Flow Investors Top 10 Ideas For Small Cap Investors
Companies trading at low multiples of trailing and/or forward free cash flow, Companies with market value of $500 million to $2 billion
or as Berkowitz might say, “cash gushers” American Eagle, AmeriCredit, Contango Oil & Gas,
Contango Oil & Gas, DISH Network, EchoStar, Deckers Outdoor, EchoStar, Net 1 UEPS, Seagate,
ITEX, Microsoft Sotheby’s, Tempur-Pedic, Walter Industries
Top 10 Ideas For GARP Investors Top 10 Ideas For Mid Cap Investors
Companies meeting criteria favored by Growth-At-a-Reasonable-Price (GARP)
Companies with market value of $2 billion to $15 billion
investors, including good long-term growth prospects and high earnings yield
DISH Network, Forest Labs, Leap Wireless, Linear
American Eagle, Cadence Design, Garmin, MEMC
Technology, McGraw-Hill, MetroPCS, Sears
Electronic Materials, Microsoft, Monster, Net 1
Holdings, Sprint Nextel, TDK, Toll Brothers
UEPS, NVIDIA, Seagate, Varian
Top 10 Ideas For Special Situation Investors Top 10 Ideas For Large Cap Investors
Companies undergoing corporate change, with expected price performance
Companies with market value of more than $15 billion
driven by corporate events such as acquisitions, recaps or divestitures
American Express, Berkshire-Hathaway, Dell,
Ascent Media, Axcelis, Brink’s, Digimarc, Discovery,
Microsoft, Nippon Telephone, Pfizer, Sony, Target,
John Bean Technologies, KHD, Porsche stub (ex.
Wal-Mart, Wells Fargo
Volkswagen), Tree.com, Yahoo
“Show me a guy who’s afraid to look bad, and I’ll “Never attribute to malice that which can be
show you a guy you can beat every time.” adequately explained by stupidity.”
—Lou Brock —Unknown
Summary investment theses for selected Top 10 companies are

included on the following pages.
Servidyne (Nasdaq: SERV) Energy Demand Management & Real Estate (www.servidyne.com)
Price: $2.10 ($2.10-$6.19) P/E FYE 4/30/08: n/m Year ended 4/30/06 4/30/07 4/30/08 7/31/08
Market value: $8 million P/E FYE 4/30/09: n/a Revenue: 16 17 20 16
Enterprise value: $20 million P/E FYE 4/30/00: n/a GP: 7 7 8 6
Shares out: 3.7 million P/E FYE 4/30/01: n/a EBIT: (3) (4) (3) (3)
Insider ownership: 25% EV / LTM EBIT: n/m Diluted EPS: (0.11) (0.31) (0.31) (0.62)
FCF: (3) (1) (2) (5)
Business: Servidyne operates in two segments: Building Performance
Net cash: (13) (14) (12) (12)
Efficiency and Real Estate. BPE provides energy efficiency solutions
and sustainability programs to companies that own and operate ST assets: 13 10 18 14
buildings. Real Estate has engaged in real estate activities since 1960, ST liabilities: 5 5 4 3
including the acquisition, development, leasing, and sale of shopping Intangibles: 9 9 9 10
centers, office buildings and land in the Southeast and Midwest. The Book value: 21 22 23 22
company uses third-party property managers and leasing agents. Total assets: 52 57 52 50
ROIC: -10% -15% -10% -10%
Thesis: The company owns income-producing real estate worth $5+
per share net of debt, giving investors the BPE segment for free. BPE,
an attractive energy demand management business, could be worth $15
another $8-12 per share, based on 2-3x trailing revenue. BPE revenue
$10
grew 11% to $14 million in FY08. Comparable companies in the energy
demand management and demand reduction space trade as high as $5
five times revenue. Servidyne may have been overlooked by investors
due to its small size, illiquidity, family control, and the fact that the $0
company has posted losses on a GAAP basis. 99 00 01 02 03 04 05 06 07 08
Ambassadors International (Nasdaq: AMIE) River & Ocean Cruising, Marina Construction (www.ambassadors.com)
Shares out: 11.1 million P/E FYE 12/31/10: n/a EBIT: 0 1 (21) (11)
Institutional ownership: 42% EV / LTM revenue: 0.4x Net income: 3 6 (27) (41)
Insider ownership: 16% EV / LTM EBIT: n/m Diluted EPS: 0.30 0.49 (2.48) (2.73)
FCF: 4 (4) (18) (25)
Business: Ambassadors International operates four businesses: 1)
Net cash: 95 (30) (143) (115)
Windstar Cruises, an international luxury cruise line with ~600
passenger berths; 2) Majestic America, a North American river cruising ST assets: 119 121 132 105
company with ~1,500 berths; 3) a global marina construction business; ST liabilities: 26 68 125 102
and 4) a small travel and event services (T&E) business. Intangibles: 10 13 20 21
Book value: 109 116 88 84
Thesis: Ambassadors has put money-losing Majestic on the block. A
Total assets: 135 256 377 309
sale would likely eliminate the company’s debt and leave it with up to
ROIC: n/m 2% -12% -5%
$40 million of net cash. Pro forma for a sale of Majestic, investors are
being paid to own the other three businesses. Ambassadors paid $100
million for Windstar in April 2007. Windstar earned EBIT of $10 million $60
in 2007 and $5 million YTD. The marina construction business
generated EBIT of $8 million in 2007 and $3 million YTD. T&E earned $40
EBIT of $1.5 million in 2007 and $3 million YTD. We value Windstar at
$40 million (4x 2007 EBIT), the marina business at $30 million (4x 2007 $20
EBIT), and T&E at $10 million (7x 2007 EBIT). Adding a pro forma net
$0
cash position of $40 million yields total equity value of $120 million, or
99 00 01 02 03 04 05 06 07 08
$11 per share. The key risk is that the company is unsuccessful in
selling Majestic, resulting in severe financial distress.
Nicholas Financial (Nasdaq: NICK) Subprime Auto Loans (www.nicholasfinancial.com)

FCF: 15 16 17 19
Business: Nicholas Financial is a subprime consumer finance
Net cash: (82) (94) (102) (105)
company engaged in acquiring and servicing contracts for the purchase
of new and used automobiles and light trucks. The company operates ST assets: 0 0 0 0
through 47 retail locations in twelve states, including Florida, Ohio, ST liabilities: 0 0 0 0
Georgia, and North Carolina. It also maintains close relationships with Intangibles: 0 0 0 0
1,500 dealers of new and used vehicles. Book value: 58 70 79 83
Total assets: 150 173 190 197
Thesis: Nicholas Financial has remained profitable throughout the
ROIC: 23% 21% 16% 16%
continuing depression in subprime lending—a testament to the
company’s prudence and superior underwriting. Prior to the subprime
crisis, the company exhibited steady revenue and profit growth, earning $20
15-20% ROEs. Nicholas reported EPS of $0.94 in the fiscal year ended
$15
March 31, 2008, an extremely difficult year for subprime auto finance.
We expect Nicholas to resume 10-20% EPS growth off the FY08 base $10
when the business environment improves. The company has a $5
relatively underleveraged balance sheet and solid management, with
$0
insiders and the Mahan family owning roughly one-fourth of the stock.
99 00 01 02 03 04 05 06 07 08
Given the company’s favorable long-term growth outlook, we value the
equity at 8x FY08 EPS, resulting in fair value of $7.50 per share.
Jamba (Nasdaq: JMBA) Fruit Smoothie Retailing (www.jambajuice.com)

Institutional ownership: 34% EV / LTM revenue: 0.1x Net income: 3 (59) (113) (223)
Insider ownership: 11% EV / LTM EBIT: n/m Diluted EPS: 0.25 (2.41) (2.17) (4.26)
FCF: 1 (6) (40) (40)
Business: Founded in 1990, Jamba is the leading retailer of freshly
Net cash: 1 87 23 9
blended fruit smoothies. It has 520 company-operated stores and 229
franchised stores in the U.S. Jamba introduced ready-to-drink ST assets: 1 105 57 27
beverages to grocery stores in partnership with Nestle in May 2008. It ST liabilities: 14 117 72 57
announced a management shakeup in August 2008, with both the CEO Intangibles: 0 272 88 4
and CFO leaving. Former Safeway SVP James White agreed to Book value: 115 286 184 90
become CEO on November 17. Total assets: 129 468 276 165
ROIC: n/m n/m -600% -576%
Thesis: Jamba shares are down ~95% since the company went public
via a reverse merger with a SPAC. Jamba posted a comparable sales
decline of 10% in Q3; it has lost money this year. Nonetheless, at an $15
enterprise value of roughly $27,000 per store, Jamba shares offer an
interesting risk-reward tradeoff. The Jamba brand has strong name $10
recognition and is associated with a healthy lifestyle. The company’s
store base offers ample opportunity for rationalization, and we believe $5
the company could be solidly profitable at a modestly lower store count.
$0
While Jamba has posted a large GAAP loss YTD, the vast majority of
00 00 00 00 00 00 05 06 07 08
the loss has been due to special charges. With a new CEO in place,
Jamba may be able to improve execution.
Select Comfort (Nasdaq: SCSS) Mattresses (www.selectcomfort.com)

Shares out: 45.1 million P/E FYE 12/31/10: 2.0x EBIT: 69 73 44 (16)
Insider ownership: 3% EV / LTM EBIT: n/m Diluted EPS: 0.76 0.85 0.57 (0.24)
FCF: 62 28 1 (41)
Business: Founded in 1987, Select Comfort provides the Sleep
Net cash: 68 47 (31) (54)
Number bed, a line of adjustable-firmness mattresses featuring air-
chamber technology, as well as foundations and accessories. Products ST assets: 116 103 79 60
are sold in 470 company-owned stores in the U.S. ST liabilities: 106 98 149 145
Intangibles: 0 0 0 0
Thesis: Select Comfort shares are down more than 95% in the past Book value: 121 116 24 15
two years due to same-store sales contraction and operating losses.
Total assets: 240 229 191 180
The company has felt the twin effects of lower consumer spending and
ROIC: >100% >100% >100% -42%
higher raw materials costs. The shares may have “fallen through the
cracks,” as they appeal neither to growth investors, nor to high FCF-
yield or low-P/E investors, nor to traditional value investors who like to
have downside protection afforded by a strong balance sheet. $30
Nonetheless, Select Comfort offers exceptional value on a “normalized”
$20
earnings basis. The company generated combined EBIT of ~$275
million from 2003-07, or $55 million per year. It also generated strong $10
cash from operations in that period, despite rapid growth. Unfortunately
for the company, but perhaps fortunately for prospective investors, $0
Select Comfort spent $132 million on repurchases in 2007, weakening 99 00 01 02 03 04 05 06 07 08
the balance sheet just before demand imploded. They key question is
whether the company can service $54 million of net debt.
Mace Security International (Nasdaq: MACE) Personal and Enterprise Security Products (www.mace.com)
Institutional ownership: 8% EV / LTM revenue: 0.1x Net income: (5) (7) (7) 1
FCF: 1 (4) (10) (10)
Business: Mace operates in three segments: security, digital media
Net cash: (15) (7) 3 8
marketing and car washes. The security segment provides surveillance
products and Mace defense sprays. Digital media marketing was ST assets: 25 45 33 34
acquired in 2007 under the former CEO. New management may sell or ST liabilities: 10 18 15 12
discontinue the segment over time, as it has little synergy with the Intangibles: 6 5 14 12
security business. The car wash segment is in the process of being Book value: 62 57 54 52
liquidated, and most of the associated real estate has been sold. Total assets: 96 88 75 66
ROIC: -5% -13% -21% -29%
Thesis: Mace had $8 million of net cash, and car washes held for sale
with a book value of $5 million, at the end of Q3. Past car wash sales
have mosty occurred at prices above book value. The pro forma net $30
cash position of $13 million gives investors the security and digital
$20
media businesses for only $2 million. We value the security business at
$20 million, or ~1x revenue, while we assign zero value to the digital $10
media business, resulting in total estimated equity value of $33 million,
or $2 per share. Mace shares have languished for quite some time as a $0
result of value destruction by former CEO Lou Paolino. However, with 99 00 01 02 03 04 05 06 07 08
Paolino’s firing in May 2008, Mace appears poised to unlock value.
Avistar Communications (Nasdaq: AVSR) Patent Licensing & Videoconferencing (www.avistar.com)

Institutional ownership: 14% EV / LTM revenue: 5.4x Net income: (5) (8) (3) (10)
Insider buys/sales: 12/0 P / tangible book: n/m Capex: 0 0 1 0
FCF: (10) (8) (6) (13)
Business: Avistar is a company with intellectual property in the field of
Net cash: 11 5 (0) (10)
unified communications, a growth segment of the technology industry.
The company sells desktop videoconferencing solutions and licenses a ST assets: 15 12 8 10
portfolio of 80 patents for inventions in video and network technology. ST liabilities: 9 14 16 19
Licensees are videoconferencing, rich media, and public networking Intangibles: 0 0 0 0
companies, including Sony, Polycom, Tandberg, and Radvision. Book value: (4) (10) (10) (15)
Thesis: Avistar’s valuable patent portfolio may have gone unnoticed
ROIC: n/m n/m n/m n/m
due to the company’s negative net worth and operating losses. While
Avistar has generated income from patent licensing, it has lost money
in videoconferencing. The company has appointed a new CEO who $15
appears focused on cutting costs and pursuing an aggressive patent
licensing strategy. Avistar’s patent portfolio has apparently been $10
appraised at several hundred million dollars by a patent valuation firm.
While investors should not rely on this appraisal, it does suggest that a $5
closer analysis of the patent portfolio may be warranted. We note that
$0
Leucadia has purchased a stake in Avistar, providing some validation
00 00 01 02 03 04 05 06 07 08
of intrinsic value (we do note that Leucadia obtained a lien on the
patent portfolio, protection that is unavailable to public investors).
Steinway Musical Instruments (NYSE: LVB) Musical Instruments (www.steinwaymusical.com)

Institutional ownership: 72% EV / LTM revenue: 0.7x Net income: 14 (1) 15 13
Insider ownership: 15% EV / LTM EBIT: 10.5x Diluted EPS: 1.67 (0.08) 1.78 1.45
FCF: 26 24 29 38
Business: Steinway is the largest domestic manufacturer of musical
Net cash: (170) (148) (139) (149)
instruments. Its brands include Steinway & Sons in the high-end piano
segment; Boston and Essex in the mid-priced piano segment; and ST assets: 296 283 286 287
Bach, Selmer, C.G. Conn, Leblanc, and others in band instruments. ST liabilities: 72 66 67 66
Thesis: Steinway has real estate assets worth $200-300 million. The Book value: 149 158 164 166
th
company owns a prime office building on W 57 Street in Manhattan—
Total assets: 456 447 458 447
on the books for ~$25 million, estimated by management to be worth
ROIC: 11% 3% 12% 9%
$100 million. The company also owns a factory on 11 acres of
waterfront property in Queens—on the books for $3 million, estimated
by management to be worth $200 million. Manufacturing pianos in New $50
York City is clearly inefficient, and the company already utilizes some $40
Asian production. While management has shown no urgency in selling $30
either piece of real estate, one or both assets may be monetized over
$20
time. The operating business has generated fairly steady adjusted
$10
EBITDA of ~$50 million per year. If we value this stream at 6x, we
$0
arrive at a combined fair enterprise value of $500-600 million.
08 07 06 05 04 03 02 01 00 99
Subtracting ~$150 million of net debt leaves an equity value of $350-
450 million, or $41-53 per share.
Pinnacle Airlines (Nasdaq: PNCL) Regional Airline (www.pncl.com)

FCF: 14 17 251 (25)
Business: Pinnacle operates 134 regional jet aircraft as Northwest
Net cash: (62) (48) (66) (636)
Airlink and Delta Connection. The Colgan Air subsidiary, acquired for
$20 million in 2007, operates 60 turboprop regional aircraft as ST assets: 126 197 295 177
Continental Connection, United 3 Express, and US Airways Express. ST liabilities: 80 74 244 259
Thesis: Pinnacle’s normalized EPS may be $1-2. The stock has Book value: 19 97 58 53
declined due to (1) airlines rationalizing their regional fleets as a result
Total assets: 229 301 709 1,086
of high oil prices; (2) losses by Colgan due to Colgan’s assumption of
ROIC: 82% >100% 39% 12%
fuel price and other risks; and (3) contentious pay negotiations with
pilots. The market appears to be ignoring the following facts: (1)
Pinnacle’s contracts guarantee a fixed EBIT margin regardless of fuel $25
prices or load factors (Delta tried to cancel its long-term deal with $20
Pinnacle but relented after minor concessions); (2) Colgan is $15
transitioning to a fixed-margin model; and (3) the current environment
$10
improves Pinnacle’s negotiating leverage with pilots. The balance
$5
sheet includes a $193 million deferred revenue liability related to
$0
Northwest’s former bankruptcy. The liability flows into income at a
00 00 00 00 00 04 05 06 07 08
100% gross margin over the life of the Northwest contract. As a result,
the liability may be viewed as equity (tax-effected at a low rate).
ITEX (OTC: ITEX) Barter Exchange for Small Businesses (www.itex.com)

Institutional ownership: n/a EV / LTM revenue: 0.5x Net income: 3 5 1 1
FCF: 2 2 (0) 0
Business: ITEX is the largest barter exchange in North America, with
Net cash: (0) 2 1 1
24,000 members and $250 million in transaction volume. ITEX helps
small businesses conserve cash and generate incremental sales. ST assets: 3 4 4 4
ST liabilities: 2 2 3 3
Thesis: ITEX may be worth $24 million, or $1.35 per share, based on Intangibles: 3 3 5 5
12x estimated forward FCF of $2 million. ITEX is a high-ROIC business Book value: 8 12 13 13
with strong management and attractive organic growth and acquisition
opportunities. Barriers to entry are high for a company its size, owing to
ROIC: >100% >100% >100% >100%
a nationwide franchise network and a proprietary payment processing
platform. ITEX’s value proposition should resonate with small
businesses in a recessionary environment. Recent initiatives have
$2
improved the value proposition, making membership attractive to most
$1
small businesses. With 24,000 members out of more than 25 million
small businesses, the company has a long runway of growth. In $1
December 2007, activist investor Sardar Biglari’s Western Sizzlin
(Nasdaq: WEST) made an unsolicited offer of $1.02 in stock. ITEX $0
remained independent, as most holders did not tender their shares. 00 00 01 02 03 04 05 06 07 08
Cowen Group (Nasdaq: COWN) Investment Banking (www.cowen.com)

Enterprise value: -$23 million P/E FYE 12/31/09: 137.5x GP: 245 292 217 191
Institutional ownership: 59% EV / LTM revenue: n/m Net income: 12 38 (11) (72)
FCF: 44 377 (30) 23
Business: Founded in 1918, Cowen is a 500-person investment bank
Net cash: (142) (68) 113 102
with franchises in health care, technology, media, telecom, consumer,
defense, and alternative energy. Cowen is a top three healthcare ST assets: 0 0 0 0
investment bank in the U.S. The company was acquired by Societe ST liabilities: 0 0 0 0
Generale for $500+ million in 1998 and spun off in an IPO in 2006. Intangibles: 50 50 50 3
Book value: 374 218 209 149
Thesis: Cowen has adjusted net cash of $135 million, or $9.50 per
Total assets: 785 684 349 228
share, with investors being “paid” to own the investment bank. The
ROIC: 9% 15% n/m n/m
company has a clean balance sheet with no leverage and no exposure
to mortgage-related securities. While Cowen has lost money this year,
the modest operating loss has had only a minor impact on the cash
position. Cowen generates revenue of $250-300 million in a “normal” $25
environment, and we believe the company should achieve a net margin $20
of at least 5% in the next upcycle, resulting in net income of at least $15
$12-15 million. If we value the company at 5x normalized earnings, we $10
arrive at a total equity value of $195-210 million, or $14-15 per share. $5
Long-time Cowen CEO Kim Fennebresque retired in March 2008 and $0
resigned from the Board in June 2008. Given Cowen’s strong balance 00 00 00 00 00 00 00 06 07 08
sheet, we would not be surprised to see former or current members of
management propose a going-private transaction.
Steak n Shake (NYSE: SNS) Restaurants (www.steaknshake.com)

Shares out: 28.6 million P/E FYE 9/30/10: n/m EBIT: 42 15 (35) (21)
Institutional ownership: 75% EV / LTM revenue: 0.5x Net income: 28 12 (23) (23)
FCF: (11) (25) (7) (7)
Business: Steak n Shake is a full-service restauranteur known for
Net cash: (175) (188) (163) (163)
“steakburgers.” The restaurants feature full-service dining areas,
counter service, and drive-thru windows. The company has 436 ST assets: 31 48 61 61
company-owned and 69 franchised units operating in 21 states. ST liabilities: 83 95 76 76
Thesis: Activist investor Sardar Biglari became CEO in August after Book value: 287 304 284 284
prevailing in a proxy fight. Old management had been plagued by
Total assets: 543 565 520 520
conflicts of interest and poor execution. Biglari’s success in taking
ROIC: 10% 3% -8% -5%
control of Steak n Shake opens the door to operating improvements
and policies focused on shareholder value. Steak n Shake has tangible
book value of $277 million, the vast majority of which relates to real
$25
estate associated with restaurants. New management appears intent $20
on cutting overhead and refranchising. The strategy promises to free up $15
capital and turn the company into an asset-light franchisor of a brand $10
that has gained acceptance over seven decades, primarily in the $5
Midwest and Southeast. Potential proceeds from real estate sales $0
could be used to repurchase stock or pay (special) dividends. 99 00 01 02 03 04 05 06 07 08
Tree.com (Nasdaq: TREE) Online Real Estate Services and Lending Marketplace (www.lendingtree.com)
Enterprise value: -$5 million P/E FYE 12/31/09: n/m GP: 355 403 273 167
Institutional ownership: 11% EV / LTM revenue: n/m Net income: 6 9 (550) (727)
FCF: (100) 62 224 21
Business: Tree.com operates two businesses: The lending business
Net cash: 0 (270) (54) 26
consists of LendingTree.com, GetSmart.com, and call centers, which
match consumers with lenders and loan brokers. The segment also ST assets: 0 505 173 187
originates and funds home loans. The real estate business consists of ST liabilities: 0 426 189 113
a residential real estate brokerage that operates a website and offices Intangibles: 0 725 249 75
in 14 markets under the brand RealEstate.com, REALTORS. Book value: 0 774 215 142
Total assets: 0 1,261 444 280
Thesis: Tree may be worth $200 million, or $21 per share, based on
ROIC: n/m 8% -258% -2157%
an EV multiple of one times run-rate revenue. The company has $98
million of net cash ($41 million if warehouse lines are netted against
cash rather than loans held for sale) – we value the cash at zero, as we
assume it may be needed in the current downturn. Tree’s primary $15
assets, LendingTree.com and RealEstate.com, operate non capital-
$10
intensive businesses with attractive long-term prospects and name
recognition. Tree was spun off from IAC/InterActiveCorp in August as $5
part of a series of transactions involving several entities. Tree, due to
its small size and participation in real estate and consumer lending, $0
may have seen selling pressure from IAC/InterActiveCorp holders, 00 00 00 00 00 00 00 00 00 08
while finding few incremental buyers. Among the buyers, however,
have been Tree CEO Doug Lebda and CFO Matthew Packey.
Magna Entertainment (Nasdaq: MECA) Horse Racing Venues (www.magnaent.com)

Institutional ownership: n/a EV / LTM revenue: 0.7x Net income: (105) (87) (114) (159)
FCF: (189) (141) (139) (114)
Business: Magna Entertainment is a large land owner and North
Net cash: (484) (507) (417) (406)
America’s largest operator of horse racetracks. The company also
operates off-track betting facilities and casinos in conjunction with some ST assets: 197 151 226 225
racetracks. It owns AmTote, a provider of totalisator services to the ST liabilities: 324 245 389 420
pari-mutuel industry, and XpressBet, an online wagering system. Intangibles: 110 112 110 110
Magna has a 50% interest in HorseRacing TV, a 24-hour TV network, Book value: 460 401 363 273
and TrackNet, a distributor of racing content. Total assets: 1,415 1,247 1,243 1,164
ROIC: -11% -11% -15% -9%
Thesis: Magna is an asset-rich, cash-poor company in distress. Due to
a high debt load, the value of the equity is highly sensitive to changes
in estimated EV. The company has tangible book of $163 million and $250
net debt of ~$600 million. It is working to reduce debt by selling off real $200
estate. We believe Magna deserves a closer look, as it is controlled by $150
chairman and CEO Frank Stronach by virtue of his control of MI $100
Developments (MIM). Stronach is also founder of Magna International $50
(MGA), the large Canadian auto parts maker. Stronach appears $0
committed to seeing Magna stay out of bankruptcy, creating a 00 00 01 02 03 04 05 06 07 08
meaningful probability that shareholders will not be wiped out.
Harvest Natural Resources (NYSE: HNR) Oil & Gas Operations (www.harvestnr.com)
Institutional ownership: 80% EV / LTM revenue: 9.0x Net income: 39 (63) 57 60
Insider ownership: 2% EV / LTM EBIT: n/m Diluted EPS: 1.01 (1.68) 1.51 1.57
FCF: 99 (26) (21) 21
Business: Harvest operates oil and natural gas properties in
Net cash: 158 43 112 118
Venezuela and owns exploration properties worldwide.
ST assets: 240 200 154 134
Thesis: Harvest remains an orphaned stock due to investors’ fear of ST liabilities: 62 82 43 16
owning assets in Chavez-ruled Venezuela. While the political risk is Intangibles: 0 0 0 0
real, much of it has played out. Venezuela has nationalized the oil and Book value: 298 281 314 286
gas industry, forcing foreign companies to enter into JVs majority-
Total assets: 401 468 414 363
owned by state oil company PDVSA. As such, Harvest is essentially a
ROIC: 55% 1% -278% -233%
service provider to the Venezuelan government. Instead of being paid
by the hour or per project, however, Harvest makes money via minority
ownership in the fields it operates. It trades at an EV of less than $3 $20
per barrel of proved reserves and less than $1 per barrel of 3P $15
reserves (assumes zero value for global exploration projects). Despite $10
the political risk, Venezuelan oil and gas assets changed hands in the
past year at 4-5x Harvest’s valuation. In addition, FCF growth should $5
accelerate as Harvest boosts production. The company has $0
repurchased $29 million of stock YTD. We value the business, 99 00 01 02 03 04 05 06 07 08
exploration assets and net cash at $800 million or $24 per share.
Gravity (Nasdaq: GRVY) Software & Programming (www.gravity.co.kr)

Enterprise value: -$25 million P/E FYE 12/30/00: n/a GP: 30 19 17 15
Institutional ownership: 20% EV / LTM revenue: n/m Net income: (2) (18) (19) (17)
Insider buys/sales: 0/0 P / tangible book: 0.4x Capex: 12 2 8 (2)
FCF: 3 (3) (16) (26)
Business: Gravity is a leading Asian developer of Internet-based
Net cash: 75 65 50 44
games commonly referred to as MMORPGs (massively multiplayer
online role-playing games). Gravity’s flagship game Ragnarok Online ST assets: 88 71 58 54
(RO) is one of the most popular Asian MMORPGs of all time. ST liabilities: 16 13 8 7
Thesis: Gravity may be worth $160 million, or $5.70 per ADR, based Book value: 97 79 60 60
on 6x post-RO2 estimated net income of $20 million, plus $40 million of
excess cash. Gravity completed an IPO at $13.50 per share in 2005 on
ROIC: -16% -481% -683% -267%
the back of nearly $25 million in profits resulting primarily from the
success of RO. Revenue has dropped and profits have evaporated
over the past three years as the company has repeatedly delayed the
much-anticipated release of Ragnarok Online 2 (RO2). Two U.S. hedge $15
funds have been engaged in a battle over Gravity’s corporate
$10
governance practices (Gravity is majority-owned by a Japanese public
company with ties to Softbank). While Gravity’s market value reflects $5
investor despondency regarding poor execution and poor treatment of
shareholders, the market value ignores the fact that RO2 is in open $0
beta testing and appears likely to come to market within a few months. 00 00 00 00 00 00 05 06 07 08
In addition, the company turned profitable in Q3 due to efficiency
improvement measures implemented by new management.
Portfolios With Signal Value

Revealing the Top Ideas of Top Investors
“Signal value” as opposed to “noise.” We present the MOI Signal Rank answers the question, “What are this
holdings of some of the world’s top investors. We look for investor’s top ten ideas right now?” Rather than simply
investors who have amassed impressive track records over presenting each investor’s largest holdings as of the recently
long periods of time. We choose these investors carefully filed quarter end, the MOI’s proprietary methodology ranks
to avoid the noise inherent in most 13F-HR filings. the companies in each investor’s portfolio based on the
investor’s current level of conviction in each holding, as
Top investors included in this section: judged by the MOI.
• William Ackman, Pershing Square Our proprietary methodology takes into account
• Bruce Berkowitz, Fairholme a number of variables, including the size of a position in an
• Warren Buffett, Berkshire Hathaway investor’s portfolio, the size of a position relative to the
• Ian Cumming & Joe Steinberg, Leucadia market value of the corresponding company, the most recent
quarterly change in the number of shares owned, and the
• David Einhorn, Greenlight
change in the stock price of a position since the most recent
• Glenn Greenberg, Chieftain
quarterly filing date.
• Mason Hawkins, Southeastern
For example, an investor might have the most
• Chris Hohn, Children’s Investment Fund
conviction in a position that is only the tenth-largest
• Carl Icahn, Icahn
position in such investor’s portfolio. This might be the case
• Seth Klarman, Baupost
if an investor invests in a small company, resulting in a
• Eddie Lampert, ESL holding that is simply too small to rank highly based on size
• Warren Lichtenstein, Steel Partners alone. On the other hand, such a holding might represent
• Dan Loeb, Third Point 19.9% of the shares outstanding of the subject company,
• Steve Mandel, Lone Pine suggesting a high level of conviction. Our estimate of the
• Mohnish Pabrai, Pabrai Funds conviction level would rise further if the subject company
• Rich Pzena, Pzena Investment has a 20% poison-pill threshold, thereby suggesting that the
investor has bought as much of the subject company as is
• Prem Watsa, Fairfax
practically feasible.
• Marty Whitman, Third Avenue
Missing your favorite Super Investor?

Let us know at editor@manualofideas.com.
Portfolio with Signal Value: William Ackman (Pershing Square)

MOI Market Price ($) Shares Owned Holdings
Signal Value Latest Filing ∆ Since Latest ∆ Since as % of
Rank Company Ticker ($mn) Date Date Filing Filing 6/30/08 Co. Fund
1 Wendy’s / Arby’s WEN 1,701 3.62 5.26 -31% 55,619,748 >+100% 12% 8%
2 Borders BGP 140 2.31 6.56 -65% 10,597,880 no change 18% 2%
3 EMC EMC 20,367 9.98 11.96 -17% 58,615,731 +47% 3% 18%
4 Dr Pepper Snapple DPS 4,455 17.56 26.48 -34% 22,128,910 +4% 9% 15%
5 Barnes & Noble BKS 866 15.75 26.08 -40% 6,540,451 no change 12% 4%
6 Target TGT 24,926 33.03 49.05 -33% 19,608,749 no change 3% 25%
7 Mastercard MA 18,569 143.68 177.33 -19% 569,924 new position 1% 3%
8 Visa V 46,025 54.24 61.39 -12% 2,703,618 new position 1% 4%
9 Greenlight Capital Re GLRE 403 11.10 22.99 -52% 250,000 no change 1% 0%
Portfolio with Signal Value: Bruce Berkowitz (Fairholme)

1 WellCare WCG 390 9.36 36.00 -74% 8,325,300 +1% 20% 3%
2 Leucadia LUK 4,630 19.88 45.44 -56% 15,497,343 +35% 7% 7%
3 AmeriCredit ACF 647 5.56 10.13 -45% 22,528,906 +50% 19% 2%
4 Sears Holdings SHLD 4,838 38.27 93.50 -59% 14,596,690 +18% 12% 14%
5 St Joe JOE 2,321 25.17 39.09 -36% 11,012,900 +16% 12% 5%
6 UnitedHealth UNH 24,180 20.02 25.39 -21% 20,695,583 +22% 2% 6%
7 Boeing BA 30,076 41.04 57.35 -28% 8,236,177 new position 1% 5%
8 Pfizer PFE 109,775 16.28 18.44 -12% 92,993,625 +26% 1% 18%
9 Winthrop Realty FUR 185 2.35 3.90 -40% 6,640,962 +53% 9% 0%
10 Canadian Natural CNQ 21,056 38.93 68.46 -43% 6,961,324 +46% 1% 5%
Portfolio with Signal Value: Warren Buffett (Berkshire-Hathaway)

1 ConocoPhillips COP 70,650 47.39 73.25 -35% 83,955,800 +41% 6% 9%
2 USG USG 904 9.12 25.60 -64% 17,072,192 no change 17% 1%
3 American Express AXP 23,186 19.99 35.43 -44% 151,610,700 no change 13% 8%
4 Moody’s MCO 4,635 19.33 34.00 -43% 48,000,000 no change 20% 2%
5 Comdisco CDCO 31 7.60 9.51 -20% 1,538,377 no change 38% 0%
6 Washington Post WPO 3,681 393.00 556.76 -29% 1,727,765 no change 21% 1%
7 Burlington Northern BNI 27,259 79.63 92.43 -14% 64,610,418 +1% 19% 9%
8 Wesco Financial WSC 2,157 303.00 357.00 -15% 5,703,087 no change 83% 3%
9 Coca-Cola KO 104,156 45.02 52.88 -15% 200,000,000 no change 9% 15%
10 Procter & Gamble PG 188,428 63.11 69.69 -9% 105,847,000 no change 4% 11%
Portfolio with Signal Value: Ian Cumming & Joe Steinberg (Leucadia)
1 AmeriCredit ACF 647 5.56 10.13 -45% 32,715,440 +8% 28% 22%
2 International Assets IAAC 85 9.88 24.11 -59% 1,384,985 no change 16% 2%
3 Cresud CRESY 254 5.90 10.50 -44% 3,364,174 no change 7% 2%
4 Jefferies JEF 2,109 12.90 22.40 -42% 48,585,385 no change 30% 73%
5 Capital Southwest CSWC 331 88.52 142.05 -38% 19,776 no change 1% 0%
6 Kewaunee Scientific KEQU 23 9.06 11.10 -18% 44,137 new position 2% 0%
7 Georesources GEOI 129 7.94 11.46 -31% 194,605 +48% 1% 0%
Portfolio with Signal Value: David Einhorn (Greenlight)

1 Helix Energy HLX 776 8.45 24.28 -65% 9,093,892 +30% 10% 15%
2 URS URS 2,292 27.45 36.67 -25% 4,325,641 +69% 5% 11%
3 Dr Pepper Snapple DPS 4,455 17.56 26.48 -34% 9,484,120 +30% 4% 17%
4 MI Developments MIM 476 10.25 18.49 -45% 5,387,535 +8% 12% 7%
5 Einstein Noah Restaurant BAGL 67 4.22 10.08 -58% 10,733,469 no change 67% 8%
6 BioFuel Energy BIOF 14 0.44 0.54 -19% 7,542,104 no change 49% 0%
7 Health Management Associates HMA 439 1.80 4.16 -57% 22,161,942 +1% 9% 6%
8 EchoStar SATS 1,381 15.42 24.10 -36% 2,307,292 +19% 5% 4%
9 Ticketmaster TKTM 336 5.87 10.73 -45% 665,518 n/m 1% 0%
10 Teradata TDC 2,114 12.01 19.50 -38% 3,935,510 +4% 2% 5%
Portfolio with Signal Value: Glenn Greenberg (Chieftain)

1 Eaton ETN 6,786 41.15 56.18 -27% 6,005,010 new position 4% 10%
2 Ingersoll-Rand IR 4,817 15.11 31.17 -52% 10,694,315 +18% 3% 10%
3 Laboratory Corp LH 6,979 64.62 69.50 -7% 7,584,821 +1% 7% 15%
4 America Movil AMX 51,406 30.76 46.36 -34% 5,875,425 +46% 1% 8%
5 Crosstex Energy XTXI/XTEX 203/307 n/a n/a -80% 6,903,887 -3% n/a 7%
6 Comcast CMCSK/CMCSA 44,413 15.15 19.72 -23% 51,512,691 -6% 6% 30%
7 Dell DELL 21,327 10.89 16.48 -34% 22,397,150 -2% 1% 11%
Portfolio with Signal Value: Mason Hawkins (Southeastern)

Market Price ($) Shares Owned Holdings
1 Liberty Media Interactive LINTA 1,790 3.01 12.91 -77% 108,163,583 +4% 19% 5%
2 Sun Microsystems JAVA 3,043 4.12 7.60 -46% 155,566,828 +62% 21% 4%
3 Dillard’s DDS 246 3.35 11.80 -72% 9,202,748 no change 13% 0%
4 Saks SKS 576 4.06 9.25 -56% 9,515,955 new position 7% 0%
5 Liberty Media Entertainment LMDIA 6,619 12.80 24.97 -49% 97,496,922 +2% 20% 9%
6 Chesapeake Energy CHK 12,758 21.23 35.86 -41% 41,102,355 +14% 7% 5%
7 Fair Isaac FIC 650 13.42 23.05 -42% 7,178,400 +11% 15% 1%
8 Dell DELL 21,327 10.89 16.48 -34% 147,277,194 +7% 8% 9%
9 tw telecom TWTC 997 6.76 10.39 -35% 11,868,000 new position 8% 0%
10 Fairfax Financial FFH 4,962 271.12 328.50 -17% 3,264,134 +20% 18% 4%
Portfolio with Signal Value: Chris Hohn (Children’s Investment Fund)

1 Visa V 46,025 54.24 61.39 -12% 6,541,000 new position 1% 7%
2 CME Group CME 14,002 209.03 371.51 -44% 2,016,967 +68% 4% 14%
3 ArcelorMittal MT 30,874 21.31 49.38 -57% 235,000 new position 0% 0%
4 Mastercard MA 18,569 143.68 177.33 -19% 5,947,290 +37% 6% 19%
5 CSX CSX 15,313 38.82 54.57 -29% 17,796,998 no change 4% 18%
6 Union Pacific UNP 29,003 57.27 71.16 -20% 24,028,735 no change 5% 31%
7 TransAlta TAC 3,766 19.06 27.48 -31% 14,521,700 >+100% 7% 7%
8 Sterlite Industries India SLT 3,145 4.44 9.01 -51% 15,625,779 +10% 2% 3%
9 Google GOOG 97,616 310.02 400.52 -23% 35,000 no change 0% 0%
Portfolio with Signal Value: Carl Icahn

1 Guaranty Financial GFG 66 1.48 4.22 -65% 3,823,308 new position 4% 0%
2 Federal Mogul FDML 533 5.36 12.55 -57% 75,241,924 no change 75% 19%
3 Biogen Idec BIIB 12,697 43.52 50.29 -13% 3,502,261 +41% 1% 3%
4 American Railcar ARII 189 8.85 16.04 -45% 6,526,980 no change 31% 2%
5 Icahn Enterprises IEP 1,885 26.74 43.05 -38% 64,288,061 no change 91% 55%
6 Yahoo! YHOO 15,015 10.82 17.30 -37% 13,757,264 no change 1% 5%
7 Lions Gate Entertainment LGF 763 6.59 7.35 -10% 2,152,479 new position 2% 0%
Portfolio with Signal Value: Seth Klarman (Baupost)

1 RHI Entertainment RHIE 67 4.95 14.90 -67% 3,480,299 new position 26% 3%
2 BreitBurn Energy BBEP 373 7.09 14.86 -52% 6,188,660 >+100% 12% 6%
3 Liberty Media LMDIA 6,619 12.80 24.97 -49% 4,808,726 +50% 1% 7%
4 News Corp NWS/A 19,523 7.43 11.99 -38% 16,855,000 +37% 1% 12%
5 Linn Energy LINE 1,747 15.17 15.30 -1% 10,028,989 >+100% 9% 9%
6 Domtar UFS 929 1.80 4.60 -61% 22,364,700 no change 5% 6%
7 Centerplate CVP 40 1.91 3.04 -37% 2,209,051 +13% 11% 0%
8 Theravance THRX 381 6.16 12.46 -51% 6,269,891 no change 12% 5%
9 Syneron Medical ELOS 212 7.74 14.25 -46% 3,086,619 no change 11% 3%
Portfolio with Signal Value: Eddie Lampert (ESL)

1 Sears Holdings SHLD 4,838 38.27 93.50 -59% 66,024,366 +1% 52% 53%
2 AutoNation AN 1,123 6.35 11.24 -44% 78,521,550 +9% 44% 8%
3 Capital One COF 12,216 31.19 51.00 -39% 9,875,523 +3% 2% 4%
4 Autozone AZO 6,131 105.76 123.34 -14% 23,370,297 +2% 39% 25%
5 Fannie Mae FNM 2,891 0.54 1.53 -65% 34,586,789 new position 1% 0%
6 Home Depot HD 34,886 20.54 25.89 -21% 19,715,300 no change 1% 4%
7 CIT Group CIT 1,182 4.14 6.96 -41% 7,269,321 +85% 3% 0%
8 Hartford Financial HIG 3,802 12.65 40.99 -69% 550,000 new position 0% 0%
9 Citigroup C 51,880 9.52 20.51 -54% 19,083,800 no change 0% 3%
10 Acxiom ACXM 529 6.78 12.54 -46% 3,293,989 no change 4% 0%
Portfolio with Signal Value: Warren Lichtenstein (Steel Partners)

1 GenCorp GY 151 2.62 6.74 -61% 8,034,059 no change 14% 4%
2 Transocean RIG 22,626 70.89 109.84 -35% 350,000 new position 0% 3%
3 SL Industries SLI 51 8.75 13.25 -34% 1,608,550 no change 27% 2%
4 Adaptec ADPT 355 2.91 3.21 -9% 22,744,046 +11% 19% 6%
5 Selectica SLTC 30 1.03 1.01 2% 4,207,681 +32% 15% 0%
6 Nathan’s Famous NATH 78 13.50 15.89 -15% 1,018,200 no change 17% 1%
7 SP Acquisition DSP 492 9.10 9.29 -2% 10,322,400 no change 19% 8%
8 Chemtura CEM 366 1.51 4.56 -67% 3,808,167 +6% 2% 1%
9 Ronson RONC 2 0.40 1.07 -63% 483,035 no change 10% 0%
10 Key Energy KEG 596 4.89 11.60 -58% 1,531,176 no change 1% 1%
Portfolio with Signal Value: Dan Loeb (Third Point)

1 Dr Pepper Snapple DPS 4,455 17.56 26.48 -34% 3,350,000 new position 1% 5%
2 Lorillard LO 10,215 60.78 71.15 -15% 1,100,000 new position 1% 5%
3 Phoenix Cos PNX 383 3.35 9.24 -64% 9,000,000 +58% 8% 5%
4 EXCO Resources XCO 1,487 7.05 16.32 -57% 6,700,000 +49% 3% 6%
5 Energy XXI Bermuda EXXI 189 1.30 3.04 -57% 22,000,000 +12% 15% 4%
6 Depomed DEPO 84 1.64 3.65 -55% 7,050,000 no change 15% 1%
7 TIBCO Software TIBX 780 4.34 7.32 -41% 7,500,000 >+100% 4% 3%
8 Nabi Biopharmaceuticals NABI 167 3.22 4.66 -31% 6,890,000 no change 13% 2%
9 Core-Mark CORE 196 18.21 24.99 -27% 1,064,200 no change 10% 2%
Portfolio with Signal Value: Steve Mandel (Lone Pine)

1 Visa V 46,025 54.24 61.39 -12% 4,651,970 >+100% 1% 5%
2 SandRidge Energy SD 1,672 10.07 19.60 -49% 13,773,667 +12% 8% 5%
3 Qualcomm QCOM 54,531 32.94 42.97 -23% 18,014,416 +57% 1% 15%
4 Crown Castle CCI 4,059 14.06 28.97 -51% 7,399,788 new positon 3% 4%
5 XTO Energy XTO 19,346 33.54 46.52 -28% 11,941,076 +40% 2% 11%
6 America Movil AMX 51,406 30.76 46.36 -34% 18,014,280 +26% 2% 16%
7 Dolby Laboratories DLB 3,039 27.00 35.19 -23% 4,425,984 new position 9% 3%
8 priceline.com PCLN 2,184 53.80 68.43 -21% 3,604,068 >+100% 9% 5%
9 Precision Castparts PCP 7,674 55.04 78.78 -30% 2,509,284 new position 2% 4%
10 Weatherford WFT 8,718 12.80 25.14 -49% 7,754,431 +61% 1% 4%
Portfolio with Signal Value: Mohnish Pabrai

1 WellCare WCG 390 9.36 36.00 -74% 818,330 +52% 2% 9%
2 Ternium TX 1,331 6.64 17.64 -62% 1,778,944 no change 1% 10%
3 Harvest Natural HNR 219 6.66 10.12 -34% 5,712,701 no change 17% 18%
4 Sears Holdings SHLD 4,838 38.27 93.50 -59% 514,111 -1% 0% 15%
5 Berkshire Hathaway BRK.A/BRK.B 155,729 n/a n/a -23% n/a n/a 0% 7%
6 CryptoLogic CRYP 38 3.00 5.50 -45% 1,114,207 no change 4% 2%
7 CompuCredit CCRT 119 2.47 3.92 -37% 2,066,097 no change 4% 3%
Portfolio with Signal Value: Rich Pzena

1 Bank of America BAC 82,389 16.42 35.00 -53% 16,729,344 +2% 0% 4%
2 Microsoft MSFT 178,445 20.06 26.69 -25% 17,560,379 +24% 0% 4%
3 Liz Claiborne LIZ 349 3.69 16.43 -78% 19,225 new position 0% 0%
4 JPMorgan Chase JPM 128,654 34.47 46.70 -26% 9,927,669 >+100% 0% 4%
5 Harman HAR 871 14.88 34.07 -56% 227,475 >+100% 0% 0%
6 KB Financial KB 7,900 22.17 45.69 -51% 174,675 new position 0% 0%
7 MetLife MET 22,332 28.14 56.00 -50% 18,057 +98% 0% 0%
8 Pediatrix Medical PDX 1,366 29.94 53.92 -44% 46,220 >+100% 0% 0%
9 Motorola MOT 9,247 4.08 7.14 -43% 31,972,279 >+100% 1% 2%
10 Timberland TBL 593 10.31 17.37 -41% 510,400 >+100% 1% 0%
Portfolio with Signal Value: Prem Watsa (Fairfax)

1 Level 3 LVLT 1,402 0.87 2.70 -68% 168,776,170 +45% 11% 12%
2 Dell DELL 21,327 10.89 16.48 -34% 16,423,900 +45% 1% 7%
3 International Coal ICO 396 2.58 6.24 -59% 21,055,000 no change 14% 3%
4 Overstock.com OSTK 206 9.04 19.81 -54% 3,388,774 no change 15% 2%
5 Cresud CRESY 254 5.06 10.50 -52% 1,573,032 >+100% 3% 0%
6 Pfizer PFE 109,775 16.28 18.44 -12% 17,833,600 no change 0% 9%
7 Johnson & Johnson JNJ 166,613 60.05 69.28 -13% 5,935,300 no change 0% 11%
8 SandRidge Energy SD 1,672 10.07 19.60 -49% 280,000 new position 0% 0%
9 Odyssey Re ORH 2,460 40.94 43.80 -7% 42,399,400 no change 67% 49%
Portfolio with Signal Value: Marty Whitman (Third Avenue)

1 Bel Fuse BELFB 177 15.31 28.47 -46% 1,131,140 +3% 12% 0%
2 Superior Industries SUP 288 10.81 19.16 -44% 4,330,332 +1% 16% 1%
3 Tejon Ranch TRC 425 25.00 37.15 -33% 4,865,973 +3% 29% 2%
4 Skyline SKY 152 18.09 26.43 -32% 1,517,212 +4% 18% 0%
5 Cavco Industries CVCO 176 27.12 36.15 -25% 814,943 +15% 13% 0%
6 Sycamore Networks SCMR 749 2.64 3.23 -18% 40,661,294 +8% 14% 2%
7 Haverty Furniture HVT 171 8.00 11.44 -30% 4,615,918 no change 27% 1%
8 Bristow Group BRS 599 20.58 33.84 -39% 2,833,391 +85% 10% 1%
9 Triad Guaranty TGIC 7 0.45 1.57 -71% 1,300,000 no change 9% 0%
10 Cimarex Energy XEC 2,311 27.75 48.91 -43% 5,752,252 +8% 7% 3%
MOI Stock Screens

Searching for Equities with Asymmetrical Risk-Reward Profiles
CONTRARIAN
“Shunned by the market, but not by insiders” Companies close to 52-week lows, with consistent insider buying
“Biggest losers” Companies whose stock prices have declined most over 1+ years
“Biggest losers (deleveraged)” Companies with no net debt and large stock price decline over 1+ years
“Biggest losers (deleveraged, likely profitable)” Companies with no net debt, positive next FY EPS, and large price drop
“Lots of revenue, but little enterprise value” Companies that trade at low multiples of net revenue
“Neglected gross profiteers” Companies that trade at low multiples of gross profit
DEEP VALUE
“Companies with strong, liquid balance sheets” Companies with at least 50% of market value in net cash
ACTIVIST TARGETS
“Underperformers” Companies underperforming their peers on a variety of metrics

“Sale, liquidation or recap opportunities” Companies that may unlock value through a corporate event
MAGIC FORMULA: “Good businesses at good prices”…

…based on LTM EBIT Companies with high ROC, trading at high EBIT-to-EV yield
…based on this FY EPS estimates Companies with high ROC, trading at high forward EPS yield
…based on next FY EPS estimates Companies with high ROC, trading at high forward EPS yield
…based on 2012 EPS estimates Companies with high ROC, trading at high forward EPS yield
Contrarian #1: Shunned by the Market, But Not by Insiders

Screening criteria: ► Persistent insider buying in past six months ► No insider selling ► Price within 10% of 52-week low ► Market
value more than $100 million │ Sorted by: Number of insider purchases
∆ to EV/ Est P/E Insiders

Price 52-Wk MV EV LTM This Next P/ % #
Company Ticker ($) High ($mn) ($mn) Rev. FY FY Book Own. Buys
1 Move Inc. MOVE 1.01 244% 155 211 .8x nm 8x 2.0x 14% 98
2 Alternative Asset Management AMV 9.07 7% 469 468 nm na na .9x 20% 84
3 Hearst-Argyle Television, In HTV 11.33 116% 1,065 1,900 2.6x 15x 34x .5x 77% 65
4 Trian Acquisition I Corp. TUX 8.87 6% 1,020 1,020 100.0x na na .8x 20% 46
5 Equity One, Inc. EQY 12.03 122% 922 1,949 8.1x 13x 19x .9x 57% 37
6 Isle of Capri Casinos ISLE 3.25 490% 100 1,470 1.3x nm nm .5x 49% 35
7 Enterprise Acquisition Corp. EST 8.93 7% 279 280 nm na na .9x 20% 28
8 MedCath Corporation MDTH 7.71 250% 151 207 .3x 8x 6x .4x 9% 27
9 Presidential Life Corp PLFE 7.37 177% 218 294 1.0x na na .4x 27% 26
10 MVC Capital, Inc. MVC 10.38 72% 252 277 8.6x 4x 6x .6x 9% 24
11 Kite Realty Group Trust KRG 3.50 380% 102 820 5.8x 9x 7x .3x 22% 21
12 Solutia Inc. SOA 6.88 216% 649 2,015 .8x 9x 6x .4x 1% 19
13 China Security & Surveillanc CSR 7.70 203% 353 445 1.2x 5x 4x 1.2x 37% 17
14 Hercules Technology Growth C HTGC 6.37 104% 209 454 6.5x 5x 5x .5x 3% 17
15 Allied Capital Corporation ALD 2.97 775% 531 2,460 4.7x 2x 3x .2x 3% 14
16 Meadowbrook Insurance Group, MIG 4.48 123% 258 300 .8x 5x 5x .5x 8% 14
17 Adolor Corporation ADLR 2.20 177% 102 -45 nm nm nm 1.0x 4% 13
18 Fairpoint Communications, In FRP 2.66 514% 237 2,549 2.5x nm 7x 1.1x 1% 13
19 Harris & Harris Group, Inc. TINY 4.14 143% 107 106 42.6x 1x na .6x 5% 12
20 Hersha Hospitality Trust HT 2.72 308% 131 842 3.2x na na .3x 10% 11
21 Gaylord Entertainment Compan GET 8.14 448% 333 1,569 1.8x nm 39x .4x 1% 9
22 State Bancorp, Inc./NY STBC 10.90 56% 158 156 1.6x 17x 11x 1.4x 8% 9
23 Synta Pharmaceuticals Corp. SNTA 4.75 117% 161 107 39.8x nm nm nm 50% 9
24 CapitalSource, Inc. CSE 4.64 321% 1,308 11,417 8.0x 4x 4x .4x 31% 8
25 Central Securities Corp. CET 15.95 85% 338 338 34.9x na na .5x 12% 8
26 CTS Corporation CTS 5.20 169% 175 222 .3x 7x 11x .5x 2% 8
27 DCP Midstream Partners, LP DPM 9.27 397% 262 nm 7x 5x 1.1x 14% 8
28 Discovery Laboratories, Inc. DSCO 1.01 212% 102 85 18.4x nm nm 6.3x 10% 8
29 Maguire Properties, Inc. MPG 2.64 1064% 126 4,984 8.8x nm nm 1.1x 26% 8
30 NGP Capital Resources NGPC 9.75 84% 211 326 8.6x 10x 7x .7x 3% 8
31 Shutterfly, Inc. SFLY 6.83 354% 171 131 .6x nm 683x 1.0x 9% 8
32 Source Capital, Inc. SOR 29.42 120% 255 261 29.9x na na .5x 0% 8
33 BreitBurn Energy Partners L. BBEP 7.09 328% 373 1,080 2.9x 3x 4x .3x 33% 7
34 Dillard's, Inc. DDS 3.35 590% 246 1,534 .2x nm nm .1x 9% 7
35 Incyte Corporation INCY 3.59 257% 349 493 38.8x nm nm nm 16% 7
36 Legacy Reserves LP LGCY 8.93 188% 278 499 2.2x 6x 5x 1.0x 62% 7
37 Mine Safety Appliances MSA 23.51 142% 841 961 .9x 12x 11x 1.7x 15% 7
38 Regal Entertainment Group RGC 9.53 121% 1,463 3,374 1.3x 11x 10x nm 57% 7
39 Ulta Salon, Cosmetics & Frag ULTA 7.60 304% 437 552 .5x 14x 11x 1.9x 65% 7
40 CDI Corp. CDI 10.54 175% 199 123 .1x 8x 11x .7x 10% 6
41 Del Monte Foods Company DLM 5.73 80% 1,132 3,064 .8x 10x 9x .8x 1% 6
42 Dow Chemical Company, The DOW 21.15 115% 19,538 30,173 .5x 7x 8x 1.0x 1% 6
43 Garmin Ltd. GRMN 19.04 492% 3,856 3,317 .9x 5x 6x 1.8x 46% 6
44 GLG Partners, Inc. GLG 2.70 420% 662 845 1.0x 7x 8x nm 61% 6
45 SeaBright Insurance Holdings SBX 9.39 76% 201 195 .7x 5x 5x .6x 3% 6
46 Stoneleigh Partners Acquisit SOC 7.61 2% 260 34 nm na na .9x 9% 6
47 Tenet Healthcare Corporation THC 1.95 253% 931 5,150 .6x nm 98x 6.7x 0% 6
48 Accelrys, Inc. ACCL 3.78 118% 103 54 .7x nm 54x 1.3x 2% 5
49 Advanta Corp. ADVNB 3.01 354% 137 272 .5x nm nm .2x 15% 5
50 CNA Financial Corporation CNA 12.77 191% 3,435 5,333 .6x 4x 4x .4x 1% 5
[MOI ● MOI - 1,2,4,5,6 ● MOIA]
Contrarian #2: Biggest Losers

Screening criteria: ► At least one analyst estimate of this year’s EPS and next year’s EPS ► Market value more than $100 million │
1
Sorted by: Largest price decline since yearend 2006
Recent Price/ Next

Price MV EV Cumulative Price Performance Since… Tang. FY
Company / Ticker ($) ($mn) ($mn) 12/31/07 12/29/06 12/30/05 12/31/01 Book P/E
1 General Growth Prope / GGP 0.44 118 24,746 -99% -99% -99% -97% .1x 1x
2 Fannie Mae / FNM 0.54 581 820,977 -99% -99% -99% -99% nm nm
3 Freddie Mac / FRE 0.67 434 750,672 -98% -99% -99% -99% nm nm
4 Ambac Financial Grou / ABK 1.35 388 2,191 -95% -98% -98% -98% nm 5x
5 iStar Financial Inc. / SFI 1.22 159 12,440 -95% -97% -97% -95% .1x nm
6 American Internation / AIG 2.08 5,595 211,675 -96% -97% -97% -97% .1x 1x
7 PMI Group, Inc., The / PMI 1.72 140 (41) -87% -96% -96% -95% .1x nm
8 McClatchy Company, T / MNI 1.63 135 2,198 -87% -96% -97% -97% nm 3x
9 Genworth Financial, / GNW 1.47 637 3,598 -94% -96% -96% na .1x 1x
10 MGIC Investment Corp / MTG 2.73 341 327 -88% -96% -96% -96% .1x nm
11 Lear Corporation / LEA 1.40 108 1,925 -95% -95% -95% -96% nm nm
12 Avis Budget Group In / CAR 1.03 105 9,136 -92% -95% -96% -96% nm 21x
13 Radian Group Inc. / RDN 2.64 214 1,486 -77% -95% -95% -94% .1x nm
14 Office Depot, Inc. / ODP 2.03 558 1,104 -85% -95% -94% -89% .3x 9x
15 KKR Financial Holdin / KFN 1.60 241 12,039 -89% -94% -93% na .1x 1x
16 E TRADE Financial Co / ETFC 1.35 726 11,971 -62% -94% -94% -87% 3.5x nm
17 Bank of Ireland (ADR / IRE 5.70 1,431 9,876 -91% -94% -91% -84% .2x 4x
18 Standard Pacific Cor / SPF 1.66 167 1,097 -50% -94% -95% -86% .2x nm
19 CompuCredit Corporat / CCRT 2.47 119 722 -75% -94% -94% -79% .2x nm
20 National City Corpor / NCC 2.33 4,744 21,695 -86% -94% -93% -92% .5x nm
21 Coldwater Creek Inc. / CWTR 1.57 143 68 -77% -94% -92% -44% .5x nm
22 Rite Aid Corporation / RAD 0.35 296 6,684 -87% -94% -90% -93% nm nm
23 Thomson SA (ADR) / TMS 1.27 343 2,035 -91% -93% -94% -96% nm nm
24 Maguire Properties, / MPG 2.64 126 4,984 -91% -93% -91% na 1.4x nm
25 National Financial P / NFP 2.92 116 370 -94% -93% -94% na nm 1x
26 Las Vegas Sands Corp / LVS 6.11 2,172 11,246 -94% -93% -85% na 1.0x 16x
27 RAIT Financial Trust / RAS 2.45 159 6,651 -72% -93% -91% -85% .1x 2x
28 Charming Shoppes, In / CHRS 0.97 110 180 -82% -93% -93% -82% .3x nm
29 Newcastle Investment / NCT 2.30 121 6,062 -82% -93% -91% na nm 2x
30 Sirius XM Radio Inc. / SIRI 0.26 924 3,937 -91% -93% -96% na nm nm
31 CIT Group Inc. / CIT 4.14 1,182 60,495 -83% -93% -92% na .3x 16x
32 Smurfit-Stone Contai / SSCC 0.79 202 3,866 -93% -93% -94% -95% nm nm
33 Brunswick Corporatio / BC 2.44 214 598 -86% -92% -94% -89% .2x nm
34 MBIA Inc. / MBI 5.90 1,612 10,033 -68% -92% -90% -89% .6x 13x
35 Unisys Corporation / UIS 0.64 232 800 -86% -92% -89% -95% nm 4x
36 Developers Diversifi / DDR 5.22 628 7,063 -86% -92% -89% -73% .3x 5x
37 ProLogis / PLD 5.08 1,350 12,456 -92% -92% -89% -76% .2x 7x
38 Protalix BioTherapeu / PLX 1.40 106 53 -59% -92% -97% -39% 1.9x nm
39 YRC Worldwide Inc. / YRCW 3.17 188 1,269 -81% -92% -93% -87% .4x nm
40 Louisiana-Pacific Co / LPX 1.81 187 551 -87% -92% -93% -79% .1x nm
41 Corus Bankshares, In / CORS 1.95 105 (2,420) -82% -92% -93% -83% .2x nm
42 Liz Claiborne, Inc. / LIZ 3.69 350 1,273 -82% -92% -90% -85% .8x 5x
43 XL Capital Ltd. / XL 6.14 2,031 (389) -88% -91% -91% -93% .3x 2x
44 Health Management As / HMA 1.80 439 3,558 -70% -91% -92% -90% nm 4x
45 Hovnanian Enterprise / HOV 2.98 229 2,294 -58% -91% -94% -72% .4x nm
46 Allied Capital Corpo / ALD 2.97 531 2,460 -86% -91% -90% -89% .2x 3x
47 Boyd Gaming Corporat / BYD 4.21 370 2,870 -88% -91% -91% -35% .8x 7x
48 Sovereign Bancorp, I / SOV 2.39 1,587 3,775 -79% -91% -88% -80% .5x 4x
49 Dillard's, Inc. / DDS 3.35 246 1,534 -82% -90% -87% -79% .1x nm
50 Chico's FAS, Inc. / CHS 1.99 351 74 -78% -90% -95% -70% .4x 20x
[Industry Browser ● Price Performance ● macros_screens.xls, MOI_screen_01]
1
All price performance numbers exclude dividends.
Contrarian #3: Biggest Losers (Deleveraged)

Screening criteria: ► Positive net cash ► At least one analyst estimate of this year’s EPS and next year’s EPS ► Market value more than
1
$100 million │ Sorted by: Largest price decline since yearend 2006
Recent Price/ Next

1 PMI Group, Inc., The / PMI 1.72 140 (41) -87% -96% -96% -95% .1x nm
2 MGIC Investment Corp / MTG 2.73 341 327 -88% -96% -96% -96% .1x nm
3 Coldwater Creek Inc. / CWTR 1.57 143 68 -77% -94% -92% -44% .5x nm
4 Protalix BioTherapeu / PLX 1.40 106 53 -59% -92% -97% -39% 1.9x nm
7 Heelys, Inc. / HLYS 3.80 105 12 -45% -88% na na .9x 20x
8 THQ Inc. / THQI 3.98 267 104 -86% -88% -83% -82% .7x 8x
9 Isilon Systems, Inc. / ISLN 3.40 217 170 -33% -88% na na 3.0x nm
10 Frontier Financial C / FTBK 3.70 174 11 -80% -87% -83% -68% .5x 62x
11 SMART Modular Tech / SMOD 1.75 108 73 -83% -87% na na .5x 6x
12 WellCare Health Plan / WCG 9.36 390 (928) -78% -86% -77% na .8x 7x
13 InterNAP Network Ser / INAP 2.71 136 90 -67% -86% -37% -77% 1.2x 13x
14 Affymetrix, Inc. / AFFX 3.20 225 89 -86% -86% -93% -92% .6x nm
15 RTI International Me / RTI 11.01 253 206 -84% -86% -71% 11% .5x 5x
16 Orbotech Ltd. / ORBK 3.90 131 (24) -78% -85% -84% -87% .3x 4x
17 Force Protection, In / FRPT 2.81 192 113 -40% -84% 260% na .7x 13x
18 Winnebago Industries / WGO 5.37 156 135 -74% -84% -84% -71% .9x 12x
19 New York & Company, / NWY 2.15 129 65 -66% -84% -90% na .5x 11x
20 SanDisk Corporation / SNDK 7.15 1,616 1,267 -78% -83% -89% -1% .4x nm
21 Kenexa Corporation / KNXA 5.59 126 100 -71% -83% -74% na 1.8x 5x
22 Rackable Systems, In / RACK 5.28 158 (18) -47% -83% -81% na .6x nm
23 Hanmi Financial Corp / HAFC 3.92 180 176 -55% -83% -78% -41% .7x 7x
24 Cornerstone Therapeu / CRTXD 3.60 156 149 -72% -82% -95% na nm nm
25 Martha Stewart Livin / MSO 3.91 215 165 -58% -82% -78% -76% 4.1x 13x
26 Acme Packet, Inc. / APKT 3.69 204 77 -71% -82% na na 1.4x 14x
27 Move Inc. / MOVE 1.01 155 211 -59% -82% -80% -72% 2.7x 8x
28 JDS Uniphase Corpora / JDSU 3.06 658 367 -77% -82% -84% -96% 1.2x 4x
29 Flamel Technologies / FLML 5.60 135 104 -44% -81% -70% 106% 2.4x 28x
30 Symyx Technologies, / SMMX 4.04 137 69 -47% -81% -85% na 1.9x nm
31 Thomas Weisel Partne / TWPG 4.00 123 35 -71% -81% na na .6x nm
32 Sun Microsystems, In / JAVA 4.12 3,043 1,671 -77% -81% -75% -92% 1.9x 24x
33 Christopher & Banks / CBK 3.55 126 42 -69% -81% -81% -84% .6x 10x
34 UTStarcom, Inc. / UTSI 1.67 211 (120) -39% -81% -79% -94% .4x nm
35 AnnTaylor Stores Cor / ANN 6.37 363 256 -75% -81% -82% -59% .7x 10x
36 Xyratex Ltd. / XRTX 4.24 123 96 -73% -80% -76% na .5x 4x
37 Motorola, Inc. / MOT 4.08 9,247 6,288 -75% -80% -82% -73% 1.0x 29x
38 Theravance, Inc. / THRX 6.16 381 335 -68% -80% -73% na nm nm
39 Palomar Medical Tech / PMTI 10.22 186 58 -33% -80% -71% 759% 1.3x 28x
40 Actions Semiconducto / ACTS 1.68 142 (116) -59% -80% -79% na .5x 6x
41 Cogo Group, Inc. / COGO 3.70 131 8 -77% -80% -40% 68% .8x 5x
42 Williams-Sonoma, Inc / WSM 6.46 682 669 -75% -79% -85% -70% .6x 21x
43 Charlotte Russe Hold / CHIC 6.36 133 87 -61% -79% -69% -66% .8x 10x
44 NutriSystem Inc. / NTRI 13.22 391 333 -51% -79% -63% 844% 3.2x 7x
45 Evercore Partners In / EVR 7.72 247 87 -64% -79% na na 1.7x 7x
46 Intevac, Inc. / IVAC 5.45 119 79 -63% -79% -59% 128% .7x nm
47 Kimball Internationa / KBALB 5.11 189 168 -63% -79% -52% -66% .5x >99x
48 Focus Media Holding / FMCN 6.99 905 524 -88% -79% -59% na 1.3x 4x
49 Global Industries, L / GLBL 2.76 309 293 -87% -79% -76% -69% .4x 5x
50 Sonus Networks, Inc. / SONS 1.40 381 64 -76% -79% -62% na .8x nm
[Industry Browser - D ● Price Performance ● macros_screens.xls, MOI_screen_01]
1
Contrarian #4: Biggest Losers (Deleveraged & Profitable)

Screening criteria: ► Positive net cash ► Positive consensus EPS estimate for next FY ► At least one analyst estimate of this year’s
1
EPS and next year’s EPS ► Market value more than $100 million │ Sorted by: Largest price decline since yearend 2006
Recent Price/ Next

3 Heelys, Inc. / HLYS 3.80 105 12 -45% -88% na na .9x 20x
4 THQ Inc. / THQI 3.98 267 104 -86% -88% -83% -82% .7x 8x
5 Frontier Financial C / FTBK 3.70 174 11 -80% -87% -83% -68% .5x 62x
6 SMART Modular Tech / SMOD 1.75 108 73 -83% -87% na na .5x 6x
7 WellCare Health Plan / WCG 9.36 390 (928) -78% -86% -77% na .8x 7x
8 InterNAP Network Ser / INAP 2.71 136 90 -67% -86% -37% -77% 1.2x 13x
9 RTI International Me / RTI 11.01 253 206 -84% -86% -71% 11% .5x 5x
10 Orbotech Ltd. / ORBK 3.90 131 (24) -78% -85% -84% -87% .3x 4x
11 Force Protection, In / FRPT 2.81 192 113 -40% -84% 260% na .7x 13x
12 Winnebago Industries / WGO 5.37 156 135 -74% -84% -84% -71% .9x 12x
13 New York & Company, / NWY 2.15 129 65 -66% -84% -90% na .5x 11x
14 Kenexa Corporation / KNXA 5.59 126 100 -71% -83% -74% na 1.8x 5x
15 Hanmi Financial Corp / HAFC 3.92 180 176 -55% -83% -78% -41% .7x 7x
16 Martha Stewart Livin / MSO 3.91 215 165 -58% -82% -78% -76% 4.1x 13x
17 Acme Packet, Inc. / APKT 3.69 204 77 -71% -82% na na 1.4x 14x
18 Move Inc. / MOVE 1.01 155 211 -59% -82% -80% -72% 2.7x 8x
19 JDS Uniphase Corpora / JDSU 3.06 658 367 -77% -82% -84% -96% 1.2x 4x
20 Flamel Technologies / FLML 5.60 135 104 -44% -81% -70% 106% 2.4x 28x
21 Sun Microsystems, In / JAVA 4.12 3,043 1,671 -77% -81% -75% -92% 1.9x 24x
22 Christopher & Banks / CBK 3.55 126 42 -69% -81% -81% -84% .6x 10x
23 AnnTaylor Stores Cor / ANN 6.37 363 256 -75% -81% -82% -59% .7x 10x
24 Xyratex Ltd. / XRTX 4.24 123 96 -73% -80% -76% na .5x 4x
25 Motorola, Inc. / MOT 4.08 9,247 6,288 -75% -80% -82% -73% 1.0x 29x
26 Palomar Medical Tech / PMTI 10.22 186 58 -33% -80% -71% 759% 1.3x 28x
27 Actions Semiconducto / ACTS 1.68 142 (116) -59% -80% -79% na .5x 6x
28 Cogo Group, Inc. / COGO 3.70 131 8 -77% -80% -40% 68% .8x 5x
29 Williams-Sonoma, Inc / WSM 6.46 682 669 -75% -79% -85% -70% .6x 21x
30 Charlotte Russe Hold / CHIC 6.36 133 87 -61% -79% -69% -66% .8x 10x
31 NutriSystem Inc. / NTRI 13.22 391 333 -51% -79% -63% 844% 3.2x 7x
32 Evercore Partners In / EVR 7.72 247 87 -64% -79% na na 1.7x 7x
33 Kimball Internationa / KBALB 5.11 189 168 -63% -79% -52% -66% .5x >99x
34 Focus Media Holding / FMCN 6.99 905 524 -88% -79% -59% na 1.3x 4x
35 Global Industries, L / GLBL 2.76 309 293 -87% -79% -76% -69% .4x 5x
36 Daktronics, Inc. / DAKT 7.85 317 314 -65% -79% -47% 86% 1.8x 11x
37 GFI Group Inc. / GFIG 3.35 396 263 -86% -78% -72% na 1.7x 5x
38 Cadence Design Syste / CDNS 3.93 1,023 864 -77% -78% -77% -82% 2.0x 66x
39 .LECG Corporation / XPRT 4.07 104 92 -73% -78% -77% na .7x 8x
40 Penson Worldwide, In / PNSN 6.30 158 (2,077) -56% -77% na na .6x 5x
41 Citi Trends, Inc. / CTRN 9.22 132 127 -40% -77% -78% na .9x 9x
42 Perficient, Inc. / PRFT 3.82 124 108 -76% -77% -57% 232% 2.1x 5x
43 Zumiez Inc. / ZUMZ 7.09 208 144 -71% -76% -67% na 1.4x 13x
44 DivX, Inc. / DIVX 5.54 179 66 -60% -76% na na 1.2x 9x
45 Akamai Technologies, / AKAM 12.76 2,158 2,060 -63% -76% -36% 115% 2.0x 7x
46 Lattice Semiconducto / LSCC 1.56 180 87 -52% -76% -64% -92% .7x 13x
47 Ciena Corporation / CIEN 6.68 603 374 -80% -76% -68% -93% 1.3x 10x
48 ValueClick, Inc. / VCLK 5.71 495 406 -74% -76% -68% 100% 5.2x 9x
49 EMCORE Corporation / EMKR 1.34 104 86 -91% -76% -82% -90% .6x 8x
50 Imation Corp. / IMN 11.38 429 316 -46% -75% -75% -47% .7x 16x
[Industry Browser – D,P ● Price Performance ● macros_screens.xls, MOI_screen_01]
1
Contrarian #5: Lots of Revenue, But Market Says Enterprise Has Little Value
Screening criteria: ► Enterprise value to trailing revenue less than 0.5x ► Market value does not exceed revenue ► Market value more
than $500 million │ Sorted by: Enterprise value to revenue
EV/ P/E P/ Insiders

Price ∆ to 52-Wk MV EV LTM Next Tang. # #
Company Ticker ($) Low High ($mn) ($mn) Rev. FY Book Buys Sells
1 Ashland Inc. ASH 17.28 -3% 239% 1,087 267 .03x 8x .4x 5 4
2 Tech Data Corporation TECD 19.46 -6% 100% 983 936 .04x 7x .5x - -
3 Ingram Micro Inc. IM 11.73 -5% 79% 1,934 1,584 .04x 9x .7x - 4
4 World Fuel Services Corporat INT 31.65 -56% 10% 926 884 .04x 10x 2.3x 6 1
5 Daiei, Inc. (ADR), The DAIEY 8.01 -38% 150% 795 1,058 .05x na .4x - -
6 Magna International Inc. (US MGA 25.98 0% 247% 2,925 1,213 .05x na .4x - -
7 Humana Inc. HUM 30.63 -18% 188% 5,168 1,568 .06x 5x 2.4x 1 1
8 Celestica Inc. (USA) CLS 4.15 -13% 138% 951 455 .06x na .7x - -
9 AmerisourceBergen Corp. ABC 29.98 -7% 62% 4,751 5,062 .07x 9x 1.8x - 1
10 Perini Corporation PCR 14.42 -19% 305% 726 387 .07x 5x 2.1x 7 -
11 Office Depot, Inc. ODP 2.03 -26% 847% 558 1,104 .07x 9x .3x - 2
12 Molina Healthcare, Inc. MOH 22.26 -17% 102% 599 253 .09x 9x 2.0x - 18
13 Health Net, Inc. HNT 9.46 -4% 460% 981 1,286 .09x 5x 1.2x - -
14 Winn-Dixie Stores, Inc. WINN 14.03 -28% 38% 762 629 .09x 44x 1.4x 2 6
15 Tesoro Corporation TSO 10.25 -26% 457% 1,419 2,777 .09x 7x .5x 1 8
16 KBR, Inc. KBR 13.11 -10% 239% 2,118 1,008 .10x 7x 1.4x 1 3
17 McKesson Corporation MCK 35.26 -6% 94% 9,643 10,315 .10x 8x 5.1x - 20
18 Sunoco, Inc. SUN 37.97 -44% 94% 4,437 5,844 .10x 11x 1.5x 1 -
19 Valero Energy Corporation VLO 19.51 -25% 265% 10,068 13,776 .11x 5x .7x - 2
20 Manpower Inc. MAN 27.78 -10% 155% 2,166 2,506 .11x 9x 1.9x 3 -
21 EMCOR Group, Inc. EME 13.80 -7% 161% 904 763 .11x 5x 5.4x - 10
22 Sun Microsystems, Inc. JAVA 4.12 -15% 423% 3,043 1,671 .12x 24x 1.9x - 6
23 Flextronics International Lt FLEX 3.06 -2% 305% 2,477 4,219 .12x 3x 1.4x - 6
24 Chicago Bridge & Iron Compan CBI 7.93 -7% 701% 756 714 .12x 3x nm - 3
25 Universal American Corporati UAM 9.33 -31% 184% 632 612 .13x 6x 1.2x - 1
26 Sears Holdings Corporation SHLD 38.27 0% 219% 4,838 6,918 .14x 31x .9x - -
27 Benchmark Electronics, Inc. BHE 10.97 -20% 82% 714 385 .14x 10x .7x 2 2
28 McDermott International MDR 7.80 -8% 761% 1,778 952 .15x 4x 1.3x 2 11
29 AMERIGROUP Corporation AGP 22.50 -29% 82% 1,192 655 .15x 9x 2.1x 2 3
30 Jabil Circuit, Inc. JBL 6.33 -5% 197% 1,333 1,930 .15x 4x .9x 2 4
31 AK Steel Holding Corporation AKS 8.72 -14% 738% 977 1,201 .15x 3x .7x 7 15
32 Eastman Kodak Company EK 7.89 -8% 210% 2,118 1,579 .15x 30x .9x - -
33 AutoNation, Inc. AN 6.35 -37% 209% 1,123 2,476 .16x 6x 1.4x 23 -
34 Holly Corporation HOC 17.47 -20% 225% 868 1,019 .16x 6x 2.0x - 4
35 Arrow Electronics, Inc. ARW 14.56 -7% 178% 1,737 2,752 .16x 7x 1.0x - 3
36 Tyson Foods, Inc. TSN 4.90 -8% 298% 1,740 4,386 .16x 6x .7x 2 1
37 Western Refining, Inc. WNR 8.36 -46% 270% 572 1,883 .16x 9x 1.2x 1 -
38 Sunoco Logistics Partners L. SXL 43.25 -36% 28% 1,239 1,791 .17x 9x 2.1x - -
39 Centene Corporation CNC 17.26 -24% 65% 741 555 .17x 9x 2.5x - 5
40 Tellabs, Inc. TLAB 3.68 -16% 101% 1,465 298 .17x 19x .9x 2 11
41 Avnet, Inc. AVT 15.02 -7% 151% 2,263 3,095 .17x 6x 1.1x - 2
42 AXA (ADR) AXA 17.43 -15% 143% 35,919 25,885 .17x 6x 1.1x - -
43 Cardinal Health, Inc. CAH 36.09 -4% 72% 12,978 16,070 .17x 8x 7.9x - -
44 Williams-Sonoma, Inc. WSM 6.46 -3% 376% 682 669 .17x 21x .6x - 3
45 Barnes & Noble, Inc. BKS 15.75 -7% 151% 866 959 .18x 10x 1.6x - 3
46 Frontier Oil Corporation FTO 12.34 -32% 274% 1,282 1,151 .18x 5x 1.1x - 4
47 Bunge Limited BG 38.70 -29% 249% 4,707 8,795 .18x 5x .7x - -
48 Cypress Semiconductor Corpor CY 3.56 -18% 74% 516 381 .18x 16x .5x - 6
49 Kyocera Corporation (ADR) KYO 52.45 -5% 92% 9,954 4,356 .19x 23x .7x - -
50 General Motors Corporation GM 3.01 -9% 915% 1,838 30,713 .19x nm nm - -
[MOI05 ● MOI - 1,2,4,5,6 ● MOIE]
Contrarian #6: Neglected Gross Profiteers

Screening criteria: ► Enterprise value not more than trailing gross profit ► Market value not more than 2x gross profit ► Market value
more than $200 million │ Sorted by: Enterprise value to gross profit
EV/ EV/ EV/ P/E P/

Price ∆ to 52-Wk MV EV LTM LTM LTM Next Tang.
Company Ticker ($) Low High ($mn) ($mn) Rev. GP EBIT FY Book
1 Chico's FAS, Inc. CHS 1.99 0% 487% 351 74 .04x .1x 5x 20x .4x
2 Zoran Corporation ZRAN 6.42 -59% 286% 329 24 .05x .1x nm nm .7x
3 Daiei, Inc. (ADR), The DAIEY 8.01 -38% 150% 795 1,058 .05x .1x 10x na .4x
4 Kindred Healthcare, Inc. KND 11.71 -1% 184% 456 572 .14x .2x 6x 8x .6x
5 Ashland Inc. ASH 17.28 -3% 239% 1,087 267 .03x .2x 1x 8x .4x
6 AnnTaylor Stores Corp. ANN 6.37 -6% 415% 363 256 .11x .2x 2x 10x .7x
7 Office Depot, Inc. ODP 2.03 -26% 847% 558 1,104 .07x .3x 11x 9x .3x
8 Sierra Wireless, Inc. (USA) SWIR 7.88 -11% 169% 244 42 .07x .3x 1x na .9x
9 Sun Microsystems, Inc. JAVA 4.12 -15% 423% 3,043 1,671 .12x .3x nm 24x 1.9x
10 Silicon Image, Inc. SIMG 3.37 -3% 128% 250 49 .16x .3x 6x 13x 1.2x
11 Humana Inc. HUM 30.63 -18% 188% 5,168 1,568 .06x .3x 1x 5x 2.4x
12 Affymetrix, Inc. AFFX 3.20 -5% 677% 225 89 .20x .3x 2x nm .6x
13 Winn-Dixie Stores, Inc. WINN 14.03 -28% 38% 762 629 .09x .3x 26x 44x 1.4x
14 Sonus Networks, Inc. SONS 1.40 -7% 391% 381 64 .20x .3x nm nm .8x
15 Airvana, Inc. AIRV 4.77 -30% 49% 305 68 .31x .3x 1x 14x 2.3x
16 Ameriprise Financial, Inc. AMP 18.00 -9% 242% 3,899 1,936 .24x .3x 3x 5x .6x
17 Evercore Partners Inc. EVR 7.72 -4% 240% 247 87 .31x .3x 4x 7x 1.7x
18 RealNetworks, Inc. RNWK 3.88 -12% 96% 524 128 .21x .3x nm nm 1.3x
19 Magna International Inc. (US MGA 25.98 0% 247% 2,925 1,213 .05x .4x 2x na .4x
20 THQ Inc. THQI 3.98 -8% 652% 267 104 .10x .4x nm 8x .7x
21 Kelly Services, Inc. KELYA 12.42 -7% 87% 432 433 .08x .4x 11x 24x .7x
22 Blyth, Inc. BTH 5.86 -5% 318% 208 264 .23x .4x 11x 5x .9x
23 Brown Shoe Company, Inc. BWS 7.47 -7% 149% 316 402 .17x .4x 5x 8x .9x
24 AllianceBernstein Holding LP AB 17.70 -11% 371% 1,550 1,550 .38x .4x 1x 7x 1.0x
25 First American Corporation FAF 19.79 -16% 234% 1,838 2,048 .31x .4x 26x 13x nm
26 Williams-Sonoma, Inc. WSM 6.46 -3% 376% 682 669 .17x .5x 2x 21x .6x
27 OmniVision Technologies, Inc OVTI 6.56 -3% 212% 336 96 .12x .5x 2x 7x .7x
28 Nortel Networks Corporation NT 0.56 -7% 3261% 279 2,114 .19x .5x nm na nm
29 Allianz SE (ADR) AZ 7.00 -13% 210% 31,665 22,612 .19x .5x 2x 5x 1.0x
30 Great Atlantic & Pacific Tea GAP 4.54 -16% 597% 262 1,288 .15x .5x nm nm nm
31 ArcelorMittal (ADR) MT 21.31 -11% 392% 30,294 62,809 .48x .5x 3x 3x .7x
32 Sears Holdings Corporation SHLD 38.27 0% 219% 4,838 6,918 .14x .5x 7x 31x .9x
33 TrueBlue, Inc. TBI 6.52 -7% 168% 283 225 .16x .5x 3x 9x 1.5x
34 Molina Healthcare, Inc. MOH 22.26 -17% 102% 599 253 .09x .5x 2x 9x 2.0x
35 Abercrombie & Fitch Co. ANF 17.79 0% 375% 1,548 1,350 .36x .5x 2x 6x .9x
36 Scholastic Corporation SCHL 15.28 -4% 146% 577 1,036 .28x .5x 4x 7x 1.4x
37 Cypress Semiconductor Corpor CY 3.56 -18% 74% 516 381 .18x .5x nm 16x .5x
38 Applied Micro Circuits Corpo AMCC 4.25 -7% 156% 277 81 .28x .6x nm 7x 1.0x
39 JDS Uniphase Corporation JDSU 3.06 -4% 401% 658 367 .24x .6x nm 4x 1.2x
40 Atlas Air Worldwide Holdings AAWW 15.90 -3% 318% 346 553 .32x .6x 6x 4x .6x
41 IAC/InterActiveCorp IACI 15.92 -17% 58% 2,235 867 .29x .6x nm 16x 1.2x
42 HSN, Inc. HSNI 4.67 -34% 254% 263 595 .20x .6x nm 5x nm
43 RadioShack Corporation RSH 9.65 -4% 111% 1,207 1,145 .26x .6x 3x 6x 1.5x
44 Barnes & Noble, Inc. BKS 15.75 -7% 151% 866 959 .18x .6x 4x 10x 1.6x
45 NetGear, Inc. NTGR 9.90 -17% 274% 349 147 .19x .6x 2x 9x 1.0x
46 Stage Stores, Inc. SSI 5.31 -11% 239% 205 258 .17x .6x 3x 7x .5x
47 Jo-Ann Stores, Inc. JAS 14.47 -38% 87% 371 521 .27x .6x 10x 12x .9x
48 Brunswick Corporation BC 2.44 -8% 778% 214 598 .11x .6x nm nm .2x
49 Manpower Inc. MAN 27.78 -10% 155% 2,166 2,506 .11x .6x 4x 9x 1.9x
50 Kyocera Corporation (ADR) KYO 52.45 -5% 92% 9,954 4,356 .19x .6x 2x 23x .7x
[MOI06 ● MOI - 1,2,4,5,6 ● MOIF]
Deep Value #1: Companies with Strong, Liquid Balance Sheets

Screening criteria: ► Net cash at least 50% of market value ► At least as much insider buying as selling in past six months ► Price to
tangible book less than 1.5x ► Market value more than $100 million │ Sorted by: Number of insider purchases; price to tangible book
EV/ P/E P/ Insiders

Price ∆ to 52-Wk MV EV LTM Next Tang. # #
Company Ticker ($) Low High ($mn) ($mn) Rev. FY Book Buys Sells
1 Adaptec, Inc. ADPT 2.91 -20% 46% 355 -15 nm 73x .9x 37 2
2 Fifth Street Finance Corp. FSC 6.61 -24% 102% 150 63 2.9x 4x .5x 17 -
3 Virtusa Corporation VRTU 5.24 -24% 261% 123 52 .3x 10x .8x 14 -
4 Adolor Corporation ADLR 2.20 0% 177% 102 -45 nm nm 1.0x 13 -
5 Electro Scientific Industrie ESIO 6.59 -5% 226% 178 26 .1x 20x .5x 9 6
6 Harvest Natural Resources, I HNR 6.66 -13% 102% 219 101 9.0x 9x .8x 8 -
7 OraSure Technologies, Inc. OSUR 2.93 -20% 229% 137 61 .8x nm 1.0x 8 1
8 Stoneleigh Partners Acquisit SOC 7.61 -4% 2% 260 34 nm na 1.1x 6 -
9 ModusLink Global Solutions, MLNK 3.42 -5% 352% 158 -4 nm na .5x 5 -
10 Thomas Weisel Partners Group TWPG 4.00 -6% 267% 123 35 .1x nm .6x 5 -
11 Ameriprise Financial, Inc. AMP 18.00 -9% 242% 3,899 1,936 .2x 5x .6x 4 -
12 Discover Financial Services DFS 9.47 -21% 110% 4,545 -4,076 nm 8x .8x 4 1
13 Tailwind Financial Inc. TNF 7.76 -4% 3% 121 19 8.1x na 1.2x 4 -
14 Zoran Corporation ZRAN 6.42 -59% 286% 329 24 .0x nm .7x 3 -
15 Exar Corporation EXAR 6.12 -19% 61% 263 17 .1x 28x .9x 3 1
16 Chico's FAS, Inc. CHS 1.99 0% 487% 351 74 .0x 20x .4x 2 -
17 Greenlight Capital Re, Ltd. GLRE 11.10 -10% 115% 403 186 5.1x na .8x 2 -
18 Sigma Designs, Inc. SIGM 8.79 -10% 730% 232 111 .4x 5x .9x 2 -
19 Microtune, Inc. TUNE 2.08 -10% 231% 110 28 .3x 13x 1.0x 2 -
20 BlackRock Real Asset Trust BCF 6.66 -21% 192% 378 -849 nm na .3x 1 -
21 Affymetrix, Inc. AFFX 3.20 -5% 677% 225 89 .2x nm .6x 1 -
22 Maxygen, Inc. MAXY 4.18 -29% 114% 155 -57 nm nm .8x 1 -
23 Cypress Bioscience, Inc. CYPB 5.18 -5% 151% 196 46 2.1x 14x 1.4x 1 1
24 PMI Group, Inc., The PMI 1.72 -30% 924% 140 -41 nm nm .1x - -
25 Natuzzi, S.p.A (ADR) NTZ 2.68 -15% 116% 147 70 .1x na .3x - -
26 Orbotech Ltd. ORBK 3.90 -26% 390% 131 -24 nm 4x .3x - -
27 Opnext, Inc. OPXT 1.81 -16% 430% 117 -53 nm 7x .4x - -
28 Qiao Xing Mobile Communicati QXM 2.85 -45% 249% 151 -89 nm na .4x - -
29 Magna International Inc. (US MGA 25.98 0% 247% 2,925 1,213 .0x na .4x - -
30 Gilat Satellite Networks Ltd GILT 2.53 -8% 345% 101 -2 nm 5x .4x - -
31 AEGON N.V. (ADR) AEG 4.80 -24% 288% 7,856 -3,690 nm 7x .4x - -
32 Coldwater Creek Inc. CWTR 1.57 -4% 452% 143 68 .1x nm .5x - -
33 Actions Semiconductor Co., L ACTS 1.68 -8% 198% 142 -116 nm 6x .5x - -
34 Agria Corporation (ADR) GRO 2.09 -26% 498% 132 -69 nm 6x .5x - -
35 Gushan Environmental Energy GU 2.46 -11% 630% 205 28 .1x 2x .6x - -
36 Rackable Systems, Inc. RACK 5.28 -1% 174% 158 -18 nm nm .6x - -
37 ORBCOMM Inc. ORBC 2.44 -10% 223% 103 16 .5x nm .7x - -
38 Lattice Semiconductor LSCC 1.56 -3% 156% 180 87 .4x 13x .7x - -
39 Novatel Wireless, Inc. NVTL 4.55 -12% 289% 138 12 .0x 12x .7x - -
40 Zapata Corporation ZAP 5.88 -16% 25% 113 -41 nm na .7x - -
41 Kyocera Corporation (ADR) KYO 52.45 -5% 92% 9,954 4,356 .2x 23x .7x - -
42 Celestica Inc. (USA) CLS 4.15 -13% 138% 951 455 .1x na .7x - -
43 Sycamore Networks, Inc. SCMR 2.64 -24% 53% 749 -72 nm nm .8x - -
44 KongZhong Corporation (ADR) KONG 3.14 -26% 138% 112 -19 nm 31x .8x - -
45 Sonus Networks, Inc. SONS 1.40 -7% 391% 381 64 .2x nm .8x - -
46 KHD Humboldt Wedag Internati KHD 9.10 -20% 293% 278 -118 nm 5x .8x - -
47 China Nepstar Chain Drugstor NPD 3.33 -10% 530% 360 43 .1x 11x .8x - -
48 WellCare Health Plans, Inc. WCG 9.36 -35% 527% 390 -928 nm 7x .8x - -
49 United Capital Corp. AFP 18.65 -6% 46% 158 51 .7x na .8x - -
50 Radware Ltd. RDWR 6.00 -5% 158% 116 28 .3x nm .9x - -
[MOI02 ● MOI - 1,2,4,5,6 ● MOIB]
Activist Targets #1: Underperformers

Screening criteria: ► Bottom-50% rank in EBIT margin, ROE and asset turnover; LTM rank lower than rank two years ago ► Stock price
lower than two and five years ago ► Insider ownership less than 20% ► Market value more than $100 million │ Sorted by: Market value
Price Percentile Rank vs. Industry Peers

Change vs. EBIT Marg. ROE Asset Turn.
Price MV EV 2 Yrs 5 Yrs 2 Yrs 2 Yrs 2 Yrs
Company Ticker ($) ($mn) ($mn) Ago Ago LTM Ago LTM Ago LTM Ago
1 Schering-Plough Cor SGP 15.76 25,630 33,368 -33% -9% 33 65 22 68 42 52
2 Merrill Lynch & Co. MER 13.20 21,117 468,780 -86% -77% 11 66 11 75 0 16
3 SLM Corporation SLM 7.43 3,472 157,628 -85% -80% 25 76 17 83 0 16
4 Mylan Inc. MYL 9.13 2,782 7,824 -54% -64% 27 78 16 69 31 43
5 Toll Brothers, Inc. TOL 17.42 2,768 3,529 -46% -12% 31 69 28 76 37 60
6 Constellation Brand STZ 11.49 2,571 7,384 -60% -30% 32 65 22 51 31 47
7 Micron Technology MU 2.75 2,100 3,464 -80% -80% 23 27 22 27 31 39
8 LSI Corporation LSI 3.12 2,013 1,554 -65% -65% 14 52 12 50 47 52
9 Advanced Micro AMD 2.43 1,479 5,372 -88% -84% 23 31 7 28 42 47
10 Tellabs, Inc. TLAB 3.68 1,465 298 -64% -56% 17 62 19 43 37 43
11 CIT Group Inc. CIT 4.14 1,182 60,495 -93% -88% 31 73 16 64 7 16
12 International Rectifier IRF 11.43 833 427 -70% -77% 32 56 31 40 37 43
13 Rambus Inc. RMBS 7.76 813 594 -59% -75% 14 19 14 27 27 34
14 E TRADE Financial ETFC 1.35 726 11,971 -94% -89% 5 78 13 67 0 16
15 Teradyne, Inc. TER 4.05 686 378 -73% -84% 44 67 38 65 47 56
16 AmeriCredit ACF 5.56 647 13,518 -78% -65% 35 76 30 69 7 30
17 Fannie Mae FNM 0.54 581 820,977 -99% -99% 16 57 4 55 0 16
18 ACI Worldwide Inc ACIW 14.75 515 496 -55% -34% 46 68 34 77 47 56
19 Lundin Mining Corpo LMC 1.23 480 576 -90% -13% 15 84 24 58 22 34
20 Salix Pharmaceutica SLXP 9.31 448 402 -24% -38% 21 66 23 57 31 52
21 Redwood Trust, Inc. RWT 12.31 412 6,994 -79% -76% 5 68 1 60 7 16
22 Sonus Networks, Inc SONS 1.40 381 64 -79% -81% 39 53 35 82 37 43
23 RF Micro Devices RFMD 1.32 347 748 -81% -87% 32 60 31 58 37 65
24 Headwaters HW 6.79 285 796 -72% -65% 28 53 23 35 42 52
25 Cohu, Inc. COHU 11.84 275 104 -41% -38% 44 50 40 43 42 60
26 LaBranche & Co. LAB 4.53 273 254 -54% -61% 21 82 28 68 7 16
27 Exar Corporation EXAR 6.12 263 17 -53% -64% 8 26 17 34 27 30
28 Pinnacle Entertainm PNK 4.07 244 1,036 -88% -56% 21 59 32 61 31 47
29 Brooks Automation, BRKS 3.66 233 89 -75% -85% 18 45 20 70 42 52
30 DineEquity, Inc. DIN 12.14 212 2,420 -77% -68% 22 74 22 65 31 43
31 ImmunoGen, Inc. IMGN 3.91 199 154 -23% -23% 10 12 12 18 31 39
32 Vital Images, Inc. VTAL 12.94 197 39 -63% -28% 28 57 34 40 27 43
33 Louisiana-Pacific LPX 1.81 187 551 -92% -90% 25 46 24 41 37 47
34 Belo Corp. BLC 1.70 174 1,306 -88% -92% 29 71 19 47 31 39
35 Herley Industries HRLY 12.80 173 167 -21% -38% 15 34 29 33 42 47
36 Standard Pacific SPF 1.66 167 1,097 -94% -93% 13 47 7 44 47 60
37 Symmetricom, Inc. SYMM 3.73 166 118 -58% -49% 36 43 31 35 42 43
38 Array BioPharma ARRY 3.33 159 123 -74% -41% 3 7 4 12 22 34
39 OraSure Technologies OSUR 2.93 137 61 -65% -63% 29 53 34 38 37 43
40 Orbotech Ltd. ORBK 3.90 131 -24 -85% -84% 45 65 41 61 47 56
41 RADVISION RVSN 6.07 123 40 -70% -47% 29 56 30 53 37 43
42 GenVec GNVC 1.15 102 80 -52% -65% 8 9 8 12 37 43
43 Gilat Satellite GILT 2.53 101 -2 -71% -48% 44 45 42 44 42 47
44 SouthWest Water SWWC 4.10 101 291 -70% -62% 42 58 29 41 31 43
[MOI03 ● MOI – 3 ● MOIC]
Activist Targets #2: Sale, Liquidation or Recap Opportunities

Screening criteria: ► Tangible book at least 50% of market value ► Current assets minus total liabilities at least 50% of market value
► Positive net cash ► Insider ownership less than 20% ► Market value more than $100 million │ Sorted by: Market value
Net Net
Current Net
P/ Assets Cash EV/ P/E
Price MV EV Tang. as % as % LTM Next
Company Ticker ($) ($mn) ($mn) Book of MV of MV Rev. FY
1 Ingram Micro Inc. IM 11.73 1,934 1,584 .7x 122% 18% .0x 9x
2 Foot Locker, Inc. FL 11.22 1,739 1,433 .9x 62% 18% .3x 12x
3 HLTH Corporation HLTH 8.21 1,524 509 1.6x 56% 67% 1.2x na
4 Tellabs, Inc. TLAB 3.68 1,465 298 .9x 86% 80% .2x 19x
5 Novellus Systems, Inc. NVLS 12.18 1,190 865 1.0x 55% 27% .7x 406x
6 Tech Data Corporation TECD 19.46 983 936 .5x 167% 5% .0x 7x
7 Benchmark Electronics, Inc. BHE 10.97 714 385 .7x 108% 46% .1x 10x
8 MKS Instruments, Inc. MKSI 13.99 688 449 1.3x 63% 35% .6x 35x
9 FormFactor, Inc. FORM 13.63 669 133 .9x 87% 80% .5x nm
10 Cymer, Inc. CYMI 21.86 647 528 1.3x 50% 18% 1.1x 21x
11 Verigy Ltd. VRGY 10.96 646 261 1.2x 52% 60% .3x 22x
12 Emulex Corporation ELX 7.22 593 299 1.5x 52% 50% .6x 8x
13 Plantronics, Inc. PLT 11.96 584 384 1.2x 58% 34% .4x 8x
14 Coherent, Inc. COHR 23.47 557 339 .9x 54% 39% .6x 15x
15 Cabot Microelectronics Corpo CCMP 23.34 543 320 1.3x 53% 41% .9x 13x
16 Analogic Corporation ALOG 39.16 527 340 1.4x 53% 35% .8x 12x
17 JAKKS Pacific, Inc. JAKK 18.98 522 428 1.5x 53% 18% .5x 6x
18 OM Group, Inc. OMG 16.10 491 372 .6x 101% 24% .2x 4x
19 Harmonic Inc. HLIT 4.83 459 166 1.3x 66% 64% .5x 8x
20 Imation Corp. IMN 11.38 429 316 .7x 99% 26% .1x 16x
21 Fred's, Inc. FRED 9.89 395 391 1.0x 58% 1% .2x 13x
22 TriQuint Semiconductor TQNT 2.69 392 312 .8x 51% 20% .6x 6x
23 Ameron International Corpora AMN 41.72 383 296 .8x 55% 23% .4x 7x
24 Sonus Networks, Inc. SONS 1.40 381 64 .8x 81% 83% .2x nm
25 Finish Line, Inc., The FINL 6.70 368 303 .9x 50% 18% .2x 9x
26 Park Electrochemical Corp. PKE 17.58 360 144 1.3x 60% 60% .6x 11x
27 Adaptec, Inc. ADPT 2.91 355 -15 .9x 103% 104% nm 73x
28 Chico's FAS, Inc. CHS 1.99 351 74 .4x 51% 79% .0x 20x
29 NetGear, Inc. NTGR 9.90 349 147 1.0x 92% 58% .2x 9x
30 Ixia XXIA 5.31 338 163 1.3x 53% 52% .9x 16x
31 OmniVision Technologies, Inc OVTI 6.56 336 96 .7x 86% 71% .1x 7x
32 Zoran Corporation ZRAN 6.42 329 24 .7x 103% 93% .0x nm
33 Ultratech, Inc. UTEK 12.95 304 153 1.6x 57% 50% 1.2x 21x
34 Geron Corporation GERN 3.70 293 120 1.6x 58% 59% 17.3x nm
35 Superior Industries Internat SUP 10.81 288 288 .5x 61% 0% .3x nm
36 L.B. Foster Company FSTR 27.46 282 199 1.3x 62% 29% .4x 11x
37 Methode Electronics Inc. MEI 7.23 278 167 1.0x 61% 40% .3x 11x
38 Applied Micro Circuits Corpo AMCC 4.25 277 81 1.0x 80% 71% .3x 7x
39 Cohu, Inc. COHU 11.84 275 104 1.0x 84% 62% .5x 85x
40 THQ Inc. THQI 3.98 267 104 .7x 84% 61% .1x 8x
41 Exar Corporation EXAR 6.12 263 17 .9x 91% 93% .1x 28x
42 Silicon Storage Technology, SSTI 2.74 262 151 .9x 61% 42% .4x nm
43 eHealth, Inc. EHTH 10.27 258 114 1.7x 54% 56% 1.1x 17x
44 RTI International Metals, In RTI 11.01 253 206 .5x 120% 19% .3x 5x
45 InfoSpace, Inc. INSP 7.32 253 61 1.1x 70% 76% .4x 35x
46 Silicon Image, Inc. SIMG 3.37 250 49 1.2x 67% 80% .2x 13x
47 Sierra Wireless, Inc. (USA) SWIR 7.88 244 42 .9x 92% 83% .1x na
48 Rigel Pharmaceuticals, Inc. RIGL 6.55 240 82 1.8x 52% 66% 10.2x nm
49 Brooks Automation, Inc.(USA) BRKS 3.66 233 89 .6x 93% 62% .2x nm
50 Sigma Designs, Inc. SIGM 8.79 232 111 .9x 82% 52% .4x 5x
[MOI04 ● MOI – 1,2,4,5,6 ● MOID]
Greenblatt’s “Magic Formula” #1: Good Businesses at Good Prices (Based on LTM Numbers)
Screening criteria: ► Market value more than $100 million ► ADRs and banks excluded │ Sorted by: Equal-weighted average of two
rankings: (1) LTM return on capital employed (“good business”), and (2) LTM EBIT-to-EV yield (“good price”)
LTM Insiders
to EBIT/
Price 52-Wk MV EV EBIT/ Capital Tax # #
Company Ticker ($) High ($mn) ($mn) EV Empl. Rate Buys Sells
1 KBR, Inc. KBR 13.11 239% 2,118 1,008 47% 5875% 38% 1 3
2 Primoris Services Corp PRIM 5.66 53% 172 123 38% 10311% 3% - -
3 Automatic Data Processing ADP 35.12 35% 17,837 1,561 173% 448% 36% - 21
4 Heidrick & Struggles Interna HSII 21.24 79% 347 164 42% 1559% 43% - 1
5 Airvana, Inc. AIRV 4.77 49% 305 68 161% 264% 14% - 40
6 McDermott International MDR 7.80 761% 1,778 952 65% 241% 22% 2 11
7 EarthLink, Inc. ELNK 6.36 60% 689 501 42% 305% 10% - 32
8 CTC Media, Inc. CTCM 4.45 613% 677 747 35% 290% 29% - -
9 Perini Corporation PCR 14.42 305% 726 387 43% 223% 38% 7 -
10 VAALCO Energy, Inc. EGY 4.39 105% 256 157 79% 164% 63% 1 -
11 HLTH Corporation HLTH 8.21 71% 1,524 509 97% 131% 3% - 1
12 Ituran Location and Control ITRN 7.00 97% 164 117 64% 145% 30% - -
13 Herbalife Ltd. HLF 17.56 191% 1,121 1,298 28% 342% 30% 5 5
14 L.B. Foster Company FSTR 27.46 118% 282 199 84% 123% 36% 1 1
15 Terra Industries Inc. TRA 16.30 254% 1,665 1,535 48% 138% 34% 1 11
16 CNA Surety Corporation SUR 13.91 65% 614 636 23% 1268% 30% 1 -
17 Hackett Group, Inc., The HCKT 2.57 159% 102 76 25% 406% 2% - -
18 Energen Corporation EGN 28.40 180% 2,037 2,609 22% 3563% 37% - -
19 Administaff, Inc. ASF 16.18 110% 410 221 31% 162% 36% - 24
20 CF Industries Holdings, Inc. CF 54.97 215% 3,126 1,978 52% 97% 36% 5 17
21 Waddell & Reed Financial, In WDR 11.21 266% 951 889 24% 258% 37% 1 6
22 MEMC Electronic Materials, I WFR 15.34 526% 3,443 2,354 40% 110% 27% 1 -
23 EMCOR Group, Inc. EME 13.80 161% 904 763 38% 111% 39% - 10
24 Terra Nitrogen Company, L.P. TNH 99.48 72% 1,859 1,786 21% 604% nm - -
25 China Sky One Medical, Inc. CSKI 10.09 69% 165 114 28% 139% 20% - -
26 Net 1 Ueps Technologies In UEPS 10.97 203% 641 509 22% 327% 29% - 2
27 Cherokee Inc. CHKE 15.52 138% 138 122 20% 1272% 40% 4 3
28 Solutia Inc. SOA 6.88 216% 649 2,015 74% 81% 17% 19 -
29 Pacer International, Inc. PACR 10.27 145% 359 395 28% 136% 36% 1 9
30 Bare Escentuals, Inc. BARE 4.45 572% 407 629 29% 126% 39% 1 -
31 Wright Express Corporation WXS 13.03 214% 505 669 33% 108% 33% 5 3
32 Affiliated Managers Group, I AMG 29.93 343% 1,229 2,246 22% 291% 22% - -
33 Korn/Ferry International KFY 11.61 79% 553 344 26% 145% 36% 1 -
34 Take-Two Interactive Softwar TTWO 10.76 160% 835 496 27% 131% 18% - -
35 China-Biotics Inc. CHBT 7.99 78% 137 94 20% 613% 22% - -
36 OpenTV Corp. OPTV 1.07 97% 149 53 27% 129% 1% - -
37 Sigma Designs, Inc. SIGM 8.79 730% 232 111 56% 78% nm 2 -
38 Gran Tierra Energy Inc. GTE 2.17 305% 251 194 32% 99% 35% 3 -
39 National Financial Partners NFP 2.92 1556% 116 370 27% 118% 52% 2 -
40 World Acceptance Corp. WRLD 17.07 169% 277 525 19% 782% 39% - 4
41 Humana Inc. HUM 30.63 188% 5,168 1,568 74% 69% 34% 1 1
42 Legg Mason, Inc. LM 15.65 411% 2,201 2,776 33% 88% nm 1 4
43 Guess?, Inc. GES 13.97 247% 1,315 1,079 33% 88% 38% - 14
44 Manitowoc Company, Inc. MTW 6.92 644% 902 974 60% 70% 26% - 3
45 Comfort Systems USA, Inc. FIX 7.10 123% 280 193 37% 83% 38% 4 17
46 Darling International Inc. DAR 4.57 283% 374 371 37% 83% 38% - 17
47 Cal-Maine Foods, Inc. CALM 21.55 126% 513 551 39% 78% 35% - 16
48 Pre-Paid Legal Services, Inc PPD 35.92 60% 417 449 22% 188% 43% - 12
49 Coach, Inc. COH 16.20 136% 5,296 4,889 23% 160% 34% 5 1
50 AmSurg Corp. AMSG 21.79 37% 685 854 24% 130% 39% - 18
[MOI07 ● Expanded Greenblatt View ● MOIG]
Greenblatt’s “Magic Formula” #2: Good Businesses at Good Prices (Based on This FY Ests)
rankings: (1) This FY estimated return on tangible equity (“good business”), and (2) This FY estimated earnings yield (“good price”)
This FY EPS / Insiders

to Tangible Price
Price 52-Wk MV EV Book per # #
Company Ticker ($) High ($mn) ($mn) Share Buys Sells
1 Innophos Holdings, Inc. IPHS 16.71 148% 351 611 200% 55% 1 23
2 Steel Dynamics, Inc. STLD 8.12 404% 1,475 4,329 176% 40% 7 -
3 Chart Industries, Inc. GTLS 9.81 468% 279 373 37345% 27% - 15
4 Federal-Mogul Corporation FDML 5.36 450% 539 2,665 481% 27% - -
5 Amkor Technology, Inc. AMKR 3.02 321% 553 1,739 125% 37% 3 -
6 ON Semiconductor Corp. ONNN 3.50 210% 1,438 2,241 710% 24% - 7
7 Vanguard Natural Resources, VNR 8.01 131% 101 199 186% 27% 5 1
8 Reliance Steel & Aluminum RS 19.00 313% 1,393 3,626 105% 37% 6 7
9 ArvinMeritor, Inc. ARM 3.80 377% 280 1,140 93% 41% - 1
10 Quiksilver, Inc. ZQK 1.62 637% 207 1,162 81% 53% 3 1
11 Coventry Health Care, Inc. CVH 12.59 407% 1,876 2,247 635% 22% 10 1
12 Advance America, Cash Advanc AEA 1.88 469% 115 307 92% 34% - 50
13 Technitrol, Inc. TNL 4.64 557% 190 505 248% 23% 5 -
14 EarthLink, Inc. ELNK 6.36 60% 689 501 105% 29% - 32
15 BE Aerospace, Inc. BEAV 8.29 552% 825 1,834 122% 25% 13 1
16 Crane Co. CR 14.15 227% 847 968 412% 21% 9 2
17 Mosaic Company, The MOS 32.47 403% 14,425 13,725 79% 32% 4 2
18 DryShips Inc. DRYS 9.11 1178% 574 3,144 57% 143% - -
19 WABCO Holdings Inc. WBC 16.00 243% 1,119 1,021 115% 25% - -
20 Terra Industries Inc. TRA 16.30 254% 1,665 1,535 65% 37% 1 11
21 ION Geophysical Corporation IO 3.91 367% 389 740 243% 20% 2 11
22 Liberty Media Corp (Entertai LMDIA 12.80 124% 6,617 7,831 52% 88% - 2
23 UDR, Inc. UDR 13.56 110% 1,847 5,352 56% 39% - -
24 United States Steel Corporat X 29.75 559% 3,459 5,891 52% 62% 1 3
25 Owens-Illinois, Inc. OI 20.16 201% 3,367 6,380 273% 18% 3 2
26 Manitowoc Company, Inc. MTW 6.92 644% 902 974 49% 47% - 3
27 EnPro Industries, Inc. NPO 17.56 149% 356 467 72% 25% 2 7
28 Barnes Group Inc. B 11.86 191% 645 1,093 344% 18% - 5
29 GrafTech International Ltd. GTI 4.79 484% 570 702 47% 41% - 5
30 Embarq Corporation EQ 30.16 73% 4,287 10,044 1768% 17% - -
31 General Cable Corporation BGC 11.44 630% 607 1,782 48% 38% - 6
32 CIGNA Corporation CI 12.95 340% 3,519 4,846 55% 28% 1 20
33 Teekay Tankers Ltd. TNK 8.65 202% 216 522 49% 34% - -
34 Ameristar Casinos, Inc. ASCA 6.16 428% 353 1,900 253% 17% - -
35 Thomas & Betts Corporation TNB 20.90 165% 1,168 1,630 156% 18% 1 4
36 Textron Inc. TXT 14.73 405% 3,551 13,130 58% 24% 9 2
37 Flextronics International Lt FLEX 3.06 305% 2,477 4,219 45% 33% - 6
38 EMCOR Group, Inc. EME 13.80 161% 904 763 103% 19% - 10
39 Clayton Williams Energy, Inc CWEI 46.15 163% 559 952 54% 25% - 3
40 Perini Corporation PCR 14.42 305% 726 387 52% 25% 7 -
41 Terex Corporation TEX 12.12 529% 1,150 2,231 41% 48% 59 6
42 Superior Energy Services, In SPN 16.75 245% 1,299 1,882 54% 24% 3 2
43 Cliffs Natural Resources Inc CLF 20.27 502% 2,301 2,336 44% 30% - -
44 National-Oilwell Varco, Inc. NOV 25.81 259% 10,771 10,518 80% 19% 4 3
45 Belden Inc. BDC 15.83 233% 736 1,111 86% 19% 7 2
46 China Security & Surveillanc CSR 7.70 203% 353 445 54% 22% 17 -
47 CF Industries Holdings, Inc. CF 54.97 215% 3,126 1,978 47% 25% 5 17
48 Pioneer Southwest Energy Par PSE 12.35 84% 371 346 50% 24% - -
49 Williams Partners L.P. WPZ 15.66 167% 827 1,745 69% 19% 3 -
50 3Com Corporation COMS 1.82 160% 739 499 65% 20% - -
[MOI08 ● Expanded Greenblatt View ● MOIG, MOIH, m. sort]
Greenblatt’s “Magic Formula” #3: Good Businesses at Good Prices (Based on Next FY Ests)
rankings: (1) Next FY estimated return on tangible equity (“good business”), and (2) Next FY estimated earnings yield (“good price”)
Next FY EPS / Insiders

to Tangible Price
Price 52-Wk MV EV Book per # #
1 Finisar Corporation FNSR 0.48 323% 227 349 560% 33% - -
3 James River Coal Company JRCC 8.37 651% 229 364 159% 64% - 9
4 Chemtura Corporation CEM 1.51 483% 366 1,355 4850% 26% 3 -
6 Continental Airlines, Inc. CAL 11.40 174% 1,261 4,273 158% 38% - -
7 Walter Industries, Inc. WLT 23.93 368% 1,300 2,877 132% 51% 2 1
11 Alpha Natural Resources, Inc ANR 26.47 351% 1,866 1,827 116% 44% - 2
12 Fortress Investment Group LL FIG 2.88 577% 1,171 1,662 195% 28% - -
14 ION Geophysical Corporation IO 3.91 367% 389 740 297% 24% 2 11
16 General Steel Holdings, Inc. GSI 3.97 320% 143 465 95% 34% - -
18 Mosaic Company, The MOS 32.47 403% 14,425 13,725 86% 35% 4 2
22 Federal-Mogul Corporation FDML 5.36 450% 539 2,665 368% 21% - -
23 Crane Co. CR 14.15 227% 847 968 405% 20% 9 2
26 MV Oil Trust MVO 10.98 169% 126 126 80% 28% - -
27 CONSOL Energy Inc. CNX 25.52 367% 4,624 5,388 82% 25% 1 11
30 Convergys Corporation CVG 5.43 230% 663 1,190 225% 19% 26 2
31 Reliance Steel & Aluminum RS 19.00 313% 1,393 3,626 74% 26% 6 7
32 A-Power Energy Generation Sy APWR 5.25 507% 172 81 55% 36% - -
33 Solutia Inc. SOA 6.88 216% 649 2,015 1888% 17% 19 -
35 EnPro Industries, Inc. NPO 17.56 149% 356 467 69% 24% 2 7
36 China Architectural Engineer CAEI 2.68 418% 141 169 56% 28% - -
37 Exide Technologies XIDE 3.38 482% 255 777 46% 53% - -
38 Manitowoc Company, Inc. MTW 6.92 644% 902 974 47% 45% - 3
39 EarthLink, Inc. ELNK 6.36 60% 689 501 80% 22% - 32
41 Embarq Corporation EQ 30.16 73% 4,287 10,044 1723% 16% - -
43 National-Oilwell Varco, Inc. NOV 25.81 259% 10,771 10,518 84% 20% 4 3
44 CF Industries Holdings, Inc. CF 54.97 215% 3,126 1,978 51% 27% 5 17
45 Transocean Inc. RIG 70.89 130% 22,626 36,188 65% 22% - 3
46 Thomas & Betts Corporation TNB 20.90 165% 1,168 1,630 153% 17% 1 4
47 Massey Energy Company MEE 16.20 491% 1,379 1,986 44% 34% 4 13
48 CBRL Group, Inc. CBRL 14.39 170% 322 1,098 73% 21% 3 1
50 China Sky One Medical, Inc. CSKI 10.09 69% 165 114 51% 24% - -
[MOI09 ● Expanded Greenblatt View ● MOII]
Greenblatt’s “Magic Formula” #4: Good Businesses at Good Prices (Based on 2112 EPS Ests)
rankings: (1) Next FY estimated return on tangible equity (“good business”), and (2) Next FY estimated earnings yield (“good price”)
5-Year EPS Est / Insiders

to Tangible Price
Price 52Wk MV EV Book per # #
1 Walter Industries, Inc. WLT 23.93 368% 1,300 2,877 849% 328% 2 1
2 Alpha Natural Resources, Inc ANR 26.47 351% 1,866 1,827 432% 165% - 2
3 Finisar Corporation FNSR 0.48 323% 227 349 948% 56% - -
4 CONSOL Energy Inc. CNX 25.52 367% 4,624 5,388 310% 97% 1 11
5 Chemtura Corporation CEM 1.51 483% 366 1,355 7092% 39% 3 -
7 Massey Energy Company MEE 16.20 491% 1,379 1,986 192% 148% 4 13
9 Continental Airlines, Inc. CAL 11.40 174% 1,261 4,273 228% 55% - -
10 James River Coal Company JRCC 8.37 651% 229 364 159% 64% - 9
11 Fortress Investment Group LL FIG 2.88 577% 1,171 1,662 275% 39% - -
12 A-Power Energy Generation Sy APWR 5.25 507% 172 81 146% 95% - -
20 Sohu.com Inc. SOHU 43.32 111% 1,669 1,390 209% 36% - 4
23 Holly Corporation HOC 17.47 225% 868 1,019 112% 57% - 4
24 Arch Coal, Inc. ACI 15.86 388% 2,266 3,567 97% 70% 1 5
25 China Architectural Engineer CAEI 2.68 418% 141 169 109% 55% - -
27 MercadoLibre, Inc. MELI 10.27 690% 455 443 694% 28% - 10
29 General Steel Holdings, Inc. GSI 3.97 320% 143 465 121% 43% - -
30 Peabody Energy Corporation BTU 27.07 228% 7,218 10,266 110% 45% 1 5
31 Crane Co. CR 14.15 227% 847 968 540% 27% 9 2
32 Atwood Oceanics, Inc. ATW 22.53 182% 1,443 1,411 96% 51% - -
33 Convergys Corporation CVG 5.43 230% 663 1,190 316% 27% 26 2
34 Net 1 Ueps Technologies In UEPS 10.97 203% 641 509 136% 32% - 2
37 PDL BioPharma Inc. PDLI 9.51 97% 1,137 1,115 490% 25% 1 -
38 Smith & Wesson Holding Corpo SWHC 2.54 346% 120 227 407% 26% - 2
39 Tyco International Ltd. TYC 20.50 134% 9,734 12,479 199% 27% - 1
40 Bally Technologies Inc. BYI 17.18 208% 942 1,173 169% 28% - 15
42 SunPower Corporation SPWRA 25.56 465% 2,193 2,322 103% 35% - 17
43 Foster Wheeler Ltd. FWLT 19.94 330% 2,667 1,581 108% 34% 4 4
44 China-Biotics Inc. CHBT 7.99 78% 137 94 94% 37% - -
45 ENGlobal Corporation ENG 4.11 347% 112 145 91% 37% - 6
46 PAREXEL International Corpor PRXL 8.03 350% 444 675 245% 26% 7 32
50 Transocean Inc. RIG 70.89 130% 22,626 36,188 98% 34% - 3
[MOI09 ● Expanded Greenblatt View ● MOIJ]
Industry Browsers: Overview of Trading Multiples and EPS Growth Estimates 4,5
P/E EPS Growth Ests
Total Top P/ EV/ EV/ Last This Next This Next
# MV Co. Tang. LTM LTM FY FY FY FY FY 5-Yr
Cos ($bn) ($bn) Book Rev. EBIT Act. Est. Est. Est. Est. Est.
Basic Materials
Chemical Manufacturing 50 161 41 2.5x .7x 8x 13x 9x 8x 24% 10% 12%
Plastics and Rubbers 10 67 25 1.4x 1.0x 11x 10x 9x 9x 11% 1% 8%
Containers and Packaging 16 32 3 2.6x .8x 9x 11x 11x 10x 9% 8% 11%
Fabricated Products 24 33 8 1.6x .5x 5x 8x 7x 7x -6% -2% 13%
Paper Products 15 38 24 1.0x .7x 11x 9x 8x 8x 2% 8% 6%
Wood Products 4 10 7 1.0x .7x 39x 16x 37x 28x -40% 22% 8%
Metal Mining 15 251 91 1.2x .7x 4x 4x 6x 7x -13% -17% 11%
Gold and Silver 12 53 25 1.3x 2.7x 27x 7x 11x 8x 40% 32% 10%
Iron and Steel 16 87 30 1.0x .4x 3x 5x 4x 4x 36% -15% 9%
Capital Goods
Aerospace and Defense 33 147 30 3.4x .7x 6x 10x 8x 7x 19% 11% 14%
Machinery 14 52 22 1.8x .8x 7x 9x 7x 6x 24% 5% 12%
Construction Supplies 20 33 13 1.3x .5x 7x 8x 8x 9x 6% 10% 14%
Construction Materials 7 12 4 1.6x 1.0x 10x 9x 17x 16x -37% 5% 13%
Construction Services 42 65 12 1.4x .5x 5x 11x 8x 7x 20% 8% 12%
Miscellaneous Goods 47 90 16 2.5x .7x 7x 9x 9x 9x 10% -2% 13%
Mobile Homes and RVs 3 1 1 1.7x .3x 14x 29x 44x 17x -58% 39% 14%
Conglomerates
All Conglomerates 15 397 168 5.2x .9x 8x 9x 9x 10x 0% 0% 13%
Consumer Cyclical
Apparel 19 23 5 2.2x .7x 7x 9x 7x 7x 11% 6% 17%
Appliances 9 14 3 4.2x .8x 9x 10x 8x 9x -6% 0% 11%
Audio and Video 6 53 30 1.0x .3x 7x 10x 12x 11x -8% 26% 12%
Automotive 14 206 100 .9x .4x 8x 5x 5x 7x -20% -3% 11%
Auto Parts 19 17 6 1.5x .4x 7x 8x 8x 9x -9% -5% 12%
Footwear 10 27 23 1.2x .4x 7x 11x 10x 9x 4% 12% 15%
Furniture 14 11 3 1.4x .5x 7x 7x 11x 10x -26% -3% 11%
Recreational Products 16 19 5 1.6x .6x 8x 10x 10x 9x -6% 9% 10%
Consumer Non-Cyclical
Beverages (alcoholic) 9 127 50 3.7x 2.0x 16x 16x 14x 12x 27% 10% 11%
Beverages (non-alcoholic) 14 240 104 4.4x 1.2x 8x 14x 11x 10x 10% 7% 9%
Crops 6 18 16 1.2x .5x 10x 11x 8x 7x -2% 10% 13%
Food Processing 46 315 65 2.6x .9x 13x 16x 14x 13x 19% 13% 10%
Household Products 21 274 188 4.6x 1.0x 10x 17x 12x 12x 19% 12% 12%
Tobacco 7 195 78 22.9x 1.9x 8x 13x 12x 11x 11% 8% 9%
Energy
Coal 17 28 7 2.5x 1.0x 9x 14x 8x 4x 101% 96% 25%
Oil and Gas (integrated) 24 1,394 375 1.2x .6x 4x 7x 5x 6x 23% -11% 6%
Oil and Gas (operations) 103 404 39 1.2x 2.1x 7x 13x 7x 8x 67% -7% 11%
Oil Well Services 74 231 58 1.3x 1.0x 6x 7x 6x 6x 18% 6% 12%
Financial
Consumer Finance 29 107 46 1.1x 2.7x 11x 9x 8x 8x 1% 11% 13%
Insurance (health) 20 102 24 1.4x .3x 6x 6x 7x 6x 9% 7% 12%
Insurance (life) 19 185 78 .7x .7x 8x 5x 5x 4x -17% 11% 10%
Insurance (property) 75 386 156 1.0x 1.1x 8x 7x 9x 7x -25% 11% 10%
Insurance (other) 12 58 22 1.6x 1.3x 11x 15x 15x 12x -1% 13% 13%
Investment Services 58 255 33 1.7x 1.8x 6x 10x 10x 9x -2% 4% 14%
Other Financial Services 27 14 2 .7x 4.5x 9x 10x 6x 6x 21% -2% 12%
Money Center Banks 25 767 129 1.8x 2.7x 5x 8x 9x 8x -7% 3% 10%
Regional Banks 175 354 33 1.6x 3.0x 6x 11x 14x 13x -17% 8% 8%
S&Ls and Savings Banks 33 41 9 1.7x 3.6x 9x 29x 19x 17x 9% 14% 10%
4
Ratios and earnings growth estimates represent industry medians.
5
Analysis includes firms with at least $100 million in market value and at least one analyst estimate of this year’s and next year’s EPS.
Industry Browsers: Overview of Trading Multiples and EPS Growth Estimates (continued)
P/E EPS Growth Ests
Total Top P/ EV/ EV/ Last This Next This Next
# MV Co. Tang. LTM LTM FY FY FY FY FY 5-Yr
Cos ($bn) ($bn) Book Rev. EBIT Act. Est. Est. Est. Est. Est.
Healthcare
Biotechnology 163 583 86 3.9x 3.3x 13x 19x 15x 14x 21% 16% 18%
Facilities 45 62 13 2.4x 1.2x 9x 16x 15x 13x 20% 13% 14%
Major Pharma 12 857 167 4.8x 2.3x 11x 16x 10x 9x 32% 6% 7%
Medical Equipment 90 254 42 4.0x 1.9x 13x 21x 17x 15x 21% 17% 18%
Services
Advertising 11 21 8 1.9x .8x 7x 8x 9x 7x 9% 9% 14%
Cable and Broadcasting 32 224 45 1.9x 1.8x 12x 11x 11x 9x 8% 2% 12%
Business Services 101 274 108 2.6x .9x 8x 11x 11x 11x 6% 10% 15%
Casinos and Gaming 18 21 4 1.3x 1.5x 9x 9x 11x 11x -9% -2% 15%
Communications Services 96 1,085 175 2.1x 1.7x 9x 11x 10x 10x 14% 8% 12%
Hotels and Motels 13 16 5 .6x 1.8x 12x 7x 8x 11x -5% -10% 11%
Motion Pictures 7 6 2 2.4x 1.3x 11x 14x 14x 13x -18% 20% 10%
Personal Services 14 19 6 3.5x 1.4x 8x 9x 9x 9x 9% 5% 11%
Publishing 20 71 19 2.9x .8x 9x 9x 9x 7x -9% 5% 10%
Real Estate Operations 104 150 12 1.0x 7.3x 22x 15x 14x 16x 6% -9% 6%
Recreational Activities 12 25 16 1.6x 1.3x 9x 12x 8x 9x 5% 9% 12%
Rental and Leasing 16 10 2 1.1x 1.6x 8x 9x 6x 6x 5% -3% 11%
Restaurants 29 97 63 2.1x .6x 10x 13x 11x 9x 10% 11% 14%
Retail (apparel) 39 47 9 1.3x .3x 4x 8x 9x 9x -9% 8% 13%
Retail (online) 8 4 2 1.6x .3x 7x 11x 15x 13x -7% -4% 23%
Retail (discount and dep't) 9 257 207 1.2x .5x 8x 9x 10x 10x -33% 2% 12%
Retail (drugs) 10 104 42 2.0x .4x 12x 21x 15x 15x 28% 16% 17%
Retail (grocery) 18 63 18 2.2x .3x 10x 15x 15x 12x 4% 13% 13%
Retail (home improvement) 5 69 35 2.1x .6x 8x 12x 13x 12x -10% 5% 12%
Retail (specialty non-apparel) 48 115 21 1.7x .4x 9x 11x 11x 10x 7% 9% 13%
Retail (technology) 4 14 9 3.0x .3x 4x 6x 7x 7x -3% 1% 13%
Schools 17 29 11 6.7x 2.2x 21x 27x 25x 20x 24% 26% 22%
Security 5 2 1 2.5x .9x 5x 7x 9x 7x 6% 29% 21%
Waste Management 11 36 15 4.2x 1.7x 11x 17x 21x 15x 14% 15% 16%
Technology
Comms Equipment 51 242 63 1.4x .6x 8x 12x 12x 10x 13% 11% 14%
Hardware 12 184 80 1.9x .5x 7x 11x 10x 12x 21% 8% 14%
Networks 18 16 4 3.3x .9x 12x 15x 11x 11x 27% 18% 15%
Services 74 196 98 3.5x 1.7x 10x 17x 13x 12x 32% 15% 19%
Data Storage 10 33 20 1.0x .6x 8x 5x 6x 6x -21% 5% 12%
Peripherals 13 142 98 1.7x .7x 6x 8x 10x 10x -16% 9% 13%
Office Equipment 4 13 6 2.2x .9x 15x 14x 9x 7x 69% 3% 14%
Electronic Instruments 66 121 25 1.5x .6x 7x 9x 9x 9x 7% 9% 14%
Scientific Instruments 45 88 17 2.9x 1.4x 11x 15x 14x 12x 18% 12% 16%
Semiconductors 115 296 74 1.4x .9x 8x 11x 11x 11x 5% 4% 17%
Software 120 492 178 3.1x 1.3x 10x 17x 13x 11x 36% 14% 17%
Transportation
Air Couriers 2 73 53 4.2x .9x 101x 83x 14x 13x 465% 7% 12%
Airlines 21 35 8 1.3x .5x 11x 6x 10x 6x -104% 49% 16%
Railroads 10 96 29 1.9x 2.0x 9x 14x 12x 11x 22% 15% 14%
Trucking 16 14 3 1.7x .5x 10x 16x 15x 14x 3% 8% 12%
Shipping 31 17 2 .8x 3.1x 7x 5x 4x 5x 25% -12% 10%
Miscellaneous 18 25 9 2.2x 1.0x 10x 10x 8x 9x 13% 3% 14%
Utilities
Electric 68 435 33 1.5x 1.8x 12x 11x 12x 11x 6% 8% 9%
Natural Gas 44 97 13 1.6x 1.4x 11x 12x 11x 11x 3% 5% 8%
Water 14 22 11 1.8x 3.3x 15x 20x 20x 17x 2% 14% 8%
Basic Materials: Chemical Manufacturing – Valuation

(Sorted by market value) P/E
Move to EV/ EV/ Last This Next P/
Price 52-Wk MV EV LTM LTM FY FY FY Tang.
Company / Ticker ($) Low High ($mn) ($mn) Rev. EBIT Act. Est. Est. Book
Monsanto Company / MON 74.10 -8% 97% 40,603 40,806 3.6x 14x 21x 16x 14x 8.6x
Praxair, Inc. / PX 59.46 -16% 68% 18,337 23,257 2.1x 11x 16x 14x 13x 6.7x
Sasol Limited (ADR) / SSL 24.11 -14% 182% 15,420 16,569 1.3x 5x 7x 6x 5x 2.1x
Mosaic Company, The / MOS 32.47 -26% 403% 14,425 13,725 1.1x 4x 7x 3x 3x 2.5x
Air Products & Chemi / APD 52.78 -12% 101% 11,181 15,044 1.4x 10x 11x 10x 9x 2.9x
PPG Industries, Inc. / PPG 45.38 -5% 59% 7,452 10,883 .7x 8x 9x 9x 9x nm
Sociedad Quimica y M / SQM 22.66 -43% 162% 5,964 6,436 4.5x 18x 31x 10x 10x 4.9x
Sigma-Aldrich Corpor / SIAL 40.84 -16% 54% 5,120 5,512 2.5x 11x 17x 15x 15x 5.2x
CF Industries Holdin / CF 54.97 -31% 215% 3,126 1,978 .5x 2x 8x 4x 4x 1.8x
Airgas, Inc. / ARG 34.59 -22% 89% 2,800 4,782 1.1x 9x 13x 10x 10x 11.2x
FMC Corporation / FMC 37.00 -23% 117% 2,739 3,220 1.1x 7x 18x 8x 7x 2.9x
Lubrizol Corporation / LZ 33.96 -16% 97% 2,284 3,293 .6x 7x 8x 8x 7x 4.6x
International Flavor / IFF 27.86 -3% 81% 2,191 3,272 1.4x 9x 10x 10x 9x nm
Huntsman Corporation / HUN 9.26 -24% 180% 2,171 6,026 .6x 14x 42x 28x 14x 1.5x
Celanese Corporation / CE 12.91 -16% 295% 1,851 4,870 .7x 5x 7x 4x 4x nm
Scotts Miracle-Gro C / SMG 27.85 -42% 46% 1,800 2,714 .9x 28x nm 14x 12x nm
Valspar Corporation, / VAL 17.29 -7% 52% 1,725 2,755 .8x 9x 12x 11x 10x nm
Nalco Holding Compan / NLC 12.39 -15% 112% 1,705 4,883 1.2x 10x 14x 11x 9x nm
Terra Industries Inc / TRA 16.30 -10% 254% 1,665 1,535 .6x 2x 9x 3x 4x 1.8x
RPM International In / RPM 12.56 -3% 101% 1,617 2,388 .6x 28x 32x 7x 7x nm
Braskem SA (ADR) / BAK 5.88 -9% 222% 1,501 5,259 .6x nm 5x 4x 11x .6x
Intrepid Potash, Inc / IPI 19.82 -24% 285% 1,483 1,345 4.0x 8x 79x 8x 4x 2.4x
Cabot Corporation / CBT 21.38 -6% 68% 1,396 1,982 .6x 12x 16x 9x 8x 1.2x
Sensient Technologie / SXT 23.83 -12% 39% 1,152 1,626 1.3x 10x 14x 13x 12x 3.0x
Cytec Industries Inc / CYT 22.63 -6% 187% 1,066 1,841 .5x 6x 5x 6x 6x 2.4x
Cheniere Energy Part / CQP 5.18 -23% 257% 838 na nm nm nm nm 5x nm
H.B. Fuller Company / FUL 16.11 -20% 74% 780 913 .7x 7x 10x 11x 9x 2.5x
Calgon Carbon Corpor / CCC 12.85 -29% 79% 695 684 1.7x 13x 41x 25x 19x 3.2x
Rockwood Holdings, I / ROC 9.00 -10% 386% 667 3,090 .9x 8x 8x 4x 5x nm
Solutia Inc. / SOA 6.88 -8% 216% 649 2,015 .8x 1x nm 9x 6x nm
Arch Chemicals, Inc. / ARJ 25.52 -17% 69% 635 713 .5x 6x 13x 12x 10x 3.7x
Cabot Microelectroni / CCMP 23.34 -2% 85% 543 320 .9x 6x 14x 17x 13x 1.3x
NewMarket Corporatio / NEU 34.26 -8% 173% 520 706 .4x 6x 7x 8x 6x 1.9x
OM Group, Inc. / OMG 16.10 -19% 310% 491 372 .2x 1x 4x 3x 4x .6x
WD-40 Company / WDFC 27.06 -8% 58% 447 447 1.4x 10x 17x 15x 14x 15.9x
SurModics, Inc. / SRDX 24.65 -9% 126% 446 421 4.3x 18x 31x 22x 17x 3.1x
Balchem Corporation / BCPC 22.95 -21% 32% 417 428 1.8x 15x 26x 22x 19x 3.8x
Ferro Corporation / FOE 8.87 -7% 172% 388 995 .4x nm nm 7x 6x 2.3x
Chemtura Corporation / CEM 1.51 -21% 483% 366 1,355 .4x nm nm 3x 4x nm
Koppers Holdings Inc / KOP 17.97 -9% 189% 366 796 .6x 5x 7x 5x 5x nm
Innophos Holdings, I / IPHS 16.71 -38% 148% 351 611 .7x 3x nm 2x 2x 3.6x
Stepan Company / SCL 34.39 -19% 77% 331 489 .3x 7x 23x 13x 12x 1.5x
American Vanguard Co / AVD 10.14 -6% 87% 273 352 1.5x 10x 15x 13x 11x 4.8x
Polypore Internation / PPO 5.84 -3% 401% 259 997 1.6x 9x 292x 7x 7x nm
Central Garden & Pet / CENT 3.06 -20% 166% 218 793 .5x nm 7x 7x 6x 1.0x
Aceto Corporation / ACET 8.66 -33% 18% 212 171 .5x 7x 16x 13x 10x 1.6x
Quaker Chemical Corp / KWR 14.58 0% 132% 158 222 .4x 7x 10x 8x 7x 1.6x
Innospec Inc. / IOSP 5.50 -11% 370% 130 207 .3x 6x 5x 6x 4x 1.4x
Penford Corporation / PENX 10.83 -2% 198% 122 191 .6x nm nm 40x 8x .9x
Average (equal-weighted) 1.2x 9x 23x 11x 9x 3.4x
Average (market value-weighted) 2.0x 10x 16x 11x 10x 4.5x
Median .7x 8x 13x 9x 8x 2.5x
[Industry Browser ● Industry Browser 1 ● MOIK]
Basic Materials: Chemical Manufacturing – Operating Performance

Est.
Revenue Rev./ LTM Profit Margins 5-Year EBIT/ LTM
LTM LTM 3-Year Empl. EPS Capital LTM LTM Asset
Ticker ($mn) Growth Growth ($'000) Gross EBIT Net Growth Empl. ROE ROA Turnover
MON 11,365 36% 22% 524 54% 26% 30% 27% 65% 37% 20% .7x
PX 10,916 21% 13% 390 40% 19% 12% 13% 24% 25% 10% .8x
SSL 12,903 -36% 23% 380 42% 26% 31% 15% 36% 62% 32% 1.0x
MOS 12,132 87% 31% 1,639 35% 32% 24% na 71% 47% 26% 1.1x
APD 10,415 14% 11% 473 26% 14% 14% 12% 20% 27% 12% .8x
PPG 15,535 34% 6% 445 36% 8% 4% 8% 26% 15% 5% 1.0x
SQM 1,416 29% 15% 378 32% 26% 20% na 22% 23% 13% .7x
SIAL 2,223 13% 13% 278 51% 23% 15% 9% 35% 21% 13% .8x
CF 3,702 52% 19% 2,644 30% 28% 17% 4% 97% 43% 24% 1.4x
ARG 4,373 23% 19% 302 52% 12% 6% 12% 21% 18% 7% 1.1x
FMC 3,052 20% 9% 610 31% 16% 10% 10% 33% 26% 10% 1.1x
LZ 5,087 17% 16% 732 23% 9% 5% 13% 23% 14% 6% 1.1x
IFF 2,404 7% 4% 454 41% 16% 12% na 31% 44% 10% .9x
HUN 10,533 19% 0% 817 14% 4% 1% na 8% 4% 1% 1.2x
CE 7,297 19% 9% 869 21% 12% 8% 15% 30% 54% 7% .9x
SMG 2,982 4% 8% 587 32% 3% 0% 11% 12% -2% 0% 1.1x
VAL 3,412 7% 10% 343 29% 9% 4% 8% 35% 11% 4% 1.0x
NLC 4,216 10% 9% 365 44% 11% 4% 14% 35% 14% 3% .7x
TRA 2,778 25% 16% 3,190 30% 27% 19% na >99% 65% 26% 1.3x
RPM 3,699 8% 13% 357 41% 2% 1% 9% 7% 4% 1% 1.1x
BAK 8,190 14% 13% 1,712 15% -2% -2% na nm -6% -2% .8x
IPI 336 na na na na 50% 36% na >99% 39% 32% .9x
CBT 3,190 22% 15% 742 15% 5% 3% na 9% 7% 3% 1.1x
SXT 1,260 9% 4% 348 31% 13% 7% 9% 19% 10% 6% .8x
CYT 3,843 13% 27% 565 21% 8% 6% 8% 19% 12% 6% .9x
CQP na na na na na na na na nm 23% -3% na
FUL 1,402 -1% 2% 438 27% 9% 6% 6% 28% 12% 7% 1.0x
CCC 393 17% 6% 452 33% 13% 9% 26% 24% 17% 9% 1.1x
ROC 3,455 16% 24% 346 31% 11% 7% 9% 17% 15% 4% .6x
SOA 2,642 43% 10% 440 18% 57% >99% na 81% >99% 64% .6x
ARJ 1,529 5% 10% 573 29% 8% 4% 15% 29% 13% 6% 1.3x
CCMP 375 11% 12% 500 47% 13% 10% 15% 19% 9% 8% .8x
NEU 1,613 23% 15% 1,361 19% 7% 5% 15% 23% 24% 10% 2.0x
OMG 1,750 98% 14% 835 25% 16% 12% 10% 46% 19% 14% 1.1x
WDFC 317 3% 6% 1,050 47% 13% 9% 10% >99% 17% 10% 1.2x
SRDX 97 33% 16% 398 91% 24% 21% 18% 51% 14% 11% .5x
BCPC 232 56% 38% 724 22% 12% 8% na 43% 18% 12% 1.5x
FOE 2,437 14% 6% 388 19% -2% -4% 12% nm -18% -5% 1.4x
CEM 3,747 2% 18% 735 22% -5% -8% 14% nm -17% -7% .9x
KOP 1,403 15% 12% 728 18% 10% 5% 9% 41% na 10% 2.0x
IPHS 862 52% 3% 825 34% 27% 17% 5% 65% >99% 24% 1.4x
SCL 1,577 24% 12% 1,098 11% 4% 2% na 18% 17% 6% 2.5x
AVD 236 16% 13% 762 41% 15% 8% na 29% 14% 7% .8x
PPO 610 19% 3% 339 36% 19% 7% 20% 22% 11% 3% .4x
CENT 1,693 0% 10% 365 31% -18% -15% 12% nm -44% -18% 1.2x
ACET 374 18% 5% 1,647 19% 7% 4% na 26% 12% 8% 1.8x
KWR 608 17% 11% 455 29% 5% 3% 0% 18% 13% 4% 1.4x
IOSP 645 12% 7% 839 30% 5% 3% na 20% 7% 3% 1.2x
PENX 346 -5% 5% 580 14% -6% -4% na nm -8% -4% 1.1x
Median 17% 12% 565 30% 12% 7% 12% 26% 15% 7% 1.1x
[Industry Browser ● Industry Browser 1 ● MOI02A]
Basic Materials: Chemicals (Plastics and Rubbers) – Valuation

E.I. du Pont de Nemo / DD 27.43 -5% 91% 24,752 33,199 1.0x 8x 9x 8x 9x 3.3x
Dow Chemical Company / DOW 21.15 -2% 115% 19,538 30,173 .5x 11x 7x 7x 8x 1.3x
Rohm and Haas Compan / ROH 72.94 -39% 5% 14,238 17,191 1.7x 20x 23x 21x 21x 64.7x
Eastman Chemical Com / EMN 35.09 -13% 123% 2,543 3,686 .5x 6x 9x 7x 8x 1.7x
Hercules Incorporate / HPC 19.17 -34% 15% 2,159 2,853 1.2x 11x 13x 13x 11x nm
Albemarle Corporatio / ALB 22.60 -16% 103% 2,061 2,823 1.1x 9x 10x 9x 8x 2.6x
Westlake Chemical Co / WLK 14.53 -14% 56% 954 1,447 .4x 9x 8x 10x 18x .7x
Rogers Corporation / ROG 27.05 -11% 75% 487 439 1.1x 16x 21x 15x 14x 1.4x
PolyOne Corporation / POL 3.21 -4% 167% 297 728 .3x 26x 27x 9x 6x 1.2x
Zoltek Companies, In / ZOLT 8.21 -14% 466% 282 257 1.4x 11x nm 13x 8x .8x
Average (equal-weighted) .9x 13x 14x 11x 11x 8.6x
Median 1.0x 11x 10x 9x 9x 1.4x
Basic Materials: Chemicals (Plastics and Rubbers) – Operating Performance

Est.
DD 32,979 9% 3% 550 28% 13% 10% 6% 23% 27% 9% .9x
DOW 60,842 18% 10% 1,323 11% 5% 4% 7% 13% 13% 5% 1.2x
ROH 9,888 15% 7% 629 26% 9% 6% 10% 20% 19% 6% 1.0x
EMN 7,117 6% 1% 678 18% 9% 6% 7% 19% 23% 8% 1.2x
HPC 2,317 11% 2% 497 32% 11% 7% na 30% 31% 6% .8x
ALB 2,549 10% 16% 617 25% 12% 9% 15% 20% 19% 8% .9x
WLK 3,946 38% 17% 1,861 6% 4% 3% na 9% 8% 4% 1.5x
ROG 411 -7% 5% 195 32% 7% 7% na 11% 9% 7% .9x
POL 2,828 9% 5% 589 11% 1% 1% na 4% 3% 1% 1.6x
ZOLT 178 36% 64% 140 29% 13% 6% 39% 8% 3% 2% .4x
Median 10% 6% 603 25% 9% 6% 8% 16% 16% 6% 1.0x
Basic Materials: Fabricated Plastic & Rubber – Valuation

Carlisle Companies, / CSL 19.99 -10% 104% 1,220 1,692 .6x 6x 6x 8x 8x 2.3x
Ashland Inc. / ASH 17.28 -3% 239% 1,087 267 .0x 1x 6x 8x 8x .4x
Tredegar Corporation / TG 14.16 -24% 48% 480 462 .5x 9x 16x 17x 16x 1.4x
A. Schulman, Inc. / SHLM 16.01 -15% 59% 418 436 .2x 10x 24x 11x 10x 1.0x
Trex Company, Inc. / TWP 12.53 -57% 73% 192 282 .9x nm nm 13x 12x 1.7x
Spartech Corporation / SEH 5.92 -27% 178% 181 497 .4x 18x 6x 17x 8x 46.4x
Average (market value-weighted) .4x 6x 9x 10x 10x 3.6x
Basic Materials: Fabricated Plastic & Rubber – Operating Performance

Est.
CSL 3,023 14% 13% 233 20% 9% 3% 12% 23% 8% 4% 1.4x
ASH 8,435 8% 5% 721 16% 3% 2% 10% 11% 5% 3% 1.5x
TG 912 -3% 8% 351 15% 6% 4% na 15% 7% 5% 1.2x
SHLM 1,984 11% 11% 902 12% 2% 1% na 8% 4% 2% 2.1x
TWP 330 0% 9% 472 24% -1% -5% 16% nm -16% -5% 1.0x
SEH 1,419 -3% 9% 394 9% 2% 0% 12% 6% 2% 1% 1.3x
Median 4% 9% 433 16% 2% 1% 12% 11% 5% 2% 1.4x
Basic Materials: Gold & Silver – Valuation

Anglo American plc ( / AAUK 9.53 -8% 282% 25,092 29,842 1.1x 3x 5x 3x 4x 1.2x
Newmont Mining Corpo / NEM 24.23 -12% 138% 11,008 13,625 2.2x 34x nm 10x 10x 1.4x
Gold Fields Limited / GFI 5.98 -22% 202% 3,906 4,884 1.5x 7x 7x 11x 8x .8x
Compania de Minas Bu / BVN 13.03 -31% 229% 3,324 3,218 3.6x nm 15x 7x 6x 2.3x
Lihir Gold Limited ( / LIHR 12.03 -32% 240% 2,632 2,570 4.7x 13x nm 17x 9x .9x
Harmony Gold Mining / HMY 6.24 -12% 133% 2,516 2,988 2.4x 61x nm 13x 9x .9x
Randgold Resources L / GOLD 27.85 -20% 102% 2,128 1,870 4.9x 27x 46x 33x 21x 3.3x
Royal Gold, Inc. / RGLD 30.88 -26% 33% 1,048 857 12.3x 25x 51x 32x 27x 2.2x
Coeur d'Alene Mines / CDE 0.52 -21% 896% 287 645 3.1x 64x 4x nm 7x nm
Hecla Mining Company / HL 1.33 -26% 888% 225 343 1.6x nm 3x nm nm .3x
Corriente Resources / ETQ 2.56 -20% 131% 193 121 nm nm nm nm nm 1.3x
Western Goldfields I / WGW 1.04 -66% 298% 142 191 2.7x 30x nm 9x 4x 1.9x
Basic Materials: Gold & Silver – Operating Performance

Est.
AAUK 27,117 -54% -1% 271 na 35% 55% 10% 36% 63% 32% .6x
NEM 6,267 13% 9% 418 51% 6% 9% 17% 4% 7% 3% .4x
GFI 3,198 -32% 19% 62 24% 22% 17% 4% 11% 11% 7% .4x
BVN 888 -26% -11% 357 67% -5% 31% na nm 20% 13% .4x
LIHR 550 3% 29% 266 43% 36% 9% 28% 12% 3% 2% .2x
HMY 1,269 4% 4% 31 12% 4% -8% na 1% -3% -2% .3x
GOLD 385 32% 62% 204 58% 18% 12% 54% 23% 7% 6% .5x
RGLD 70 37% 38% 4,369 95% 49% 28% 5% 13% 4% 4% .1x
CDE 207 -7% 26% 198 46% 5% 5% na 1% 1% 0% .1x
HL 221 17% 19% 254 23% -1% -14% 5% nm -6% -4% .3x
ETQ na na na na na na na na nm 2% 2% na
WGW 72 na -25% 369 35% 9% -1% na 6% -1% 0% .3x
Median 3% 19% 266 44% 9% 9% 10% 11% 3% 3% .3x
Basic Materials: Metal Mining – Valuation

BHP Billiton Limited / BHP 32.64 -12% 193% 90,825 97,229 1.6x 4x 6x 5x 5x 2.4x
Vale (ADR) / RIO 11.47 -13% 285% 60,543 74,198 1.9x 5x 8x 4x 5x 1.6x
Rio Tinto plc (ADR) / RTP 149.80 -13% 273% 54,488 96,684 2.2x 7x 7x 5x 7x 6.6x
Southern Copper Corp / PCU 13.14 -31% 219% 11,445 11,481 2.0x 4x 5x 6x 7x 3.0x
Freeport-McMoRan Cop / FCX 24.34 -12% 423% 9,192 19,174 1.0x 3x 3x 4x 8x 1.0x
Alcoa Inc. / AA 10.84 -17% 313% 8,675 18,028 .6x 7x 4x 7x 11x .9x
Aluminum Corp. of Ch / ACH 10.75 -33% 475% 5,815 7,973 .7x 4x 4x 7x 10x .7x
Sterlite Industries / SLT 4.44 -30% 552% 3,146 3,273 .7x 2x 3x x x .7x
Cliffs Natural Resou / CLF 20.27 -13% 502% 2,301 2,336 .7x 3x 8x 3x 2x 1.5x
Titanium Metals Corp / TIE 7.67 -17% 294% 1,389 1,369 1.2x 6x 5x 9x 9x 1.2x
Alumina Limited (ADR / AWC 3.42 0% 642% 1,248 1,959 nm nm 3x 6x 5x 1.2x
Olin Corporation / OLN 16.21 -23% 87% 1,246 1,296 .7x 6x 12x 7x 7x 2.6x
Stillwater Mining Co / SWC 2.41 -4% 843% 225 307 .4x 14x nm 11x 60x .4x
Brush Engineered Mat / BW 9.75 -5% 382% 198 249 .3x 5x 4x 6x 7x .6x
HORSEHEAD / ZINC 3.07 -26% 551% 108 28 .1x x 1x 3x nm .4x
Basic Materials: Metal Mining – Operating Performance

Est.
BHP 59,473 1% 31% 1,425 40% 41% 48% na 58% 91% 45% .9x
RIO 38,334 -1% 59% 672 51% 43% 23% 0% 28% 26% 11% .5x
RTP 44,837 23% 32% 868 na 33% 40% na 36% 75% 26% .6x
PCU 5,696 -12% 25% 469 60% 52% 42% na 68% 61% 37% .9x
FCX 19,913 38% 93% 784 46% 34% 15% 12% 25% 19% 7% .5x
AA 29,616 -5% 11% 277 19% 9% 6% 17% 14% 11% 4% .7x
ACH 11,163 20% 33% 118 25% 20% 33% 14% 27% 57% 33% 1.0x
SLT 5,030 -18% 55% 392 30% 26% 16% na 44% 19% 11% .7x
CLF 3,475 70% 24% 656 30% 27% 16% na 44% 40% 16% .9x
TIE 1,185 -9% 37% 468 27% 20% 19% 10% 23% 20% 16% .8x
AWC 1 -81% -32% 0 na <-99% >99% na >99% 43% 28% .0x
OLN 1,735 55% -14% 482 21% 13% 7% 4% 32% 18% 7% 1.0x
SWC 789 22% 11% 486 17% 3% 3% na 4% 4% 3% 1.0x
BW 954 3% 24% 434 17% 5% 4% na 12% 9% 6% 1.6x
ZINC 473 -18% 36% 447 23% 17% 11% na 43% 19% 15% 1.4x
Median 1% 31% 469 27% 23% 16% 11% 30% 20% 15% .9x
Basic Materials: Containers and Packaging – Valuation

Owens-Illinois, Inc. / OI 20.16 -19% 201% 3,367 6,380 .8x 6x 11x 5x 5x 14.8x
Avery Dennison Corpo / AVY 30.63 -6% 80% 3,256 5,441 .8x 12x 10x 9x 9x Nm
Pactiv Corporation / PTV 24.53 -23% 166% 3,223 4,611 1.3x 11x 13x 14x 12x Nm
Ball Corporation / BLL 32.77 -16% 71% 3,100 5,645 .7x 10x 12x 9x 8x Nm
Crown Holdings, Inc. / CCK 16.31 -6% 81% 2,628 5,829 .7x 9x 5x 10x 8x Nm
Sealed Air Corp. / SEE 15.99 -8% 77% 2,524 3,911 .8x 9x 8x 12x 10x Nm
Bemis Company, Inc. / BMS 24.18 -15% 23% 2,410 3,088 .8x 10x 14x 14x 13x 2.9x
MeadWestvaco Corp. / MWV 12.23 -9% 183% 2,089 3,975 .6x 8x 8x 15x 17x .9x
AptarGroup, Inc. / ATR 29.88 -39% 55% 2,017 2,116 1.0x 9x 15x 14x 13x 2.2x
Owens Corning / OC 13.74 -4% 108% 1,762 3,776 .6x 28x 65x 11x 13x 2.3x
Silgan Holdings Inc. / SLGN 41.73 -6% 40% 1,584 2,597 .8x 10x 13x 12x 11x 6.9x
Greif, Inc. / GEF 32.53 -9% 126% 1,518 2,187 .6x 6x 10x 8x 7x 3.7x
Packaging Corporatio / PKG 13.36 -4% 132% 1,368 1,877 .8x 7x 8x 10x 10x 2.0x
Mobile Mini, Inc. / MINI 13.25 -5% 97% 462 1,552 4.1x 15x 11x 9x 8x Nm
EnPro Industries, In / NPO 17.56 -3% 149% 356 467 .4x 6x 10x 4x 4x 2.9x
Myers Industries, In / MYE 7.01 -7% 210% 247 435 .5x 13x 7x 12x 9x 2.0x
Basic Materials: Containers and Packaging – Operating Performance

Est.
OI 8,174 11% 7% 341 23% 12% 6% 16% 30% 19% 5% .8x
AVY 6,913 15% 6% 185 26% 7% 4% 13% 21% 14% 5% 1.1x
PTV 3,560 14% 9% 274 26% 12% 6% 10% 28% 16% 5% .9x
BLL 7,585 5% 11% 489 16% 8% 4% 10% 23% 22% 5% 1.2x
CCK 8,299 10% 7% 381 14% 8% 7% 11% 34% >99% 8% 1.1x
SEE 4,925 8% 7% 278 26% 8% 4% 11% 35% 10% 4% .9x
BMS 3,824 5% 9% 244 17% 8% 5% 9% 18% 11% 5% 1.2x
MWV 6,890 7% 5% 287 17% 7% 4% 11% 10% 7% 3% .7x
ATR 2,100 15% 13% 250 32% 11% 8% 11% 22% 13% 8% 1.0x
OC 5,860 19% -4% 293 14% 2% -14% 12% 4% -22% -11% .7x
SLGN 3,063 6% 7% 365 14% 9% 4% 8% 18% 24% 5% 1.3x
GEF 3,681 16% 15% 357 18% 10% 6% 18% 28% 22% 8% 1.3x
PKG 2,395 5% 7% 287 21% 11% 6% na 18% 20% 7% 1.2x
MINI 376 21% 24% 179 93% 28% 10% 17% 8% 8% 3% .3x
NPO 1,154 16% 8% 246 35% 7% 4% na 26% 11% 3% .8x
MYE 911 4% 13% 199 23% 4% 4% 13% 9% 10% 5% 1.3x
Median 11% 7% 283 22% 8% 4% 11% 22% 13% 5% 1.1x
Basic Materials: Forestry & Wood Products – Valuation

Weyerhaeuser Company / WY 32.78 -10% 138% 6,926 8,952 1.0x nm nm nm nm 1.0x
Rayonier Inc. / RYN 30.61 -13% 62% 2,413 3,152 2.7x 15x 14x 15x 17x 2.4x
Universal Forest Pro / UFPI 18.89 -7% 103% 360 496 .2x 63x 17x 59x 39x 1.0x
Louisiana-Pacific Co / LPX 1.81 -12% 807% 187 551 .4x nm nm nm nm .1x
Median .7x 39x 16x 37x 28x 1.0x
Basic Materials: Forestry & Wood Products – Operating Performance

Est.
WY 8,877 -33% -20% 234 17% -14% 0% 9% nm 0% 0% .4x
RYN 1,169 -4% 2% 584 23% 18% 16% 7% 13% 18% 9% .6x
UFPI 2,321 -7% 1% 276 11% 0% 0% 11% 1% -2% -1% 2.4x
LPX 1,503 -11% -15% 295 -1% -24% -19% 6% nm -17% -10% .5x
Median -9% -7% 285 14% -7% 0% 8% 7% -1% -1% .6x
Basic Materials: Misc. Fabricated Products – Valuation

Companhia Siderurgic / SID 9.77 -9% 437% 7,518 9,639 5.6x 20x 4x 5x 4x 10.1x
Parker-Hannifin Corp / PH 35.95 -9% 142% 5,793 7,742 .6x 5x 7x 7x 7x 5.1x
Fastenal Company / FAST 33.32 -5% 70% 4,949 4,897 2.1x 11x 21x 17x 16x 4.4x
Allegheny Technologi / ATI 21.20 -13% 365% 2,041 2,285 .4x 2x 3x 4x 5x .9x
Reliance Steel & Alu / RS 19.00 -13% 313% 1,393 3,626 .4x 4x 4x 3x 4x 2.9x
Timken Company, The / TKR 13.80 -7% 181% 1,332 1,977 .3x 4x 6x 4x 6x .8x
Matthews Internation / MATW 40.63 -13% 44% 1,256 1,472 1.8x 11x 16x 15x 13x 70.5x
Simpson Manufacturin / SSD 22.57 -16% 42% 1,098 934 1.2x 11x 16x 17x 16x 1.7x
Kaydon Corporation / KDN 27.54 -17% 124% 943 681 1.3x 6x 11x 13x 13x 1.7x
Actuant Corporation / ATU 16.61 -18% 124% 933 1,385 .8x 7x 9x 7x 7x nm
Crane Co. / CR 14.15 -22% 227% 847 968 .4x 3x nm 5x 5x 19.8x
Watts Water Technolo / WTS 22.00 -8% 50% 804 1,092 .7x 9x 11x 12x 12x 3.2x
Mueller Industries, / MLI 20.62 -21% 78% 766 777 .3x 4x 7x 8x 8x 1.2x
Mueller Water Produc / MWA 5.42 -10% 135% 625 1,537 .8x 11x 15x 16x 11x nm
Century Aluminum Com / CENX 12.12 -32% 564% 595 869 .4x 2x nm 2x 6x .4x
RBC Bearings Incorpo / ROLL 19.84 -6% 122% 432 474 1.3x 7x 11x 10x 9x 2.2x
Encore Wire Corporat / WIRE 16.58 -16% 52% 382 374 .3x 11x 13x 14x 14x 1.0x
CIRCOR International / CIR 22.35 -2% 198% 378 336 .4x 4x 10x 6x 6x 1.5x
L.B. Foster Company / FSTR 27.46 -27% 118% 282 199 .4x 1x 3x 12x 11x 1.3x
RTI International Me / RTI 11.01 -8% 592% 253 206 .3x 2x 3x 4x 5x .5x
Ladish Co., Inc. / LDSH 15.15 -28% 208% 241 351 .8x 7x 7x 7x 6x 1.2x
Sun Hydraulics Corpo / SNHY 13.56 -6% 217% 226 193 1.0x 5x 10x 8x 12x 2.1x
A.M. Castle & Co. / CAS 8.74 -8% 351% 198 331 .2x 5x 4x 5x 8x .8x
Olympic Steel, Inc. / ZEUS 16.90 -7% 363% 184 271 .2x 2x 7x 3x 6x .6x
Basic Materials: Misc. Fabricated Products – Operating Performance

Est.
SID 1,716 -44% 21% 120 44% 29% 36% na 19% 63% 14% .4x
PH 12,423 13% 15% 200 23% 12% 8% 13% 42% 20% 10% 1.3x
FAST 2,315 16% 19% 173 52% 19% 12% 17% 43% 26% 22% 1.9x
ATI 5,471 -2% 26% 564 22% 17% 11% 15% 39% 26% 14% 1.3x
RS 8,287 16% 35% 895 26% 11% 6% na 34% 22% 11% 1.8x
TKR 5,794 13% 7% 230 23% 10% 6% 14% 19% 17% 8% 1.3x
MATW 819 9% 9% 200 na 16% 10% na 53% 18% 10% 1.0x
SSD 782 -5% 5% 285 37% 11% 7% 14% 18% 7% 6% .9x
KDN 514 20% 15% 242 38% 22% 15% 13% 39% 14% 9% .6x
ATU 1,664 14% 20% 222 34% 13% 7% 15% 78% 21% 8% 1.0x
CR 2,681 6% 12% 223 32% 10% 7% 10% 46% 20% 7% .9x
WTS 1,458 7% 19% 187 34% 9% 5% 12% 20% 8% 4% .8x
MLI 2,745 5% 25% 563 13% 6% 4% na 25% 14% 7% 1.9x
MWA 1,859 1% 3% 273 24% 8% 2% 2% 15% 3% 1% .6x
CENX 2,001 12% 19% 1,053 22% 19% -16% 10% 24% -43% -11% .7x
ROLL 359 14% 11% 518 34% 18% 12% 13% 28% 18% 13% 1.1x
WIRE 1,183 2% 25% 1,552 8% 3% 2% 8% 9% 6% 4% 2.2x
CIR 766 16% 20% 295 32% 12% 8% 17% 38% 14% 9% 1.1x
FSTR 483 -5% 23% 737 17% 35% 22% na >99% 50% 33% 1.4x
RTI 625 3% 44% 391 31% 19% 12% 5% 25% 13% 9% .7x
LDSH 465 14% 27% 366 14% 10% 7% 9% 15% 14% 8% 1.1x
SNHY 187 16% 21% 271 34% 22% 15% 23% 55% 28% 23% 1.5x
CAS 1,502 6% 23% 772 15% 4% 3% 2% 19% 11% 6% 1.9x
ZEUS 1,210 19% 5% 1,034 25% 9% 6% na 33% 24% 15% 2.6x
Median 10% 19% 290 26% 12% 7% 13% 28% 17% 9% 1.1x
Basic Materials: Iron & Steel – Valuation

ArcelorMittal (ADR) / MT 21.31 -11% 392% 30,294 62,809 .5x 3x 3x 2x 3x .7x
POSCO (ADR) / PKX 53.31 -25% 226% 16,646 15,841 .8x 4x 6x 4x 6x 1.2x
Nucor Corporation / NUE 32.73 -20% 155% 10,276 11,878 .5x 3x 7x 5x 6x 1.9x
Gerdau SA (ADR) / GGB 6.07 -24% 332% 8,622 20,204 1.0x 6x 5x 4x 4x nm
Kubota Corporation ( / KUB 28.06 -37% 55% 7,169 10,697 .9x 8x 10x 11x 11x 1.0x
United States Steel / X 29.75 -11% 559% 3,459 5,891 .2x 2x 4x 2x 3x .8x
Mechel OAO (ADR) / MTL 5.80 -35% 911% 2,414 5,540 .7x 3x 3x 1x 1x 2.4x
Steel Dynamics, Inc. / STLD 8.12 -16% 404% 1,475 4,329 .5x 4x 4x 3x 3x 4.4x
Ternium S.A. (ADR) / TX 6.64 -7% 593% 1,331 3,837 .5x 2x 7x 1x 3x .3x
Commercial Metals Co / CMC 9.81 -14% 306% 1,116 2,233 .2x 6x 5x 5x 4x .7x
AK Steel Holding Cor / AKS 8.72 -14% 738% 977 1,201 .2x 1x 3x 2x 3x .7x
Worthington Industri / WOR 11.30 -14% 131% 891 1,261 .4x 8x 9x 6x 7x 1.2x
Schnitzer Steel Indu / SCHN 25.22 -16% 370% 705 874 .2x 2x 3x 9x 6x 1.1x
Carpenter Technology / CRS 15.97 -8% 399% 704 632 .2x 1x 4x 5x 4x 1.0x
Grupo Simec S.A.B. d / SIM 4.33 -4% 327% 688 707 .3x 3x 5x 4x 5x .9x
Haynes International / HAYN 18.95 -15% 370% 227 242 .4x 2x 3x 4x 3x .7x
Basic Materials: Iron & Steel – Operating Performance

Est.
MT 130,840 30% 72% 401 96% 15% 11% 5% 24% 24% 10% .9x
PKX 18,788 -27% 10% 658 30% 23% 32% 6% 35% 49% 33% 1.0x
NUE 23,909 53% 13% 1,322 18% 15% 9% 7% 60% 31% 16% 1.9x
GGB 20,364 53% 32% 552 25% 16% 10% 9% 24% 46% 9% .9x
KUB 12,043 2% 6% 489 28% 10% 5% na 18% 9% 4% .8x
X 23,787 48% 7% 485 16% 11% 8% 11% 33% 31% 11% 1.4x
MTL 7,596 53% 23% 89 40% 23% 16% 5% 41% 35% 16% 1.0x
STLD 8,321 >99% 27% 1,401 18% 14% 8% 5% 40% 38% 12% 1.6x
TX 8,508 54% 53% 360 28% 20% 14% 11% 19% 24% 9% .7x
CMC 10,427 25% 19% 683 11% 4% 2% 7% 18% 14% 6% 2.6x
AKS 7,878 14% 10% 1,158 16% 11% 7% 10% 30% 45% 11% 1.6x
WOR 3,221 9% 0% 467 13% 5% 5% 15% 15% 19% 9% 1.7x
SCHN 3,642 42% 62% 993 17% 11% 7% 16% 51% 29% 18% 2.7x
CRS 2,817 48% 14% 828 23% 15% 13% na 44% 41% 20% 1.6x
SIM 2,194 -33% 60% 366 16% 10% 11% 10% 17% 20% 12% 1.1x
HAYN 637 24% 34% 588 24% 17% 10% na 25% 19% 11% 1.1x
Median 30% 21% 570 21% 14% 9% 9% 28% 30% 11% 1.3x
Basic Materials: Paper & Paper Products – Valuation

Kimberly-Clark Corpo / KMB 57.37 -12% 23% 23,737 30,465 1.6x 12x 14x 14x 13x 11.4x
International Paper / IP 12.52 -10% 178% 5,353 16,614 .7x 10x 4x 6x 9x 1.1x
Sonoco Products Comp / SON 23.45 -11% 53% 2,339 2,978 .7x 11x 11x 10x 10x 4.5x
Sappi Limited (ADR) / SPP 5.62 -18% 175% 1,288 3,955 .7x 11x 9x 8x 6x .8x
Potlatch Corporation / PCH 26.27 -4% 109% 1,038 1,461 .9x 15x 11x 12x 14x 1.8x
Aracruz Celulose SA / ARA 10.00 -16% 822% 1,031 3,438 1.7x 7x 2x nm 3x .6x
Domtar Corp. (USA) / UFS 1.80 -8% 367% 887 2,933 .4x 13x 12x 6x 6x .3x
Wausau Paper Corp. / WPP 8.72 -25% 25% 426 576 .5x nm nm 291x 24x 1.7x
P.H. Glatfelter Comp / GLT 9.14 -17% 79% 414 712 .6x 4x 7x 9x 8x .8x
Albany International / AIN 13.23 -5% 198% 395 847 .8x 22x 22x 6x 8x 1.0x
Schweitzer-Mauduit I / SWM 14.17 -8% 103% 218 377 .5x 15x 64x 16x 9x .7x
Smurfit-Stone Contai / SSCC 0.79 -8% 1375% 202 3,866 .5x 20x nm nm nm nm
Buckeye Technologies / BKI 4.49 -14% 242% 174 548 .6x 6x 4x 5x 5x .7x
KapStone Paper and P / KPPC 4.74 -9% 80% 135 572 1.4x 11x 6x 4x 4x 1.1x
Neenah Paper, Inc. / NP 7.45 -8% 339% 109 474 .6x 8x 3x 6x 5x 1.6x
Basic Materials: Paper & Paper Products – Operating Performance

Est.
KMB 19,575 10% 7% 369 30% 13% 9% 8% 27% 32% 9% 1.0x
IP 24,124 13% 2% 468 26% 7% 3% 5% 10% 9% 3% .9x
SON 4,248 7% 9% 228 18% 6% 4% 8% 20% 13% 6% 1.3x
SPP 5,766 11% 4% 382 13% 6% 3% 12% 9% 11% 3% .9x
PCH 1,707 8% 7% 474 16% 6% 4% 5% 8% 12% 5% 1.1x
ARA 2,042 13% 17% 819 35% 25% -13% 2% 14% -12% -5% .4x
UFS 6,582 27% 11% 506 19% 3% 1% 3% 3% 2% 1% .9x
WPP 1,221 -1% 6% 436 4% -5% -3% na nm -16% -6% 1.7x
GLT 1,263 11% 28% 328 14% 13% 8% na 24% 19% 7% 1.0x
AIN 1,129 10% 6% 185 34% 3% 1% 33% 5% 2% 1% .7x
SWM 780 13% 3% 225 13% 3% 1% na 5% 3% 1% 1.0x
SSCC 7,350 -1% 3% 324 11% 3% 1% 6% 5% 3% 1% 1.0x
BKI 849 10% 5% 566 17% 11% 5% 10% 14% 10% 4% .9x
KPPC 408 >99% na 575 38% 13% 6% 5% 14% 17% 7% 1.1x
NP 842 12% 23% 343 14% 7% -13% na 10% -48% -13% 1.0x
Median 10% 6% 382 17% 6% 3% 6% 10% 9% 3% 1.0x
Capital Goods: Aerospace and Defense – Valuation

Boeing Company, The / BA 41.04 -5% 131% 30,076 32,906 .5x 6x 8x 9x 6x 10.1x
Lockheed Martin Corp / LMT 72.26 -5% 66% 28,948 30,219 .7x 6x 10x 9x 9x nm
General Dynamics Cor / GD 55.51 -7% 71% 21,641 21,163 .7x 6x 11x 9x 8x 10.4x
Honeywell Internatio / HON 27.35 -7% 130% 19,864 26,765 .7x 6x 9x 7x 7x nm
Northrop Grumman Cor / NOC 40.34 -8% 107% 13,189 16,117 .5x 6x 8x 8x 7x nm
Rockwell Collins, In / COL 33.07 -8% 125% 5,272 5,612 1.2x 6x 8x 8x 7x 8.8x
FLIR Systems, Inc. / FLIR 29.70 -20% 53% 4,126 4,130 4.1x 16x 33x 24x 19x 8.6x
Goodrich Corporation / GR 32.08 -12% 136% 3,949 5,342 .8x 5x 8x 6x 6x 4.5x
Embraer - Empr Bras / ERJ 14.00 -4% 250% 2,591 2,626 .4x 6x 5x 5x 4x 1.2x
Alliant Techsystems / ATK 76.85 -7% 55% 2,514 3,906 .9x 9x 12x 10x 9x nm
Elbit Systems Ltd. ( / ESLT 43.78 -6% 47% 1,843 1,886 .8x 10x 24x 14x 13x nm
Spirit AeroSystems H / SPR 11.47 -13% 216% 1,605 2,019 .5x 4x 5x 5x 5x 1.1x
Curtiss-Wright Corp. / CW 30.12 -5% 86% 1,355 1,797 1.0x 9x 13x 12x 11x 7.6x
TransDigm Group Inco / TDG 27.23 -6% 89% 1,318 2,486 3.6x 9x 15x 10x 9x nm
Orbital Sciences Cor / ORB 17.08 -9% 63% 1,005 808 .7x 10x 18x 17x 19x 2.4x
Esterline Technologi / ESL 31.23 -14% 101% 926 1,170 .8x 8x 9x 9x 8x 4.8x
BE Aerospace, Inc. / BEAV 8.29 -10% 552% 825 1,834 .9x 6x 5x 4x 4x 4.8x
HEICO Corporation / HEI 30.03 -12% 90% 793 829 1.5x 8x 21x 17x 15x 14.1x
Barnes Group Inc. / B 11.86 -9% 191% 645 1,093 .7x 6x 7x 6x 6x 19.4x
AeroVironment, Inc. / AVAV 29.84 -38% 30% 625 512 2.3x 17x 30x 26x 22x 3.4x
Ceradyne, Inc. / CRDN 22.85 -30% 135% 600 509 .7x 3x 4x 6x 7x 1.2x
Triumph Group, Inc. / TGI 34.50 -17% 142% 572 953 .8x 6x 8x 6x 6x 2.0x
AAR Corp. / AIR 14.43 -33% 173% 559 1,001 .7x 7x 8x 7x 6x 1.2x
Kaman Corporation / KAMN 21.57 -17% 82% 549 636 .5x 9x 15x 11x 9x 1.9x
ARGON ST, Inc. / STST 21.87 -31% 27% 472 465 1.4x 19x 34x 23x 19x 4.4x
Force Protection, In / FRPT 2.81 -63% 459% 192 113 .1x 2x 26x 6x 13x .7x
Herley Industries, I / HRLY 12.80 -26% 59% 173 167 1.1x nm nm 17x 21x 1.7x
Ducommun Incorporate / DCO 15.63 -19% 165% 165 169 .4x 5x 8x 7x 7x 1.3x
GenCorp Inc. / GY 2.62 -3% 373% 151 534 .7x 13x 4x 7x 4x nm
Kratos Defense & Sec / KTOS 1.38 -20% 71% 145 210 .8x 1052x nm nm 14x nm
LMI Aerospace, Inc. / LMIA 12.15 -7% 135% 140 167 .7x 5x 10x 7x 6x 2.6x
Hawk Corporation / HWK 13.46 -12% 90% 121 121 .4x 3x 18x 6x 7x 1.5x
Smith & Wesson Holdi / SWHC 2.54 -40% 346% 120 227 .8x 11x 12x 11x 7x 15.9x
Capital Goods: Aerospace and Defense – Operating Performance

Est.
BA 65,722 -1% 9% 413 19% 8% 6% 11% nm 43% 7% 1.1x
LMT 42,440 1% 6% 303 11% 12% 8% 11% >99% 33% 11% 1.5x
GD 28,963 10% 13% 338 17% 12% 8% 7% 99% 20% 9% 1.1x
HON 37,119 11% 11% 304 23% 11% 7% 10% 58% 29% 8% 1.0x
NOC 33,557 8% 3% 274 18% 8% 5% 13% 68% 10% 5% 1.0x
COL 4,769 8% 11% 238 na 20% 14% 14% 76% 45% 17% 1.2x
FLIR 1,017 41% 17% 584 56% 25% 22% 20% 58% 31% 20% .9x
GR 7,034 13% 11% 301 30% 15% 9% 15% 36% 24% 8% .9x
ERJ 6,392 44% 16% 269 22% 7% 7% 12% 18% 22% 6% .8x
ATK 4,401 13% 14% 259 21% 10% 5% 12% 41% 31% 8% 1.4x
ESLT 2,379 39% 28% 236 28% 8% 5% 10% 54% 22% 4% .8x
SPR 4,106 10% na 314 17% 12% 8% 11% 23% 23% 9% 1.1x
CW 1,820 24% 19% 243 33% 11% 6% 14% 30% 12% 6% .9x
TDG 693 28% 25% 330 54% 41% 17% 28% >99% 22% 6% .3x
ORB 1,157 19% 17% 373 18% 7% 6% 18% 48% 15% 8% 1.4x
ESL 1,499 29% 27% 160 32% 10% 7% 21% 28% 9% 5% .7x
BEAV 2,047 33% 32% 325 34% 16% 10% 21% 35% 14% 9% .9x
HEI 566 18% 33% 259 36% 18% 8% 19% 50% 12% 7% .9x
B 1,468 4% 13% 245 38% 12% 8% 10% 35% 16% 7% .9x
AVAV 220 15% 27% 406 37% 14% 10% 19% 33% 13% 12% 1.1x
CRDN 733 -2% 52% 292 40% 25% 16% 7% 37% 20% 15% .9x
TGI 1,240 18% 19% 223 29% 12% 7% 17% 21% 12% 6% .9x
AIR 1,439 28% 23% 266 19% 9% 5% 14% 18% 14% 6% 1.1x
KAMN 1,210 14% 3% 334 27% 6% 4% 15% 17% 13% 8% 1.7x
STST 330 25% 30% 340 17% 7% 5% 20% 27% 6% 5% 1.0x
FRPT 1,528 >99% >99% 1,175 12% 4% 3% 18% 39% 18% 9% 3.3x
HRLY 153 -7% 0% 169 22% -14% -11% 4% nm -9% -6% .6x
DCO 396 10% 18% 212 20% 9% 6% 11% 25% 10% 7% 1.2x
GY 748 6% 15% 230 12% 6% 3% na 31% -55% 2% .7x
KTOS 271 40% -13% 181 19% 0% -5% na 1% -7% -4% .8x
LMIA 242 68% 25% 181 26% 13% 8% 19% 39% 16% 11% 1.4x
HWK 269 26% 12% 234 28% 14% 11% na 35% 39% 13% 1.2x
SWHC 300 14% 33% 206 30% 7% 2% 22% 17% 8% 2% 1.0x
Median 14% 17% 269 25% 11% 7% 14% 35% 16% 7% 1.0x
Capital Goods: Construction (Raw Materials) – Valuation

Cemex SAB de CV (ADR / CX 5.14 -12% 534% 3,997 14,897 .8x 7x 2x 3x 3x .2x
Martin Marietta Mate / MLM 79.46 -21% 80% 3,292 4,640 2.1x 13x 13x 18x 18x 7.4x
James Hardie Industr / JHX 14.90 -13% 112% 1,286 1,439 1.0x nm nm 21x 33x nm
USG Corporation / USG 9.12 -8% 341% 904 2,209 .5x nm 12x nm nm .5x
Eagle Materials, Inc / EXP 18.75 -31% 120% 817 1,200 1.8x 19x 9x 20x 17x 3.1x
Texas Industries, In / TXI 26.91 -18% 199% 741 1,162 1.1x 9x 9x 16x 14x 1.0x
AMCOL International / ACO 18.21 -8% 134% 554 808 .9x 10x 10x 10x 9x 2.2x
Median 1.0x 10x 9x 17x 16x 1.6x
Capital Goods: Construction (Raw Materials) – Operating Performance

Est.
CX 19,165 -44% 35% 299 32% 12% 7% 13% 12% 10% 3% .5x
MLM 2,179 0% 9% 415 23% 17% 10% 9% 18% 23% 8% .8x
JHX 1,409 -9% 7% 489 35% -6% -8% na nm >99% -5% .6x
USG 4,827 -9% 5% 326 5% -4% -3% na nm -7% -3% 1.0x
EXP 674 -20% 7% 421 12% 9% 7% na 9% 12% 4% .6x
TXI 1,022 3% 7% 409 18% 12% 8% 29% 11% 10% 6% .7x
ACO 873 24% 17% 433 25% 9% 6% na 20% 15% 8% 1.2x
Median -9% 7% 415 23% 9% 7% 13% 12% 11% 4% .7x
Capital Goods: Construction (Supplies and Fixtures) – Valuation

Tenaris S.A. (ADR) / TS 22.07 -31% 242% 13,027 14,515 1.3x 5x 7x 5x 6x 3.0x
Precision Castparts / PCP 55.04 -14% 181% 7,674 7,585 1.1x 5x 8x 7x 6x 3.8x
Plum Creek Timber Co / PCL 33.88 -11% 77% 5,651 8,078 4.9x 21x 21x 33x 31x 3.2x
Valmont Industries, / VMI 50.30 -18% 140% 1,315 1,543 .9x 7x 14x 10x 9x 3.7x
Armstrong World Indu / AWI 17.11 -3% 159% 976 1,169 .3x 6x 6x 7x 11x .6x
Minerals Technologie / MTX 44.95 -4% 63% 842 793 .7x 7x nm 12x 12x 1.2x
Beacon Roofing Suppl / BECN 11.25 -40% 67% 498 871 .5x 12x 20x 16x 13x nm
Griffon Corporation / GFF 6.72 -21% 116% 397 585 .4x 26x 9x 336x 10x 1.4x
Ameron International / AMN 41.72 -20% 232% 383 296 .4x 5x 6x 7x 7x .8x
Gibraltar Industries / ROCK 12.21 -21% 102% 366 767 .6x 8x 12x 8x 9x 6.8x
Northwest Pipe Compa / NWPX 29.48 -36% 121% 271 386 .9x 7x 13x 9x 9x 1.0x
Drew Industries, Inc / DW 11.51 -11% 182% 247 255 .4x 6x 6x 12x 13x 1.4x
American Woodmark Co / AMWD 16.35 -13% 98% 229 196 .3x nm 56x nm 55x 1.1x
Apogee Enterprises, / APOG 7.77 -5% 235% 222 280 .3x 4x 5x 5x 5x 1.0x
Dynamic Materials Co / BOOM 15.47 -20% 329% 196 248 1.1x 6x 8x 8x 7x 12.2x
Titan Machinery Inc. / TITN 10.85 -15% 218% 191 227 .4x 11x 16x 12x 10x 1.3x
Gulf Island Fabricat / GIFI 13.39 -5% 293% 191 186 .4x 3x 6x 5x 5x .8x
General Steel Holdin / GSI 3.97 -47% 320% 143 465 .3x 20x 6x 18x 3x 2.8x
Insteel Industries, / IIIN 7.41 -4% 172% 130 103 .3x 2x 3x 7x 6x .8x
Bway Holding Company / BWY 5.10 0% 165% 111 502 .5x 10x nm 7x 6x nm
Capital Goods: Construction (Supplies and Fixtures) – Operating Performance

Est.
TS 11,382 15% 39% 487 43% 28% 23% 10% 50% 33% 16% .7x
PCP 7,138 14% 33% 334 28% 23% 15% 17% 78% 28% 18% 1.2x
PCL 1,657 7% 3% 1,841 31% 23% 15% 8% 9% 14% 6% .4x
VMI 1,799 25% 13% 298 27% 12% 7% 14% 37% 23% 11% 1.5x
AWI 3,537 1% 3% 288 23% 6% 4% 15% 13% 6% 3% .8x
MTX 1,147 8% 7% 424 21% 9% 7% 12% 15% 10% 7% 1.0x
BECN 1,711 8% 36% 684 23% 4% 2% 18% 23% 8% 3% 1.8x
GFF 1,312 -13% 5% 248 22% 2% -2% na 4% -5% -3% 1.4x
AMN 669 13% 16% 257 23% 8% 9% 14% 15% 14% 9% .9x
ROCK 1,391 9% 16% 352 19% 7% 3% 9% 18% 8% 3% 1.1x
NWPX 428 12% 10% 339 20% 12% 7% 14% 14% 11% 6% .9x
DW 572 -15% 8% 163 23% 8% 6% 14% 26% 14% 10% 1.6x
AMWD 576 -18% -8% 132 16% -1% 0% 7% nm 0% 0% 1.8x
APOG 938 12% 14% 172 21% 7% 5% 14% 28% 17% 9% 1.7x
BOOM 229 57% 45% 614 31% 18% 11% 13% 58% 23% 10% .9x
TITN 555 69% 39% 775 17% 4% 2% 23% 13% 12% 4% 2.2x
GIFI 435 -3% 40% 219 15% 13% 9% 14% 22% 15% 11% 1.3x
GSI 1,358 >99% >99% 1,087 4% 2% 1% 8% 7% 18% 2% 1.9x
IIIN 354 19% 5% 633 25% 19% 12% na 51% 28% 22% 1.7x
BWY 988 3% 16% 333 13% 5% 0% 25% 21% 2% 1% 1.2x
Median 9% 14% 336 23% 8% 7% 14% 21% 14% 6% 1.3x
Capital Goods: Construction and Agricultural Machinery – Valuation

Caterpillar Inc. / CAT 36.96 -14% 133% 22,296 54,322 1.1x 10x 7x 6x 7x 3.2x
Deere & Company / DE 33.79 -16% 181% 14,429 34,173 1.3x 8x 8x 7x 6x 2.4x
CNH Global N.V. (ADR / CNH 14.95 -26% 368% 3,549 13,306 .7x 7x 6x 4x 4x 1.0x
Joy Global Inc. / JOYG 25.18 -24% 257% 2,714 2,972 1.0x 6x 10x 7x 6x 4.7x
AGCO Corporation / AG 27.60 -20% 161% 2,532 2,767 .3x 5x 11x 7x 6x 1.9x
Bucyrus Internationa / BUCY 25.18 -32% 216% 1,885 2,339 1.0x 7x 13x 8x 6x 5.0x
Kennametal Inc. / KMT 17.61 -14% 137% 1,288 1,700 .6x 7x 8x 7x 7x 1.9x
Manitowoc Company, I / MTW 6.92 -1% 644% 902 974 .2x 2x 3x 2x 2x 1.0x
Lufkin Industries, I / LUFK 45.28 -13% 110% 673 562 .8x 5x 9x 8x 7x 1.6x
Rofin-Sinar Technolo / RSTI 18.64 -2% 162% 538 488 .8x 5x 9x 10x 9x 1.3x
Lindsay Corporation / LNN 42.90 -18% 206% 526 507 1.1x 8x 13x 12x 10x 3.7x
KHD Humboldt Wedag I / KHD 9.10 -20% 293% 278 -118 nm nm 6x 4x 5x .8x
Columbus McKinnon Co / CMCO 11.16 -4% 203% 213 264 .4x 4x 6x 5x 5x 1.7x
Alamo Group, Inc. / ALG 11.38 -7% 133% 113 202 .4x 7x 9x 7x 8x .8x
Capital Goods: Construction and Agricultural Machinery – Operating Performance

Est.
CAT 50,545 15% 14% 451 24% 10% 8% 12% 21% 42% 7% .8x
DE 27,177 18% 8% 523 32% 16% 9% 9% 38% 34% 6% .7x
CNH 18,869 27% 9% 671 23% 10% 4% 12% 21% 13% 3% .7x
JOYG 3,123 25% 22% 339 30% 16% 10% 11% 57% 41% 13% 1.3x
AG 8,439 34% 9% 615 18% 7% 4% 12% 37% 17% 7% 1.7x
BUCY 2,332 84% 53% 385 27% 14% 10% 15% 33% 26% 10% 1.0x
KMT 2,759 12% 7% 197 34% 9% 6% 12% 20% 11% 6% 1.0x
MTW 4,405 29% 30% 421 23% 13% 9% 13% 70% 27% 13% 1.4x
LUFK 668 17% 19% 248 28% 18% 12% 14% 45% 20% 16% 1.3x
RSTI 575 20% 15% 351 43% 17% 14% 15% 35% 20% 14% 1.0x
LNN 475 69% 39% 383 26% 13% 8% 19% 46% 23% 13% 1.6x
KHD 638 11% 46% 501 18% 13% 11% 33% nm 21% 8% .7x
CMCO 630 8% 7% 195 30% 12% 6% 7% 41% 13% 7% 1.1x
ALG 561 15% 14% 239 19% 5% 3% na 12% 8% 4% 1.4x
Median 19% 15% 384 27% 13% 9% 12% 37% 21% 8% 1.1x
Capital Goods: Mobile Homes and RVs – Valuation

Thor Industries, Inc / THO 16.37 -10% 154% 908 718 .3x 5x 10x 19x 17x 1.7x
Cavco Industries, In / CVCO 27.12 -6% 53% 176 101 .8x 23x 29x 68x 42x 2.2x
Winnebago Industries / WGO 5.37 -21% 350% 156 135 .2x nm 54x nm 12x .9x
Median .3x 14x 29x 44x 17x 1.7x
Capital Goods: Mobile Homes and RVs – Operating Performance

Est.
THO 2,641 -8% 1% 374 12% 5% 4% 14% 42% 14% 9% 2.6x
CVCO 132 -11% -3% 131 13% 3% 3% 20% 8% 3% 2% .7x
WGO 604 -31% -15% 269 6% -2% 0% 14% nm 2% 1% 1.8x
Median -11% -3% 269 12% 3% 3% 14% 25% 3% 2% 1.8x
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Capital Goods: Construction Services – Valuation

CRH PLC (ADR) / CRH 22.42 -23% 87% 11,919 20,164 .8x 8x 7x 7x 8x 2.6x
Fluor Corporation (N / FLR 35.73 -19% 184% 6,485 4,418 .2x 4x 12x 10x 9x 2.4x
Vulcan Materials Com / VMC 53.25 -22% 88% 5,865 9,414 2.5x 16x 11x 27x 27x nm
Jacobs Engineering G / JEC 31.01 -9% 233% 3,796 3,299 .3x 5x 9x 8x 8x 2.8x
Quanta Services, Inc / PWR 14.12 -13% 151% 2,786 2,932 .8x 11x 16x 16x 11x 3.3x
Toll Brothers, Inc. / TOL 17.42 -11% 61% 2,768 3,529 1.0x nm 79x nm nm .8x
Foster Wheeler Ltd. / FWLT 19.94 -11% 330% 2,667 1,581 .2x 3x 7x 5x 5x 3.2x
Pulte Homes, Inc. / PHM 9.08 -24% 156% 2,338 4,522 .6x nm nm nm nm .7x
URS Corporation / URS 27.45 -27% 134% 2,292 3,234 .4x 9x 12x 10x 9x nm
NVR, Inc. / NVR 395.00 -14% 72% 2,154 1,483 .4x 4x 7x 14x 19x 1.6x
KBR, Inc. / KBR 13.11 -10% 239% 2,118 1,008 .1x 2x 12x 8x 7x 1.4x
D.R. Horton, Inc. / DHI 5.79 -25% 210% 1,833 4,650 .6x nm nm nm nm .5x
Ormat Technologies, / ORA 28.57 -24% 103% 1,295 1,604 5.0x 30x 41x 26x 19x 1.6x
M.D.C. Holdings, Inc / MDC 27.27 -8% 78% 1,269 1,137 .6x nm nm nm nm 1.1x
Granite Construction / GVA 31.65 -33% 33% 1,211 1,065 .4x 5x 12x 12x 13x 1.8x
Shaw Group Inc., The / SGR 13.71 -9% 405% 1,145 1,389 .2x 4x 8x 5x 5x 1.2x
Centex Corporation / CTX 8.98 -15% 237% 1,116 3,221 .5x nm nm nm nm .6x
Trinity Industries, / TRN 13.93 -5% 195% 1,108 2,685 .7x 5x 4x 4x 5x .8x
KB Home / KBH 12.01 -10% 141% 1,076 2,011 .5x nm nm nm nm 1.0x
Lennar Corporation / LEN 6.30 -16% 261% 1,012 2,493 .5x nm nm nm nm .3x
EMCOR Group, Inc. / EME 13.80 -7% 161% 904 763 .1x 3x 7x 5x 5x 5.4x
Chicago Bridge & Iro / CBI 7.93 -7% 701% 756 714 .1x nm 5x nm 3x nm
Perini Corporation / PCR 14.42 -19% 305% 726 387 .1x 2x 4x 4x 5x 2.1x
Empresas ICA SA (ADR / ICA 5.29 -30% 423% 659 1,261 .7x 10x nm 17x 11x .7x
Ryland Group, Inc., / RYL 14.43 -11% 162% 617 1,056 .5x nm nm nm nm .8x
MasTec, Inc. / MTZ 8.08 -17% 95% 549 722 .6x 10x 90x 9x 7x 4.4x
Gafisa SA (ADR) / GFA 8.05 -11% 522% 523 na nm nm 18x 5x 4x nm
Insituform Technolog / INSU 13.79 -33% 39% 385 362 .7x 12x 29x 20x 16x 1.7x
Pike Electric Corpor / PEC 10.23 -34% 88% 342 498 .8x 8x 17x 11x 13x 3.5x
Layne Christensen Co / LAYN 17.07 -10% 243% 329 361 .4x 5x 8x 7x 6x 1.0x
Meritage Homes Corpo / MTH 10.30 -32% 186% 316 827 .5x nm nm nm nm .5x
NCI Building Systems / NCS 14.74 -3% 178% 291 724 .4x 5x 5x 4x 5x nm
Comfort Systems USA, / FIX 7.10 0% 123% 280 193 .1x 3x 9x 6x 7x 1.6x
Great Lakes Dredge & / GLDD 4.22 -6% 132% 247 462 .8x 16x 30x 38x 16x 1.9x
Dycom Industries, In / DY 6.23 -10% 375% 246 377 .3x 9x 10x 7x 6x 1.7x
Hovnanian Enterprise / HOV 2.98 -17% 353% 229 2,294 .6x nm nm nm nm .4x
Matrix Service Compa / MTRX 8.75 -10% 225% 228 211 .3x 6x 11x 6x 5x 1.8x
Xinyuan Real Estate / XIN 2.38 -35% 656% 180 363 .9x 5x nm 4x 3x .4x
Palm Harbor Homes, I / PHHM 7.32 -45% 80% 167 414 .8x nm nm nm nm 1.4x
Standard Pacific Cor / SPF 1.66 -12% 313% 167 1,097 .5x nm nm nm nm .2x
M/I Homes, Inc. / MHO 10.50 -31% 148% 147 480 .6x nm nm nm nm .5x
Sterling Constructio / STRL 10.72 -28% 134% 141 122 .3x 4x 9x 8x 7x 1.5x
Capital Goods: Construction Services – Operating Performance

Est.
CRH 26,622 -29% 18% 289 30% 10% 13% -2% 19% 36% 14% 1.1x
FLR 20,967 34% 21% 811 5% 5% 4% 18% >99% 32% 13% 3.3x
VMC 3,709 13% 11% 353 22% 16% 8% 23% 17% 8% 3% .4x
JEC 11,252 33% 26% 205 15% 6% 4% 16% 89% 21% 11% 3.0x
PWR 3,738 58% 18% 1,913 17% 7% 4% 14% 24% 7% 4% 1.1x
TOL 3,629 -31% 6% 838 6% -10% -8% 10% 34% -9% -4% .5x
FWLT 6,681 38% 24% 482 13% 9% 8% 20% nm 64% 14% 1.9x
PHM 7,538 -30% -7% 887 -20% -21% -27% 10% >99% -55% -22% .8x
URS 9,117 93% >99% 173 5% 4% 2% 13% 37% 6% 3% 1.3x
NVR 4,234 -21% 6% 1,028 17% 8% 5% 10% nm 16% 9% 1.9x
KBR 10,584 22% -10% 204 7% 4% 3% 15% >99% 13% 6% 2.0x
DHI 8,036 -38% 1% 1,290 -6% -19% -23% 9% >99% -40% -19% .8x
ORA 320 10% 11% 356 30% 17% 15% 21% 5% 6% 3% .2x
MDC 1,964 -44% -10% 905 15% -25% -29% 11% 54% -43% -21% .7x
GVA 2,680 -5% 9% 1,276 17% 7% 4% 11% 30% 15% 6% 1.5x
SGR 6,998 22% 29% 583 8% 4% 2% 22% >99% 11% 4% 1.6x
CTX 6,319 -39% -6% 968 -29% -33% -35% 9% >99% -92% -27% .8x
TRN 4,102 15% 25% 285 na 14% 8% 9% 24% 18% 7% .9x
KBH 4,186 -43% -3% 1,350 -7% -23% -34% 11% >99% -99% -29% .8x
LEN 5,474 -55% -1% 789 -31% -40% -28% 9% >99% -43% -18% .6x
EME 6,872 25% 8% 237 13% 4% 3% 15% >99% 18% 6% 2.3x
CBI 5,755 47% 32% 339 3% -1% -1% 14% 16% -7% -1% 1.8x
PCR 5,304 23% 36% 1,278 5% 3% 2% 11% >99% 18% 5% 2.5x
ICA 1,799 -40% 20% 94 16% 7% -3% 8% 14% -4% -2% .6x
RYL 2,302 -35% -8% 1,136 -5% -21% -23% 11% >99% -56% -23% 1.0x
MTZ 1,238 23% 9% 159 15% 6% 4% 14% 41% 16% 7% 1.6x
GFA na na 38% na na na na 38% na na na na
INSU 529 6% -3% 331 22% 5% 4% na 15% 6% 4% 1.0x
PEC 598 2% -7% 111 19% 11% 6% 13% 20% 15% 6% 1.1x
LAYN 963 21% 36% 224 26% 8% 5% 11% 21% 11% 7% 1.4x
MTH 1,742 -32% 5% 1,310 9% -17% -20% na >99% -49% -21% 1.1x
NCS 1,719 4% 14% 300 25% 9% 5% 13% 37% 14% 6% 1.3x
FIX 1,293 19% 13% 200 19% 6% 4% 10% 83% 17% 8% 2.2x
GLDD 581 21% 14% 1,868 13% 5% 1% na 8% 3% 1% .9x
DY 1,230 8% 9% 114 18% 3% 2% 13% 13% 5% 3% 1.5x
HOV 3,979 -23% 5% 921 6% -27% -29% 6% >99% <-99% -27% .9x
MTRX 757 12% 19% 236 11% 5% 3% 10% 35% 18% 9% 2.8x
XIN 425 >99% >99% 671 28% 18% -27% 25% 23% -33% -15% .5x
PHHM 508 -12% -3% 175 24% -3% -5% 15% nm -21% -5% 1.0x
SPF 2,108 -33% -5% 1,121 -26% -46% -62% 9% >99% <-99% -43% .7x
MHO 798 -29% -5% 1,156 -8% -24% -31% na nm -60% -26% .9x
STRL 394 40% 32% 328 11% 8% 5% 16% 28% 13% 7% 1.4x
Median 7% 9% 482 13% 5% 2% 12% 24% 7% 3% 1.1x
Capital Goods: Miscellaneous Capital Goods – Valuation

Illinois Tool Works / ITW 31.84 -10% 85% 16,275 19,003 1.2x 7x 10x 10x 10x 6.2x
Mitsui & Co., Ltd. ( / MITSY 177.00 -10% 201% 16,115 47,048 .7x 11x 5x 3x 3x .7x
ITT Corporation / ITT 40.99 -13% 70% 7,443 8,628 .8x 7x 12x 10x 10x nm
W.W. Grainger, Inc. / GWW 65.06 -6% 44% 4,949 5,111 .7x 7x 13x 11x 11x 2.6x
Ingersoll-Rand Compa / IR 15.11 -6% 245% 4,817 9,591 .8x 8x 6x 4x 5x nm
Cummins Inc. / CMI 21.59 -9% 252% 4,348 4,360 .3x 4x 6x 5x 5x 1.3x
Flowserve Corporatio / FLS 48.39 -15% 201% 2,736 3,152 .7x 6x 11x 6x 6x 6.2x
Mettler-Toledo Inter / MTD 75.58 -10% 59% 2,534 2,942 1.5x 10x 16x 13x 12x nm
Donaldson Company, I / DCI 28.73 -2% 82% 2,230 2,468 1.1x 10x 14x 13x 11x 4.0x
MSC Industrial Direc / MSM 32.98 -10% 65% 2,053 2,243 1.3x 7x 11x 12x 11x 5.5x
Harsco Corporation / HSC 22.31 -21% 198% 1,863 2,885 .7x 6x 7x 7x 7x 2.2x
SPX Corporation / SPW 33.18 -8% 324% 1,806 2,870 .5x 5x 6x 5x 5x nm
IDEX Corporation / IEX 21.17 -12% 92% 1,750 1,988 1.3x 9x 11x 10x 10x nm
Lincoln Electric Hol / LECO 38.61 -10% 125% 1,653 1,481 .6x 5x 8x 7x 8x 1.5x
Dresser-Rand Group I / DRC 18.24 -7% 133% 1,495 1,762 .9x 6x 15x 8x 7x nm
Lennox International / LII 22.95 -6% 84% 1,271 1,531 .4x 6x 9x 9x 9x 3.6x
Graco Inc. / GGG 21.28 -2% 98% 1,266 1,470 1.7x 6x 9x 9x 10x 13.5x
Zebra Technologies C / ZBRA 19.13 -13% 104% 1,213 1,084 1.1x 7x 12x 12x 11x 2.4x
Gardner Denver, Inc. / GDI 22.46 -15% 158% 1,162 1,258 .6x 4x 6x 6x 7x 3.7x
Terex Corporation / TEX 12.12 -9% 529% 1,150 2,231 .2x 2x 2x 2x 3x .9x
Nordson Corporation / NDSN 30.20 -1% 162% 1,030 1,297 1.2x 7x 11x 9x 9x nm
Toro Company, The / TTC 29.00 -6% 104% 1,030 1,205 .6x 6x 9x 9x 10x 3.4x
Watsco, Incorporated / WSO 34.96 -14% 75% 990 1,030 .6x 10x 14x 16x 16x 2.7x
REGAL-BELOIT CORPORA / RBC 29.40 -10% 70% 949 1,407 .6x 6x 8x 8x 8x 6.2x
Intermec Inc. / IN 11.45 -8% 118% 707 505 .5x 8x 29x 18x 15x 1.4x
Briggs & Stratton Co / BGG 13.71 -18% 82% 683 1,058 .5x 23x 30x 15x 11x 1.5x
Robbins & Myers, Inc / RBN 19.39 -19% 184% 673 583 .7x 4x 8x 8x 8x 3.1x
Middleby Corporation / MIDD 32.17 -7% 145% 547 797 1.2x 7x 10x 9x 9x nm
Astec Industries, In / ASTE 22.79 -25% 86% 511 482 .5x 5x 9x 8x 8x 1.2x
Blount International / BLT 8.75 -25% 64% 417 695 1.2x 8x 13x 12x 9x nm
Gorman-Rupp Company, / GRC 24.77 -10% 88% 414 374 1.1x 9x 18x 14x 14x 2.5x
Tennant Company / TNC 21.27 -5% 125% 388 467 .6x 8x 10x 11x 10x 2.5x
Sauer-Danfoss Inc. / SHS 7.35 -6% 416% 355 788 .4x 5x 8x 6x 14x .8x
Colfax Corporation / CFX 6.84 -18% 314% 301 353 .6x 8x 4x 6x 7x 5.4x
AAON, Inc. / AAON 16.60 -23% 39% 286 288 1.0x 7x 14x 11x 11x 3.1x
Cascade Corporation / CAE 25.51 -1% 154% 277 368 .6x 5x 5x 7x 6x 1.8x
Interline Brands, In / IBI 8.52 -6% 186% 276 655 .5x 6x 5x 6x 7x nm
John Bean Technologi / JBT 7.71 -6% 97% 212 321 .3x 4x 5x 6x 7x nm
Fuel Tech Inc. / FTEK 8.46 -5% 221% 203 172 1.8x 11x 29x 45x 28x 2.9x
Kadant Inc. / KAI 14.70 -15% 117% 190 191 .5x 5x 8x 9x 12x 1.6x
Capstone Turbine Cor / CPST 1.00 -9% 342% 174 128 3.3x nm nm nm nm 2.5x
LSB Industries, Inc. / LXU 8.15 -14% 253% 174 253 .4x 4x 4x 6x 7x 1.4x
Met-Pro Corporation / MPR 10.05 -14% 66% 152 134 1.2x 8x 13x 14x 12x 2.3x
DXP Enterprises, Inc / DXPE 11.25 -14% 203% 145 314 .4x 7x 8x 6x 5x nm
Harbin Electric, Inc / HRBN 6.64 -4% 322% 140 137 1.3x 4x 7x 5x 3x 1.0x
Flanders Corporation / FLDR 5.36 -21% 44% 138 171 .8x nm nm 14x 14x 1.5x
PMFG Inc / PMFG 7.85 -4% 292% 103 155 1.0x 19x 12x 14x 7x nm
Capital Goods: Miscellaneous Capital Goods – Operating Performance

Est.
ITW 16,435 13% 12% 274 35% 16% 13% 10% 50% 22% 13% 1.0x
MITSY 65,414 -4% 18% 1,481 18% 7% 6% na 16% 17% 4% .6x
ITT 11,279 32% 15% 284 28% 11% 7% 12% 81% 18% 7% 1.0x
GWW 6,869 10% 8% 437 41% 11% 7% 11% 40% 23% 14% 2.1x
IR 11,881 38% -2% 334 28% 11% 27% 13% 35% 34% 16% .6x
CMI 14,570 16% 16% 385 21% 8% 6% 14% 35% 25% 11% 1.7x
FLS 4,414 25% 14% 276 35% 13% 10% 12% 55% 30% 12% 1.2x
MTD 1,997 16% 9% 210 50% 15% 10% 13% 71% 37% 12% 1.2x
DCI 2,233 16% 12% 176 33% 11% 8% 12% 33% 24% 12% 1.5x
MSM 1,780 5% 17% 434 46% 18% 11% 13% 55% 27% 18% 1.6x
HSC 4,107 17% 14% 191 27% 12% 8% 10% 23% 19% 8% 1.0x
SPW 5,780 26% 10% 325 30% 10% 8% 14% 54% 20% 7% .9x
IEX 1,480 13% 15% 296 41% 16% 10% 13% 61% 12% 7% .7x
LECO 2,533 15% 20% 282 29% 13% 10% 11% 37% 21% 13% 1.4x
DRC 1,969 22% >99% 328 28% 14% 8% 29% >99% 20% 8% 1.0x
LII 3,631 -3% 8% 227 29% 7% 4% 15% 36% 24% 8% 1.9x
GGG 856 2% 12% 389 54% 26% 17% 11% 76% 62% 25% 1.5x
ZBRA 978 16% 9% 306 49% 16% 11% 15% 39% 12% 10% .9x
GDI 2,004 12% 36% 323 32% 15% 10% 6% 52% 16% 10% 1.0x
TEX 10,400 21% 24% 495 20% 10% 6% 13% 47% 27% 10% 1.6x
NDSN 1,118 18% 9% 270 56% 17% 10% 6% 56% 20% 10% .9x
TTC 1,869 0% 4% 355 36% 11% 7% 12% 42% 33% 12% 1.8x
WSO 1,763 1% 10% 490 26% 6% 4% 13% 25% 11% 8% 2.2x
RBC 2,238 32% 34% 125 22% 11% 6% 14% 33% 15% 7% 1.1x
IN 923 13% 2% 401 40% 7% 5% 16% 28% 9% 5% 1.1x
BGG 2,243 3% -7% 314 15% 2% 2% 10% 5% 5% 2% 1.2x
RBN 787 13% 9% 234 37% 17% 11% 17% 58% 19% 10% .9x
MIDD 646 43% 23% 385 38% 18% 10% 22% >99% 31% 11% 1.1x
ASTE 999 23% 20% 257 24% 10% 7% 14% 31% 16% 11% 1.7x
BLT 595 18% -7% 186 32% 15% 8% na 42% <-99% 11% 1.3x
GRC 327 11% 15% 307 24% 12% 9% 5% 30% 18% 13% 1.5x
TNC 731 13% 9% 263 42% 8% 5% 15% 26% 16% 9% 1.6x
SHS 2,213 18% 12% 224 22% 7% 3% 15% 16% 12% 4% 1.4x
CFX 589 24% 18% 286 35% 8% 0% 7% 27% 2% 0% .6x
AAON 282 11% 15% 215 23% 15% 10% 15% 40% 29% 19% 2.0x
CAE 579 11% 13% 241 29% 12% 7% 7% 30% 15% 9% 1.2x
IBI 1,218 -1% 19% 321 38% 8% 4% 13% 29% 12% 5% 1.3x
JBT 1,084 23% na na 20% 7% 5% na >99% 50% 13% 2.5x
FTEK 96 45% 38% 537 48% 16% 10% 18% 60% 14% 11% 1.1x
KAI 359 1% 23% 179 40% 10% 7% 8% 35% 10% 6% .8x
CPST 39 61% 23% 181 -5% -98% -95% 40% nm -64% -47% .5x
LXU 704 22% 17% 394 20% 10% 5% 16% 37% 34% 11% 2.1x
MPR 110 13% 14% 295 34% 15% 10% na 33% 13% 10% 1.0x
DXPE 712 >99% 40% 444 28% 6% 3% 21% 37% 22% 8% 2.2x
HRBN 105 81% >99% 215 43% 32% 22% na 44% 19% 13% .6x
FLDR 225 -9% 7% 81 15% -4% 3% 25% nm 6% 3% 1.3x
PMFG 154 70% 40% 383 27% 5% 3% 18% 26% 10% 3% 1.2x
Median 16% 14% 295 30% 11% 7% 13% 37% 19% 10% 1.2x
Conglomerates – Valuation
General Electric Com / GE 16.02 -9% 141% 168,144 700,506 3.8x 28x 7x 8x 9x 12.3x
United Technologies / UTX 50.23 -14% 58% 47,750 54,507 .9x 7x 12x 10x 10x 31.3x
Siemens AG (ADR) / SI 53.60 -18% 199% 47,003 52,151 .6x 8x 17x 9x 7x 3.1x
3M Company / MMM 63.06 -21% 41% 43,698 47,767 1.8x 8x 11x 12x 12x 8.1x
Emerson Electric Co. / EMR 33.40 -12% 77% 25,917 28,658 1.2x 8x 11x 11x 11x 10.2x
Raytheon Company / RTN 47.91 -13% 41% 19,838 19,350 .8x 7x 13x 12x 10x 19.1x
Koninklijke Philips / PHG 17.12 -9% 159% 16,202 18,117 .5x 11x 3x 8x 9x 2.0x
Tyco International L / TYC 20.50 -8% 134% 9,734 12,479 .6x 6x 9x 7x 6x 7.3x
Dover Corporation / DOV 29.21 -14% 87% 5,432 6,906 .9x 7x 9x 8x 9x nm
Fortune Brands, Inc. / FO 36.07 -11% 124% 5,407 10,037 1.2x 13x 8x 9x 10x nm
Textron Inc. / TXT 14.73 -32% 405% 3,551 13,130 .9x 7x 4x 4x 4x 2.4x
Alleghany Corporatio / Y 231.00 -9% 82% 1,911 2,180 1.8x 9x 7x 19x 13x .9x
Tomkins plc (ADR) / TKS 5.99 -2% 177% 1,319 2,027 .3x 6x 7x 6x 9x 1.0x
Temple-Inland, Inc. / TIN 4.41 -11% 537% 470 3,753 1.0x 2x x 88x 28x 1.3x
Federal Signal Corpo / FSS 6.84 -7% 156% 324 542 .5x 9x 11x 9x 10x nm
Conglomerates – Operating Performance

Est.
GE 184,890 12% 9% 565 35% 14% 13% 11% 10% 21% 3% .2x
UTX 58,896 12% 14% 261 28% 13% 8% 11% 81% 21% 8% 1.0x
SI 86,536 7% 1% 204 31% 8% 12% 16% 38% 25% 9% .7x
MMM 25,966 8% 7% 346 48% 22% 15% 11% 55% 31% 14% 1.0x
EMR 24,807 12% 13% 180 10% 15% 10% 13% 68% 26% 11% 1.2x
RTN 23,088 11% 6% 320 20% 11% 8% 13% >99% 15% 8% 1.0x
PHG 34,393 2% 3% 269 33% 5% 10% 13% 23% 14% 8% .8x
TYC 20,199 9% 7% 184 35% 10% 9% 21% 36% 12% 6% .7x
DOV 7,702 8% 17% 231 36% 14% 9% 16% 55% 17% 8% .9x
FO 8,039 -6% 12% 259 41% 10% 10% 10% 21% 14% 6% .6x
TXT 14,403 18% 17% 360 25% 13% 8% 13% 17% 33% 6% .7x
Y 1,235 -1% 15% 1,321 na 19% 20% na nm 10% 4% .2x
TKS 5,791 -24% -14% 171 27% 6% 2% 31% 18% 9% 4% 2.1x
TIN 3,848 -11% -7% 321 11% 51% 30% na nm >99% 20% .7x
FSS 1,060 4% 7% 193 25% 6% -7% 8% 22% -20% -7% 1.0x
Median 8% 7% 261 29% 13% 10% 13% 30% 16% 8% .8x
Consumer Cyclical: Apparel and Accessories – Valuation

Coach, Inc. / COH 16.20 -10% 136% 5,296 4,889 1.5x 4x 7x 7x 7x 4.9x
V.F. Corporation / VFC 47.20 -6% 79% 5,196 6,529 .8x 6x 9x 8x 8x 4.5x
Polo Ralph Lauren Co / RL 42.15 -10% 95% 4,160 4,090 .8x 6x 11x 10x 10x 3.4x
Hanesbrands Inc. / HBI 14.16 -29% 166% 1,324 3,624 .8x 9x 11x 7x 6x nm
Columbia Sportswear / COLM 36.00 -22% 40% 1,219 1,074 .8x 7x 9x 13x 13x 1.4x
Under Armour, Inc. / UA 22.94 -30% 127% 1,131 1,128 1.6x 14x 22x 21x 17x 3.6x
Phillips-Van Heusen / PVH 17.14 -5% 180% 882 1,021 .4x 4x 5x 5x 5x nm
Warnaco Group, Inc., / WRC 16.16 -5% 233% 754 878 .4x 5x 9x 6x 6x 1.7x
Lululemon Athletica / LULU 8.24 -11% 514% 562 518 1.6x 8x 18x 12x 9x 4.4x
Jones Apparel Group, / JNY 6.32 -1% 250% 527 1,110 .3x 55x 14x 7x 7x 1.2x
Iconix Brand Group, / ICON 8.72 -25% 170% 508 1,098 5.2x 7x 8x 8x 7x nm
Liz Claiborne, Inc. / LIZ 3.69 -4% 618% 350 1,273 .3x nm nm 4x 5x .8x
True Religion Appare / TRLG 12.77 -9% 149% 312 257 1.0x 4x 11x 7x 7x 2.4x
American Apparel Inc / APP 3.94 -11% 326% 279 382 .7x 14x 13x 10x 7x 2.2x
Volcom, Inc. / VLCM 9.21 -1% 214% 225 151 .5x 3x 7x 6x 6x 1.3x
Quiksilver, Inc. / ZQK 1.62 -26% 637% 207 1,162 .5x 15x nm 2x 2x 1.5x
Maidenform Brands, I / MFB 7.86 -3% 124% 178 229 .6x 4x 5x 7x 6x 10.0x
G-III Apparel Group, / GIII 9.12 0% 126% 151 266 .5x 10x 9x 7x 5x 1.7x
Oxford Industries, I / OXM 8.96 -2% 233% 142 359 .4x 6x 8x 5x 4x nm
Consumer Cyclical: Apparel and Accessories – Operating Performance

Est.
COH 3,257 18% 24% 880 75% 35% 24% 14% >99% 53% 35% 1.5x
VFC 7,686 12% 11% 142 44% 13% 8% 10% 41% 18% 10% 1.1x
RL 5,053 11% 14% 337 55% 14% 9% 14% 53% 19% 11% 1.2x
HBI 4,373 -2% -2% 87 33% 9% 4% 20% 20% 57% 6% 1.2x
COLM 1,340 0% 7% 438 43% 12% 9% 10% 20% 13% 11% 1.2x
UA 721 27% 44% 515 49% 11% 7% 21% 29% 16% 11% 1.7x
PVH 2,468 9% 14% 392 49% 12% 7% 14% 62% 16% 8% 1.1x
WRC 2,094 16% 10% 450 44% 9% 4% 20% 32% 11% 5% 1.3x
LULU 334 75% 89% 124 53% 18% 13% 36% >99% 36% 27% 2.1x
JNY 3,608 -10% -6% 427 33% 1% 0% 11% 2% -1% 0% 1.1x
ICON 210 51% 32% 2,233 na 70% 34% 17% >99% 13% 5% .2x
LIZ 4,196 -5% 0% 254 47% -14% -14% 18% nm -41% -19% 1.3x
TRLG 250 66% 84% 739 58% 26% 19% na >99% 43% 35% 1.8x
APP 511 85% na 75 55% 5% 3% 30% 25% 12% 5% 1.7x
VLCM 334 30% 33% 990 49% 17% 11% 22% 61% 20% 17% 1.5x
ZQK 2,437 11% 24% 254 49% 3% -14% 14% 8% -43% -14% 1.0x
MFB 415 1% 8% 377 39% 13% 7% na 55% 26% 10% 1.4x
GIII 589 27% 34% 1,027 27% 5% 2% 18% 17% 8% 5% 2.0x
OXM 961 -11% -13% 209 41% 6% 3% 13% 23% 6% 3% 1.1x
Median 12% 14% 392 48% 12% 7% 17% 27% 16% 8% 1.3x
Consumer Cyclical: Appliances and Tools – Valuation

Whirlpool Corporatio / WHR 39.09 -5% 151% 2,873 5,468 .3x 6x 5x 7x 9x 7.3x
Stanley Works, The / SWK 31.12 -9% 70% 2,452 3,803 .8x 8x 8x 8x 9x nm
Black & Decker Corpo / BDK 39.48 -5% 118% 2,373 3,658 .6x 9x 5x 8x 9x 9.3x
Pentair, Inc. / PNR 23.28 -5% 76% 2,296 3,242 .9x 9x 11x 10x 10x nm
Snap-on Incorporated / SNA 32.33 -8% 92% 1,857 2,255 .8x 6x 10x 8x 8x 5.8x
Jarden Corporation / JAH 13.35 -20% 120% 1,022 3,622 .7x 10x 35x 5x 5x nm
Helen of Troy Limite / HELE 15.45 -13% 60% 467 621 1.0x 9x 8x 8x 8x 2.6x
iRobot Corporation / IRBT 9.92 -8% 126% 246 219 .7x 137x 28x 124x 34x 2.2x
Advanced Battery Tec / ABAT 2.13 -1% 200% 117 77 1.7x 5x 10x 6x 4x 1.7x
Consumer Cyclical: Appliances and Tools – Operating Performance

Est.
WHR 19,917 5% 14% 273 15% 4% 3% 11% 20% 14% 4% 1.4x
SWK 4,515 6% 14% 245 38% 11% 9% 10% 42% 23% 8% .9x
BDK 6,361 -3% 7% 251 33% 7% 7% 7% 25% 30% 8% 1.2x
PNR 3,445 6% 14% 215 30% 10% 8% 12% 42% 14% 7% .8x
SNA 2,928 7% 7% 252 45% 13% 8% 11% 48% 17% 8% 1.0x
JAH 5,500 29% 77% 220 27% 7% 2% 8% 18% 6% 2% .9x
HELE 653 0% 4% 701 43% 10% 8% 13% 23% 9% 5% .7x
IRBT 316 49% 38% 625 31% 1% 5% 20% 2% 15% 10% 2.0x
ABAT 45 55% >99% 35 46% 38% 33% 25% 60% 30% 28% .8x
Median 6% 14% 251 33% 10% 8% 11% 25% 15% 8% .9x
Consumer Cyclical: Audio and Video Equipment – Valuation

Panasonic Corporatio / PC 14.66 -18% 66% 30,357 23,865 .3x 4x 11x 11x 11x .9x
Sony Corporation (AD / SNE 21.12 -9% 171% 21,193 20,396 .2x 8x 6x 12x 9x .7x
Harman International / HAR 14.88 -9% 407% 871 1,104 .3x 9x 9x 8x 6x 1.0x
Thomson SA (ADR) / TMS 1.27 -17% 1139% 343 2,035 .3x 7x 1x nm nm nm
DTS Inc. / DTSI 15.00 -4% 140% 264 173 2.9x 12x 29x 28x 22x 2.0x
Universal Electronic / UEIC 15.33 -6% 151% 214 139 .5x 7x 12x 13x 12x 1.5x
Average (market value-weighted) .3x 6x 9x 12x 10x .9x
Consumer Cyclical: Audio and Video Equipment – Operating Performance

Est.
PC 91,802 -4% 1% 293 30% 6% 3% 7% 27% 8% 4% 1.2x
SNE 91,553 1% 7% 493 23% 3% 3% 5% 14% 8% 2% .7x
HAR 4,035 10% 11% 345 27% 3% 2% 23% 13% 7% 4% 1.5x
TMS 6,569 -54% -2% 266 23% 5% -2% na 45% -4% -1% .7x
DTSI 59 27% -5% 370 98% 24% -16% 33% 21% -7% -7% .4x
UEIC 275 -1% 20% 692 35% 8% 6% 12% 34% 10% 7% 1.3x
Median 0% 4% 357 28% 5% 3% 12% 24% 8% 3% 1.0x
Consumer Cyclical: Auto and Truck Manufacturers – Valuation

Toyota Motor Corpora / TM 63.68 -10% 85% 99,824 206,293 .8x 13x 6x 18x 17x .8x
HONDA MOTOR CO., LTD / HMC 21.65 -13% 68% 39,283 81,455 .7x 10x 6x 10x 16x .8x
Daimler AG (USA) / DAI 29.74 -19% 251% 30,153 60,366 .5x 6x 5x 6x 8x .9x
Nissan Motor Co., Lt / NSANY 7.67 -1% 202% 15,620 61,576 .3x 5x 3x 5x 4x .5x
PACCAR Inc / PCAR 28.11 -22% 107% 10,195 15,855 1.0x 10x 9x 9x 10x 1.9x
Ford Motor Company / F 1.80 -4% 388% 4,300 140,259 .9x nm nm nm nm nm
General Motors Corpo / GM 3.01 -9% 915% 1,838 30,713 .2x nm nm nm nm nm
Tata Motors Limited / TTM 4.02 -13% 399% 1,550 na nm nm 5x 3x 3x nm
Navistar Internation / NAV 21.01 -27% 276% 1,495 7,336 .5x 9x nm 3x 2x nm
WABCO Holdings Inc. / WBC 16.00 -28% 243% 1,119 1,021 .4x 3x 9x 4x 6x 4.7x
Oshkosh Corporation / OSK 5.77 -10% 793% 430 3,115 .4x 8x 5x 3x 3x nm
Rush Enterprises, In / RUSHA 6.81 -1% 177% 252 592 .3x 9x 5x 8x 8x .9x
Wabash National Corp / WNC 4.69 -9% 149% 144 216 .3x nm 9x nm nm .9x
Spartan Motors, Inc. / SPAR 3.24 -37% 266% 106 174 .2x 2x 4x 3x 7x .6x
Median .4x 8x 5x 5x 7x .9x
Consumer Cyclical: Auto and Truck Manufacturers – Operating Performance

Est.
TM 263,066 -1% 12% 811 17% 6% 5% na 12% 11% 4% .8x
HMC 121,831 -1% 12% 658 29% 7% 5% -8% 14% 11% 4% .9x
DAI 125,690 -1% -11% 456 24% 8% 5% 5% 24% 13% 4% .7x
NSANY 211,870 32% 8% 1,332 21% 6% 4% 4% 14% 22% 7% 1.7x
PCAR 15,815 1% 10% 725 16% 10% 7% 12% 13% 22% 7% .9x
F 161,201 -4% 0% 720 8% -9% -7% na nm <-99% -4% .6x
GM 165,483 -10% -3% 657 2% -10% -15% na nm 52% -19% 1.2x
TTM na na 23% na na na na 10% na na na na
NAV 14,058 -40% 8% 895 19% 6% 2% 27% 22% -57% 3% 1.2x
WBC 2,813 25% 12% 365 27% 11% 9% 15% 61% 37% 13% 1.5x
OSK 7,138 13% 34% 503 17% 6% 2% 10% 36% 8% 2% 1.1x
RUSHA 1,731 -22% 23% 586 18% 4% 2% 15% 10% 9% 4% 1.7x
WNC 863 -28% 2% 278 5% -1% -1% na nm -3% -2% 1.8x
SPAR 936 65% 30% 712 16% 8% 5% 46% 37% 32% 15% 2.9x
Median -1% 11% 658 17% 6% 4% 11% 18% 12% 4% 1.2x
Consumer Cyclical: Auto Parts – Valuation

Genuine Parts / GPC 35.95 -17% 38% 5,732 6,107 .5x 7x 12x 11x 11x 2.3x
BorgWarner Inc. / BWA 17.42 -9% 221% 2,025 2,728 .5x 10x 7x 8x 9x .9x
CLARCOR Inc. / CLC 29.47 -7% 50% 1,496 1,542 1.5x 11x 17x 16x 14x 4.5x
LKQ Corporation / LKQX 9.74 -6% 157% 1,362 1,906 1.0x 9x 18x 13x 11x 43.0x
Autoliv Inc. / ALV 18.69 -5% 235% 1,314 2,599 .4x 5x 5x 5x 6x 2.6x
Goodyear Tire & Rubb / GT 5.42 -7% 455% 1,308 5,093 .2x 5x 8x 3x 4x .6x
Gentex Corporation / GNTX 7.81 -1% 156% 1,091 753 1.1x 6x 9x 13x 16x 1.5x
Applied Industrial T / AIT 16.41 -2% 96% 695 746 .4x 5x 7x 9x 8x 2.2x
Federal-Mogul / FDML 5.36 -40% 450% 539 2,665 .4x 1x x 4x 5x 17.8x
Fuel Systems Solutio / FSYS 33.66 -71% 82% 530 508 1.3x 10x 89x 16x 16x 5.1x
Cooper Tire & Rubber / CTB 5.16 -7% 303% 304 672 .2x nm 4x nm 18x .5x
TRW Automotive Holdi / TRW 2.88 -6% 926% 291 3,023 .2x 5x 3x 3x nm .8x
Superior Industries / SUP 10.81 -4% 113% 288 288 .3x nm 31x nm nm .5x
ArvinMeritor, Inc. / ARM 3.80 -2% 377% 280 1,140 .2x 9x nm 2x 3x 2.3x
Titan International, / TWI 7.61 -16% 399% 263 427 .4x 8x nm 6x 4x .9x
Dorman Products / DORM 11.13 -41% 33% 196 210 .6x 7x 11x 12x 11x 1.2x
Modine Manufacturing / MOD 5.50 -3% 307% 180 371 .2x nm nm nm 55x .5x
Tenneco Inc. / TEN 2.50 -22% 1139% 117 1,514 .2x 8x nm 3x 5x nm
Lear Corporation / LEA 1.40 -16% 2369% 108 1,925 .1x 6x x 1x nm nm
Stoneridge, Inc. / SRI 4.29 -22% 351% 106 199 .3x 5x 6x 10x 6x .7x
Dana Holding Corpora / DAN 1.05 0% 1281% 105 1,256 .1x 2x nm nm 2x .1x
Consumer Cyclical: Auto Parts – Operating Performance

Est.
GPC 11,122 3% 6% 348 28% 8% 5% 9% 29% 19% 11% 2.3x
BWA 5,705 11% 15% 322 18% 5% 2% 17% 13% 5% 2% 1.1x
CLC 1,032 13% 5% 188 32% 14% 9% 12% 35% 15% 10% 1.1x
LKQX 1,882 >99% 38% 207 45% 11% 6% 24% 46% 12% 6% 1.1x
ALV 7,064 7% 3% 197 19% 7% 4% 5% 27% 13% 5% 1.3x
GNTX 672 6% 9% 247 34% 20% 16% 17% 38% 13% 12% .8x
AIT 2,115 4% 7% 440 27% 7% 4% 9% 40% 19% 12% 2.6x
FDML 7,295 9% 4% 146 17% 27% 20% na 61% 67% 18% .9x
FSYS 378 59% 31% 377 28% 13% 7% 25% 65% 18% 10% 1.4x
TRW 16,068 14% 7% 242 8% 4% 1% na 18% 7% 2% 1.3x
SUP 832 -11% 3% 157 3% -1% 0% 15% nm 0% 0% 1.1x
ARM 7,039 -1% -7% 391 9% 2% 0% 12% 13% -2% 0% 1.5x
TWI 983 23% 18% 364 13% 6% 2% 10% 14% 8% 4% 1.6x
DORM 346 8% 10% 349 33% 8% 5% na 17% 9% 7% 1.4x
MOD 1,907 9% 11% 235 14% -2% -5% 12% nm -20% -8% 1.6x
TEN 6,273 8% 14% 299 15% 3% -3% 12% 12% -48% -5% 1.7x
LEA 14,829 -10% -2% 163 6% 2% 0% 9% 30% 2% 0% 1.8x
SRI 780 9% 2% 139 24% 5% 2% 12% 20% 8% 3% 1.5x
DAN 8,731 2% 4% 249 5% 6% 0% na 20% 0% 0% 1.2x
Median 8% 7% 247 18% 6% 2% 12% 27% 8% 4% 1.4x
Consumer Cyclical: Footwear – Valuation

NIKE, Inc. / NKE 46.53 -7% 52% 22,577 20,730 1.1x 8x 12x 12x 10x 3.3x
Wolverine World Wide / WWW 18.92 -4% 65% 926 933 .8x 6x 11x 10x 9x 2.2x
Deckers Outdoor Corp / DECK 60.70 -9% 174% 793 725 1.3x 7x 12x 9x 7x 2.7x
Timberland Company, / TBL 10.31 -3% 91% 593 528 .4x 7x 16x 13x 14x 1.2x
Skechers USA, Inc. / SKX 11.61 -12% 117% 535 401 .3x 4x 7x 6x 7x .8x
K-Swiss Inc. / KSWS 12.44 -8% 67% 434 152 .4x 51x 11x 622x nm 1.1x
Brown Shoe Company, / BWS 7.47 -7% 149% 316 402 .2x 5x 5x 9x 8x .9x
Steven Madden, Ltd. / SHOO 17.58 -17% 65% 314 264 .6x 7x 10x 10x 9x 1.8x
Kenneth Cole Product / KCP 8.52 0% 132% 152 79 .2x nm 24x nm 37x .8x
Heelys, Inc. / HLYS 3.80 -21% 93% 105 12 .2x nm 5x 95x 20x .9x
Consumer Cyclical: Footwear – Operating Performance

Est.
NKE 19,404 16% 11% 597 46% 13% 9% 13% 42% 24% 15% 1.6x
WWW 1,232 4% 7% 265 40% 12% 8% 15% 37% 21% 14% 1.8x
DECK 580 53% 28% 1,568 45% 19% 12% 23% 52% 22% 18% 1.5x
TBL 1,417 -4% -1% 225 46% 6% 4% 10% 17% 9% 7% 1.7x
SKX 1,445 3% 15% 670 43% 8% 6% 15% 24% 13% 10% 1.6x
KSWS 362 -15% -5% 633 44% 1% 9% 19% 3% 9% 7% .8x
BWS 2,341 -5% 7% 179 39% 3% 2% na 19% 9% 5% 2.1x
SHOO 441 0% 8% 596 40% 9% 6% na 29% 13% 11% 1.8x
KCP 498 -3% 0% 553 42% -2% -1% na nm -3% -2% 1.4x
HLYS 65 -73% >99% 1,182 20% -19% -9% na nm -5% -5% .5x
Median -2% 7% 596 43% 7% 6% 15% 27% 11% 9% 1.6x
Consumer Cyclical: Furniture and Fixtures – Valuation

Masco Corporation / MAS 7.69 -7% 225% 2,768 5,814 .6x 12x 7x 19x 19x nm
Leggett & Platt, Inc / LEG 14.88 -7% 65% 2,324 3,128 .7x 22x 53x 14x 12x 3.1x
Hillenbrand, Inc. / HI 18.74 -12% 32% 1,170 1,247 1.8x 9x 12x 11x 10x 4.4x
Steelcase Inc. / SCS 6.16 0% 200% 827 956 .3x 5x 7x 7x 8x 1.4x
Herman Miller, Inc. / MLHR 14.61 -6% 132% 784 1,002 .5x 4x 6x 7x 7x nm
HNI Corporation / HNI 12.02 -3% 231% 532 862 .3x 7x 5x 9x 10x 5.7x
Tempur-Pedic Interna / TPX 6.72 -10% 392% 503 934 .9x 5x 4x 7x 8x nm
Knoll, Inc. / KNL 10.61 -14% 76% 500 814 .7x 6x 7x 6x 7x nm
Ethan Allen Interior / ETH 15.25 -6% 123% 438 561 .6x 7x 8x 12x 9x 1.6x
La-Z-Boy Incorporate / LZB 4.83 -20% 143% 248 337 .2x nm nm 69x 21x .6x
Sealy Corporation / ZZ 2.31 -18% 504% 212 961 .6x 6x 3x 5x 5x nm
Kimball Internationa / KBALB 5.11 -3% 200% 189 168 .1x nm nm 85x 102x .5x
Furniture Brands Int / FBN 3.63 -9% 326% 177 268 .1x nm nm nm nm .4x
LSI Industries, Inc. / LYTS 6.11 -18% 250% 132 132 .5x nm nm 18x 14x 1.1x
Consumer Cyclical: Furniture and Fixtures – Operating Performance

Est.
MAS 10,319 -13% 0% 198 26% 5% 0% 13% 15% -1% 0% 1.0x
LEG 4,248 0% -5% 177 18% 3% -2% 14% 8% -4% -2% 1.1x
HI 678 33% na na 41% 22% 14% na >99% 50% 23% 1.7x
SCS 3,505 9% 9% 260 32% 5% 3% 5% 29% 12% 5% 1.6x
MLHR 2,000 2% 10% 318 35% 12% 8% 2% 96% >99% 20% 2.7x
HNI 2,508 -3% 7% 189 34% 5% 3% na 30% 17% 6% 2.0x
TPX 1,028 -4% 17% 734 45% 17% 10% 13% 59% >99% 12% 1.3x
KNL 1,126 8% 14% 901 35% 13% 7% 10% 73% >99% 12% 1.6x
ETH 937 -7% 1% 162 54% 9% 5% 7% 19% 13% 6% 1.2x
LZB 1,428 -9% -7% 142 27% -1% -1% na nm -3% -2% 1.8x
ZZ 1,614 -3% 9% 265 40% 9% 3% 11% 50% -49% 5% 1.5x
KBALB 1,358 4% 10% 189 18% -1% 0% na nm -1% -1% 1.9x
FBN 1,845 -14% -5% 155 20% -8% -4% na nm -9% -5% 1.3x
LYTS 291 -15% 3% 194 25% -6% -6% 11% nm -11% -9% 1.5x
Median -3% 7% 194 33% 5% 3% 11% 30% -1% 5% 1.6x
Consumer Cyclical: Recreational Products – Valuation

Mattel, Inc. / MAT 13.91 -10% 70% 4,986 5,977 1.0x 9x 9x 10x 9x 3.6x
Hasbro, Inc. / HAS 26.94 -20% 55% 3,750 4,336 1.1x 8x 14x 12x 11x 13.0x
Harley-Davidson, Inc / HOG 15.35 -2% 226% 3,574 5,126 .8x 4x 4x 5x 5x 1.5x
Marvel Entertainment / MVL 28.11 -17% 37% 2,224 2,280 4.1x 8x 17x 11x 20x nm
Polaris Industries I / PII 25.01 -4% 117% 810 987 .5x 5x 8x 7x 7x 7.2x
Pool Corporation / POOL 15.48 -9% 83% 742 1,055 .6x 9x 11x 13x 12x 8.3x
Callaway Golf Compan / ELY 10.10 -11% 80% 652 642 .6x 8x 12x 11x 9x 1.5x
JAKKS Pacific, Inc. / JAKK 18.98 -6% 61% 522 428 .5x 5x 7x 7x 6x 1.5x
LeapFrog Enterprises / LF 4.60 -4% 131% 293 270 .5x nm nm nm 14x 1.5x
Brunswick Corporatio / BC 2.44 -8% 778% 214 598 .1x nm 3x nm nm .2x
RC2 Corporation / RCRC 11.33 -12% 169% 195 272 .6x 17x 11x 7x 7x 5.6x
Marine Products Corp / MPX 4.82 -6% 102% 176 157 .7x 10x 11x 18x 24x 1.9x
Steinway Musical Ins / LVB 17.46 -5% 75% 149 298 .7x 10x 10x 8x 7x 1.2x
Cherokee Inc. / CHKE 15.52 -11% 138% 138 122 3.1x 5x 8x 9x 9x 7.8x
Sturm, Ruger & Compa / RGR 5.84 -6% 74% 114 91 .6x 48x 13x 22x 14x 1.6x
Arctic Cat Inc. / ACAT 6.26 -7% 112% 113 124 .2x nm nm 52x 23x .6x
Consumer Cyclical: Recreational Products – Operating Performance

Est.
MAT 6,167 5% 5% 199 46% 11% 9% 9% 36% 23% 11% 1.3x
HAS 4,088 12% 9% 693 59% 13% 8% 9% 61% 26% 11% 1.3x
HOG 6,096 -3% 5% 625 35% 20% 13% 10% 35% 31% 12% 1.0x
MVL 561 22% -2% 2,245 78% 52% 30% 16% nm 67% 19% .6x
PII 1,966 17% 0% 614 23% 9% 7% 12% 90% 93% 18% 2.5x
POOL 1,826 -6% 14% 522 28% 6% 3% 10% 31% 26% 7% 2.0x
ELY 1,120 -1% 6% 373 44% 8% 5% 12% 21% 9% 6% 1.2x
JAKK 919 13% 14% 1,537 37% 10% 10% 9% 47% 13% 10% 1.0x
LF 503 13% -12% 595 40% -10% -11% 20% nm -25% -17% 1.5x
BC 5,307 -5% 4% 196 19% -11% -11% 10% nm -33% -14% 1.3x
RCRC 454 -10% 10% 546 45% 4% 2% 10% 10% 2% 1% .7x
MPX 212 -12% -1% 193 20% 7% 6% 10% 33% 13% 11% 1.7x
LVB 415 6% 3% 186 30% 7% 3% na 9% 7% 3% .9x
CHKE 40 -47% 2% 1,985 na 62% 38% na >99% 51% 36% .9x
RGR 157 -5% 2% 143 20% 1% 1% na 2% 3% 2% 1.5x
ACAT 627 -10% -3% 384 17% -1% 0% 10% nm 0% 0% 2.0x
Median -2% 3% 534 35% 7% 5% 10% 33% 13% 8% 1.3x
Consumer Non-Cyclical: Alcoholic Beverages – Valuation

Anheuser-Busch Compa / BUD 68.50 -34% 1% 49,529 56,903 3.3x 20x 25x 22x 19x 16.7x
Diageo plc (ADR) / DEO 54.51 -5% 70% 34,129 43,593 3.6x 13x 16x 11x 10x nm
Companhia de Bebidas / ABV 46.59 -35% 91% 28,608 32,577 3.7x 17x 13x 17x 19x 4.0x
Molson Coors Brewing / TAP 42.55 -18% 40% 7,814 9,474 1.7x 14x 15x 14x 12x 8.9x
Constellation Brands / STZ 11.49 -7% 117% 2,571 7,384 1.9x nm nm 7x 6x nm
Compania Cervecerias / CCU 28.85 -19% 38% 1,834 2,074 2.0x 13x 17x 11x 11x 3.4x
Vina Concha y Toro S / VCO 30.81 -16% 57% 1,106 1,313 2.8x 17x 20x 14x 13x 2.8x
Central European Dis / CEDC 23.13 -26% 235% 1,094 1,927 1.2x 12x 12x 8x 6x nm
Boston Beer Company, / SAM 32.00 -3% 69% 454 443 1.1x 20x 21x 18x 18x 3.4x
Median 2.0x 16x 16x 14x 12x 3.7x
Consumer Non-Cyclical: Alcoholic Beverages – Operating Performance

Est.
BUD 17,431 6% 4% 565 35% 17% 12% 11% 36% 55% 12% 1.0x
DEO 11,995 -50% 7% 502 60% 28% 62% 11% 59% >99% 34% .5x
ABV 8,884 0% 18% 250 70% 21% 17% 7% 77% 19% 9% .6x
TAP 5,635 -8% 13% 581 40% 12% 8% 12% 35% 7% 4% .4x
STZ 3,868 -13% -3% 472 35% -11% -18% 11% nm -23% -7% .4x
CCU 1,029 -52% 12% 314 53% 16% 29% 7% 20% 49% 25% .9x
VCO 477 -52% 13% 229 39% 16% 22% na 14% 29% 15% .7x
CEDC 1,581 44% 27% 470 23% 10% 7% na 84% 10% 5% .6x
SAM 387 20% 16% 774 49% 6% 3% 11% 24% 9% 6% 2.0x
Median -8% 13% 472 40% 16% 12% 11% 36% 15% 9% .6x
Consumer Non-Cyclical: Non-Alcoholic Beverages – Valuation

Coca-Cola Company, T / KO 45.02 -11% 46% 104,156 107,596 3.3x 13x 18x 14x 14x 9.5x
PepsiCo, Inc. / PEP 53.52 -6% 49% 83,123 na nm nm 16x 15x 14x 9.7x
Cadbury plc (ADR) / CBY 31.27 -3% 80% 10,627 13,278 1.7x 27x 41x 15x 13x nm
Fomento Economico Me / FMX 28.07 -33% 78% 10,044 12,586 1.1x 8x 15x 13x 12x 2.0x
Coca-Cola FEMSA, S.A / KOF 34.45 -24% 85% 6,362 7,310 1.2x 8x 12x 11x 9x 18.9x
Coca-Cola HBC S.A. ( / CCH 13.45 -29% 273% 4,915 7,027 .8x 8x 8x 8x 8x 2.6x
Coca-Cola Enterprise / CCE 9.17 -10% 195% 4,474 13,483 .6x nm 6x 7x 7x nm
Dr Pepper Snapple Gr / DPS 17.56 0% 71% 4,455 7,838 1.4x 8x 9x 9x 9x nm
Pepsi Bottling Group / PBG 20.84 -4% 106% 4,403 9,666 .7x 9x 9x 9x 8x nm
Hansen Natural Corpo / HANS 25.36 -19% 98% 2,344 2,074 2.0x 8x 17x 14x 12x 4.8x
PepsiAmericas, Inc. / PAS 17.61 -18% 103% 2,242 4,169 .9x 9x 11x 9x 9x nm
Embotelladora Andina / AKO.A 12.10 -41% 78% 1,530 1,506 1.3x 8x 12x 10x 9x 4.4x
Heckmann Corporation / HEK 6.71 -1% 60% 454 451 nm nm 224x nm 13x 1.1x
National Beverage Co / FIZZ 8.08 -18% 25% 372 na nm nm 16x 16x 16x 2.7x
Median 1.2x 8x 14x 11x 10x 4.4x
Consumer Non-Cyclical: Non-Alcoholic Beverages – Operating Performance

Est.
KO 32,149 17% 10% 355 64% 26% 19% 9% 94% 26% 13% .7x
PEP 42,868 14% 11% 232 53% 17% 13% 10% 61% 34% 16% 1.2x
CBY 8,036 -59% -5% 112 11% 6% 17% na 16% 24% 9% .5x
FMX 11,768 -37% 13% 105 47% 13% 10% 15% 32% 23% 9% .9x
KOF 5,934 -42% 11% 96 49% 15% 12% 10% 48% 18% 10% .9x
CCH 8,597 7% 14% 178 41% 10% 7% 6% 21% 16% 7% .9x
CCE 21,869 7% 5% 300 37% -18% -13% 6% nm -68% -13% 1.0x
DPS 5,770 -19% 23% 289 54% 16% 8% 5% 72% 11% 4% .6x
PBG 14,023 5% 8% 200 45% 8% 4% 9% 23% 21% 4% 1.0x
HANS 1,026 27% 71% 2,290 51% 26% 17% 15% >99% 38% 30% 1.7x
PAS 4,904 13% 10% 237 40% 10% 5% 11% 31% 12% 4% .9x
AKO.A 1,119 -52% 14% 900 46% 17% 26% 5% 44% 69% 38% 1.5x
HEK na na na na na na na na na 2% 2% na
FIZZ 567 5% 5% 436 30% 6% 4% 6% 47% 16% 10% 2.5x
Median 5% 11% 237 46% 13% 10% 9% 44% 19% 9% .9x
Consumer Non-Cyclical: Crops – Valuation

Syngenta AG (ADR) / SYT 34.35 -22% 94% 16,267 18,497 1.7x 10x 15x 9x 9x 4.0x
Fresh Del Monte Prod / FDP 20.30 -36% 96% 1,290 1,708 .5x 11x 7x 7x 7x 1.2x
Andersons, Inc., The / ANDE 17.58 -4% 177% 320 702 .2x 5x 5x 5x 5x .8x
Cresud Inc. (ADR) / CRESY 5.06 -10% 365% 254 152 3.1x 12x 28x 10x 6x nm
Landec Corporation / LNDC 7.45 -19% 88% 195 133 .5x 8x 15x 17x 14x 2.3x
Agria Corporation (A / GRO 2.09 -26% 498% 132 -69 nm nm 5x 7x 6x .5x
Consumer Non-Cyclical: Crops – Operating Performance

Est.
SYT 10,845 -32% 8% 512 51% 17% 30% 15% 34% 52% 24% .8x
FDP 3,548 9% 5% 101 10% 4% 5% 8% 11% 12% 7% 1.5x
ANDE 3,504 70% 23% 2,503 9% 4% 3% 10% 30% 24% 6% 2.3x
CRESY 49 47% 28% 134 13% 27% 14% 38% 7% 2% 1% .1x
LNDC 248 12% 5% 2,098 16% 7% 5% 26% 49% 12% 9% 1.8x
GRO 95 30% 64% 225 50% -86% <-99% 10% nm <-99% -79% .7x
Median 21% 16% 368 15% 6% 5% 13% 30% 12% 6% 1.2x
Consumer Non-Cyclical: Food Processing – Valuation

Unilever N.V. (ADR) / UN 23.12 -6% 61% 65,177 76,294 1.5x 9x 14x 11x 16x nm
Unilever plc (ADR) / UL 21.73 -6% 76% 61,259 72,359 1.4x 8x 13x 10x 15x nm
Kraft Foods Inc. / KFT 27.44 -7% 29% 40,313 60,169 1.4x 13x 17x 14x 14x nm
General Mills, Inc. / GIS 66.23 -23% 9% 22,130 28,838 2.0x 13x 18x 17x 16x nm
Kellogg Company / K 46.93 -4% 25% 17,913 22,778 1.8x 12x 17x 16x 15x nm
Archer Daniels Midla / ADM 25.92 -48% 89% 16,627 19,862 .3x 6x 9x 8x 9x 1.3x
Campbell Soup Compan / CPB 37.53 -20% 9% 13,546 16,080 2.0x 15x 21x 17x 16x nm
H.J. Heinz Company / HNZ 41.02 -6% 29% 12,811 17,514 1.7x 11x 16x 14x 13x nm
Hershey Company, The / HSY 35.96 -10% 23% 8,167 10,272 2.0x 18x 39x 20x 19x nm
ConAgra Foods, Inc. / CAG 15.18 -1% 73% 6,787 9,879 .8x 11x 14x 10x 9x 14.4x
Sara Lee Corp. / SLE 9.47 -5% 79% 6,695 8,698 .6x 27x nm 12x 10x nm
Bunge Limited / BG 38.70 -29% 249% 4,707 8,795 .2x 3x 7x 4x 5x .7x
McCormick & Company, / MKC 30.79 -4% 37% 4,003 5,324 1.7x 14x 18x 14x 13x nm
Ralcorp Holdings, In / RAH 65.22 -26% 14% 3,652 4,307 1.5x 24x 12x 18x 15x nm
Hormel Foods Corpora / HRL 26.76 -3% 60% 3,608 3,923 .6x 8x 12x 13x 12x 2.9x
Perdigao SA (ADR) / PDA 29.35 -29% 128% 3,031 4,464 1.0x nm 17x 34x 11x 2.0x
Flowers Foods, Inc. / FLO 26.48 -22% 23% 2,456 2,734 1.2x 17x 26x 21x 19x 6.4x
Dean Foods Company / DF 14.55 -8% 101% 2,240 6,851 .5x 12x 15x 12x 10x nm
J.M. Smucker Company / SJM 39.00 -4% 45% 2,138 2,784 1.1x 10x 13x 11x 11x 61.3x
Corn Products Intern / CPO 23.91 -27% 130% 1,781 2,393 .6x 5x 9x 7x 7x 1.5x
Tyson Foods, Inc. / TSN 4.90 -8% 298% 1,740 4,386 .2x 13x 20x 11x 6x .7x
Tootsie Roll Industr / TR 25.00 -14% 40% 1,377 1,341 2.7x 21x 27x 34x 31x 3.7x
Del Monte Foods Comp / DLM 5.73 -9% 80% 1,132 3,064 .8x 10x 9x 10x 9x nm
Wimm-Bill-Dann Foods / WBD 22.52 -9% 545% 991 1,511 .5x 7x 7x 6x 4x 1.6x
Smithfield Foods, In / SFD 6.93 -19% 364% 980 4,932 .4x 21x 7x 14x 4x .5x
TreeHouse Foods Inc. / THS 27.33 -30% 16% 862 1,412 1.0x 17x 21x 18x 16x nm
United Natural Foods / UNFI 19.75 -21% 61% 847 1,174 .3x 13x 17x 15x 12x 3.1x
Lancaster Colony Cor / LANC 29.05 -6% 44% 812 876 .9x 13x 18x 16x 15x 3.2x
Hain Celestial Group / HAIN 18.06 -1% 89% 731 1,008 .9x 14x 18x 12x 10x 11.2x
Green Mountain Coffe / GMCR 29.25 -21% 53% 711 834 1.7x 20x 34x 24x 20x 19.7x
Lance, Inc. / LNCE 19.04 -14% 32% 600 681 .8x 35x 25x 35x 17x 3.8x
Synutra Internationa / SYUT 10.81 -14% 383% 584 615 1.4x nm 13x nm 98x 4.2x
J&J Snack Foods Corp / JJSF 29.46 -21% 22% 551 490 .8x 11x 20x 17x 15x 2.7x
Diamond Foods, Inc. / DMND 27.49 -42% 17% 448 394 .7x 16x 30x 22x 17x 3.3x
Sanderson Farms, Inc / SAFM 22.06 -8% 129% 448 604 .4x 11x 6x 105x 8x 1.1x
Chiquita Brands Inte / CQB 8.58 -2% 200% 380 1,015 .3x 8x nm 6x 6x nm
Darling Internationa / DAR 4.57 -10% 283% 374 371 .4x 3x 8x 5x 7x 2.3x
Smart Balance, Inc. / SMBL 5.94 -23% 111% 372 449 2.2x nm nm nm 35x nm
Peet's Coffee & Tea, / PEET 21.72 -15% 40% 294 280 1.0x 18x 37x 27x 22x 2.0x
American Italian Pas / AIPC 14.75 -71% 22% 286 518 1.0x 13x 53x 22x 9x 2.6x
Gruma S.A.B. de C.V. / GMK 2.00 -21% 603% 282 1,124 .4x 6x 2x nm 29x .3x
ZHONGPIN INC. / HOGS 8.53 -24% 81% 234 270 .5x 7x 11x 7x 6x 1.5x
B&G Foods, Inc. / BGS 4.90 -48% 142% 180 684 1.4x 9x 9x 11x 9x nm
Imperial Sugar Compa / IPSU 14.47 -33% 80% 172 98 .1x nm 4x nm nm 1.1x
Lifeway Foods, Inc. / LWAY 9.35 -9% 66% 156 154 3.5x 35x 49x 37x 28x 8.8x
Calavo Growers, Inc. / CVGW 7.00 0% 215% 101 129 .4x 17x 14x 19x 10x 1.4x
Median .9x 13x 16x 14x 13x 2.6x
Consumer Non-Cyclical: Food Processing – Operating Performance

Est.
UN 51,046 0% 3% 293 na 17% 12% 8% >99% 38% 12% 1.1x
UL 51,046 0% 3% 293 na 17% 12% 8% >99% 38% 12% 1.1x
KFT 41,830 18% 5% 406 33% 11% 9% 9% 38% 14% 6% .6x
GIS 14,077 11% 7% 477 35% 16% 9% 10% 54% 22% 7% .7x
K 12,683 10% 7% 479 43% 16% 9% 10% 63% 46% 10% 1.1x
ADM 78,148 65% 25% 2,831 6% 4% 4% 8% 21% 22% 8% 2.2x
CPB 7,998 8% 4% 412 40% 14% 15% 8% 52% 74% 17% 1.2x
HNZ 10,406 13% 8% 320 36% 15% 8% 8% 58% 44% 8% 1.0x
HSY 5,098 3% 4% 463 33% 11% 6% 7% 25% 47% 7% 1.2x
CAG 12,050 13% 1% 482 22% 8% 10% 10% 23% 24% 9% .9x
SLE 13,507 11% 5% 307 38% 2% 0% 6% 11% -2% 0% 1.2x
BG 48,687 47% 15% 2,038 9% 5% 3% 10% 26% 21% 6% 2.0x
MKC 3,130 9% 5% 417 40% 12% 10% 11% 46% 27% 10% 1.0x
RAH 2,824 27% 19% 362 18% 6% 6% na 29% 31% 9% 1.5x
HRL 6,558 8% 9% 354 23% 8% 5% 9% 33% 16% 9% 1.9x
PDA 4,506 52% 11% 77 25% -10% -7% na nm -20% -9% 1.2x
FLO 2,267 13% 10% 291 48% 7% 5% 11% 27% 16% 10% 2.0x
DF 12,606 13% 7% 493 23% 5% 1% 11% 24% 36% 2% 1.8x
SJM 2,627 20% 7% 808 31% 11% 8% 8% 32% 12% 7% .8x
CPO 3,938 24% 14% 555 18% 11% 7% 3% 24% 15% 8% 1.2x
TSN 26,862 4% 1% 258 5% 1% 0% 15% 6% 3% 1% 2.6x
TR 496 1% 6% 225 33% 13% 8% na 20% 7% 5% .6x
DLM 3,710 10% 9% 431 24% 9% 3% 6% 21% 8% 3% .8x
WBD 2,783 33% 27% 141 31% 8% 5% 33% 23% 22% 9% 1.7x
SFD 11,876 29% 8% 227 9% 2% 1% 13% 5% 3% 1% 1.4x
THS 1,474 38% 19% 433 20% 6% 2% 10% 18% 6% 3% 1.0x
UNFI 3,366 22% 18% 534 19% 3% 1% 15% 16% 11% 5% 3.3x
LANC 1,001 8% -2% 286 15% 7% 5% na 19% 13% 9% 1.8x
HAIN 1,108 20% 19% 371 26% 7% 3% 16% 22% 5% 3% .9x
GMCR 500 46% 46% 536 35% 8% 4% 30% 31% 18% 7% 1.6x
LNCE 822 10% 11% 175 37% 2% 1% 11% 7% 5% 3% 1.9x
SYUT 431 56% 79% 86 33% -1% -1% na nm -2% -1% 1.4x
JJSF 629 11% 11% 242 30% 7% 4% na 26% 9% 7% 1.6x
DMND 532 2% 5% 846 17% 4% 3% 30% 26% 10% 5% 1.8x
SAFM 1,690 26% 10% 174 7% 3% 2% na 10% 8% 5% 2.6x
CQB 3,924 6% 15% 164 15% 3% 2% na 19% 6% 2% 1.4x
DAR 835 40% 26% 444 27% 16% 10% na 83% 35% 22% 2.2x
SMBL 207 >99% na 4,500 44% -6% -26% 35% 52% -14% -9% .4x
PEET 277 16% 20% 403 53% 6% 4% 22% 11% 7% 6% 1.5x
AIPC 517 -21% 1% 794 20% 8% 3% 6% 11% 8% 3% .9x
GMK 3,059 -31% 13% 161 32% 6% 3% na 11% 7% 3% 1.1x
HOGS 501 >99% na 139 13% 7% 6% 25% 38% 20% 12% 1.9x
BGS 484 8% 8% 647 29% 16% 3% 10% 57% 10% 2% .6x
IPSU 687 -23% 4% 819 6% -5% -1% na nm -4% -2% 2.1x
LWAY 44 21% 33% 368 29% 10% 7% 30% 19% 11% 8% 1.3x
CVGW 353 20% 3% 426 8% 2% 1% 15% 14% 7% 4% 2.5x
Median 13% 8% 404 26% 7% 4% 10% 24% 12% 6% 1.4x
Consumer Non-Cyclical: Personal and Household Products – Valuation

Procter & Gamble Com / PG 63.11 -13% 19% 188,428 224,725 2.6x 13x 17x 15x 15x nm
Colgate-Palmolive Co / CL 62.06 -12% 32% 31,323 34,367 2.2x 12x 19x 16x 15x nm
Avon Products, Inc. / AVP 22.53 -12% 101% 9,605 11,048 1.0x 9x 19x 11x 11x 13.8x
Clorox Company, The / CLX 59.30 -20% 13% 8,226 11,489 2.1x 13x 18x 16x 14x nm
Ecolab Inc. / ECL 32.77 -10% 61% 8,122 9,058 1.5x 12x 19x 18x 16x 16.7x
Brown-Forman Corpora / BF.B 47.22 -11% 33% 7,124 7,961 2.4x 12x 17x 16x 15x 19.5x
Estee Lauder Compani / EL 29.93 -4% 83% 5,884 6,987 .9x 8x 12x 13x 12x 3.4x
Church & Dwight Co., / CHD 56.61 -16% 16% 3,965 4,671 2.0x 15x 23x 20x 17x nm
Newell Rubbermaid In / NWL 12.05 -6% 139% 3,340 5,986 .9x 10x 7x 8x 8x nm
Alberto-Culver Compa / ACV 22.92 -10% 28% 2,230 1,777 1.2x 11x 22x 17x 15x 2.5x
Tupperware Brands Co / TUP 19.60 -6% 129% 1,215 1,764 .8x 8x 10x 7x 7x 27.6x
Herbalife Ltd. / HLF 17.56 -5% 191% 1,121 1,298 .5x 4x 7x 5x 5x nm
Nu Skin Enterprises, / NUS 10.56 -5% 89% 682 767 .6x 8x 16x 10x 8x 6.1x
USANA Health Science / USNA 35.05 -48% 42% 541 558 1.3x 10x 13x 16x 14x 14.4x
Revlon, Inc. / REV 8.27 -19% 80% 424 1,691 1.2x 9x nm 10x 8x nm
Zep, Inc. / ZEP 18.80 -34% 16% 394 439 .8x 15x 24x 16x 14x 5.8x
Elizabeth Arden, Inc / RDEN 13.52 -5% 81% 390 816 .7x 26x 20x 9x 8x 3.4x
Inter Parfums, Inc. / IPAR 8.40 -7% 138% 257 299 .6x 6x 11x 10x 8x 3.0x
Blyth, Inc. / BTH 5.86 -5% 318% 208 264 .2x 11x 21x 5x 5x .9x
China Architectural / CAEI 2.68 -32% 418% 141 169 1.1x 6x 11x 5x 4x 2.0x
Gaiam, Inc. / GAIA 4.35 -1% 606% 105 54 .2x nm 13x nm 12x .9x
Median 1.0x 10x 17x 12x 12x 4.6x
Consumer Non-Cyclical: Personal and Household Products – Operating Performance

Est.
PG 85,330 10% 14% 618 51% 20% 14% 10% 75% 18% 9% .6x
CL 15,308 15% 9% 425 57% 19% 12% 10% 88% 83% 17% 1.4x
AVP 10,958 16% 9% 261 62% 11% 7% 13% 56% 84% 13% 1.8x
CLX 5,418 10% 6% 653 41% 16% 9% 10% 83% <-99% 10% 1.1x
ECL 6,094 15% 9% 234 49% 12% 8% 13% 46% 23% 9% 1.2x
BF.B 3,333 15% 14% 806 51% 20% 13% 9% 49% 25% 13% 1.0x
EL 8,104 13% 8% 253 75% 10% 6% 11% 41% 31% 10% 1.6x
CHD 2,357 9% 15% 637 40% 13% 8% 12% 59% 15% 7% .9x
NWL 6,662 4% 4% 296 34% 9% 5% 9% 39% 14% 4% .9x
ACV 1,444 10% 4% 380 53% 11% 18% 12% 40% 24% 17% 1.0x
TUP 2,217 17% 17% 173 65% 10% 7% na 47% 27% 8% 1.1x
HLF 2,424 18% 18% 673 80% 15% 10% 14% >99% >99% 22% 2.2x
NUS 1,236 8% 1% 142 82% 8% 5% 12% 77% 20% 8% 1.8x
USNA 427 3% 16% 446 38% 13% 9% 16% >99% 76% 32% 3.7x
REV 1,395 2% 3% 249 64% 14% 6% 5% >99% -8% 10% 1.6x
ZEP 575 2% 2% 203 56% 5% 3% na 24% 17% 6% 2.2x
RDEN 1,154 1% 7% 543 40% 3% 1% 11% 6% 2% 1% 1.2x
IPAR 465 29% 18% 1,875 57% 12% 6% 14% 32% 13% 6% 1.0x
BTH 1,146 -3% -4% 358 54% 2% 0% na 7% 0% 0% 1.7x
CAEI 148 79% 44% 452 30% 20% 17% 25% 44% 40% 20% 1.2x
GAIA 265 4% 40% 583 61% -13% 0% na nm -1% -1% 1.1x
Median 10% 9% 425 54% 12% 7% 12% 46% 20% 9% 1.2x
Consumer Non-Cyclical: Tobacco – Valuation

Philip Morris Intern / PM 38.41 -13% 46% 77,705 86,049 1.4x 8x 13x 12x 11x nm
British American Tob / BTI 49.95 -9% 62% 49,894 60,945 3.6x 12x 16x 12x 11x nm
Altria Group, Inc. / MO 16.26 -2% 51% 33,502 33,472 1.7x 7x 11x 10x 9x 31.7x
Reynolds American, I / RAI 42.99 -13% 67% 12,530 14,620 1.6x 6x 10x 9x 9x nm
Lorillard Inc. / LO 60.78 -12% 30% 10,215 9,007 2.2x 7x 12x 12x 11x 14.1x
UST Inc. / UST 68.74 -28% 1% 10,201 11,351 5.7x 13x 21x 19x 18x nm
Vector Group Ltd. / VGR 15.29 -29% 43% 1,009 1,048 1.9x 8x 14x 15x 14x nm
Median 1.9x 8x 13x 12x 11x 22.9x
Consumer Non-Cyclical: Tobacco – Operating Performance

Est.
PM 63,315 53% 12% 839 25% 16% 11% 12% >99% 70% 28% 2.5x
BTI 16,917 15% -2% 173 74% 29% 21% 10% 93% 36% 13% .6x
MO 19,230 3% -41% 229 40% 23% 33% 11% >99% 82% 21% .6x
RAI 8,898 0% 12% 1,253 45% 27% 15% 7% nm 18% 7% .5x
LO 4,072 35% 6% 1,454 42% 31% 21% 8% nm 95% 34% 1.6x
UST 1,996 5% 2% 433 71% 44% 27% 7% 97% <-99% 37% 1.4x
VGR 566 3% 4% 1,316 41% 24% 10% na >99% 64% 8% .7x
Median 5% 4% 839 42% 27% 21% 9% 95% 67% 21% .7x
Energy: Coal – Valuation

Peabody Energy Corpo / BTU 27.07 -11% 228% 7,218 10,266 1.7x 9x 17x 8x 5x 2.5x
CONSOL Energy Inc. / CNX 25.52 -21% 367% 4,624 5,388 1.2x 11x 18x 12x 4x 3.2x
Yanzhou Coal Mining / YZC 5.14 -21% 346% 2,528 1,276 .4x 1x 5x 2x 2x .8x
Arch Coal, Inc. / ACI 15.86 -5% 388% 2,266 3,567 1.2x 9x 13x 7x 3x 1.4x
Alpha Natural Resour / ANR 26.47 -17% 351% 1,866 1,827 .7x 7x 62x 8x 2x 2.6x
Massey Energy Compan / MEE 16.20 -6% 491% 1,379 1,986 .7x 24x 14x 5x 3x 1.3x
Walter Industries, I / WLT 23.93 -8% 368% 1,300 2,877 2.1x 8x 11x 5x 2x 2.6x
Natural Resource Par / NRP 18.77 -14% 122% 1,218 1,664 6.1x 9x 15x 10x 8x 2.0x
Alliance Resource Pa / ARLP 27.20 -19% 113% 996 na nm nm 7x 10x 5x 3.1x
Alliance Holdings GP / AHGP 15.76 -40% 97% 943 1,131 1.0x 7x 11x 11x 6x 3.6x
Patriot Coal Corpora / PCX 9.40 -4% 775% 727 937 .7x 28x nm nm 2x .9x
Penn Virginia Resour / PVR 12.61 -25% 139% 653 1,201 1.4x 8x 13x 8x 5x 1.6x
Foundation Coal Hold / FCL 13.92 -5% 545% 620 1,196 .7x 30x 20x 82x 3x nm
Penn Virginia GP Hol / PVG 11.94 -26% 203% 467 1,006 1.2x 7x 16x 7x 7x 3.2x
International Coal G / ICO 2.58 -6% 439% 396 759 .7x nm nm 52x 4x .8x
Headwaters Incorpora / HW 6.79 -11% 142% 285 796 .9x nm nm 9x 5x nm
James River Coal Com / JRCC 8.37 -43% 651% 229 364 .7x nm nm nm 2x 2.5x
Energy: Coal – Operating Performance

Est.
BTU 5,925 25% 8% 846 28% 19% 13% 31% 15% 28% 8% .6x
CNX 4,328 14% 11% 560 30% 12% 6% 56% 10% 21% 4% .7x
YZC 2,890 11% 11% 68 54% 39% 41% 5% 56% 38% 31% .8x
ACI 2,898 21% 8% 719 26% 13% 13% 30% 14% 23% 10% .8x
ANR 2,469 35% 15% 678 20% 10% 8% 55% 33% 37% 14% 1.7x
MEE 2,820 19% 11% 455 24% 3% 0% 63% 4% 1% 0% .9x
WLT 1,366 10% 8% 506 46% 27% 11% 86% 84% 49% 5% .5x
NRP 273 37% 21% 4,631 99% 65% 42% 11% 16% 16% 9% .2x
ARLP 1,098 5% 17% 422 26% 15% 10% 2% 28% 34% 12% 1.2x
AHGP 1,098 5% 17% 422 26% 15% 8% 3% 28% 32% 9% 1.2x
PCX 1,368 27% 10% 595 14% 2% 2% 10% 2% 9% 1% .7x
PVR 870 65% 94% 6,740 27% 17% 8% 4% 19% 15% 7% .8x
FCL 1,601 8% 50% 534 21% 3% -1% 25% 6% -6% -1% .8x
PVG 870 65% 94% 6,740 30% 17% 5% 10% 19% 20% 5% .8x
ICO 1,044 20% 84% 461 11% -14% -11% 36% nm -22% -9% .8x
HW 886 -27% -6% 227 26% -17% -19% na nm -22% -11% .6x
JRCC 554 4% 15% 330 8% -12% -15% na nm -87% -17% 1.2x
Median 19% 15% 534 26% 13% 8% 25% 18% 20% 5% .8x
Energy: Oil and Gas (Integrated) – Valuation

Exxon Mobil Corporat / XOM 73.68 -23% 30% 374,784 346,614 .7x 4x 10x 8x 10x 3.0x
Royal Dutch Shell pl / RDS.A 49.84 -16% 78% 155,561 164,466 .3x 3x 5x 5x 6x 1.2x
Chevron Corporation / CVX 72.68 -24% 44% 147,671 143,649 .5x 3x 8x 6x 8x 1.8x
BP plc (ADR) / BP 43.90 -14% 77% 137,019 150,793 .5x 4x 7x 5x 6x 1.6x
PetroChina Company L / PTR 73.58 -23% 180% 134,664 133,060 .8x 5x 6x 7x 7x 1.2x
TOTAL S.A. (ADR) / TOT 51.75 -18% 77% 115,513 126,604 .6x 3x 7x 6x 6x 1.9x
Eni S.p.A. (ADR) / E 45.55 -22% 87% 91,222 113,482 .8x 4x 6x 5x 6x 1.9x
ConocoPhillips / COP 47.39 -11% 102% 70,650 91,634 .4x 3x 7x 4x 5x 1.1x
StatoilHydro ASA (AD / STO 16.57 -9% 161% 52,786 53,907 .5x 2x 8x 5x 6x 2.4x
China Petroleum & Ch / SNP 57.63 -13% 190% 49,966 81,355 .4x 14x 6x 10x 6x 1.2x
Repsol YPF, S.A. (AD / REP 18.60 -14% 141% 22,708 34,210 .2x 2x 6x 5x 6x 1.2x
Marathon Oil Corpora / MRO 26.69 -19% 137% 18,832 25,805 .3x 3x 5x 4x 5x 1.0x
Hess Corp. / HES 55.53 -25% 147% 18,107 20,659 .5x 3x 10x 6x 9x 1.6x
Petrobras Energia Pa / PZE 5.15 -3% 230% 1,098 2,762 .6x 4x nm 4x 4x .5x
Atlas Energy Resourc / ATN 16.05 -17% 183% 1,038 1,888 2.4x 10x 7x 7x 6x 1.1x
Encore Energy Partne / ENP 14.10 -17% 104% 442 599 3.2x 7x nm 6x 7x 1.6x
BreitBurn Energy Par / BBEP 7.09 -8% 328% 373 1,080 2.9x 10x nm 3x 4x .3x
Pioneer Southwest En / PSE 12.35 -18% 84% 371 346 2.3x 4x 6x 4x 5x 2.1x
Calumet Specialty Pr / CLMT 10.20 -31% 273% 329 803 .3x 10x 4x 73x 6x 1.6x
Legacy Reserves LP / LGCY 8.93 -8% 188% 278 499 2.2x 5x nm 6x 5x 1.1x
Petroleum Developmen / PETD 15.74 -16% 402% 234 440 .9x 3x 7x 4x 4x .7x
Gushan Environmental / GU 2.46 -11% 630% 205 28 .1x x 5x 3x 2x .6x
Kayne Anderson Energ / KED 12.40 -40% 107% 125 203 23.6x nm 8x 9x 9x .6x
Vanguard Natural Res / VNR 8.01 -12% 131% 101 199 4.5x 11x 33x 4x 4x 6.8x
Energy: Oil and Gas (Integrated) – Operating Performance

Est.
XOM 509,305 35% 11% 6,303 24% 18% 10% 7% 76% 40% 19% 2.0x
RDS.A 483,992 49% 10% 4,654 15% 11% 8% 8% 46% 28% 12% 1.6x
CVX 289,212 40% 13% 4,449 28% 15% 8% 9% 56% 29% 15% 1.8x
BP 324,735 19% 14% 3,327 20% 13% 13% 5% 37% 40% 16% 1.3x
PTR 159,737 -21% 28% 342 36% 17% 17% 14% 25% 26% 17% 1.0x
TOT 208,336 24% 13% 2,160 34% 18% 9% 4% 51% 32% 13% 1.3x
E 139,008 2% 14% 1,832 33% 21% 12% 3% 41% 32% 13% 1.1x
COP 255,576 40% 12% 7,840 19% 14% 7% 10% 41% 21% 10% 1.4x
STO 102,639 23% 20% 3,479 55% 32% 8% 4% 78% 30% 11% 1.3x
SNP 201,600 -17% 25% 603 9% 3% 7% 9% 9% 33% 14% 1.9x
REP 144,643 89% 12% 3,941 35% 10% 6% 6% 47% 37% 14% 2.4x
MRO 82,135 35% 9% 2,782 15% 9% 5% 6% 33% 21% 9% 1.8x
HES 43,343 46% 23% 3,259 24% 14% 7% 3% 44% 27% 10% 1.5x
PZE 4,715 -27% 15% 944 28% 15% 7% na 17% 16% 5% .7x
ATN 790 56% 38% na 43% 25% 16% 5% 11% 17% 7% .4x
ENP 188 >99% 82% 516 na 47% 20% 6% 23% 13% 8% .4x
BBEP 369 >99% 22% na 63% 30% 22% 2% 10% 7% 4% .2x
PSE 150 96% na 88 70% 61% 60% 4% 70% 68% 53% .9x
CLMT 2,427 55% 45% 3,793 8% 3% 1% na 15% 7% 2% 2.5x
LGCY 225 >99% 99% 5,926 73% 47% -9% 10% 23% -10% -3% .4x
PETD 509 83% 5% 1,989 58% 29% 16% 15% 20% 21% 8% .5x
GU 213 59% 80% 572 40% 34% 20% 15% 55% 13% 12% .6x
KED 9 0% na na 49% 0% -94% 9% na -3% -3% .0x
VNR 44 3% 26% >9,999 na 39% 26% 4% 14% 30% 7% .3x
Median 35% 18% 3,020 34% 17% 9% 6% 37% 26% 11% 1.2x
Energy: Oil and Gas Operations (I of II) – Valuation

Occidental Petroleum / OXY 48.19 -17% 108% 39,028 39,347 1.5x 3x 8x 5x 7x 1.4x
Ecopetrol S.A. (ADR) / EC 17.60 -21% 58% 35,830 na nm nm 13x 9x 12x nm
CNOOC Limited (ADR) / CEO 76.05 -27% 172% 33,969 29,056 1.7x 4x 8x 5x 5x 1.6x
Devon Energy Corpora / DVN 70.14 -22% 82% 30,967 34,610 2.2x 5x 10x 6x 8x 1.6x
Apache Corporation / APA 76.04 -24% 96% 25,448 27,947 2.1x 4x 9x 6x 8x 1.4x
EOG Resources, Inc. / EOG 80.63 -33% 80% 20,124 21,135 3.2x 6x 18x 10x 11x 2.3x
XTO Energy Inc. / XTO 33.54 -29% 120% 19,347 29,504 4.0x 8x 10x 9x 7x 1.4x
Anadarko Petroleum C / APC 37.82 -35% 115% 17,361 28,079 1.9x 5x 5x 7x 11x 1.3x
Chesapeake Energy Co / CHK 21.23 -44% 249% 12,758 25,304 2.4x 7x 8x 6x 6x .8x
Southwestern Energy / SWN 30.26 -37% 74% 10,389 10,727 4.8x 12x 47x 20x 18x 4.7x
Valero Energy Corpor / VLO 19.51 -25% 265% 10,068 13,776 .1x 3x 3x 4x 5x .7x
Enterprise Products / EPD 22.87 -30% 43% 10,014 18,539 .8x 15x 24x 12x 11x 2.3x
Murphy Oil Corporati / MUR 46.86 -19% 117% 8,926 9,008 .3x 3x 12x 5x 7x 1.5x
Noble Energy, Inc. / NBL 50.61 -39% 108% 8,743 9,999 2.4x 4x 9x 7x 7x 1.7x
Ultra Petroleum Corp / UPL 44.50 -21% 131% 6,697 7,142 6.9x 11x 39x 16x 16x 6.5x
Range Resources Corp / RRC 40.62 -41% 89% 6,310 7,957 6.6x 14x 37x 20x 23x 2.8x
Santos Limited (ADR) / STOSY 35.65 -35% 138% 5,307 6,511 3.7x 13x 17x 10x 16x 2.4x
Questar Corporation / STR 28.92 -29% 159% 5,016 7,149 2.1x 6x 10x 8x 8x 1.6x
Sunoco, Inc. / SUN 37.97 -44% 94% 4,437 5,844 .1x 6x 5x 8x 11x 1.5x
CNX Gas Corporation / CXG 28.56 -51% 59% 4,312 4,372 6.2x 12x 32x 18x 17x 3.4x
Plains All American / PAA 34.71 -33% 52% 4,266 8,883 .3x 16x 14x 12x 12x 1.8x
Petrohawk Energy Cor / HK 16.50 -49% 230% 4,142 5,722 5.4x 13x 53x 25x 24x 1.4x
Energy Transfer Equi / ETE 17.64 -27% 102% 3,931 10,521 1.3x 11x 43x 10x 8x nm
Continental Resource / CLR 22.54 -17% 272% 3,813 4,039 4.1x 7x 133x 9x 12x 4.0x
Enterprise GP Holdin / EPE 20.19 -28% 84% 2,810 14,629 .4x 9x 21x 13x 13x nm
Ultrapar Participaco / UGP 20.86 -35% 96% 2,785 na nm nm 19x 13x 7x 1.4x
Cabot Oil & Gas Corp / COG 26.54 -28% 175% 2,743 3,391 3.7x 10x 17x 11x 12x 1.6x
Newfield Exploration / NFX 19.89 -13% 251% 2,630 4,709 2.1x 4x 15x 5x 4x .7x
Pioneer Natural Reso / PXD 22.27 -8% 269% 2,621 5,350 2.2x 7x 11x 5x 5x .8x
Plains Exploration & / PXP 22.64 -25% 253% 2,436 5,893 2.3x 5x 11x 3x 5x .7x
Cimarex Energy Co. / XEC 27.75 -6% 168% 2,311 2,584 1.2x 6x 7x 4x 6x .9x
Denbury Resources In / DNR 9.09 -13% 344% 2,246 2,850 1.9x 4x 9x 5x 6x 1.3x
Dynegy Inc. / DYN 2.38 -15% 317% 2,006 7,252 2.1x 10x 16x 22x 10x .5x
Comstock Resources, / CRK 42.04 -42% 116% 1,935 1,809 2.6x 5x 27x 11x 19x 1.7x
Forest Oil Corporati / FST 19.80 -10% 320% 1,923 4,610 2.7x 5x 9x 4x 6x .7x
Concho Resources Inc / CXO 22.63 -33% 81% 1,917 2,490 4.9x 10x 60x 11x 9x 1.7x
Whiting Petroleum Co / WLL 43.47 -28% 159% 1,840 2,938 2.4x 5x 13x 6x 7x 1.0x
Linn Energy, LLC / LINE 15.17 -28% 79% 1,747 3,471 9.9x nm nm 8x 7x .9x
AmeriGas Partners, L / APU 29.91 -40% 25% 1,705 2,660 .9x 11x 11x 11x 11x nm
SandRidge Energy Inc / SD 10.07 -21% 589% 1,672 3,568 3.0x 10x 112x 16x 32x .7x
EXCO Resources, Inc. / XCO 7.05 -24% 481% 1,487 4,378 3.3x nm nm 7x 9x .7x
Spectra Energy Partn / SEP 19.93 -39% 51% 1,434 1,847 15.7x 36x 7x 15x 14x 1.4x
Tesoro Corporation / TSO 10.25 -26% 457% 1,419 2,777 .1x 10x 3x 8x 7x .5x
Unit Corporation / UNT 29.55 -7% 199% 1,397 1,545 1.1x 3x 5x 4x 6x .8x
Encore Acquisition C / EAC 25.65 -28% 210% 1,353 2,631 2.2x 5x 80x 6x 8x 1.3x
Penn Virginia Corpor / PVA 31.21 -20% 160% 1,306 2,305 1.9x 7x 24x 10x 11x 1.5x
St. Mary Land & Expl / SM 20.88 -13% 214% 1,298 1,820 1.4x 4x 7x 5x 6x 1.3x
Quicksilver Resource / KWK 7.78 -6% 478% 1,298 3,718 5.0x 12x 3x 6x 6x .9x
Energy: Oil and Gas Operations (II of II) – Valuation

Frontier Oil Corpora / FTO 12.34 -32% 274% 1,282 1,151 .2x 4x 3x 7x 5x 1.1x
W&T Offshore, Inc. / WTI 14.62 -4% 310% 1,116 1,085 .7x 2x 8x 4x 8x .8x
Mariner Energy, Inc. / ME 12.50 -21% 199% 1,111 2,060 1.6x 4x 7x 4x 4x .8x
Goodrich Petroleum C / GDP 27.76 -43% 210% 1,042 1,070 5.2x 7x nm 82x 60x 1.6x
CARBO Ceramics Inc. / CRR 40.44 -25% 55% 989 957 2.5x 12x 18x 17x 15x 2.4x
World Fuel Services / INT 31.65 -56% 10% 926 884 .0x 6x 14x 10x 10x 2.3x
Bill Barrett Corpora / BBG 20.33 -26% 229% 918 1,177 2.0x 7x 34x 7x 8x .9x
Inergy, L.P. / NRGY 18.22 -29% 81% 908 1,823 1.0x 14x 30x 20x 16x 8.1x
Permian Basin Royalt / PBT 18.96 -24% 47% 884 872 7.8x 8x 13x 7x 9x nm
Arena Resources, Inc / ARD 23.04 -21% 150% 879 800 3.8x 6x 23x 10x 12x 1.9x
Holly Corporation / HOC 17.47 -20% 225% 868 1,019 .2x 6x 3x 9x 6x 2.0x
Stone Energy Corpora / SGY 20.80 -8% 256% 829 1,444 1.7x 4x 3x 3x 5x .6x
McMoRan Exploration / MMR 11.00 -20% 223% 775 978 .8x 5x nm 4x 9x 1.3x
Swift Energy Company / SFY 24.68 -17% 178% 761 1,269 1.5x 3x 5x 3x 8x .7x
Sabine Royalty Trust / SBR 46.98 -24% 51% 685 676 7.9x 8x 12x 7x 10x 81.5x
GMX Resources Inc. / GMXR 33.50 -36% 164% 632 778 6.3x 13x 36x 17x 12x 1.7x
Eagle Rock Energy Pa / EROC 8.14 -12% 167% 629 na nm nm nm nm 9x 1.2x
Berry Petroleum Comp / BRY 13.45 -4% 362% 599 1,725 2.2x 6x 5x 3x 4x 1.0x
Delta Petroleum Corp / DPTR 5.69 -32% 399% 588 1,392 6.0x nm nm nm nm .5x
Western Refining, In / WNR 8.36 -46% 270% 572 1,883 .2x 10x 2x 6x 9x 1.2x
Clayton Williams Ene / CWEI 46.15 -41% 163% 559 952 1.6x 4x 89x 4x 5x 2.2x
BPZ Resources, Inc. / BPZ 6.96 -9% 329% 548 550 11.7x nm nm 54x 10x 3.4x
Carrizo Oil & Gas, I / CRZO 17.55 -14% 335% 540 993 4.5x 11x 31x 9x 7x 1.1x
Targa Resources Part / NGLS 10.30 -15% 190% 485 1,098 .4x 6x 13x 5x 5x .8x
Aegean Marine Petrol / ANW 11.20 -25% 297% 476 743 .3x 17x 17x 10x 5x 1.9x
Rosetta Resources In / ROSE 9.10 -15% 226% 471 580 1.1x nm 8x 7x 7x .6x
Enbridge Energy Mana / EEQ 30.97 -22% 65% 457 457 nm nm 14x 9x 10x 1.0x
Alon USA Energy, Inc / ALJ 9.69 -36% 226% 454 1,599 .3x 85x 4x nm 9x 1.5x
Genesis Energy, L.P. / GEL 8.91 -14% 191% 352 734 .3x 54x nm 13x 7x 2.9x
PetroQuest Energy, I / PQ 6.33 -6% 361% 319 498 1.6x 4x 8x 6x 7x .9x
Delek US Holdings, I / DK 5.51 -31% 285% 296 493 .1x 10x 3x 9x 7x .7x
VAALCO Energy, Inc. / EGY 4.39 -20% 105% 256 157 .8x 1x 14x 5x 8x 1.5x
Ivanhoe Energy Inc. / IVAN 0.85 -4% 369% 238 240 4.8x nm nm nm nm 1.4x
ATP Oil & Gas Corpor / ATPG 6.18 -7% 745% 222 1,696 2.3x 8x 4x 2x 3x .6x
Harvest Natural Reso / HNR 6.66 -13% 102% 219 101 9.0x nm 4x 18x 9x .8x
Gulfport Energy Corp / GPOR 5.13 -12% 317% 219 310 2.3x 6x 5x 4x 3x .6x
Brigham Exploration / BEXP 4.49 -9% 307% 209 442 3.6x 10x 20x 10x 12x .7x
Approach Resources I / AREX 9.60 -19% 213% 198 220 2.9x 7x 40x 8x 8x .9x
EV Energy Partners, / EVEP 14.69 -24% 145% 191 633 3.1x 6x 15x 3x 4x .6x
Venoco, Inc. / VQ 3.67 -11% 564% 189 940 2.0x 6x nm 3x 7x .7x
Energy XXI (Bermuda) / EXXI 1.30 -11% 510% 189 1,066 1.7x 8x 4x 9x 2x .3x
Rex Energy Corporati / REXX 4.98 -37% 501% 182 156 2.3x 32x nm 26x nm .8x
Warren Resources, In / WRES 3.09 -14% 396% 182 248 2.2x 5x 15x 4x 5x .5x
Callon Petroleum Com / CPE 7.69 -16% 276% 166 333 2.0x 5x 11x 7x 3x .5x
Hiland Holdings GP, / HPGP 6.51 -2% 352% 141 390 1.0x 12x 27x 8x 5x nm
Northern Oil & Gas, / NOG 4.00 -37% 310% 136 121 110.3x nm nm 100x 9x 3.9x
FX Energy, Inc. / FXEN 3.24 -15% 168% 135 122 6.6x nm nm nm nm 3.4x
Global Partners LP / GLP 10.00 -41% 191% 133 na nm nm 3x 7x 6x 1.1x
Parallel Petroleum C / PLLL 3.18 -12% 647% 132 471 2.4x 5x nm 5x 4x .5x
Energy: Oil Well Services and Equipment – Valuation

Schlumberger Limited / SLB 48.76 -14% 130% 58,325 60,571 2.2x 8x 12x 10x 10x 5.0x
Transocean Inc. / RIG 70.89 -20% 130% 22,626 36,188 3.2x 7x 5x 5x 4x 2.9x
Halliburton Company / HAL 18.11 -14% 206% 16,186 17,984 1.0x 6x 7x 6x 6x 2.5x
National-Oilwell Var / NOV 25.81 -22% 259% 10,771 10,518 .9x 4x 7x 5x 5x 4.1x
Diamond Offshore Dri / DO 73.73 -16% 102% 10,249 10,115 3.1x 6x 12x 8x 6x 3.1x
Baker Hughes Incorpo / BHI 30.94 -11% 194% 9,515 10,019 .9x 4x 7x 6x 6x 1.8x
Weatherford Internat / WFT 12.80 -14% 290% 8,718 14,000 1.5x 7x 8x 6x 6x 2.2x
Noble Corporation / NE 26.89 -17% 157% 7,097 7,611 2.3x 4x 6x 5x 4x 1.4x
Smith International, / SII 27.12 -6% 226% 5,935 8,542 .9x 5x 8x 7x 7x 6.7x
Energy Transfer Part / ETP 35.61 -37% 53% 5,414 10,591 1.3x 11x 29x 10x 9x 2.2x
Ensco International / ESV 32.37 -8% 157% 4,591 4,405 1.9x 3x 5x 4x 4x 1.1x
Cameron Internationa / CAM 20.62 -17% 184% 4,526 4,502 .8x 5x 10x 8x 7x 2.8x
Nabors Industries Lt / NBR 13.61 -18% 272% 3,873 7,247 1.3x 6x 4x 4x 5x .8x
Kinder Morgan Manage / KMR 44.94 -26% 23% 3,431 3,431 nm nm 375x 19x 18x 1.6x
FMC Technologies, In / FTI 27.18 -7% 191% 3,399 3,219 .7x 6x 12x 10x 9x 5.4x
BJ Services Company / BJS 10.93 -18% 220% 3,215 3,734 .7x 4x 5x 6x 5x 1.4x
Enbridge Energy Part / EEP 31.18 -22% 73% 3,033 6,689 .6x 14x 15x 10x 10x 1.2x
Helmerich & Payne, I / HP 26.00 -17% 197% 2,736 3,094 1.6x 5x 6x 6x 5x 1.3x
Pride International, / PDE 15.68 -17% 212% 2,714 3,017 1.4x 4x 6x 4x 4x .7x
TEPPCO Partners, L.P / TPP 25.56 -34% 59% 2,672 na nm nm 10x 13x 13x 2.0x
NuStar Energy L.P. / NS 42.39 -36% 35% 2,309 4,368 1.0x 13x 15x 10x 10x 1.7x
CGG Veritas (ADR) / CGV 15.90 -26% 286% 2,189 3,568 1.2x 5x 7x 5x 4x nm
Tidewater Inc. / TDW 39.79 -18% 79% 2,051 2,206 1.7x 6x 6x 5x 5x 1.2x
Magellan Midstream P / MMP 29.56 -36% 52% 1,973 2,971 2.3x 8x 11x 10x 10x 2.1x
Rowan Companies, Inc / RDC 16.04 -14% 199% 1,813 2,094 .9x 3x 4x 4x 4x .7x
Patterson-UTI Energy / PTEN 11.54 -13% 225% 1,784 1,759 .8x 3x 4x 5x 8x .9x
McDermott Internatio / MDR 7.80 -8% 761% 1,778 952 .1x 2x 3x 3x 4x 1.3x
Buckeye Partners, L. / BPL 36.16 -39% 48% 1,749 na nm nm 12x 12x 11x 1.8x
Core Laboratories N. / CLB 68.39 -23% 114% 1,576 1,818 2.4x 8x 14x 11x 11x nm
Atwood Oceanics, Inc / ATW 22.53 -12% 182% 1,443 1,411 2.9x 6x 10x 7x 4x 1.9x
Oceaneering Internat / OII 25.85 -19% 219% 1,408 1,686 .9x 5x 8x 7x 6x 1.7x
Superior Energy Serv / SPN 16.75 -11% 245% 1,299 1,882 1.0x 3x 5x 4x 4x 2.2x
Sunoco Logistics Par / SXL 43.25 -36% 28% 1,239 1,791 .2x 9x 13x 9x 9x 2.1x
Exterran Holdings, I / EXH 17.34 -9% 394% 1,122 3,472 1.1x 9x 23x 8x 6x .8x
Grey Wolf, Inc. / GW 6.05 -22% 60% 1,083 1,068 1.2x 5x 8x 10x 12x 1.5x
Magellan Midstream H / MGG 15.98 -29% 69% 1,001 2,067 1.6x 6x 16x 12x 12x nm
Acergy S.A. (ADR) / ACGY 5.09 -15% 452% 960 947 .3x 2x 7x 3x 3x 1.2x
Oil States Internati / OIS 18.82 -14% 245% 937 1,298 .5x 3x 5x 3x 4x 1.1x
RPC, Inc. / RES 8.61 -17% 120% 845 1,027 1.2x 7x 10x 10x 14x 2.0x
NuStar GP Holdings, / NSH 18.56 -34% 75% 789 795 11.7x 12x 18x 12x 11x 1.4x
Helix Energy Solutio / HLX 8.45 -12% 407% 776 2,704 1.3x 5x 3x 3x 3x .8x
Dril-Quip, Inc. / DRQ 18.51 -11% 253% 722 615 1.1x 4x 7x 7x 6x 1.3x
GulfMark Offshore, I / GLF 28.37 -14% 150% 719 1,167 3.1x 7x 7x 5x 4x 1.0x
Cal Dive Internation / DVR 6.58 -16% 135% 697 1,009 1.3x 7x 5x 7x 5x 1.9x
Complete Production / CPX 8.37 -13% 352% 627 1,377 .8x 4x 4x 3x 4x 1.3x
Bristow Group Inc. / BRS 20.58 -16% 187% 599 1,153 1.1x 8x 6x 7x 6x .6x
Key Energy Services, / KEG 4.89 -15% 311% 596 1,169 .6x 4x 4x 4x 4x 1.3x
Atlas Pipeline Partn / APL 11.20 -11% 313% 515 1,969 1.6x nm nm 5x 4x 2.0x
WSP Holdings Limited / WH 4.77 -22% 99% 477 413 .6x 3x 5x 7x 6x 1.1x
Financial: Consumer Financial Services – Valuation

Move to Last This Next P/
Price 52-Wk MV FY FY FY Tang.
Company / Ticker ($) Low High ($mn) Act. Est. Est. Book
Visa Inc. / V 54.24 -19% 66% 45,825 85x 20x 17x 38.8x
American Express Com / AXP 19.99 -17% 199% 23,186 6x 8x 8x 1.9x
Capital One Financia / COF 31.19 -7% 104% 12,216 5x 7x 8x 1.0x
Discover Financial S / DFS 9.47 -21% 110% 4,545 8x 6x 8x .8x
Dun & Bradstreet Cor / DNB 72.73 -10% 36% 3,921 15x 14x 12x nm
SLM Corporation / SLM 7.43 -44% 436% 3,472 nm 6x 4x 1.5x
Fidelity National In / FIS 15.85 -22% 60% 3,011 6x 10x 9x nm
Metavante Technologi / MV 15.55 -26% 70% 1,861 52x 11x 10x nm
Greenhill & Co., Inc / GHL 61.05 -26% 52% 1,721 15x 36x 18x 15.0x
CIT Group Inc. / CIT 4.14 -36% 643% 1,182 nm nm 16x .3x
AmeriCredit Corp. / ACF 5.56 -49% 188% 647 nm nm 17x .3x
Fannie Mae / FNM 0.54 -35% 8200% 581 nm nm nm nm
Nelnet, Inc. / NNI 11.48 -25% 72% 568 16x 17x 8x 1.6x
Financial Federal Co / FIF 18.81 -7% 43% 483 9x 10x 10x 1.2x
Ocwen Financial Corp / OCN 7.36 -50% 10% 462 12x 12x 10x 1.1x
Euronet Worldwide, I / EEFT 9.14 -15% 264% 460 8x 7x 7x nm
Freddie Mac / FRE 0.67 -63% 6310% 434 nm nm nm nm
S1 Corporation / SONE 6.05 -34% 37% 324 19x 15x 13x 4.3x
PHH Corporation / PHH 5.14 -17% 342% 279 nm 5x 8x nm
World Acceptance Cor / WRLD 17.07 -12% 169% 277 6x 5x 5x 1.2x
United Financial Ban / UBNK 13.72 -26% 25% 243 53x 25x 23x 1.1x
BGC Partners, Inc. / BGCP 2.99 -19% 334% 242 18x 5x 6x 1.1x
Hercules Technology / HTGC 6.37 -7% 104% 209 4x 5x 5x .5x
Dollar Financial Cor / DLLR 8.50 -3% 270% 204 4x 4x 4x nm
NewStar Financial, I / NEWS 3.70 -5% 173% 180 nm 6x 7x .3x
China Finance Online / JRJC 8.00 -13% 277% 176 nm 10x 6x 2.5x
Advanta Corp. / ADVNB 3.01 -9% 354% 137 2x nm nm .2x
CompuCredit Corporat / CCRT 2.47 -37% 526% 119 nm nm nm .2x
Advance America, Cas / AEA 1.88 -20% 469% 115 3x 3x 3x 2.7x
Average (equal-weighted) 17x 11x 10x 3.7x
Average (market value-weighted) 41x 14x 12x 17.5x
Median 9x 8x 8x 1.1x
Financial: Insurance (Miscellaneous) – Valuation

MetLife, Inc. / MET 28.14 -11% 139% 22,332 5x 6x 6x 1.0x
Marsh & McLennan Com / MMC 23.85 -7% 54% 12,261 24x 16x 13x nm
Aon Corporation / AOC 42.16 -22% 22% 11,374 20x 15x 12x 13.5x
Willis Group Holding / WSH 24.56 -20% 66% 4,085 9x 9x 9x nm
Brown & Brown, Inc. / BRO 20.42 -20% 34% 2,889 15x 17x 16x nm
Arthur J. Gallagher / AJG 23.90 -11% 26% 2,271 15x 16x 15x nm
Enstar Group Ltd. / ESGR 62.82 -20% 115% 837 16x 10x 6x 1.6x
Crawford & Company / CRD.B 11.20 -73% 101% 574 35x 20x 16x nm
Life Partners Holdin / LPHI 30.95 -61% 37% 368 20x 14x 13x 11.2x
CNinsure Inc. / CISG 7.61 -13% 162% 347 12x 12x 9x 1.5x
eHealth, Inc. / EHTH 10.27 -7% 259% 258 8x 19x 17x 1.7x
Baldwin & Lyons, Inc / BWINB 16.72 -16% 70% 252 5x 10x 11x .7x
Financial: Insurance (Accident and Health) – Valuation

UnitedHealth Group I / UNH 20.02 -28% 197% 24,180 6x 7x 7x 1.2x
AFLAC Incorporated / AFL 41.77 -23% 65% 19,470 13x 10x 9x 3.0x
WellPoint, Inc. / WLP 35.24 -7% 155% 17,939 6x 6x 6x nm
Aetna Inc. / AET 23.33 -13% 157% 10,758 7x 6x 6x 3.1x
Humana Inc. / HUM 30.63 -18% 188% 5,168 6x 7x 5x 2.4x
Unum Group / UNM 15.04 -34% 99% 4,980 8x 6x 6x .8x
CIGNA Corporation / CI 12.95 -24% 340% 3,519 3x 4x 3x 2.0x
Torchmark Corporatio / TMK 38.47 -18% 72% 3,271 7x 7x 6x 1.6x
Transatlantic Holdin / TRH 38.92 -17% 93% 2,579 5x 7x 6x .9x
Assurant, Inc. / AIZ 19.98 -7% 257% 2,350 4x 3x 3x .8x
Coventry Health Care / CVH 12.59 -9% 407% 1,876 3x 5x 4x 28.9x
AMERIGROUP Corporati / AGP 22.50 -29% 82% 1,192 10x 9x 9x 2.1x
HealthSpring, Inc / HS 17.02 -23% 35% 996 11x 8x 7x nm
Health Net, Inc. / HNT 9.46 -4% 460% 981 6x 5x 5x 1.2x
Catalyst Health Solu / CHSI 20.00 -38% 77% 871 22x 17x 14x 20.6x
Universal American C / UAM 9.33 -31% 184% 632 8x 6x 6x 1.2x
Molina Healthcare, I / MOH 22.26 -17% 102% 599 11x 10x 9x 2.0x
WellCare Health Plan / WCG 9.36 -35% 527% 390 3x 2x 7x .8x
Triple-S Management / GTS 9.88 -2% 125% 319 5x 6x 5x .7x
Amerisafe, Inc. / AMSF 15.97 -44% 35% 301 6x 7x 7x 1.2x
Financial: Insurance (Life) – Valuation

China Life Insurance / LFC 41.26 -19% 114% 77,745 12x 22x 16x 3.2x
AXA (ADR) / AXA 17.43 -15% 143% 35,919 5x 9x 6x 1.1x
ING Groep N.V. (ADR) / ING 9.53 -31% 327% 19,375 2x 4x 4x .9x
Prudential Public Li / PUK 9.00 -17% 236% 11,236 10x 3x 3x 1.7x
Prudential Financial / PRU 25.24 -20% 295% 10,702 3x 4x 3x .6x
AEGON N.V. (ADR) / AEG 4.80 -24% 288% 7,856 3x nm 7x .4x
Nationwide Financial / NFS 50.00 -25% 4% 6,899 12x 16x 12x 1.9x
Principal Financial / PFG 16.83 -26% 321% 4,365 6x 5x 4x 1.0x
Lincoln National Cor / LNC 14.35 -12% 341% 3,672 3x 3x 3x .7x
Reinsurance Group of / RGA.A 37.87 -31% 69% 2,360 8x 6x 6x .9x
StanCorp Financial G / SFG 31.72 -10% 74% 1,552 7x 6x 6x 1.1x
Genworth Financial, / GNW 1.47 -39% 1819% 637 1x 1x 1x .1x
Protective Life Corp / PL 8.85 -17% 401% 619 2x 3x 2x .4x
Delphi Financial Gro / DFG 12.26 0% 225% 576 4x 6x 4x .7x
Conseco, Inc. / CNO 2.68 -51% 428% 495 nm 3x 2x .2x
Phoenix Companies, I / PNX 3.35 -20% 317% 383 3x nm 4x .3x
FBL Financial Group / FFG 12.14 0% 215% 366 4x 5x 4x .7x
Citizens, Inc. / CIA 7.90 -36% 16% 354 23x 25x 22x 2.3x
American Equity Inve / AEL 4.39 -17% 165% 233 9x 3x 3x .4x
Median 5x 5x 4x .7x
Financial: Insurance (Property and Casualty) – Valuation

Berkshire Hathaway I / BRK.A 101,000 -5% 50% 156,467 12x 18x 16x 1.8x
Allianz SE (ADR) / AZ 7.00 -13% 210% 31,665 3x 6x 5x 1.0x
Travelers Companies, / TRV 41.88 -31% 40% 24,480 6x 8x 8x 1.2x
Chubb Corporation, T / CB 49.60 -33% 40% 17,643 7x 9x 9x 1.3x
ACE Limited / ACE 52.70 -34% 29% 17,580 7x 7x 7x 1.5x
Allstate Corporation / ALL 27.07 -18% 105% 14,509 3x 8x 5x .9x
Loews Corporation / L 27.94 -17% 84% 12,184 8x 7x 6x .8x
Progressive Corporat / PGR 14.13 -27% 51% 9,547 9x 11x 11x 2.2x
American Internation / AIG 2.08 -40% 2895% 5,595 1x nm 1x .1x
W.R. Berkley Corpora / WRB 27.29 -39% 17% 4,400 7x 9x 9x 1.5x
Philadelphia Consoli / PHLY 59.66 -50% 1% 4,283 14x 16x 16x 2.7x
Everest Re Group, Lt / RE 69.47 -21% 54% 4,266 5x 7x 6x .8x
Cincinnati Financial / CINF 26.23 -48% 58% 4,259 5x 13x 12x .9x
Arch Capital Group L / ACGL 66.30 -50% 21% 3,996 6x 7x 7x 1.1x
Hartford Financial S / HIG 12.65 -35% 680% 3,802 1x 3x 2x .4x
Axis Capital Holding / AXS 25.63 -22% 69% 3,625 4x 9x 5x .9x
PartnerRe Ltd. / PRE 65.74 -27% 28% 3,619 6x 6x 7x 1.0x
CNA Financial Corpor / CNA 12.77 -9% 191% 3,435 4x 4x 4x .5x
White Mountains Insu / WTM 319.00 -17% 66% 3,331 8x 37x 13x .8x
Markel Corporation / MKL 312.25 -8% 59% 3,064 8x 18x 14x 1.6x
HCC Insurance Holdin / HCC 23.59 -40% 33% 2,706 7x 8x 8x 1.6x
RenaissanceRe Holdin / RNR 42.76 -26% 44% 2,626 5x 11x 6x 1.1x
Odyssey Re Holdings / ORH 40.94 -23% 17% 2,460 5x 24x 15x .9x
Mercury General Corp / MCY 44.72 -11% 39% 2,449 10x 12x 13x 1.4x
American Financial G / AFG 20.90 -35% 53% 2,415 7x 5x 6x .9x
Old Republic Interna / ORI 9.65 -30% 79% 2,227 8x nm nm .6x
XL Capital Ltd. / XL 6.14 -44% 995% 2,031 5x 2x 2x .3x
Fidelity National Fi / FNF 9.47 -25% 121% 2,006 16x nm 18x 2.1x
Erie Indemnity Compa / ERIE 37.48 -48% 50% 1,926 11x 14x 12x 2.1x
Hanover Insurance Gr / THG 37.66 -21% 46% 1,924 8x 11x 9x 1.0x
First American Corpo / FAF 19.79 -16% 234% 1,838 nm 19x 13x nm
MBIA Inc. / MBI 5.90 -39% 562% 1,612 nm nm 13x .6x
Aspen Insurance Hold / AHL 19.45 -18% 67% 1,585 4x 8x 5x .6x
ProAssurance Corpora / PRA 46.78 -20% 94% 1,567 10x 10x 10x 1.2x
Allied World Assuran / AWH 30.24 -31% 69% 1,482 4x 4x 4x .7x
Platinum Underwriter / PTP 29.73 -28% 30% 1,418 6x 6x 6x .8x
Endurance Specialty / ENH 24.85 -22% 74% 1,416 3x 7x 5x .7x
Montpelier Re Holdin / MRH 13.93 -21% 29% 1,275 4x 12x 6x .9x
IPC Holdings, Ltd. / IPCR 26.40 -28% 28% 1,234 5x 6x 6x .7x
Zenith National Insu / ZNT 31.96 -19% 51% 1,191 5x 10x 12x 1.2x
RLI Corp. / RLI 54.68 -20% 32% 1,171 7x 12x 14x 1.7x
Selective Insurance / SIGI 20.95 -20% 45% 1,106 8x 11x 11x 1.2x
Harleysville Group I / HGIC 33.05 -25% 57% 933 10x 12x 10x 1.4x
State Auto Financial / STFC 23.35 -17% 59% 924 8x nm 11x 1.2x
Argo Group Internati / AGII 30.00 -18% 44% 923 10x 9x 6x .8x
OneBeacon Insurance / OB 9.50 -1% 151% 903 4x 7x 6x .7x
Navigators Group, In / NAVG 50.60 -22% 32% 849 9x 12x 10x 1.3x
Assured Guaranty Ltd / AGO 8.45 -23% 231% 769 nm 6x 4x .4x
Max Capital Group Lt / MXGL 13.00 -8% 138% 728 3x nm 4x .6x
Employers Holdings, / EIG 13.98 -28% 48% 683 6x 8x 8x 1.7x
Average MV-weighted) 8x 12x 11x 1.4x
Financial: Investment Services – Valuation

UBS AG (USA) / UBS 11.50 0% 301% 32,631 nm nm 7x 1.2x
Credit Suisse Group / CS 26.95 -8% 139% 28,066 5x nm 9x 1.2x
Goldman Sachs Group, / GS 66.73 -9% 251% 26,388 3x 6x 6x .7x
Merrill Lynch & Co., / MER 13.20 -12% 378% 21,117 nm nm 6x .9x
Charles Schwab Corpo / SCHW 16.61 -35% 73% 19,188 18x 16x 14x 5.4x
CME Group Inc. / CME 209.03 -6% 242% 14,002 14x 12x 11x nm
BlackRock, Inc. / BLK 110.12 -10% 126% 13,014 15x 15x 15x 78.3x
Morgan Stanley / MS 12.03 -44% 360% 12,776 5x 3x 3x .4x
Franklin Resources, / BEN 54.43 -9% 136% 12,751 8x 12x 10x 2.5x
T. Rowe Price Group, / TROW 31.51 -15% 123% 8,142 13x 15x 19x 4.1x
TD Ameritrade Holdin / AMTD 12.31 -19% 91% 7,294 9x 10x 9x nm
NYSE Euronext / NYX 24.84 -12% 273% 6,583 9x 8x 8x nm
IntercontinentalExch / ICE 70.86 -25% 175% 5,119 21x 15x 13x nm
NASDAQ OMX Group, In / NDAQ 21.90 -9% 128% 4,384 6x 11x 9x nm
Ameriprise Financial / AMP 18.00 -9% 242% 3,899 5x 5x 5x .6x
SEI Investments Comp / SEIC 15.67 -16% 111% 2,987 12x 12x 12x 6.7x
Legg Mason, Inc. / LM 15.65 -29% 411% 2,201 8x nm 6x nm
Federated Investors, / FII 20.96 -18% 115% 2,134 10x 10x 9x nm
Jefferies Group, Inc / JEF 12.90 -11% 125% 2,109 13x nm 25x 1.1x
Raymond James Financ / RJF 17.14 -9% 123% 2,052 8x 9x 7x 1.1x
Eaton Vance Corp. / EV 17.26 -14% 177% 2,003 16x 11x 12x 31.0x
Lazard Ltd / LAZ 25.86 -10% 97% 1,790 9x 15x 11x 16.7x
Blackstone Group L.P / BX 6.50 -6% 273% 1,726 1x nm 8x 1.7x
Och-Ziff Capital Man / OZM 4.80 -35% 510% 1,700 nm 11x 9x nm
AllianceBernstein Ho / AB 17.70 -11% 371% 1,550 4x 6x 7x 1.0x
Knight Capital Group / NITE 15.43 -29% 28% 1,382 13x 11x 10x 2.2x
IDACORP, Inc. / IDA 29.23 -25% 26% 1,332 16x 13x 13x 1.1x
Affiliated Managers / AMG 29.93 -10% 343% 1,229 7x 5x 6x nm
Fortress Investment / FIG 2.88 -13% 577% 1,171 nm 7x 4x 7.0x
Janus Capital Group / JNS 7.27 -11% 407% 1,148 7x 8x 11x nm
Stifel Financial Cor / SF 38.87 -37% 56% 997 31x 16x 14x 2.2x
Waddell & Reed Finan / WDR 11.21 -11% 266% 951 7x 8x 10x 6.8x
optionsXpress Holdin / OXPS 15.22 -31% 130% 912 10x 10x 9x 4.2x
Gamco Investors Inc. / GBL 27.81 -8% 164% 861 10x 19x 17x 1.8x
RiskMetrics Group, I / RMG 13.22 -19% 100% 812 331x 47x 27x nm
Interactive Brokers / IBKR 18.99 -9% 89% 771 3x 8x 8x 1.6x
KBW, Inc. / KBW 22.59 -20% 133% 750 26x nm 17x 1.8x
E TRADE Financial Co / ETFC 1.35 -6% 347% 726 nm nm nm 3.5x
Investment Technolog / ITG 16.60 -8% 221% 718 7x 7x 7x 2.9x
GLG Partners, Inc. / GLG 2.70 -4% 420% 662 nm 7x 8x nm
Piper Jaffray Compan / PJC 31.03 -31% 62% 586 12x nm 30x 1.0x
Cohen & Steers, Inc. / CNS 10.78 -4% 211% 448 6x 14x 14x 2.0x
thinkorswim Group In / SWIM 6.40 -12% 185% 426 19x 7x 8x nm
Duff & Phelps Corpor / DUF 11.28 -10% 102% 402 226x 11x 9x nm
GFI Group Inc. / GFIG 3.35 -22% 670% 396 4x 4x 5x 1.7x
SWS Group, Inc. / SWS 12.84 -21% 75% 353 11x 11x 9x 1.1x
MF Global Ltd. / MF 2.48 -22% 1198% 298 nm 3x 3x .3x
TradeStation Group, / TRAD 6.38 -23% 133% 275 8x 9x 10x 1.7x
LaBranche & Co., Inc / LAB 4.53 -31% 79% 273 nm 9x 11x .8x
Evercore Partners In / EVR 7.72 -4% 240% 247 nm 17x 7x 1.7x
Average (MV-weighted) 9x 7x 9x 5.7x
Financial: Miscellaneous Financial Services – Valuation

BP Prudhoe Bay Royal / BPT 76.97 -25% 41% 1,647 1,646 6.9x 7x 9x 7x 8x nm
San Juan Basin Royal / SJT 32.39 -20% 46% 1,510 1,489 10.6x 11x 13x 10x 10x 82.0x
MSCI Inc. / MXB 13.95 -9% 175% 1,396 1,557 3.7x 11x 15x 13x 12x nm
Apollo Investment Co / AINV 9.59 -17% 112% 1,364 2,612 6.9x 14x nm 6x 6x .7x
American Capital Ltd / ACAS 6.33 -13% 518% 1,312 5,534 4.7x 9x 2x 2x 2x .3x
Hugoton Royalty Trus / HGT 23.17 -29% 63% 927 911 8.0x 8x 13x 7x 10x 6.2x
Cash America Interna / CSH 27.31 -8% 79% 793 1,115 1.1x 7x 10x 9x 8x 7.0x
Sapient Corporation / SAPE 4.25 -4% 135% 539 390 .6x 8x 35x 11x 10x 2.4x
Allied Capital Corpo / ALD 2.97 -5% 775% 531 2,460 4.7x 10x 3x 2x 3x .2x
Ares Capital Corpora / ARCC 5.45 -13% 190% 530 1,370 5.9x 9x 4x 4x 4x .4x
Chimera Investment C / CIM 2.86 -21% 592% 507 1,621 19.8x nm nm 5x 7x 2.1x
Blackrock Kelso Capi / BKCC 7.37 -31% 110% 409 838 5.8x 7x 21x 4x 6x .6x
FBR Capital Markets / FBCM 4.65 -34% 148% 302 859 3.2x nm 58x nm 66x .7x
Prospect Capital Cor / PSEC 9.98 -43% 65% 296 398 4.0x 6x 9x 5x 5x .7x
MVC Capital, Inc. / MVC 10.38 0% 72% 252 277 8.6x 26x 4x 4x 6x .6x
Global Cash Access H / GCA 2.81 -12% 207% 233 470 .7x 7x 10x 5x 4x nm
Meridian Interstate / EBSB 9.33 -12% 11% 215 222 4.2x 11x 104x nm 62x 1.1x
Whiting USA Trust I / WHX 15.29 -28% 65% 212 na nm nm nm 2x 2x nm
NGP Capital Resource / NGPC 9.75 -9% 84% 211 326 8.6x 14x 5x 10x 7x .7x
Insight Enterprises, / NSIT 4.34 -10% 369% 198 456 .1x nm 3x 3x 4x .5x
Encore Capital Group / ECPG 7.75 -21% 83% 179 466 1.8x 9x 12x 8x 7x 1.0x
Gladstone Capital Co / GLAD 8.22 -10% 145% 173 301 6.7x 11x 7x 6x 5x .6x
Internet Capital Gro / ICGE 4.19 -4% 198% 160 96 1.5x nm nm nm nm .6x
Fifth Street Finance / FSC 6.61 -24% 102% 150 63 2.9x 125x 132x 5x 4x .5x
GreenHunter Energy, / GRH 7.22 -55% 252% 144 215 195.1x nm nm nm 7x 7.1x
MV Oil Trust / MVO 10.98 -17% 169% 126 126 4.3x 4x 4x 9x 4x 2.9x
China BAK Battery In / CBAK 1.99 -9% 239% 107 252 1.2x nm 199x nm 7x .9x
Median 4.5x 9x 10x 6x 6x .7x
Financial: Money Center Banks – Valuation

(Sorted by market value) P/E Insider
Move to Last This Next P/ Trades
Price 52-Wk MV FY FY FY Tang. # #
Company / Ticker ($) Low High ($mn) Act. Est. Est. Book Buy Sell
JPMorgan Chase & Co. / JPM 34.47 -15% 47% 128,654 8x 19x 11x 1.9x - 1
HSBC Holdings plc (A / HBC 52.60 -6% 68% 127,394 6x 9x 8x 1.5x - -
Wells Fargo & Compan / WFC 28.73 -29% 56% 95,534 12x 14x 14x 6.9x 5 -
Bank of America Corp / BAC 16.42 -9% 186% 82,389 5x 11x 6x 3.3x 4 2
Mitsubishi UFJ Finan / MTU 6.00 -14% 87% 66,401 nm 7x 6x 1.1x - -
Citigroup Inc. / C 9.52 -13% 271% 51,880 13x nm 10x 1.5x 2 -
U.S. Bancorp / USB 26.30 -22% 61% 46,145 11x 13x 12x 5.1x 5 10
Banco Bilbao Vizcaya / BBV 10.52 -14% 144% 39,429 5x 5x 6x 1.7x - -
Bank of New York Mel / BK 30.24 -32% 66% 34,702 13x 11x 10x 6.8x 1 22
Westpac Banking Corp / WBK 54.18 -2% 146% 20,527 8x 8x 8x 2.1x - -
Barclays PLC (ADR) / BCS 9.29 -3% 407% 19,440 2x 31x 6x .9x - -
Deutsche Bank AG (US / DB 30.70 -9% 341% 16,753 2x nm 5x .5x - -
National Bank of Gre / NBG 3.90 -23% 245% 9,685 6x 5x 5x 1.9x - -
HDFC Bank Limited (A / HDB 58.01 -10% 151% 8,212 25x 17x 14x 2.9x
Banco Santander-Chil / SAN 32.33 -22% 72% 5,853 16x 9x 9x 2.7x
Banco de Chile (ADR) / BCH 31.39 -30% 91% 4,223 11x 7x 7x 2.3x - -
Bancolombia S.A. (AD / CIB 18.69 -20% 135% 3,703 8x 6x 6x 1.8x - -
Allied Irish Banks, / AIB 7.26 -5% 563% 3,204 1x 2x nm .3x - -
Corpbanca (ADR) / BCA 20.03 -15% 84% 885 11x 8x 8x nm
Banco Macro SA (ADR) / BMA 8.69 -43% 224% 594 5x 3x 3x 1.0x - -
Bank of the Ozarks, / OZRK 28.07 -51% 31% 473 15x 14x 13x 2.3x 7 30
BBVA Banco Frances S / BFR 2.47 -39% 269% 388 1x 3x 3x .6x - -
Banco Latinoamerican / BLX 9.71 -12% 114% 353 5x 5x 4x .6x - -
Danvers Bancorp, Inc / DNBK 12.33 -24% 14% 220 49x 103x 69x 1.0x 4 -
Encore Bancshares, I / EBTX 12.47 -8% 76% 127 16x 36x 12x 1.0x 12 1
Financial: Regional Banks (I of III) – Valuation

Banco Itau Holding F / ITU 10.95 -39% 136% 32,844 9x 7x 8x nm - -
Banco Bradesco SA (A / BBD 10.19 -20% 148% 30,591 8x 8x 8x nm - -
Mizuho Financial Gro / MFG 4.95 -28% 142% 28,193 15x 5x 4x nm - -
PNC Financial Servic / PNC 62.34 -32% 41% 21,703 14x 14x 14x 5.1x 2 20
State Street Corpora / STT 38.89 -25% 123% 16,799 11x 8x 8x 2.5x - -
BB&T Corporation / BBT 28.05 -33% 62% 15,497 9x 11x 11x 2.4x 7 6
SunTrust Banks, Inc. / STI 33.52 -24% 119% 11,870 7x 10x 16x 1.3x 5 5
Wachovia Corporation / WB 5.49 -86% 728% 11,863 2x nm 5x .6x 3 1
Northern Trust Corpo / NTRS 44.92 -4% 98% 10,019 14x 10x 11x 2.3x 1 17
Unibanco - Uniao Ban / UBB 59.60 -36% 171% 9,683 11x 5x 5x nm - -
Shinhan Financial Gr / SHG 44.25 -7% 173% 8,819 5x 4x 4x nm - -
KB Financial Group, / KB 22.17 -7% 255% 7,502 2x 4x 4x nm - -
M&T Bank Corporation / MTB 65.83 -19% 65% 7,260 11x 12x 13x 2.4x 3 12
Regions Financial Co / RF 9.67 -34% 184% 6,691 5x 10x 12x .9x 17 -
Fifth Third Bancorp / FITB 9.54 -18% 227% 5,509 5x 106x 13x 1.1x 1 1
KeyCorp / KEY 9.60 -40% 184% 4,752 4x nm 15x .8x 6 1
National City Corpor / NCC 2.33 -46% 815% 4,744 5x nm nm .5x - -
TFS Financial Corpor / TFSL 13.10 -28% 5% 4,229 164x 82x 109x 2.2x 10 -
Marshall & Ilsley Co / MI 14.70 -26% 125% 3,826 8x nm 12x .9x 14 -
Zions Bancorporation / ZION 32.69 -46% 75% 3,771 7x 15x 14x 1.2x 10 3
Comerica Incorporate / CMA 21.95 -12% 146% 3,303 5x 13x 11x .6x 1 1
Commerce Bancshares, / CBSH 42.41 -18% 25% 3,215 16x 17x 16x 2.2x - 9
Credicorp Ltd. (USA) / BAP 39.82 -24% 118% 3,176 9x 7x 6x 1.8x - -
Cullen/Frost Bankers / CFR 51.92 -17% 41% 3,080 15x 15x 14x 2.9x 1 12
Woori Finance Holdin / WF 10.81 0% 481% 2,922 2x 2x 2x nm - -
BOK Financial Corpor / BOKF 43.11 -11% 42% 2,907 13x 17x 13x 1.9x 4 5
Huntington Bancshare / HBAN 7.79 -44% 116% 2,852 31x 7x 8x 1.2x 12 1
Synovus Financial Co / SNV 7.89 -18% 138% 2,606 8x 46x 42x .9x 2 2
Valley National Banc / VLY 17.55 -22% 41% 2,368 15x 20x 15x 3.1x 4 14
Bank of Hawaii Corpo / BOH 43.46 -14% 61% 2,074 12x 11x 12x 2.9x 2 -
City National Corpor / CYN 42.54 -16% 68% 2,049 9x 14x 14x 1.8x 1 25
First Horizon Nation / FHN 9.78 -55% 136% 1,972 nm nm 978x 1.3x 8 -
TCF Financial Corpor / TCB 14.48 -36% 93% 1,896 7x 13x 11x 2.0x 2 2
Fulton Financial Cor / FULT 10.39 -29% 64% 1,818 12x 14x 13x 1.9x 3 1
First Niagara Financ / FNFG 14.81 -33% 51% 1,756 18x 18x 17x 2.8x 15 3
UMB Financial Corpor / UMBF 41.85 -16% 66% 1,713 24x 17x 18x 2.1x 13 11
Popular, Inc. / BPOP 5.97 -17% 138% 1,684 nm nm 43x 1.0x 1 -
FirstMerit Corporati / FMER 20.73 -34% 49% 1,679 14x 14x 15x 2.1x 1 1
BancorpSouth, Inc. / BXS 19.89 -24% 60% 1,653 12x 13x 13x 1.7x 4 23
Wilmington Trust Cor / WL 24.01 -15% 95% 1,635 9x 12x 12x 2.4x 7 1
WestAmerica Bancorp. / WABC 51.74 -31% 52% 1,495 17x 17x 16x 5.7x - 24
NewAlliance Bancshar / NAL 13.48 -30% 33% 1,443 59x 28x 25x 1.7x 1 6
Bank of Ireland (ADR / IRE 5.70 0% 1053% 1,431 1x 1x 4x .2x - -
Prosperity Bancshare / PRSP 30.47 -28% 53% 1,404 16x 16x 14x 3.8x - 14
United Bankshares, I / UBSI 30.14 -39% 39% 1,306 14x 14x 14x 2.9x 1 11
SVB Financial Group / SIVB 39.69 -7% 79% 1,302 12x 13x 12x 1.8x - 16
Hancock Holding Comp / HBHC 40.54 -18% 69% 1,287 18x 17x 16x 2.4x 20 26
National Penn Bancsh / NPBC 14.81 -27% 35% 1,186 11x 12x 11x 2.6x 22 8
Susquehanna Bancshar / SUSQ 13.70 -23% 102% 1,180 11x 13x 11x 1.9x 12 1
Financial: Regional Banks (II of III) – Valuation

PrivateBancorp, Inc. / PVTB 32.94 -38% 50% 1,106 63x nm 33x 2.3x 3 67
Old National Bancorp / ONB 16.28 -26% 73% 1,079 14x 15x 17x 2.4x 6 -
Trustmark Corporatio / TRMK 18.75 -24% 81% 1,075 10x 12x 13x 1.9x - -
Whitney Holding Corp / WTNY 16.69 -16% 98% 1,068 7x 18x 16x 1.3x 7 -
Signature Bank / SBNY 30.20 -26% 68% 1,063 33x 22x 18x 1.9x - 11
First Financial Bank / FFIN 50.18 -29% 34% 1,043 21x 20x 19x 3.6x - 7
F.N.B. Corporation / FNB 11.57 -20% 79% 1,037 10x 12x 11x 2.6x 5 17
Cathay General Banco / CATY 20.18 -52% 73% 999 8x 13x 13x 1.5x 1 -
East West Bancorp, I / EWBC 15.00 -55% 100% 955 6x nm 22x 1.0x 1 2
CVB Financial Corp. / CVBF 11.29 -37% 77% 940 16x 14x 13x 2.6x 3 17
Glacier Bancorp, Inc / GBCI 17.24 -18% 132% 937 13x 14x 13x 2.3x 1 6
First Midwest Bancor / FMBI 18.96 -28% 111% 921 12x 9x 10x 2.1x 10 2
First BanCorp. / FBP 9.51 -41% 47% 880 30x 11x 12x 1.0x 5 -
MB Financial, Inc. / MBFI 24.97 -25% 77% 871 15x 16x 15x 1.8x - 4
Umpqua Holdings Corp / UMPQ 14.35 -40% 61% 863 14x 15x 18x 1.8x 2 -
Park National Corpor / PRK 60.87 -28% 38% 850 38x 14x 28x 1.9x 7 2
S&T Bancorp, Inc. / STBA 30.51 -18% 54% 842 14x 13x 12x 3.1x 1 19
Webster Financial Co / WBS 15.44 -15% 132% 814 8x 12x 11x 1.0x 3 -
NBT Bancorp Inc. / NBTB 24.80 -28% 47% 807 16x 14x 14x 2.8x - 13
First Commonwealth F / FCF 10.84 -26% 49% 797 17x 16x 15x 2.2x 11 10
Community Bank Syste / CBU 22.80 -21% 45% 744 16x 15x 15x 3.3x 1 7
PacWest Bancorp / PACW 25.52 -56% 84% 694 8x 21x 17x 2.0x 16 7
Pacific Capital Banc / PCBC 14.75 -33% 90% 688 7x 15x 8x 1.4x 9 -
BancFirst Corporatio / BANF 43.91 -10% 66% 670 13x 15x 18x 1.9x 2 21
IBERIABANK Corporati / IBKC 48.84 -23% 45% 634 15x 16x 14x 2.5x - 15
WesBanco, Inc. / WSBC 23.00 -38% 53% 611 11x 14x 16x 1.9x 5 4
Pinnacle Financial P / PNFP 25.71 -25% 42% 610 19x 17x 16x 2.4x - 15
City Holding Company / CHCO 37.08 -16% 46% 600 12x 16x 12x 2.6x - 6
Chemical Financial C / CHFC 24.41 -40% 76% 583 15x 23x 19x 1.4x 2 -
United Community Ban / UCBI 12.12 -37% 70% 577 10x nm nm 1.2x 11 1
First Busey Corporat / BUSE 15.86 -30% 42% 568 14x 20x 18x 2.4x - -
Wintrust Financial C / WTFC 22.84 -25% 72% 542 10x 28x 20x 1.2x - -
Colonial BancGroup, / CNB 2.66 -47% 573% 539 2x nm nm .4x 26 -
Bank Mutual Corporat / BKMU 10.58 -9% 35% 511 34x 34x 29x 1.5x - 10
First Financial Banc / FFBC 13.04 -38% 38% 489 14x 17x 15x 2.0x 16 -
Home BancShares, Inc / HOMB 24.46 -28% 43% 485 23x 20x 18x 2.1x 2 36
First Financial Corp / THFF 36.83 -32% 36% 482 19x 20x 18x 1.8x - -
Sterling Bancshares, / SBIB 6.45 -9% 117% 472 9x 12x 11x 1.5x - -
Texas Capital Bancsh / TCBI 15.13 -11% 65% 467 13x 15x 13x 1.3x - 26
Capital City Bank Gr / CCBG 26.79 -28% 29% 459 16x 22x 24x 2.2x - 5
Community Trust Banc / CTBI 29.65 -46% 56% 447 12x 18x 14x 1.9x 1 13
Tompkins Financial C / TMP 46.06 -25% 29% 445 17x 15x 14x 2.7x - 10
UCBH Holdings, Inc. / UCBH 3.99 -46% 332% 443 4x 50x 12x .6x 13 1
Boston Private Finan / BPFH 6.78 -33% 338% 432 62x nm 15x 1.3x 15 -
Western Alliance Ban / WAL 11.15 -39% 148% 430 11x nm 20x 1.4x 10 -
Republic Bancorp, In / RBCAA 20.84 -32% 70% 429 17x 11x 9x 1.6x 10 -
Simmons First Nation / SFNC 27.63 -13% 59% 386 14x 14x 15x 1.8x - 8
Santander BanCorp / SBP 8.26 -20% 88% 385 nm 21x 11x 1.0x - -
Independent Bank Cor / INDB 23.59 -15% 66% 384 12x 12x 12x 2.2x 5 1
Financial: Regional Banks (III of III) – Valuation

Renasant Corp. / RNST 18.26 -24% 42% 384 11x 12x 13x 1.8x 9 21
First Merchants Corp / FRME 20.31 -20% 48% 371 12x 13x 12x 1.7x 1 -
SCBT Financial Corpo / SCBT 31.99 -18% 41% 360 14x 18x 13x 2.3x - 1
Central Pacific Fina / CPF 12.48 -43% 80% 359 66x nm 29x 1.1x 30 -
Doral Financial Corp / DRL 6.40 -6% 279% 344 nm nm nm .7x 2 -
Heartland Financial / HTLF 20.97 -24% 29% 341 15x 19x 15x 1.9x - 8
S.Y. Bancorp, Inc. / SYBT 24.60 -22% 47% 331 15x 15x 15x 2.4x 66 14
TriCo Bancshares / TCBK 20.57 -54% 59% 324 13x 18x 15x 1.9x 4 5
Citizens Republic Ba / CRBC 2.56 -34% 515% 323 2x nm 17x .4x 8 -
First Community Banc / FCBC 27.87 -8% 40% 306 11x 14x 14x 3.1x 1 4
StellarOne Corp. / STEL 13.38 -10% 70% 302 9x 15x 21x 1.1x 1 5
Provident Bankshares / PBKS 8.99 -50% 175% 302 9x nm 9x 1.3x 4 -
Washington Trust Ban / WASH 18.84 -7% 77% 300 11x 11x 11x 2.5x - 1
Southside Bancshares / SBSI 21.25 -28% 27% 297 18x 11x 13x 2.5x 3 9
South Financial Grou / TSFG 3.99 -38% 366% 295 4x nm nm .4x 3 -
Sandy Spring Bancorp / SASR 17.62 -23% 80% 289 9x 12x 13x 1.3x 10 -
Wilshire Bancorp, In / WIBC 9.42 -36% 75% 277 10x 10x 11x 1.5x - -
Union Bankshares Cor / UBSH 20.37 -30% 43% 276 14x 18x 16x 1.9x 29 3
Oriental Financial G / OFG 10.08 0% 154% 245 7x 5x 4x 1.4x - -
CoBiz Financial Inc / COBZ 10.29 -50% 65% 240 11x 17x 13x 1.7x 12 -
Lakeland Financial C / LKFN 19.04 -22% 58% 234 12x 12x 11x 1.6x 7 4
Grupo Financiero Gal / GGAL 1.87 -21% 328% 232 1x 5x 5x nm - -
Nara Bancorp, Inc. / NARA 8.81 -10% 98% 231 7x 14x 13x 1.0x 1 1
Smithtown Bancorp / SMTB 19.25 -33% 27% 227 13x 12x 11x 2.1x 1 1
Columbia Banking Sys / COLB 12.14 -30% 164% 220 6x 37x 20x .9x 1 -
Lakeland Bancorp, In / LBAI 8.96 -22% 81% 212 12x 11x 10x 1.6x 5 6
Sterling Bancorp / STL 11.68 -13% 60% 211 14x 13x 12x 2.2x 1 4
ESSA Bancorp, Inc. / ESSA 12.72 -25% 11% 210 33x 31x 31x 1.0x - 2
Southwest Bancorp, I / OKSB 14.04 -30% 68% 204 10x 13x 13x .9x 1 1
Cascade Bancorp / CACB 7.21 -13% 157% 203 7x 28x 21x 1.2x - -
Green Bankshares, In / GRNB 15.35 -22% 105% 199 7x 19x 12x 1.2x 3 -
Sun Bancorp, Inc. /N / SNBC 8.59 -10% 94% 193 10x 14x 13x .9x 4 1
Enterprise Financial / EFSC 14.85 -13% 72% 189 11x 15x 11x 1.5x 4 1
Centerstate Banks of / CSFL 15.02 -35% 20% 187 24x 42x 41x 1.6x 2 11
Hanmi Financial Corp / HAFC 3.92 -13% 162% 180 nm 14x 7x .7x - -
Peoples Bancorp Inc. / PEBO 17.22 -5% 70% 180 10x 12x 11x 1.4x - -
BancTrust Financial / BTFG 9.89 -42% 70% 175 20x 37x 82x 1.3x 44 -
Shore Bancshares, In / SHBI 20.72 -16% 32% 174 13x 15x 14x 1.7x - 2
Frontier Financial C / FTBK 3.70 -51% 467% 174 2x nm 62x .5x 5 -
Sierra Bancorp / BSRR 17.85 -24% 51% 173 9x 9x 9x 1.6x - 1
Pennsylvania Commerc / COBH 26.64 -22% 27% 170 25x 13x 15x 1.5x - -
Banner Corporation / BANR 10.02 -29% 216% 168 4x 1002x 20x .6x - 5
Old Second Bancorp I / OSBC 11.96 -11% 146% 164 6x 8x 8x 1.3x 12 2
State Bancorp, Inc./ / STBC 10.90 0% 56% 158 24x 17x 11x 1.4x 9 -
Financial Institutio / FISI 14.42 -30% 56% 156 11x nm 10x 1.6x - -
Pacific Continental / PCBK 12.95 -31% 28% 156 12x 13x 11x 1.7x 3 17
Center Financial Cor / CLFC 9.06 -12% 64% 152 7x 14x 9x .9x - 2
Yadkin Valley Financ / YAVY 13.19 -25% 36% 152 10x 13x 11x 1.6x 8 2
First of Long Island / FLIC 21.12 -14% 16% 152 14x 12x 11x 1.5x 3 2
Financial: S&Ls and Savings Banks – Valuation

Hudson City Bancorp, / HCBK 17.51 -24% 43% 9,127 30x 19x 15x 2.0x 2 5
People's United Fina / PBCT 18.15 -23% 20% 6,312 35x 33x 29x 1.7x - 18
New York Community B / NYB 14.01 -16% 57% 4,822 16x 14x 12x 2.8x - 13
Capitol Federal Fina / CFFN 44.42 -38% 16% 3,299 63x 65x 50x 3.8x - -
Associated Banc-Corp / ASBC 17.99 -21% 78% 2,296 8x 11x 11x 1.7x 7 3
Astoria Financial Co / AF 16.89 -6% 78% 1,619 12x 11x 9x 1.6x - 10
Sovereign Bancorp, I / SOV 2.39 -15% 521% 1,587 nm nm 4x .5x 26 -
Investors Bancorp, I / ISBC 13.32 -11% 21% 1,452 89x 44x 32x 1.7x - -
Washington Federal I / WFSL 15.22 -13% 80% 1,338 21x 12x 8x 1.2x 7 -
Northwest Bancorp, I / NWSB 22.98 -13% 49% 1,114 23x 22x 18x 2.6x 2 3
Beneficial Mutual Ba / BNCL 11.11 -21% 32% 914 nm 44x 38x 1.9x 1 2
Provident Financial / PFS 15.06 -29% 43% 904 24x 18x 17x 1.8x - 2
Brookline Bancorp, I / BRKL 11.07 -21% 45% 646 37x 50x 31x 1.5x 1 -
Oritani Financial Co / ORIT 16.29 -34% 24% 622 74x 51x 37x 2.3x - 1
Dime Community Bancs / DCOM 15.02 -24% 57% 513 22x 16x 14x 2.3x - 11
Roma Financial Corpo / ROMA 14.08 -16% 24% 438 61x 101x 88x 2.0x 3 -
Provident New York B / PBNY 10.97 -17% 49% 437 18x 15x 13x 1.9x 3 8
ViewPoint Financial / VPFG 15.77 -13% 27% 393 75x 69x 56x 2.0x - 2
Berkshire Hills Banc / BHLB 26.36 -26% 21% 322 18x 13x 13x 2.1x 6 1
Sterling Financial C / STSA 5.97 -60% 242% 311 3x 13x 11x .4x 24 10
Flushing Financial C / FFIC 14.11 -22% 52% 305 14x 11x 9x 1.4x 1 18
Westfield Financial, / WFD 9.50 -11% 21% 298 33x 35x 33x 1.1x - 4
MainSource Financial / MSFG 13.96 -14% 70% 281 12x 11x 10x 1.9x - 2
WSFS Financial Corpo / WSFS 42.28 -5% 55% 261 9x 11x 11x 1.2x 1 6
Abington Bancorp, In / ABBC 9.83 -14% 26% 231 33x 27x 25x .9x - 8
First Financial Hold / FFCH 19.57 -23% 118% 229 10x 10x 8x 1.7x 6 8
West Bancorporation, / WTBA 11.63 -37% 39% 202 11x 23x 14x 2.3x - -
Home Federal Bancorp / HOME 10.27 -6% 27% 178 41x 43x 45x .9x 2 5
OceanFirst Financial / OCFC 14.30 -14% 61% 177 159x 11x 10x 1.4x 1 3
Waterstone Financial / WSBF 5.45 -15% 172% 170 109x nm 109x 1.0x - -
Cape Bancorp, Inc. / CBNJ 8.50 -10% 19% 113 33x 14x 23x .9x 10 -
Prudential Bancorp, / PBIP 9.75 -15% 33% 108 33x nm 33x 1.5x - -
Benjamin Franklin Ba / BFBC 13.75 -31% 6% 108 29x 21x 21x 1.5x - -
Healthcare: Biotechnology and Drugs – Valuation

Genentech, Inc. / DNA 81.59 -20% 22% 85,835 82,943 6.5x 17x 32x 24x 21x 7.2x
Sanofi-Aventis SA (A / SNY 30.22 -18% 62% 82,566 89,716 2.5x 13x 12x 8x 7x nm
Amgen, Inc. / AMGN 58.23 -33% 14% 61,696 63,115 4.2x 12x 21x 13x 12x 11.4x
Gilead Sciences, Inc / GILD 46.92 -24% 23% 42,721 42,108 8.4x 17x 28x 23x 20x 10.3x
Novo Nordisk A/S (AD / NVO 50.52 -17% 46% 36,226 35,046 4.7x 20x 22x 18x 18x 6.9x
Teva Pharmaceutical / TEVA 42.91 -16% 17% 35,015 36,420 3.4x 16x 18x 15x 14x 7.8x
Celgene Corporation / CELG 58.86 -30% 31% 26,969 24,515 12.0x nm 109x 38x 26x 10.4x
Genzyme Corporation / GENZ 69.14 -13% 21% 18,704 18,531 4.1x 32x 40x 17x 15x 4.8x
Cardinal Health, Inc / CAH 36.09 -4% 72% 12,978 16,070 .2x 8x 10x 9x 8x 7.9x
Biogen Idec Inc. / BIIB 43.52 -13% 81% 12,697 12,363 3.2x 10x 22x 12x 11x 5.3x
Allergan, Inc. / AGN 35.66 -13% 97% 10,837 11,423 2.6x 14x 22x 14x 13x 23.2x
McKesson Corporation / MCK 35.26 -6% 94% 9,643 10,315 .1x 7x 11x 9x 8x 5.1x
Shire Plc. (ADR) / SHPGY 38.76 -16% 89% 7,236 7,894 2.6x 18x nm 10x 12x nm
Barr Pharmaceuticals / BRL 64.63 -42% 6% 7,074 8,418 3.0x 23x 49x 22x 17x 16.7x
Forest Laboratories, / FRX 22.97 -13% 86% 6,923 5,033 1.3x 4x 8x 7x 6x 2.1x
ImClone Systems Inco / IMCL 69.45 -47% 0% 6,171 5,749 8.9x nm 151x 58x 48x 6.9x
Cephalon, Inc. / CEPH 74.50 -25% 8% 5,099 5,278 2.8x 19x nm 16x 13x 14.7x
Hospira, Inc. / HSP 30.02 -22% 49% 4,791 6,665 1.8x 14x 35x 12x 11x 19.7x
AmerisourceBergen Co / ABC 29.98 -7% 62% 4,751 5,062 .1x 6x 10x 10x 9x 1.8x
Vertex Pharmaceutica / VRTX 27.50 -50% 27% 4,138 3,527 18.2x nm nm nm nm 11.8x
Warner Chilcott Ltd. / WCRX 13.30 -17% 43% 3,335 4,356 4.7x 17x 111x 10x 9x nm
Elan Corporation, pl / ELN 6.71 -12% 458% 3,186 4,452 4.7x nm nm nm nm nm
Myriad Genetics, Inc / MYGN 66.13 -48% 10% 3,075 2,767 7.7x 44x 65x 45x 33x 6.4x
Perrigo Company / PRGO 33.27 -17% 29% 3,070 3,735 1.9x 18x 23x 17x 15x 7.6x
Alexion Pharmaceutic / ALXN 38.24 -36% 25% 2,980 3,056 14.2x 711x nm 137x 46x 20.7x
Edwards Lifesciences / EW 53.31 -22% 26% 2,967 2,956 2.4x 19x 29x 21x 18x 6.6x
Mylan Inc. / MYL 9.13 -37% 70% 2,782 7,824 1.5x nm nm 14x 9x nm
Endo Pharmaceuticals / ENDP 19.76 -30% 44% 2,653 2,365 1.9x 7x 12x 9x 8x 4.2x
Pharmaceutical Produ / PPDI 22.22 0% 122% 2,620 2,110 1.3x 8x 16x 13x 11x 2.6x
Covance Inc. / CVD 40.03 0% 148% 2,533 2,347 1.3x 9x 15x 13x 11x 2.4x
Techne Corporation / TECH 65.96 -11% 26% 2,508 2,312 8.6x 15x 25x 22x 20x 5.5x
Watson Pharmaceutica / WPI 23.61 -15% 39% 2,470 2,946 1.2x 9x 19x 12x 11x 3.9x
King Pharmaceuticals / KG 9.64 -28% 31% 2,376 1,472 .8x 4x 13x 8x 12x 1.2x
Invitrogen Corporati / IVGN 25.05 -19% 98% 2,314 2,792 2.0x 12x 19x 10x 9x 63.6x
OSI Pharmaceuticals, / OSIP 36.92 -13% 45% 2,128 2,057 5.6x 16x 22x 17x 14x 13.4x
United Therapeutics / UTHR 90.52 -20% 30% 2,103 2,121 8.0x 49x 103x 42x 28x 5.0x
Alpharma Inc. / ALO 34.75 -49% 10% 1,868 1,602 2.5x nm nm 120x 36x 4.2x
BioMarin Pharmaceuti / BMRN 17.11 -17% 140% 1,708 1,713 7.1x nm nm 53x 29x 8.1x
Onyx Pharmaceuticals / ONXX 28.88 -25% 106% 1,629 1,199 nm nm nm 88x 29x 3.3x
Sepracor Inc. / SEPR 13.88 -19% 120% 1,511 1,514 1.2x nm 28x 11x 10x 3.5x
Inverness Medical In / IMA 19.00 -22% 230% 1,484 3,520 2.3x 92x nm 10x 8x nm
Valeant Pharmaceutic / VRX 17.88 -39% 17% 1,457 1,368 1.9x 66x 64x 85x 19x 7.0x
Cubist Pharmaceutica / CBST 24.64 -34% 5% 1,404 1,358 3.5x 27x 29x 19x 14x 11.1x
Regeneron Pharmaceut / REGN 17.17 -23% 47% 1,368 822 3.3x nm nm nm nm 3.1x
ISIS Pharmaceuticals / ISIS 14.09 -23% 43% 1,367 1,023 9.2x nm nm nm nm 42.1x
Dr. Reddy's Laborato / RDY 8.10 -5% 130% 1,363 1,518 1.3x 21x 14x 12x 11x 4.8x
Chattem Inc. / CHTT 67.27 -15% 22% 1,273 1,720 3.8x 14x 22x 17x 15x nm
PDL BioPharma Inc. / PDLI 9.51 -23% 97% 1,137 1,115 3.8x 16x nm 16x 8x 19.4x
NBTY, Inc. / NTY 18.29 -17% 104% 1,127 1,608 .7x 7x 8x 7x 6x 2.6x
ICON plc (ADR) / ICLR 18.98 -2% 136% 1,110 1,055 1.3x 11x 20x 15x 12x 3.5x
Median 2.8x 16x 22x 15x 13x 6.9x
Healthcare: Healthcare Facilities – Valuation

Fresenius Medical Ca / FMS 45.56 -13% 30% 13,383 18,955 1.8x 11x 19x 17x 15x nm
Quest Diagnostics In / DGX 47.99 -19% 25% 9,387 12,229 1.7x 10x 17x 15x 13x nm
Laboratory Corp. of / LH 64.62 -18% 25% 6,979 8,657 2.0x 11x 16x 14x 13x nm
DaVita Inc. / DVA 51.36 -18% 22% 5,331 8,599 1.5x 10x 14x 15x 14x nm
Universal Health Ser / UHS 39.02 -14% 77% 1,977 2,913 .6x 7x 12x 10x 10x 2.4x
Lincare Holdings Inc / LNCR 25.03 -9% 51% 1,862 2,452 1.5x 6x 10x 8x 11x nm
Psychiatric Solution / PSYS 30.78 -12% 33% 1,722 2,995 1.7x 12x 22x 15x 13x nm
Community Health Sys / CYH 17.97 -21% 123% 1,721 10,287 1.0x 13x 29x 8x 7x nm
VCA Antech, Inc. / WOOF 17.79 -15% 157% 1,506 1,965 1.6x 8x 13x 12x 11x nm
Magellan Health Serv / MGLN 34.29 -10% 44% 1,387 959 .4x 7x 15x 17x 16x 2.4x
Pediatrix Medical Gr / PDX 29.94 -7% 142% 1,366 1,502 1.5x 6x 11x 10x 9x nm
Amedisys, Inc. / AMED 50.57 -28% 34% 1,365 1,719 1.7x 13x 20x 16x 13x nm
LifePoint Hospitals, / LPNT 23.08 -16% 56% 1,233 2,695 1.0x 9x 10x 9x 9x nm
HEALTHSOUTH Corp. / HLS 10.90 -34% 111% 959 3,171 1.7x 15x 5x 18x 14x nm
Tenet Healthcare Cor / THC 1.95 -7% 253% 931 5,150 .6x 22x nm nm 98x nm
Centene Corporation / CNC 17.26 -24% 65% 741 555 .2x 6x 19x 9x 9x 2.5x
Gentiva Health Servi / GTIV 23.79 -28% 23% 686 885 .7x 5x 21x 16x 15x nm
AmSurg Corp. / AMSG 21.79 -8% 37% 685 854 1.4x 4x 16x 14x 13x nm
Genoptix, Inc. / GXDX 35.43 -42% 18% 588 491 4.9x 22x 169x 29x 30x 4.8x
LHC Group, Inc. / LHCG 30.96 -56% 15% 564 557 1.6x 12x 26x 20x 16x 10.9x
Hanger Orthopedic Gr / HGR 17.16 -47% 22% 528 898 1.3x 12x 27x 21x 18x nm
Brookdale Senior Liv / BKD 4.96 -20% 613% 503 2,914 1.5x nm nm nm nm .7x
Sun Healthcare Group / SUNH 10.75 -8% 75% 468 1,132 .6x 9x 8x 12x 10x nm
Kindred Healthcare, / KND 11.71 -1% 184% 456 572 .1x 6x 13x 9x 8x .6x
Alliance Imaging, In / AIQ 8.72 -27% 38% 445 980 2.0x 13x 28x 24x 17x nm
Health Management As / HMA 1.80 -13% 356% 439 3,558 .8x 9x 4x 4x 4x nm
Almost Family, Inc. / AFAM 46.53 -64% 16% 379 413 2.3x 18x 33x 22x 19x nm
Skilled Healthcare G / SKH 9.93 -6% 73% 368 842 1.2x 9x 28x 10x 9x nm
Res-Care, Inc. / RSCR 11.77 -5% 125% 347 613 .4x 9x 9x 8x 7x nm
Bio-Reference Labora / BRLI 23.14 -14% 55% 319 338 1.2x 12x 23x 21x 17x 4.3x
Odyssey HealthCare, / ODSY 9.43 -28% 20% 309 382 .7x 14x 23x 16x 13x nm
Emeritus Corporation / ESC 7.61 -8% 294% 298 1,741 2.3x nm nm nm nm 1.7x
Kendle International / KNDL 20.16 -20% 158% 297 484 .7x 8x 16x 9x 8x nm
Ensign Group, Inc., / ENSG 14.10 -47% 37% 290 294 .6x 6x 14x 11x 9x 2.1x
Healthways, Inc. / HWAY 8.19 -7% 770% 275 588 .8x 5x 5x 5x 5x nm
RehabCare Group, Inc / RHB 14.51 -30% 80% 262 302 .4x 9x 20x 15x 12x 3.9x
IPC The Hospitalist / IPCM 15.68 -2% 82% 252 207 .9x 10x nm 18x 14x 4.1x
Assisted Living Conc / ALC 3.79 -8% 113% 235 353 1.5x 11x 15x 16x 14x .9x
Enzo Biochem, Inc. / ENZ 4.88 -9% 205% 182 104 1.3x nm nm nm nm 1.8x
MedCath Corporation / MDTH 7.71 -2% 250% 151 207 .3x 5x 11x 8x 6x .5x
U.S. Physical Therap / USPH 12.01 -3% 75% 144 145 .8x 6x 16x 14x 12x 5.8x
Continucare Corporat / CNU 1.97 -47% 42% 123 113 .4x 6x 12x 10x 9x 4.9x
Virtual Radiologic C / VRAD 7.38 -18% 265% 117 82 .8x 6x nm 15x 12x 2.2x
American Dental Part / ADPI 8.28 -49% 153% 107 236 .8x 8x nm 17x 16x nm
American Caresource / ANCI 6.87 -65% 38% 105 96 1.9x 46x nm 43x 26x 13.4x
Average (market value-weighted) 1.5x 10x 18x 14x 14x .5x
Median 1.2x 9x 16x 15x 13x 2.4x
Healthcare: Major Drugs – Valuation

Johnson & Johnson / JNJ 60.05 -13% 21% 166,613 166,454 2.6x 11x 17x 13x 13x 9.7x
Novartis AG (ADR) / NVS 48.94 -15% 25% 110,839 113,506 2.7x 14x 17x 13x 12x 3.8x
Pfizer Inc. / PFE 16.28 -12% 50% 109,775 99,330 2.0x 9x 14x 7x 7x 4.1x
GlaxoSmithKline plc / GSK 36.25 -9% 51% 94,416 106,982 3.1x 10x 13x 10x 10x 80.2x
Abbott Laboratories / ABT 55.06 -17% 11% 85,430 92,228 3.2x 17x 24x 17x 15x 29.1x
AstraZeneca plc (ADR / AZN 42.20 -18% 18% 61,037 70,786 2.2x 8x 11x 9x 8x nm
Merck & Co., Inc. / MRK 27.33 -14% 125% 57,781 57,872 2.4x nm 18x 8x 8x 3.3x
Wyeth / WYE 34.14 -18% 46% 45,457 42,795 1.8x 7x 10x 10x 9x 3.0x
Bristol Myers Squibb / BMY 19.58 -18% 52% 38,651 37,475 1.8x 11x 20x 12x 10x 5.6x
Eli Lilly & Co. / LLY 32.06 -9% 79% 36,451 34,944 1.7x 11x 12x 8x 7x 3.2x
Schering-Plough Corp / SGP 15.76 -24% 100% 25,630 33,368 1.9x nm nm 9x 9x nm
Alcon, Inc. / ACL 84.79 -12% 111% 25,386 23,666 3.8x 11x 16x 14x 13x 6.9x
Median 2.3x 11x 16x 10x 9x 4.8x
Healthcare: Major Drugs – Operating Performance

Est.
JNJ 64,522 10% 9% 540 71% 24% 20% 8% 78% 28% 15% .8x
NVS 42,407 10% 13% 432 73% 19% 18% 7% 51% 15% 10% .5x
PFE 48,820 1% 0% 564 82% 23% 22% 1% 25% 16% 9% .4x
GSK 34,718 -17% 4% 335 75% 31% 26% 4% 69% 72% 19% .7x
ABT 28,799 16% 10% 424 56% 19% 16% 12% 45% 25% 11% .7x
AZN 31,578 11% 11% 465 80% 29% 19% 1% >99% 40% 13% .6x
MRK 24,061 0% 2% 402 76% -1% 19% 5% nm 23% 10% .5x
WYE 23,249 6% 9% 460 72% 28% 19% 3% 39% 23% 10% .5x
BMY 20,729 21% 0% 494 68% 16% 19% 11% 46% 35% 14% .8x
LLY 20,357 15% 10% 514 77% 15% 12% 6% 26% 17% 9% .7x
SGP 17,878 54% 15% 325 59% -21% -12% 13% nm -26% -7% .6x
ACL 6,266 17% 13% 432 76% 34% 32% 13% 81% 51% 27% .8x
VRUS 9 -36% 99% 261 na <-99% <-99% 20% >99% -97% -60% .1x
PBH 322 -1% 4% 3,465 52% 28% 11% 10% >99% 7% 3% .3x
SNTA 3 na 52% 15 na <-99% <-99% 20% nm na -81% .0x
Median 10% 10% 432 73% 23% 19% 8% 46% 23% 10% .6x
Healthcare: Medical Equipment and Supplies – Valuation

Medtronic, Inc. / MDT 37.45 -8% 52% 42,255 47,644 3.4x 16x 19x 13x 11x 16.5x
Baxter International / BAX 60.00 -14% 19% 37,210 38,439 3.1x 16x 23x 18x 16x 7.5x
Covidien Ltd. / COV 38.10 -7% 50% 19,119 21,215 2.1x 14x nm 14x 13x 31.6x
Stryker Corporation / SYK 44.59 -2% 72% 18,003 15,816 2.4x 10x 19x 15x 13x 3.7x
Becton, Dickinson an / BDX 67.69 -7% 38% 16,487 16,678 2.3x 11x 15x 14x 13x 4.3x
St. Jude Medical, In / STJ 32.92 -18% 47% 11,331 12,153 2.9x 12x 21x 14x 13x 9.3x
Boston Scientific Co / BSX 7.39 -14% 92% 11,096 16,136 2.0x 33x nm 14x 12x nm
Zimmer Holdings, Inc / ZMH 42.00 -11% 93% 9,432 9,221 2.2x 8x 13x 10x 10x 4.2x
C.R. Bard, Inc. / BCR 82.91 -16% 23% 8,225 7,839 3.3x 15x 22x 19x 16x 7.4x
Luxottica Group S.p. / LUX 17.64 -6% 91% 8,057 11,715 1.8x 12x 13x 14x 14x nm
Smith & Nephew plc ( / SNN 37.75 -6% 83% 6,667 8,064 2.1x 13x 22x 14x 12x 44.4x
Intuitive Surgical, / ISRG 148.41 -3% 142% 5,805 5,397 6.5x 18x 40x 28x 21x 5.7x
Varian Medical Syste / VAR 40.69 -8% 62% 5,080 4,723 2.3x 11x 18x 16x 14x 6.2x
DENTSPLY Internation / XRAY 29.44 -16% 63% 4,385 4,545 2.0x 12x 18x 15x 14x 11.8x
Henry Schein, Inc. / HSIC 40.84 -1% 56% 3,649 3,790 .6x 9x 16x 14x 12x 4.3x
Hologic, Inc. / HOLX 14.14 -25% 158% 3,622 5,724 3.4x nm nm 12x 10x nm
Patterson Companies, / PDCO 22.04 -6% 73% 2,677 3,000 1.0x 8x 13x 11x 10x 15.4x
ResMed Inc. / RMD 34.33 -16% 59% 2,598 2,441 2.8x 17x 25x 19x 16x 3.6x
IDEXX Laboratories, / IDXX 32.93 -27% 96% 1,961 2,047 2.0x 12x 23x 18x 18x 9.5x
Immucor, Inc. / BLUD 25.76 -33% 36% 1,816 1,727 6.4x 16x 26x 26x 21x 10.9x
Steris Corporation / STE 30.71 -33% 27% 1,808 1,899 1.4x 12x 26x 18x 16x 4.3x
Kinetic Concepts, In / KCI 22.86 -14% 165% 1,642 3,137 1.7x 9x 7x 6x 6x nm
Owens & Minor, Inc. / OMI 39.19 -11% 40% 1,622 1,805 .3x 10x 22x 17x 15x 4.2x
Masimo Corporation / MASI 27.93 -13% 50% 1,592 1,471 5.0x 22x 63x 39x 34x 7.7x
NuVasive, Inc. / NUVA 39.89 -22% 48% 1,442 1,495 6.7x nm nm 665x 100x 12.2x
Haemonetics Corporat / HAE 54.42 -9% 24% 1,376 1,279 2.3x 15x 28x 23x 19x 3.6x
Thoratec Corporation / THOR 23.08 -44% 29% 1,294 1,213 4.2x 63x 385x 38x 32x 5.6x
West Pharmaceutical / WST 35.16 -8% 48% 1,150 1,424 1.3x 13x 17x 15x 13x 3.0x
PSS World Medical, I / PSSI 17.19 -13% 26% 1,040 1,248 .6x 13x 20x 18x 15x 5.4x
Integra LifeSciences / IART 33.14 -19% 51% 916 1,337 2.1x 35x 29x 16x 14x nm
Mine Safety Applianc / MSA 23.51 -4% 142% 841 961 .9x 7x 13x 12x 11x 2.1x
Wright Medical Group / WMGI 22.07 -11% 51% 839 865 1.9x 60x 736x 34x 26x 2.4x
Datascope Corporatio / DSCP 51.51 -38% 3% 819 576 1.4x 9x 24x 30x 24x 2.2x
Volcano Corporation / VOLC 17.15 -38% 14% 818 642 4.0x nm nm 858x 95x 3.8x
American Medical Sys / AMMD 11.01 -11% 67% 807 1,363 2.7x 18x 61x 17x 14x nm
CONMED Corporation / CNMD 25.69 -18% 36% 746 935 1.2x 11x 18x 16x 14x 12.9x
Cooper Companies, In / COO 15.35 -9% 188% 691 1,615 1.5x 21x nm 7x 6x 9.1x
Sirona Dental System / SIRO 12.57 -1% 172% 689 1,157 1.5x 17x 12x 8x 7x nm
China Medical Techno / CMED 24.50 -25% 135% 672 708 4.9x 10x 14x 11x 9x nm
ev3 Inc. / EVVV 5.82 -14% 164% 616 580 1.4x nm nm nm 146x 4.7x
Cardionet Inc / BEAT 22.60 -25% 59% 528 472 4.3x 91x nm 63x 27x 5.7x
ABIOMED, Inc. / ABMD 13.97 -24% 44% 511 461 6.6x nm nm nm nm 5.7x
Invacare Corporation / IVC 15.65 -5% 70% 503 974 .6x 11x 391x 12x 10x nm
Mentor Corporation / MNT 14.76 -93% 177% 499 552 1.4x 8x 11x 13x 12x 7.5x
Quidel Corporation / QDEL 15.10 -16% 41% 492 437 3.3x 14x 37x 23x 20x 4.3x
Align Technology, In / ALGN 6.87 -29% 189% 461 346 1.1x 16x 14x 29x 29x 3.1x
ICU Medical, Incorpo / ICUI 30.95 -28% 25% 445 327 1.7x 13x 20x 21x 17x 1.9x
Conceptus, Inc. / CPTS 14.00 -36% 59% 425 488 5.3x nm nm 1400x 34x nm
Merit Medical System / MMSI 15.15 -21% 41% 425 393 1.8x 13x 28x 20x 17x 2.5x
ArthroCare Corporati / ARTC 15.53 -4% 286% 414 440 1.3x 8x 10x 11x 8x 2.9x
Median 2.1x 13x 21x 16x 14x 5.5x
Healthcare: Medical Equipment and Supplies – Operating Performance

Est.
MDT 14,095 13% 10% 386 75% 21% 16% 12% 42% 20% 11% .6x
BAX 12,226 11% 6% 266 49% 20% 16% 12% 39% 27% 13% .8x
COV 9,938 10% 4% 237 52% 16% 10% 10% 34% 14% 6% .6x
SYK 6,658 16% 14% 415 68% 23% 17% 17% 34% 20% 15% .9x
BDX 7,156 13% 10% 255 51% 22% 16% 13% 39% 24% 15% .9x
STJ 4,249 17% 18% 354 73% 24% 16% 15% 48% 22% 12% .8x
BSX 8,200 -1% 14% 298 70% 6% 3% 15% 25% 1% 1% .3x
ZMH 4,164 11% 9% 548 76% 29% 23% 11% 61% 17% 14% .6x
BCR 2,401 12% 10% 235 61% 22% 16% 14% 62% 20% 15% 1.0x
LUX 6,534 -16% 16% 102 66% 15% 8% 9% 49% 17% 6% .7x
SNN 3,808 20% 39% 414 70% 16% 9% 15% 37% 20% 8% .8x
ISRG 833 59% 63% 1,090 71% 36% 24% 33% >99% 20% 17% .7x
VAR 2,070 18% 14% 460 42% 20% 20% 18% >99% 43% 21% 1.1x
XRAY 2,227 15% 6% 250 52% 18% 13% 14% 43% 18% 10% .8x
HSIC 6,539 15% 15% 545 29% 7% 4% 16% 45% 14% 8% 1.9x
HOLX 1,675 >99% 80% 468 53% -12% -23% 16% nm -8% -5% .2x
PDCO 3,041 7% 7% 444 34% 12% 7% 15% 73% 18% 11% 1.5x
RMD 868 18% 25% 321 59% 17% 13% 22% 25% 11% 9% .6x
IDXX 1,026 18% 19% 218 52% 17% 12% 18% 65% 27% 16% 1.4x
BLUD 271 15% 22% 444 71% 41% 27% na >99% 25% 21% .8x
STE 1,324 8% 5% 250 41% 12% 8% na 26% 14% 8% 1.1x
KCI 1,819 18% 18% 280 50% 20% 10% 11% 64% 25% 9% .9x
OMI 7,107 6% 15% 1,481 11% 2% 1% 12% 31% 15% 6% 4.6x
MASI 293 18% 55% 218 71% 23% 15% 23% >99% 25% 18% 1.2x
NUVA 222 61% 58% 645 83% -15% -18% 38% nm -22% -10% .6x
HAE 563 19% 10% 300 50% 15% 10% 17% 32% 12% 10% .9x
THOR 292 27% 11% 285 59% 7% 7% 25% 6% 5% 3% .5x
WST 1,062 7% 24% 164 29% 10% 7% 20% 18% 14% 6% .9x
PSSI 1,923 7% 8% 541 30% 5% 3% 17% 28% 17% 7% 2.2x
IART 638 23% 34% 255 61% 6% 2% 21% 14% 5% 2% .7x
MSA 1,122 13% 6% 220 39% 12% 6% 12% 32% 15% 7% 1.1x
WMGI 449 21% 9% 427 72% 3% 2% 24% 5% 2% 1% .6x
DSCP 410 83% 9% 536 65% 15% 31% na 34% 36% 28% .9x
VOLC 162 35% 29% 254 62% -28% -24% 15% nm -17% -15% .6x
AMMD 498 11% 31% 402 78% 15% 5% 19% 44% 7% 2% .5x
CNMD 753 12% 8% 235 52% 11% 6% 13% 25% 9% 5% .8x
COO 1,048 15% 25% 138 54% 7% 1% 14% 8% 1% 1% .4x
SIRO 754 22% >99% 331 46% 9% 11% 18% 41% 13% 5% .4x
CMED 145 63% 62% 210 64% 48% 36% na nm 25% 12% .3x
EVVV 408 64% 49% 255 65% -38% -37% 30% nm -16% -15% .4x
BEAT 110 65% 49% 187 65% 5% -1% 53% 21% -2% -1% .8x
ABMD 70 34% 16% 185 73% -47% -55% 22% nm -37% -31% .6x
IVC 1,752 12% 5% 307 28% 5% 2% 11% 20% 5% 2% 1.2x
MNT 382 14% 14% 321 72% 18% 15% 15% 45% 40% 13% .9x
QDEL 133 12% 15% 477 61% 23% 16% 19% 71% 18% 15% 1.0x
ALGN 302 13% 18% 231 74% 7% 7% 17% 37% 12% 9% 1.4x
ICUI 194 -1% 36% 114 43% 13% 11% na 14% 9% 8% .8x
CPTS 92 57% 77% 430 78% -8% -8% 20% nm -41% -7% .8x
MMSI 224 10% 11% 148 41% 13% 9% 20% 20% 11% 9% 1.0x
ARTC 337 23% 28% 313 73% 17% 13% 20% 38% 13% 11% .8x
Median 15% 15% 299 61% 14% 9% 17% 34% 14% 8% .8x
Services: Advertising – Valuation

Omnicom Group Inc. / OMC 25.40 -11% 99% 7,894 10,576 .8x 6x 9x 8x 8x nm
WPP Group plc (ADR) / WPPGY 25.06 -5% 160% 5,878 8,822 .9x 7x 8x 6x 5x nm
Interpublic Group of / IPG 3.90 -11% 168% 1,859 2,801 .4x 5x 15x 9x 8x nm
Clear Channel Outdoo / CCO 5.11 -34% 459% 1,818 4,333 1.3x 9x 7x 9x 10x 3.7x
Lamar Advertising Co / LAMR 14.88 -26% 254% 1,362 4,233 3.5x 20x 32x 135x nm nm
Focus Media Holding / FMCN 6.99 -7% 766% 905 524 .7x 3x 6x 4x 4x 1.3x
ValueClick, Inc. / VCLK 5.71 -4% 333% 495 406 .6x 5x 8x 10x 9x 5.2x
VisionChina Media In / VISN 5.71 -26% 348% 410 269 3.3x 8x 52x 9x 7x 1.9x
AirMedia Group Inc. / AMCN 4.89 -21% 442% 326 148 1.5x 7x nm 9x 7x 1.2x
Daktronics, Inc. / DAKT 7.85 -5% 216% 317 314 .6x 8x 12x 12x 11x 1.8x
China Mass Media Int / CMM 4.36 -28% 57% 104 15 .3x 1x 2x 4x 3x 11.2x
Services: Broadcasting and Cable TV – Valuation

Comcast Corporation / CMCSA 15.53 -41% 47% 44,723 75,494 2.3x 12x 19x 17x 15x nm
Walt Disney Company, / DIS 21.08 -7% 66% 38,427 50,065 1.3x 7x 9x 10x 9x 16.4x
Time Warner Inc. / TWX 9.15 -12% 91% 32,825 66,762 1.4x 8x 8x 8x 8x nm
DIRECTV Group, Inc., / DTV 20.64 -45% 41% 21,678 24,540 1.3x 9x 17x 15x 12x 25.1x
Time Warner Cable In / TWC 18.87 -12% 67% 18,436 30,904 1.8x 10x 16x 16x 17x nm
Viacom, Inc. / VIA.B 16.78 -14% 171% 10,295 18,722 1.3x 6x 7x 7x 7x nm
British Sky Broadcas / BSY 23.48 -15% 126% 10,289 13,232 1.8x 74x nm 12x 9x nm
Grupo Televisa, S.A. / TV 15.09 -14% 86% 8,480 8,490 2.4x 7x 13x 11x 10x 3.5x
Liberty Media Corp ( / LMDIA 12.80 -12% 124% 6,617 7,831 5.9x 46x nm 1x 7x .6x
DISH Network Corp. / DISH 11.00 -5% 316% 4,918 9,466 .8x 5x 7x 5x 5x nm
CBS Corporation / CBS 6.62 -11% 323% 4,499 11,046 .8x nm 4x 4x 5x nm
Liberty Global Inc. / LBTYA 14.13 -15% 194% 4,139 21,448 2.1x 17x nm 67x 74x nm
Cablevision Systems / CVC 13.90 -8% 137% 4,129 15,537 2.2x 13x 174x 21x 12x nm
Discovery Communicat / DISCA 13.92 -28% 85% 3,915 7,777 2.9x 13x nm 14x 13x nm
Liberty Media Corpor / LINTA 3.01 -13% 609% 1,787 8,710 1.1x 8x 5x 5x 5x nm
Net Servicos de Comu / NETC 5.22 -26% 204% 1,768 4,409 2.2x 17x 13x 37x 9x nm
Echostar Corporation / SATS 15.42 -3% 171% 1,381 778 .4x nm nm nm 308x .5x
Hearst-Argyle Televi / HTV 11.33 -6% 116% 1,065 1,900 2.6x 11x 16x 15x 34x nm
Sirius XM Radio Inc. / SIRI 0.26 -15% 1415% 924 3,937 3.0x nm nm nm nm nm
CTC Media, Inc. / CTCM 4.45 -22% 613% 677 747 1.2x 3x 5x 4x 4x nm
TiVo Inc. / TIVO 5.86 -16% 61% 599 493 1.8x nm nm nm nm 22.9x
Liberty Media Corpor / LCAPA 3.78 0% 543% 369 1,117 1.3x nm x nm nm .5x
Cox Radio, Inc. / CXR 4.52 -4% 190% 367 781 1.8x nm 226x 6x 7x nm
Mediacom Communicati / MCCC 3.71 -26% 127% 352 3,627 2.6x 14x nm nm nm nm
Crown Media Holdings / CRWN 2.20 -4% 253% 231 1,213 4.4x 49x nm nm nm nm
Limelight Networks, / LLNW 2.68 -35% 219% 223 46 .4x nm nm nm nm 1.4x
Knology, Inc. / KNOL 5.21 -29% 205% 186 752 1.9x 25x nm nm 87x nm
Sinclair Broadcast G / SBGI 2.16 -4% 430% 175 1,560 2.1x 9x 9x 3x 7x nm
Belo Corp. / BLC 1.70 -4% 749% 174 1,306 1.4x nm nm 3x 3x nm
Outdoor Channel Hold / OUTD 5.72 -7% 59% 145 87 1.7x 67x nm 48x 34x 1.6x
Median 1.8x 12x 11x 11x 9x 1.9x
Services: Business Services (I of II) – Valuation

International Busine / IBM 80.33 -6% 63% 107,920 132,577 1.3x 8x 11x 9x 9x 19.2x
Accenture Ltd. / ACN 28.67 -14% 50% 20,919 17,304 .7x 6x 11x 10x 9x 12.3x
MasterCard Incorpora / MA 143.68 -16% 123% 18,569 15,833 3.3x nm 18x 16x 14x 16.1x
Automatic Data Proce / ADP 35.12 -12% 35% 17,837 1,561 .1x 1x 16x 15x 13x 3.7x
Yahoo! Inc. / YHOO 10.82 -10% 180% 14,994 11,780 1.6x 24x 23x 26x 23x 2.1x
Paychex, Inc. / PAYX 25.70 -8% 58% 9,272 5,151 2.5x 6x 16x 16x 14x 12.4x
Johnson Controls, In / JCI 15.36 -5% 158% 9,124 12,684 .3x 9x 9x 8x 7x 4.4x
Moody's Corporation / MCO 19.33 -8% 140% 4,635 5,588 3.0x 7x 7x 11x 11x nm
Satyam Computer (ADR / SAY 13.16 -16% 127% 4,432 3,383 1.4x 7x 11x 9x 8x 2.6x
Iron Mountain Incorp / IRM 20.75 -11% 87% 4,185 7,282 2.4x 15x 27x 28x 26x nm
Equifax Inc. / EFX 23.53 -6% 70% 2,972 4,211 2.1x 9x 12x 10x 9x nm
Global Payments Inc. / GPN 36.76 -5% 36% 2,948 2,871 2.1x 10x 18x 15x 14x 37.5x
Robert Half Internat / RHI 17.81 -20% 68% 2,762 2,392 .5x 5x 10x 11x 25x 3.3x
Hewitt Associates, I / HEW 24.80 -8% 73% 2,337 2,596 .8x 8x 13x 12x 11x 29.5x
Manpower Inc. / MAN 27.78 -10% 155% 2,166 2,506 .1x 4x 5x 6x 9x 1.9x
FTI Consulting, Inc. / FCN 41.16 -8% 94% 2,092 2,514 2.0x 11x 21x 18x 15x nm
AECOM Technology Cor / ACM 19.81 -27% 74% 2,031 1,949 .4x 9x 14x 12x 10x 3.3x
IHS Inc. / IHS 32.73 -8% 121% 2,029 1,958 2.4x 16x 24x 17x 13x 45.0x
DST Systems, Inc. / DST 35.23 -3% 152% 1,748 2,927 1.3x 8x 3x 9x 8x 6.6x
Rollins, Inc. / ROL 16.16 -42% 39% 1,630 1,656 1.7x 15x 25x 23x 22x nm
Corrections Corporat / CXW 12.84 -8% 146% 1,614 2,741 1.7x 10x 12x 11x 9x 1.2x
Charles River Labora / CRL 23.51 -2% 194% 1,591 1,921 1.4x 8x 10x 8x 8x 2.5x
Watson Wyatt Worldwi / WW 37.27 -9% 66% 1,586 1,624 .9x 7x 11x 11x 10x 17.4x
Broadridge Financial / BR 11.10 -10% 118% 1,570 1,639 .7x 5x 8x 8x 7x 6.3x
Gartner, Inc. / IT 15.78 -13% 80% 1,484 1,764 1.4x 10x 23x 16x 15x nm
Teledyne Technologie / TDY 39.98 -8% 66% 1,434 1,708 .9x 9x 15x 12x 11x 33.1x
Monster Worldwide, I / MWW 11.62 -14% 222% 1,432 1,040 .7x 5x 10x 8x 11x 4.3x
Huron Consulting Gro / HURN 48.51 -23% 73% 1,011 1,332 2.1x 15x 21x 22x 14x nm
Chemed Corporation / CHE 39.93 -27% 46% 893 1,104 1.0x 9x 16x 12x 12x nm
athenahealth, Inc / ATHN 26.68 -23% 76% 885 815 6.5x 85x nm 53x 33x 10.9x
Celera Corporation / CRA 10.92 -19% 61% 879 562 3.3x nm nm 109x 36x 2.3x
Corporate Executive / EXBD 24.53 -9% 185% 835 795 1.4x 7x 11x 12x 11x nm
Navigant Consulting, / NCI 17.16 -36% 33% 832 1,101 1.3x 14x 26x 20x 16x nm
ABM Industries, Inc. / ABM 14.50 -17% 89% 737 1,016 .3x 10x 14x 13x 10x 18.4x
Geo Group, Inc., The / GEO 14.39 -12% 105% 735 1,203 1.1x 11x 17x 11x 10x 1.4x
First Advantage Corp / FADV 12.02 -42% 95% 715 720 .9x 7x 6x 13x 13x 10.8x
Stanley, Inc. / SXE 30.21 -25% 29% 710 885 1.3x 16x 27x 21x 17x nm
Resources Connection / RECN 14.84 -10% 70% 672 550 .6x 6x 14x 16x 15x 3.1x
Fair Isaac Corporati / FIC 13.42 -6% 203% 650 1,034 1.4x 8x 8x 8x 7x nm
Healthcare Services / HCSG 13.96 -9% 81% 600 507 .8x 12x 21x 23x 19x 3.3x
MPS Group, Inc. / MPS 6.26 -12% 104% 578 523 .2x 4x 7x 8x 15x 2.3x
VistaPrint Limited / VPRT 12.77 -2% 259% 569 448 1.0x 10x 15x 9x 7x 2.3x
Heartland Payment Sy / HPY 14.91 -7% 121% 561 667 .4x 10x 17x 13x 11x nm
Korn/Ferry Internati / KFY 11.61 -15% 79% 553 344 .4x 4x 8x 10x 10x 1.6x
Forrester Research, / FORR 23.80 -15% 52% 551 343 1.5x 11x 30x 18x 16x 2.6x
NetSuite Inc. / N 8.60 -13% 435% 523 390 2.7x nm nm nm 860x 6.4x
UniFirst Corporation / UNF 26.26 -2% 92% 508 717 .7x 7x 8x 8x 8x 2.2x
Wright Express Corpo / WXS 13.03 -5% 214% 505 669 1.7x 3x 10x 7x 7x nm
CSG Systems Internat / CSGS 14.42 -27% 40% 505 570 1.2x 7x 10x 9x 9x nm
Phase Forward Incorp / PFWD 11.68 -17% 117% 501 346 2.2x 22x 16x 24x 19x 3.0x
Median 1.3x 9x 14x 12x 11x 3.7x
Services: Business Services (II of II) – Valuation

Portfolio Recovery A / PRAA 31.87 -14% 65% 487 726 2.9x 9x 10x 11x 9x 2.1x
CBIZ, Inc. / CBZ 7.50 -24% 31% 464 618 .9x 10x 15x 14x 13x nm
Viad Corp / VVI 21.71 -27% 82% 445 304 .3x 5x 11x 10x 12x 1.9x
Kelly Services, Inc. / KELYA 12.42 -7% 87% 432 433 .1x 11x 8x 15x 24x .7x
American Reprographi / ARP 9.22 -7% 137% 421 751 1.0x 6x 6x 7x 8x nm
Team, Inc. / TISI 22.34 -8% 81% 421 519 1.0x 11x 19x 14x 12x 6.2x
Administaff, Inc. / ASF 16.18 -7% 110% 410 221 .1x 3x 9x 9x 9x 2.0x
G&K Services, Inc. / GKSR 21.25 -12% 95% 403 682 .7x 9x 9x 10x 9x 7.2x
Exponent, Inc. / EXPO 28.09 -16% 38% 384 332 1.5x 9x 22x 20x 18x 3.0x
inVentiv Health Inc. / VTIV 11.18 -29% 221% 372 655 .6x 6x 8x 7x 7x nm
Monro Muffler Brake, / MNRO 19.28 -24% 36% 358 457 1.0x 11x 19x 16x 14x 3.6x
EnergySolutions, Inc / ES 3.96 -40% 618% 350 867 .5x 7x nm 6x 5x nm
Heidrick & Struggles / HSII 21.24 -11% 79% 347 164 .2x 2x 7x 9x 14x 1.8x
Advisory Board Compa / ABCO 21.52 -5% 223% 344 323 1.4x 9x 13x 15x 15x 4.9x
ATC Technology Corp. / ATAC 16.73 -9% 82% 339 334 .6x 5x 9x 9x 8x 2.3x
Compass Diversified / CODI 10.74 -13% 47% 339 402 .3x 12x 67x 6x 7x nm
The9 Limited (ADR) / NCTY 12.04 -7% 137% 332 29 .1x 1x 9x 5x 5x .9x
Computer Programs & / CPSI 27.90 -39% 11% 304 280 2.4x 13x 23x 20x 18x 7.8x
Cornell Companies, I / CRN 19.90 -21% 43% 294 610 1.6x 11x 24x 14x 13x 1.4x
Standard Parking Cor / STAN 16.87 -9% 51% 285 385 .6x 10x 19x 17x 15x nm
TrueBlue, Inc. / TBI 6.52 -7% 168% 283 225 .2x 3x 5x 6x 9x 1.5x
AMN Healthcare Servi / AHS 8.62 -10% 136% 281 431 .4x 6x 8x 8x 8x nm
CRA International, I / CRAI 25.22 -12% 99% 275 252 .6x 8x 9x 17x 10x 3.3x
COMSCORE, Inc. / SCOR 9.44 -5% 301% 275 209 1.9x 18x 10x 47x 26x 4.5x
ICF International, I / ICFI 18.00 -19% 57% 266 353 .5x 6x 7x 10x 13x nm
Kforce Inc. / KFRC 6.77 -4% 76% 262 278 .3x 6x 7x 10x 14x 3.4x
Cross Country Health / CCRN 8.51 -5% 104% 262 394 .6x 9x 11x 11x 12x nm
eTelecare Global Sol / ETEL 8.60 -52% 24% 255 221 .7x 28x 11x 28x 15x 2.2x
eResearch Technology / ERES 4.65 -1% 305% 237 174 1.3x 5x 16x 9x 7x 2.4x
Michael Baker Corpor / BKR 26.26 -45% 67% 232 191 .3x 4x 12x 9x 7x 1.9x
Marchex, Inc. / MCHX 5.91 0% 139% 227 199 1.3x nm nm 16x 16x 4.4x
DICE HOLDINGS, INC. / DHX 3.44 -7% 251% 214 236 1.5x 6x nm 10x 11x nm
On Assignment, Inc. / ASGN 5.90 -27% 64% 211 298 .5x 7x 23x 11x 11x nm
Furmanite Corporatio / FRM 5.64 -2% 123% 206 208 .7x 7x 16x 10x 9x 2.5x
Hill International I / HIL 4.91 -21% 301% 202 183 .5x 9x 11x 9x 7x 2.5x
CDI Corp. / CDI 10.54 -4% 175% 199 123 .1x 3x 7x 8x 11x .8x
51job, Inc. (ADR) / JOBS 6.80 -11% 201% 193 36 .3x 2x 13x 16x 12x 1.1x
National Research Co / NRCI 28.12 -18% 27% 188 188 3.8x 17x 29x 26x 24x 55.4x
Asset Acceptance Cap / AACC 6.07 -2% 141% 185 366 1.5x 9x 10x 12x 10x 1.6x
ExlService Holdings, / EXLS 6.40 -25% 322% 185 83 .4x 5x 7x 12x 10x 1.3x
eLong, Inc. (ADR) / LONG 7.10 -56% 44% 180 23 .5x nm nm nm 237x 1.1x
Spherion Corporation / SFN 2.71 -18% 211% 140 211 .1x 6x 5x 9x 12x .5x
MYR Group Inc. / MYRG 6.90 -28% 161% 136 143 .2x 13x nm 8x 7x 1.5x
Midas, Inc. / MDS 9.23 -9% 107% 129 249 1.3x 9x 10x 15x 14x 25.9x
Kenexa Corporation / KNXA 5.59 -3% 330% 126 100 .5x 3x 6x 4x 5x 1.8x
Hudson Highland Grou / HHGP 4.33 -12% 200% 111 67 .1x 4x 23x 24x 108x .8x
Barrett Business Ser / BBSI 10.14 -11% 92% 108 57 .2x 6x 7x 10x 9x 1.7x
Volt Information Sci / VOL 4.90 -11% 303% 108 289 .1x 11x 3x 7x 5x .6x
.LECG Corporation / XPRT 4.07 -3% 328% 104 92 .3x 6x 8x 10x 8x .7x
SM&A / WINS 5.55 -66% 23% 102 91 .9x 14x 17x 22x 14x 3.2x
Services: Casinos and Gaming – Valuation

Wynn Resorts, Limite / WYNN 43.00 -35% 221% 4,473 7,677 2.5x 18x 18x 15x 21x 3.3x
International Game T / IGT 10.74 -9% 360% 3,189 5,118 2.0x 8x 10x 9x 8x nm
MGM MIRAGE / MGM 10.45 -15% 792% 2,890 15,928 2.1x 7x 2x 8x 10x .8x
Las Vegas Sands Corp / LVS 6.11 -29% 1912% 2,172 11,246 2.6x 34x 19x 20x 16x 1.0x
Melco Crown Entertai / MPEL 3.53 -35% 329% 1,554 1,823 1.4x nm nm 88x 353x 1.4x
Scientific Games Cor / SGMS 14.58 -10% 140% 1,354 2,464 2.2x 19x 21x 13x 11x nm
Penn National Gaming / PENN 16.37 -28% 270% 1,279 3,561 1.5x 6x 9x 11x 11x nm
WMS Industries Inc. / WMS 21.11 -23% 95% 1,056 1,062 1.6x 9x 18x 14x 12x 2.6x
Bally Technologies I / BYI 17.18 -11% 208% 942 1,173 1.2x 6x 9x 8x 7x 6.0x
Live Nation, Inc. / LYV 5.50 -1% 241% 430 811 .2x 12x nm 5x nm nm
Churchill Downs, Inc / CHDN 31.35 -10% 84% 429 466 1.1x 9x 25x 21x 16x 1.7x
Boyd Gaming Corporat / BYD 4.21 -12% 835% 370 2,870 1.6x 26x 3x 4x 7x .8x
Ameristar Casinos, I / ASCA 6.16 -15% 428% 353 1,900 1.5x 37x 5x 6x 6x 14.8x
Pinnacle Entertainme / PNK 4.07 -37% 589% 244 1,036 1.0x nm nm nm nm .3x
Shuffle Master, Inc. / SHFL 3.09 -16% 339% 172 293 1.6x 16x 7x 14x 10x nm
Dover Downs Gaming & / DDE 3.89 -10% 223% 124 213 .9x 5x 5x 6x 6x 1.2x
Monarch Casino & Res / MCRI 7.45 -31% 281% 120 152 1.0x 8x 6x 12x 14x 1.1x
Isle of Capri Casino / ISLE 3.25 -5% 490% 100 1,470 1.3x nm nm nm nm nm
Services: Casinos and Gaming – Operating Performance

Est.
WYNN 3,084 21% na 187 37% 14% 14% 16% 11% 26% 7% .5x
IGT 2,529 -4% 2% 468 56% 26% 14% 12% 67% 28% 8% .6x
MGM 7,513 -1% 24% 137 45% 30% 17% 11% 13% 24% 6% .3x
LVS 4,345 71% 35% 155 38% 8% 0% 37% 4% -1% 0% .3x
MPEL 1,342 >99% >99% 272 18% -1% -1% na nm -1% -1% .4x
SGMS 1,123 11% 13% 187 41% 11% 8% 20% 17% 13% 4% .5x
PENN 2,438 1% 30% 159 41% 26% 11% 3% 44% 21% 5% .5x
WMS 669 19% 19% 437 60% 17% 11% 22% 28% 14% 10% .9x
BYI 948 32% 24% 337 57% 22% 12% 24% 62% 38% 12% 1.0x
LYV 4,398 10% 14% 936 20% 1% 0% na 25% -1% 0% 1.5x
CHDN 434 8% 10% 434 20% 12% 6% 10% 16% 7% 4% .7x
BYD 1,837 -10% 5% 109 46% 6% 2% 14% 4% 2% 1% .4x
ASCA 1,277 25% 8% 142 44% 4% -2% 5% 3% -5% -1% .5x
PNK 1,005 10% 26% 117 38% -7% -4% 15% nm -4% -2% .4x
SHFL 188 9% 28% 330 58% 10% 7% 23% 23% 11% 3% .5x
DDE 243 1% 5% 297 23% 16% 9% na 22% 23% 9% 1.0x
MCRI 145 -9% 7% 79 55% 13% 9% 15% 17% 12% 8% .9x
ISLE 1,129 12% 6% 132 47% -4% -8% na nm -43% -5% .6x
Median 10% 14% 187 43% 12% 7% 15% 17% 12% 4% .5x
Services: Communications Services (I of II) – Valuation

China Mobile Ltd. (A / CHL 43.73 -21% 121% 175,308 149,520 2.6x 7x 14x 11x 9x 3.2x
AT&T Inc. / T 27.65 -24% 55% 162,942 238,122 1.9x 10x 14x 10x 9x nm
Vodafone Group Plc ( / VOD 18.09 -15% 121% 97,307 139,911 2.5x 17x 10x 8x 7x 9.2x
Telefonica S.A. (ADR / TEF 56.94 -18% 82% 89,378 147,030 2.0x 9x 8x 8x 8x nm
Verizon Communicatio / VZ 30.00 -23% 52% 85,215 128,316 1.3x 8x 16x 12x 11x nm
France Telecom SA (A / FTE 24.61 -16% 61% 64,112 105,069 1.6x 8x 8x 9x 9x nm
America Movil S.A.B / AMX 30.76 -25% 119% 52,984 59,581 2.4x 9x 12x 9x 8x 7.4x
China Telecom Corpor / CHA 35.33 -27% 160% 28,593 38,888 1.5x 8x 8x 9x 10x .9x
Telecom Italia S.p.A / TI 12.73 -31% 159% 24,545 73,392 1.9x 12x 8x 8x 9x nm
Telefonaktiebolaget / ERIC 6.52 -7% 125% 21,165 16,288 .7x 9x 7x 9x 9x 1.9x
Chunghwa Telecom Co. / CHT 15.72 -17% 43% 18,182 15,673 2.5x 8x 12x 12x 11x 1.7x
Telefonos de Mexico, / TMX 18.37 -18% 48% 17,110 23,526 2.5x 8x 8x 8x 8x 5.8x
China Unicom (Hong K / CHU 11.99 -11% 110% 16,381 15,989 1.0x 8x 11x 15x 12x 1.1x
BT Group plc (ADR) / BT 18.50 -10% 226% 14,324 32,319 1.0x 9x 6x 5x 6x 87.9x
Telecomunicacoes de / TSP 22.50 -25% 36% 11,382 12,102 1.8x 7x 10x 9x 9x 2.3x
SK Telecom Co., Ltd. / SKM 17.12 -18% 94% 11,285 13,343 1.5x 13x 10x 12x 11x 1.8x
American Tower Corpo / AMT 26.64 -16% 73% 10,568 14,924 9.5x 27x 121x 52x 39x nm
Turkcell Iletisim Hi / TKC 11.95 -20% 151% 10,516 8,317 1.2x 4x 8x 6x 6x 2.3x
Mobile TeleSystems O / MBT 27.60 -27% 283% 10,439 12,962 1.3x 4x 5x 4x 4x 3.4x
PT Telekomunikasi In / TLK 20.14 -9% 148% 9,512 10,321 2.0x 5x 9x 9x 8x 3.5x
Vimpel-Communication / VIP 9.32 -31% 388% 9,465 16,237 1.9x 6x 6x 5x 4x nm
Telmex Internacional / TII 9.75 -19% 105% 8,992 na nm nm 24x 15x 13x nm
Philippine Long Dist / PHI 45.64 -21% 68% 8,624 12,502 9.3x 46x 11x 11x 9x 5.0x
Hellenic Telecom Org / OTE 7.52 -29% 154% 7,372 13,263 1.6x 10x 9x 8x 8x 24.9x
Portugal Telecom, SG / PT 7.61 -29% 95% 7,173 14,618 1.7x 13x 10x 8x 9x nm
Sprint Nextel Corpor / S 2.30 -23% 592% 6,571 25,095 .7x nm nm 29x nm nm
KT Corporation (ADR) / KTC 12.56 -18% 141% 5,148 8,992 .7x 7x 7x 16x 11x 1.0x
Qwest Communications / Q 2.86 -28% 159% 4,936 18,405 1.4x 9x 2x 7x 7x 14.3x
Tele Norte Leste Par / TNE 12.31 -17% 129% 4,706 7,391 .9x 4x 3x 5x 5x 1.1x
Embarq Corporation / EQ 30.16 -10% 73% 4,287 10,044 1.6x 6x 7x 6x 6x nm
MetroPCS Communicati / PCS 11.77 -10% 86% 4,122 6,160 2.4x 17x 38x 25x 17x nm
Crown Castle Interna / CCI 14.06 -14% 208% 4,059 10,389 6.9x 59x nm nm 1406x nm
Rostelecom OAO (ADR) / ROS 33.20 -34% 126% 4,032 3,837 1.6x 35x 52x 41x 28x 2.0x
Vivo Participacoes S / VIV 10.80 -28% 189% 3,968 5,733 .9x 11x nm 31x 12x 1.6x
Windstream Corporati / WIN 8.43 -24% 78% 3,704 8,988 2.8x 8x 4x 8x 8x nm
Telephone & Data Sys / TDS 30.04 -29% 126% 3,458 4,091 .8x 7x 10x 12x 13x 2.3x
TIM Participacoes SA / TSU 14.02 -26% 216% 3,286 4,017 .7x 18x 78x nm 12x 2.5x
Brasil Telecom SA (A / BTM 15.65 -39% 146% 2,856 4,059 .8x 10x 8x 3x 5x 1.3x
United States Cellul / USM 32.47 -15% 176% 2,837 3,666 .9x 9x 9x 11x 11x 2.6x
Maxcom Telecomunic S / MXT 3.56 -29% 402% 2,812 2,862 14.2x 117x 178x 13x 11x 7.7x
NII Holdings, Inc. / NIHD 16.77 -22% 240% 2,780 3,681 .9x 5x 8x 7x 6x 1.5x
Tata Communications / TCL 19.27 -28% 109% 2,746 na nm nm nm 35x 43x nm
Magyar Telekom Plc. / MTA 13.15 -10% 114% 2,739 4,240 1.3x 6x 10x 5x 5x 3.2x
Partner Communicatio / PTNR 17.02 -3% 45% 2,686 3,229 2.0x 8x 11x 9x 8x 31.6x
Frontier Communicati / FTR 8.49 -19% 55% 2,643 7,301 3.2x 11x 13x 14x 12x nm
CenturyTel, Inc. / CTL 25.25 -9% 70% 2,529 5,614 2.1x 8x 7x 8x 8x nm
Cellcom Israel Ltd. / CEL 25.39 -5% 46% 2,481 3,395 2.0x 8x 11x 10x 10x nm
Telecom Corp of New / NZT 6.77 -15% 162% 2,473 3,710 1.2x 6x 6x 9x 10x 2.5x
Brasil Telecom Parti / BRP 33.21 -34% 158% 2,408 2,939 .6x 4x 7x 7x 6x 1.2x
Equinix, Inc. / EQIX 52.91 -11% 110% 1,976 2,907 4.5x 59x nm 80x 34x 5.4x
Services: Communications Services (II of II) – Valuation

SBA Communications C / SBAC 15.50 -27% 148% 1,807 4,195 9.3x 97x nm nm nm nm
Virgin Media Inc. / VMED 5.02 -27% 285% 1,647 10,189 1.7x nm nm nm nm nm
Leap Wireless Intern / LEAP 21.64 -13% 185% 1,502 3,258 1.7x 51x nm nm nm nm
Cia de Telecom de Ch / CTC 5.97 -12% 54% 1,426 1,966 2.0x 23x 27x 75x 54x 1.1x
Level 3 Communicatio / LVLT 0.87 -31% 415% 1,402 7,578 1.7x nm nm nm nm nm
Telecom Argentina S. / TEO 6.80 -36% 301% 1,339 1,735 .6x 3x 4x 4x 4x 1.4x
Clearwire Corporatio / CLWR 7.05 -21% 159% 1,159 2,029 9.4x nm nm nm nm nm
tw telecom inc. / TWTC 6.76 -35% 254% 997 2,038 1.8x 26x nm 97x 28x 7.3x
Mahanagar Telephone / MTE 3.05 -15% 252% 961 na nm nm 19x 10x 11x nm
NTELOS Holdings Corp / NTLS 22.49 -20% 47% 949 1,491 2.8x 14x 29x 18x 16x nm
Centennial Communica / CYCL 7.52 -76% 33% 814 2,703 2.7x 11x 30x 21x 16x nm
j2 Global Communicat / JCOM 16.79 -14% 63% 737 596 2.5x 6x 12x 10x 9x 5.5x
Starent Networks Cor / STAR 9.25 -14% 167% 648 292 1.2x 8x 77x 10x 13x 2.1x
Infinera Corp. / INFN 6.75 -14% 233% 633 385 .8x 5x nm nm nm 1.6x
Syniverse Holdings, / SVR 8.66 -3% 165% 593 985 2.0x 6x 11x 5x 6x nm
Shenandoah Telecommu / SHEN 22.61 -45% 14% 533 544 3.8x 13x 28x 22x 21x 3.1x
Telemig Celular Part / TMB 27.74 -8% 152% 502 278 .5x 3x 7x 5x 7x 1.0x
Global Crossing Ltd. / GLBC 8.77 -35% 182% 494 1,494 .6x nm nm nm nm nm
Neutral Tandem Inc. / TNDM 15.05 -13% 53% 486 383 3.5x 13x 72x 23x 17x 2.9x
Iowa Telecommunicati / IWA 15.04 -23% 40% 481 1,001 4.1x 14x 17x 21x 21x nm
Alaska Communication / ALSK 9.75 -10% 64% 425 956 2.4x 18x 3x 44x 30x nm
Cincinnati Bell Inc. / CBB 1.79 -82% 192% 412 2,524 1.8x 10x 7x 4x 4x nm
Premiere Global Serv / PGI 6.52 0% 159% 402 658 1.1x 9x 14x 6x 6x nm
GeoEye Inc. / GEOY 19.04 -16% 96% 343 440 2.9x 13x 12x 41x 28x 1.5x
DG FastChannel Inc. / DGIT 15.64 -10% 67% 332 479 3.5x 16x 24x 24x 22x nm
General Communicatio / GNCMA 6.11 -26% 80% 322 1,099 2.0x 19x 27x 51x 28x nm
Consolidated Communi / CNSL 10.74 -23% 88% 317 1,186 3.0x 18x 24x 15x 14x nm
Cbeyond, Inc. / CBEY 11.01 -26% 322% 313 270 .8x 27x 15x 85x 73x 2.2x
Atlantic Tele-Networ / ATNI 20.51 -7% 91% 312 309 1.5x 4x 8x 8x 8x 2.0x
Hughes Communication / HUGH 12.55 -1% 382% 270 650 .6x 9x 6x 17x 6x 1.0x
USA Mobility, Inc. / USMO 9.55 -33% 63% 260 156 .4x nm nm 7x 9x 1.5x
Fairpoint Communicat / FRP 2.66 -9% 514% 237 2,549 2.5x 36x 17x nm 7x nm
RCN Corporation / RCNI 6.04 -17% 171% 226 907 1.3x nm nm nm nm nm
UTStarcom, Inc. / UTSI 1.67 -4% 256% 211 -120 nm nm nm nm nm .4x
Aruba Networks, Inc. / ARUN 2.50 -12% 534% 209 107 .6x nm nm 19x 9x 2.0x
Terremark Worldwide, / TMRK 3.44 -13% 123% 205 489 2.2x 34x nm nm 11x nm
Alvarion Ltd. (USA) / ALVR 2.99 -3% 243% 189 43 .2x nm 27x 21x 14x 1.1x
Cogent Communication / CCOI 3.99 -11% 528% 178 349 1.7x nm nm nm nm 2.2x
ShoreTel, Inc. / SHOR 3.99 -17% 301% 173 66 .5x nm 67x nm 40x 1.5x
SureWest Communicati / SURW 12.33 -41% 57% 172 403 1.8x 41x 103x 51x 43x .7x
RRSat Global Communi / RRST 9.73 -25% 131% 168 107 1.5x 8x 15x 13x 10x 2.1x
PAETEC Holding Corp. / PAET 1.15 -34% 909% 166 976 .7x nm 12x nm nm nm
iBasis, Inc. / IBAS 2.15 -35% 176% 153 122 .1x 10x 7x 43x 31x nm
Vonage Holdings Corp / VG 0.89 -36% 173% 139 303 .3x nm nm nm nm nm
iPCS, Inc. / IPCS 7.42 0% 397% 127 533 1.0x 27x nm nm 41x nm
ORBCOMM Inc. / ORBC 2.44 -10% 223% 103 16 .5x nm nm nm nm .7x
Median 1.7x 13x 17x 19x 14x 1.6x
Services: Hotels and Motels – Valuation

Marriott Internation / MAR 15.66 -2% 142% 5,467 8,396 .6x 8x 9x 10x 11x nm
Starwood Hotels & Re / HOT 14.99 -7% 274% 2,744 6,691 1.1x 8x 6x 7x 11x nm
InterContinental Hot / IHG 7.20 -5% 178% 2,056 3,407 1.8x 7x 11x 7x 7x nm
Choice Hotels Intern / CHH 23.80 -23% 59% 1,496 1,657 2.5x 9x 14x 13x 14x nm
Wyndham Worldwide Co / WYN 5.63 -14% 448% 999 4,584 1.0x 7x 3x 3x 3x nm
Hospitality Properti / HPT 9.73 -17% 296% 914 3,974 3.1x 13x 5x 8x 7x .4x
Orient-Express Hotel / OEH 6.51 -4% 869% 394 1,175 1.9x 14x 6x 8x 12x .6x
Marcus Corporation, / MCS 11.67 -22% 71% 347 596 1.6x 12x 17x 16x 16x 1.2x
Gaylord Entertainmen / GET 8.14 -6% 448% 333 1,569 1.8x 40x 3x nm 39x .4x
Home Inns & Hotels M / HMIN 9.14 -23% 354% 324 351 1.5x 30x 65x 26x 14x 2.1x
DiamondRock Hospital / DRH 3.56 -5% 461% 321 1,281 1.8x 12x 5x 6x 30x .3x
Landry's Restaurants / LNY 11.46 -36% 122% 185 1,026 .9x 10x 8x 8x 10x .7x
Morgans Hotel Group / MHGC 3.79 -17% 428% 111 782 2.4x 17x nm nm nm 5.9x
Services: Hotels and Motels – Operating Performance

Est.
MAR 13,184 4% 9% 87 14% 8% 4% 11% 51% 39% 6% 1.5x
HOT 6,184 1% 5% 40 27% 13% 6% 11% 22% 20% 4% .6x
IHG 1,914 >99% -26% 185 54% 27% 15% 17% 64% >99% 10% .7x
CHH 656 11% 13% 361 na 29% 17% 8% nm -87% 32% 1.9x
WYN 4,402 2% 13% 133 53% 16% 9% 13% 70% 11% 4% .4x
HPT 1,297 7% 26% na 51% 24% 10% na 6% 6% 2% .2x
OEH 620 10% 17% 84 51% 14% 3% 17% 6% 2% 1% .3x
MCS 379 10% 12% 57 49% 13% 6% 3% 9% 7% 3% .5x
GET 889 21% 1% 142 40% 4% 0% 11% 2% 0% 0% .4x
HMIN 229 93% >99% 28 16% 5% -2% 47% 8% -2% -1% .5x
DRH 705 10% >99% >9,999 28% 15% 9% na 5% 6% 3% .3x
LNY 1,171 1% 13% 48 46% 8% -1% 9% 9% -2% -1% .8x
MHGC 330 6% 11% 75 60% 14% -7% 12% 10% -21% -3% .4x
Median 8% 12% 84 48% 14% 6% 11% 9% 4% 3% .5x
Services: Motion Pictures – Valuation

DreamWorks Animation / DWA 25.11 -15% 30% 2,250 1,982 2.7x 8x 12x 14x 15x 2.4x
Regal Entertainment / RGC 9.53 -8% 121% 1,463 3,374 1.3x 17x 4x 11x 10x nm
Cinemark Holdings, I / CNK 8.52 -19% 106% 924 2,216 1.3x 15x 10x 17x 13x nm
CKX Inc. / CKXE 4.04 -19% 183% 401 426 1.4x 6x 21x 14x 13x nm
National CineMedia, / NCMI 8.40 -41% 247% 353 1,097 3.1x 7x 17x 14x 12x nm
BigBand Networks, In / BBND 4.34 -46% 83% 279 114 .7x nm nm 18x 15x 2.3x
Rentrak Corporation / RENT 10.74 -7% 47% 114 78 .8x 15x 26x 33x 15x 2.5x
Median 1.3x 11x 14x 14x 13x 2.4x
Services: Personal Services – Valuation

H&R Block, Inc. / HRB 17.68 -15% 58% 5,801 6,588 1.5x 9x 13x 11x 9x nm
Cintas Corporation / CTAS 21.01 -6% 69% 3,210 3,980 1.0x 7x 10x 9x 9x 4.0x
Expedia, Inc. / EXPE 7.80 -9% 344% 2,238 2,723 .9x 5x 8x 6x 6x nm
Weight Watchers Inte / WTW 26.63 0% 88% 2,048 3,632 2.4x 9x 11x 10x 9x nm
Ctrip.com Internatio / CTRP 22.99 -13% 208% 1,526 1,339 6.6x 19x 27x 23x 17x 6.1x
Service Corporation / SCI 5.70 -9% 148% 1,457 3,177 1.4x 10x 7x 10x 11x 6.2x
Regis Corporation / RGS 10.01 -8% 219% 432 1,114 .4x 7x 5x 5x 5x nm
NutriSystem Inc. / NTRI 13.22 -24% 139% 391 333 .5x 3x 4x 7x 7x 3.2x
Stewart Enterprises, / STEI 3.84 -6% 160% 354 756 1.4x 9x 10x 9x 8x 2.7x
Steiner Leisure Limi / STNR 22.79 -13% 108% 354 326 .6x 7x 9x 8x 8x 3.7x
Jackson Hewitt Tax S / JTX 11.76 -10% 193% 339 620 2.2x 10x 11x 8x 7x nm
Interval Leisure Gro / IILG 5.99 -16% 183% 336 633 1.5x 6x 5x 5x 8x nm
Ambassadors Group, I / EPAX 8.40 -12% 148% 160 98 1.0x 4x 5x 9x 10x 2.3x
StoneMor Partners L. / STON 12.42 -30% 86% 147 292 1.7x 20x 41x 22x 18x 1.2x
Services: Publishing – Valuation

News Corporation / NWS.A 7.43 -13% 190% 19,419 27,408 .8x 5x 4x 7x 6x nm
Thomson Reuters PLC / TRIN 108.32 -21% 95% 14,881 na nm nm 12x 10x 9x nm
Reed Elsevier plc (A / RUK 31.29 -8% 74% 8,626 8,626 2.8x 14x 12x 11x 10x 11.0x
McGraw-Hill Companie / MHP 23.36 -27% 110% 7,347 8,366 1.3x 6x 8x 9x 9x nm
Pearson PLC (ADR) / PSO 8.78 -6% 78% 7,105 9,804 1.5x 12x 14x 9x 9x nm
Washington Post Comp / WPO 393.00 -18% 109% 3,681 3,785 .9x 14x 13x 14x 15x 2.9x
R.R. Donnelley & Son / RRD 12.47 -5% 213% 2,556 6,511 .5x 10x nm 4x 4x nm
Wiley John & Sons In / JW.A 32.26 -42% 70% 1,909 2,799 1.7x 13x 13x 12x 10x nm
Gannett Co., Inc. / GCI 8.15 -4% 393% 1,859 5,645 .8x nm 2x 2x 3x nm
New York Times Compa / NYT 7.34 -1% 188% 1,055 2,136 .7x nm 10x 10x 12x 17.6x
Meredith Corporation / MDP 16.11 -6% 263% 727 1,163 .7x 5x 6x 7x 6x nm
Scholastic Corporati / SCHL 15.28 -4% 146% 577 1,036 .3x 4x 5x 9x 7x 1.4x
American Greetings C / AM 10.07 -11% 144% 457 784 .4x 9x 7x 7x 6x .8x
Harte-Hanks, Inc. / HHS 5.01 -7% 258% 317 591 .5x 4x 4x 5x 6x nm
Martha Stewart Livin / MSO 3.91 -1% 181% 215 165 .5x 6x 20x 65x 13x 4.1x
infoGROUP Inc / IUSA 3.38 -13% 195% 192 494 .7x 12x 5x 12x 5x nm
E.W. Scripps Company / SSP 3.24 -7% 250% 174 188 .1x nm nm 3x 6x .4x
McClatchy Company, T / MNI 1.63 -9% 912% 135 2,198 1.1x nm nm 2x 3x nm
Media General, Inc. / MEG 4.77 -9% 483% 109 845 1.0x nm 11x 10x 11x nm
Dolan Media Company / DM 3.57 -31% 773% 107 277 1.6x 10x nm 6x 4x nm
Services: Real Estate Operations (I of II) – Valuation

Simon Property Group / SPG 52.20 -6% 104% 11,787 29,764 7.9x 20x 25x 24x 23x 4.6x
Public Storage / PSA 64.46 -1% 59% 10,920 14,304 8.0x 21x 55x 16x 25x 2.1x
Vornado Realty Trust / VNO 56.28 -5% 92% 8,687 20,173 7.0x 23x 20x 15x 34x 1.8x
Equity Residential / EQR 27.66 -2% 77% 7,524 17,305 8.3x 28x 66x 18x 66x 1.5x
Annaly Capital Manag / NLY 13.29 -25% 60% 7,193 57,471 18.6x 59x 10x 6x 5x 1.1x
Boston Properties, I / BXP 52.40 -2% 103% 6,330 12,386 8.4x 21x 6x 23x 30x 1.7x
HCP, Inc. / HCP 21.58 -4% 95% 5,452 11,571 11.1x 26x 32x 12x 20x 1.2x
Kimco Realty Corpora / KIM 17.25 -7% 177% 4,593 8,866 11.9x 24x 13x 19x 14x 1.1x
AvalonBay Communitie / AVB 55.46 -5% 104% 4,277 7,625 9.0x 26x 18x 10x 19x 1.3x
Host Hotels & Resort / HST 7.15 -5% 181% 3,736 9,245 1.7x 10x 7x 10x 19x .7x
Health Care REIT, In / HCN 35.42 -3% 52% 3,664 6,634 12.2x 23x 28x 12x 19x 1.3x
Ventas, Inc. / VTR 23.96 -10% 117% 3,433 6,453 6.9x 18x 21x 16x 15x 1.6x
Federal Realty Inv. / FRT 51.16 -11% 86% 3,017 4,733 9.2x 22x 30x 25x 23x 2.7x
St. Joe Company, The / JOE 25.17 -6% 86% 2,321 2,265 7.4x 267x 168x nm 194x 2.3x
Regency Centers Corp / REG 32.71 -7% 150% 2,290 4,684 9.7x 23x 15x 15x 15x 1.5x
Nationwide Health Pr / NHP 21.31 -1% 88% 2,117 3,661 10.0x 18x 15x 8x 19x 1.3x
Digital Realty Trust / DLR 28.99 -12% 77% 2,116 4,020 8.3x 37x 362x 88x 58x 2.4x
Realty Income Corp / O 19.23 -6% 81% 2,005 3,700 11.3x 17x 19x 18x 17x 1.7x
Essex Property Trust / ESS 72.97 -3% 78% 1,955 3,810 9.5x 29x 57x 37x 43x 2.3x
Liberty Property Tru / LRY 18.85 -6% 137% 1,850 4,552 6.0x 16x 14x 14x 16x 1.0x
UDR, Inc. / UDR 13.56 -1% 110% 1,847 5,352 9.5x 26x nm 3x nm 1.4x
Alexandria Real Esta / ARE 56.80 -3% 105% 1,831 4,999 11.3x 27x 24x 18x 20x 1.3x
Senior Housing Prope / SNH 14.69 -10% 72% 1,683 2,242 10.4x 16x 14x 14x 13x 1.0x
Douglas Emmett, Inc. / DEI 11.94 -6% 118% 1,454 5,185 9.1x 34x nm nm nm .8x
AMB Property Corpora / AMB 14.75 -13% 336% 1,453 5,148 7.2x 23x 7x 8x 12x .6x
Duke Realty Corporat / DRE 9.71 -2% 193% 1,431 6,804 5.3x 23x 15x 28x 121x .8x
BRE Properties, Inc. / BRE 27.81 -3% 235% 1,421 3,404 9.7x 23x 30x 17x 23x 1.6x
Camden Property Trus / CPT 26.65 -3% 108% 1,419 4,213 6.7x 25x 33x 15x 41x .9x
Taubman Centers, Inc / TCO 26.75 -7% 147% 1,418 4,166 6.3x 20x 30x 43x 32x nm
Weingarten Realty In / WRI 15.92 -5% 151% 1,386 4,651 7.5x 18x 11x 9x 9x 1.0x
ProLogis / PLD 5.08 -29% 1313% 1,350 12,456 2.5x 13x 1x 3x 7x .2x
CapitalSource, Inc. / CSE 4.64 -4% 321% 1,308 11,417 8.0x 54x 5x 4x 4x .5x
Macerich Company, Th / MAC 17.11 -2% 379% 1,302 7,287 8.0x 26x 18x 7x 13x .9x
Mack-Cali Realty Cor / CLI 19.45 -13% 121% 1,281 3,530 4.4x 16x 18x 19x 29x .8x
Washington Real Esta / WRE 23.93 -2% 63% 1,254 2,542 9.2x 31x 34x 35x 37x 2.1x
Healthcare Realty Tr / HR 20.69 -8% 55% 1,217 1,870 8.7x 31x 59x 30x 32x 1.5x
Apartment Investment / AIV 12.09 -17% 261% 1,072 8,415 5.2x 28x nm 6x nm 1.2x
National Retail Prop / NNN 13.12 -1% 93% 1,028 2,222 10.0x 15x 11x 9x 10x .7x
Homex Development Co / HXM 18.25 -18% 287% 1,022 1,383 1.0x 5x 8x 5x 5x 1.2x
MFA Mortgage Investm / MFA 4.94 -19% 124% 1,021 9,972 19.9x 74x 21x 45x 5x .8x
CB Richard Ellis Gro / CBG 4.84 -27% 411% 992 4,012 .7x 9x 3x 6x 5x nm
BioMed Realty Trust, / BMR 12.16 -2% 143% 977 2,743 9.7x 26x 15x 16x 26x .8x
Entertainment Proper / EPR 28.75 -6% 140% 945 2,152 7.8x 12x 10x 9x 9x .7x
Tanger Factory Outle / SKT 29.72 -11% 56% 941 1,796 7.5x 26x 41x 43x 31x 5.7x
Equity One, Inc. / EQY 12.03 -4% 122% 922 1,949 8.1x 26x 18x 13x 19x 1.0x
American Campus Comm / ACC 21.38 -5% 73% 905 2,122 10.6x 55x nm nm nm 1.1x
PS Business Parks, I / PSB 42.56 -20% 42% 871 1,595 5.6x 19x 52x 44x 38x 2.1x
Mid-America Apartmen / MAA 29.52 -2% 105% 832 2,147 5.9x 22x 47x 34x 28x 1.8x
W. P. Carey & Co. LL / WPC 20.77 -21% 77% 831 1,140 4.9x 17x 12x 11x 11x 1.5x
Equity Lifestyle Pro / ELS 33.43 0% 68% 831 2,446 6.1x 21x 36x 32x 25x 10.1x
Median 8.1x 23x 19x 15x 20x 1.3x
Services: Real Estate Operations (II of II) – Valuation

Jones Lang LaSalle I / JLL 24.07 -7% 277% 831 1,329 .5x 6x 3x 8x 6x nm
EastGroup Properties / EGP 31.28 -17% 63% 784 1,452 8.9x 25x 28x 24x 28x 1.9x
Extra Space Storage, / EXR 8.79 -4% 104% 752 1,939 7.2x 21x 17x 16x 18x .9x
Inland Real Estate C / IRC 10.47 -15% 62% 695 1,581 8.2x 21x 17x 15x 15x 2.1x
Forest City Enterpri / FCE.A 6.64 -2% 679% 687 8,497 6.2x 31x nm nm nm .7x
DCT Industrial Trust / DCT 3.71 -4% 184% 645 1,780 7.0x 30x 186x 31x nm .6x
Developers Diversifi / DDR 5.22 -23% 813% 628 7,063 7.5x 19x 5x 6x 5x .3x
Post Properties, Inc / PPS 14.11 -4% 217% 624 1,663 6.0x 105x 6x 88x 21x .6x
HRPT Properties Trus / HRP 2.68 -1% 227% 610 4,199 5.1x 15x 12x 17x 67x .3x
Brandywine Realty Tr / BDN 6.91 -6% 221% 609 3,621 4.6x 19x 29x 18x nm .4x
Sovran Self Storage, / SSS 26.17 -2% 78% 575 1,176 5.8x 15x 14x 15x 17x 1.1x
Cousins Properties I / CUZ 11.01 0% 166% 566 1,564 7.6x 55x nm 79x 367x 1.9x
Hatteras Financial C / HTS 20.83 -24% 30% 558 5,029 37.3x 86x 260x 6x 5x 1.1x
Capstead Mortgage Co / CMO 8.96 -16% 108% 527 7,915 20.3x 63x 47x 4x 4x .9x
Investors Real Estat / IRET 8.74 -37% 35% 509 1,562 6.9x 20x 49x 58x 44x 2.0x
Anworth Mortgage Ass / ANH 5.27 -22% 95% 472 537 2.0x 12x nm 7x 4x .9x
LTC Properties, Inc. / LTC 19.04 -3% 64% 441 651 9.2x 13x 14x 15x 15x 1.6x
Tejon Ranch Company / TRC 25.00 -10% 78% 425 371 9.4x 161x 60x 45x 42x 2.5x
Redwood Trust, Inc. / RWT 12.31 -23% 279% 412 6,994 11.5x 92x nm nm 10x 1.0x
E-House (China) Hold / EJ 4.95 -9% 516% 408 236 1.5x 4x 9x 8x 6x 1.0x
Acadia Realty Trust / AKR 12.34 -1% 129% 407 1,090 8.3x 24x 23x 11x 12x 1.8x
Medical Properties T / MPW 5.77 -3% 125% 383 979 8.5x 13x 7x 8x 9x .6x
LaSalle Hotel Proper / LHO 9.02 -8% 332% 370 1,332 1.9x 13x 12x 32x nm .4x
CBL & Associates Pro / CBL 4.86 -10% 505% 323 6,279 5.6x 16x 6x 7x 8x .4x
First Industrial Rea / FR 7.03 -28% 480% 311 2,295 4.8x 1208x nm 4x nm .4x
U-Store-It Trust / YSI 5.23 -7% 157% 303 1,291 5.4x 38x nm nm nm .6x
Cedar Shopping Cente / CDR 6.62 -1% 112% 295 1,335 7.7x 20x 22x 19x 25x .7x
Colonial Properties / CLP 6.03 -2% 355% 289 1,974 6.1x 32x 1x 3x 50x .3x
American Capital Age / AGNC 18.25 -34% 11% 274 257 6.8x 11x nm 8x 5x 1.0x
Pennsylvania R.E.I.T / PEI 6.57 -1% 461% 259 2,762 5.8x 29x 11x nm nm .4x
Parkway Properties, / PKY 16.09 -12% 163% 246 1,329 5.1x 31x 17x 146x nm .9x
LoopNet, Inc. / LOOP 6.41 -5% 163% 220 150 1.8x 5x 12x 13x 13x 3.3x
Anthracite Capital I / AHR 2.82 -38% 263% 216 3,304 9.2x 68x 2x 2x 3x .3x
Sun Communities, Inc / SUI 11.48 -8% 128% 211 1,418 5.6x 24x nm nm nm nm
First Potomac Realty / FPO 7.64 -8% 162% 209 856 6.9x 21x 382x 8x 32x .6x
IRSA Inversiones Rep / IRS 3.60 -7% 355% 208 501 1.5x 8x 12x 2x 1x nm
Northstar Realty Fin / NRF 3.30 -14% 225% 208 1,949 4.9x 27x 7x 1x 5x .2x
CapLease, Inc. / LSE 4.13 -11% 146% 196 898 4.8x nm nm nm nm .7x
Care Investment Trus / CRE 9.13 -11% 40% 192 4 .2x 3x nm 13x 9x .7x
Sunstone Hotel Inves / SHO 3.76 -2% 550% 182 1,985 2.0x 14x 6x 3x nm .3x
Cogdell Spencer Inc. / CSA 10.26 -12% 94% 180 594 2.3x 42x nm nm nm nm
iStar Financial Inc. / SFI 1.22 -36% 2646% 159 12,440 8.3x 227x 1x nm nm .1x
RAIT Financial Trust / RAS 2.45 -27% 379% 159 6,651 8.4x nm nm 1x 2x .1x
Forestar Real Estate / FOR 4.39 0% 572% 157 464 2.9x 15x 6x 24x 88x .4x
Move Inc. / MOVE 1.01 0% 244% 155 211 .8x nm nm nm 8x 2.7x
Ashford Hospitality / AHT 1.62 -47% 554% 150 2,787 2.4x 17x nm nm nm .1x
Capital Trust, Inc. / CT 5.89 -38% 559% 132 2,121 23.8x 31x 1x 20x 3x .3x
Maguire Properties, / MPG 2.64 -8% 1064% 126 4,984 8.8x 68x nm nm nm 1.4x
Newcastle Investment / NCT 2.30 -21% 573% 121 6,062 11.9x nm nm nm 2x nm
Glimcher Realty Trus / GRT 3.15 -5% 1797% 119 1,943 6.0x 19x nm nm nm nm
Average (equal-weighted) 7.0x 62x 39x 21x 28x .9x
Median 6.1x 21x 12x 13x 10x .7x
Services: Recreational Activities – Valuation

Carnival Corporation / CCL 18.97 -5% 144% 15,888 24,615 1.7x 9x 6x 7x 7x 1.0x
Royal Caribbean Crui / RCL 10.42 -5% 322% 2,225 7,794 1.2x 9x 4x 4x 5x .4x
Netflix, Inc. / NFLX 22.03 -19% 86% 1,293 1,081 .8x 10x 23x 17x 15x 6.5x
International Speedw / ISCA 26.24 -6% 71% 1,279 1,653 2.0x 6x 16x 9x 10x 1.5x
World Wrestling Ente / WWE 12.42 -5% 60% 904 733 1.4x 10x 17x 20x 16x 2.5x
Vail Resorts, Inc. / MTN 22.36 -3% 158% 825 1,219 1.1x 7x 8x 13x 11x 1.6x
Cedar Fair, L.P. / FUN 13.60 -8% 84% 749 2,387 2.4x 12x nm 11x 10x nm
Speedway Motorsports / TRK 13.45 -14% 170% 584 1,130 1.8x 6x 15x 6x 6x 1.7x
Life Time Fitness, I / LTM 13.09 -2% 325% 520 1,160 1.6x 7x 7x 6x 6x .8x
Warner Music Group C / WMG 2.77 -4% 227% 426 2,360 .7x 11x nm nm nm nm
Orbitz Worldwide, In / OWW 3.00 -16% 233% 250 767 .9x nm nm nm nm nm
Blockbuster Inc. / BBI 0.96 -25% 336% 185 1,094 .2x 9x nm 5x 3x nm
Services: Recreational Activities – Operating Performance

Est.
CCL 14,468 14% 10% 189 51% 19% 16% 12% 12% 12% 7% .4x
RCL 6,567 13% 11% 143 34% 14% 10% 12% 8% 9% 4% .4x
NFLX 1,307 11% 34% 848 33% 8% 6% 17% 89% 20% 12% 2.1x
ISCA 836 3% 8% 760 54% 32% 15% 8% 22% 11% 6% .4x
WWE 534 25% 10% 936 40% 13% 10% 13% 31% 14% 11% 1.1x
MTN 1,152 23% 13% 329 23% 15% 9% 10% 21% 14% 5% .6x
FUN 992 0% 22% 551 46% 20% 5% 9% 11% 23% 2% .4x
TRK 621 9% 8% 807 53% 31% 10% 7% 19% 8% 4% .3x
LTM 747 20% 28% 136 42% 21% 10% 16% 13% 13% 5% .5x
WMG 3,506 4% 10% 923 47% 6% -2% 4% nm 80% -1% .8x
OWW 887 6% 52% 558 81% -28% -36% 17% >99% -48% -16% .5x
BBI 5,470 0% -3% 431 52% 2% 0% na 25% 3% 1% 2.0x
Median 10% 10% 555 47% 15% 9% 12% 20% 12% 5% .5x
Services: Rental and Leasing – Valuation

Ryder System, Inc. / R 36.91 -7% 108% 2,053 4,864 .7x 8x 9x 8x 8x 1.9x
Hertz Global Holding / HTZ 4.70 -23% 317% 1,518 13,631 1.5x 14x 6x 6x 7x nm
Aaron Rents, Inc. / RNT 22.73 -42% 33% 1,216 1,363 .9x 10x 16x 15x 13x 2.1x
Rent-A-Center, Inc / RCII 13.37 -25% 94% 893 1,788 .6x 8x 12x 7x 6x nm
AMERCO / UHAL 40.23 -28% 84% 789 2,001 1.0x 12x 14x 26x 36x .9x
RSC Holdings Inc. / RRR 6.92 -25% 102% 715 3,344 1.9x 8x 6x 5x 6x nm
Textainer Group Hold / TGH 9.12 -15% 152% 434 1,008 3.6x 7x 5x 5x 5x 1.1x
TAL International Gr / TAL 13.18 -5% 115% 431 1,702 4.2x 10x 11x 6x 6x 1.3x
McGrath RentCorp / MGRC 17.80 -9% 82% 421 643 2.2x 8x 11x 10x 10x 1.7x
United Rentals, Inc. / URI 6.26 0% 307% 375 3,899 1.1x 7x 2x 2x 3x nm
AerCap Holdings N.V. / AER 4.05 -14% 480% 344 3,771 3.1x 9x 2x 2x 2x .3x
Electro Rent Corpora / ELRC 11.30 -17% 42% 292 238 1.6x 8x 14x 15x 13x 1.2x
H&E Equipment Servic / HEES 6.22 -25% 223% 216 563 .5x 4x 4x 4x 5x 1.0x
Babcock & Brown Air / FLY 6.06 -9% 234% 203 1,612 7.7x 34x 87x 4x 4x .4x
Genesis Lease Limite / GLS 3.10 -3% 587% 112 1,182 5.4x 10x 3x 3x 3x .2x
Avis Budget Group In / CAR 1.03 -3% 1648% 105 9,136 1.5x nm nm 2x 21x nm
Services: Restaurants – Valuation

McDonald's Corporati / MCD 56.13 -18% 19% 62,559 70,951 3.0x 11x 29x 16x 15x 5.8x
Yum! Brands, Inc. / YUM 24.98 -10% 67% 11,555 14,880 1.3x 11x 15x 13x 12x nm
Starbucks Corporatio / SBUX 8.61 -6% 177% 6,333 7,274 .7x 19x 20x 11x 9x 2.9x
Burger King Holdings / BKC 21.11 -22% 47% 2,843 3,700 1.5x 11x 15x 14x 12x nm
Darden Restaurants, / DRI 17.36 -6% 138% 2,408 4,293 .6x 7x 7x 7x 6x 5.5x
Wendy's Arby's Group / WEN 3.62 -27% 170% 1,701 2,396 1.9x 31x 23x 20x 14x nm
Chipotle Mexican Gri / CMG 44.32 -10% 251% 1,462 1,250 1.0x 10x 21x 19x 18x 2.4x
Panera Bread Company / PNRA 39.08 -22% 66% 1,198 1,167 .9x 11x 22x 18x 15x 3.4x
Jack in the Box Inc. / JBX 15.37 -8% 110% 872 1,303 .4x 6x 8x 8x 7x 2.1x
Brinker Internationa / EAT 7.20 -4% 237% 733 1,572 .4x 23x 15x 7x 6x 1.6x
Bob Evans Farms, Inc / BOBE 16.95 -10% 105% 524 819 .5x 8x 9x 9x 8x 1.0x
Sonic Corporation / SONC 8.08 -10% 205% 488 1,241 1.5x 7x 8x 8x 7x nm
Papa John's Int'l, I / PZZA 16.74 -3% 83% 468 609 .5x 11x 15x 10x 9x 10.5x
P.F. Chang's China B / PFCB 16.83 -3% 96% 400 571 .5x 13x 12x 12x 11x 1.4x
Cheesecake Factory I / CAKE 6.69 0% 270% 400 619 .4x 6x 7x 8x 8x .9x
CEC Entertainment, I / CEC 17.51 -3% 126% 397 787 1.0x 8x 10x 7x 7x 3.0x
Texas Roadhouse, Inc / TXRH 5.54 0% 145% 388 526 .6x 8x 11x 11x 11x 1.7x
Buffalo Wild Wings / BWLD 21.64 -16% 108% 386 354 .9x 12x 20x 16x 13x 2.5x
CKE Restaurants, Inc / CKR 6.42 -4% 137% 338 682 .5x 8x 11x 8x 7x 2.2x
CBRL Group, Inc. / CBRL 14.39 -5% 170% 322 1,098 .5x 7x 5x 5x 5x 3.5x
Domino's Pizza, Inc. / DPZ 3.87 -6% 292% 220 1,905 1.3x 10x 7x 5x 5x nm
BJ's Restaurants, In / BJRI 8.06 -9% 148% 215 220 .6x 15x 18x 20x 16x .9x
DineEquity, Inc. / DIN 12.14 -53% 363% 212 2,420 1.6x 20x nm 11x 8x nm
Red Robin Gourmet Bu / RRGB 12.16 -11% 258% 205 415 .5x 7x 7x 7x 7x 1.5x
California Pizza Kit / CPKI 7.04 -2% 140% 170 217 .3x 9x 14x 11x 12x 1.0x
Krispy Kreme Doughnu / KKD 2.50 -30% 126% 169 211 .5x nm nm 42x 17x 4.2x
Denny's Corporation / DENN 1.59 -26% 178% 152 469 .6x 6x 5x 6x 5x nm
Luby's, Inc. / LUB 4.04 -12% 183% 113 108 .3x nm 45x nm 202x .6x
Steak n Shake Compan / SNS 3.91 -5% 236% 112 275 .5x nm nm nm nm .4x
Services: Restaurants – Operating Performance

Est.
MCD 23,711 6% 7% 61 36% 26% 19% 11% 34% 32% 16% .8x
YUM 11,158 10% 5% 232 25% 12% 9% 12% 47% >99% 14% 1.6x
SBUX 10,383 10% 18% 60 19% 4% 3% 18% 13% 13% 6% 1.9x
BKC 2,527 10% 8% 62 59% 14% 8% 16% 46% 23% 7% 1.0x
DRI 6,933 22% 10% 39 22% 8% 6% 12% 26% 29% 8% 1.5x
WEN 1,247 -2% 57% 47 31% 6% -4% 12% 19% -14% -4% .9x
CMG 1,276 26% 32% 68 22% 10% 6% 23% 26% 13% 10% 1.6x
PNRA 1,242 24% 31% 159 32% 8% 5% 18% 27% 14% 9% 1.9x
JBX 2,986 5% 7% 70 15% 7% 5% 13% 25% 37% 11% 2.2x
EAT 4,325 7% 4% 43 14% 2% 1% 10% 5% 6% 2% 1.9x
BOBE 1,762 4% 6% 36 na 6% 3% 6% 11% 10% 5% 1.5x
SONC 805 4% 9% 2,101 61% 21% 7% 12% 31% -67% 8% 1.0x
PZZA 1,136 8% 5% 64 26% 5% 3% 12% 32% 25% 8% 2.8x
PFCB 1,203 14% 16% 42 17% 4% 2% 17% 10% 10% 5% 1.9x
CAKE 1,612 10% 16% 50 17% 6% 4% 14% 12% 11% 5% 1.4x
CEC 815 4% 3% 44 57% 13% 7% 13% 16% 32% 7% 1.1x
TXRH 833 19% 27% 36 19% 8% 5% 18% 18% 11% 7% 1.5x
BWLD 393 22% 25% 483 46% 8% 5% 24% 20% 14% 10% 1.8x
CKR 1,508 -3% 0% 58 42% 6% 2% 14% 19% 21% 5% 1.9x
CBRL 2,385 1% 3% 37 68% 6% 3% 11% 16% 79% 5% 1.8x
DPZ 1,443 -1% 0% 115 25% 14% 4% 1% >99% -4% 13% 3.1x
BJRI 360 21% 35% 42 40% 4% 3% 25% 6% 5% 4% 1.2x
DIN 1,472 >99% 11% 1,711 27% 8% -3% 29% 20% -24% -1% .4x
RRGB 835 19% 24% 33 20% 7% 4% 17% 16% 12% 6% 1.5x
CPKI 678 10% 14% 46 19% 4% 3% 17% 10% 9% 5% 1.8x
KKD 412 -7% -15% 102 11% -5% -7% na nm -45% -14% 1.9x
DENN 796 -17% -1% 38 29% 10% 4% 24% 73% -20% 9% 2.2x
LUB 318 -1% 0% 41 13% -1% 2% na nm 4% 3% 1.4x
SNS 610 -7% 0% 28 20% -3% -4% na nm -8% -4% 1.1x
Median 7% 8% 50 25% 7% 4% 14% 19% 11% 6% 1.6x
Services: Retail (Apparel) – Valuation

TJX Companies, Inc., / TJX 21.32 -5% 76% 8,942 9,303 .5x 6x 13x 10x 10x 4.6x
Gap Inc., The / GPS 11.55 -9% 91% 8,217 6,725 .4x 4x 11x 9x 8x 1.9x
Ross Stores, Inc. / ROST 26.23 -19% 58% 3,450 3,288 .5x 7x 14x 11x 10x 3.4x
Limited Brands, Inc. / LTD 9.01 -10% 146% 3,061 4,984 .5x 5x 5x 6x 6x nm
Urban Outfitters, In / URBN 16.04 -10% 139% 2,690 2,494 1.4x 8x 17x 12x 10x 2.6x
Nordstrom, Inc. / JWN 11.74 -5% 246% 2,529 5,203 .6x 7x 4x 5x 6x 2.3x
American Eagle Outfi / AEO 8.88 -5% 168% 1,828 1,523 .5x 3x 5x 7x 7x 1.3x
Foot Locker, Inc. / FL 11.22 -19% 62% 1,739 1,433 .3x nm 36x 14x 12x .9x
Abercrombie & Fitch / ANF 17.79 0% 375% 1,548 1,350 .4x 2x 3x 5x 6x .9x
Guess?, Inc. / GES 13.97 -7% 247% 1,315 1,079 .5x 3x 7x 6x 5x 1.9x
Carter's, Inc. / CRI 19.69 -39% 17% 1,109 1,389 1.0x 10x nm 15x 14x nm
Aeropostale, Inc. / ARO 16.00 -8% 134% 1,070 999 .6x 4x 9x 7x 7x 4.4x
Buckle, Inc., The / BKE 19.79 -8% 125% 912 705 1.0x 5x 12x 9x 8x 2.4x
J. Crew Group, Inc. / JCG 11.22 -5% 363% 701 687 .5x 4x 7x 8x 7x 3.3x
Collective Brands In / PSS 10.85 -18% 94% 693 1,375 .4x 24x 17x 8x 7x nm
Children's Place Ret / PLCE 22.13 -33% 96% 651 589 .3x nm nm 9x 8x 1.3x
Men's Wearhouse, Inc / MW 12.10 -11% 250% 625 590 .3x 4x 4x 9x 9x .8x
Gymboree Corporation / GYMB 21.32 -7% 124% 618 575 .6x 4x 8x 7x 6x 2.3x
bebe stores, inc. / BEBE 6.11 -2% 126% 544 424 .6x 6x 9x 15x 13x 1.1x
DSW Inc. / DSW 10.86 -16% 116% 478 345 .2x 5x 9x 14x 11x 1.1x
Dress Barn, Inc., Th / DBRN 7.40 -11% 142% 448 372 .3x 3x 6x 6x 6x 1.4x
Genesco Inc. / GCO 22.12 -23% 75% 427 514 .3x 2x 61x 10x 9x 1.6x
Cato Corporation, Th / CTR 12.83 -12% 57% 379 226 .3x 6x 12x 13x 12x 1.4x
Finish Line, Inc., T / FINL 6.70 -78% 86% 368 303 .2x nm nm 11x 9x .9x
AnnTaylor Stores Cor / ANN 6.37 -6% 415% 363 256 .1x 2x 4x 8x 10x .7x
Chico's FAS, Inc. / CHS 1.99 0% 487% 351 74 .0x 5x 4x nm 20x .4x
Jos. A. Bank Clothie / JOSB 19.05 -1% 119% 346 335 .5x 4x 7x 6x 6x 1.2x
Wet Seal, Inc., The / WTSLA 2.65 -32% 109% 254 135 .2x 5x 12x 7x 7x 1.6x
Zumiez Inc. / ZUMZ 7.09 -6% 330% 208 144 .4x 4x 8x 13x 13x 1.4x
Stage Stores, Inc. / SSI 5.31 -11% 239% 205 258 .2x 3x 4x 7x 7x .5x
Talbots, Inc., The / TLB 2.99 -1% 501% 166 532 .2x nm nm nm 19x 2.0x
Coldwater Creek Inc. / CWTR 1.57 -4% 452% 143 68 .1x nm nm nm nm .5x
Charlotte Russe Hold / CHIC 6.36 -8% 224% 133 87 .1x 3x 8x 9x 10x .8x
Citi Trends, Inc. / CTRN 9.22 0% 205% 132 127 .3x 6x 9x 9x 9x .9x
New York & Company, / NWY 2.15 -8% 464% 129 65 .1x 1x 5x 11x 11x .5x
Shoe Carnival, Inc. / SCVL 10.18 -1% 81% 129 112 .2x 6x 10x 12x 10x .6x
Christopher & Banks / CBK 3.55 -3% 370% 126 42 .1x 2x 8x 13x 10x .6x
Tween Brands Inc. / TWB 5.00 -1% 575% 124 235 .2x 4x 3x 7x 5x .6x
Charming Shoppes, In / CHRS 0.97 -16% 622% 110 180 .1x nm nm nm nm .3x
Services: Retail (Apparel) – Operating Performance

Est.
TJX 19,108 6% 8% 148 25% 8% 6% 12% 53% 53% 17% 2.8x
GPS 15,412 -4% -1% 103 37% 10% 6% 12% 41% 23% 12% 1.9x
ROST 6,317 8% 12% 602 23% 7% 5% 15% 45% 30% 12% 2.6x
LTD 9,408 -15% 3% 485 35% 10% 6% 12% 40% 28% 8% 1.3x
URBN 1,792 28% 22% 366 40% 18% 12% 23% 40% 23% 17% 1.4x
JWN 8,485 -5% 7% 154 36% 8% 6% 10% 18% 49% 10% 1.5x
AEO 3,069 3% 18% 495 44% 17% 11% 13% 49% 25% 18% 1.6x
FL 5,449 -4% 1% 324 27% 0% 1% 14% 0% 3% 2% 1.7x
ANF 3,771 3% 23% 419 67% 17% 11% 12% 39% 25% 16% 1.4x
GES 1,988 59% 23% 201 46% 18% 11% 18% 88% 32% 18% 1.6x
CRI 1,462 5% 20% 531 34% 9% 5% 10% 36% 20% 8% 1.5x
ARO 1,717 16% 18% 535 35% 13% 8% 15% 80% 61% 26% 3.2x
BKE 705 25% 10% 503 42% 19% 13% na 61% 26% 20% 1.5x
JCG 1,410 13% 18% 455 44% 12% 7% 14% 82% 62% 18% 2.6x
PSS 3,452 22% 5% 111 31% 2% 0% 13% 8% 1% 0% 1.4x
PLCE 1,998 8% 23% 470 39% -1% -1% 10% nm -5% -3% 1.9x
MW 2,084 2% 11% 162 45% 7% 5% na 21% 11% 8% 1.7x
GYMB 977 16% 16% 208 49% 15% 9% 12% 58% 38% 21% 2.3x
BEBE 690 2% 11% 414 45% 11% 9% 10% 25% 12% 10% 1.2x
DSW 1,423 4% 14% 167 27% 5% 3% na 17% 10% 6% 2.0x
DBRN 1,444 1% 13% 253 39% 8% 5% 11% 29% 14% 8% 1.5x
GCO 1,550 3% 11% 111 50% 16% 8% 15% 55% 31% 15% 1.8x
CTR 860 -2% 2% 88 34% 5% 4% na 14% 11% 7% 2.0x
FINL 1,293 -3% 3% 349 30% -4% -3% 18% nm -10% -6% 2.0x
ANN 2,386 1% 9% 434 53% 6% 4% 12% 23% 11% 7% 1.7x
CHS 1,640 -6% 17% 287 54% 1% 1% 16% 2% 2% 2% 1.3x
JOSB 638 11% 18% 211 63% 14% 8% na 35% 20% 12% 1.5x
WTSLA 621 5% 12% 288 33% 4% 4% 13% 32% 19% 11% 2.6x
ZUMZ 402 16% 35% 268 35% 9% 6% 17% 27% 16% 11% 1.8x
SSI 1,554 -1% 8% 872 29% 5% 3% na 15% 9% 5% 1.7x
TLB 2,214 -6% 11% 351 32% -10% -9% 26% nm -42% -13% 1.4x
CWTR 1,129 -3% 25% 333 35% -4% -3% 18% nm -10% -5% 1.7x
CHIC 823 11% 17% 398 25% 3% 2% 6% 11% 8% 5% 2.0x
CTRN 471 13% 29% 294 37% 4% 3% 18% 19% 11% 8% 2.2x
NWY 1,202 2% 5% 468 30% 4% 1% 13% 20% 3% 1% 2.4x
SCVL 659 -4% 4% 366 28% 3% 2% 15% 9% 6% 4% 2.2x
CBK 577 2% 10% 240 39% 3% 2% 13% 10% 6% 5% 1.8x
TWB 1,052 12% 15% 300 35% 6% 3% 14% 17% 19% 6% 1.8x
CHRS 2,744 -7% 9% 266 26% -6% -6% 14% nm -23% -10% 1.7x
Median 3% 12% 324 35% 7% 5% 13% 28% 14% 8% 1.7x
Services: Retail (Online) – Valuation

IAC/InterActiveCorp / IACI 15.92 -17% 58% 2,235 867 .3x nm nm 53x 16x 1.2x
Gmarket Inc. (ADR) / GMKT 14.65 -14% 87% 733 482 2.5x 15x 28x 16x 16x 4.9x
Ticketmaster Enterta / TKTM 5.87 -9% 360% 336 550 .4x 3x 2x 4x 5x nm
HSN, Inc. / HSNI 4.67 -34% 254% 263 595 .2x nm 2x nm 5x nm
Overstock.com, Inc. / OSTK 9.04 -15% 227% 206 202 .2x nm nm nm nm nm
Liquidity Services, / LQDT 6.50 -2% 134% 182 131 .5x 7x 17x 15x 13x 3.5x
Stamps.com Inc. / STMP 8.54 -2% 85% 154 71 .8x 15x 17x 14x 15x 1.6x
PC Connection, Inc. / PCCC 4.07 -7% 250% 110 68 .0x 2x 5x 6x 8x .6x
Services: Retail (Department and Discount) – Valuation

Wal-Mart Stores, Inc / WMT 52.71 -18% 21% 207,360 248,510 .6x 11x 17x 15x 14x 4.1x
Target Corporation / TGT 33.03 -8% 85% 24,926 43,054 .7x 8x 10x 10x 10x 1.9x
Kohl's Corporation / KSS 29.09 -13% 93% 8,860 10,956 .7x 7x 9x 10x 10x 1.4x
Sears Holdings Corpo / SHLD 38.27 0% 219% 4,838 6,918 .1x 7x 7x 17x 31x .9x
J.C. Penney Company, / JCP 17.27 -5% 198% 3,836 5,717 .3x 4x 4x 6x 7x .7x
Dollar Tree, Inc. / DLTR 38.53 -46% 10% 3,484 3,638 .8x 11x 18x 16x 14x 3.7x
Macy's, Inc. / M 7.52 -8% 320% 3,163 12,697 .5x 8x 4x 6x 7x nm
Saks Incorporated / SKS 4.06 -1% 447% 576 1,086 .3x 12x 13x nm nm .5x
Dillard's, Inc. / DDS 3.35 -7% 590% 246 1,534 .2x 21x 5x nm nm .1x
Services: Retail (Department and Discount) – Operating Performance

Est.
WMT 403,919 9% 10% 192 25% 6% 4% 12% 24% 26% 10% 2.4x
TGT 64,981 5% 11% 178 31% 8% 4% 13% 17% 19% 6% 1.5x
KSS 16,641 1% 12% 640 37% 10% 6% 14% 20% 16% 9% 1.5x
SHLD 49,526 -5% 37% 164 27% 2% 1% 10% 9% 4% 2% 1.8x
JCP 19,117 -5% 3% 123 38% 8% 4% 10% 19% 15% 6% 1.4x
DLTR 4,441 6% 11% 334 34% 8% 5% 14% 30% 21% 12% 2.4x
M 25,552 -5% 19% 140 40% 6% 3% 9% 13% 7% 3% .9x
SKS 3,327 6% 6% 259 38% 3% 1% 12% 6% 4% 2% 1.4x
DDS 7,242 -6% -2% 145 34% 1% 0% 6% 2% 0% 0% 1.3x
Median 1% 11% 178 34% 6% 4% 12% 17% 15% 6% 1.5x
Services: Retail (Drugs) – Valuation

CVS Caremark Corpora / CVS 29.31 -17% 51% 42,096 50,736 .6x 9x 15x 12x 11x nm
Walgreen Company / WAG 23.43 -9% 72% 23,181 24,158 .4x 7x 11x 10x 9x 2.0x
Medco Health Solutio / MHS 39.93 -25% 37% 19,886 23,963 .5x 13x 24x 17x 15x nm
Express Scripts, Inc / ESRX 58.49 -17% 35% 14,474 16,087 .8x 13x 26x 19x 16x nm
Omnicare, Inc. / OCR 23.57 -35% 39% 2,790 5,378 .9x 18x 25x 11x 10x nm
PharMerica Corporati / PMC 19.15 -32% 35% 583 781 .4x 21x nm 21x 17x 4.1x
PetMed Express, Inc. / PETS 17.30 -40% 10% 407 355 1.7x 11x 21x 18x 16x 5.2x
China Nepstar Chain / NPD 3.33 -10% 530% 360 43 .1x 1x 11x 13x 11x .8x
Rite Aid Corporation / RAD 0.35 0% 1249% 296 6,684 .3x nm nm nm nm nm
drugstore.com, inc. / DSCM 1.11 -14% 215% 110 83 .2x nm nm nm 37x 2.0x
Median .4x 12x 21x 15x 15x 2.0x
Services: Retail (Drugs) – Operating Performance

Est.
CVS 85,272 28% 36% 711 21% 7% 4% 14% 51% 10% 6% 1.6x
WAG 59,034 10% 12% 362 28% 6% 4% 13% 28% 21% 12% 2.8x
MHS 49,675 13% 8% 2,614 7% 4% 2% 17% >99% 17% 6% 3.1x
ESRX 21,166 2% 7% 1,791 9% 6% 4% 18% nm >99% 17% 4.0x
OCR 6,269 0% 15% 398 25% 5% 2% 13% 17% 3% 1% .8x
PMC 1,960 >99% 50% 399 15% 2% 1% 19% 12% 4% 2% 2.9x
PETS 206 15% 20% 804 39% 15% 11% 18% 70% 30% 27% 2.5x
NPD 313 14% 32% 22 48% 10% 10% 20% 30% 9% 7% .8x
RAD 26,436 33% 13% 434 27% 0% -5% 7% nm <-99% -12% 2.3x
DSCM 391 10% 7% 460 27% -4% -3% 30% nm -15% -8% 2.2x
Median 13% 14% 447 26% 5% 3% 17% 29% 9% 6% 2.4x
Services: Retail (Grocery) – Valuation

Kroger Co., The / KR 28.02 -20% 11% 18,282 25,638 .3x 11x 17x 15x 13x 6.3x
SYSCO Corporation / SYY 22.68 -4% 54% 13,589 15,222 .4x 8x 13x 12x 11x 6.8x
Safeway Inc. / SWY 20.99 -7% 72% 8,998 14,486 .3x 8x 11x 9x 9x 2.0x
Delhaize Group (ADR) / DEG 58.28 -25% 56% 5,792 9,011 .4x 8x 12x 10x 10x 5.7x
Companhia Brasileira / CBD 29.58 -28% 71% 3,479 4,027 .4x 22x 27x 19x 15x 1.6x
SUPERVALU INC. / SVU 11.92 -4% 263% 2,524 11,050 .3x 7x 4x 4x 4x nm
Distribucion y Servi / DYS 18.93 -31% 93% 2,053 2,913 1.0x 17x 26x 21x 17x 2.4x
Casey's General Stor / CASY 29.50 -32% 6% 1,498 1,531 .3x 11x 18x 18x 17x 2.4x
Whole Foods Market, / WFMI 9.38 -9% 389% 1,316 2,215 .3x 9x 11x 13x 12x 1.7x
Ruddick Corporation / RDK 26.75 -4% 49% 1,292 1,594 .4x 9x 13x 12x 10x 1.6x
Weis Markets, Inc. / WMK 31.29 -17% 37% 844 751 .3x 14x 17x 20x 18x 1.3x
Winn-Dixie Stores, I / WINN 14.03 -28% 38% 762 629 .1x 26x 58x 78x 44x 1.4x
Spartan Stores, Inc. / SPTN 23.38 -28% 21% 516 638 .2x 9x 16x 14x 12x 12.4x
Pantry, Inc., The / PTRY 22.28 -60% 39% 495 1,642 .2x 15x 19x 19x 14x nm
Nash-Finch Company / NAFC 38.55 -20% 24% 493 811 .2x 10x 14x 12x 10x 5.4x
Great Atlantic & Pac / GAP 4.54 -16% 597% 262 1,288 .2x nm 2x nm nm nm
Susser Holdings Corp / SUSS 15.32 -50% 86% 261 678 .2x 12x 16x 22x 21x nm
Core-Mark Holding Co / CORE 18.21 -6% 69% 196 216 .0x 9x 8x 15x 10x .7x
Median .3x 10x 15x 15x 12x 2.2x
Services: Retail (Grocery) – Operating Performance

Est.
KR 74,530 9% 8% 231 23% 3% 2% 9% 20% 25% 6% 3.4x
SYY 37,994 6% 7% 760 19% 5% 3% 12% 45% 33% 11% 3.8x
SWY 43,645 5% 6% 217 28% 4% 2% 11% 18% 14% 5% 2.5x
DEG 23,205 -5% 3% 371 25% 5% 2% 9% 25% 12% 5% 2.0x
CBD 9,566 23% 6% 145 27% 2% 1% 17% 8% 5% 2% 1.6x
SVU 44,170 -1% 31% 232 23% 4% 1% 8% 22% 10% 3% 2.1x
DYS 3,049 -55% 9% 6,135 29% 6% 6% 15% 13% 22% 9% 1.4x
CASY 5,114 22% 20% 684 14% 3% 2% 14% 18% 13% 7% 4.2x
WFMI 7,954 21% 19% 177 34% 3% 1% 13% 14% 8% 4% 2.4x
RDK 3,992 10% 10% 161 30% 4% 2% 11% 18% 12% 6% 2.4x
WMK 2,406 5% 3% 142 26% 2% 2% na 9% 6% 5% 2.8x
WINN 7,337 2% 2% 326 27% 0% 0% na 4% 1% 1% 4.3x
SPTN 2,572 14% 7% 598 20% 3% 2% 7% 32% 19% 6% 4.2x
PTRY 8,502 29% 26% 756 10% 1% 0% 15% 11% 4% 1% 4.1x
NAFC 4,570 0% 5% 1,002 9% 2% 1% na 20% 12% 4% 4.7x
GAP 8,553 57% -16% 541 30% -1% 0% 20% nm -5% -1% 2.6x
SUSS 4,267 79% 23% 693 9% 1% 0% 14% 18% 9% 2% 4.9x
CORE 5,926 8% 10% 1,469 6% 0% 0% 17% 7% 6% 3% 9.9x
Median 8% 8% 456 24% 3% 1% 13% 18% 11% 4% 3.1x
Services: Retail (Home Improvement) – Valuation

Home Depot, Inc., Th / HD 20.54 -17% 51% 34,887 45,491 .6x 8x 9x 12x 13x 2.0x
Lowe's Companies, In / LOW 18.23 -14% 56% 26,719 31,135 .6x 7x 10x 12x 13x 1.5x
Sherwin-Williams Com / SHW 54.50 -18% 19% 6,371 7,574 .9x 9x 12x 13x 12x 35.1x
Tractor Supply Compa / TSCO 34.48 -23% 38% 1,256 1,265 .4x 8x 14x 14x 12x 2.1x
Lumber Liquidators, / LL 9.65 -41% 88% 259 234 .5x 8x 23x 13x 11x 2.3x
Services: Retail (Home Improvement) – Operating Performance

Est.
HD 75,517 -3% 2% 228 34% 8% 4% 10% 19% 19% 7% 1.7x
LOW 48,462 1% 10% 303 35% 9% 5% 11% 20% 16% 8% 1.5x
SHW 8,134 2% 9% 258 44% 10% 6% 12% 57% 36% 11% 1.6x
TSCO 2,932 12% 16% 425 31% 5% 3% 15% 24% 17% 8% 2.6x
LL 471 23% 33% 703 35% 7% 4% 25% 51% 19% 13% 3.3x
Median 2% 10% 303 35% 8% 4% 12% 24% 19% 8% 1.7x
Services: Retail (Technology) – Valuation

Best Buy Co., Inc. / BBY 22.06 -9% 144% 9,096 11,242 .3x 5x 7x 8x 9x 4.5x
GameStop Corp. / GME 23.28 -9% 174% 3,811 3,817 .5x 6x 13x 9x 8x 6.2x
RadioShack Corporati / RSH 9.65 -4% 111% 1,207 1,145 .3x 3x 6x 6x 6x 1.5x
CONN'S, Inc. / CONN 8.37 -2% 202% 188 141 .2x 2x 5x 5x 5x .6x
Services: Retail (Technology) – Operating Performance

Est.
BBY 42,137 11% 13% 281 24% 5% 3% 13% 56% 31% 9% 2.9x
GME 8,095 36% 57% 623 25% 7% 4% 20% >99% 19% 10% 2.2x
RSH 4,330 0% -4% 128 46% 9% 5% 10% 56% 29% 12% 2.2x
CONN 852 7% 13% 304 36% 7% 4% 13% 23% 12% 9% 2.1x
Median 9% 13% 293 31% 7% 4% 13% 56% 24% 10% 2.2x
Services: Retail (Specialty Non-Apparel) – Valuation

Costco Wholesale Cor / COST 48.06 -36% 57% 20,746 19,818 .3x 10x 17x 16x 14x 2.3x
Amazon.com, Inc. / AMZN 41.75 -8% 133% 17,904 16,015 .9x 19x 37x 29x 26x 8.4x
eBay Inc. / EBAY 12.36 -8% 184% 15,783 12,139 1.4x 5x 49x 7x 7x 3.9x
Staples, Inc. / SPLS 17.09 -21% 55% 12,152 16,335 .8x 11x 12x 12x 11x 28.8x
AutoZone, Inc. / AZO 105.76 -12% 36% 6,131 8,139 1.2x 7x 11x 10x 9x nm
Bed Bath & Beyond In / BBBY 20.60 -5% 69% 5,350 5,051 .7x 7x 10x 12x 11x 1.9x
Family Dollar Stores / FDO 26.67 -45% 22% 3,726 3,818 .5x 10x 16x 16x 14x 3.0x
O'Reilly Automotive, / ORLY 23.24 -14% 49% 3,126 3,765 1.2x 12x 14x 15x 13x 2.0x
Tiffany & Co. / TIF 20.31 -8% 152% 2,519 3,006 1.0x 5x 8x 7x 7x 1.4x
Advance Auto Parts, / AAP 26.04 -7% 75% 2,466 3,098 .6x 7x 11x 10x 10x 2.5x
Copart, Inc. / CPRT 27.93 -1% 77% 2,328 2,306 2.9x 10x 16x 14x 12x 3.9x
BJ's Wholesale Club, / BJ 34.76 -24% 27% 2,063 1,960 .2x 9x 18x 16x 15x 2.1x
PetSmart, Inc. / PETM 15.77 -2% 83% 1,997 2,549 .5x 7x 8x 11x 10x 2.0x
CarMax, Inc / KMX 8.36 -9% 186% 1,843 2,070 .3x 15x 10x 27x 17x 1.2x
Dick's Sporting Good / DKS 12.01 -11% 182% 1,341 1,497 .4x 6x 9x 9x 9x 2.3x
Big Lots, Inc. / BIG 15.41 -20% 129% 1,264 1,368 .3x 5x 10x 8x 8x 1.9x
AutoNation, Inc. / AN 6.35 -37% 209% 1,123 2,476 .2x nm 4x 6x 6x 1.4x
Suburban Propane Par / SPH 32.67 -38% 32% 1,069 1,499 1.0x 10x 10x 9x 9x nm
Ferrellgas Partners, / FGP 14.27 -42% 63% 899 na nm nm 37x 19x 18x nm
Barnes & Noble, Inc. / BKS 15.75 -7% 151% 866 959 .2x 4x 8x 10x 10x 1.6x
99 Cents Only Stores / NDN 11.33 -53% 14% 792 717 .6x nm 283x 45x 27x 1.5x
Sally Beauty Holding / SBH 3.90 -12% 178% 707 2,481 .9x 9x 16x 8x 6x nm
Williams-Sonoma, Inc / WSM 6.46 -3% 376% 682 669 .2x 2x 4x 22x 21x .6x
Penske Automotive Gr / PAG 7.41 -32% 218% 681 3,355 .3x 11x 5x 6x 7x nm
EZCORP, Inc. / EZPW 15.35 -35% 25% 636 609 1.3x 8x 13x 10x 9x 2.6x
Sotheby's / BID 8.85 -14% 373% 596 873 1.0x 4x 3x 7x 8x 1.0x
Office Depot, Inc. / ODP 2.03 -26% 847% 558 1,104 .1x 11x 1x 6x 9x .3x
Ulta Salon, Cosmetic / ULTA 7.60 -6% 304% 437 552 .5x 12x 29x 14x 11x 1.9x
Cabela's Incorporate / CAB 6.42 -11% 167% 428 829 .3x 5x 5x 6x 6x .5x
Hibbett Sports, Inc. / HIBB 14.65 -16% 76% 417 432 .8x 9x 15x 14x 12x 3.5x
Bare Escentuals, Inc / BARE 4.45 -17% 572% 407 629 1.1x 3x 5x 4x 4x nm
First Cash Financial / FCFS 13.78 -45% 45% 403 466 1.3x 9x 14x 11x 10x 4.1x
Fred's, Inc. / FRED 9.89 -22% 61% 395 391 .2x 29x 37x 14x 13x 1.0x
Zale Corporation / ZLC 11.99 -4% 252% 382 643 .3x 55x 133x 13x 10x .8x
OfficeMax Incorporat / OMX 4.92 -42% 458% 374 2,028 .2x nm 2x 3x 5x .9x
Jo-Ann Stores, Inc. / JAS 14.47 -38% 87% 371 521 .3x 10x 23x 13x 12x .9x
Blue Nile, Inc. / NILE 23.76 -11% 245% 344 319 1.0x 15x 23x 26x 26x 23.1x
Hot Topic, Inc. / HOTT 7.00 -44% 10% 306 255 .3x 10x 19x 18x 17x 1.3x
1-800-FLOWERS.COM, I / FLWS 3.93 -4% 180% 250 391 .4x 10x 12x 11x 9x 6.9x
Pep Boys - Manny, Mo / PBY 3.58 -16% 309% 186 467 .2x nm nm 60x 13x .4x
Group 1 Automotive, / GPI 7.86 -45% 285% 183 1,608 .3x 15x 3x 4x 4x nm
Haverty Furniture Co / HVT 8.00 -10% 72% 171 174 .2x nm 100x nm 200x .6x
hhgregg, Inc. / HGG 4.92 -9% 232% 159 276 .2x 5x 7x 6x 6x 1.8x
Borders Group, Inc. / BGP 2.31 -21% 473% 140 562 .2x 624x nm nm 58x .4x
Sonic Automotive, In / SAH 3.37 -40% 629% 135 1,890 .2x 9x 1x 2x 4x nm
America's Car-Mart, / CRMT 10.80 -16% 114% 127 170 .6x 5x 9x 7x 6x .9x
Asbury Automotive Gr / ABG 3.72 -53% 384% 119 1,372 .3x 10x 2x 3x 4x 1.3x
West Marine, Inc. / WMAR 4.63 -27% 108% 102 125 .2x nm nm nm nm .5x
Services: Retail (Specialty Non-Apparel) – Operating Performance

Est.
COST 72,483 13% 11% 966 12% 3% 2% 13% 25% 14% 6% 3.5x
AMZN 18,135 38% 29% 885 23% 5% 3% 26% >99% 34% 10% 2.9x
EBAY 8,686 20% 33% 560 75% 26% 22% 14% >99% 17% 13% .6x
SPLS 20,452 8% 10% 475 28% 7% 5% 14% 40% 17% 9% 1.9x
AZO 6,523 6% 5% 201 50% 17% 10% 12% 54% >99% 13% 1.3x
BBBY 7,230 4% 11% 185 41% 11% 7% 12% 35% 19% 13% 1.8x
FDO 6,984 2% 6% 279 34% 5% 3% 13% 28% 20% 9% 2.7x
ORLY 3,066 24% 14% 76 45% 10% 6% 15% 17% 10% 7% 1.1x
TIF 3,081 12% 10% 350 57% 19% 12% 12% 25% 20% 12% 1.0x
AAP 4,998 4% 9% 196 48% 9% 5% 12% 26% 24% 9% 1.7x
CPRT 785 40% 21% 264 41% 30% 20% 17% 42% 18% 15% .8x
BJ 9,658 10% 7% 464 10% 2% 1% 11% 21% 13% 6% 4.7x
PETM 4,899 11% 12% 233 30% 7% 4% 14% 24% 19% 8% 2.2x
KMX 7,978 1% 16% 510 13% 2% 1% 18% 8% 6% 4% 3.5x
DKS 4,050 13% 23% 389 29% 6% 4% 18% 31% 16% 7% 1.9x
BIG 4,700 -2% 4% 333 40% 6% 4% 14% 30% 24% 11% 3.1x
AN 15,621 -11% -1% 625 16% -8% -8% 9% nm -38% -15% 2.0x
SPH 1,574 9% -1% 501 34% 10% 10% 9% 36% 66% 15% 1.5x
FGP 2,291 15% 9% 653 29% 5% 1% 7% 13% 13% 2% 1.5x
BKS 5,403 0% 4% 135 31% 4% 2% 9% 21% 14% 4% 1.8x
NDN 1,238 6% 7% 106 39% -1% 0% 8% nm -1% -1% 1.9x
SBH 2,616 6% 6% 141 46% 11% 3% 17% 54% -10% 5% 1.8x
WSM 3,871 2% 8% 466 38% 7% 5% 13% 21% 16% 9% 1.9x
PAG 12,633 0% 16% 800 15% 2% 1% 10% 13% 11% 3% 2.6x
EZPW 457 23% 22% 143 70% 16% 11% 19% 48% 21% 18% 1.6x
BID 871 4% 23% 560 81% 25% 16% 15% 39% 21% 7% .4x
ODP 15,092 -3% 5% 308 28% 1% 1% 10% 4% 3% 1% 2.1x
ULTA 1,006 22% 23% 252 31% 5% 2% 25% 13% 10% 4% 2.0x
CAB 2,563 14% 15% 337 41% 6% 3% 13% 12% 10% 4% 1.2x
HIBB 549 4% 11% 289 32% 9% 5% 16% 32% 24% 13% 2.4x
BARE 554 16% 53% 838 72% 33% 18% 14% >99% <-99% 40% 2.2x
FCFS 349 22% 29% 106 57% 15% -6% 17% 34% -11% -7% 1.2x
FRED 1,825 1% 7% 180 27% 1% 0% 13% 3% 2% 2% 3.2x
ZLC 2,138 -1% -4% 138 49% 1% 1% 8% 1% 1% 1% 1.4x
OMX 8,582 -6% -12% 238 25% -17% -14% 9% nm -71% -21% 1.5x
JAS 1,915 2% 1% 88 47% 3% 1% na 9% 6% 3% 2.1x
NILE 321 8% 24% 1,683 21% 6% 5% 19% nm 45% 16% 3.4x
HOTT 735 -3% 4% 293 35% 3% 2% 13% 11% 7% 5% 2.2x
FLWS 932 1% 11% 233 42% 4% 2% 20% 23% 10% 5% 2.3x
PBY 2,031 -8% -2% 168 22% -1% -2% 12% nm -8% -2% 1.3x
GPI 6,050 -4% 6% 677 16% 2% 0% 15% 8% 3% 1% 2.4x
HVT 735 -8% 0% 175 51% 0% 0% na nm 0% 0% 1.8x
HGG 1,330 15% 16% 360 31% 5% 2% 16% 52% 38% 9% 3.7x
BGP 3,655 -2% -1% 259 26% 0% -4% na 0% -31% -6% 1.6x
SAH 7,763 -2% 9% 681 16% 3% 0% 11% 14% 3% 1% 2.3x
CRMT 292 23% 10% 347 48% 11% 6% 15% >99% 13% 9% 1.5x
ABG 5,171 -10% 6% 623 16% 3% 1% 12% 11% 7% 2% 2.5x
WMAR 639 -7% 0% 298 27% -11% -15% na nm -43% -25% 1.7x
Median 4% 9% 303 33% 5% 2% 13% 23% 12% 6% 1.9x
Services: Schools – Valuation

Apollo Group, Inc. / APOL 68.11 -44% 20% 10,831 10,344 3.3x 14x 24x 20x 17x 14.9x
DeVry Inc. / DV 55.04 -29% 12% 3,943 3,923 3.4x 22x 32x 25x 20x 29.5x
ITT Educational Serv / ESI 82.51 -49% 45% 3,193 3,056 3.2x 10x 22x 17x 15x 24.3x
Strayer Education, I / STRA 216.94 -34% 9% 3,087 2,969 8.0x 25x 49x 38x 31x 17.2x
New Oriental Educati / EDU 54.85 -17% 67% 2,087 1,821 7.7x 32x 44x 31x 22x 6.7x
Career Education Cor / CECO 14.84 -22% 110% 1,331 834 .5x 12x 15x 24x 20x 2.7x
Corinthian Colleges, / COCO 14.43 -55% 26% 1,235 1,260 1.1x 26x 38x 24x 17x 6.1x
Capella Education Co / CPLA 50.80 -32% 48% 847 733 2.8x 20x 38x 31x 25x 6.7x
American Public Educ / APEI 38.77 -29% 37% 696 655 6.8x 29x 61x 48x 34x 14.7x
K12 Inc. / LRN 20.85 -21% 49% 599 574 2.2x 35x 19x 47x 30x 4.3x
Universal Technical / UTI 16.27 -59% 36% 408 336 1.0x 41x 29x 49x 33x 4.8x
Lincoln Educational / LINC 13.56 -27% 18% 345 350 1.0x 11x 26x 19x 16x 4.3x
Princeton Review, In / REVU 5.16 -9% 74% 174 233 1.7x nm nm 103x 22x nm
Learning Tree Intern / LTRE 10.00 -16% 177% 166 99 .5x 6x 10x 12x 11x 1.9x
Nobel Learning Commu / NLCI 13.75 -13% 18% 144 159 .7x 13x 20x 18x 16x nm
China Distance Educa / DL 3.84 -22% 82% 136 131 9.0x 30x 20x 64x 11x 17.5x
ATA Inc.(ADR) / ATAI 4.99 -29% 250% 114 63 2.0x 11x 31x 12x 7x 2.1x
Median 2.2x 21x 27x 25x 20x 6.7x
Services: Schools – Operating Performance

Est.
APOL 3,141 15% 12% 177 56% 24% 15% 16% >99% 60% 27% 1.7x
DV 1,145 19% 12% 188 54% 15% 12% 23% >99% 18% 12% 1.0x
ESI 966 14% 12% 261 62% 31% 20% 17% >99% >99% 35% 1.8x
STRA 371 22% 20% 285 66% 31% 21% 20% 96% 43% 24% 1.2x
EDU 237 -81% -32% 51 62% 24% 46% 31% 24% 14% 11% .2x
CECO 1,716 -2% -1% 191 62% 4% 2% 11% 14% 4% 3% 1.3x
COCO 1,114 18% 5% 183 41% 4% 3% 25% 19% 8% 5% 1.6x
CPLA 261 22% 24% 201 55% 14% 10% 25% 35% 20% 15% 1.5x
APEI 97 59% 44% 106 59% 23% 15% 36% >99% 35% 24% 1.6x
LRN 256 58% 38% 335 41% 6% 8% 42% 22% 14% 10% 1.3x
UTI 346 -3% 12% 164 45% 2% 2% 15% 15% 6% 3% 1.6x
LINC 360 12% 8% 155 59% 9% 5% 18% 40% 11% 7% 1.5x
REVU 141 23% 9% 276 63% -9% -23% 20% nm -80% -21% .9x
LTRE 181 12% 3% 366 58% 9% 10% na nm 23% 11% 1.1x
NLCI 213 13% 9% 45 39% 6% 4% 13% >99% 13% 7% 2.0x
DL 15 >99% 62% 32 63% 30% 17% 40% nm 36% 19% 1.1x
ATAI 32 67% >99% 91 63% 19% 15% 33% >99% 11% 8% .6x
Median 17% 12% 183 59% 14% 10% 22% 23% 14% 11% 1.3x
Services: Security – Valuation

Brink's Company, The / BCO 21.06 -3% 254% 964 869 .2x 3x 7x 5x 6x 1.0x
Checkpoint Systems, / CKP 11.10 -6% 156% 430 478 .5x 8x 8x 9x 9x 2.5x
China Security & Sur / CSR 7.70 -2% 203% 353 445 1.2x 8x 8x 5x 4x 2.5x
ArcSight Inc. / ARST 5.92 -14% 120% 184 110 1.0x nm nm 24x 14x 3.9x
Ituran Location and / ITRN 7.00 -4% 97% 164 117 .9x 2x 3x 11x 7x 1.7x
Services: Security – Operating Performance

Est.
BCO 3,684 20% 12% 71 na 9% 5% 8% 29% 18% 8% 1.5x
CKP 943 20% 8% 240 41% 7% 6% 13% 23% 9% 5% .9x
CSR 368 87% na 147 30% 15% 10% 29% 39% 15% 8% .8x
ARST 109 43% 46% 326 83% -1% 0% 25% 4% -2% -1% 1.3x
ITRN 136 21% 17% 127 46% 55% 34% 21% >99% 35% 24% .7x
Median 21% 15% 147 44% 9% 6% 21% 26% 15% 8% .9x
Services: Waste Management – Valuation

Waste Management, In / WMI 31.20 -21% 26% 15,306 23,231 1.7x 10x 14x 14x 13x 59.8x
Stericycle, Inc. / SRCL 58.01 -20% 14% 4,964 5,692 5.4x 23x 44x 34x 29x nm
Allied Waste Industr / AW 10.93 -29% 41% 4,751 11,119 1.8x 10x 15x 11x 11x nm
Republic Services, I / RSG 24.70 -26% 48% 4,500 6,059 1.9x 11x 16x 14x 14x nm
Waste Connections, I / WCN 34.87 -20% 17% 2,780 3,056 2.9x 14x 25x 24x 20x 9.0x
Clean Harbors, Inc. / CLHB 62.56 -29% 33% 1,484 1,303 1.3x 13x 29x 24x 21x 4.6x
Tetra Tech, Inc. / TTEK 16.98 -18% 78% 1,009 1,027 .8x 10x 17x 15x 12x 3.9x
American Ecology Cor / ECOL 17.66 -20% 92% 323 304 1.7x 9x 17x 15x 14x 3.5x
Waste Services, Inc. / WSII 5.96 -13% 64% 275 636 1.3x 11x nm 21x 15x nm
Heritage-Crystal Cle / HCCI 13.17 -26% 42% 141 141 1.4x 26x 14x 77x 18x 3.5x
Casella Waste System / CWST 4.93 -21% 229% 126 691 1.2x 16x nm 35x 18x nm
Median 1.7x 11x 17x 21x 15x 4.2x
Technology: Communications Equipment – Valuation

Deutsche Telekom AG / DT 14.45 -19% 60% 62,994 106,548 1.4x 14x 85x 16x 13x nm
QUALCOMM, Inc. / QCOM 32.94 -6% 73% 54,531 48,120 4.3x 13x 17x 16x 13x 4.1x
Nokia Corporation (A / NOK 12.59 -3% 222% 47,854 44,007 .6x 5x 5x 6x 7x 10.3x
Corning Incorporated / GLW 8.91 -10% 215% 13,849 12,222 1.9x 7x 7x 5x 7x 1.1x
Motorola, Inc. / MOT 4.08 -4% 309% 9,247 6,288 .2x nm nm 68x 29x 1.0x
L-3 Communications H / LLL 69.33 -5% 66% 8,278 11,970 .8x 7x 12x 9x 9x nm
Juniper Networks, In / JNPR 15.03 -6% 133% 7,935 5,914 1.7x 9x 24x 13x 11x 3.8x
Alcatel-Lucent (ADR) / ALU 2.32 -21% 258% 5,241 6,063 .3x nm nm nm 9x nm
Harris Corporation / HRS 33.04 -9% 102% 4,447 5,015 .9x 7x 10x 8x 7x 11.6x
Dolby Laboratories, / DLB 27.00 -3% 99% 3,031 2,526 3.9x 9x 16x 16x 14x 4.2x
NDS Group plc (ADR) / NNDS 46.32 -7% 37% 2,706 1,995 2.4x 12x 17x 18x 15x 3.5x
Foundry Networks, In / FDRY 15.32 -37% 25% 2,291 1,372 2.1x 18x 29x 23x 20x 2.1x
Itron, Inc. / ITRI 44.15 -7% 141% 1,522 2,605 1.3x 22x nm 13x 12x nm
Polycom, Inc. / PLCM 18.20 -7% 59% 1,515 1,234 1.2x 14x 27x 13x 12x 4.1x
Tellabs, Inc. / TLAB 3.68 -16% 101% 1,465 298 .2x nm 25x 20x 19x .9x
Comtech Telecomm. Co / CMTL 44.00 -15% 27% 1,087 782 1.5x 7x 16x 15x 12x 2.6x
InterDigital, Inc. / IDCC 22.33 -27% 25% 965 788 3.5x 27x 56x 36x 30x nm
ADTRAN, Inc. / ADTN 13.44 -4% 97% 837 739 1.5x 6x 12x 11x 11x 2.3x
TEKELEC / TKLC 12.11 -16% 46% 801 572 1.3x 10x 32x 13x 13x 1.8x
Arris Group, Inc. / ARRS 6.19 -28% 74% 760 707 .6x 10x 7x 8x 7x 2.4x
Sycamore Networks, I / SCMR 2.64 -24% 53% 749 -72 nm nm nm nm nm .8x
Belden Inc. / BDC 15.83 -16% 233% 736 1,111 .5x 6x 6x 5x 7x 4.6x
CommScope, Inc. / CTV 10.31 -6% 448% 726 2,426 .7x 8x 4x 3x 3x nm
ADC Telecommunicatio / ADCT 6.01 -31% 218% 708 705 .5x 42x 6x 6x 8x 1.4x
JDS Uniphase Corpora / JDSU 3.06 -4% 401% 658 367 .2x nm nm 7x 4x 1.2x
General Cable Corpor / BGC 11.44 -10% 630% 607 1,782 .3x 4x 3x 3x 3x 1.3x
Ciena Corporation / CIEN 6.68 -13% 567% 603 374 .4x 5x 8x 5x 10x 1.3x
ViaSat, Inc. / VSAT 19.05 -20% 92% 587 497 .8x 11x 18x 12x 10x 1.7x
Plantronics, Inc. / PLT 11.96 -4% 136% 584 384 .4x 4x 9x 9x 8x 1.2x
Harmonic Inc. / HLIT 4.83 -3% 135% 459 166 .5x 4x 17x 7x 8x 1.3x
Sonus Networks, Inc. / SONS 1.40 -7% 391% 381 64 .2x nm nm nm nm .8x
Brightpoint, Inc. / CELL 4.33 -7% 313% 354 438 .1x 6x 6x 21x 9x 3.0x
NetGear, Inc. / NTGR 9.90 -17% 274% 349 147 .2x 2x 8x 8x 9x 1.0x
Airvana, Inc. / AIRV 4.77 -30% 49% 305 68 .3x 1x 1x 21x 14x 2.3x
Harris Stratex Netwo / HSTX 5.08 -6% 269% 297 221 .3x nm nm 7x 6x .9x
ICx Technologies, In / ICXT 8.04 -53% 45% 274 238 1.5x nm nm nm 73x 3.1x
Finisar Corporation / FNSR 0.48 -10% 323% 227 349 .8x nm nm 4x 3x 16.8x
Applied Signal Techn / APSG 16.66 -36% 13% 213 177 1.0x 14x 30x 27x 23x 2.1x
Acme Packet, Inc. / APKT 3.69 -11% 260% 204 77 .7x 4x 12x 15x 14x 1.4x
Ceragon Networks Ltd / CRNT 5.09 -16% 173% 188 112 .5x 8x 12x 11x 9x 1.0x
SonicWALL, Inc. / SNWL 3.46 -4% 223% 185 86 .4x nm 8x 14x 12x 1.7x
Symmetricom, Inc. / SYMM 3.73 -23% 43% 166 118 .6x nm nm 11x 9x 1.0x
Extreme Networks, In / EXTR 1.84 -21% 117% 162 104 .3x 522x 26x 15x 9x 1.2x
Anaren, Inc. / ANEN 10.84 -28% 61% 157 172 1.3x 21x 19x 12x 10x 1.7x
DSP Group, Inc. / DSPG 5.75 -19% 182% 154 81 .3x nm nm 12x 13x 1.0x
Novatel Wireless, In / NVTL 4.55 -12% 289% 138 12 .0x x 4x 24x 12x .7x
Cogo Group, Inc. / COGO 3.70 -4% 419% 131 8 .0x x 6x 5x 5x .8x
RADVISION LTD. (USA) / RVSN 6.07 -33% 95% 123 40 .5x nm 14x nm nm 1.0x
Audiovox Corporation / VOXX 4.89 -24% 181% 112 79 .1x nm 17x nm 20x .4x
Coleman Cable, Inc. / CCIX 6.20 -19% 190% 104 432 .4x 9x 7x 10x 11x nm
Technology: Communications Equipment – Operating Performance

Est.
DT 77,785 -3% 3% 338 44% 10% 2% 7% 18% 4% 1% .5x
QCOM 11,142 26% 25% 724 69% 33% 28% 13% 48% 19% 16% .6x
NOK 68,166 11% 20% 554 36% 13% 10% 13% 80% 38% 14% 1.4x
GLW 6,446 14% 15% 260 49% 29% 89% 13% 26% 48% 33% .4x
MOT 32,656 -16% 7% 495 27% -3% -1% 11% nm -3% -1% 1.0x
LLL 14,696 9% 27% 227 10% 11% 6% 11% 74% 15% 6% 1.0x
JNPR 3,458 32% 29% 588 67% 19% 15% 18% >99% 9% 7% .5x
ALU 21,888 4% 20% 286 34% -22% -23% 11% nm -38% -12% .5x
HRS 5,448 20% 21% 330 31% 13% 8% 17% 57% 21% 10% 1.2x
DLB 640 33% 25% 656 89% 45% 31% 14% >99% 21% 16% .5x
NNDS 827 10% 15% 203 61% 20% 15% 22% >99% 14% 10% .6x
FDRY 645 13% 14% 658 63% 12% 10% 13% 14% 6% 5% .5x
ITRI 1,958 71% 54% 233 34% 6% 1% 17% 23% 3% 1% .6x
PLCM 1,070 25% 20% 432 58% 8% 7% 17% 38% 7% 6% .8x
TLAB 1,790 -6% 16% 482 36% -55% -52% 6% nm -36% -28% .5x
CMTL 532 19% 20% 394 44% 20% 14% 23% >99% 19% 12% .9x
IDCC 225 -8% 31% 591 na 13% 9% 20% 31% 17% 4% .5x
ADTN 507 9% 2% 323 59% 23% 16% 10% 42% 21% 16% 1.0x
TKLC 456 3% 10% 490 64% 13% 11% 10% 26% 11% 6% .6x
ARRS 1,102 13% 27% 553 32% 6% 4% 13% 18% 5% 3% .7x
SCMR 116 -26% 21% 235 46% -33% 0% 13% nm 0% 0% .1x
BDC 2,173 19% 33% 262 29% 9% 6% 6% 29% 12% 6% 1.0x
CTV 3,617 94% 19% 233 27% 9% 4% 18% 30% 11% 3% .7x
ADCT 1,462 12% 22% 138 35% 1% -2% 10% 3% -3% -1% .7x
JDSU 1,554 8% 29% 219 43% -8% -2% 17% nm -2% -1% .5x
BGC 6,235 47% 33% 528 13% 7% 4% 13% 29% 30% 6% 1.5x
CIEN 939 30% 38% 425 51% 8% 10% 16% 11% 10% 5% .4x
VSAT 612 15% 18% 364 29% 8% 6% 15% 23% 9% 7% 1.1x
PLT 878 6% 15% 176 42% 10% 9% 4% 30% 13% 10% 1.2x
HLIT 356 19% 8% 540 48% 10% 16% 18% 24% 16% 12% .7x
SONS 321 6% 23% 346 63% -3% -1% 13% nm -1% -1% .5x
CELL 5,244 59% 34% 1,604 7% 1% 0% 13% 21% 3% 1% 2.9x
NTGR 780 13% 24% 2,738 33% 8% 5% 16% 35% 10% 7% 1.4x
AIRV 221 37% >99% 394 95% 49% 46% na >99% 69% 38% .8x
HSTX 742 21% 59% 526 27% -2% -2% 13% nm -2% -1% .7x
ICXT 160 30% >99% 184 46% -20% -20% 35% nm -17% -15% .7x
FNSR 463 11% 16% 103 34% -11% -14% 19% nm -44% -12% .9x
APSG 184 9% 6% 290 31% 7% 4% 15% 14% 7% 5% 1.2x
APKT 117 11% 92% 364 80% 15% 11% 16% 21% 8% 7% .6x
CRNT 207 39% 44% 619 34% 7% 13% 20% 17% 16% 12% .9x
SNWL 220 16% 17% 327 69% -1% 11% 17% nm 9% 6% .5x
SYMM 213 1% 5% 224 46% -6% -5% 11% nm -5% -3% .6x
EXTR 362 4% -2% 421 57% 0% 2% 11% 0% 3% 2% 1.1x
ANEN 137 5% 12% 148 30% 6% 8% 15% 7% 7% 6% .7x
DSPG 319 57% 17% 636 38% -7% -9% 8% nm -7% -6% .7x
NVTL 400 18% 61% 1,329 28% 7% 6% 20% 26% 11% 8% 1.4x
COGO 281 25% 39% 597 18% 6% 7% 25% 32% 9% 7% 1.1x
RVSN 84 -11% 13% 192 78% -16% -11% 18% nm -7% -6% .5x
VOXX 607 16% 3% 607 18% -2% -1% na nm -1% -1% 1.1x
CCIX 1,045 47% 45% 681 11% 4% 1% 7% 17% 13% 2% 1.9x
Median 14% 20% 394 38% 7% 6% 14% 26% 9% 5% .7x
Technology: Computer Hardware – Valuation

Apple Inc. / AAPL 90.24 -6% 125% 80,218 55,728 1.7x 9x 17x 17x 14x 3.9x
Hewlett-Packard Comp / HPQ 30.46 -7% 74% 74,600 69,972 .6x 7x 11x 8x 8x 6.3x
Dell Inc. / DELL 10.89 -19% 161% 21,327 14,263 .2x 4x 8x 8x 8x 57.3x
Sun Microsystems, In / JAVA 4.12 -15% 423% 3,043 1,671 .1x nm 8x nm 24x 1.9x
Ingram Micro Inc. / IM 11.73 -5% 79% 1,934 1,584 .0x 4x 8x 8x 9x .7x
Tech Data Corporatio / TECD 19.46 -6% 100% 983 936 .0x 4x 10x 8x 7x .5x
Electronics For Imag / EFII 9.06 -17% 159% 467 265 .5x nm 21x 12x 12x 1.2x
Palm, Inc. / PALM 2.52 -10% 255% 277 683 .5x nm nm nm nm nm
Digi International I / DGII 10.36 -34% 56% 266 193 1.0x 12x 22x 18x 17x 2.4x
SeaChange Internatio / SEAC 7.37 -30% 34% 225 153 .8x 26x 74x 35x 22x 1.6x
Rackable Systems, In / RACK 5.28 -1% 174% 158 -18 nm nm nm nm nm .6x
Maxwell Technologies / MXWL 6.50 -6% 127% 142 153 2.0x nm nm nm nm 3.9x
Technology: Computer Hardware – Operating Performance

Est.
AAPL 32,479 35% 33% 1,015 34% 19% 15% 21% 77% 26% 15% 1.0x
HPQ 113,054 12% 9% 657 25% 9% 7% 13% >99% 22% 9% 1.2x
DELL 64,146 10% 8% 776 18% 5% 4% 12% nm 66% 10% 2.2x
JAVA 13,651 -2% 8% 391 45% -9% -10% 9% nm -26% -10% 1.0x
IM 35,685 5% 11% 2,379 6% 1% 1% 10% 18% 8% 3% 4.2x
TECD 24,640 9% 6% 2,969 5% 1% 1% 14% 13% 7% 3% 4.5x
EFII 577 -7% 16% 286 56% -5% -1% 13% nm -1% -1% .6x
PALM 1,325 -15% 1% 1,262 28% -14% -11% 14% nm <-99% -13% 1.1x
DGII 185 7% 14% 328 53% 8% 7% 20% 13% 5% 5% .7x
SEAC 193 17% 5% 224 49% 3% 9% 14% 10% 10% 8% .9x
RACK 321 -8% 48% 858 20% -19% -17% 17% nm -20% -16% 1.0x
MXWL 76 36% 21% 291 29% -18% -23% 25% nm -28% -16% .7x
Median 8% 10% 716 29% 1% 1% 14% 13% 7% 3% 1.0x
Technology: Computer Networks – Valuation

NetApp Inc. / NTAP 12.30 -16% 123% 4,027 3,212 .9x 10x 14x 11x 9x 5.1x
Cerner Corporation / CERN 36.19 -14% 67% 2,931 2,808 1.7x 12x 24x 17x 14x 3.4x
F5 Networks, Inc. / FFIV 22.50 -21% 59% 1,780 1,589 2.4x 16x 25x 13x 11x 3.7x
Jack Henry & Associa / JKHY 17.71 -17% 55% 1,497 1,491 2.0x 9x 15x 14x 13x 9.8x
3Com Corporation / COMS 1.82 -8% 160% 739 499 .4x nm nm 5x 5x 3.3x
Sykes Enterprises, I / SYKE 16.54 -25% 36% 682 462 .6x 7x 17x 10x 11x 1.9x
Convergys Corporatio / CVG 5.43 -4% 230% 663 1,190 .4x nm 4x 5x 5x 11.6x
L-1 Identity Solutio / ID 5.96 -1% 226% 514 974 1.8x 55x 25x nm 66x nm
AsiaInfo Holdings, I / ASIA 10.57 -36% 41% 488 291 1.8x 18x 23x 19x 16x 2.4x
Black Box Corporatio / BBOX 25.36 -22% 56% 445 628 .6x 7x 11x 8x 10x nm
SI International, In / SINT 30.51 -42% 4% 406 506 .9x 15x 21x 26x 19x nm
SYNNEX Corporation / SNX 12.32 -3% 121% 398 803 .1x 6x 6x 5x 5x .8x
Blue Coat Systems, I / BCSI 9.68 -6% 313% 377 377 1.1x 21x 12x 10x 6x nm
NetScout Systems, In / NTCT 8.45 -16% 90% 332 351 1.5x 270x nm 13x 11x 25.6x
RadiSys Corporation / RSYS 7.26 -38% 131% 166 194 .5x nm nm 15x 11x 1.4x
Radiant Systems, Inc / RADS 5.08 -19% 248% 165 254 .9x 10x 14x 7x 7x nm
Radware Ltd. / RDWR 6.00 -5% 158% 116 28 .3x nm nm nm nm .9x
Tier Technologies, I / TIER 5.26 -11% 82% 104 57 .5x nm nm nm 25x 1.1x
Median .9x 12x 15x 11x 11x 3.3x
Technology: Computer Networks – Operating Performance

Est.
NTAP 3,602 20% 27% 471 60% 9% 8% 13% 39% 18% 6% .8x
CERN 1,605 7% 18% 204 39% 15% 10% 20% 29% 13% 9% .9x
FFIV 650 24% 32% 411 77% 15% 11% 19% 62% 10% 8% .7x
JKHY 751 9% 12% 196 41% 22% 14% 13% 76% 17% 11% .8x
COMS 1,318 2% 26% 216 53% -12% -10% na >99% -12% -7% .7x
SYKE 816 22% 15% 28 36% 8% 8% 15% 50% 16% 12% 1.6x
CVG 2,796 -2% 5% 37 32% -3% -1% 12% nm -1% -1% 1.1x
ID 529 50% 79% 291 31% 3% 5% na 21% 2% 2% .3x
ASIA 163 31% 10% 64 49% 10% 15% 27% 33% 12% 8% .5x
BBOX 1,000 -3% 24% 232 36% 9% 5% na 63% 7% 4% .9x
SINT 563 15% 25% 125 34% 6% 3% 16% 40% 6% 3% 1.2x
SNX 7,643 13% 11% 1,274 5% 2% 1% 14% 18% 12% 4% 3.9x
BCSI 346 70% 47% 334 74% 5% 7% 18% nm 10% 6% .9x
NTCT 241 >99% 26% 305 73% 1% -1% 15% 5% -1% 0% .6x
RSYS 383 34% 10% 494 24% -4% -3% 15% nm -6% -3% 1.0x
RADS 297 22% 23% 287 43% 9% 5% 14% 50% 9% 5% 1.0x
RDWR 94 10% 9% 159 79% -32% -27% 10% nm -15% -12% .5x
TIER 121 14% -5% 148 23% -11% -18% 20% nm -17% -14% .7x
Median 15% 21% 224 40% 6% 5% 15% 40% 8% 4% .9x
Technology: Computer Services – Valuation

Google Inc. / GOOG 310.02 -10% 134% 97,580 83,168 4.0x 13x 23x 16x 14x 4.5x
Wipro Limited (ADR) / WIT 7.07 -19% 126% 10,345 10,211 2.2x 13x 15x 13x 11x 6.7x
Western Union Compan / WU 13.49 -9% 112% 9,653 11,606 2.2x 8x 12x 10x 9x nm
Baidu.com, Inc. (ADR / BIDU 178.89 -9% 134% 6,134 5,797 13.8x 41x 68x 38x 25x 15.9x
Fiserv, Inc. / FISV 32.75 -13% 73% 5,245 9,032 1.9x 11x 14x 10x 9x nm
Computer Sciences Co / CSC 28.53 -9% 94% 4,322 7,354 .4x 6x 9x 7x 6x 7.7x
Scripps Networks Int / SNI 26.00 -20% 73% 4,258 4,367 2.8x 31x nm 14x 14x 15.8x
Affiliated Computer / ACS 39.30 -6% 46% 3,834 5,770 .9x 9x 12x 11x 9x nm
Alliance Data System / ADS 45.13 -14% 75% 2,913 4,544 2.1x 11x 22x 10x 9x nm
NCR Corporation / NCR 16.17 -12% 74% 2,552 2,127 .4x 6x 17x 10x 9x 1.8x
NetEase.com, Inc. (A / NTES 19.65 -17% 38% 2,515 1,742 4.1x 7x 14x 12x 10x 3.4x
Total System Service / TSS 12.16 -9% 146% 2,393 2,348 1.2x 7x 10x 9x 9x 4.9x
IMS Health, Inc. / RX 12.47 -12% 104% 2,268 3,438 1.5x 8x 11x 7x 7x nm
priceline.com Incorp / PCLN 53.80 -16% 168% 2,184 2,199 1.2x 8x 16x 9x 9x 13.5x
Akamai Technologies, / AKAM 12.76 -12% 221% 2,158 2,060 2.7x 10x 23x 8x 7x 2.0x
Teradata Corporation / TDC 12.01 -2% 132% 2,114 1,736 1.0x 5x 11x 9x 9x 4.0x
Interactive Data Cor / IDC 20.99 -17% 60% 1,970 1,731 2.3x 9x 16x 15x 15x 7.3x
FactSet Research Sys / FDS 38.18 -16% 78% 1,809 1,666 2.9x 9x 15x 14x 12x 8.2x
Shanda Interactive E / SNDA 24.22 -14% 65% 1,760 1,243 2.8x 7x 9x 10x 9x 3.7x
Sohu.com Inc. / SOHU 43.32 -17% 111% 1,669 1,390 3.7x 11x 48x 12x 10x 5.8x
SINA Corporation (US / SINA 26.25 -10% 123% 1,465 1,002 3.0x 15x 27x 16x 13x 2.9x
Morningstar, Inc. / MORN 30.23 0% 183% 1,414 1,104 2.2x 8x 20x 16x 15x 5.5x
Perot Systems Corpor / PER 11.72 -6% 61% 1,405 1,159 .4x 5x 13x 12x 11x 2.4x
Neustar, Inc / NSR 16.52 -20% 112% 1,303 1,207 2.5x 8x 14x 17x 11x 6.2x
CACI International I / CAI 41.68 -11% 29% 1,246 1,775 .7x 10x 15x 14x 12x nm
WebMD Health Corp. / WBMD 21.45 -36% 113% 1,238 905 2.5x 43x 20x 39x 35x 3.4x
Syntel, Inc. / SYNT 24.10 -33% 65% 1,000 882 2.2x 11x 16x 13x 12x 4.3x
Perfect World Co., L / PWRD 16.91 -13% 98% 965 763 4.1x 8x 17x 10x 7x 3.4x
Cogent, Inc. / COGT 8.90 -11% 43% 798 418 3.9x 9x 30x 17x 16x 1.6x
SkillSoft Public Lim / SKIL 7.33 -4% 56% 765 827 2.6x 14x 13x 19x 15x nm
Ariba, Inc. / ARBA 8.46 -8% 120% 728 641 2.0x nm nm 12x 10x nm
Riverbed Technology, / RVBD 9.73 -10% 231% 694 413 1.3x nm 49x 18x 14x 2.6x
EarthLink, Inc. / ELNK 6.36 -4% 60% 689 501 .5x 2x nm 3x 5x 3.6x
CyberSource Corporat / CYBS 9.76 -27% 109% 679 605 2.9x nm 163x 15x 13x 7.8x
Arbitron Inc. / ARB 25.11 -2% 108% 663 724 2.0x 13x 18x 19x 13x nm
Net 1 Ueps Technol / UEPS 10.97 -10% 203% 641 509 1.9x 5x 7x 6x 5x 4.2x
HMS Holdings Corp. / HMSY 24.51 -26% 51% 617 604 3.5x 18x 43x 32x 25x 10.1x
CoStar Group, Inc. / CSGP 30.03 -8% 104% 593 410 1.9x 10x 37x 24x 21x 2.7x
TeleTech Holdings, I / TTEC 8.69 -15% 209% 568 553 .4x 5x 12x 7x 8x 1.6x
Bankrate, Inc. / RATE 29.68 -24% 93% 558 517 3.4x 15x 29x 19x 16x 8.7x
Advent Software, Inc / ADVS 20.58 -15% 175% 554 478 1.9x 28x 46x 35x 32x 6.9x
United Online, Inc. / UNTD 6.62 -8% 162% 543 896 1.7x 10x 8x 5x 5x nm
Acxiom Corporation / ACXM 6.78 -6% 123% 529 1,028 .8x 13x nm 10x 9x nm
Tyler Technologies, / TYL 12.60 -22% 47% 458 434 1.7x 15x 30x 22x 20x 51.4x
MercadoLibre, Inc. / MELI 10.27 -9% 690% 455 443 3.4x 13x 47x 28x 16x 24.9x
Imation Corp. / IMN 11.38 -6% 143% 429 316 .1x nm nm 14x 16x .7x
DealerTrack Holdings / TRAK 10.09 -12% 360% 402 209 .8x 24x 21x 13x 14x 1.8x
GSI Commerce, Inc. / GSIC 8.30 -8% 227% 395 636 .7x nm 138x nm nm nm
WNS (Holdings) Limit / WNS 9.00 -19% 143% 383 584 1.2x 28x 41x 9x 6x nm
SAVVIS, Inc. / SVVS 7.00 -18% 385% 374 860 1.0x 60x 2x nm nm 2.4x
Median 2.0x 10x 17x 13x 11x 4.3x
Technology: Computer Services – Operating Performance

Est.
GOOG 20,921 40% 73% 1,040 60% 30% 24% 21% 50% 20% 18% .7x
WIT 4,736 31% 34% 49 30% 17% 15% 17% 42% 26% 14% 1.0x
WU 5,300 11% 11% 869 42% 26% 17% 13% nm na 16% .9x
BIDU 420 98% >99% 67 64% 34% 34% 55% >99% 41% 32% .9x
FISV 4,788 29% 2% 192 35% 18% 19% 16% nm 35% 9% .5x
CSC 17,320 12% 6% 195 20% 7% 5% 12% 24% 17% 6% 1.1x
SNI 1,577 51% na na na 9% -8% 11% 46% -13% -8% 1.0x
ACS 6,272 7% 12% 100 12% 11% 6% 13% 40% 16% 6% 1.0x
ADS 2,120 8% 22% 216 32% 20% 9% 17% 61% 21% 5% .5x
NCR 5,415 13% -6% 233 22% 6% 5% 15% 41% 16% 6% 1.2x
NTES 423 33% 35% 179 82% 62% 49% 17% 56% 35% 27% .5x
TSS 1,904 3% 15% 245 45% 19% 12% 12% 86% 25% 15% 1.2x
RX 2,355 11% 12% 296 56% 18% 10% 12% >99% <-99% 10% 1.0x
PCLN 1,814 36% 16% 1,370 50% 16% 11% 23% >99% 29% 14% 1.3x
AKAM 762 32% 45% 490 72% 27% 18% 18% 48% 10% 8% .4x
TDC 1,735 3% 8% 294 54% 19% 14% 6% >99% 37% 19% 1.3x
IDC 739 10% 13% 321 67% 27% 18% 13% >99% 14% 11% .6x
FDS 576 21% 23% 283 67% 32% 22% 18% >99% 28% 23% 1.0x
SNDA 438 49% 24% 171 70% 40% 37% 28% >99% 29% 20% .5x
SOHU 373 >99% 25% 157 74% 35% 31% 51% >99% 42% 30% 1.0x
SINA 339 46% 7% 163 60% 20% 24% 28% 27% 15% 11% .5x
MORN 501 24% 34% 223 74% 29% 19% 19% >99% 20% 13% .7x
PER 2,828 14% 14% 122 18% 7% 5% 13% 46% 10% 7% 1.5x
NSR 483 21% 38% 503 79% 30% 16% 17% >99% 18% 14% .9x
CAI 2,522 25% 14% 205 33% 7% 3% 15% 42% 10% 5% 1.4x
WBMD 368 17% 35% 313 65% 6% 11% 24% 15% 7% 6% .5x
SYNT 400 26% 22% 34 41% 21% 19% 18% 58% 34% 26% 1.4x
PWRD 187 >99% na 134 87% 52% 52% 33% >99% 41% 33% .6x
COGT 108 -15% 7% 414 69% 45% 38% 19% 13% 8% 7% .2x
SKIL 318 31% 10% 280 87% 19% 19% 18% nm 29% 10% .5x
ARBA 328 9% 1% 197 55% -15% -13% 17% 86% -11% -7% .5x
RVBD 317 64% >99% 390 73% -2% -2% 27% nm -3% -2% .9x
ELNK 1,022 -19% -4% 727 63% 20% 15% na >99% 45% 20% 1.3x
CYBS 212 >99% 47% 428 51% 0% 1% 21% nm 0% 0% .4x
ARB 355 6% 5% 325 50% 16% 11% 20% >99% >99% 22% 2.1x
UEPS 262 13% 13% 126 73% 43% 36% 18% >99% 29% 20% .6x
HMSY 174 25% 43% 229 72% 19% 11% 25% 72% 12% 10% .9x
CSGP 210 14% 20% 158 64% 19% 13% 30% 44% 9% 8% .6x
TTEC 1,446 8% 9% 32 26% 7% 5% 24% 33% 16% 9% 1.9x
RATE 152 67% 35% 548 61% 22% 14% 23% >99% 9% 9% .6x
ADVS 250 21% 13% 264 67% 7% 7% 20% nm 9% 4% .7x
UNTD 539 4% 5% 603 74% 17% 11% na >99% 14% 8% .7x
ACXM 1,360 -2% 4% 206 21% 6% 2% 13% 22% 4% 2% .9x
TYL 256 22% 9% 132 41% 11% 6% 24% >99% 12% 6% 1.0x
MELI 131 77% 89% 140 79% 26% 11% 63% 88% 15% 10% .9x
IMN 2,307 27% 21% 1,311 17% -2% -3% na nm -6% -4% 1.4x
TRAK 249 14% 50% 249 55% 3% 3% 16% 11% 2% 2% .5x
GSIC 911 36% 31% 204 58% -2% -3% 19% nm -11% -4% 1.4x
WNS 505 15% 42% 28 22% 4% 3% 21% 40% 7% 4% 1.3x
SVVS 832 5% 9% 359 43% 2% -2% na 3% -10% -2% .9x
Median 21% 15% 229 58% 18% 11% 18% 42% 15% 9% .9x
Technology: Data Storage – Valuation

EMC Corporation / EMC 9.98 -16% 102% 20,367 17,950 1.2x 10x 13x 13x 12x 3.9x
Western Digital Corp / WDC 13.45 -11% 197% 2,980 2,272 .3x 2x 4x 4x 4x 1.1x
Seagate Technology / STX 4.87 -11% 481% 2,378 3,255 .3x 3x 2x 5x 3x 1.1x
Micron Technology, I / MU 2.75 -4% 240% 2,100 3,464 .6x nm nm nm nm .4x
SanDisk Corporation / SNDK 7.15 -5% 454% 1,616 1,267 .3x nm 8x nm nm .4x
Brocade Communicatio / BRCD 3.81 -37% 139% 1,417 912 .6x 51x 19x 6x 6x 1.8x
Data Domain, Inc. / DDUP 17.55 -15% 77% 1,051 837 3.6x 137x nm 117x 63x 4.3x
Adaptec, Inc. / ADPT 2.91 -20% 46% 355 -15 nm nm nm 29x 73x .9x
Xyratex Ltd. / XRTX 4.24 -6% 442% 123 96 .1x 6x 5x 5x 4x .5x
Intevac, Inc. / IVAC 5.45 -10% 225% 119 79 .7x nm 4x nm nm .7x
Technology: Data Storage – Operating Performance

Est.
EMC 14,690 17% 17% 390 55% 12% 11% 11% 74% 12% 7% .6x
WDC 8,417 41% 30% 168 22% 13% 12% 14% 59% 40% 21% 1.8x
STX 12,456 5% 19% 231 23% 9% 8% 12% 37% 20% 9% 1.2x
MU 5,841 3% 6% 256 -1% -27% -28% 13% nm -24% -12% .4x
SNDK 3,733 -2% 30% 1,177 23% -5% -3% 14% nm -2% -1% .5x
BRCD 1,408 27% 28% 510 57% 1% 12% 12% 6% 13% 8% .7x
DDUP 234 >99% >99% 331 73% 3% 3% 55% 8% 3% 3% .8x
ADPT 144 -23% -25% 369 42% -15% 7% 10% nm 2% 2% .2x
XRTX 1,012 10% 27% 625 17% 2% 2% 9% 11% 7% 5% 2.3x
IVAC 111 -63% 46% 230 41% -16% -5% 20% nm -3% -2% .5x
Median 5% 27% 350 32% 1% 5% 12% 24% 5% 4% .7x
Technology: Peripherals – Valuation

Cisco Systems, Inc. / CSCO 16.62 -6% 81% 97,853 77,961 1.9x 8x 13x 12x 11x 4.8x
Canon Inc. (ADR) / CAJ 29.65 -19% 85% 37,390 29,926 .7x 4x 8x 10x 10x 1.2x
Logitech Internation / LOGI 12.88 -1% 189% 2,298 1,840 .7x 6x 10x 9x 8x 3.0x
Lexmark Internationa / LXK 23.97 -8% 58% 1,879 1,442 .3x 4x 8x 7x 9x 1.8x
Avocent Corporation / AVCT 15.20 -17% 70% 681 746 1.2x 21x 17x 8x 7x nm
Avid Technology, Inc / AVID 13.38 -14% 124% 496 374 .4x nm nm nm 29x 2.1x
ScanSource, Inc. / SCSC 17.32 -6% 121% 457 474 .2x 5x 8x 10x 9x 1.2x
Omnicell, Inc. / OMCL 9.49 -18% 219% 297 172 .7x 9x 7x 14x 11x 1.6x
Universal Display Co / PANL 6.45 -1% 262% 233 154 14.8x nm nm nm nm 3.0x
Sigma Designs, Inc. / SIGM 8.79 -10% 730% 232 111 .4x 2x 4x 5x 5x .9x
Stratasys, Inc. / SSYS 10.52 -2% 171% 221 193 1.6x 9x 16x 13x 12x 2.0x
Rimage Corporation / RIMG 13.37 -25% 105% 125 68 .7x 4x 9x 14x 13x 1.2x
Immersion Corporatio / IMMR 3.74 0% 290% 104 -15 nm nm 1x nm nm 1.2x
Technology: Peripherals – Operating Performance

Est.
CSCO 40,317 11% 17% 610 64% 24% 20% 12% 44% 24% 14% .7x
CAJ 45,070 -1% 9% 316 48% 15% 10% 7% 35% 15% 10% 1.0x
LOGI 2,519 15% 17% 268 35% 12% 12% 13% 70% 30% 19% 1.6x
LXK 4,754 -6% -2% 345 35% 8% 7% 7% 30% 25% 10% 1.4x
AVCT 639 5% 18% 356 63% 5% 5% 14% 52% 4% 3% .6x
AVID 897 -2% 16% 329 48% -10% -10% 12% nm -14% -10% 1.0x
SCSC 2,162 6% 14% 2,041 10% 4% 2% 14% 23% 14% 7% 2.8x
OMCL 248 25% 20% 307 52% 8% 10% 26% 42% 11% 8% .8x
PANL 10 -6% 17% 168 91% <-99% <-99% na nm -21% -18% .1x
SIGM 258 91% 92% 1,177 51% 24% 28% 17% 78% 24% 22% .8x
SSYS 123 10% 17% 321 54% 18% 13% 19% 30% 13% 11% .8x
RIMG 99 -11% 15% 467 46% 16% 12% 12% 28% 11% 10% .8x
IMMR 37 12% 13% 246 74% <-99% <-99% na nm -29% -23% .2x
Median 6% 17% 329 51% 12% 10% 13% 39% 13% 10% .8x
Technology: Office Equipment – Valuation

Xerox Corporation / XRX 6.36 -5% 178% 5,505 13,509 .7x 20x 5x 5x 5x 1.6x
Pitney Bowes Inc. / PBI 23.37 -11% 71% 4,817 9,569 1.5x 12x 14x 8x 8x nm
Diebold Incorporated / DBD 28.17 -20% 44% 1,862 2,229 .7x 15x 48x 11x 10x 2.8x
VeriFone Holdings, I / PAY 7.93 -1% 513% 669 1,037 1.1x nm nm 9x 6x nm
Technology: Office Equipment – Operating Performance

Est.
XRX 18,120 8% 3% 316 40% 4% 3% 14% 11% 8% 3% .8x
PBI 6,374 6% 8% 176 52% 13% 5% 11% 54% 55% 3% .7x
DBD 3,242 12% 8% 191 25% 5% 3% 15% 15% 8% 3% 1.2x
PAY 915 11% 32% 412 31% -2% -4% 16% nm -7% -3% .6x
Median 10% 8% 254 35% 4% 3% 14% 15% 8% 3% .8x
Technology: Electronic Instruments – Valuation

ABB Ltd (ADR) / ABB 10.87 -8% 207% 24,883 20,057 .6x 4x 8x 6x 6x 2.9x
Agilent Technologies / A 20.75 -13% 84% 7,263 7,959 1.4x 10x 11x 11x 10x 4.3x
Nidec Corporation (A / NJ 12.44 -36% 59% 7,216 7,219 .9x 8x 17x 12x 11x 2.6x
Eaton Corporation / ETN 41.15 -8% 142% 6,786 10,685 .7x 8x 6x 6x 6x nm
Tyco Electronics Ltd / TEL 14.50 -11% 178% 6,718 8,813 .6x 5x 4x 8x 7x 1.9x
Cooper Industries, L / CBE 26.92 -15% 107% 5,498 6,443 1.0x 7x 7x 7x 8x 18.8x
LG Display Co Ltd. ( / LPL 7.19 -26% 318% 5,177 5,595 .5x 3x 5x 4x nm .8x
AU Optronics Corp. ( / AUO 5.83 -6% 241% 4,817 6,704 .4x 2x 4x 4x nm .5x
TDK CORPORATION (ADR / TDK 33.37 -14% 137% 4,304 3,727 .4x 6x 6x 17x 13x .7x
Amphenol Corporation / APH 22.25 -5% 135% 3,911 4,451 1.4x 7x 11x 9x 10x 14.3x
Rockwell Automation / ROK 26.08 -18% 178% 3,797 4,219 .7x 5x 7x 7x 7x 7.3x
AMETEK, Inc. / AME 29.80 -8% 78% 3,180 4,167 1.7x 9x 14x 12x 10x nm
Molex Incorporated / MOLX 13.05 -11% 135% 2,298 2,082 .6x 7x 11x 12x 10x 1.1x
Avnet, Inc. / AVT 15.02 -7% 151% 2,263 3,095 .2x 4x 5x 6x 6x 1.1x
Energizer Holdings, / ENR 37.83 -5% 214% 2,200 5,120 1.2x 8x 7x 7x 6x nm
Teleflex Incorporate / TFX 48.33 -11% 41% 1,919 3,406 1.4x 13x nm 12x 11x nm
Arrow Electronics, I / ARW 14.56 -7% 178% 1,737 2,752 .2x 4x 4x 5x 7x 1.0x
Hubbell Incorporated / HUB.B 30.35 -10% 92% 1,703 2,007 .8x 6x 9x 8x 9x 4.5x
Woodward Governor Co / WGOV 24.76 -8% 96% 1,667 1,633 1.4x 10x 18x 14x 12x 4.2x
AVX Corporation / AVX 8.55 -9% 82% 1,458 858 .5x 6x 10x 13x 13x .9x
Jabil Circuit, Inc. / JBL 6.33 -5% 197% 1,333 1,930 .2x 8x 10x 5x 4x .9x
Brady Corporation / BRC 24.63 -3% 64% 1,315 1,535 1.0x 7x 10x 10x 9x 15.0x
Energy Conversion De / ENER 27.98 -27% 198% 1,279 1,140 3.7x 58x 311x 17x 9x 1.9x
Thomas & Betts Corpo / TNB 20.90 -9% 165% 1,168 1,630 .7x 5x 7x 6x 6x 8.8x
Acuity Brands, Inc. / AYI 28.80 -9% 87% 1,163 1,229 .6x 5x 8x 8x 7x 11.3x
Anixter Internationa / AXE 28.30 -8% 165% 999 2,125 .3x 5x 5x 4x 5x 1.5x
A. O. Smith Corporat / AOS 29.29 -11% 74% 882 1,202 .5x 9x 10x 9x 9x 3.9x
Hexcel Corporation / HXL 8.16 -8% 233% 786 1,133 .8x 9x 12x 10x 7x 1.7x
Franklin Electric Co / FELE 33.16 -7% 65% 763 904 1.2x 11x 27x 14x 12x 4.4x
Ener1, Inc. / HEV 6.75 -40% 37% 762 747 1067.7x nm nm nm nm 26.1x
Benchmark Electronic / BHE 10.97 -20% 82% 714 385 .1x 4x 9x 9x 10x .7x
WESCO International, / WCC 16.55 -14% 181% 695 1,803 .3x 5x 3x 3x 4x nm
Baldor Electric Comp / BEZ 14.41 0% 177% 666 1,994 1.0x 8x 7x 6x 7x nm
Plexus Corp. / PLXS 14.89 -10% 116% 584 554 .3x 5x 11x 9x 8x 1.3x
GrafTech Internation / GTI 4.79 -15% 484% 570 702 .6x 2x 3x 2x 2x 1.1x
Greatbatch Inc. / GB 24.40 -37% 11% 559 891 1.8x 31x 36x 19x 14x nm
Raven Industries, In / RAVN 29.58 -13% 62% 532 500 1.9x 11x 19x 17x 15x 4.5x
American Superconduc / AMSC 10.92 -15% 335% 473 351 2.3x nm nm nm 78x 2.5x
Park Electrochemical / PKE 17.58 -10% 80% 360 144 .6x 5x 10x 14x 11x 1.3x
EMS Technologies, In / ELMG 22.65 -28% 47% 344 259 .8x 12x 18x 17x 14x 1.6x
Littelfuse, Inc. / LFUS 15.64 -4% 151% 340 310 .6x 10x 10x 12x 10x 1.3x
Ixia / XXIA 5.31 -5% 102% 338 163 .9x nm 53x 19x 16x 1.3x
EnerSys / ENS 6.86 -5% 450% 329 690 .3x 4x 6x 4x 4x 1.1x
Advanced Energy Indu / AEIS 7.16 -1% 137% 300 165 .5x 7x 10x 18x 34x 1.0x
Methode Electronics / MEI 7.23 -15% 134% 278 167 .3x 3x 7x 18x 11x 1.0x
Nam Tai Electronics, / NTE 6.11 -13% 119% 274 13 .0x x 4x 10x 17x .9x
AZZ Incorporated / AZZ 22.21 -9% 118% 270 357 1.0x 6x 10x 7x 6x 3.3x
Sanmina-SCI Corporat / SANM 0.50 0% 432% 266 878 .1x 9x nm 6x 3x .4x
FuelCell Energy, Inc / FCEL 3.77 -18% 249% 259 246 2.7x nm nm nm nm 3.7x
Powell Industries, I / POWL 22.74 -26% 155% 259 291 .5x 9x 26x 11x 8x 1.5x
Technology: Electronic Instruments – Operating Performance

Est.
ABB 34,485 26% 13% 308 32% 15% 14% 4% 79% 39% 14% 1.1x
A 5,774 7% 7% 304 55% 14% 12% 15% 70% 23% 9% .8x
NJ 7,758 8% 15% 81 22% 11% 7% 19% 25% 15% 7% 1.1x
ETN 15,263 20% 10% 186 28% 9% 8% 12% 30% 18% 7% 1.0x
TEL 14,834 15% 9% 158 25% 12% 12% 12% 28% 16% 8% .7x
CBE 6,542 15% 10% 208 33% 15% 11% 12% 58% 25% 11% 1.0x
LPL 11,736 25% 20% 533 23% 19% 15% na 27% 26% 15% 1.0x
AUO 15,716 23% 42% 320 23% 18% 16% 10% 25% 26% 13% .8x
TDK 8,571 -5% 10% 131 25% 7% 6% na 13% 7% 5% .8x
APH 3,259 19% 23% 102 33% 20% 13% 18% 72% 32% 15% 1.1x
ROK 5,698 14% 12% 285 41% 15% 10% 14% 65% 32% 12% 1.2x
AME 2,491 22% 20% 220 33% 18% 11% 15% 63% 20% 9% .8x
MOLX 3,375 5% 9% 105 30% 9% 6% 14% 17% 8% 6% .9x
AVT 18,348 14% 18% 1,433 13% 4% 3% 15% 25% 12% 6% 2.3x
ENR 4,331 29% 13% 265 47% 15% 8% 13% 42% 39% 6% .8x
TFX 2,408 34% -7% 172 39% 11% 7% 16% 30% 12% 4% .6x
ARW 17,090 14% 15% 1,356 14% 4% 2% 13% 25% 10% 5% 2.1x
HUB.B 2,667 6% 8% 232 30% 13% 8% 12% 50% 21% 11% 1.3x
WGOV 1,198 22% 14% 282 30% 14% 10% 12% 40% 22% 15% 1.4x
AVX 1,633 6% 8% 117 17% 9% 8% 14% 16% 7% 6% .8x
JBL 12,780 4% 19% 210 7% 2% 1% 19% 13% 5% 2% 1.9x
BRC 1,523 12% 23% 195 49% 14% 9% 10% 61% 13% 7% .8x
ENER 305 >99% 18% 279 32% 6% 8% 43% 4% 4% 3% .4x
TNB 2,505 24% 12% 228 31% 14% 12% 12% 55% 22% 11% .9x
AYI 2,027 3% -2% 312 40% 13% 7% 13% 87% 27% 11% 1.5x
AXE 6,170 9% 21% 771 24% 7% 4% 15% 28% 24% 8% 2.0x
AOS 2,366 4% 12% 141 23% 5% 5% 10% 18% 14% 6% 1.3x
HXL 1,353 21% 4% 332 22% 9% 7% 22% 18% 20% 8% 1.2x
FELE 747 25% 18% 234 30% 11% 6% 14% 25% 12% 6% 1.0x
HEV 1 >99% na 7 na <-99% <-99% na nm <-99% <-99% .0x
BHE 2,743 -6% 13% 251 7% 3% 3% 18% 12% 7% 5% 1.6x
WCC 6,170 5% 17% 845 20% 6% 4% 13% 39% 35% 8% 2.2x
BEZ 1,938 24% 41% 240 30% 14% 5% 10% 32% 12% 4% .7x
PLXS 1,791 18% 14% 239 12% 6% 5% 14% 27% 17% 10% 1.9x
GTI 1,195 23% 11% 468 35% 26% 18% 12% 54% 66% 23% 1.3x
GB 485 63% 17% 198 28% 6% 3% 20% 12% 4% 2% .6x
RAVN 265 19% 12% 276 25% 18% 12% 15% 52% 26% 20% 1.7x
AMSC 151 >99% 25% 396 30% -10% -13% 27% nm -9% -7% .6x
PKE 240 -2% 5% 275 24% 12% 13% na 14% 11% 9% .7x
ELMG 321 13% 13% 291 38% 7% 6% 20% 19% 8% 6% 1.0x
LFUS 560 6% 4% 90 29% 6% 4% 15% 13% 7% 5% 1.1x
XXIA 181 4% 16% 240 77% 0% 4% 18% nm 2% 2% .5x
ENS 2,254 34% 23% 262 19% 7% 4% 11% 23% 12% 5% 1.3x
AEIS 345 -15% 0% 214 40% 7% 6% 16% 11% 6% 5% .8x
MEI 563 19% 12% 157 23% 9% 8% 12% 29% 13% 10% 1.2x
NTE 685 -18% 14% 103 13% 6% 9% na 37% 18% 12% 1.3x
AZZ 366 21% 28% 258 26% 17% 10% 12% 43% 24% 14% 1.4x
SANM 7,202 1% -15% 137 7% 1% 0% 20% 7% -1% 0% 1.6x
FCEL 91 >99% 15% 205 -47% -96% -98% 33% nm -86% -38% .4x
POWL 622 24% 40% 293 19% 5% 3% 14% 18% 11% 5% 1.7x
Median 14% 13% 239 28% 9% 7% 14% 28% 14% 7% 1.1x
Technology: Scientific and Technical Instruments – Valuation

Danaher Corporation / DHR 53.92 -9% 65% 17,233 19,655 1.6x 10x 14x 12x 12x nm
Thermo Fisher Scient / TMO 34.04 -4% 84% 14,304 15,236 1.5x 13x 19x 11x 10x nm
Applied Biosystems I / ABI 29.29 -12% 27% 4,987 4,568 2.0x 11x 16x 15x 14x 4.1x
Garmin Ltd. / GRMN 19.04 -5% 492% 3,856 3,317 .9x 4x 5x 5x 6x 2.0x
Waters Corporation / WAT 39.14 -5% 109% 3,848 3,983 2.5x 10x 15x 12x 11x 17.2x
Roper Industries, In / ROP 39.71 -11% 77% 3,563 4,753 2.1x 10x 15x 13x 12x nm
Qiagen NV / QGEN 15.63 -20% 51% 3,084 3,741 4.3x 30x 56x 20x 16x nm
Illumina, Inc. / ILMN 23.86 -8% 101% 2,952 2,703 5.2x 233x nm 39x 26x 5.1x
Beckman Coulter, Inc / BEC 46.91 -4% 64% 2,940 3,867 1.3x 15x 14x 13x 12x 6.8x
Pall Corporation / PLL 24.43 -11% 77% 2,898 3,221 1.3x 9x 14x 12x 11x 3.5x
Millipore Corporatio / MIL 52.26 -12% 59% 2,887 3,982 2.5x 16x 21x 15x 14x nm
Gen-Probe Incorporat / GPRO 42.86 -8% 60% 2,331 1,775 3.8x 13x 27x 22x 23x 3.1x
Trimble Navigation L / TRMB 19.24 -17% 215% 2,300 2,281 1.7x 11x 20x 12x 12x 8.8x
PerkinElmer, Inc. / PKI 16.80 -8% 78% 1,984 2,340 1.2x 13x 15x 12x 11x nm
Mindray Medical Inte / MR 18.31 -14% 146% 1,976 2,016 4.2x 18x 3x 19x 13x 7.0x
Bio-Rad Laboratories / BIO 66.00 -8% 67% 1,801 2,025 1.1x 11x 19x 14x 13x 3.4x
Hill-Rom Holdings, I / HRC 23.50 -13% 48% 1,469 1,470 1.0x 14x 22x 16x 14x 1.4x
Moog Inc. / MOG.A 29.80 -16% 141% 1,272 1,856 1.0x 9x 11x 10x 9x 3.5x
Varian, Inc. / VARI 33.65 -19% 114% 973 888 .9x 9x 15x 12x 10x 2.9x
Dionex Corporation / DNEX 49.90 -14% 75% 897 856 2.2x 10x 18x 17x 15x 5.8x
ESCO Technologies In / ESE 31.11 -8% 74% 810 1,018 1.7x 15x 24x 15x 13x nm
Cepheid / CPHD 13.99 -39% 138% 807 782 4.5x nm nm nm nm 10.7x
Bruker Corporation / BRKR 4.61 -26% 274% 756 883 .9x 11x 15x 11x 10x 2.6x
II-VI, Inc. / IIVI 21.68 -1% 123% 642 579 1.7x 8x 10x 13x 11x 2.4x
Axsys Technologies, / AXYS 57.33 -41% 39% 641 633 2.8x 18x 45x 25x 21x 7.7x
American Science & E / ASEI 71.77 -41% 3% 630 552 3.4x 34x 38x 23x 20x 4.0x
Coinstar, Inc. / CSTR 20.11 -4% 93% 568 871 1.1x nm nm 40x 21x nm
Coherent, Inc. / COHR 23.47 -7% 64% 557 339 .6x 15x 28x 22x 15x .9x
Cubic Corporation / CUB 20.75 -18% 106% 555 441 .5x 8x 13x 15x 11x 1.5x
Cognex Corporation / CGNX 13.88 -3% 102% 549 360 1.4x 9x 23x 20x 24x 1.7x
Analogic Corporation / ALOG 39.16 -12% 96% 527 340 .8x 14x 22x 15x 12x 1.4x
Landauer, Inc. / LDR 49.71 -6% 48% 463 431 4.8x 13x 24x 20x 19x 9.3x
MTS Systems Corporat / MTSC 25.82 -3% 76% 438 351 .8x 6x 10x 9x 9x 2.2x
School Specialty, In / SCHS 19.47 -7% 86% 366 866 .8x 10x 9x 9x 8x nm
Badger Meter, Inc. / BMI 23.92 -27% 162% 354 382 1.4x 10x 19x 15x 15x 4.5x
Chart Industries, In / GTLS 9.81 -5% 468% 279 373 .5x 3x 6x 4x 4x nm
FARO Technologies, I / FARO 13.44 0% 169% 224 122 .6x 5x 12x 14x 18x 1.2x
Clinical Data, Inc. / CLDA 9.42 -12% 174% 214 194 5.3x nm nm nm nm 23.3x
Newport Corporation / NEWP 5.65 -8% 148% 203 245 .5x 26x 5x 17x 11x 1.1x
China Fire & Securit / CFSG 7.21 -51% 126% 199 177 2.8x 8x 12x 8x 7x 2.8x
OSI Systems, Inc. / OSIS 10.96 -6% 151% 196 237 .4x 11x 14x 14x 10x 1.1x
IRIS International, / IRIS 10.49 -3% 114% 194 161 1.8x 16x 26x 24x 19x 2.7x
LaBarge, Inc. / LB 12.40 -24% 31% 192 199 .7x 7x 13x 11x 10x 2.7x
Orbotech Ltd. / ORBK 3.90 -26% 390% 131 -24 nm nm 98x 8x 4x .3x
OYO Geospace Corpora / OYOG 18.56 -5% 483% 110 130 1.0x 6x 6x 7x 5x 1.0x
Median 1.4x 11x 15x 14x 12x 2.9x
Technology: Scientific and Technical Instruments – Operating Performance

Est.
DHR 12,662 21% 17% 253 47% 15% 11% 12% 90% 14% 8% .7x
TMO 10,473 19% 64% 317 40% 11% 9% 16% 44% 6% 4% .5x
ABI 2,257 7% 8% 458 58% 19% 15% 13% 72% 22% 14% .9x
GRMN 3,663 42% 61% 434 45% 26% 24% 13% 85% 38% 28% 1.2x
WAT 1,594 12% 10% 319 58% 25% 20% 16% 89% 52% 16% .8x
ROP 2,291 14% 29% 323 51% 21% 13% 15% >99% 15% 8% .6x
QGEN 866 53% 20% 325 67% 15% 9% 24% 29% 6% 3% .3x
ILMN 525 67% 94% 504 64% 2% 3% 32% 3% 3% 2% .5x
BEC 3,077 15% 5% 293 46% 8% 5% 13% 16% 11% 4% .8x
PLL 2,572 14% 11% 243 47% 14% 8% 13% 31% 19% 8% .9x
MIL 1,611 7% 20% 268 54% 16% 10% 13% 27% 13% 6% .6x
GPRO 463 17% 14% 469 73% 30% 23% 17% 23% 13% 13% .5x
TRMB 1,374 20% 22% 382 50% 16% 11% 19% 75% 13% 10% .9x
PKI 2,028 19% 8% 223 41% 9% 7% 14% 51% 9% 5% .7x
MR 478 -77% 47% 87 54% 23% 82% 36% 21% 24% 19% .2x
BIO 1,776 32% 10% 278 53% 10% 6% 20% 25% 10% 5% .9x
HRC 1,508 11% -8% 152 44% 7% 5% 14% 14% 7% 5% .9x
MOG.A 1,903 22% 22% 227 32% 11% 6% 10% 21% 13% 6% .9x
VARI 1,013 10% 9% 260 45% 10% 7% 13% 38% 11% 7% 1.1x
DNEX 389 15% 11% 288 67% 21% 14% 14% 69% 28% 17% 1.2x
ESE 590 38% 8% 218 38% 11% 7% 28% 35% 9% 5% .7x
CPHD 172 53% 35% 364 47% -13% -12% 23% nm -16% -12% 1.0x
BRKR 976 19% 15% 441 45% 9% 5% 19% 25% 14% 4% .8x
IIVI 333 25% 18% 142 44% 20% 22% 13% 36% 26% 21% 1.0x
AXYS 229 46% 18% 279 34% 16% 11% 21% 50% 15% 11% 1.0x
ASEI 162 -4% 24% 468 35% 10% 9% 15% 12% 8% 6% .7x
CSTR 784 42% 21% 413 31% 0% -3% 19% nm -9% -3% .8x
COHR 599 0% 5% 256 42% 4% 4% na 7% 4% 3% .7x
CUB 869 0% 7% 145 19% 7% 5% 17% 23% 10% 7% 1.4x
CGNX 256 17% 4% 321 72% 15% 14% 18% 27% 8% 7% .5x
ALOG 414 21% 8% 243 37% 6% 6% na 14% 6% 5% .8x
LDR 89 8% 6% 222 68% 37% 25% 8% >99% 35% 21% .9x
MTSC 461 12% 7% 285 41% 13% 13% 9% 60% 28% 15% 1.2x
SCHS 1,080 3% 4% 432 42% 8% 3% 15% 26% 7% 3% .9x
BMI 269 17% 8% 238 35% 14% 8% 14% 36% 21% 12% 1.6x
GTLS 740 18% 30% 269 32% 17% 10% 17% 78% 20% 8% .8x
FARO 212 20% 26% 272 61% 11% 10% 20% 16% 10% 8% .9x
CLDA 36 18% 12% 120 26% <-99% <-99% na nm <-99% -85% .3x
NEWP 456 1% 19% 228 39% 2% 5% 12% 4% 6% 4% .7x
CFSG 62 -5% na 139 57% 34% 35% 30% 60% 36% 25% .7x
OSIS 640 17% 17% 190 35% 3% 2% 23% 10% 6% 3% 1.3x
IRIS 91 10% 25% 294 51% 11% 9% 22% 33% 11% 10% 1.0x
LB 289 18% 15% 214 20% 9% 6% na 36% 18% 10% 1.8x
ORBK 392 2% 5% 243 41% 1% 2% 7% 1% 2% 1% .7x
OYOG 135 -1% 30% 115 34% 16% 12% 37% 20% 15% 11% .9x
Median 17% 15% 269 45% 11% 9% 16% 28% 12% 7% .8x
Technology: Semiconductors (I of II) – Valuation

Intel Corporation / INTC 13.32 -3% 110% 74,086 64,238 1.6x 6x 11x 12x 13x 2.2x
Taiwan Semiconductor / TSM 6.96 -11% 71% 35,673 31,249 2.9x 8x 17x 11x 16x 2.5x
Texas Instruments In / TXN 16.11 -3% 115% 20,885 18,892 1.4x 6x 9x 10x 12x 2.3x
Applied Materials, I / AMAT 10.23 -30% 113% 13,725 11,827 1.5x 9x 15x 13x 9x 2.3x
Kyocera Corporation / KYO 52.45 -5% 92% 9,954 4,356 .2x 2x 9x 18x 23x .7x
First Solar, Inc. / FSLR 116.78 -18% 171% 9,470 8,913 8.8x 25x 58x 30x 16x 7.0x
Broadcom Corporation / BRCM 15.38 -16% 94% 7,852 5,605 1.2x 14x 42x 9x 11x 3.0x
STMicroelectronics N / STM 7.50 -4% 121% 6,626 7,582 .7x nm nm 12x 11x 1.0x
ASML Holding N.V. (A / ASML 15.07 -8% 135% 6,565 5,657 1.3x 7x 8x 11x 19x 2.6x
Analog Devices, Inc. / ADI 19.29 -7% 88% 5,603 4,321 1.7x 7x 13x 11x 12x 2.7x
United Microelectron / UMC 2.03 -28% 78% 5,308 4,768 1.1x 30x nm 102x nm .9x
Linear Technology Co / LLTC 21.95 -16% 72% 4,867 5,545 4.6x 10x 13x 14x 13x nm
Altera Corporation / ALTR 15.02 -5% 61% 4,466 3,683 2.7x 9x 18x 12x 13x 5.1x
Xilinx, Inc. / XLNX 15.95 -5% 77% 4,369 4,067 2.1x 10x 13x 11x 11x 3.0x
Maxim Integrated Pro / MXIM 13.30 -15% 103% 4,204 2,948 1.5x 7x 14x 23x 16x 1.4x
NVIDIA Corporation / NVDA 7.17 -17% 408% 3,991 2,686 .6x 7x 5x 9x 11x 2.0x
Microchip Technology / MCHP 19.75 -2% 94% 3,592 3,633 3.5x 11x 14x 13x 14x 3.6x
Marvell Technology G / MRVL 5.81 -9% 215% 3,550 2,983 .9x 22x nm 7x 8x 2.7x
MEMC Electronic Mate / WFR 15.34 -10% 526% 3,443 2,354 1.1x 2x 4x 4x 4x 1.7x
KLA-Tencor Corporati / KLAC 18.16 -8% 186% 3,067 2,505 1.1x 7x 9x 36x 14x 1.7x
Siliconware Precisio / SPIL 4.30 -16% 134% 2,670 2,363 1.2x 7x 7x 10x 10x 1.5x
National Semiconduct / NSM 11.52 -11% 117% 2,644 3,411 1.8x 7x 9x 9x 8x 18.7x
Flextronics Internat / FLEX 3.06 -2% 305% 2,477 4,219 .1x 23x nm 3x 3x 1.4x
Lam Research Corpora / LRCX 17.99 -7% 167% 2,248 1,488 .7x 5x 5x 138x 15x 1.6x
SunPower Corporation / SPWRA 25.56 -8% 465% 2,193 2,322 1.8x 19x 232x 11x 8x 2.9x
Infineon Technologie / IFX 2.77 -9% 371% 2,077 2,596 .4x nm nm 55x nm .8x
LSI Corporation / LSI 3.12 -4% 152% 2,013 1,554 .6x nm nm 7x 8x 2.9x
Advanced Semiconduct / ASX 1.61 -7% 245% 1,830 2,978 .9x 6x 6x 7x 10x .9x
Atmel Corporation / ATML 3.99 -37% 20% 1,787 1,513 .9x 141x 40x 100x 16x 2.4x
ARM Holdings plc (AD / ARMH 4.05 -17% 108% 1,698 1,599 4.0x 22x 34x 14x 12x 9.4x
Cree, Inc. / CREE 18.59 -13% 91% 1,642 1,356 2.6x 77x 52x 42x 33x 2.1x
LDK Solar Co., Ltd. / LDK 14.62 -15% 417% 1,557 2,086 2.0x 9x 11x 4x 3x 2.5x
Advanced Micro Devic / AMD 2.43 -5% 446% 1,479 5,372 .8x nm nm nm nm 8.7x
Microsemi Corporatio / MSCC 18.48 -11% 54% 1,465 1,296 2.5x 20x 29x 12x 11x 2.2x
ON Semiconductor Cor / ONNN 3.50 -15% 210% 1,438 2,241 1.1x 11x 4x 4x 4x 29.6x
QLogic Corporation / QLGC 10.84 -12% 86% 1,387 1,006 1.5x 6x 16x 9x 9x 2.5x
Intersil Corporation / ISIL 10.62 -4% 181% 1,305 1,014 1.2x 6x 10x 7x 11x 1.7x
Varian Semiconductor / VSEA 17.47 -5% 149% 1,269 1,063 1.3x 7x 13x 250x 22x 2.5x
Novellus Systems, In / NVLS 12.18 -5% 131% 1,190 865 .7x 10x 7x 51x 406x 1.0x
Silicon Laboratories / SLAB 21.50 -7% 83% 995 712 1.7x 14x 31x 12x 13x 2.7x
Tessera Technologies / TSRA 18.50 -53% 143% 897 636 2.7x 31x 20x 69x 18x 2.8x
Skyworks Solutions, / SWKS 5.29 -4% 112% 873 829 1.0x 9x 8x 6x 6x 2.0x
Integrated Device Te / IDTI 5.14 -6% 147% 869 561 .7x 16x 29x 6x 7x 2.0x
PMC-Sierra, Inc. / PMCS 3.86 -15% 158% 854 663 1.3x 13x nm 8x 9x 4.5x
Hittite Microwave Co / HITT 27.37 -13% 80% 833 648 3.7x 8x 17x 16x 15x 3.5x
International Rectif / IRF 11.43 -6% 208% 833 427 .4x nm nm nm 29x .6x
Atheros Communicatio / ATHR 12.43 -7% 180% 750 476 1.0x 18x 19x 9x 9x 2.2x
FEI Company / FEIC 18.85 -16% 55% 700 642 1.1x 17x 14x 28x 18x 1.5x
MKS Instruments, Inc / MKSI 13.99 -5% 85% 688 449 .6x 7x 9x 17x 35x 1.3x
Teradyne, Inc. / TER 4.05 -5% 258% 686 378 .3x 66x 10x 16x nm .8x
Median 1.2x 9x 13x 12x 12x 2.3x
Technology: Semiconductors (II of II) – Valuation

Vishay Intertechnolo / VSH 3.67 -8% 249% 685 734 .2x nm 5x 5x 7x .4x
FormFactor, Inc. / FORM 13.63 -8% 190% 669 133 .5x nm 9x nm nm .9x
Cymer, Inc. / CYMI 21.86 -14% 96% 647 528 1.1x 7x 9x 17x 21x 1.3x
Verigy Ltd. / VRGY 10.96 -4% 155% 646 261 .3x 3x 7x 9x 22x 1.2x
IPG Photonics Corpor / IPGP 13.25 -10% 69% 594 586 2.6x 11x 20x 16x 14x 2.6x
Emulex Corporation / ELX 7.22 -5% 148% 593 299 .6x 5x nm 9x 8x 1.5x
Semtech Corporation / SMTC 9.45 -6% 96% 584 348 1.1x 7x 13x 10x 10x 1.7x
Amkor Technology, In / AMKR 3.02 -8% 321% 553 1,739 .6x 5x 3x 3x 8x 3.4x
Fairchild Semiconduc / FCS 4.31 -4% 287% 535 691 .4x 6x 8x 6x 12x .7x
Evergreen Solar, Inc / ESLR 3.15 -33% 498% 519 608 6.8x nm nm nm 12x .9x
Cypress Semiconducto / CY 3.56 -18% 74% 516 381 .2x nm 2x 5x 16x .5x
Power Integrations, / POWI 17.35 -15% 102% 509 283 1.3x 10x 20x 14x 16x 1.6x
Yingli Green Energy / YGE 3.97 -17% 945% 504 800 .9x 5x 9x 1x x .9x
JA Solar Holdings Co / JASO 2.80 -28% 864% 470 417 .5x 11x 7x 3x 2x .7x
Micrel, Incorporated / MCRL 6.42 -25% 68% 441 359 1.3x 8x 11x 15x 17x 2.0x
Cavium Networks, Inc / CAVM 10.41 -6% 158% 425 338 4.2x 58x 174x 27x 18x 3.7x
ASM International N. / ASMI 7.56 -2% 344% 410 429 .4x 3x 6x 9x 19x 1.2x
Semiconductor Manufa / SMI 1.09 -27% 389% 406 1,275 .9x nm nm nm nm .2x
NetLogic Microsystem / NETL 18.19 -11% 121% 397 313 2.2x nm 152x 12x 12x 4.0x
TriQuint Semiconduct / TQNT 2.69 -1% 163% 392 312 .6x 11x 17x 7x 6x .8x
Aixtron AG (ADR) / AIXG 4.32 -18% 272% 388 312 1.0x 8x 17x 11x 16x 2.1x
GT Solar Internation / SOLR 2.71 -8% 527% 387 381 1.3x 6x 11x 4x 3x nm
Himax Technologies, / HIMX 2.01 -20% 213% 387 255 .3x 2x 4x 4x 6x .9x
ATMI, Inc. / ATMI 12.03 -17% 178% 387 292 .8x 5x 10x 13x 15x 1.1x
Monolithic Power Sys / MPWR 11.26 -8% 158% 380 295 1.8x 10x 34x 12x 11x 2.3x
Eagle Test Systems, / EGLT 15.55 -40% 0% 357 273 2.3x 10x 34x 15x 14x 2.1x
Chartered Semiconduc / CHRT 1.39 -5% 475% 353 1,934 1.2x nm 4x nm nm .2x
RF Micro Devices, In / RFMD 1.32 -5% 373% 347 748 .7x nm 66x 7x 6x 1.2x
OmniVision Technolog / OVTI 6.56 -3% 212% 336 96 .1x 2x 6x 8x 7x .7x
Zoran Corporation / ZRAN 6.42 -59% 286% 329 24 .0x nm 5x 32x nm .7x
Standard Microsystem / SMSC 14.31 -3% 177% 318 221 .6x 5x 10x 10x 10x 1.1x
Ultratech, Inc. / UTEK 12.95 -33% 33% 304 153 1.2x 22x nm 28x 21x 1.6x
ReneSola Ltd. (ADR) / SOL 4.35 -21% 578% 295 336 .7x 4x 6x 3x 2x .6x
Applied Micro Circui / AMCC 4.25 -7% 156% 277 81 .3x nm nm 10x 7x 1.0x
Cohu, Inc. / COHU 11.84 -5% 73% 275 104 .5x 104x 35x nm 85x 1.0x
Supertex, Inc. / SUPX 21.37 -21% 66% 275 231 2.7x 14x 17x 16x 14x 1.7x
Cirrus Logic, Inc. / CRUS 4.08 -16% 87% 266 162 .8x nm nm 10x 9x 1.8x
Exar Corporation / EXAR 6.12 -19% 61% 263 17 .1x nm nm 68x 28x .9x
Silicon Storage Tech / SSTI 2.74 -9% 29% 262 151 .4x nm nm nm nm .9x
Solarfun Power Holdi / SOLF 5.29 -21% 660% 256 363 .6x 6x 12x 1x 1x .9x
Silicon Image, Inc. / SIMG 3.37 -3% 128% 250 49 .2x 6x 15x 11x 13x 1.2x
Trina Solar Limited / TSL 9.43 -10% 499% 242 548 1.1x 8x 6x 3x 2x .6x
Brooks Automation, I / BRKS 3.66 -4% 277% 233 89 .2x nm nm nm nm .6x
Canadian Solar Inc. / CSIQ 6.43 -21% 706% 229 306 .5x 6x nm 3x 3x .9x
Diodes Incorporated / DIOD 5.17 -8% 509% 212 551 1.2x 11x 4x 4x 3x .8x
Actel Corporation / ACTL 8.22 -1% 129% 212 78 .4x nm nm nm 20x .9x
Mellanox Technologie / MLNX 6.42 -5% 217% 203 35 .3x 1x 5x 7x 11x 1.0x
Volterra Semiconduct / VLTR 7.52 -2% 136% 189 125 1.2x 9x 376x 9x 9x 2.3x
Entegris, Inc. / ENTG 1.64 -3% 479% 185 246 .4x nm 4x 5x 6x .7x
IXYS Corporation / IXYS 5.89 -8% 135% 183 143 .5x 4x 8x 9x 8x .9x
Technology: Software (I of II) – Valuation

Microsoft Corporatio / MSFT 20.06 -7% 83% 178,445 159,698 2.6x 7x 11x 10x 9x 9.2x
Oracle Corporation / ORCL 16.90 -11% 40% 87,110 85,326 3.7x 10x 16x 11x 10x nm
SAP AG (ADR) / SAP 35.24 -17% 69% 41,890 39,852 2.8x 12x 17x 14x 13x nm
Infosys Technologies / INFY 24.72 -8% 103% 14,152 12,266 2.7x 9x 12x 11x 10x 4.2x
Activision Blizzard, / ATVI 10.61 -11% 82% 13,989 11,053 6.9x 108x 28x 18x 15x 5.4x
Adobe Systems Incorp / ADBE 22.34 -5% 108% 11,862 10,211 2.9x 10x 18x 11x 10x 6.3x
Symantec Corporation / SYMC 12.21 -8% 87% 10,208 10,003 1.6x 10x 23x 9x 8x nm
CA, Inc. / CA 17.02 -29% 58% 8,821 8,660 2.0x 8x 18x 11x 10x nm
VMware, Inc. / VMW 20.00 -9% 414% 7,792 6,551 3.7x 23x 33x 21x 18x 7.1x
Intuit Inc. / INTU 21.58 -5% 49% 6,991 7,161 2.3x 10x 16x 12x 10x 68.7x
Electronic Arts Inc. / ERTS 20.44 -6% 195% 6,559 4,094 .9x nm nm 17x 11x 2.5x
Cognizant Technology / CTSH 16.87 -8% 120% 4,912 4,317 1.6x 9x 15x 12x 10x 3.0x
BMC Software, Inc. / BMC 25.02 -18% 63% 4,691 4,077 2.2x 13x 16x 11x 10x nm
Autodesk, Inc. / ADSK 19.53 -23% 162% 4,393 3,551 1.5x 8x 13x 9x 9x 8.3x
Check Point Software / CHKP 20.01 -16% 29% 4,373 3,569 4.5x 10x 16x 11x 11x 3.7x
McAfee, Inc. / MFE 28.50 -13% 44% 4,350 3,570 2.3x 20x 28x 14x 13x 6.3x
Citrix Systems, Inc. / CTXS 22.95 -17% 71% 4,169 3,708 2.4x 24x 20x 14x 13x 6.1x
Amdocs Limited / DOX 18.34 -5% 92% 3,788 2,995 .9x 7x 11x 8x 7x 3.8x
Verisign, Inc. / VRSN 18.64 -8% 128% 3,617 4,228 3.8x nm nm 19x 13x nm
SAIC, Inc. / SAI 18.74 -13% 17% 3,607 4,035 .4x 6x 20x 17x 15x 8.0x
salesforce.com, inc. / CRM 26.40 -10% 185% 3,194 2,616 2.8x 54x 176x 88x 46x 6.0x
KONAMI CORPORATION ( / KNM 21.40 -29% 100% 2,942 2,759 .9x 7x 16x 10x 11x 2.2x
ANSYS, Inc. / ANSS 28.40 -28% 76% 2,548 2,636 5.8x 16x 28x 17x 15x nm
Synopsys, Inc. / SNPS 16.19 -6% 72% 2,333 1,456 1.1x 8x 19x 10x 9x 4.6x
Lender Processing Se / LPS 21.47 -7% 77% 2,046 3,545 1.9x 8x 8x 9x 8x nm
Sybase, Inc. / SY 24.98 -8% 48% 2,025 1,924 1.7x 9x 16x 12x 12x nm
Red Hat, Inc. / RHT 10.49 -5% 137% 2,012 1,521 2.5x 19x 29x 14x 18x 3.4x
ManTech Internationa / MANT 49.59 -26% 25% 1,756 1,794 1.0x 12x 25x 19x 17x 17.6x
National Instruments / NATI 21.82 -3% 65% 1,728 1,452 1.8x 14x 17x 18x 16x 3.0x
Nuance Communication / NUAN 7.48 -4% 201% 1,702 2,343 2.9x 239x nm 9x 7x nm
Compuware Corporatio / CPWR 5.98 -9% 99% 1,474 1,302 1.1x 6x 13x 10x 9x 3.6x
Novell, Inc. / NOVL 4.17 -40% 82% 1,440 527 .6x nm nm 16x 14x 2.8x
Giant Interactive Gr / GA 6.04 -17% 185% 1,436 668 2.7x 4x 8x 8x 8x 1.8x
Quest Software, Inc. / QSFT 13.01 -21% 45% 1,378 1,097 1.5x 17x 22x 14x 11x 6.8x
Parametric Technolog / PMTC 11.21 -8% 92% 1,293 1,125 1.1x 9x 16x 8x 7x 11.2x
Nice Systems Ltd. (A / NICE 21.53 -25% 67% 1,291 1,038 1.7x 38x 32x 13x 12x 3.8x
MICROS Systems, Inc. / MCRS 15.34 -13% 144% 1,233 909 .9x 6x 13x 11x 9x 3.0x
Solera Holdings, Inc / SLH 18.25 -18% 73% 1,185 1,620 2.9x 15x 1825x 12x 10x nm
Concur Technologies, / CNQR 23.44 -15% 113% 1,179 914 4.2x 34x 67x 33x 25x 3.6x
Macrovision Solution / MVSN 11.35 -21% 137% 1,169 1,768 6.7x 104x 14x 17x 10x nm
Informatica Corporat / INFA 13.03 -20% 48% 1,143 921 2.1x 14x 23x 17x 15x 11.3x
Allscripts-Misys Hea / MDRX 7.70 -45% 168% 1,124 1,182 3.9x 73x 22x 14x 10x nm
Cadence Design Syste / CDNS 3.93 -38% 351% 1,023 864 .6x 5x 4x 393x 66x 2.0x
Quality Systems, Inc / QSII 35.59 -24% 35% 1,007 939 4.4x 14x 25x 21x 17x 8.8x
Digital River, Inc. / DRIV 23.32 -8% 95% 865 565 1.4x 7x 15x 13x 12x 3.1x
Blackboard Inc. / BBBB 27.05 -18% 66% 848 892 3.1x 203x 63x 35x 22x nm
Take-Two Interactive / TTWO 10.76 -7% 160% 835 496 .3x 4x nm 5x 8x 2.5x
Progress Software Co / PRGS 20.81 -12% 63% 829 599 1.2x 8x 22x 11x 10x 3.0x
Tibco Software Inc. / TIBX 4.34 -14% 102% 780 544 .8x 9x 17x 10x 9x 2.5x
SRA International, I / SRX 13.44 -13% 131% 754 823 .5x 7x 11x 12x 10x 5.1x
Median 2.0x 10x 17x 12x 11x 4.0x
Technology: Software (II of II) – Valuation

Eclipsys Corporation / ECLP 13.79 -8% 91% 752 714 1.4x 24x 18x 13x 16x 2.7x
Websense Inc. / WBSN 16.43 -6% 50% 739 816 2.9x nm nm 12x 11x nm
Rackspace Hosting, I / RAX 6.24 -28% 92% 729 767 1.5x 24x 37x 45x 52x 2.8x
Longtop Financial Te / LFT 13.19 -14% 95% 665 465 6.3x 53x 120x 15x 13x 3.0x
Synaptics, Incorpora / SYNA 19.69 -25% 107% 665 638 1.6x 14x 25x 10x 10x 4.9x
MedAssets, Inc. / MDAS 12.23 -13% 96% 659 924 3.7x 30x nm 24x 17x nm
Lawson Software, Inc / LWSN 3.94 -12% 170% 642 529 .6x 13x 49x 11x 9x nm
Omniture, Inc. / OMTR 8.78 -8% 309% 640 576 2.3x nm nm 20x 14x 6.3x
Wind River Systems, / WIND 7.61 -20% 71% 593 484 1.4x 403x nm 15x 13x 3.2x
EPIQ Systems, Inc. / EPIQ 14.80 -29% 24% 526 578 2.7x 25x 70x 25x 21x nm
RealNetworks, Inc. / RNWK 3.88 -12% 96% 524 128 .2x nm 13x nm nm 1.3x
MAXIMUS, Inc. / MMS 28.53 -9% 58% 522 402 .5x 5x 11x 18x 9x 2.4x
ACI Worldwide Inc / ACIW 14.75 -40% 71% 515 496 1.2x 75x nm 20x 16x nm
Interwoven, Inc. / IWOV 11.00 -12% 46% 507 344 1.4x 14x 22x 16x 13x 4.1x
Mentor Graphics Corp / MENT 5.35 -36% 199% 494 599 .7x 78x 17x 11x 6x 2.7x
Blackbaud, Inc. / BLKB 11.31 0% 167% 490 538 1.8x 10x 16x 12x 11x nm
SPSS Inc. / SPSS 24.30 -10% 78% 441 284 .9x 5x 15x 13x 12x 3.4x
MicroStrategy Incorp / MSTR 35.51 -4% 205% 422 295 .8x 4x 8x 10x 10x 3.7x
Netezza Corporation / NZ 7.10 -1% 111% 420 319 2.0x 46x nm 39x 28x 3.1x
Pegasystems Inc. / PEGA 11.35 -23% 33% 409 238 1.2x 28x 63x 35x 34x 2.5x
CommVault Systems, I / CVLT 9.82 -25% 132% 406 305 1.4x 11x 21x 15x 12x 3.8x
Secure Computing Cor / SCUR 5.72 -40% 76% 392 423 1.7x nm nm 22x 16x nm
Patni Computer Syste / PTI 5.48 -9% 238% 381 381 .5x 4x 3x 4x 5x .8x
JDA Software Group, / JDAS 12.07 -17% 84% 375 375 1.0x 8x 16x 8x 7x 5.6x
MSC Software Corp. / MSCS 7.94 -11% 77% 360 212 .8x nm nm 99x 38x 2.6x
VASCO Data Security / VDSI 9.55 -36% 202% 357 306 2.3x 9x 17x 13x 12x 4.6x
Manhattan Associates / MANH 14.75 -3% 92% 355 275 .8x 7x 13x 11x 11x 3.0x
SuccessFactors, Inc. / SFSF 6.29 -12% 143% 353 251 2.6x nm nm nm nm nm
Ultimate Software Gr / ULTI 13.57 -21% 207% 332 311 1.8x nm 11x 48x 24x 7.7x
China Digital TV Hol / STV 5.77 -13% 537% 331 60 .8x 2x 8x 9x 8x 1.2x
Renaissance Learning / RLRN 9.92 -40% 61% 289 260 2.3x 16x 38x 24x 20x 33.3x
TeleCommunication Sy / TSYS 6.30 -57% 39% 277 251 1.4x 10x nm 11x 10x 4.2x
THQ Inc. / THQI 3.98 -8% 652% 267 104 .1x nm nm nm 8x .7x
iGATE Corporation / IGTE 4.75 -21% 137% 257 206 .8x 8x 16x 8x 8x 2.4x
VanceInfo Technologi / VIT 6.88 -29% 103% 257 182 2.2x 16x 36x 18x 13x 2.4x
Taleo Corporation / TLEO 8.04 -25% 325% 246 199 1.3x nm 62x 13x 10x 5.0x
Synchronoss Technolo / SNCR 7.94 -21% 435% 245 175 1.5x 7x 11x 21x 17x 2.3x
Echelon Corporation / ELON 5.91 -7% 301% 239 171 1.2x nm nm nm nm 1.9x
OPNET Technologies, / OPNT 11.27 -33% 28% 232 150 1.3x 300x 376x 33x 18x 2.5x
CIBER, Inc. / CBR 3.82 -7% 135% 230 372 .3x 6x 8x 7x 7x nm
3D Systems Corporati / TDSC 8.91 -23% 116% 199 193 1.3x nm nm nm 69x 4.3x
Vital Images, Inc. / VTAL 12.94 -16% 48% 197 39 .6x nm 162x nm nm 1.2x
Actuate Corporation / ACTU 3.16 -30% 157% 191 125 .9x 10x 11x 12x 11x 2.8x
Ness Technologies, I / NSTC 4.77 -10% 173% 189 197 .3x 5x 18x 5x 5x 1.5x
Art Technology Group / ARTG 1.45 -30% 234% 187 131 .8x nm nm 16x 10x 5.2x
Smith Micro Software / SMSI 5.84 -25% 65% 183 151 1.6x 216x 58x 10x 8x 3.5x
China Information Se / CPBY 3.85 -35% 157% 182 161 2.1x 7x 12x 7x 6x 2.4x
i2 Technologies, Inc / ITWO 8.32 -4% 113% 182 150 .6x 1x 15x 14x 11x nm
Deltek Inc. / PROJ 4.17 -16% 347% 180 345 1.2x 7x 8x 6x 6x nm
DivX, Inc. / DIVX 5.54 -19% 231% 179 66 .7x 11x 21x 9x 9x 1.2x
Median 1.3x 11x 17x 13x 11x 2.8x
Transportation: Air Couriers – Valuation

United Parcel Servic / UPS 53.14 -18% 43% 52,884 62,081 1.2x 190x 148x 15x 15x 6.7x
FedEx Corporation / FDX 64.37 -16% 58% 20,035 20,470 .5x 11x 18x 13x 11x 1.8x
Transportation: Air Couriers – Operating Performance

Est.
UPS 52,181 7% 11% 123 15% 1% 0% 12% 2% 1% 0% 1.4x
FDX 38,724 8% 9% 409 26% 5% 3% 13% 13% 7% 4% 1.5x
Transportation: Airlines – Valuation

Southwest Airlines C / LUV 10.16 -6% 65% 7,516 5,615 .5x 11x 12x 22x 16x 1.1x
Ryanair Holdings plc / RYAAY 23.46 -33% 90% 6,911 7,302 1.9x 57x 14x 90x 17x 2.0x
Lan Airlines S.A. (A / LFL 9.06 -24% 71% 3,069 4,944 1.1x 11x 10x 9x 8x 2.9x
Delta Air Lines, Inc / DAL 7.85 -49% 161% 2,422 9,480 .5x nm 2x nm 4x nm
AMR Corporation / AMR 7.65 -48% 201% 2,133 8,638 .4x nm 4x nm 5x nm
JetBlue Airways Corp / JBLU 5.42 -44% 63% 1,470 4,040 1.2x 45x 54x nm 8x 1.1x
UAL Corporation / UAUA 10.15 -72% 328% 1,308 6,436 .3x nm 4x nm 3x nm
Continental Airlines / CAL 11.40 -48% 174% 1,261 4,273 .3x nm 3x nm 3x 4.1x
TAM S.A. (ADR) / TAM 7.28 -5% 311% 1,096 2,687 .6x 14x 5x 5x 3x 1.5x
Copa Holdings, S.A. / CPA 24.04 -19% 82% 1,038 1,567 1.3x 8x 6x 7x 6x 1.9x
Alaska Air Group, In / ALK 24.43 -59% 17% 885 1,685 .5x nm 8x nm 11x 1.0x
China Southern Airli / ZNH 6.80 -19% 557% 824 7,741 .9x 113x 3x nm nm .4x
Allegiant Travel Com / ALGT 40.29 -61% 7% 819 751 1.6x 23x 26x 29x 13x 3.8x
SkyWest, Inc. / SKYW 12.87 -16% 118% 734 1,802 .5x 6x 5x 7x 6x .6x
US Airways Group, In / LCC 5.73 -75% 313% 654 2,991 .2x nm 1x nm 3x nm
Gol Linhas Aereas In / GOL 3.20 -8% 766% 645 1,884 .7x nm 13x nm 6x 4.8x
China Eastern Airlin / CEA 11.55 -21% 826% 562 7,462 1.2x nm 14x nm nm 6.2x
Republic Airways Hol / RJET 12.81 -50% 77% 438 2,466 1.7x 10x 6x 6x 6x 1.0x
AirTran Holdings, In / AAI 3.47 -63% 167% 407 1,230 .5x nm 6x nm 6x 1.1x
Atlas Air Worldwide / AAWW 15.90 -3% 318% 346 553 .3x 6x 3x 11x 4x .6x
Hawaiian Holdings, I / HA 6.21 -30% 79% 320 328 .3x 6x 41x 15x 4x nm
Transportation: Airlines – Operating Performance

Est.
LUV 10,781 12% 15% 312 25% 5% 4% 11% 6% 5% 2% .6x
RYAAY 3,766 16% 27% 636 21% 3% 3% 14% 3% 3% 1% .5x
LFL 4,401 32% 19% 759 24% 10% 7% 14% 16% 30% 8% 1.1x
DAL 20,667 10% 8% 395 30% -35% -37% 26% nm <-99% -27% .7x
AMR 23,980 6% 7% 280 15% -7% -8% 25% nm -93% -6% .8x
JBLU 3,316 21% 31% 353 25% 3% -1% 13% 2% -2% 0% .5x
UAUA 20,677 5% 7% 376 25% -18% -20% 24% nm <-99% -18% .9x
CAL 15,293 10% 13% 381 17% -1% -2% 13% nm -24% -3% 1.2x
TAM 4,352 29% 22% 190 51% 5% -1% 18% 7% -5% -1% 1.0x
CPA 1,227 25% 37% 323 68% 16% 11% 12% 19% 24% 8% .7x
ALK 3,689 7% 9% 272 43% -1% -2% 10% nm -9% -2% .8x
ZNH 8,313 -21% 32% 179 21% 1% 7% 102% 1% 33% 5% .7x
ALGT 483 50% 59% 376 50% 7% 5% 18% 25% 11% 5% 1.2x
SKYW 3,608 9% 43% 249 18% 8% 4% 14% 8% 11% 3% .9x
LCC 12,134 4% 62% 306 27% -9% -14% 6% nm <-99% -22% 1.5x
GOL 2,555 27% 36% 289 13% -6% -3% 18% nm -14% -2% .8x
CEA 6,416 -22% 26% 151 41% -2% -4% 58% nm -60% -3% .7x
RJET 1,492 21% 26% 320 52% 17% 6% 15% 11% 20% 3% .5x
AAI 2,547 16% 30% 314 7% -5% -6% 30% nm -36% -7% 1.1x
AAWW 1,715 11% 3% 994 57% 6% 3% 47% 12% 9% 3% 1.1x
HA 1,161 22% na 340 12% 4% 2% na 48% 16% 3% 1.3x
Median 12% 26% 320 25% 3% -1% 16% 10% 4% 0% .8x
Transportation: Miscellaneous – Valuation

C.H. Robinson Worldw / CHRW 50.78 -28% 33% 8,592 8,277 1.0x 15x 27x 24x 22x 11.3x
Expeditors Internati / EXPD 30.68 -22% 63% 6,506 5,809 1.0x 13x 25x 22x 20x 4.9x
Emergency Medical Se / EMS 35.42 -42% 7% 1,480 1,824 .8x 12x 25x 19x 18x 14.3x
GATX Corporation / GMT 25.99 -7% 98% 1,266 3,818 2.6x 9x 8x 8x 9x 1.1x
UTi Worldwide Inc. / UTIW 10.75 -19% 127% 1,073 1,225 .4x 9x 11x 10x 9x 5.0x
Grupo Aeroportuario / PAC 18.20 -20% 170% 1,021 878 3.2x 8x 7x 9x 10x 2.2x
Hub Group, Inc. / HUBG 26.60 -15% 67% 1,002 938 .5x 10x 17x 16x 15x 15.9x
Grupo Aeroportuario / ASR 30.30 -10% 110% 909 771 3.2x 7x 45x 10x 9x .9x
DynCorp Internationa / DCP 13.39 -26% 106% 763 1,226 .5x 9x 16x 11x 9x nm
Grupo Aeroportuario / OMAB 9.12 -24% 210% 453 na nm nm nm 8x 8x nm
Pacer International, / PACR 10.27 -12% 145% 359 395 .2x 4x 7x 6x 6x 6.9x
Aircastle Limited / AYR 4.48 -13% 542% 352 2,974 5.5x 10x 3x 3x 3x .3x
American Commercial / ACLI 6.12 -15% 238% 310 738 .6x 7x 8x 7x 6x 2.0x
Teekay Offshore Part / TOO 9.24 -31% 194% 276 1,808 2.2x 13x 9x 7x 7x nm
Air Methods Corporat / AIRM 18.05 -18% 219% 219 317 .6x 9x 8x 11x 8x 1.6x
Teekay Tankers Ltd. / TNK 8.65 -17% 202% 216 522 4.0x 10x 5x 3x 4x 1.5x
Macquarie Infrastruc / MIC 4.14 -25% 890% 186 1,731 1.6x 21x nm 2x 2x nm
OSG America L.P. / OSP 4.31 -4% 334% 129 732 2.7x 236x 14x 6x 7x nm
Transportation: Railroads – Valuation

Union Pacific Corpor / UNP 57.27 -11% 50% 29,160 36,765 2.1x 10x 17x 13x 11x 1.9x
Burlington Northern / BNI 79.63 -7% 44% 27,260 35,484 2.0x 9x 16x 13x 11x 2.3x
Norfolk Southern Cor / NSC 51.98 -20% 45% 19,247 25,161 2.4x 9x 14x 11x 11x 1.9x
CSX Corporation / CSX 38.82 -1% 82% 15,313 22,252 2.0x 8x 14x 11x 9x 1.8x
Kansas City Southern / KSU 22.74 -4% 146% 2,076 3,896 2.1x 10x 14x 11x 10x 3.1x
Wabtec Corporation / WAB 34.51 -17% 76% 1,673 1,637 1.1x 8x 15x 13x 11x 4.8x
Genesee & Wyoming In / GWR 29.13 -25% 63% 1,049 1,327 2.3x 12x 16x 16x 13x 4.6x
FreightCar America, / RAIL 20.72 -15% 119% 246 118 .2x nm 10x 20x 14x 1.5x
American Railcar Ind / ARII 8.85 -18% 194% 189 173 .2x 3x 5x 7x 13x .6x
Greenbrier Companies / GBX 6.43 -10% 359% 107 703 .5x 9x 5x 5x 3x nm
Median 2.0x 9x 14x 12x 11x 1.9x
Transportation: Railroads – Operating Performance

Est.
UNP 17,881 11% 10% 364 35% 21% 12% 18% 11% 14% 6% .5x
BNI 17,890 16% 13% 435 36% 21% 11% 13% 13% 18% 6% .5x
NSC 10,613 14% 9% 345 33% 28% 16% 13% 14% 17% 6% .4x
CSX 11,158 13% 8% 319 59% 24% 13% 18% 12% 17% 6% .4x
KSU 1,889 10% 40% 291 62% 21% 10% 18% 13% 10% 4% .4x
WAB 1,535 19% 18% 255 27% 14% 8% 15% 54% 20% 11% 1.3x
GWR 587 18% 19% 255 40% 18% 10% 13% 15% 13% 5% .5x
RAIL 612 -43% 19% 1,062 8% -6% -3% 3% nm -11% -5% 1.5x
ARII 768 9% 25% 343 11% 7% 4% 31% 20% 10% 5% 1.1x
GBX 1,290 5% 8% 304 13% 6% 2% 12% 15% 8% 2% 1.1x
Median 12% 16% 331 34% 20% 10% 14% 14% 14% 5% .5x
Transportation: Trucking – Valuation

J.B. Hunt Transport / JBHT 24.71 -6% 63% 3,114 3,803 1.0x 10x 16x 15x 14x 6.4x
Landstar System, Inc / LSTR 32.92 -11% 80% 1,725 1,812 .7x 9x 17x 15x 14x 7.8x
Heartland Express, I / HTLD 13.93 -12% 44% 1,340 1,271 2.0x 14x 18x 20x 19x 3.7x
Con-way Inc. / CNW 29.15 -5% 89% 1,336 2,265 .4x 8x 10x 10x 11x 1.3x
Werner Enterprises, / WERN 18.52 -18% 55% 1,315 1,179 .5x 10x 18x 19x 18x 1.5x
Knight Transportatio / KNX 14.47 -18% 51% 1,216 1,149 1.5x 13x 20x 22x 20x 2.5x
Old Dominion Freight / ODFL 23.87 -15% 68% 890 1,103 .7x 8x 12x 12x 13x 1.7x
Forward Air Corporat / FWRD 23.11 -21% 69% 669 708 1.5x 9x 15x 14x 14x 5.7x
Arkansas Best Corpor / ABFS 23.93 -25% 89% 605 389 .2x 5x 11x 12x 12x 1.0x
Marten Transport, Lt / MRTN 19.04 -44% 19% 416 422 .7x 15x 28x 24x 20x 1.7x
Universal Truckload / UACL 14.35 -16% 108% 230 212 .3x 7x 13x 12x 12x 1.7x
Dynamex, Inc. / DDMX 20.64 -8% 57% 205 185 .4x 7x 13x 13x 10x 4.2x
YRC Worldwide Inc. / YRCW 3.17 -13% 610% 188 1,269 .1x nm nm nm nm .4x
Celadon Group, Inc. / CLDN 7.35 -12% 107% 162 243 .4x 12x 25x 17x 11x 1.3x
USA Truck, Inc. / USAK 14.61 -35% 34% 152 275 .5x 32x 1461x 37x 23x 1.0x
Saia Inc. / SAIA 9.78 -28% 104% 132 249 .2x 10x 8x 15x 11x .8x
Median .5x 10x 16x 15x 14x 1.7x
Transportation: Trucking – Operating Performance

Est.
JBHT 3,797 12% 8% 240 19% 10% 5% 12% 25% 50% 11% 2.1x
LSTR 2,686 9% 7% 2,097 16% 7% 4% 15% 59% 52% 17% 4.0x
HTLD 636 9% 9% 193 64% 15% 11% 11% 31% 19% 12% 1.2x
CNW 5,112 22% 6% 189 13% 6% 3% 12% 18% 15% 5% 1.6x
WERN 2,201 7% 7% 153 23% 5% 3% 9% 11% 8% 5% 1.6x
KNX 779 11% 17% 177 29% 11% 7% 14% 16% 11% 8% 1.2x
ODFL 1,561 15% 19% 135 25% 9% 5% 13% 16% 14% 7% 1.5x
FWRD 466 25% 12% 272 54% 16% 10% 13% 48% 25% 17% 1.7x
ABFS 1,901 4% 4% 160 9% 4% 3% 9% 15% 8% 5% 1.9x
MRTN 612 12% 14% 233 26% 5% 3% 14% 8% 6% 4% 1.5x
UACL 754 12% 23% 1,175 16% 4% 2% 11% 23% 11% 8% 3.5x
DDMX 456 10% 12% 228 27% 6% 3% 17% 98% 17% 12% 3.4x
YRCW 9,360 -3% 12% 149 8% -16% -16% 11% nm <-99% -31% 1.9x
CLDN 579 14% 9% 149 34% 3% 1% na 9% 5% 2% 1.9x
USAK 542 16% 10% 152 22% 2% 0% 66% 3% 1% 0% 1.5x
SAIA 1,043 10% 15% 127 48% 2% 1% 12% 7% 5% 2% 1.8x
Median 11% 11% 183 24% 5% 3% 12% 16% 11% 6% 1.8x
Transportation: Shipping – Valuation

Frontline Ltd. (USA) / FRO 29.55 -15% 145% 2,212 5,179 3.1x 6x 4x 4x 7x 3.6x
Kirby Corporation / KEX 25.92 0% 138% 1,385 1,653 1.2x 6x 11x 9x 8x 2.1x
Alexander & Baldwin, / AXB 28.78 -12% 91% 1,190 1,706 .9x 8x 11x 9x 11x 1.0x
Teekay Corporation / TK 13.86 -3% 336% 1,002 6,638 2.4x 17x 6x 4x 4x .5x
Overseas Shipholding / OSG 34.96 -8% 151% 991 2,098 1.3x 4x 6x 3x 6x .6x
Ship Finance Interna / SFL 12.60 -22% 161% 917 3,092 6.7x 9x 5x 4x 4x 1.4x
Dampskibsselskabet T / TRMD 13.06 -12% 205% 904 2,594 2.7x 8x 1x 3x 4x .8x
Tsakos Energy Naviga / TNP 21.68 -10% 82% 817 1,858 3.1x 6x 5x 5x 7x .9x
Diana Shipping Inc. / DSX 10.59 -3% 288% 795 963 3.1x 5x 5x 4x 5x 1.0x
Teekay LNG Partners / TGP 13.04 -30% 149% 574 3,101 11.6x 27x nm 12x 8x .9x
DryShips Inc. / DRYS 9.11 -7% 1178% 574 3,144 2.9x 3x 1x 1x 1x .4x
Seaspan Corporation / SSW 8.27 -6% 280% 550 2,034 9.2x 19x nm 7x 7x .5x
Hornbeck Offshore Se / HOS 16.87 -2% 252% 436 1,075 2.6x 7x 5x 4x 4x .7x
General Maritime Cor / GMR 13.61 -36% 128% 426 976 3.2x 11x 10x 6x 7x 2.0x
Genco Shipping & Tra / GNK 13.03 -5% 549% 411 1,145 3.1x 4x 3x 2x 2x .5x
Eagle Bulk Shipping / EGLE 8.71 -37% 316% 408 1,117 6.9x 14x 7x 5x 4x .8x
Golar LNG Limited (U / GLNG 5.71 -17% 337% 382 2,231 9.9x 31x 3x 34x 6x .7x
Excel Maritime Carri / EXM 8.64 -7% 606% 373 1,855 3.3x 5x 2x 1x 2x .4x
Danaos Corporation / DAC 6.36 -7% 400% 347 2,299 7.9x 16x 3x 3x 3x .6x
Safe Bulkers, Inc. / SB 5.87 -29% 236% 320 747 4.5x 6x 2x 2x 2x nm
Martin Midstream Par / MMLP 19.16 -37% 107% 279 786 .6x 21x 11x 11x 9x nm
K-Sea Transportation / KSP 16.49 -27% 134% 260 675 2.0x 16x 8x 9x 8x 1.0x
Knightsbridge Tanker / VLCCF 13.83 -28% 153% 237 267 2.9x 3x 3x 5x 6x 1.1x
TBS International Li / TBSI 6.23 -4% 894% 186 432 .7x 2x 2x 1x 4x .3x
Star Bulk Carriers C / SBLK 3.35 -18% 363% 183 350 3.3x 7x 37x 3x 2x .4x
DHT Maritime Inc. / DHT 4.63 -35% 207% 176 476 5.1x 10x 5x 4x 5x 1.1x
Navios Maritime Hold / NM 1.66 -7% 848% 171 420 .3x 4x 1x 2x 1x .3x
Arlington Tankers Li / ATB 9.77 -37% 149% 151 366 5.2x 13x 13x 8x 8x 1.7x
Euroseas Ltd. / ESEA 4.37 -18% 300% 133 119 .9x 2x 2x 2x 5x .5x
Paragon Shipping Inc / PRGN 4.88 -11% 376% 132 461 3.1x 5x 17x 2x 2x .4x
Horizon Lines, Inc. / HRZ 3.86 -24% 574% 116 721 .6x 10x 5x 4x 6x nm
Average (equal-weighted) 3.7x 10x 7x 6x 5x .9x
Transportation: Shipping – Operating Performance

Est.
FRO 1,683 16% -11% >9,999 54% 51% 47% na 23% >99% 20% .4x
KEX 1,341 20% 20% 433 37% 20% 11% 17% 26% 18% 10% .9x
AXB 1,940 18% 4% 860 14% 10% 7% 7% 13% 13% 6% .8x
TK 2,789 26% 3% 498 37% 14% 5% 16% 6% 6% 1% .3x
OSG 1,588 43% 12% 423 48% 31% 26% 15% 17% 22% 10% .4x
SFL 459 6% -7% >9,999 78% 75% 45% na 51% 33% 7% .2x
TRMD 974 52% -32% 2,218 44% 33% 26% na 14% 21% 8% .3x
TNP 598 24% 16% na 61% 50% 38% na 15% 25% 9% .2x
DSX 312 87% 44% 729 84% 66% 65% 2% 26% 26% 20% .3x
TGP 268 22% 27% 656 99% 43% -11% 7% 6% -4% -1% .1x
DRYS 1,096 >99% >99% 6,023 91% 88% 94% na 39% 62% 27% .3x
SSW 222 23% 77% >9,999 76% 48% 10% 16% 4% 3% 1% .1x
HOS 412 36% 37% 377 60% 39% 26% na 14% 18% 8% .3x
GMR 305 20% -29% 631 64% 30% 15% na 13% 22% 5% .4x
GNK 370 >99% >99% 599 88% 79% 69% 10% 26% 40% 15% .2x
EGLE 161 37% na 416 80% 48% 43% 11% 11% 14% 6% .1x
GLNG 225 -6% 11% 375 67% 32% -9% 62% 5% -4% -1% .1x
EXM 568 >99% 50% 463 80% 60% 56% na 21% 37% 14% .2x
DAC 292 19% 8% 349 68% 50% 47% 11% 11% 23% 6% .1x
SB 166 52% na na 92% 81% 73% 5% 63% <-99% 60% .8x
MMLP 1,248 92% 38% 2,355 14% 3% 2% 8% 10% <-99% 4% 1.8x
KSP 346 42% 39% 331 75% 13% 7% 5% 7% 8% 3% .5x
VLCCF 91 3% -13% na 76% 113% >99% na 37% 45% 30% .3x
TBSI 587 93% 19% 4,515 55% 35% 33% na 35% 43% 24% .7x
SBLK 105 na na 6,538 na 45% 49% na 10% 14% 10% .2x
DHT 93 11% -16% >9,999 80% 52% 33% na 13% 33% 7% .2x
NM 1,214 >99% 40% 6,527 15% 8% 27% 30% 11% 44% 16% .6x
ATB 70 1% 7% >9,999 71% 41% 15% na 9% 11% 3% .2x
ESEA 134 >99% 24% 373 98% 46% 46% 7% 27% 22% 17% .4x
PRGN 148 >99% na 294 87% 57% 45% na 15% 23% 10% .2x
HRZ 1,306 11% 36% 604 18% 5% 2% na 24% 23% 4% 1.4x
Median 23% 16% 599 70% 45% 30% 10% 14% 22% 8% .3x
Utilities: Electric – Valuation

Exelon Corporation / EXC 50.57 -18% 82% 33,271 45,775 2.4x 9x 13x 12x 12x 3.7x
Southern Company, Th / SO 35.21 -15% 15% 27,273 45,741 2.7x 13x 15x 15x 14x 2.0x
National Grid plc (A / NGG 53.77 -15% 62% 26,113 58,847 3.5x 13x 11x 14x 13x 13.0x
Dominion Resources, / D 36.39 -14% 36% 21,104 36,836 2.4x 5x 9x 12x 11x 3.9x
Duke Energy Corporat / DUK 15.64 -14% 33% 19,789 32,652 2.5x 13x 13x 13x 12x 1.2x
FPL Group, Inc. / FPL 47.30 -29% 56% 19,333 35,021 2.2x 14x 14x 12x 12x 1.7x
FirstEnergy Corp. / FE 52.75 -22% 59% 16,080 29,474 2.2x 11x 13x 12x 10x 4.3x
Entergy Corporation / ETR 79.99 -23% 59% 15,145 25,534 2.0x 11x 14x 12x 10x 2.0x
Public Service Enter / PEG 28.60 -23% 83% 14,543 23,807 1.8x 9x 11x 10x 9x 1.9x
PG&E Corporation / PCG 37.21 -28% 28% 13,432 24,860 1.7x 11x 13x 13x 12x 1.5x
American Electric Po / AEP 30.95 -17% 60% 12,490 28,852 2.0x 10x 11x 10x 9x 1.2x
PPL Corporation / PPL 32.62 -18% 69% 12,219 20,078 2.8x 12x 12x 16x 17x 2.9x
Edison International / EIX 33.47 -20% 73% 10,905 21,322 1.5x 8x 10x 9x 8x 1.3x
Consolidated Edison, / ED 39.19 -13% 29% 10,724 18,660 1.4x 15x 11x 13x 12x 1.2x
Empresa Nacional de / EOC 38.06 -24% 51% 10,386 13,437 4.4x 15x 39x 15x 16x nm
Spectra Energy Corp. / SE 16.73 -9% 74% 10,223 20,445 3.9x 13x 11x 9x 10x 3.9x
Progress Energy, Inc / PGN 38.84 -16% 29% 10,218 21,035 2.3x 13x 14x 13x 12x 2.0x
Enersis S.A. (ADR) / ENI 14.16 -29% 46% 9,229 15,114 1.8x 7x 31x 21x 21x 2.4x
Xcel Energy Inc. / XEL 17.98 -15% 31% 8,074 16,384 1.5x 12x 13x 12x 12x 1.2x
Companhia Energetica / CIG 15.75 -41% 69% 7,817 8,878 3.3x nm 10x 8x 7x 2.2x
Ameren Corporation / AEE 33.67 -24% 63% 7,120 14,928 1.9x 10x 11x 11x 10x 1.2x
CPFL Energia S.A. (A / CPL 40.33 -13% 93% 6,452 9,082 2.1x 7x 8x 12x 14x 2.6x
Huaneng Power Intern / HNP 20.66 -20% 120% 6,227 19,461 2.1x 89x 7x nm 65x 2.0x
DTE Energy Company / DTE 36.77 -24% 39% 5,994 14,732 1.6x 11x 8x 12x 11x 1.5x
AES Corporation, The / AES 8.28 -24% 172% 5,483 20,967 1.3x 5x 11x 7x 7x 2.4x
NRG Energy, Inc. / NRG 22.65 -36% 102% 5,279 8,926 1.3x 4x 12x 9x 9x 1.9x
Wisconsin Energy Cor / WEC 42.17 -17% 20% 4,931 9,504 2.2x 15x 15x 15x 13x 1.7x
Allegheny Energy, In / AYE 28.70 -17% 128% 4,852 8,755 2.5x 10x 12x 12x 9x 1.9x
Constellation Energy / CEG 24.53 -47% 340% 4,377 11,228 .6x 14x 5x 5x 5x .9x
CenterPoint Energy, / CNP 11.85 -28% 56% 4,078 14,183 1.3x 11x 10x 10x 9x 11.2x
SCANA Corporation / SCG 34.02 -18% 30% 3,998 8,150 1.6x 12x 12x 11x 11x 1.3x
Calpine Corporation / CPN 8.72 -13% 168% 3,741 12,768 1.3x 14x 2x 25x 12x .8x
Northeast Utilities / NU 23.17 -26% 43% 3,608 8,850 1.6x 12x 15x 13x 12x 1.3x
Pepco Holdings, Inc. / POM 17.74 -14% 70% 3,587 9,115 .9x 12x 10x 9x 9x 1.4x
NSTAR / NST 32.00 -20% 25% 3,418 6,412 2.0x 12x 15x 14x 14x 1.9x
Puget Energy, Inc. / PSD 25.58 -26% 11% 3,317 6,422 1.9x 16x 16x 16x 15x 1.3x
Integrys Energy Grou / TEG 43.38 -15% 24% 3,315 4,904 .4x 13x 17x 12x 11x 1.5x
Covanta Holding Corp / CVA 21.19 -27% 43% 3,269 5,310 3.2x 16x 25x 22x 20x 4.4x
Alliant Energy Corpo / LNT 29.17 -22% 49% 3,222 4,709 1.3x 6x 8x 11x 10x 1.1x
Pinnacle West Capita / PNW 29.23 -10% 52% 2,947 6,487 1.9x 12x 10x 12x 12x .9x
Mirant Corporation / MIR 17.30 -31% 144% 2,709 2,953 1.2x 4x 11x 7x 5x .8x
TECO Energy, Inc. / TE 12.08 -6% 82% 2,570 5,785 1.7x 10x 6x 14x 9x 1.3x
OGE Energy Corp. / OGE 26.54 -26% 41% 2,463 4,903 1.1x 10x 10x 10x 10x 1.3x
CMS Energy Corporati / CMS 10.76 -23% 68% 2,434 9,322 1.4x 22x nm 9x 8x 1.0x
DPL Inc. / DPL 20.65 -3% 50% 2,395 3,923 2.5x 10x 11x 10x 9x 2.5x
Hawaiian Electric In / HE 26.68 -21% 12% 2,271 4,230 1.4x 17x 26x 16x 15x 1.8x
Great Plains Energy / GXP 18.24 -14% 67% 2,169 5,168 2.5x 15x 10x 12x 11x .9x
Westar Energy, Inc. / WR 20.03 -20% 34% 2,169 4,637 2.5x 17x 11x 15x 11x 1.0x
ITC Holdings Corp. / ITC 43.06 -25% 39% 2,138 4,265 7.4x 16x 26x 21x 19x nm
Sierra Pacific Resou / SRP 9.02 -24% 97% 2,112 6,686 1.9x 13x 10x 10x 9x .7x
Median 1.9x 12x 11x 12x 11x 1.6x
Utilities: Electric – Operating Performance

Est.
EXC 18,921 5% 10% 1,063 74% 26% 14% 7% 19% 25% 6% .4x
SO 16,665 10% 9% 623 96% 21% 11% 6% >99% 14% 4% .4x
NGG 17,048 -37% 16% 623 28% 26% 43% 10% 12% >99% 14% .3x
D 15,124 -7% 4% 890 96% 44% 24% 9% >99% 39% 9% .4x
DUK 12,845 3% -13% 722 97% 20% 10% 4% >99% 6% 3% .3x
FPL 16,089 6% 13% 1,102 32% 15% 9% 10% >99% 13% 3% .4x
FE 13,505 9% 3% 929 35% 20% 9% 10% >99% 14% 4% .4x
ETR 12,825 14% 6% 904 78% 18% 10% 11% >99% 16% 4% .4x
PEG 13,342 9% 7% 5,257 6% 20% 12% 3% >99% 23% 6% .5x
PCG 14,400 11% 6% 718 27% 15% 7% 7% nm 12% 3% .4x
AEP 14,480 11% -2% 694 91% 19% 10% 5% nm 14% 4% .3x
PPL 7,137 11% 4% 640 69% 23% 15% 12% >99% 20% 5% .3x
EIX 13,788 6% 9% 798 72% 19% 9% 8% nm 14% 3% .4x
ED 13,614 9% 11% 895 47% 9% 10% 3% >99% 15% 5% .5x
EOC 3,043 -45% 17% 5,176 32% 30% 26% 8% >99% 28% 10% .4x
SE 5,210 15% -29% 1,022 45% 30% 31% 9% 11% 24% 7% .2x
PGN 9,208 2% 4% 837 86% 18% 9% 6% >99% 10% 3% .3x
ENI 8,386 -50% 18% 691 31% 25% 10% 7% 14% 18% 5% .5x
XEL 11,099 12% 7% 1,017 84% 12% 6% 6% >99% 9% 3% .5x
CIG 2,722 18% 10% 252 na -10% -16% 10% nm -13% -7% .4x
AEE 7,738 5% 14% 853 13% 19% 10% 3% 9% 12% 4% .4x
CPL 4,310 4% 12% 601 43% 31% 14% 2% >99% 26% 8% .6x
HNP 9,307 -29% 18% 407 -20% 2% 3% 5% 2% 5% 2% .5x
DTE 9,370 13% 6% 913 26% 14% 7% 7% >99% 11% 3% .4x
AES 16,268 27% 16% 581 24% 25% 9% 13% 17% 40% 4% .4x
NRG 6,690 17% 42% 1,961 46% 31% 15% 13% 17% 22% 5% .3x
WEC 4,379 5% 8% 876 73% 15% 8% 9% >99% 11% 3% .4x
AYE 3,464 6% 6% 795 88% 26% 14% 17% >99% 18% 5% .3x
CEG 20,241 -1% 21% 1,984 -11% 4% 2% 17% 40% 9% 2% .8x
CNP 11,150 18% 6% 1,301 21% 11% 4% 12% >99% 24% 3% .6x
SCG 5,189 12% 6% 910 51% 13% 7% 5% >99% 12% 3% .5x
CPN 10,110 28% -3% 4,861 25% 9% 0% 27% 41% -1% 0% .5x
NU 5,628 -7% -4% 959 26% 14% 5% 7% >99% 9% 2% .5x
POM 10,552 18% 9% 2,056 93% 7% 3% 9% >99% 7% 2% .7x
NST 3,279 -1% 3% 1,041 89% 16% 7% 7% >99% 14% 3% .4x
PSD 3,323 4% 14% na 51% 12% 5% 6% >99% 6% 2% .4x
TEG 13,691 51% 28% 2,617 13% 3% 1% 9% 37% 6% 1% 1.1x
CVA 1,646 21% 36% 470 42% 20% 11% 10% 11% 17% 4% .4x
LNT 3,671 8% 7% 709 86% 20% 12% 6% >99% 16% 6% .5x
PNW 3,502 0% 8% 461 95% 16% 8% 5% >99% 8% 3% .3x
MIR 2,490 15% -15% 1,431 32% 29% 28% 12% 24% 17% 6% .2x
TE 3,463 -1% 10% 805 77% 17% 9% 8% >99% 16% 5% .5x
OGE 4,343 18% -8% 1,350 29% 11% 6% na >99% 14% 4% .8x
CMS 6,658 1% 5% 843 na 6% 2% 10% 34% 4% 1% .5x
DPL 1,580 6% 8% 1,185 60% 26% 14% 11% >99% 24% 6% .4x
HE 3,127 28% 10% 907 8% 8% 4% 11% 6% 9% 1% .3x
GXP 2,032 24% 10% 812 70% 17% 10% 8% nm 11% 4% .4x
WR 1,826 9% 6% 786 36% 15% 9% 4% 6% 8% 3% .3x
ITC 575 48% 50% 1,905 81% 45% 17% 18% nm 12% 3% .2x
SRP 3,549 0% 8% 1,085 67% 15% 6% 13% >99% 7% 2% .4x
Median 9% 8% 895 46% 17% 9% 8% 16% 14% 3% .4x
Utilities: Natural Gas – Valuation

Kinder Morgan Energy / KMP 50.48 -29% 21% 13,162 21,927 1.8x 15x nm 21x 20x 4.0x
Sempra Energy / SRE 42.09 -19% 53% 10,254 16,307 1.4x 10x 10x 11x 9x 1.3x
Williams Companies, / WMB 16.45 -25% 148% 9,519 16,785 1.3x 6x 12x 7x 8x 1.3x
El Paso Corporation / EP 7.28 -10% 209% 5,086 18,013 3.4x 8x 13x 6x 6x .9x
Oneok Partners LP / OKS 51.63 -31% 26% 4,694 7,485 .9x 12x 12x 9x 11x 2.1x
Equitable Resources, / EQT 30.00 -31% 154% 3,923 5,173 3.3x 11x 14x 14x 13x 2.1x
MDU Resources Group, / MDU 18.87 -16% 87% 3,466 5,005 1.0x 7x 11x 9x 9x 1.5x
Boardwalk Pipeline P / BWP 21.52 -35% 51% 3,370 5,754 7.7x 16x 11x 12x 12x 1.3x
NiSource Inc. / NI 11.55 -9% 72% 3,168 10,749 1.2x 13x 10x 9x 9x 4.8x
ONEOK, Inc. / OKE 26.88 -20% 91% 2,809 8,279 .5x 9x 10x 9x 8x 2.8x
National Fuel Gas Co / NFG 31.96 -15% 99% 2,529 3,560 1.5x 7x 10x 11x 11x 1.6x
UGI Corporation / UGI 23.01 -19% 25% 2,477 4,308 .6x 7x 12x 11x 10x nm
Piedmont Natural Gas / PNY 32.05 -36% 10% 2,349 3,338 1.6x 16x 23x 21x 19x 2.7x
AGL Resources Inc. / ATG 28.65 -16% 37% 2,200 4,633 1.7x 10x 10x 10x 10x 1.7x
Vectren Corporation / VVC 25.50 -24% 26% 2,065 3,734 1.5x 14x 14x 15x 12x 1.8x
Energen Corporation / EGN 28.40 -13% 180% 2,037 2,609 1.7x 5x 7x 7x 7x 1.2x
Atmos Energy Corpora / ATO 22.32 -12% 31% 2,023 4,447 .7x 10x 11x 11x 11x 1.5x
El Paso Pipeline Par / EPB 16.77 -30% 53% 1,890 na nm nm 22x 14x 12x 3.0x
Nicor Inc. / GAS 39.29 -18% 32% 1,776 2,498 .7x 13x 13x 17x 15x 1.9x
Southern Union Compa / SUG 13.49 -8% 133% 1,673 5,482 1.8x 12x 8x 7x 7x .8x
WGL Holdings, Inc. / WGL 31.72 -29% 14% 1,583 2,556 1.0x 11x 14x 13x 14x 1.5x
New Jersey Resources / NJR 35.87 -39% 15% 1,509 1,818 .5x 9x 13x 16x 14x 2.3x
Northwest Natural Ga / NWN 47.13 -22% 67% 1,248 1,930 1.9x 14x 17x 18x 17x 2.1x
Laclede Group, Inc., / LG 49.87 -36% 12% 1,096 1,431 .7x 12x 21x 21x 21x 2.3x
ALLETE, Inc. / ALE 34.00 -7% 44% 1,075 1,558 1.9x 13x 11x 12x 13x 1.3x
Southwest Gas Corpor / SWX 24.31 -12% 37% 1,068 2,380 1.1x 11x 12x 12x 11x 1.1x
South Jersey Industr / SJI 35.44 -29% 11% 1,054 1,567 1.6x 11x 17x 15x 15x 2.0x
Copano Energy, L.L.C / CPNO 14.69 -5% 171% 851 1,533 .9x 14x 11x 13x 9x 1.2x
Williams Partners L. / WPZ 15.66 -7% 167% 827 1,745 2.7x 13x 8x 5x 6x 3.5x
TC Pipelines, LP / TCLP 23.50 -16% 60% 819 1,373 8.9x 10x 9x 9x 9x 1.0x
MarkWest Energy Part / MWE 14.05 -16% 174% 796 1,662 1.8x 21x 117x nm 10x 2.5x
Regency Energy Partn / RGNC 9.34 -6% 273% 758 1,786 1.0x 14x nm 8x 9x 1.4x
PNM Resources, Inc. / PNM 8.69 -12% 176% 752 2,972 1.5x nm 11x 58x 14x .6x
Williams Pipeline Pa / WMZ 14.10 -25% 48% 473 466 nm nm 2x 10x 10x 1.1x
Western Gas Partners / WES 13.45 -33% 30% 357 341 2.3x 6x 15x 13x 10x .6x
Duncan Energy Partne / DEP 14.61 -31% 62% 297 496 .4x 10x 12x 14x 13x 1.0x
Crosstex Energy, L.P / XTEX 5.75 -2% 521% 280 1,503 .3x 15x nm nm nm 1.4x
DCP Midstream Partne / DPM 9.27 -8% 397% 262 na nm nm nm 7x 5x 2.1x
Clean Energy Fuels C / CLNE 5.01 -13% 298% 252 243 1.9x nm nm nm 42x 1.4x
Quicksilver Gas Serv / KGS 8.97 -13% 197% 213 na nm nm 26x 11x 8x 2.1x
Crosstex Energy, Inc / XTXI 4.38 -2% 779% 203 1,412 .3x 14x 17x 7x 24x nm
Chesapeake Utilities / CPK 28.10 -22% 29% 192 322 1.1x 11x 14x 14x 13x 1.6x
Exterran Partners, L / EXLP 13.08 -37% 175% 167 568 3.8x 12x 10x 8x 8x 3.3x
Atlas Pipeline Holdi / AHD 5.52 -2% 573% 153 1,565 1.3x nm nm 4x 3x nm
Median 1.4x 11x 12x 11x 11x 1.6x
Utilities: Natural Gas – Operating Performance

Est.
KMP 11,898 34% 5% 1,565 21% 13% 5% 6% 13% 14% 4% .7x
SRE 11,575 0% 7% 809 97% 14% 9% 7% >99% 13% 4% .4x
WMB 12,726 23% -5% 2,947 27% 22% 12% 19% 16% 20% 6% .5x
EP 5,282 23% -1% 1,058 95% 43% 19% 9% 12% 21% 4% .2x
OKS 8,321 62% >99% 7,325 14% 8% 7% 5% 18% 21% 8% 1.3x
EQT 1,552 17% 9% 1,109 54% 31% 18% 12% nm 21% 6% .4x
MDU 4,940 21% 16% 402 85% 14% 8% 10% >99% 15% 7% .8x
BWP 749 16% 35% 691 72% 47% 38% 8% nm 13% 6% .2x
NI 8,717 13% 6% 1,146 37% 9% 1% 3% >99% 2% 1% .5x
OKE 17,299 38% 33% 3,798 12% 6% 2% 9% >99% 17% 3% 1.5x
NFG 2,400 18% 9% 1,230 49% 20% 11% 5% >99% 17% 7% .6x
UGI 6,648 21% 11% 700 24% 9% 3% 6% >99% 15% 4% 1.1x
PNY 2,055 20% 4% 1,096 27% 10% 6% 8% >99% 13% 4% .7x
ATG 2,680 7% 11% 1,149 41% 17% 8% 5% 62% 12% 3% .4x
VVC 2,422 8% 11% 677 50% 11% 5% 6% 55% 10% 3% .6x
EGN 1,545 6% 15% 1,002 79% 37% 22% 6% >99% 24% 11% .5x
ATO 6,052 3% -36% 1,301 -10% 7% 4% 5% 10% 12% 4% .9x
EPB 133 1% 15% na 75% 54% 69% 8% 12% 20% 9% .1x
GAS 3,655 18% 5% 937 21% 5% 3% 4% >99% 13% 3% .8x
SUG 3,066 19% 72% 1,312 38% 15% 7% 9% >99% 10% 3% .4x
WGL 2,628 -1% 7% 1,605 27% 9% 4% 4% 84% 11% 4% .8x
NJR 3,816 26% 6% 4,723 13% 5% 3% 6% 72% 17% 5% 1.6x
NWN 1,020 -2% 13% 897 37% 14% 6% 5% >99% 11% 3% .5x
LG 2,081 13% 17% 1,140 19% 6% 4% na 88% 18% 5% 1.3x
ALE 817 -1% 6% 584 21% 14% 10% 5% 10% 11% 5% .5x
SWX 2,196 2% 13% 865 50% 10% 3% 6% nm 7% 2% .6x
SJI 954 1% 5% 1,580 28% 15% 7% 6% 97% 14% 5% .6x
CPNO 1,713 73% 38% 5,385 12% 7% 4% 9% 17% 8% 4% .9x
WPZ 655 16% 7% 2,461 36% 21% 23% 8% 21% 79% 12% .5x
TCLP 154 32% 34% na na 90% 63% 5% >99% 11% 7% .1x
MWE 917 36% 26% 2,576 28% 9% 0% 9% 8% 1% 0% .4x
RGNC 1,824 69% 35% 5,753 21% 7% 3% 9% 11% 8% 3% .9x
PNM 1,954 -1% 6% 625 8% -6% -12% 12% nm -14% -4% .3x
WMZ na na na na na na na 7% 47% 38% 38% na
WES 147 13% 20% na 90% 37% 31% 17% 15% 10% 9% .3x
DEP 1,149 36% 5% 821 5% 4% 2% 5% 5% 9% 3% 1.1x
XTEX 5,227 50% 25% 7,467 -13% 2% 0% 9% nm -1% 0% 1.9x
DPM 1,177 45% 2% 8,060 2% -7% -11% 8% nm -65% -11% 1.0x
CLNE 130 13% 27% 1,070 24% -17% -16% 28% nm -9% -8% .5x
KGS 66 >99% na na 72% 43% 31% 15% 9% 19% 6% .2x
XTXI 5,227 50% 25% 7,467 -17% 2% 1% 9% nm 20% 2% 1.9x
CPK 290 17% 13% 651 31% 10% 5% 5% >99% 11% 3% .7x
EXLP 151 na -29% na 55% 30% 19% 8% 13% 19% 6% .3x
AHD 1,248 >99% 94% 3,346 -1% -11% -2% 9% nm -31% -1% .4x
Median 17% 11% 1,148 28% 10% 5% 8% 16% 13% 4% .6x
Utilities: Water – Valuation

Veolia Environnement / VE 24.46 -15% 295% 11,188 31,482 .7x 10x 9x 9x 8x nm
American Water Works / AWK 19.50 -16% 21% 3,120 8,234 3.5x nm nm 17x 14x 1.3x
Aqua America, Inc. / WTR 19.76 -38% 17% 2,671 3,976 6.5x 18x 28x 27x 24x 2.7x
Companhia de Saneame / SBS 21.41 -35% 168% 2,439 4,995 1.9x 6x 5x 4x 4x .5x
California Water Ser / CWT 38.62 -28% 9% 800 1,122 2.8x 14x 26x 20x 19x 2.0x
American States Wate / AWR 31.92 -15% 38% 552 884 2.9x 14x 20x 20x 18x 1.8x
SJW Corp. / SJW 24.47 -18% 58% 451 685 3.1x 15x 24x 21x 18x 1.8x
Energy Recovery, Inc / ERII 5.95 -23% 123% 298 218 5.0x 25x 43x 43x 25x 2.9x
Middlesex Water Comp / MSEX 15.27 -20% 30% 205 360 4.0x 15x 18x 16x 16x 1.5x
Connecticut Water Se / CTWS 22.82 -8% 27% 193 301 4.9x 22x 22x 21x 19x 1.9x
Consolidated Water C / CWCO 10.47 -28% 221% 152 141 2.5x 15x 13x 19x 13x 1.3x
York Water Company, / YORW 11.23 -45% 49% 127 212 6.7x 15x 20x 20x 17x 1.9x
Artesian Resources C / ARTNA 14.80 -12% 32% 109 202 3.7x 13x 16x 18x 15x 1.2x
SouthWest Water Comp / SWWC 4.10 -2% 227% 101 291 1.3x nm nm 19x 10x .7x
Median 3.3x 15x 20x 20x 17x 1.8x
Utilities: Water – Valuation

Est.
VE 44,702 -31% 13% 140 17% 7% 5% 9% 28% 29% 4% .8x
AWK 2,322 40% 3% 332 43% -20% -36% 11% >99% -28% -9% .2x
WTR 616 4% 11% 389 58% 36% 16% 8% >99% 10% 3% .2x
SBS 2,685 -1% 11% 160 58% 31% 20% 8% 24% 11% 6% .3x
CWT 396 10% 5% 427 44% 20% 10% 8% nm 10% 3% .3x
AWR 309 5% 10% 539 77% 20% 8% 4% >99% 8% 3% .3x
SJW 218 7% 7% 600 84% 22% 10% na >99% 9% 3% .3x
ERII 44 >99% >99% 677 60% 20% 14% na 82% 16% 13% 1.0x
MSEX 91 8% 7% 333 33% 27% 16% 8% >99% 11% 4% .2x
CTWS 61 9% 9% 297 49% 22% 15% na >99% 9% 2% .2x
CWCO 57 23% 28% 589 33% 17% 17% na 13% 8% 7% .4x
YORW 32 2% 12% 291 79% 44% 19% 8% nm 9% 3% .1x
ARTNA 55 6% 10% 267 48% 28% 11% 5% 6% 7% 2% .2x
SWWC 222 2% 7% 159 24% 0% -5% 5% 0% -8% -2% .4x
Median 6% 10% 332 48% 21% 12% 8% 19% 9% 3% .3x
Favorite Third-Party Resources

Tracking Down the Best Ideas and Opinion on the Internet
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TIMELY IDEAS AND OPINION ALL-TIME FAVORITE IDEAS AND INVESTMENT PHILOSOPHY
Leaders on current financial crisis: Investors:

• Bill Ackman: Charlie Rose, 11/11/08, 100; Q3 • Claire Barnes: 40
letter to Pershing Square investors, 103 • Warren Buffett: 22
• Jack Bogle: Morningstar, 9/23/08, 05 • Marc Faber: 41
• Warren Buffett: Charlie Rose, 10/1/08, 04 • Ben Graham: 43, 44
• Jeremy Grantham: October letter, 17 • Jeremy Grantham: 42
• Jim Rogers: Bloomberg, 10/10/08, 11 • Ace Greenberg: 24, 30
• George Soros: Fareed Zakaria, 10/14/08, 01; • Bill Gross: 35
Bill Moyers, 10/10/08, 02 • Charlie Munger: 46, 52, 53, 55
• Mohnish Pabrai: 57, 59, 62
Articles: • Bob Rodriguez: 64
• “Fuld Sought Buffett Offer He Refused as • Jim Rogers: 66, 13, 70, 73, 74
Lehman Sank,” Bloomberg, 11/10/08, 101 • Walter Schloss: 19
• Michael Lewis, “The End,” 11/11/08, 102 • George Soros: 89, 91, 96, 97, 79, 76
Business Leaders:
• Bill Gates and Steve Jobs: 33
• Steve Wynn: 23, 36
production. One barrel of crude oil contains the energy
Glossary equivalent of 6 mcf of natural gas. For example, 1 barrel

of crude oil and 7 mcf of natural gas amount to a
combined 2 BOE.
BOPD. Barrels of oil per day. A measure of crude oil
Terms, Acronyms and Abbreviations
production. Same as bpd.
Commonly Used In Financial Publications
bpd. Barrels per say. Same as BOPD.
10-K. A company’s annual report, as filed with the SEC DD&A. Depreciation, depletion and amortization.
according to the requirements of SEC Form 10-K. Public
companies are required to file a 10-K each year. MBbls. One million barrels. A measure of crude oil
volume.
10-Q. A company’s quarterly report, as filed with the
SEC according to the requirements of SEC Form 10-Q. Mcf. 100 cubic feet. A measure of natural gas volume.
Public companies are required to file a 10-Q each quarter. MCFD. Million cubic feet per day. A measure of natural
ADR. American Depository Receipt. gas production.
ADS. American Depository Share. Functionally MMcf. One million cubic feet. A measure of natural gas
equivalent to an ADR. volume.
ASPs. Average selling prices. NGL. Natural gas liquids.
AUM. Assets under management.
bps. Basis points. 100 basis points equal 1%. Insurance
capex. Capital expenditure. Typically represents Frequency business. Consists of (re)insurance contracts
investment in equipment or facilities; creates long-term containing a potentially large number of smaller losses
asset that is depreciated over time. emanating from multiple events. Frequency business is
typically less volatile line than severity business.
EBIT. Earnings before interest and taxes; also known as
“operating income.” Severity business. Typically consists of contracts with
the potential for significant losses emanating from one
ETF. Exchange-traded fund. event or multiple events. Severity business is more lumpy
GAAP. Generally accepted accounting principles. and typically more profitable than frequency business.
Guidance. Forward-looking financial estimates provided Acquisition cost ratio. Typically calculated by dividing
by company management. acquisition expenses by net premiums earned.
NOL or NOLs. Net Operating Losses. Operating loss Combined ratio. Sum of loss ratio, acquisition cost ratio,
carryforwards available to offset future income taxes, and internal expense ratio.
subject to certain change-of-ownership restrictions. NOLs Composite ratio. Sum of loss ratio and acquisition cost
may or may not be capitalized on a company’s balance
ratio.
sheet as deferred tax assets. Unprofitable companies are
likely to have few or no deferred tax assets, but may Internal expense ratio. Typically calculated by dividing
nonetheless have large NOLs. The amount of NOLs is G&A expenses by net premiums earned.
disclosed in the footnotes to a company’s financial Loss ratio. Typically calculated by dividing underwriting
statements, as presented in 10-K filings with the SEC. losses incurred and loss adjustment expenses by
SPAC. Special-purpose acquisition company. A publicly premiums earned.
traded cash shell with the stated goal of acquiring another
company, typically in a previously disclosed industry. Media & Technology
PO. Purchase order. API. Application program interface. A software interface
y-y. Year over year. that enables other software programs to use and access the
functionality of the API-connected software platform.
Terms, Acronyms and Abbreviations Used ASIC. Application-specific integrated circuit. A
By Companies In Specific Industries semiconductor designed to support a specific application,
such as computer-aided design.
Energy
CPU. Central processing unit.
Bbl. Barrel. Standard measure of crude oil volume; equals
42 gallons or 159 liters. CTO. Chief Technology Officer.
Bboe. See BOE. DBS. Direct broadcast satellite. Commercial satellite TV
providers, such as DirecTV and Dish Network.
bcf. Billions cubic feet.
DRAM. Dynamic random access memory.
BOE. Barrel of oil equivalent. Used by energy companies
when combining information on oil and gas reserves and DTH. Direct to home.
EDA. Electronic design automation. Refers to software ad

hardware technologies that assist semiconductor
companies in designing, verifying and preparing
integrated circuits for manufacturing.
IC. Integrated circuit, aka semiconductor.
IDM. Integrated device manufacturer.
ISP. Internet service provider. A company that provides
Internet access and related data services, such as Internet-
based email and virus protection.
IT. Information technology.
J2EE. Java 2 Platform Enterprise Edition.
MSO. Multiple system operator. Cable companies that
operate a large number of cable systems, e.g., Comcast,
Cox or Time Warner Cable.
OEM. Original Equipment Manufacturer. For example,
Apple (Nasdaq: AAPL) is the OEM of the iPod device.
Companies selling disk drives to Apple for inclusion in
the iPod would label their sales to Apple as “OEM sales.”
PCB. Printed circuit board.
PDA. Personal digital assistant.
PMP. Personal Media Player.
POP. Point of presence.
PPV. Pay per view. Cable or satellite programming
available for an additional fee at a specific time. For
example, live championship boxing is often available on a
PPV basis only. (Contrast with VOD, which is available
to the viewer at a time of the viewer’s choosing.)
SoC (or SOC). System-on-a-Chip.
SiP (or SIP). System-in-a-Package.
VAR. Value Added Reseller. A vendor that redistributes
software or hardware products to third-party customers,
either individually or as part of an integrated product.
VOD. Video on demand. Fee-based programming
available at cable or satellite television subscribers at a
time of their choosing.
Pharma and Biotech

CNS. Central nervous system.
GAD. Generalized anxiety disorder.
NMDA. N-methyl-D-aspartate.
SSRI. Selective serotonin reuptake inhibitor.
Other
Hectare. Metric unit of area equal to 10,000 square
meters or 2.47105381 acres.
MRO. Maintenance, repair and operations.
NDA. New drug application.
or needs of individual investors. The price and value of
About the MOI securities referred to in this newsletter will fluctuate. Past
performance is not a guide to future performance, future
returns are not guaranteed, and a loss of all of the original
capital invested in a security discussed in this newsletter
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When asked how he became so successful, Buffett answered:

THE “MAGIC FORMULA” 100

Also inside: Proprietary Stock Screens

EDITORS’ COMMENTARY collection of Titanic artifacts. 16% shareholder Mark

employed). The two rankings are given equal weight in

M companies that are available at good prices. The result is a

CAGR, 1988-2004 underperformance, they may be left with few investors

• Insider selling: We avoid companies with heavy

American Eagle Outfitters (NYSE: AEO) Branded Apparel Retail (www.ae.com)

Thesis: American Eagle is a well-managed specialty retailer with a

Garmin (Nasdaq: GRMN) Personal and Specialty Navigation Devices (www.garmin.com)

KHD Humboldt Wedag (NYSE: KHD) Cement Plant Engineering (www.khdhumboldt.com)

Net 1 Ueps Technologies (Nasdaq: UEPS) Electronic Payment Processing (www.net1ueps.co.za)

Thesis: Net 1 has developed a workable electronic payment solution

Premier Exhibitions (Nasdaq: PRXI) Recreational Activities – Exhibitions (www.prxi.com)

Syneron Medical (Nasdaq: ELOS) Aesthetic Medical Products (www.syneron.com)

Tempur-Pedic International (NYSE: TPX) Mattresses and Pillows (www.tempurpedic.com)

Travelzoo Inc. (Nasdaq: TZOO) Travel-related Internet Media (www.travelzoo.com)

In-depth profiles of the Magic Formula Top 10 are included in

The “Magic Formula” 100

Recent Market Enterprise LTM LTM Date of FY

Recent Market Enterprise LTM LTM Date of FY

Recent Market Enterprise LTM LTM Date of FY

Recent Market Enterprise LTM LTM Date of FY

Recent ∆ to 52-Wk Price Performance

Recent ∆ to 52-Wk Price Performance

Recent Market P/E (A) P/E (Estimated) FY

Recent Market P/E (A) P/E (Estimated) FY

Recent FY EPS (Actual) EPS (Estimated)

Recent FY EPS (Actual) EPS (Estimated)

Recent Market Date of Latest EPS Surprise

Recent Market Date of Latest EPS Surprise

Revenue Growth EPS Growth

Revenue Growth EPS Growth

Market Percentile Rank within Industry

Market Percentile Rank within Industry

Market Recent Last Six Months

Market Recent Last Six Months

Accenture Ltd. (NYSE: ACN) Hamilton, Bermuda, 441-296-8262

Trading Data Consensus EPS Estimates Valuation

Operating Performance and Financial Position

Ten-Year Stock Price Performance and Trading Volume Dynamics

BUSINESS OVERVIEW • Guiding for revenue growth of 9-12% (constant

THE BOTTOM LINE

Acme Packet, Inc. (Nasdaq: APKT) Burlington, MA, 781-328-4400

Trading Data Consensus EPS Estimates Valuation

Operating Performance and Financial Position

Ten-Year Stock Price Performance and Trading Volume Dynamics

BUSINESS OVERVIEW • Strong balance sheet, with $127 million of cash

THE BOTTOM LINE

Trading Data Consensus EPS Estimates Valuation

Operating Performance and Financial Position

Ten-Year Stock Price Performance and Trading Volume Dynamics

BUSINESS OVERVIEW • Active M&A strategy, including 39% investment

THE BOTTOM LINE

Allegheny Technologies Incorpo (NYSE: ATI) Pittsburgh, PA, 412-394-2800

Trading Data Consensus EPS Estimates Valuation

Operating Performance and Financial Position

Ten-Year Stock Price Performance and Trading Volume Dynamics

BUSINESS OVERVIEW • Chairman and CEO Patrick Hassey (62) joined

THE BOTTOM LINE

Ambassadors Group, Inc. (Nasdaq: EPAX) Spokane, WA, 509-568-7800

Portfolio Manager's Review: The Magic Formula Issue, by The Manual of Ideas

Portfolio Manager's Review: The Magic Formula Issue, by The Manual of Ideas