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Information Technology Sector ETFs Neutral Risk/Reward Rating • We recommend investors buy only the Very Attractive and

Attractive stocks in the Information Technology sector over a sector ETF.

• The Information Technology sector has a Neutral Overall Risk/Reward Rating because the sector offers upside potential that is fairly balanced with downside risk.

• Our analysis is based on the market-weighted aggregation of models for the 561 companies in the Information Technology sector we cover.

• We offer custom reports with Overall Risk/Reward Ratings for any ETF, mutual fund, or portfolio.

• Figure 1 summarizes the five factors that drive our Overall Risk/Reward Rating for the Information Technology sector.

• The Information Technology sector has Positive Economic Earnings (EE) because ROIC is greater than WACC.

• To increase exposure to our ETF/Fund diligence and research tools, we are offering this aged report at a highly reduced price.

Figure 1: New Constructs’ Risk/Reward Rating – Information Technology Sector ETFs

Sources: New Constructs, LLC and company filings

Quality of Earnings Valuation

Economic vs Reported EPS

Return on Invested Capital (ROIC) FCF Yield Price-to-EBV Ratio

Growth Appreciation Period

(yrs)Very Dangerous Misleading Trend Bottom Quintile <-5% >3.5 or -1<0 more than 50

Dangerous False Positive 4th Quintile -5%<-1% 2.4<3.5 or <-1 20<50

Neutral Neutral EE 3rd Quintile -1%<3% 1.6<2.4 10<20

Attractive Positive EE 2nd Quintile 3%<10% 1.1<1.6 3<10

Very Attractive Rising EE Top Quintile >10% 0<1.1 Less than 3

Market-Weighted Avg $3.41 / $4.65 42.3% 4.0% 2.4 26Median $-0.29 / $0.15 3.4% 2.5% 4.4 101

Overall Risk/Reward

Score

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Methodology

Our analysis of the Information Technology sector is based on the market-weighted aggregation of data for the 561 companies in the Information Technology sector we cover as of November 9th, 2010.1 See Appendix 2 for a complete list of companies and their market weights. This report offers benchmarks for (1) investors considering buying Information Technology ETFs and for (2) comparing individual stocks to the Information Technology sector. Given the success of our Rating system for individual stocks, we believe its application to groups of stocks (i.e. ETFs and funds) helps investors make more informed ETF and mutual fund buying decisions. Recommendation

If you require exposure to the Information Technology sector: We recommend investors buy only the Very Attractive and Attractive stocks in the Information Technology sector as opposed to a sector ETF. The Information Technology allocates 42% of its value to holdings in Neutral-or-worse-rated stocks. The 85 Attractive-or-better-rated stocks in the sector could create a higher rated diversified portfolio of Information Technology stocks. Please contact us if you would like access to an ETF of only the Very Attractive and Attractive-rated stocks for the Information Technology sector or any other ETF2. If you require exposure to a sector ETF: We recommend investors buy a Consumer Staples ETF because of its Attractive Overall Risk/Reward Rating. 73% of the value of the Consumer Staples sector is allocated to Attractive-or-better-rated stocks compared to only 57% for the Information Technology sector. See our U.S. Equity ETF Strategic Roadmap report to compare sector or index ETFs. If you require exposure to an Information Technology ETF or an index ETF: We recommend investors buy an S&P 500 ETF instead of an Information Technology ETF. See Figure 2, which shows the Risk/Reward rating for the S&P 500. If you are looking for exposure to the best stocks in the market: We recommend investors buy our Most Attractive Stocks.

1 For an explanation of the merits of using market-weighted averages in aggregation analysis instead of aggregate values, see Jeremy Siegel’s WSJ article “The S&P Gets Its Earnings Wrong.” 2 We offer custom aggregation reports with our ratings for any ETF, mutual fund, or portfolio. We help improve your portfolio’s ratings by overweighting stocks with Attractive ratings and underweighting stocks with Dangerous ratings. Contact research@newconstructs.com for more information.

Our Risk/Reward Ratings have a solid track record of outperformance for investors. You don’t have to take our word for it. See how Barron’s ranked us #1 for stock-picking.

Custom ETFs: Please contact us if you would like access to an ETF of only the Very Attractive and Attractive-rated stocks for a particular sector or index.

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Figure 2: S&P 500 – Risk/Reward Rating

Sources: New Constructs, LLC and company filings

Although both the S&P 500 and the Information Technology sector have the same Attractive-or-better ratings for quality of earnings, the Information Technology sector outperforms the S&P500’s ROIC. Apple (AAPL) and Microsoft’s (MSFT) large market caps and extraordinarily high ROICs have a major impact on the market-weighted ROIC for the Information Technology sector and the S&P 500. AAPL has an ROIC of 190.2% and MSFT an ROIC of 61.6%. Without AAPL and MSFT, the S&P 500’s market-weighted ROIC would fall from 17.4% to 11.1%. The Information Technology sector’s ROIC would fall from 42.3% to 18.13%. The S&P 500 outperforms the Information Technology sector in Price-to-EBV ratings. The S&P 500 has a Price-to-EBV of 1.3, compared to a -2.4 for the sector. The S&P 500 and the Information Technology sector offer investors similar upside potential and similar downside risk.

Quality of Earnings Valuation

Economic vs Reported EPS

Return on Invested Capital (ROIC) FCF Yield Price-to-EBV Ratio

Growth Appreciation Period

(yrs)Very Dangerous Misleading Trend Bottom Quintile <-5% >3.5 or -1<0 more than 50

Dangerous False Positive 4th Quintile -5%<-1% 2.4<3.5 or <-1 20<50

Neutral Neutral EE 3rd Quintile -1%<3% 1.6<2.4 10<20

Attractive Positive EE 2nd Quintile 3%<10% 1.1<1.6 3<10

Very Attractive Rising EE Top Quintile >10% 0<1.1 Less than 3

Market-Weighted Avg $0.80 / $3.27 17.4% 3.3% 1.3 20Median $-0.09 / $1.77 6.8% 3.6% 1.6 11

Overall Risk/Reward

Score

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Figure 3 maps the Risk/Reward composition of the Information Technology sector’s holdings and capital allocation. Figure 3: Information Technology Sector – Capital Allocation & Holdings by Risk/Reward Rating

Sources: New Constructs, LLC and company filings

The Information Technology sector has 57% of its value invested in Attractive-or-better-rated stocks. The sector only allocates 4% of its value of Very Dangerous-rated stocks. The Information Technology sector could offer investors a more attractive Risk/Reward profile by (1) adding Attractive-rated holdings in place of Neutral-or-worse-rated holdings and/or (2) allocating more capital to the Attractive rating holdings instead of Neutral-or-worse-rated holdings.

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Figure 4 maps the Risk/Reward composition of the S&P 500 and its capital allocation. Figure 4: S&P 500 – Capital Allocation & Holdings by Rating

Sources: New Constructs, LLC and company filings

The S&P 500 allocates 24% of its value to Dangerous-or-worse-rated stocks, while the Information Technology sector allocates 21% of its value to Dangerous-or-worse-rated stocks. The S&P allocates 44% of its value to Attractive-or-better-rated stocks while the Information Technology sector allocates 57% of its value to Attractive-or-better-rated stocks. Comparing their ratings distributions, the Information Technology sector shows a better allocation of capital and is a more appealing option for investors looking to buy an ETF than the S&P 500. For a detailed description of an individual company’s ratings, purchase a Company Valuation Report for any of the 3000+ companies we cover. Sample reports are available in the Free Archive on our website. Appendices in our Company Valuation Reports highlight all adjustments we make to reported earnings and their effects on NOPAT, Invested Capital, WACC, and Economic Earnings. Our Company Valuation Reports show every adjustment and exactly how we calculate each variable used in our Risk/Reward Ratings.

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Economic vs Reported Earnings

Why Economic Earnings Matter Economic Earnings provide a truer measure of profitability and shareholder value creation than reported earnings. Economic Earnings almost always meaningfully differ from reported earnings. Investors should beware of investing in companies that report earnings meaningfully different than their economic earnings. Figure 5: Economic Earnings Per Share vs Reported EPS

Sources: New Constructs, LLC and company filings

Our Economic Earnings and Return on Invested Capital (ROIC) metrics are significantly more accurate than reported earnings because they are adjusted to reverse accounting distortions. The majority of the data required to reverse accounting distortions is available only in the Financial Footnotes, which we analyze rigorously. Our core competency is gathering and analyzing all relevant financial data (from the Financial Footnotes and the Management Discussion and Analysis) so that we can deliver earnings analyses that best represent the true profitability of businesses. See Figure 6 for a list of the adjustments we make to a company's reported earnings in order to reverse accounting distortions and arrive at a truer measure of a firm's earnings. Figure 6: Accounting Issues that Distort Reported Earnings

- Employee Stock Options - Off-Balance-Sheet Financing- Pension Over/Under Funding - Reserves- Excess Cash - Unrealized Gains/Losses- Restructuring - Goodwill Amortization- Pooling Goodwill - Unconsolidated Subsidiaries- Minority Interests - Capitalized Expenses

Sources: New Constructs, LLC

We reverse ALL accounting distortions to reveal accurate and comparable economic earnings for 3,000+ companies. See our chapter in the Valuation Handbook (Wiley Finance, 2009) for more information.

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Figure 7 compares the Information Technology sector's Return on Invested Capital (ROIC) to its Weighted-Average Cost of Capital (WACC). The Information Technology sector's ROIC during the last fiscal year ranks in the top quintile. Figure 7: Return on Invested Capital vs Weighted Average Cost of Capital

Sources: New Constructs, LLC and company filings How We Measure Economic Earnings The metrics we use to measure the economic performance of companies are Economic Earnings Margin and Economic Earnings. The Economic Earnings Margin for a company equals its ROIC minus its WACC. The Economic Earnings of a company equal its Economic Earnings Margin multiplied by its Invested Capital. Economic Earnings per Share equal Economic Earnings divided by Basic Shares Outstanding. ROIC equals Net Operating Profit After-Tax (NOPAT) divided by Invested Capital. We believe our measures of economic performance are substantially more accurate than accounting metrics because we make adjustments for all the issues listed in Figure 6. Figure 8 provides benchmarks for the Information Technology sector over the past five years for the key profitability metrics we use. Our Risk/Reward Ratings are based on market-weighted averages. Aggregate values for the sector are also provided for comparison.

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Figure 8: Information Technology Sector Benchmarks ($ millions except per share amounts)

Sources: New Constructs, LLC and company filings

The years shown in all figures represent the financial results for all companies that have a fiscal-year end on or after 12/31 of that year through to 12/30 of the following year. Most companies have 12/31 fiscal year ends. It is far simpler to put all companies into an annual bucket that represents the fiscal-year end results of the majority of the companies. The alternative is to refer to "Last Fiscal Year" etc, which is not as clear and adds little analytical value.

Market-Weighted Averages 2005 2006 2007 2008 2009Revenues $23,355 $25,610 $28,129 $32,919 $33,365Revenue Growth (Based on Avg) n/a 9.7% 9.8% 17.0% 1.4%ROIC 17.1% 23.3% 28.2% 32.4% 41.9%WACC 7.8% 7.9% 7.8% 7.5% 7.6%Economic Earnings Margin 9.2% 15.4% 20.4% 25.0% 34.4%Economic EPS $0.47 $1.01 $1.58 $2.24 $3.68Reported EPS $1.40 $2.08 $2.75 $2.82 $4.99- net difference -$0.93 -$1.07 -$1.17 -$0.58 -$1.31Economic Earnings $2,030 $2,437 $2,927 $3,674 $4,248Reported Earnings $3,523 $4,085 $4,505 $4,970 $5,937- net difference -$1,494 -$1,649 -$1,579 -$1,296 -$1,689

Aggregate Values 2005 2006 2007 2008 2009Revenues $947,824 $1,079,470 $1,228,649 $1,268,321 $1,227,624Revenue Growth n/a 13.9% 13.8% 3.2% -3.2%ROIC 4.8% 9.0% 3.9% 5.2% 5.9%WACC 7.8% 7.9% 7.8% 7.7% 7.6%Economic Earnings Margin -3.0% 1.1% -3.9% -2.5% -1.7%Economic EPS -$0.76 -$0.46 -$0.47 -$0.46 -$0.45Reported EPS $0.03 $0.38 $0.28 -$0.48 -$0.01- net difference -$0.79 -$0.84 -$0.75 $0.02 -$0.44Economic Earnings $10,896 $24,459 $28,391 $28,289 $36,129Reported Earnings $82,652 $105,787 $102,304 $42,093 $115,595- net difference -$71,756 -$81,328 -$73,913 -$13,804 -$79,466

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Free Cash Flow Yield

Using Free Cash Flow Yields to pick stocks is not a new strategy. However, our strategy yields superior results because we use a better measure of Free Cash Flow (FCF) that incorporates information from the Notes and MD&A other firms miss. We measure Free Cash Flow by subtracting the change in Invested Capital from NOPAT. Figure 9: Free Cash Flow Yield

Sources: New Constructs, LLC and company filings

Figure 10 provides the data behind Figure 9. Our Risk/Reward Ratings are based on market-weighted averages. Aggregate values for the sector are also provided for comparison. Figure 10: Benchmarks for Free Cash Flow Yield ($ millions)

Sources: New Constructs, LLC and company filings

Free Cash Flow Yield equals unlevered FCF divided by enterprise value. The level of FCF does not always reflect the health of a business or its prospects. For example, a large amount of FCF can be a sign that a company has limited investment opportunities and, hence, limited growth prospects. On the other hand, negative FCF can be an attractive indication that a company has more investment opportunities than it can fund with cash from operations. Zero FCF could mean that the company generates just enough cash to internally fund its growth opportunities.

Market-Weighted Average 2005 2006 2007 2008 2009 CurrentFree Cash Flow Yield 1.65% 1.12% 0.77% 2.16% 4.71% 4.05%

Aggregate Values 2005 2006 2007 2008 2009 CurrentFree Cash Flow $36,649 $19,956 -$3,943 $37,369 $108,174 $108,039Enterprise Value $2,237,210 $2,578,277 $2,779,898 $1,827,378 $2,410,872 $2,779,390Free Cash Flow Yield 1.64% 0.77% -0.14% 2.04% 4.49% 3.89%

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Price-to-EBV Per Share

Figure 11 shows the Price to Economic Book Value (EBV) per share for the Information Technology sector. This ratio reflects the value that the market places on $1 of current cash flows into perpetuity. With a Price to EBV of 2.37, the market expects cash flows for the Information Technology sector to improve by 137%. When stock prices are much higher than EBVs, the market predicts cash flows of the company will meaningfully increase. When stock prices are much lower than EBVs, the market predicts the cash flows of the company will meaningfully decrease. If the stock price equals the EBV, the market predicts the company's cash flows will not change. Figure 11: Price to Economic Book Value Per Share

Sources: New Constructs, LLC and company filings

Figure 12 provides the data behind Figure 11. Our Risk/Reward Ratings are based on market-weighted averages. Aggregate values for the sector are also provided for comparison. Figure 12: Price to Economic Book Value Per Share ($ millions)

Sources: New Constructs, LLC and company filings

Market-Weighted Average 2005 2006 2007 2008 2009 CurrentPrice to Economic Book Value 2.71 2.13 2.60 1.04 1.64 2.37

Aggregate Values 2005 2006 2007 2008 2009 CurrentMarket Value $2,279,365 $2,593,144 $2,765,178 $1,849,344 $2,523,933 $2,876,768Economic Book Value $1,076,141 $1,315,328 $1,495,951 $1,666,700 $1,888,035 $1,868,604Price to Economic Book Value 2.12 1.97 1.85 1.11 1.34 1.54

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EBV measures the no-growth value of the company based on the current economic cash flows generated by the business. It is also known as the "pre-strategy value" of the company because it ignores the value attributable to future cash flows, which are, in theory, what business strategies should aim to improve. The Formula for EBV is: (NOPAT / WACC) + Excess Cash + Unconsolidated Subsidiary Assets + Net Assets from Discontinued Operations - Debt (incl. Operating Leases) - Value of Outstanding Stock Options - Preferred Capital - Minority Interests. EBV per share equals EBV divided by shares outstanding.

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Quantifying Market Expectations

Figure 13 compares the future performance required to justify the sector's market value to its historical performance. Historically, the Information Technology sector has generated a Revenue CAGR of 8.1%, 5.1%, and 7.5% and Economic Earnings Margins of 13.1%, 20.3%, and 34.4% over the past 5, 3 and 1 year(s) respectively. To justify the current market value of $2,877 billion, the Information Technology sector must grow revenues at 11.4% and maintain a 36.7% Economic Earnings Margin for 26 years. Compare the market’s expectations for future cash flows for the Information Technology sector to those of the S&P 500 in Figure 14. Figure 13: Future Performance Required to Justify Valuation

Market Value is an aggregate value. All other values in table are market-weighted averages. Sources: New Constructs, LLC and company filings.

The current price level of the S&P 500 implies the index must grow revenues at 9.1% and maintain an 11.8% Economic Earnings Margin for 20 years. Figure 14: Future Performance Required to Justify Valuation - S&P 5003

Index Price is the price of the S&P 500 index. All other values in table are market-weighted averages. Sources: New Constructs, LLC and company filings.

The Information Technology sector has higher market expectations for revenue growth and Economic Earnings Margin than the S&P 500, and a longer Growth Appreciation Period. However, the sector’s historical performance suggests that the sector faces a comparable challenge to meet expectations as the S&P 500. Growth Appreciation Period (GAP) measures the number of years implied by the stock price over which a company must maintain an edge over its

3 Technically, instead of using the Index Price of the S&P 500 in Figure 14, we should use the aggregate market values because all calculations in this report are based on market-weighted values. We use market-weighted values as a proxy for Standard and Poor’s proprietary method of weighting companies in the S&P 500.

Investing 101 – “Buy stocks with low expectations and sell stocks with high expectations.”

Historical Performance Market Expectations

Performance Hurdles 5-Year Avg 3-Year AvgLast Fiscal

Year based on current priceMarket Values ($bn) $2,279 $2,765 $2,524 $2,8771. Revenue CAGR 8.1% 5.1% 7.5% 11.4%2. Economic Earnings Margin 13.1% 20.3% 34.4% 36.7%3. Growth Appreciation Period - - - 26

Historical Performance Market Expectations

Performance Hurdles 5-Year Avg 3-Year AvgLast Fiscal

Year based on current price 3

Index Price 1,248 1,468 1,115 1,2131. Revenue CAGR 4.5% 0.6% 2.0% 9.1%2. Economic Earnings Margin 4.5% 5.8% 10.0% 11.8%3. Growth Appreciation Period - - - 20

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current and future competitors. Specifically, GAP measures the number of years a company will earn returns on invested capital greater than its cost of capital on new investments. The law of competition dictates that a company can only grow its economic earnings for the finite period over which it can maintain a competitive advantage. GAP analysis comes from our dynamic discounted cash flow model, a multi-stage DCF model that values companies across multiple forecast horizons. Each forecast horizon (i.e., GAP), assumes the company cannot grow profits beyond the GAP. Our model exclusively uses no-growth terminal value assumptions for calculating the value of the stock for each GAP. The forecast drivers for our DCF model are: (1) Revenue Growth; (2) NOPBT Margin, (i.e. EBIT Margin with Adjustments), (3) Cash Tax Rate, (4) Incremental Net Working and Fixed Capital needs. Our company models value stocks based on the present value of expected free cash flows, with that free cash flow measured according to our economic (as distinct from conventional accounting) methodology. Website subscribers can set the four forecast drivers referenced above to arrive at estimates of the three value drivers:

1. Revenue Growth Compounded over the indicated time frame.

2. Economic Earnings Margin The Return On Invested Capital minus the Weighted-Average Cost of Capital.

3. Growth Appreciation Period Number of years the company can earn a positive Economic Earnings Margin on incremental investments, i.e. the number of years it can create economic value.

An alternative way to conceptualize the three value drivers is:

1. "How fast will the company grow?"

2. "How profitable will the company be?"

3. "For how many years will the company grow economic earnings or create incremental value?"

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Appendix 1: Risk/Reward Rating System

Our Risk/Reward Rating System assigns a rating to every stock we cover according to what we believe are the 5 most important criteria for assessing the risk versus reward of stocks. See table that follows for details.

Overall Risk/Reward

Ranking

The Overall Risk/Reward Ranking provides a final rating based on the equal-weighted average rating of each criterion.

Very Dangerous FCF Yield is not included in the average. Dangerous FCF Yield is not included in the average.

Neutral All criteria are equal-weighted in the average calculation. Attractive All criteria are equal-weighted in the average calculation.

Very Attractive All criteria are equal-weighted in the average calculation.

Economic vs Reported EPS

Rates stocks based on how their Economic Earnings compare to their Reported Earnings. Values based on Latest Fiscal Year.

Very Dangerous Negative and declining Economic Earnings despite positive and rising Reported Earnings

Dangerous Same as above except Reported Earnings are not rising or Reported Earnings are not positive

Neutral Negative Economic and Reported Earnings Attractive Economic Earnings are positive

Very Attractive Economic Earnings are positive and rising

Return on Invested

Capital (ROIC)

Rates stocks based on their ROIC. Values based on Latest Fiscal Year.

Bottom Quintile Very Dangerous = the bottom 20% of Russell 1000 companies

4th Quintile Dangerous = the bottom 40% of Russell 1000 companies 3rd Quintile Neutral = the middle 20% of Russell 1000 companies 2nd Quintile Attractive = the top 40% of Russell 1000 companies Top Quintile Very Attractive = the top 20% of Russell 1000 companies

FCF Yield Rates stocks based on their Free Cash Flow Yield. Values based on Latest Closing Stock price and Latest Fiscal Year.

<-5% Very Dangerous = less than or equal to -5% -5%<-1% Dangerous = more than -5% but less than or equal to -1% -1%<3% Neutral = more than -1% but less than or equal to +3% 3%<10% Attractive = more than +3% but less than or equal to +10%

>10% Very Attractive = more than +10%

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Price-to-EBV

Ratio

Rates stocks based on their Price-to-Economic Book Value Ratio. Values based on Latest Closing Stock price and Latest Fiscal Year.

>3.5 or -1>0 Very Dangerous = greater than or equal to 3.5 or less than 0 but greater than -1

2.4>3.5 or <-1 Dangerous = greater than or equal to 2.4 but less than 3.5 and less than or equal to -1

1.6>2.4 Neutral = greater than or equal to 1.6 but less than 2.4 1.1>1.6 Attractive = greater than or equal to 1.1 but less than 1.6 0>1.1 Very Attractive = greater than or equal to 0 but less than 1.1

Growth

Appreciation Period (yrs)

Rates stocks based on their Market-Implied Growth Appreciation Period. Values based on Latest Closing Stock price and Default Forecast Scenario.

>50 Very Dangerous = greater than or equal to 50 years 20>50 Dangerous = at least 20 years but less than 50 10>20 Neutral = at least 10 years but less than 20 3>10 Attractive = at least 3 years but less than 10 0>3 Very Attractive = at least 0 years but less than 3

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Appendix 2: Sector Constituents and Market Weights

Contact us for a detailed rating of the individual companies below, or purchase a Company Valuation Report for any of the 3000+ companies we cover. Sample reports are available in the Free Archive on our website.

1 AAPL 10.08% APH 0.31% INFA 0.13% CPWR 0.08%2 MSFT 8.11% CHKP 0.31% LSI 0.13% NCR 0.08%3 GOOG 6.91% AKAM 0.31% SNPS 0.13% ATHR 0.08%4 IBM 6.60% FISV 0.29% ARW 0.13% CDNS 0.08%5 ORCL 5.02% BMC 0.29% MCRS 0.13% ZBRA 0.08%6 CSCO 4.73% RHT 0.28% SLH 0.12% SYNT 0.08%7 INTC 4.06% ADSK 0.28% ONNN 0.12% DBD 0.08%8 HPQ 3.66% STM 0.28% RAX 0.12% DST 0.07%9 QCOM 2.69% WDC 0.28% G 0.12% TER 0.07%10 EMC 1.57% MU 0.27% JBL 0.12% NICE 0.07%11 EBAY 1.38% DLB 0.26% EQIX 0.11% QLGC 0.07%12 TXN 1.35% CSC 0.26% NSM 0.11% SFSF 0.07%13 BIDU 1.32% MFE 0.26% ADS 0.11% ADTN 0.07%14 MA 1.14% XLNX 0.26% TIBX 0.11% AXE 0.07%15 VMW 1.14% LLTC 0.26% GPN 0.11% NOVL 0.07%16 RIMM 1.07% NVDA 0.25% TSS 0.11% RFMD 0.07%17 GLW 1.03% STX 0.24% LXK 0.11% IRF 0.07%18 ACN 1.00% TDC 0.24% IT 0.11% SLAB 0.07%19 DELL 0.98% MXIM 0.23% CTV 0.11% LORL 0.07%20 YHOO 0.83% VRSN 0.22% IM 0.10% SATS 0.06%21 ADP 0.77% KLAC 0.22% PLCM 0.10% QSII 0.06%22 BRCM 0.72% MCHP 0.22% PAY 0.10% LDK 0.06%23 NTAP 0.69% SAI 0.21% NVLS 0.10% VECO 0.06%24 MOT 0.66% HRS 0.21% SOHU 0.10% NETL 0.06%25 CTSH 0.66% CREE 0.20% WBMD 0.10% PMCS 0.06%26 JNPR 0.62% LRCX 0.20% NATI 0.10% VPRT 0.06%27 AMAT 0.59% FLEX 0.20% BR 0.10% PLT 0.06%28 ADBE 0.54% ROVI 0.19% MELI 0.09% ISLN 0.06%29 INTU 0.54% DOX 0.19% VSH 0.09% HITT 0.06%30 TEL 0.52% ERTS 0.19% CNQR 0.09% SAPE 0.06%31 ATVI 0.51% AMD 0.18% TLAB 0.09% WXS 0.06%32 CRM 0.51% MTD 0.16% JDSU 0.09% MSCC 0.06%33 SYMC 0.49% AVT 0.16% AVX 0.09% ISIL 0.06%34 MRVL 0.45% IRM 0.16% PMTC 0.09% NZ 0.06%35 WU 0.44% ATML 0.16% APKT 0.09% TQNT 0.06%36 A 0.43% TRMB 0.15% OTEX 0.09% VSAT 0.06%37 CA 0.42% FLIR 0.15% CY 0.09% ARBA 0.06%38 CTXS 0.41% ANSS 0.15% ITRI 0.08% PRGS 0.06%39 FIS 0.36% NUAN 0.15% JKHY 0.08% CVG 0.05%40 XRX 0.36% FDS 0.14% VSEA 0.08% FCS 0.05%41 ADI 0.36% RVBD 0.14% BRCD 0.08% IDCC 0.05%42 PAYX 0.35% SWKS 0.14% QSFT 0.08% CACI 0.05%43 ALTR 0.35% LOGI 0.13% RMBS 0.08% CAVM 0.05%44 FFIV 0.33% SINA 0.13% LFT 0.08% MANT 0.05%45 SNDK 0.32% MOLX 0.13% TECD 0.08% OVTI 0.05%

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1 N 0.05% UIS 0.03% CKP 0.02% AVID 0.02%2 LWSN 0.05% SYNA 0.03% MIPS 0.02% ROG 0.02%3 FNSR 0.05% ELNK 0.03% QTM 0.02% SMSI 0.02%4 SMTC 0.05% SANM 0.03% MANH 0.02% DAKT 0.02%5 DRIV 0.05% PEGA 0.03% SCOR 0.02% XRTX 0.02%6 ACXM 0.05% LFUS 0.03% BGCP 0.02% LPSN 0.02%7 ADVS 0.05% WBSN 0.03% OSIS 0.02% ININ 0.02%8 BBBB 0.05% COGT 0.03% LLNW 0.02% RNWK 0.02%9 SPWRA 0.05% CCMP 0.03% SSYS 0.02% RBCN 0.02%10 SVVS 0.05% ELX 0.03% FIRE 0.02% ICGE 0.02%11 CVLT 0.05% EEFT 0.03% CTCT 0.02% VOCS 0.02%12 CIEN 0.05% ASIA 0.03% RDWR 0.02% OCLR 0.02%13 VCLK 0.04% TKLC 0.03% HLIT 0.02% BRKS 0.02%14 ARRS 0.04% ACIW 0.03% CELL 0.02% SMOD 0.02%15 JCOM 0.04% CRUS 0.03% ENTR 0.02% EPIQ 0.02%16 AMKR 0.04% PANL 0.03% ENOC 0.02% FARO 0.02%17 PLXS 0.04% EBIX 0.03% EFII 0.02% UTEK 0.02%18 IGTE 0.04% ACTG 0.03% BBOX 0.02% OPNT 0.02%19 IPGP 0.04% CMTL 0.03% RADS 0.02% LQDT 0.02%20 FICO 0.04% RNOW 0.03% NSIT 0.02% CEVA 0.02%21 BLKB 0.04% SYKE 0.03% INET 0.02% DY 0.01%22 SRX 0.04% TTWO 0.03% EZCH 0.02% MXWL 0.01%23 BCSI 0.04% STEC 0.03% EPAY 0.02% SMCI 0.01%24 CGNX 0.04% SCMR 0.03% EXLS 0.02% KLIC 0.01%25 AZPN 0.04% RSTI 0.03% UNTD 0.02% CSR 0.01%26 CYMI 0.04% FEIC 0.03% ATMI 0.02% LOOP 0.01%27 MTZ 0.04% INFN 0.03% UEPS 0.02% OYOG 0.01%28 NTGR 0.04% HIMX 0.03% SMSC 0.02% CRNT 0.01%29 BHE 0.04% ENTG 0.03% PKE 0.02% FSIN 0.01%30 MENT 0.04% SNCR 0.03% VRGY 0.02% ANAD 0.01%31 ID 0.04% SCSC 0.03% EPIC 0.02% ORBK 0.01%32 JDAS 0.04% IN 0.03% TTMI 0.02% SNIC 0.01%33 MSTR 0.04% MLNX 0.03% MTSC 0.02% XRIT 0.01%34 MMS 0.04% SONS 0.03% EGOV 0.02% KEM 0.01%35 TSRA 0.04% TMRK 0.03% MFLX 0.02% MEI 0.01%36 COHR 0.04% FORR 0.03% HPY 0.02% ESIO 0.01%37 ULTI 0.04% ARTG 0.03% MPWR 0.02% MRCY 0.01%38 DIOD 0.04% MCRL 0.03% LSCC 0.02% ADPT 0.01%39 MKSI 0.04% DTSI 0.03% NEWP 0.02% SIGM 0.01%40 VRNT 0.04% HUGH 0.03% TZOO 0.02% ZRAN 0.01%41 XXIA 0.04% CML 0.03% VLTR 0.02% COHU 0.01%42 SNX 0.04% TRAK 0.03% AEIS 0.02% HYC 0.01%43 POWI 0.04% TYL 0.03% FORM 0.02% IMN 0.01%44 IDTI 0.04% AMCC 0.02% TNS 0.02% ELON 0.01%45 NTCT 0.03% CSGS 0.02% SIMG 0.02% RLRN 0.01%

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1 MEDQ 0.01% ZIXI 0.01% QADI 0.01% BITS 0.00%2 IXYS 0.01% MCHX 0.01% ACTI 0.01% CNXT 0.00%3 CTS 0.01% RSYS 0.01% CTFO 0.01% HTCH 0.00%4 MEAS 0.01% KITD 0.01% ORCC 0.00% NEI 0.00%5 PRFT 0.01% CBR 0.01% TSTC 0.00% NLST 0.00%6 OPLK 0.01% NVEC 0.01% MOSY 0.00% LOCM 0.00%7 KEI 0.01% FNDT 0.01% GKNT 0.00% SMTX 0.00%8 SWIR 0.01% SGI 0.01% MTSN 0.00% SRT 0.00%9 SUPX 0.01% CRAY 0.01% NVMI 0.00% DTLK 0.00%10 VDSI 0.01% ACTU 0.01% PLXT 0.00% LCRD 0.00%11 CNIT 0.01% PCCC 0.01% PTEC 0.00% BVSN 0.00%12 LTXC 0.01% LAVA 0.01% WGAT 0.00% RDCM 0.00%13 NVTL 0.01% DDIC 0.01% AGYS 0.00% VTSS 0.00%14 DIVX 0.01% LIOX 0.01% FALC 0.00% BPHX 0.00%15 DMAN 0.01% MRVC 0.01% PCTI 0.00% CYBE 0.00%16 SONE 0.01% CKSW 0.01% FSII 0.00% NCS 0.00%17 MLNK 0.01% BBND 0.01% ESIC 0.00% TXCC 0.00%18 KNOT 0.01% WSTL 0.01% LCRY 0.00% PLNR 0.00%19 PWAV 0.01% EGHT 0.01% MGIC 0.00% PXLW 0.00%20 NCIT 0.01% ZIGO 0.01% PDFS 0.00% BSQR 0.00%21 EXAR 0.01% MGI 0.01% HILL 0.00% CCUR 0.00%22 THQI 0.01% GCA 0.01% RMTR 0.00% LOOK 0.00%23 LASR 0.01% GSIT 0.01% TIER 0.00% VSNT 0.00%24 NTE 0.01% KVHI 0.01% TLGD 0.00% PFSW 0.00%25 COGO 0.01% ISSI 0.01% INVE 0.00% DITC 0.00%26 ACLS 0.01% QUIK 0.01% EMKR 0.00% GLOW 0.00%27 ELMG 0.01% WAVX 0.01% WRLS 0.00% SWKH 0.00%28 SPRT 0.01% NSTC 0.01% GIGM 0.00% SCON 0.00%29 UTSI 0.01% WWWW 0.01% NWK 0.00% ABTL 0.00%30 TSYS 0.01% OPWV 0.01% RAE 0.00% EDGR 0.00%31 SYMM 0.01% KEYN 0.01% TSCM 0.00% LTRX 0.00%32 INSP 0.01% DSPG 0.01% AFOP 0.00% NSSC 0.00%33 IVAC 0.01% GRB 0.01% ULCM 0.00% VTRO 0.00%34 EXTR 0.01% TNL 0.01% LOJN 0.00% WEBM 0.00%35 PLAB 0.01% UCTT 0.01% IGOI 0.00% RMKR 0.00%36 NANO 0.01% HCKT 0.01% ZHNE 0.00% COOL 0.00%37 AXTI 0.01% AATI 0.01% TACT 0.00% ADAT 0.00%38 ANEN 0.01% CHINA 0.01% INOD 0.00% OBAS 0.00%39 INAP 0.01% ALVR 0.01% EVOL 0.00% RADA 0.00%40 DGII 0.01% TUNE 0.01% IPAS 0.00% ATRM 0.00%41 SEAC 0.01% IMMR 0.01% EMAN 0.00% HAUP 0.00%42 PSEM 0.01% MSPD 0.01% REFR 0.00% ENWV 0.00%43 RTEC 0.01% RVSN 0.01% LRAD 0.00% EDCI 0.00%44 AVNW 0.01% COMV 0.01% PRST 0.00% TIII 0.00%45 KOPN 0.01% ISYS 0.01% CAMP 0.00% PRKR 0.00%

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1 TKOI 0.00%2 TBUS 0.00%3 RITT 0.00%4 JCDA 0.00%5 WSTM 0.00%6 SLTC 0.00%7 OVRL 0.00%8 ENTN 0.00%9 RFMI 0.00%10 INTZ 0.00%11 DIGA 0.00%12 STRB 0.00%13 NRTLQ 0.00%14 ALAN 0.00%15 CICI 0.00%16 SCKT 0.00%17 EONC 0.00%18 BOSC 0.00%19 MKTY 0.00%20 TGAL 0.00%21 DPAC 0.00%

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New Constructs® – Profile

How New Constructs Creates Value for Clients 1. Superior Recommendations – Our stock picks consistently

outperform. See our track record in our stock-picking accolades and Proof Is In Performance reports.

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Our Philosophy About Research Accounting data is not designed for equity investors, but for debt investors. Accounting data must be translated into economic earnings to understand the profitability and valuation relevant to equity investors. Respected investors (e.g. Adam Smith, Warren Buffett and Ben Graham) have repeatedly emphasized that accounting results should not be used to value stocks. Economic earnings are what matter because they are:

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the business. Additional Information Incorporated in July 2002, New Constructs is an independent publisher of investment research that provides clients with consulting, advisory and research services. We specialize in quality-of-earnings, forensic accounting and discounted cash flow valuation analyses for all U.S. public companies. We translate accounting data from 10Ks into economic financial statements, i.e. NOPAT, Invested Capital, and WACC, to create economic earnings models, which are necessary to understand the true profitability and valuation of companies. Visit the Free Archive to download samples of our research. New Constructs is a BBB accredited business and a member of the Investorside Research Association.

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DISCLOSURES New Constructs®, LLC (together with any subsidiaries and/or affiliates, “New Constructs”) is

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